and in response to its objections to the project. The parties
were represented by counsel and made oral and written
On July 23, 1971, HUD prepared its own analysis. Its conclusion
was that the LVA project was likely to have an integrated
occupancy. It also noted that there was a great need for Section
236 units in Hyde Park-Kenwood due to displacement of former
black residents during urban renewal.
On July 26, 1971, Ernest Stevens, Director of the Chicago FHA
Insuring Office, issued his administrative determination. He
concluded that there was a reasonable probability that the
project would be racially mixed. He also concluded that there was
a great need for low income housing in this area. In order to
further the integration objective, Stevens ordered: (1) the
Section 236 income limits waived on 20 per cent of the project's
units; (2) Section 221(d)(3) exception income limits applied to
all two-bedroom units; (3) the staging of three-bedroom units to
delay their availability until after the highrise units had been
rented; and (4) a detailed plan of tenant selection procedures
devised to attain the maximum possible racial mixed in the
occupancy of the project. LVA complied. Shortly thereafter, this
suit was filed.
In Count I, plaintiffs demand a declaration that their rights
under the Fifth and Fourteenth Amendments to the Constitution of
the United States, the National Housing Act, and the 1964 and
1968 Civil Rights Acts (42 U.S.C. § 2000d et seq.; 42 U.S.C. § 3601
et seq.) have been violated, and that they have a right to
prevent the use of federal subsidy programs to sponsor the LVA
project. They also seek an injunction prohibiting the federal
defendants and the City of Chicago from approving mortgage
insurance, an interest reduction subsidy, or rent supplement
funds for the project.
The specific claim urged in support of an injunction is that
the subsidies will increase racial concentration and segregation
in violation of plaintiffs' constitutional and statutory rights
and the federal defendants' responsibilities.
With respect to the latter, plaintiffs argue that the recently
effectuated HUD Project Selection Criteria, 37 Fed. Reg. 203
(January 7, 1972), set the standard for the federal defendants'
statutory duty — even though these regulations became effective
after the project was initially funded — because it is the law in
effect at this time. See Thorpe v. Housing Authority of the City
of Durham, 393 U.S. 262, 281-82, 89 S.Ct. 518, 21 L.Ed.2d 474
(1969). This Court recognizes the general rule that an appellate
court must apply the law in effect at the time it renders its
decision, but that rule must be reconciled with the Fifth
Amendment's prohibition of deprivation of property without due
process of law. Thorpe, supra, at 278-81, 89 S.Ct. 518. Here the
plaintiffs are asking the Court to apply a new and subsequent
standard to pre-existing contractual obligations and rights. This
was not the case in Thorpe or in Citizens to Preserve Overton
Park v. Volpe, 401 U.S. 402, 417-18, 91 S.Ct 814, 28 L.Ed.2d 136
(1971). Plaintiffs here seek precisely what the Supreme Court in
Thorpe said would be a "far different case." Thorpe, supra, at
279 n. 33, 89 S.Ct. 518. Although this Court is aware of certain
cases in which the Supreme Court has upheld particular
legislation despite effects upon contract rights, it cannot on
the present facts superimpose regulations which were not
specifically stated to be retroactive. See Permian Basin Area
Rate Cases, 390 U.S. 747, 779-80, 88 S.Ct. 1344, 20 L.Ed.2d 312
(1968); Lynch v. United States, 292 U.S. 571, 579, 54 S.Ct. 840,
78 L.Ed. 1434 (1934); Home Bldg. & Loan Ass'n v. Blaisdell,
290 U.S. 398, 431, 54 S.Ct. 231, 78 L.Ed. 413 (1934).
In reviewing the federal defendants' determination that the LVA
236 project would not significantly increase racial
concentration in Hyde Park-Kenwood, this Court's scope of review
is narrow. 5 U.S.C. § 706; Overton Park, supra, at 414, 91 S.Ct.
814; Shannon v. United States Department of Housing and Urban
Development, 436 F.2d 809, 822 (3d Cir. 1970). After reviewing
the voluminous exhibits in this case and Stevens' Administrative
Determination, the Court concludes that the agency's decision was
an "informed one." Shannon, supra, at 822. The officer acted
within the scope of his authority; his decision was based on a
consideration of the relevant factors; there was no clear error
of judgment; and the agency action followed the necessary
procedural requirements. See Overton Park, supra, at 414, 91
In Count II, plaintiffs attack the administrative process
utilized by FHA as unfair and inadequate, and as a denial of
plaintiffs' right to procedural due process. Specifically,
plaintiffs contend they were entitled to transcription of the
July 15, 1971 conference by a court reporter, the right to
cross-examine parties appearing at the conference, and advance
notice of the other parties' claims. Plaintiffs also attack the
impartiality and objectivity of the HUD and FHA officials. This
is not a meritorious claim, as indicated under Count 1, supra.
In essence, plaintiffs seek a review de novo of an
administrative determination. However, as the Shannon court
noted, the judgment made by HUD in a case like this is a
quasi-legislative one (436 F.2d at 821), and plaintiffs' rights
are adequately protected by their opportunity to obtain judicial
review pursuant to the Administrative Procedure Act (5 U.S.C. § 706)
after the agency decision. Shannon, supra, 436 F.2d at 821.
In the absence of statutory power for a de novo review, and there
being no apparent abuse of discretion or "plain error," the Court
cannot appropriately inquire further whether plaintiffs' rights
were violated by the procedures used at the July 15, 1971
Count III charges that the federal defendants have knowingly
administered the federal low and moderate income housing programs
in the Chicago metropolitan area and other metropolitan areas in
a racially discriminatory manner by confining the housing
developments assisted under these programs almost exclusively to
areas of high racial concentration. Plaintiffs seek to enjoin the
administration of the programs in this manner and request
affirmative relief. The federal defendants have moved to dismiss
on the ground that plaintiffs lack standing.
The test for standing is (1) "whether the plaintiff alleges
that the challenged action has caused him injury in fact,
economic or otherwise," and (2) "whether the interest sought to
be protected by the complainant is arguably within the zone of
interests to be protected or regulated by the statute or
constitutional guarantee in question." Association of Data
Processing Service Organizations v. Camp, 397 U.S. 150, 152-53,
90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970).
In their complaint, plaintiffs claim that the federal
defendants' actions have injured them by depriving them of the
opportunity to work and/or reside in a stable, integrated
community, and by imposing upon them the evil characteristics of
segregation. These allegations, which must be accepted as true on
a motion to dismiss, clearly are injuries in fact under the Data
The remaining question is whether the plaintiffs are within the
zone of interests to be protected by the statutes in question.
The Court may only find standing under the National Housing Act;
however, the precedents under this statute do not appear to
extend standing to these plaintiffs. Plaintiffs are not minority
group residents removed by virtue of site acquisition, nor are
they potential residents of federally assisted housing projects.
See Norwalk CORE v. Norwalk Redevelopment Agency, 395 F.2d 920,
927 (2d Cir. 1968); Gautreaux
v. Chicago Housing Authority, 265 F. Supp. 582, 583 (N.D.Ill.
1967). And since the responsible agencies have found — without
appellate challenge — that the LVA § 236 project meets applicable
statutes and regulations, the plaintiffs are not suing as
residents and businessmen of a community which predictably will
be damaged by the erection of a federally subsidized housing
project. See Shannon, supra, 436 F.2d at 817-18.
However, Congress has repeatedly affirmed the goal of the
federal housing program as "a decent home and a suitable living
environment for every American family." 12 U.S.C. § 1701t
(Housing and Urban Development Act of 1968); 42 U.S.C. § 1441
(National Housing Act). We are not aware of any housing cases
expanding the right to a suitable living environment beyond
residents or businessmen of a community attacking public housing
in their community. Nevertheless, given the trend toward
expansion of the classes of persons deemed by the courts to have
standing to sue, the Court cannot say that a group of residents
in one neighborhood of a city cannot attack agency policy which
fosters segregation in that city. Since plaintiffs have attacked
the federal defendants' policy in Chicago, the Court need not
reach the broader question of standing to sue against allegedly
racist housing programs in other cities.
But allegations which will survive a motion to dismiss will not
necessarily support the issuance of a preliminary injunction.
Plaintiffs have shown little or no probability of success on the
merits, or of irreparable injury, or that the balance of the
equities lies with them. Indeed, issuance of an injunction at
this time might seriously injure those who are in need of this
housing, and issuance of an injunction certainly would occasion
losses to these defendants. Cf. Croskey Street Concerned Citizens
et al. v. Romney et al., 459 F.2d 109 (3d Cir. 1972).
Count IV of the complaint alleges that the building of a low
income Section 236 project on HR1B violates LVA's contractual
obligations under the terms of its redevelopment agreement with
the City of Chicago, by which it acquired title to this property.
Plaintiffs contend that they are the intended or third party
beneficiaries of this "agreement" and seek specific performance
of its terms.
This Court concludes that a contract never arose between LVA
and the City on LVA's original proposal to build a luxury
highrise on HR1B. Rather, LVA's original proposal was rejected
and was withdrawn. Therefore, there was no contract.
Construction, Inc. v. Rockwood Borough Municipal Authority,
326 F.2d 751, 752 (3d Cir. 1964); Automatic Voting Machine Corp. v.
Daley, 409 Ill. 438, 449, 100 N.E.2d 591, 596-97 (1951). This
conclusion is supported by DUR's June 20, 1967 resolution. The
"proposal" referred to in paragraph three thereof clearly is the
proposal contained in the LVA-UDF-Amalgamated memorandum
agreement, not the original LVA offer. Accordingly, the
beneficiary issue need not be reached.
For the foregoing reasons, Counts I, II and IV of the complaint
will be dismissed, with judgment thereon for defendants. The
federal defendants' motion to dismiss Count III is denied.
© 1992-2003 VersusLaw Inc.