Thomas v. Pierce

• Decision Date: 20 May 1987
• Docket Number: Civ. A. No. 86-2439.
• Citation: 662 F. Supp. 519
• Parties: Marjorie L. THOMAS, Geneva Miller, Glenda McKinley, and Tina Marie Brown, Plaintiffs, v. Samuel PIERCE, Secretary of United States Department of Housing and Urban Development; Gerald F. Simpson, Regional Administrator-Regional Housing Commissioner of Region VII of Department of Housing and Urban Development; Jerry Bajaj, Vanita Bajaj, Bobby Abraham, and Usha Abraham, d/b/a Highland Park Townhouse Associates, Defendants.
• Court: U.S. District Court — District of Kansas

662 F. Supp. 519

Marjorie L. THOMAS, Geneva Miller, Glenda McKinley, and Tina Marie Brown, Plaintiffs, v. Samuel PIERCE, Secretary of United States Department of Housing and Urban Development; Gerald F. Simpson, Regional Administrator-Regional Housing Commissioner of Region VII of Department of Housing and Urban Development; Jerry Bajaj, Vanita Bajaj, Bobby Abraham, and Usha Abraham, d/b/a Highland Park Townhouse Associates, Defendants.

Civ. A. No. 86-2439.

United States District Court, D. Kansas.

May 20, 1987.

Stephen M. Kirschbaum, Luis Mata, Wyandotte-Leavenworth Legal Service, Kansas City, Kan., for plaintiffs.

Benjamin L. Burgess, Jr., U.S. Atty., Janice Miller Karlin, Asst. U.S. Atty., Kansas City, Kan., for defendants Pierce and Simpson.

Richard C. Wallace, Kansas City, Kan., for defendants Bajaj and Abraham.

MEMORANDUM AND ORDER

EARL E. O'CONNOR, Chief Judge.

This matter is before the court upon the following motions: (1) defendants Pierce and Simpson's motion to dismiss or, in the alternative, for summary judgment; (2) defendants Bajaj and Abrahams' motion to dismiss or, in the alternative, for summary judgment; and (3) plaintiffs' motion for class certification. For the reasons discussed below, the court holds that this action must be dismissed as to all defendants.

I. Factual Background.

This is an action for declaratory and injunctive relief seeking to declare invalid the sale of Highland Park Townhouses I, II, and III by defendants Samuel Pierce, Secretary of the United States Department of Housing and Urban Development hereinafter HUD, and Gerald Simpson, Regional Administrator and Regional Housing Commissioner of Region VII of HUD. The Highland Park Townhouses are a multifamily apartment project consisting of 126 units located in Kansas City, Kansas. It was originally constructed with a federally-insured loan that carried a below market interest rate pursuant to section 221(d) of the National Housing Act. Many, and perhaps all, of the tenants of Highland Park were lower-income individuals and eligible for rent subsidies pursuant to section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f.

HUD acquired title to Highland Park through foreclosure and subsequently sold the entire project to the defendants Jerry Bajaj, Vanita Bajaj, Bobby Abraham and Usha Abraham. HUD sold the townhouses with section 8 subsidies attached to 38 of the 126 units. The subsidy payments take the form of a housing assistance payment made by HUD to the owners on behalf of a tenant in an amount representing the difference between the market rent and thirty percent of the tenant's adjusted monthly income. Plaintiffs contend that HUD's sale of the townhouses without section 8 subsidies on 100 percent of the units violates 12 U.S.C. § 1701z-11 and the regulations promulgated pursuant thereto, 24 C.F.R. §§ 290.1 et seq.

Plaintiffs seek review of HUD's actions pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 701 et seq. Plaintiffs have either applied for section 8 housing assistance and are currently on a waiting list, or have attempted to apply for housing assistance and have been refused an application because the waiting list is too long. Plaintiffs are income eligible for housing assistance payments under section 8 and desire to live at Highland Park Townhouses if they are repaired and properly subsidized.

II. Statutory Background.

In 1937, Congress enacted the United States Housing Act of 1937, creating the public housing program to provide decent, safe, sanitary and affordable housing to lower-income families. Pursuant to 12 U.S.C. § 713(k), the Secretary of HUD is authorized to acquire title to projects for which mortgage insurance has been issued by the government, and is authorized to operate and/or sell any property so acquired consistent with National Housing Act policies and objectives. 12 U.S.C. § 1713(l); 42 U.S.C. § 1441.

The section 8 subsidy program was enacted as part of the Housing and Community Development Act of 1974, Pub.L. No. 93-383, 88 Stat. 633 (codified, as amended, at 42 U.S.C. § 1437f). The purpose of the section 8 program is to aid "lower-income families in obtaining a decent place to live and of promoting economically mixed housing." 42 U.S.C. § 1437f(a). To achieve this purpose, the Secretary of HUD is authorized to enter into contracts to make housing assistance payments to private owners of housing in which some or all of the units are leased to lower-income families. 42 U.S.C. § 1437f; 24 C.F.R. § 886.309. These payments are the subsidies referred to throughout this opinion.

In 1978, Congress enacted the Housing and Community Development Amendments, Pub.L. No. 95-557. Section 203 of Title II of Public Law 95-557, codified at 12 U.S.C. § 1701z-11, deals with the management and disposal of multifamily housing projects. Subsection (a) provides as follows:

It is the policy of the United States that the Secretary of Housing and Urban Development (hereinafter referred to as the "Secretary") shall manage and dispose of multifamily housing projects which are owned by the Secretary in a manner consistent with the National Housing Act 12 USCS §§ 1701 et seq. and this section. The purpose of the property management and disposition program of the Department of Housing and Urban Development shall be to manage and dispose of projects in a manner which will protect the financial interests of the Federal Government and be less costly to the Federal Government than other reasonable alternatives by which the Secretary can further the goals of —

(1) preserving the housing units so that at least those units which are occupied by low- and moderate-income persons or which are vacant, at the time of acquisition, are available to and affordable by such persons;

(2) preserving and revitalizing residential neighborhoods;

(3) maintaining the existing housing stock in a decent, safe, and sanitary condition;

(4) minimizing the involuntary displacement of tenants;

(5) minimizing the need to demolish projects; and

(6) maintaining the project for the purpose of providing rental or cooperative housing.

The Secretary, in determining the manner by which a project shall be managed or disposed of, may balance competing goals relating to individual projects in a manner which will further the achievement of the overall purpose of this section.

12 U.S.C. § 1701z-11(a).

The statute contemplates that the Secretary will promulgate such rules and regulations as may be necessary to carry out its provisions. 12 U.S.C. § 1701z-11(g). Accordingly, the Secretary has issued several regulations governing the management and disposal of HUD-owned multifamily housing projects. See 24 C.F.R. §§ 290.1 et seq. Section 290.25(b) provides:

Formerly subsidized projects and formerly unsubsidized projects serving as a lower income housing resource, as determined pursuant to § 290.27(c), may not be sold without a subsidy if there is a need for low and moderate income housing in the community.

Furthermore, section 290.27(b) provides:

A formerly subsidized project shall be allocated subsidy ... sufficient to assist 100% of the units. Provided, however, that the Director may recommend disposition for less than 100% of the units if the Director makes a written finding that such a sale will promote a racially mixed or mixed income tenancy and the amount of subsidy provided is at least sufficient to assist all eligible tenants residing in the project.

Plaintiffs contend that HUD's sale of the Highland Park Townhouses with section 8 subsidies attached to only 38 of the 126 units, rather than to all of the units, was arbitrary and capricious, an abuse of discretion, and otherwise contrary to law. Plaintiffs seek a declaratory judgment that the conduct of the Secretary and Administrator in processing and approving the sale of the Highland Park Townhouses was in violation of 12 U.S.C. § 1701z-11 and 24 C.F.R. §§ 290.25 and 290.27. Plaintiffs also seek an order requiring the Secretary and Administrator to repurchase Highland Park Townhouses and reprocess its disposition so that it is sold with section 8 rent subsidies attached to all 126 units. Furthermore, plaintiffs seek an order requiring the Secretary and Administrator to provide 126 units of section 8 subsidies to the Kansas City, Kansas, area in general, equivalent to the amount of subsidy that would have been required had federal statutes and regulations governing HUD's property disposition been followed.

III. Motion to Dismiss or, in the Alternative, for Summary Judgment by Defendants Pierce and Simpson.

Plaintiffs have sued defendant Samuel Pierce in his official capacity as Secretary of HUD and defendant Gerald Simpson in his official capacity as Regional Administrator and Housing Commissioner of Region VII of HUD. These defendants seek to dismiss plaintiffs' action based upon the doctrine of sovereign immunity.

A party suing the United States, its agencies or officers, must allege both a basis for the court's jurisdiction, see Fed.R. Civ.P. 8(a)(1), and a specific statute containing a waiver of the government's immunity from suit, see C. Wright & A. Miller, Federal Practice and Procedure § 1212 at 102. Plaintiffs' amended complaint invokes jurisdiction against Pierce and Simpson pursuant to 28 U.S.C. §§ 1331, 1337 and 1361. The complaint also alleges that declaratory and injunctive relief is authorized by 28 U.S.C. §§ 2201 and 2202, and 5 U.S.C. §§ 701-706. Plaintiffs' amended complaint fails to allege any statutory basis for waiver. Plaintiffs, however, assert in their response to defendants' motion that the government's waiver of immunity is predicated upon 12 U.S.C. § 1702.

The defendants do not dispute plaintiffs' invocation of subject matter jurisdiction, and thus the court will not address this issue in any detail. The court finds that this action arises under 12 U.S.C. § 1701z-11, and therefore holds that subject matter jurisdiction is proper under...