United States v. Yonkers Bd. of Educ.

Decision Date18 September 1984
Docket NumberNo. 80 CIV 6761 (LBS).,80 CIV 6761 (LBS).
Citation594 F. Supp. 466
PartiesUNITED STATES of America, Plaintiff, and Yonkers Branch-National Association For the Advancement of Colored People, et al., Plaintiffs-Intervenors, v. YONKERS BOARD OF EDUCATION; City of Yonkers; and Yonkers Community Development Agency, Defendants. CITY OF YONKERS and Yonkers Community Development Agency, Third-Party Plaintiffs, v. UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, and Secretary of Housing and Urban Development, Third-Party Defendants.
CourtU.S. District Court — Southern District of New York

U.S. Dept. of Justice, Civ. Rights Div., Joshua P. Bogin, Kenneth Barnes, Michael L. Barrett, Sarah Vanderwicken, Washington, D.C., for U.S.

Michael H. Sussman, Brooklyn, N.Y., for plaintiffs-intervenors N.A.A.C.P.

Vedder, Price, Kaufman, Kammholz & Day, Michael W. Sculnick, Gerald S. Hartman, Nicholas D'Ambrosio, New York City, for defendants City of Yonkers and Yonkers Community Development Agency.

Butzel, Long, Gust, Klein & Van Zile, John B. Weaver, John H. Dudley, Mark T. Nelson, Detroit, Mich., Hall, Dickler, Lawler, Kent & Howley, Paul Whitby, New York City, for defendant Yonkers Bd. of Educ.

U.S. Dept. of Justice, Civ. Div., Raymond M. Larizza, Calvin E. Davis, Kirk Victor, John W. Herold, Office of Litigation, U.S. Dept. of Housing & Urban Development, Washington, D.C., for third-party defendant Dept. of Housing & Urban Development.

OPINION

SAND, District Judge.

This action was brought by the United States against the City of Yonkers, the Yonkers Community Development Agency (collectively "the City") and the Yonkers Board of Education, alleging violations of Title VI of the Civil Rights Act of 1964, Title VIII of the Civil Rights Act of 1968, and the Fourteenth Amendment, in the administration of Yonkers' school system and public housing programs. Soon thereafter, the Yonkers Branch of the National Association for the Advancement of Colored People ("NAACP") intervened as a party-plaintiff.

In its amended answer, the City has asserted a counterclaim against the United States and a third-party complaint against the Department of Housing and Urban Development ("HUD"). Subsequently, the NAACP also asserted a claim against HUD.

The claims of the NAACP against HUD were settled by a consent decree approved by this Court on March 19, 1984. Thus, the only remaining claims that involve HUD are those asserted by the City. The United States and HUD have moved to dismiss the City's counterclaim and third-party complaint. For the reasons stated, the motion is granted.

At the outset, we note certain unusual aspects of defendant's counterclaim and third-party complaint. Both of these causes of action arise from the same alleged breach by HUD of its statutory responsibilities. Moreover, the plaintiff, the United States, is both the counterclaim defendant and the real party in interest with respect to the third-party claim, since HUD is an agency of the federal government.1 See, e.g., 14 Wright & Miller, Federal Practice and Procedure § 3655, at 174-75 (1976). Thus, the claims asserted in the counterclaim and third-party complaint are clearly alternative theories of liability, since the defendant could not recover on both.

The City's counterclaim and third-party claims seek monetary relief to reimburse the City in whole or in part for the cost of providing any remedy the Court might order or, alternatively, the equitable equivalent thereof, such as an order requiring HUD "to include the City among the governmental units receiving HUD funding." Defendants' Memorandum of June 13, 1984 at 10.

The United States and HUD have asserted two grounds for dismissal of the City's claims: first, that they are barred by the doctrine of sovereign immunity; and second, that they fail to state a claim for which relief can be granted.

A. Sovereign Immunity

The sovereign immunity defense in this case is grounded upon the ancient principle that the United States, as sovereign, is immune from suit, except to the extent that Congress otherwise consents. United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607 (1980); United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976); United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941). Of course, sovereign immunity applies equally to claims, such as those asserted by the City against HUD, brought against federal agencies regarding their official functions. See Dugan v. Rank, 372 U.S. 609, 620, 83 S.Ct. 999, 1006, 10 L.Ed.2d 15 (1963). See generally 14 Wright & Miller, Federal Practice and Procedure § 3655 at 172-75 (and cases cited therein) (1976). Thus, the City's claims are barred unless they fall within some applicable congressional waiver of the sovereign immunity defense.

The City has advanced three theories upon which it asserts that sovereign immunity has been waived in this case. One theory relies on the recoupment exception to the doctrine of sovereign immunity, a second on the general waiver provision of the Administrative Procedure Act, and the third on the "sue and be sued" clauses of the National Housing Act and the Housing Act of 1948. The first two theories can readily be dismissed as inapplicable to the present case. The issues raised by the third theory are more complex. Ultimately, however, we conclude that this theory, too, fails to provide a basis for finding that sovereign immunity has been waived.

1. Recoupment

The City first argues that sovereign immunity is no bar in the present case because its counterclaim against the United States is in the nature of a recoupment. It is settled doctrine that when the government brings a suit, it waives sovereign immunity as to counterclaims arising out of the same transaction which seek only to defeat all or part of its original claim. E.g., Frederick v. United States, 386 F.2d 481, 488 (5th Cir.1967); United States v. Wallace & Wallace Fuel Oil Corp., 540 F.Supp. 419, 431-32 (S.D.N.Y.1982). See also 14 Wright & Miller, Federal Practice and Procedure § 3654, at 165 (1976). To fall within this rule, however, the counterclaim must not only involve the same transaction as that sued on by the government, but must also not seek "relief different in kind or nature to that sought by the government or in the sense of exceeding the amount of the government's claims." Frederick, supra, 386 F.2d at 488. See also United States v. Ameco Electronic Corp., 224 F.Supp. 783 (E.D.N.Y.1963) (defendant could not assert a counterclaim seeking monetary relief on theory of recoupment where government brought action for replevin of chattels). The United States in this action seeks only equitable relief. The City, in contrast, seeks monetary relief, or the equitable equivalent thereof. Thus, the City cannot rely upon the recoupment exception to the sovereign immunity defense, since its claims involve "relief different in kind or nature to that sought by the government." Frederick, supra, 386 F.2d at 488.

2. The Administrative Procedure Act

The second theory advanced by the City is the general waiver of sovereign immunity contained in the Administrative Procedure Act, 5 U.S.C. § 702. However, that provision is, by its express terms, inapplicable when the relief sought is an award of monetary damages.2 Moreover, the provision has also been held inapplicable when the relief sought is equitable relief that is the equivalent of monetary damages, such as, for example, an order to pay money. See, e.g., Jaffee v. United States, 592 F.2d 712, 719 (3d Cir.), cert. denied, 441 U.S. 961, 99 S.Ct. 2406, 60 L.Ed.2d 1066 (1979). Cf. B.K. Instrument, Inc. v. United States, 715 F.2d 713, 727 (2d Cir.1983) (jurisdictional limitations over monetary claims "could not be avoided by framing a complaint to appear to seek only injunctive, mandatory or declaratory relief against government officials when result would be the equivalent of obtaining money damages").

The City acknowledges this limitation but maintains nevertheless that its claims seeking recovery of the cost of a remedy by requiring HUD "to include the City among the governmental units receiving HUD funding" would fall within the waiver. We believe that this reading of the statute is plainly incorrect. In Jaffee, supra, the Third Circuit held that a purported equitable claim would be considered the equivalent of a claim for monetary damages if it could be satisfied by the payment of money. 592 F.2d at 715.3 We cannot imagine a clearer case of an "equitable claim" that would meet this test than the City's prayer "to include the city among the governmental units receiving HUD funding."4

3. The Housing Acts

Finally, the City contends that sovereign immunity has been waived because its claims fall within the "sue and be sued" provisions of the National Housing Act, 12 U.S.C. § 1702, and the Housing Act of 1948, 42 U.S.C. § 1404a. Section One of the National Housing Act (12 U.S.C. § 1702) provides in pertinent part:

The Secretary shall, in carrying out the provisions of this subchapter and subchapters II, III, V, VI, VII, VIII, IX-A, IX-B, and X of this chapter, be authorized, in his official capacity, to sue and be sued in any court of competent jurisdiction, State or Federal.

Similarly, 42 U.S.C. § 1404a provides that the United States Housing Authority, a predecessor of HUD, "may sue and be sued only with respect to its functions under this chapter, and sections 1501 to 1505 of this title."

These statutes, of course, waive sovereign immunity for claims alleging direct violations by HUD of the substantive provisions of the Housing Acts themselves. See, e.g., Abrams v. Hills, 547 F.2d 1062, 1070 (9th Cir.1976) (failure to implement an "operating subsidy" program for federally financed housing as required by the National Housing Act). More difficult questions of interpretation arise as to claims against HUD alleging breaches of other legal duties that...

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