The City Of Fort Lauderdale v. Scott

• Decision Date: 19 January 2011
• Docket Number: CASE NO.: 10-61122-CIV-COHN/SELTZER
• Parties: THE CITY OF FORT LAUDERDALE, Plaintiff, v. HEZZEKIAH SCOTT, Defendant/Counter-claimant, VIRGIL BOLDEN, GLORIA BURNELL, THE ESTATE OF WALTER TIRSCHMAN and KAREN MCNAIR, Counter-Plaintiffs/Third Party Plaintiffs, v. THE CITY OF FORT LAUDERDALE, Counter-defendant, ALFRED G. BATTLE, JR., Director of Community Redevelopment Agency, in his official and individual capacities, SHAUN DONOVAN, in his official capacity as Secretary of United States Department of Housing and Urban Development, and UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Third-Party Defendants.
• Court: U.S. District Court — Southern District of Florida

THE CITY OF FORT LAUDERDALE, Plaintiff,

v.HEZZEKIAH SCOTT, Defendant/Counter-claimant, VIRGIL BOLDEN, GLORIA BURNELL, THE ESTATE OF WALTER TIRSCHMAN and KAREN MCNAIR, Counter-Plaintiffs/Third Party Plaintiffs,

v.THE CITY OF FORT LAUDERDALE, Counter-defendant, ALFRED G. BATTLE, JR., Director of Community Redevelopment Agency, in his official and individual capacities, SHAUN DONOVAN, in his official capacity as Secretary of United States Department of Housing and Urban Development, and UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Third-Party Defendants.

CASE NO.: 10-61122-CIV-COHN/SELTZER

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

Date: January 19, 2011

ORDER GRANTING FEDERAL COUNTER-DEFENDANTS' MOTION TO DISMISS

THIS CAUSE is before the Court upon the Federal Counter-Defendants' Motion to Dismiss Second Amended Counterclaim Class Action [DE 23] and Memorandum in Support [DE 24], the Counter-Plaintiffs' Response [DE 65], the Federal Counter-Defendants' Reply [DE 77], the Federal Counter-Defendants' Motion to Strike Jury Trial [DE 26] and Memorandum [DE 27], Counter-Plaintiffs' Response [DE 63], Counter-Defendants' Reply [DE 76], and the Federal Counter-Defendants' Motions to Stay [DE 31] and to Vacate Scheduling Order [DE 39]. The Court has considered all of the filings in this case, and is otherwise fully advised in the premises.

I. BACKGROUND

This case originated in the Circuit Court in and for Broward County, Florida as an action by the City of Fort Lauderdale ("City") to foreclose a Special Master Order and Claim of Lien on un-homesteaded real property owned by Defendant/Counter-Plaintiff Hezzekiah Scott. Although the state court filings are not all part of the docket in this court, the City states that Scott and four other property owners (hereinafter "Counter-Plaintiffs") filed an Amended Counterclaim asserting various claims, to which the City filed a Motion to Dismiss. After only a few issues were resolved by the state court after a partial hearing, Counter-Defendants Shaun Donovan, as Secretary of the United States Department of Housing and Urban Development ("HUD"), and HUD itself (hereinafter "Federal Counter-Defendants"), removed this action before a further hearing on the remaining issues in the City's state court motion.

After removal, Counter-Plaintiffs filed a Second Amended Counterclaim ("Counterclaim"), containing twenty counts against the City, Alfred Battle, Director of the City's Community Redevelopment Agency, and the Federal Counter-Defendants [DE 12]. In general, the Counterclaim alleges that the City and Battle engaged in unconstitutional code enforcement operations in the Northwest portion of the City of Fort Lauderdale against Black property owners to obtain their property through a fine andforeclosure scheme, fraudulently obtained federal funds by certifying to HUD that the City was complying with HUD's mandates to use the funds to help low and middle income families obtain housing, and then using the federal funds to redevelop the Northwest portion to the benefit of high-end developers. Counterclaim, ¶¶ 42-61. In addition to state common law claims of fraud, nuisance and slander of title, the Counterclaim alleges that the City violated the Fifth and Fourteenth Amendments to the United States Constitution by denying Counter-Plaintiffs their rights of substantive due process, procedural due process and equal protection. Counter-Plaintiffs further allege various violations of the federal Fair Housing Act against both the City and the Federal Defendants, and violations of the Florida statutes governing code enforcement against the City. The claims against the Federal Counter-Defendants can largely be summarized by allegations of HUD's failure to exercise oversight of the City's allegedly unlawful actions. See Counts XII, XIII, XVI, XVII, and XIX. Counter-Plaintiffs further allege that the City violated a prior settlement agreement in a related case, Velva Tuner, et al. v. City of Fort Lauderdale, Case No. 06-61635-Civ-Ungaro [DE 101-2 in that case].

Both the Federal Counter-Defendants and the City have moved to dismiss the Second Amended Counterclaim, while the Counter-Plaintiffs have moved to certify this action as a class action under Rule 23 of the Federal Rules of Civil Procedure. All Counter-Defendants have moved to stay discovery, while the Federal Counter-Defendants have also moved to strike the jury demand. This Order will only consider the issues raised by the Federal Counter-Defendants.

II. DISCUSSION

A. Motion to Dismiss-Lack of Standing

The Federal Defendants move pursuant to Fed. R. Civ. P. 12(b)(1) to dismiss the Second Amended Counterclaim on the grounds that Counter-Plaintiffs lack Article III standing to sue, that the Court lacks jurisdiction because sovereign immunity bars the claims, and for failure to state a claim. Counter-Plaintiffs would have standing to sue the Federal Counter-Defendants if they: (1) have suffered an injury in fact; (2) the injury was causally connected to Counter-Defendants' action; and (3) it "must be 'likely, ' as opposed to merely 'speculative, ' that the injury will be 'redressed by a favorable decision.'" Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561(1992) (quoting Simon v. Eastern Ky. Welfare Rights Org., 426 U.S. 26, 41-42 (1976)). The Federal Defendants focus their standing argument on the issue of redressability.¹ Under Rule 12(b)(1), the Court is not necessarily limited to the four corners of the Counterclaim, but may consider undisputed facts evidenced in the record. Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11^th Cir. 1990).

The Federal Defendants contend that even if Counter-Plaintiffs obtained a favorable decision as to HUD, redress will depend upon the independent policy decisions of the City of Fort Lauderdale. The United States Court of Appeals for the District of Columbia has held at least twice that where redress "depends largely on policy decisions yet to be made by government officials, " standing is lacking, despite the existence of injury. Miami Bldg. & Const. Trades Council, AFL/CIO v. Secretary of Defense, 493 F.3d 201, 205-06 (D.C. Cir. 2007) (quoting US Ecology Inc. v. U.S. Dept. of Interior, 231 F.3d 20, 24-25 (D.C. Cir. 2000)). In both cited cases, the plaintiffs were attempting to force a federal agency to transfer title of land to a state or local government for the construction of a particular project that had previously been agreed to by the local authority. In each case, the Circuit Court of Appeals held that because such a transfer had to be independently accepted by the state or local government, and at the time of litigation such acceptance had been rejected, it was not likely that a favorable decision for plaintiffs against the federal agency would result in redress. In the case at bar, Counter-Plaintiffs seek damages, as well as injunctive relief to change the way in which the City uses federal funds.

Counter-Plaintiffs argue that the Federal Counter-Defendants have engaged in circular reasoning by merging the doctrines of redressability (standing) and waiver of sovereign immunity (jurisdiction). Counter-Plaintiffs' Response at 7 [DE 65]. They cite to Gautreaux v. Romney, 448 F.2d 721 (7^th Cir. 1971), which reversed a dismissal of an action against the Secretary of HUD for HUD's role in approving and funding a racially discriminatory public housing system. The Seventh Circuit decision did not discuss standing, and only mentioned in passing that sovereign immunity does not bar challenging "alleged unconstitutional and unauthorized conduct by a federal officer." 448 F.2d at 735; Smith v. Housing Authority of South Bend,-F. Supp.2d-, 2010 WL 3927572 (N.D. Ind. 2010). There is no allegation in the Counterclaim that Defendant Donovan, HUD Secretary and a federal officer, had knowledge of the City's alleged actions.

Moreover, Gautreaux retains limited precedential value as it pertains to the redressability issue, as Congress changed the Housing and Community Development Act in 1974 to one in which HUD makes grants, known as Community Development Block Grants ("CDBG") to states, tribes and local governments to carry out projects in accordance with the Act. Dixson v. U.S., 465 U.S. 482, 486 (1984) ("Congress enacted the legislation as a federal block grant statute, under which the day-to-day administration of the federal program, including the actual expenditure of federal funds, is delegated to State and local authorities.") The Federal Counter-Defendants assert correctly that HUD's role in policing the use of CDBG funds by the City is limited by statute and regulation. See 24 C.F.R. ¶ 91.500 (and statutes cited therein). HUD must give "maximum feasible deference" to a state's interpretation of the statutory requirements to spend CDBG funds. 24 C.F.R. ¶ 570.480. HUD's enforcement power is limiting to conducting an Audit, and referral to the Department of Justice to bring a civil action to recover misspent CDBG funds. 42 U.S.C. §5304(e); 42 U.S.C. § 5311(b). Thus, even if the Court had jurisdiction to rule in favor of Counter-Plaintiffs and against the Federal Defendants, the City makes all decisions regarding the use of the federal CDBG funds at issue.

Counter-Plaintiffs contend that "[i]f HUD had dealt with the City's improper use of CDBG funds in a timely manner, the probability that Counter-Plaintiff and Plaintiffs would have been harmed by the City would have been significantly decreased or already redressed." Counter-Plaintiffs' Response at 9. This conclusory argument in Counter-Plaintiffs' brief, even if alleged in the Counterclaim, does not make it more likely that the Counter-Plaintiffs would obtain redress from a favorable decision against the Federal Counter-Defendants. As alleged in the Counterclaim, HUD did in fact conduct an audit of the City's use of funds in 2008. The Audit resulted in thirteen recommendations, and included a direction from HUD to the City to repay...