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CORNELL VILLAGE TOWER CONDO. v. HUD

October 9, 1990

CORNELL VILLAGE TOWER CONDOMINIUM, HAROLD R. METCALF, KARLYN A. METCALF, IMRE G. HIDVEGI, DENISE F. HIDGEVI, THOMAS ROBY, MARY ROBY, DAVID Z. FEUER, and JOYCE H. FEUER, Plaintiffs,
v.
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, SAMUEL PIERCE, Secretary of Housing and Urban Development, and GERTRUDE JORDAN, Regional Administrator of Chicago Area Housing and Urban Development Office, Defendants


James B. Moran, United States District Judge.


The opinion of the court was delivered by: MORAN

JAMES B. MORAN, UNITED STATES DISTRICT JUDGE

 Seeking to prevent the construction of a 21-story apartment building in their neighborhood, plaintiffs, a condominium association and several of its members (collectively "Cornell"), have filed this action against the United States Department of Housing and Urban Development and two of its officials (collectively "HUD"), alleging that HUD's decision to award this project a Housing Development Grant was arbitrary, capricious, and an abuse of discretion. Before this court is HUD's motion to dismiss or for summary judgment. For the following reasons, that motion is granted in part and denied in part.

 FACTS

 The Housing Development Grant Program, authorized by § 17(d) of the U.S. Housing Act of 1937, 42 U.S.C. § 1437 o (d) (1988), provides federal funds for the rehabilitation and development of privately owned property that will be used for primarily residential rental purposes and that is located in areas experiencing severe rental housing shortages. To be eligible for a grant under this program, a developer must reserve at least 20 percent of the project's units for lower income families. The Secretary of Housing and Urban Development has awarded a Housing Development Grant to the City of Chicago ("the City") for the development of the Park Tower Apartment building, the project at issue here, and Cornell is attempting, through this suit, to enjoin the release of funds. In its two-count complaint, Cornell points to several violations of HUD regulations that allegedly render HUD's decision to award the grant "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(2)(A) (1988). Count I asserts that HUD failed to ensure that the City's application met two of the threshold requirements set forth in 24 C.F.R. § 850.37, and Count II claims that HUD's erred in accepting the City's finding that the project would have no significant impact on the environment. We consider these allegations in turn.

 DISCUSSION

 A. Count I: HUD's Threshold Requirements for Housing Development Grant Applications

 Pursuant to the Housing Development Grant Program of the United States Housing Act of 1937, 42 U.S.C. § 1437 o (1988), the Department of Housing and Urban Development has promulgated a series of regulations that sets forth the eligibility and application requirements and award procedures for Housing Development Grants. 24 C.F.R. Pt. 850 (1989). These regulations require, as part of the application procedure, that a potential grantee fulfill certain threshold requirements before an application will be considered by HUD. 24 C.F.R. § 850.37. According to Cornell, HUD's initial approval and subsequent failure to rescind the grant in this case violates two of § 850.37's threshold requirements: § 850.37(i), which forbids consideration of applications where the applicant is not able to ensure that "the project will be started within 24 months of notice of HUD preliminary funding approval and will be completed in a timely manner"; and § 850.37(m), which limits consideration to those applications "determined not to have a negative effect on neighborhood development or cause undue relocation hardship."

 In urging dismissal of Count I of Cornell's complaint, HUD asserts that judicial review of the alleged violations of § 850.37 is barred by sovereign immunity, arguing that agency action taken pursuant to these regulations is "committed to agency discretion by law," 5 U.S.C. § 701(a)(2), and that as a result, the waiver of sovereign immunity found in the Administrative Procedure Act does not extend to the allegations in Count I. Cornell, in turn, points to 42 U.S.C. § 1404a (1988) as an alternative waiver of sovereign immunity; that section provides, inter alia :

 
The Secretary of Housing and Urban Development may sue and be sued only with respect to its functions under the United States Housing Act of 1937, as amended [ 42 U.S.C. 1437 et seq.], and title II of Public Law 671, Seventy-sixth Congress, approved June 28, 1940, as amended [ 42 U.S.C. 1501 et seq.].

 HUD attempts to disclaim the applicability of § 1404a by arguing that Cornell has asserted a violation of regulation rather than of statute, and therefore only the APA can provide the waiver of sovereign immunity necessary to permit review of the alleged violations. This argument, however, misconstrues the nature and applicability of the Administrative Procedure Act. The APA broadly subjects agency action of all kind to judicial review; it is not restricted to action claimed to transgress an agency regulation. See, e.g., Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971) (APA invoked to review an alleged violation of § 4(f) of the Department of Transportation Act of 1966). Similarly, judicial review of regulatory irregularities is available under non-APA auspices. See, e.g., Grant v. Schweiker, 699 F.2d 189 (4th Cir. 1983) (review of alleged violation of a Social Security Regulation pursuant to § 405 of the Social Security Act). Review in this case, then, could be predicated on a sovereign immunity waiver found in § 1404a. And that section, which applies to suits relating to the functions of the Secretary of Housing and Urban Development under, inter alia, the Housing Act of 1937, does appear to extend to an action for equitable damages alleging a violation of a regulation promulgated by HUD to implement § 17 of this Act. See United States v. Yonkers Board of Education, 594 F. Supp. 466, 470 (S.D.N.Y. 1984) (§ 1404a waives sovereign immunity "for claims alleging direct violations by HUD of the substantive provisions of the Housing Acts"); Little Earth of United Tribes, Inc. v. United States Dep't of Housing & Urban Dev., 584 F. Supp. 1292, 1299 (D. Minn. 1983); cf. Batterton v. Francis, 432 U.S. 416, 425 n. 9, 53 L. Ed. 2d 448, 97 S. Ct. 2399 (1977) (quoting U.S. Dep't of Justice, Attorney General's Manual on the Administrative Procedure Act 30 n.3 (1947)) (suggesting that substantive regulations issued pursuant to statutory authority are part of the statutory scheme and "'have the force and effect of law'"). *fn1"

 That sovereign immunity may be waived by a non-APA provision, however, does not mean that the exceptions to judicial review contained in the APA can be ignored. Section 701(a) of the APA excludes judicial review of agency action in two situations: where a statute precludes review and where agency action is committed to agency discretion by law. 5 U.S.C. § 701(a). These limitations on review do not represent, as HUD and Cornell seem to think, exceptions to the APA's comprehensive waiver of sovereign immunity contained in § 702; rather, they constitute distinct inquiries that therefore must be pursued even in the presence of an alternative waiver. See Saferstein, Nonreviewability: A Functional Analysis of "Committed to Agency Discretion ", 82 Harv. L. Rev. 367, 368-69; Scanwell Laboratories, Inc. v. Shaffer, 137 U.S. App. D.C. 371, 424 F.2d 859, 873-74 (D.C. Cir. 1970). *fn2"

  HUD does not assert, nor do we believe, that Congress intended to preclude review of agency action in this area; *fn3" indeed, § 1404a indicates a clear intent to make HUD's actions under the Housing Act of 1937 reviewable. Instead, HUD's argument focuses on the second prong of § 701(a), claiming that the agency action at issue is nonreviewable because of its discretionary nature. Although frequently discussed, this exception is quite narrow in scope; the Supreme Court, in its first exploration of this doctrine, announced that § 701(a)(2) precluded review only "in those rare instances where 'statutes are drawn in such broad terms that in a given case there is no law to apply.'" Overton Park, 401 U.S. at 410 (quoting S. Rep. No. 752, 79th Cong., 1st Sess. 26 (1945) (legislative history of the Administrative Procedure Act)). Though criticized, see Cardoza v. Commodity Futures Trading Commission, 768 F.2d 1542, 1548-49 & n. 5 (7th Cir. 1985), the "no law to apply" standard appears to enjoy continued vitality. See Heckler v. Chaney, 470 U.S. 821, 84 L. Ed. 2d 714, 105 S. Ct. 1649 (1985); Turner v. United States Parole Commission, 810 F.2d 612, 614 (7th Cir. 1987) ("judicial review will . . . be presumed unless the statutory scheme provides no meaningful guideline by which to define the limits of the agency's discretion"); Robbins v. Reagan, 250 U.S. App. D.C. 375, 780 F.2d 37, 45 (D.C. Cir. 1985). Where agency action is of a sort that is inherently unsuitable for judicial review, a presumption of nonreviewability is imposed, which can be defeated by a showing that Congress intended to circumscribe agency discretion by "provid[ing] meaningful standards for defining the limits of that discretion." Heckler, 470 U.S. at 834; Cardoza, 768 F.2d at 1549; Robbins, 780 F.2d at 44. This requirement necessarily imposes a greater burden on the party seeking review than the test for presumptively reviewable cases even though the two standards seem to be drawn in similar terms. Cf. Robbins, 780 F.2d at 44-45 (referring to a "heightened degree of discernible standards" required to overcome the presumption of nonreviewability).

 The category of cases that are deemed inherently unsuitable for judicial review is very narrow, see Cardoza, 768 F.2d at 1549, and only encompasses those areas of agency action in which courts are not qualified to determine whether an agency has abused its discretion, such as "State Department action in foreign affairs, . . . Federal Reserve Board decisions setting interest rates" and agency refusal to take enforcement measures. Id. HUD's decision to award Housing Development Grants cannot be analogized to any of the situations in this narrow category of presumptively nonreviewable action. We are left, then, to inquire whether the more relaxed standard applicable to presumptively reviewable cases serves to bar judicial review of HUD's actions in this case. We conclude that it does not.

 In discerning whether a statutory scheme provides sufficient law for a reviewing court to apply, two factors must be considered. See Sunstein, Reviewing Agency Inaction After Heckler v. Chaney, 52 U. Chi. L. Rev. 653, 658 (1985). The first focuses on the statute at issue and as such relates to congressional intent. See Saferstein, supra p. 5, at 371 ("Courts properly applying the doctrine [of "committed to agency discretion"] try to discern whether Congress intended review of the particular agency determination at issue."). The second factor looks to the actual allegations of the plaintiff to determine whether the statutes or regulations cited provide meaningful standards on which to base judicial evaluation. See Sunstein, supra, at 658-69; Saferstein, supra p. 5, at 395; Robbins, 780 F.2d at 47.

 The regulatory provisions at issue in this case were promulgated pursuant to § 17 of the U.S. Housing Act of 1937, which authorizes the Secretary of HUD, inter alia, "to make development grants for new construction or substantial rehabilitation . . . of real property to be used primarily for residential rental purposes." 42 U.S.C. § 1437 o (a)(1)(B), (d)(1). The statute proceeds to specify the general criteria for area eligibility, the requirements for actual grant recipients, the information to be included in applications for grants, and the factors to be considered by the Secretary of HUD in selecting grant recipients. While the individual provisions of the statute seem to be quite focused and specific, collectively they reflect a general sense of the overriding purpose of the development grant program: to redress the severe shortage of decent rental housing in those areas -- especially large cities -- where availability is limited. See 42 U.S.C. § 1437 o (d)(2) (to qualify for grant, project must be "located in an area that is experiencing a severe shortage of decent rental housing opportunities for families and individuals without other reasonable and affordable housing alternatives in the private market"), (d)(5)(A), (d)(6)(B), (d)(9). Three secondary concerns also emerge: a desire to ensure a certain level of construction or rehabilitation aimed at lower income families, see 42 U.S.C. § 1437 o (d)(4)(C), (d)(4)(E), (d)(6)(A), to promote the development of housing at the least cost to the federal government, see 42 U.S.C. § 1437 o (d)(4)(B), (d)(5)(E), and to minimize the disruption of existing neighborhoods. See 42 U.S.C. § 1437 o (d)(3)(D), (d)(5)(C). It is true that § 17 allows the Secretary some discretion in determining whether to select a project for a grant, for the statute provides that the Secretary shall make selections "on the basis of the extent" of fulfillment of eight criteria, 42 U.S.C. § 1437 o (d)(5), without explicitly dictating the relative importance of each criteria. But Congress does direct the Secretary to give priority to projects that exceed the statutory minimum percentage of units reserved to low-income tenants and those that are located in areas experiencing profound housing shortages. 42 U.S.C. § 1437 o (d)(6). And the underlying goals of the program offer further guidance to a court reviewing alleged arbitrary action of the Secretary. As a general matter, then, the governing statute in this case clearly provides "law to apply."

 The second factor to be considered in determining whether there is law to apply requires us to look to Cornell's actual allegations. Cornell asserts a violation of two regulations, the first prohibiting HUD from considering applications unless it is assured of a timely project start and completion, and the second requiring HUD to make a threshold determination that a project will not have a negative effect on neighborhood development or cause undue relocation hardship. These regulations in turn correspond to specific provisions in the authorizing statute requiring rental development programs assisted under § 17 to provide that "the grantee must commence construction or substantial rehabilitation activities not later than 24 months after notice of project selection," 42 U.S.C. § 1437 o (d)(4)(G), and directing the Secretary to consider the effect of the proposal on neighborhood development before selecting a project for assistance. 42 U.S.C. § 1437 o (d)(5)(C). The statute additionally requires the Secretary to consider the applicant's record of performance in meeting housing needs and his capacity to complete the project in a timely manner.


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