United States ex rel. Dieter v. City of Milwaukee

• Docket Number: 22-CV-240-JPS
• Decision Date: 27 October 2023
• Parties: UNITED STATES OF AMERICA ex rel. JAMES DIETER and KAREN SCHWENKE, Plaintiffs, v. CITY OF MILWAUKEE, CITY OF MILWAUKEE COMMUNITY DEVELOPMENT GRANTS ADMINISTRATION, HOUSING AUTHORITY OF THE CITY OF MILWAUKEE, and MILWAUKEE COUNTY, Defendants.
• Court: U.S. District Court — Eastern District of Wisconsin

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UNITED STATES OF AMERICA ex rel. JAMES DIETER and KAREN SCHWENKE, Plaintiffs, v. CITY OF MILWAUKEE, CITY OF MILWAUKEE COMMUNITY DEVELOPMENT GRANTS ADMINISTRATION, HOUSING AUTHORITY OF THE CITY OF MILWAUKEE, and MILWAUKEE COUNTY, Defendants.

No. 22-CV-240-JPS

United States District Court, E.D. Wisconsin

October 27, 2023

ORDER

J.P Stadtmueller U.S. District Judge

Relators James Dieter and Karen Schwenke (“Relators”) allege that Defendants City of Milwaukee, City of Milwaukee Community Development Grants Administration (together, the “City”), Housing Authority of the City of Milwaukee (“HACM”), and Milwaukee County (the “County”) (collectively “Defendants”) violated the False Claims Act, 31 U.S.C. § 3729 (the “FCA”) by falsely certifying compliance with, inter alia anti-discrimination and housing laws in order to receive government funding. ECF No. 58. After the Court dismissed Relators' first amended complaint without prejudice, ECF No. 55, Relators filed a second amended complaint. ECF No. 58. Defendants now move to dismiss the second amended complaint. ECF Nos. 60 (HACM's motion), 62 (the City's motion), 65 (the County's motion). The motions are fully briefed, ECF Nos. 61, 63, 66, 73, 75, 76, 77, and for the reasons set forth below, will be granted.

1. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b) provides for dismissal of complaints which, among other things, fail to state a viable claim for relief. Fed.R.Civ.P. 12(b)(6). To state a claim, a complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). In other words, the complaint must give “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). The allegations must “plausibly suggest that the plaintiff has a right to relief, raising that possibility above a speculative level.” Kubiak v. City of Chicago, 810 F.3d 476, 480 (7th Cir. 2016) (quoting EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007)). Plausibility requires “more than a sheer possibility that a defendant has acted unlawfully.” Olson v. Champaign County, 784 F.3d 1093, 1099 (7th Cir. 2015) (quoting Ashcroft v. Iqbal, 566 U.S. 662, 678 (2009)).

“In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). In other words, the plaintiff must set forth the “‘who, what, when, where, and how' of the fraud.” Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 441-42 (7th Cir. 2011) (quoting United States ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 854 (7th Cir. 2009)).

2. RELEVANT ALLEGATIONS

2.1 Certifications

Defendants receive federal funding from the United States Department of Housing and Urban Development (“HUD”). ECF No. 58 at 7.

HUD disburses funds to Public Housing Agencies (“PHAs”), which then disburse funds on a local level. Id. HACM and the County are registered PHAs. Id. From HUD, Defendants receive funds pursuant to four programs: the Community Development Block Grant (“CDBG”), the HOME Investment Partnership (“HOME”), the Emergency Shelter Grant, and Housing Opportunities for People with AIDS. Id. HACM and the County also receive funds from HUD through the Section 8 Housing Choice Voucher program (the “Housing Voucher program”). Id. at 8.

As a condition to receiving federal funds, Defendants are required to comply with federal anti-discrimination laws and to “Affirmatively Further the Purposes of the Fair Housing Act (the “AFFH mandate”). Id. at 3. The federal antidiscrimination laws include, inter alia, Title VI of the Civil Rights Act (“Title VI”), Section 504 of the Rehabilitation Act (“Section 504”), and the Americans with Disabilities Act (the “ADA”). Id. at 9, 11. The AFFH mandate is set forth in the Fair Housing Act (the “FHA”) and HUD program-specific regulations, as well as defined in HUD's regulations. Id. at 9-11. HUD requires that fund recipients certify their compliance with federal anti-discrimination laws and the AFFH mandate. Id. at 10, 11.

Relators plead, inter alia, the following statutory and regulatory antidiscrimination provisions with which they claim Defendants failed to comply during the relevant statutory period (between February 25, 2016 and February 25, 2022):

• Section 109 of the Housing and Community Development Act of 1974 (“HDCA”), 42 U.S.C. § 5309, and the implementing regulations set forth at 24 C.F.R. § 6.4(a). Id. at 72-73. The regulations require, inter alia, that recipients “not make selections that have the effect of excluding persons from, denying them the benefits of, or subjecting them to discrimination” when “determining the site or location of housing,” “take any necessary steps to overcome the effects of prior discrimination,” and submit sufficient records for the federal government to ascertain compliance. Id.

• Section 504 and the implementing regulations set forth at 24 C.F.R. § 8.4(a). Id. at 74-76. The regulations require, inter alia, that no person be excluded or discriminated against “under any program or activity that receives Federal financial assistance” on the basis of “handicaps,” that recipients not “utilize criteria or methods of administration the purpose or effect of which” would be to discriminate or “impair the accomplishment of the objectives of the recipient's federally assisted program.” Id.

• Title VI and the implementing regulations set forth at 24 C.F.R. § 1.4(b). Id. at 77-79. The regulations require, inter alia, recipients not, “on the ground of race, color, or national origin” “[p]rovide any housing . . . to a person which are different, or are provided in a different manner, from those provided to others,” “[s]ubject a person to segregation or separate treatment in any matter related to his receipt of housing,” and “take affirmative action to overcome the effects of prior discrimination.” Id.

Relators also plead the three iterations of the AFFH mandate (as defined in HUD's regulations) in effect during the relevant statutory period. From July 16, 2015 through August 6, 2020, the AFFH mandate included

taking meaningful actions that, taken together, address significant disparities in housing needs and in access to opportunity, replacing segregated living patterns with racially balanced living patterns, transforming racially or ethnically concentrated areas of poverty into areas of opportunity, and fostering and maintaining compliance with civil rights and fair housing laws.

Id. at 69-70 (quoting 80 Fed.Reg. 42272 (July 16, 2015); 86 Fed.Reg. 30779 (June 10, 2021)). The term “meaningful actions” was defined as “significant actions that are designed and can be reasonably expected to achieve a material positive change that affirmatively furthers fair housing by, for example, increasing fair housing choice or decreasing disparities in access to opportunity.” Id. at 70 (quoting 80 Fed.Reg. 42272 (July 16, 2015); 86 Fed.Reg. 30779 (June 10, 2021)) The term “fair housing choice” was defined to mean that “individuals and families have the information, opportunity, and options to live where they choose without unlawful discrimination and other barriers related to race, color, religion, sex familial status, national origin, or disability.” Id. (quoting 80 Fed.Reg. 42272 (July 16, 2015); 86 Fed.Reg. 30779 (June 10, 2021)).

From August 7, 2020 through July 30, 2021 the AFFH mandate for the HOME and CDBG programs changed. Id. (citing 85 Fed.Reg. 45899 (Aug. 7 2020)). The AFFH mandate during this time required recipients to certify that they took action “rationally related to promoting one or more attributes of fair housing.” Id. (quoting 85 Fed.Reg. 45899 (Aug. 7 2020) and 24 C.F.R. § 5.151 (2020)). The term “fair housing” was defined as “housing that, among other attributes, is affordable, safe, decent, free of unlawful discrimination, and accessible as required under civil rights laws.” Id. (quoting 85 Fed.Reg. 45899 (Aug. 7 2020) and 24 C.F.R. § 5.151 (2020)).

From July 31, 2021 through the present, the substance of the 2015 AFFH mandate was reinstated:

Affirmatively furthering fair housing means taking meaningful actions, in addition to combating discrimination, that overcome patterns of segregation and foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics. Specifically, affirmatively furthering fair housing means taking meaningful actions that, taken together, address significant disparities in housing needs and in access to opportunity, replacing segregated living patterns with truly integrated and balanced living patterns, transforming racially or ethnically concentrated areas of poverty into areas of opportunity, and fostering and maintaining compliance with civil rights and fair housing laws. The duty to affirmatively further fair housing extends to all of a program participant's activities and programs relating to housing and urban development.

Id. at 70-71 (quoting 86 Fed.Reg. 30779 (June 10, 2021) and 24 C.F.R. § 5.151).

2.2 Submissions

As PHAs, HACM and the County are required to submit annual PHA plans as well as five-year PHA plans. Id. at 11 (citing 42 U.S.C. § 1437c-1). The annual PHA plans require HACM and the County to annually submit a signed certification confirming that they would “carry out the public housing agency plan” in conformity with Title VI, the FHA, Section 504, the ADA, and the AFFH mandate. Id. (citing 42 U.S.C. § 1437c-1(d)(16)). Relators plead the date, document title, and nature of the certification of HACM's annual PHA plans from 2015 through 2023. Id. at...