Urban Developers LLC v. City of Jackson, Miss.

• Decision Date: 24 October 2006
• Docket Number: No. 05-60046.,05-60046.
• Citation: 468 F.3d 281
• Parties: URBAN DEVELOPERS LLC, Plaintiff-Appellee, v. CITY OF JACKSON, MISSISSIPPI; et al., Defendants, City of Jackson, Mississippi; Mississippi Regional Housing Authority VI; John Murphy, in his official and individual capacities; Sharon Wilson, in her official and individual capacities, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

468 F.3d 281

URBAN DEVELOPERS LLC, Plaintiff-Appellee, v. CITY OF JACKSON, MISSISSIPPI; et al., Defendants City of Jackson, Mississippi; Mississippi Regional Housing Authority VI; John Murphy, in his official and individual capacities; Sharon Wilson, in her official and individual capacities, Defendants-Appellants.

No. 05-60046.

United States Court of Appeals, Fifth Circuit.

October 24, 2006.

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Jon L. Schoenhorn (argued), Jon L. Schoenhorn & Associates, Hartford, CT, Crane D. Kipp, Wise, Carter, Child & Caraway, Jackson, MS, for Urban Developers LLC.

Carroll E. Rhodes (argued), Law Offices of Carroll Rhodes, Hazlehurst, MS, for Mississippi Regional Housing Authority VI, John Murphy and Sharon Wilson.

Pieter Teeuwissen (argued), Paul Neville, Jackson, MS, for City of Jackson, MS.

Appeals from the United States District Court for the Southern District of Mississippi.

Before GARWOOD, HIGGINBOTHAM and CLEMENT, Circuit Judges.

GARWOOD, Circuit Judge:

Plaintiff-appellee Urban Developers LLC brought this suit against the City of Jackson and its Mayor, Harvey Johnson, in his individual and official capacities; and also against the Mississippi Regional Housing Authority VI (MRHA) and its officers, John Murphy and Sharon Wilson, in their individual and official capacities. Urban Developers asserted federal takings and procedural due process claims under section 1983, and supplemental state-law claims for taking and deprivation without due process under the Mississippi Constitution, breach of contract, tortious interference with contract, and negligence. A jury found for Urban Developers on most claims except those against Mayor Johnson (and those against the City for negligence and tortious interference). The district court entered judgment on the verdict in favor of Urban Developers and against the City, the MRHA, Murphy and Wilson. In accordance with the jury verdict, the judgment awarded Urban Developers $1,000,000 damages as against the MRHA, Wilson and Murphy, jointly and severally, and also $415,000 damages as against the City. The judgment likewise awarded Urban Developers attorney's fees in the amount of $48,363 as against the City and also $118,406 as against the MRHA, Wilson and Murphy, jointly and severally.

The City of Jackson appeals contending, inter alia, that none of Urban Developers' winning claims were ripe for review. We agree, and dismiss without prejudice all claims appealed by the City.

The MRHA, Murphy and Wilson challenge subject matter jurisdiction and appeal from the district court's denial of their motion for judgment as a matter of law, principally contending that the jury erred in finding that a contract existed between the MRHA and Urban Developers. We agree, and reverse the district court's rulings on the following matters: the contract question, the related state and federal procedural due process claims arising out of an alleged deprivation of those same contract rights, the Mississippi takings claim against the MRHA and Murphy, and the court's ruling on the claims arising under the Mississippi Tort Claims Act. We dismiss all remaining claims against the MRHA and its officers without prejudice as unripe.

FACTS AND PROCEEDINGS BELOW

In 1978, the Department of Housing and Urban Development (HUD) faced a nationwide shortage of low-income housing because an estimated 2.7 million apartment units suffered from deficiencies that made them ineligible for HUD rental subsidies. To address this problem, Congress amended Section 8 of the United States Housing Act of 1937, to create the Moderate Rehabilitation ("Mod Rehab") program. 42 U.S.C. § 1437f (1982). This program authorized HUD to provide financial incentives to the owners of substandard housing to upgrade their properties. Act of Oct. 31, 1978, Pub.L. No. 95-557, § 206(e), 92 Stat.2080, 2092.

HUD regulations governing the program made state public-housing authorities responsible for the program's administration. These public housing authorities would first decide which substandard properties qualified for funding, 24 C.F.R §§ 882.503-882.504 (1982), and would then contract with the owners to rehabilitate the properties. 24 C.F.R. § 882.505 (1982). Once the property was adequately upgraded, 24 C.F.R. § 882.506 (1982), the owners were eligible for contracts with the public housing authority, funded though HUD, that guaranteed a fifteen-year stream of rental subsidies. These rents were pegged at up to 120% of the fair market value, an income stream intended to cover both the costs of rehabilitation as well as operating expenses. 24 C.F.R. §§ 882.403(c), 882.409 (1982). HUD oversaw the public housing authorities' administration of the Mod Rehab program, allocating funds to qualified public housing authorities under one-year annual contribution contracts. 24 C.F.R. §§ 882.403, 882.501 (1982).

In 1990, Congress repealed the Mod Rehab program, but has since provided for one-year extensions on expiring contracts at the owner's request. 42 U.S.C. 1437f (e)(2), repealed by Cranston-Gonzalez National Affordable Housing Act of 1990, Title II, § 289(b), 104 Stat. 4128. See, e.g., HUD Directive Number 01-29, Financial Management Program Requirements for Section 8 Moderate Rehabilitation Program Housing (2001) (providing for extensions).

The Mississippi legislature created local and regional housing authorities in 1938 to provide "safe and sanitary dwelling accommodations for persons of low income." Miss.Code Ann. § 43-33-3 (2001). The defendant-appellant, MRHA, is one such regional housing authority. It is responsible for the administration of the Section 8 housing programs for nine counties in Northeast Mississippi, and is governed by a nine-member board of commissioners which meets monthly. MRHA is authorized to develop and operate low-income housing under the United States Housing Act of 1937. 42 U.S.C. § 1437a(b)(6). During much of the time period relevant to this litigation, Sharon Wilson was the assistant executive director of the MRHA, and her supervisor, John Murphy, was the interim executive director. Both Wilson and Murphy are sued in their individual and official capacities.

The plaintiff-appellee, Urban Developers LLC, a Mississippi limited liability company, was at all times run by its principal member, Shahid Shaikh. On November 20, 2000, Urban Developers purchased the often-flooded and nearly-bankrupt Town Creek Apartments in Jackson, Mississippi, a city within MRHA's region. Town Creek's revenue came entirely from MRHA tenants, subsidized by two Mod Rehab contracts that the prior owner, Mitchell Company, had executed with the MRHA in 1984. Lured by these Mod Rehab contracts, Urban Developers purchased Town Creek from the Mitchell Company and its lienholding banks. Urban Developers was unaware of the flood danger and did not seek flood insurance.

The question of whether the two Mod Rehab contracts were properly assigned from the Mitchell Company to Urban Developers was a highly contested issue at trial. Although both contracts required the express, written consent of the MRHA as a precondition of assignment,¹ such written consent was never given to either the Mitchell Company or Urban Developers, and the MRHA's board minutes contain no discussion or vote approving (or in any way addressing) any assignment of the contracts. The Mitchell Company did however receive oral approval for the assignment from several representatives of MRHA, including the defendant Wilson. At the time, it seems, no one cared about the improper assignment. Urban Developers had rescued the Town Creek Apartments from likely insolvency or lien foreclosure and had immediately invested $200,000 for repairs to the apartments. The MRHA increased Urban Developers' monthly payments as Shaikh brought more apartments up to standard, and suggested that they would continue to renew Urban Developers' yearly Mod Rehab contracts as long as Congress continued to fund them. In fact, since 1998, the yearly directives issued by HUD had required housing authorities to renew the expiring yearly contracts if the owner so requested.

The two contracts associated with Town Creek Apartments were due to expire on March 31, 2001, and October 31, 2001.² Because the appropriations bill was delayed in Congress that year, the HUD directives that explained renewal procedures for FY 2002, beginning October 1, 2001, were also delayed until the Spring of 2001.³ So, it wasn't until July 5, 2001, that Sharon Wilson sent a letter to Shaikh, requesting written verification of his interest in renewing the contracts, outlining the renewal process, and proposing a reduction in rent for the following year. Shaikh replied in writing five days later, notifying her that he did desire to renew both contracts and disputing the lowered rent. In the letter, Shaikh advised Wilson that, in accordance with HUD regulations, he would renew at the lower rate but would then avail himself of an appeal to HUD. Wilson, however, in contravention of HUD regulations, refused to let Shaikh renew the contracts until the dispute about rental values was settled.

During that same period, the MRHA was deciding whether it should just let the two contracts expire. When the time came to request funding from HUD for the 2002 fiscal year, the MRHA's executive director who preceded Murphy⁴ (and who is not party to this suit) did not include Town Creek's Mod Rehab contracts in the budget, deciding instead to rely on tenant-based assistance in the form of housing-choice vouchers. On July 15, 2001, the MRHA board approved a budget for 2002 that did not include funds for the two Mod Rehab contracts. Shiakh was not notified of this decision until months later.

By August 2001, Shaikh and Wilson were deep into the rental dispute. The first contract had already expired on March 31, 2001, although apparently it was...