Wagner v. US Dept. of Housing & Urban Dev.

• Decision Date: 16 September 1993
• Docket Number: Civ. A. No. 92-420.
• Parties: Patsy WAGNER, Plaintiff, v. UNITED STATES of America, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Defendant.
• Court: U.S. District Court — Eastern District of Kentucky

835 F. Supp. 953

Patsy WAGNER, Plaintiff, v. UNITED STATES of America, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Defendant.

Civ. A. No. 92-420.

United States District Court, E.D. Kentucky, Pikeville.

September 16, 1993.

Phyllis J. Pyles, U.S. Dept. of Justice, Torts Branch, Civil Div., Washington, DC, for defendant.

MEMORANDUM OPINION AND ORDER

HOOD, District Judge.

This matter is before the Court on motion of the defendant, United States of America, Department of Housing and Urban Development, HUD, to dismiss. Record No. 2. The parties having fully briefed the issues, this matter is now ripe for decision.

FACTUAL BACKGROUND

The plaintiff, Patsy Wagner, Wagner, was the former Executive Director of the Housing Authority of Pikeville. Authority. HUD employee Mary Stumler, Stumler, in September and October of 1990, conducted a management review of the Authority. In October of 1990, HUD issued a report on the administration of the Authority based on its review. Wagner claims that HUD employees were negligent in performing the review and in imposing a Limited Denial of Participation, LDP, sanction against her.

Specifically, Wagner alleges that HUD employees failed to review existing documentation, adequately interview or consult with Authority officers, ascertain and report the existing condition of the Authority and its management practices, and to make true statements of fact in the review report. Wagner further claims that supervisory personnel in HUD's Louisville Area Office failed to supervise Stumler in the performance of the review and production of the report. Wagner argues that, based on the errors in the review and the report, the HUD Louisville Area Office issued an LDP against her, suspending her for one year from employment or participation in HUD-funded programs in Kentucky. The issuance of the LDP, according to the plaintiff, resulted in her discharge from the Authority.

Subsequent to her discharge, Wagner requested an informal conference to contest the LDP and a formal hearing before a HUD administrative judge. During the LDP hearing, the plaintiff and the defendant entered into an Agreed Order of Settlement and Dismissal. Pursuant to the agreement, HUD lifted the LDP that day, May 9, 1991, and Wagner withdrew her appeal of the imposition of the sanction. The plaintiff now seeks damages for past and future lost wages, pension benefits, health insurance coverage, injury to her professional reputation, emotional and mental distress, and pain and suffering.

DISCUSSION

For the purpose of clarity, the Court will address the four counts of the plaintiff's complaint separately.

A. HUD Negligently Conducted and Supervised a Management Review of the Authority and Erroneously Issued Sanctions Against the Plaintiff.

Count I of the plaintiff's complaint asserts a claim under the Federal Tort Claims Act, FTCA, 28 U.S.C. § 1346(b), due to the negligent performance of the management review and improper issuance of the LDP. HUD argues that this Court does not have jurisdiction over the claim because the challenged conduct falls within the discretionary function exception to the FTCA and because there is no analogous cause of action under Kentucky law.

The FTCA constitutes a waiver of sovereign immunity. However, the FTCA's waiver of immunity is limited by, among other things, the discretionary function exception codified at 28 U.S.C. § 2680(a). Accordingly, federal courts lack subject matter jurisdiction to entertain claims falling within this exception. Feyers v. United States, 749 F.2d 1222, 1225 (6th Cir.1984), cert. denied, 471 U.S. 1125, 105 S.Ct. 2655, 86 L.Ed.2d 272 (1985) (citations omitted). The discretionary function exception of the FTCA provides that,

The provisions of this chapter and section 1346(b) of this title shall not apply to —

(a) Any claim based upon an act or omission of an employee of the Government, exercising due care, in the execution of a statute or regulation, whether or not such statute or regulation be valid, or based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused.

28 U.S.C. § 2680(a) (emphasis added).

The United States Supreme Court has detailed the context in which the discretionary function exception applies. See United States v. Gaubert, 499 U.S. 315, 111 S.Ct. 1267, 113 L.Ed.2d 335 (1991); Berkovitz v. United States, 486 U.S. 531, 108 S.Ct. 1954, 100 L.Ed.2d 531 (1988); United States v. S.A. Empresa De Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 104 S.Ct. 2755, 81 L.Ed.2d 660 (1984); and Dalehite v. United States, 346 U.S. 15, 73 S.Ct. 956, 97 L.Ed. 1427 (1953). Initially, the court must determine if the challenged conduct is discretionary in nature. Berkovitz, 486 U.S. at 536, 108 S.Ct. at 1958. If an "element of judgment or choice" is involved, the conduct is discretionary. Id. Similarly, Dalehite held that where there is "room for policy judgment and decision there is discretion." 346 U.S. at 36, 73 S.Ct. at 968. Once the conduct is determined to be discretionary, the court must then decide if the discretion exercised is the kind that the exception was promulgated to protect. Gaubert, 499 U.S. at 321-22, 111 S.Ct. at 1273 (citations omitted). For example, whether the discretionary action is "based on considerations of public policy." Id., at 323, 111 S.Ct. at 1274. If the exception applies, even negligence on the part of employees does not create liability; the exception shields the actors' conduct regardless. Dalehite, 346 U.S. at 32-33, 73 S.Ct. at 966.

HUD relies on several regulations to support its position that the issuance of the LDP was a discretionary decision. Initially, the very decision of which sanction is appropriate is left to agency judgment, not specified by the regulations. 24 C.F.R. § 24.100 et seq. Once the agency decides that an LDP, as opposed to another form of sanction, will be issued, 24 C.F.R. § 24.700 governs. This section specifically states that "the decision to order a limited denial of participation shall be discretionary and in the best interests of the Government." 24 C.F.R. § 24.700. That language alone reveals that policy determinations such as the "best interests of the government" are left to the discretion of HUD employees. In this context, the "best interests of the government," as summarized by the defendant, involves preventing fraud and waste in public housing.

The issuance of the LDP, according to 24 C.F.R. § 24.705, is to be based upon "adequate evidence" of certain causes, as determined by the issuing officer. The regulations define "adequate" in 24 C.F.R. § 105(a) as "information sufficient to support the reasonable belief that a particular act or omission has occurred." Again, the regulation is vesting discretion in agency personnel to formulate and act upon a "reasonable belief." This clearly meets the Supreme Court's interpretation of discretion in Gaubert which held that a "discretionary act is one that involves choice or judgment...." 499 U.S. at 325, 111 S.Ct. at 1275. Further, such discretion in sanctioning clearly involves public policy considerations such as ensuring efficient use of public funds while providing adequate public housing.

The plaintiff, in fact, concedes that HUD's decision to issue an LDP is discretionary, "obviously, HUD could choose from a variety of sanctions if the facts were adequately investigated. However, HUD did not investigate adequately or report accurately the facts before issuing the Review or LDP." Record No. 4, 7. The plaintiff essentially argues that because HUD employees issued the LDP based on what she deems inadequate evidence, they engaged in negligent conduct which is not protected by the discretionary function exception. For support, the plaintiff relies primarily on Donohue v. United States, 459 F.Supp. 465 (E.D.Mich.1978). Donohue, though factually similar to the case at hand and supportive of the plaintiff's position, conflicts with recent Supreme Court precedent. Also, the plaintiff's negligence theory has been specifically rejected as an exception to the discretionary function exception. Dalehite, 346 U.S. at 32-33, 73 S.Ct. at 966.

Wagner distinguishes the Supreme Court cases factually, and argues that they are inapplicable because they involve federal banking agencies, airline pilots, and military duties, as opposed to HUD suspensions. Regardless of these distinctions, the Supreme Court's analysis of the applicability of the discretionary function exception applies equally in this context. The plaintiff also intermingles an analogy of Kentucky law with her discussion of the discretionary function exception. However, if the exception applies, whether an analogous cause of action exists under Kentucky law is irrelevant.

This Court finds that the discretionary function exception applies to the issuance of an LDP by HUD employees. Accordingly, no jurisdiction lies to consider this count of the plaintiff's complaint. Id., at 24, 73 S.Ct. at 962. Further, because this Court finds that the issuance of the LDP is conduct protected by the discretionary function exception, it need not address the question of whether there exists an analogous cause of action under Kentucky law.

B. HUD Wrongfully Denied the Plaintiff's Petition for Costs and Attorney's Fees.

Count II of the plaintiff's complaint alleges that, under the Equal Access to Justice Act, 5 U.S.C. § 504, EAJA, HUD wrongfully denied the plaintiff's petition for costs and attorney's fees in contesting the issuance of the LDP. An administrative judge denied the plaintiff's EAJA petition on June 24, 1991, finding that the EAJA does not apply to LDP cases. Subsequently, the plaintiff timely filed a petition for review with the Secretary of HUD pursuant to 24 C.F.R. § 26.25.

A party desiring review of the Secretary's...