Valentine Properties Associates v. United States Dep't of Hous., No. 05 Civ. 2033.

• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Writing for the Court: OPINION
• Citation: 785 F.Supp.2d 357
• Parties: VALENTINE PROPERTIES ASSOCIATES, LP and Park Properties Associates, LP, Plaintiffs,v.UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT and Alphonso Jackson, in his capacity as Secretary of the Unites States Department of Housing and Urban Development., Defendants.
• Docket Number: No. 05 Civ. 2033.
• Decision Date: 06 April 2011

785 F.Supp.2d 357

VALENTINE PROPERTIES ASSOCIATES, LP and Park Properties Associates, LP, Plaintiffs,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT and Alphonso Jackson, in his capacity as Secretary of the Unites States Department of Housing and Urban Development., Defendants.

No. 05 Civ. 2033.

United States District Court, S.D. New York.

April 6, 2011.

[785 F.Supp.2d 360]

Welby, Brady & Greenblatt, LLP, by: Alan David Singer, White Plains, NY, Esq., for Plaintiffs.Preet Bharara, United States Attorney for the Southern District of New York, by: Mara E. Trager, Esq., New York, NY, for Defendants.OPINION SWEET, District Judge.

Plaintiffs Valentine Properties, LP (“Valentine”) and Park Properties, LP (“Park”), collectively, the “Plaintiffs”, filed a motion for summary judgment on April 29, 2010. Defendants United States Department of Housing and Urban Development (“HUD”) and Alphonso Jackson (“Jackson”), collectively, the “Defendants,” cross-filed for judgment on the pleadings on the same day. Oral argument was heard on October 13, 2010. For the reasons stated below, Plaintiffs' motion is denied and Defendants' motion is granted.

I. Statement of Facts and Prior Proceedings

Plaintiffs are the owners of two multi-family housing projects in Yonkers, New York, that receive project-based housing assistance payments from HUD, pursuant to Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437 et seq. See Am. Cmplt. ¶¶ 1, 2, 13. Both plaintiffs entered into thirty-year term Housing Assistant Payment (“HAP”) contracts with HUD in the late 1970's. Id. ¶ 13. Pursuant to the HAP contracts, Plaintiffs were required to maintain and operate their apartment units and related facilities so as to provide decent, safe, and sanitary housing. Id. ¶¶ 15, 35. The contracts also have provided HUD with inspection rights to ensure compliance. Id.

On June 30, 1998, HUD published a proposed rule to amend parts of Title 24 of the Code of Federal Regulations and establish uniform physical condition and inspection standards for certain HUD programs, including Section 8 project-based housing like the housing projects owned by Plaintiffs. 63 Fed.Reg. 35650 (Jun. 30, 1998). The introductory summary to the proposed rule explained its purpose:

HUD's Section 8 housing, Public Housing, HUD-insured multifamily housing, and other HUD assisted housing (collectively, HUD housing) currently must meet certain standards and must undergo an annual physical inspection to determine that the housing qualifies as decent, safe, sanitary, and in good repair. The description or components of what constitutes acceptable physical housing quality and the physical inspection procedures by which the standards are determined to be met, however, vary from HUD program to HUD program.

[785 F.Supp.2d 361]

To the extent possible, HUD believes that housing assessed under its programs should be subject to uniform physical standards, regardless of the source of the subsidy or assistance. Additionally, to the extent feasible, HUD believes that the physical inspection procedures by which the standards will be assessed should be uniform in the covered programs. Therefore, this rule proposes that certain HUD housing, as defined in this rule, must meet uniform physical condition standards to ensure that the HUD housing is decent, safe, sanitary, and in good repair. This rule also generally describes new physical inspection procedures that will allow HUD to determine conformity with such standards. This rule would not change the requirement for annual physical inspections currently found in the covered HUD programs.63 Fed.Reg. 35650. The rule was apparently intended to unify, to the extent feasible, the inspection standards and procedures for various HUD programs. Id. These inspections were to be conducted under the auspices of the newly-established “Real Estate Assessment Center” (“REAC”). See 63 Fed.Reg. 46566, 46567 (Sept. 1, 1998). After notice and comment, the final rule was promulgated on September 1, 1998 (hereinafter the “1998 final rule”). Id. Subsequently, on December 8, 2000, after further notice and comment, HUD issued another rule setting forth, among other things, the administrative process by which HUD would notify owners of HUD's assessment of the physical condition of their multifamily housing. See 65 Fed.Reg. 77230 (Dec. 8, 2000) (hereinafter the “2000 final rule”). The products of the 1998 and 2000 rulemaking procedures will be collectively referred to as the “REAC Regulations.”

In 2003, several years after the REAC Regulations took effect, and after several annual inspections of Plaintiffs' properties by HUD according to the REAC standards, Plaintiffs' properties failed their annual inspection. See Am. Cmplt. ¶¶ 21–22. HUD agreed not to terminate Plaintiffs' HAP contracts as a result of these failing scores. Id. ¶ 75. Nevertheless, Plaintiffs filed their initial complaint, dated February 5, 2005, asserting inter alia, that HUD's application of the REAC standards to Plaintiffs' properties and HUD's attempt to terminate Plaintiffs' HAP contracts based on the failed REAC inspections violated the terms of the HAP contracts. See generally Complaint [Dkt. Entry No. 1].

HUD moved to dismiss the complaint on grounds of: (a) lack of subject matter jurisdiction because HUD had not waived its sovereign immunity from Plaintiffs' claims; (b) lack of standing because Plaintiffs' had suffered no concrete injury, and (c) the Court of Federal Claims' exclusive jurisdiction over Plaintiffs' breach of contract claims pursuant to the Tucker Act, 28 U.S.C. § 1491. See Memorandum of Law in Support of Motion to Dismiss the Complaint, dated July 8, 2005 [Dkt. Entry No. 5], at 7–19. In the alternative, HUD also argued that the complaint should be dismissed for failure to state a claim because HUD had properly applied the REAC standards to Plaintiffs' properties. Id. at 19–26.

The Court denied HUD's motion to dismiss for lack of jurisdiction. See Oct. 12, 2007 Decision and Order [Dkt. Entry 12], at 8–11, 2007 WL 3146698 (“2007 Order”). The Court determined that Plaintiffs could assert 28 U.S.C. § 1331 as an applicable basis for jurisdiction. See Id. at 11–14. The Court permitted Plaintiffs to amend the complaint to allege jurisdiction under § 1331, and then analyzed HUD's motion to dismiss under the assumption that such

[785 F.Supp.2d 362]

an amendment would be made. Id. at 14–31. The Court granted part of HUD's motion with respect to its argument that the complaint failed to state a claim.

Specifically, in light of HUD's agreement not to terminate the HAP contracts on the basis of the already-conducted failed REAC inspections, the Court dismissed Plaintiffs' claim concerning these inspections of their properties because they had not resulted in any concrete injury. Id. at 21–23. The Court also rejected Plaintiffs' contention that HUD's regulations prohibit application of the REAC inspection standards to Plaintiffs' properties, determining that the REAC standards apply to all HAP contracts, regardless of when the HAP contact was executed. Id. at 24–25. In addition, the Court dismissed Plaintiffs' claim that HUD's adoption of the REAC standards unlawfully amended the HAP contracts by changing the definition of “decent, safe and sanitary.” Id. at 25–31. Finally, the Court found that because HUD's motion papers had not addressed certain of Plaintiffs' claims, those claims survived the motion to dismiss. Id. at 25. Specifically, Plaintiffs' surviving claims were that: 1) in light of the fact that REAC's inspection standards are applied only to certain types of Section 8 contracts, HUD's adoption of two different definitions of decent, safe and sanitary depending on the type of Section 8 contract involved is arbitrary and capricious; 2) any attempt by HUD to apply REAC inspection standards to terminate Plaintiffs' pre–1980 HAP contracts is barred and illegal under HUD's own regulations; and 3) the REAC regulations violate federal provisions, standards and preconditions to adoption. Id.

As expected, following the Court's decision, Plaintiffs filed an amended complaint, asserting 28 U.S.C. § 1331 as the basis of jurisdiction. Am. Cmplt. ¶ 7. Plaintiffs also removed from their complaint the claims dismissed by the Court in its 2007 Order but reasserted the claims that the Court had found to survive the Government's motion to dismiss.

II. Applicable Standards

The legal standard used to decide a motion for judgment on the pleadings made pursuant to Rule 12(c) is identical to the standard used to decide a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6). See, e.g., Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir.2001) (collecting cases). Therefore, to survive a motion for judgment on the pleadings pursuant to Rule 12(c), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)), Though the court must accept the factual allegations of a complaint as true, it is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555, 127 S.Ct. 1955). Plaintiffs must allege sufficient facts to “nudge [ ] their claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955.

Summary judgment “should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In considering a summary judgment motion, the Court must “view the evidence in the light most favorable to the non-moving party and draw...