III. PLAINTIFFS' CLAIMS UNDER SECTION 1437p
Plaintiffs seek relief against both the CHA defendants and the HUD defendants under causes of action rooted in § 1437p of the United States Housing Act. In Count I, plaintiffs sue the CHA and defendant Lane under 42 U.S.C. § 1983 for violation of plaintiffs' rights under 42 U.S.C. § 1437p. In Count II, plaintiffs seek relief against HUD and Secretary Cisneros alleging a statutory claim for violation of plaintiffs' rights under § 1437p.
The Housing Act establishes conditions under which a public housing authority may demolish or dispose of existing public housing units. Section 1437p(d) provides that a public housing agency "shall not take any action to demolish or dispose of a public housing project without obtaining the approval of the Secretary and satisfying the conditions specified in subsections (a) and (b) of this section." 42 U.S.C. § 1437p(d). Subsection (a) requires a public housing authority to secure the approval of the Secretary of HUD before demolishing or disposing of the development. 42 U.S.C. § 1437p(a). Subsection (b) requires that the public housing authority consult with tenants and tenant councils who will be affected by the demolition or disposition, and to provide assistance and alternative units to any displaced tenants. 42 U.S.C. § 1437p(b).
This case is not about whether defendants have satisfied the conditions of 42 U.S.C. § 1437p(a) and (b). The CHA defendants have made no formal application to demolish or dispose of the Horner developments, so they have not even tried to meet the statutory conditions for demolition. Plaintiffs contend, however, that by failing to maintain Horner and allowing it to exist in a state of perpetual disrepair, defendants have, in effect, demolished Horner while skirting the need to comply with § 1437p(a) and (b). By their inaction defendants have, according to plaintiffs, accomplished the constructive or de facto demolition of the Horner developments.
Earlier in this litigation, in a case of first impression in this jurisdiction, this Court recognized de facto demolition as a viable cause of action under § 1437p. Henry Horner Mothers Guild v. Chicago Hous. Auth., 780 F. Supp. 511, 514-15 (N.D. Ill. 1991). Accord Tinsley v. Kemp, 750 F. Supp. 1001, 1008 (W.D. Mo. 1991)); Concerned Tenants Ass'n of Father Panik Village v. Pierce, 685 F. Supp. 316, 320 (D. Conn. 1988); contra Dessin v. Housing Authority of Fort Meyers, No. 90-232 (M.D. Fla. Sept. 27, 1990). The Court agreed with plaintiffs that "conduct that destroys a project--in the sense that the housing units would no longer be habitable--is governed by § 1437p(d) regardless of whether such conduct is characterized as affirmative conduct or passive neglect." Henry Horner, 780 F. Supp. at 513. But the Court did not reach "the far more difficult problem of what would have to be proved to show de facto demolition." Id. at 515.
Plaintiffs have proposed a standard of proof for establishing liability for de facto demolition. Plaintiffs contend they may meet their burden by showing either that: (1) defendants took actions likely to result in either active or de facto demolition of Horner or (2) defendants in fact (de facto) "demolished" Horner, in whole or in part. Additionally, plaintiffs assert that they can establish de facto demolition by showing either that a substantial number of residential units are vacant or that a substantial number of units are not habitable.
The Court is not prepared to adopt plaintiffs' formulation of what must be proved to show de facto demolition. Nor is the Court ready to articulate its own standard of proof for establishing liability under § 1437p(d). De facto demolition has never before been proved. The cause of action was judicially recognized for the first time only a few years ago. It appears that only one other court has actually considered whether a de facto demolition had been proved, see Gomez, et al. v. Housing Authority of the City of El Paso, et al., 805 F. Supp. 1363, 1992 U.S. Dist. LEXIS 17087 (W.D. Tex. Nov. 2, 1992), and that case does not provide a real life example of what a de facto demolition might look like. The court in Gomez found that the plaintiffs failed to adduce sufficient evidence to prove de facto demolition--a determination the court reached after the benefit of a trial.
A trial is necessary in this case too.
A genuine issue of material fact exists as to whether the Horner developments are demolished "in the sense that the housing units [are] no longer  habitable," Henry Horner, 780 F. Supp. at 513, and if they are uninhabitable whether defendants' conduct caused the de facto demolition. Plaintiffs have presented the Court with certain indicia of uninhabitability. Vacancy rates at Horner are quite high, and the CHA's vacancy reduction strategies have not helped. But the Court will not rest its determination on vacancy rates alone, as plaintiffs suggest. It is, in the Court's view, too narrow a criterion on which to judge the habitability of a building. The physical conditions at the Horner developments may be deplorable, but on this record it is unclear whether the scores of code violations reported by plaintiffs translate to a demolished property. Nor can the Court say whether the physical conditions at Horner are worse than those that exist at the other public housing developments in Chicago. Under plaintiffs' theory of the case--that defendants chose to allocate insufficient funds to Horner and to not make necessary repairs--the conditions at Horner should be appreciably worse than at those developments that defendants have favored at Horner's expense.
Other indicia of uninhabitability include the relative paucity of funds defendants have allocated to Horner, especially in light of the soaring vacancy rates there. Of course, defendants' resources are not infinite and their properties are numerous. Some amount of discretion must be accorded these agencies when they make judgments about where to spend their limited funds.
Have defendants exercised their judgment in a manner that has, in effect, rendered Horner uninhabitable? And if defendants spent twice as much money at Horner as they are now spending, would conditions there be any different? These are unresolved questions of fact. Whether these facts are "material" depends on whether they are "outcome-determinative under applicable law." Pritchard v. Rainfair, Inc., 945 F.2d 185, 191 (7th Cir. 1991). The "applicable law" in this case is nascent. It does not provide a solid foundation for deciding this case on summary judgment. A trial on these issues will greatly assist the Court. A trial will also aid the Court in determining the physical conditions at Horner as they presently exist. The last physical inspection chronicled in plaintiffs' briefs occurred in the summer of 1992. What, if anything, has changed at Horner since then? Has the additional expenditure of CIAP funds in 1992 touted by defendants improved conditions at Horner? These questions warrant further investigation by trial.
Whatever the Court finds necessary to prove de facto demolition, that proof will not include a showing of intent to demolish. Section 1437p(d) obligates the CHA not to demolish public housing without first obtaining HUD's approval. If the statutory conditions for demolition are not satisfied and public housing is demolished, be it through design, neglect, incompetence or inadvertence, a violation of § 1437p(d) has occurred. This is not to say that evidence showing intent or supporting an inference of intent will not be entertained by the Court. But there is nothing in the language or legislative history of § 1437p(d) that compels the conclusion that intent is a necessary element of a claim under that section. See Henry Horner, 780 F. Supp. at 513-15 (discussing legislative history of § 1437p(d)).
The Court's conclusion that intent to demolish is not essential to an action for de facto demolition disposes of the HUD defendants' suggestion that the provisions of § 1437p are triggered only after the CHA actually decides to demolish public housing. And HUD's argument that it has no duty to stop a public housing authority from violating § 1437p(d) fares no better. HUD's enforcement obligation is created through the same statutory scheme that charges HUD with administering, funding and monitoring public housing agencies. 42 U.S.C. § 1437p. Under that statutory scheme, HUD must approve in advance any action to demolish public housing. § 1437p(d). Although the statute does not expressly say so, the Court finds HUD's duty to enforce the statute is triggered when action to demolish is taken without HUD's approval. Any other interpretation would leave the section without a governmental mechanism of enforcement--a result contrary to Congress' intent to prevent the unapproved destruction of public housing.
Finally, the Court rejects HUD's contention that no private right of action exists under 42 U.S.C. § 1437p. We agree with the court in Tinsley that under the test promulgated in Cort v. Ash, 422 U.S. 66, 78, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975), public housing tenants have implied private causes of action against HUD. Tinsley, 750 F. Supp. at 1008. See also Concerned Tenants, 685 F. Supp. at 319 (finding implied right of action under § 1437p). As the Tinsley court noted, several courts have held that in addition to a remedy under the Administrative Procedure Act, public housing tenants have implied causes of action against HUD under § 1437a, a provision of the Housing Act closely related to § 1437p. See Id. and cases cited therein. The court finds these authorities dispositive of the question.
IV. PLAINTIFFS' REMAINING CLAIMS
In Count III, plaintiffs bring a claim against the HUD defendants pursuant to the Administrative Procedure Act ("APA") under 5 U.S.C. § 702. In Count IV, plaintiffs assert that the CHA and HUD defendants breached the Annual Contributions Contract ("ACC") between HUD and the CHA; the CHA, by failing to fulfill its obligations to plaintiffs, who are third-party beneficiaries under the ACC; HUD, by approving the de facto demolition of public housing units at Horner without lawful justification. Lastly, a pendent contract claim for breach of the tenants' leases is asserted against the CHA in Count V. A brief discussion of these remaining claims is in order.
As to Count III, HUD contends that plaintiffs' APA claim is not reviewable by this Court. We disagree. First, HUD says that plaintiffs have an adequate remedy against the CHA, thus precluding review under 5 U.S.C. § 704.
The court in Tinsley rejected the same argument. The court reasoned that given the pervasive regulation, close oversight and the funding provided by HUD to the housing agency, the agency "could not correct alleged problems to any significant degree without HUD cooperation, supervision, approval and funding." Tinsley, 750 F. Supp. at 1009. Under these circumstances, "[a] remedy directed only at [the authority] could be nearly worthless . . ." Id. And, as plaintiffs aptly note, the argument presumes that in suing HUD plaintiffs are merely challenging HUD's alleged failure to enforce the provisions prohibiting unapproved demolition. This misconstrues the complaint, which challenges HUD actions that allegedly facilitated and encouraged the constructive demolition of Horner, like HUD's approval of the CHA's Comprehensive Occupancy Plans from 1989-1991 despite deficiencies in the vacancy reduction strategies outlined in the plans. Thus, even if plaintiffs obtained relief against the CHA, that would not remedy HUD's actions that allegedly contributed to the destruction of Horner.
Next, HUD relies on Heckler v. Chaney, 470 U.S. 821, 84 L. Ed. 2d 714, 105 S. Ct. 1649 (1985) to support its claim that the APA presumes immunity from judicial review of a decision not to enforce § 1437p. For reasons with which this Court agrees, the Tinsley court rejected this argument as well. The court noted that the presumed immunity of Chaney represents a "narrow exception to the overall presumption favoring judicial enforcement," which is applicable only when Congress intended to exempt agency action from such review. Tinsley, 750 F. Supp. at 1009. Noting Congress' explicit intention to provide a private right of action and that "such a right, by definition, is a right to obtain judicial review," the court concluded that "this matter is not within the narrow exemption from judicial review." Id.
The defendants' arguments with respect to Count IV--breach of contract under the ACC--warrant little discussion. The CHA defendants assert that if the ACC is construed as a "best efforts" contract or if the defense of "partial impracticability" is applied, they are entitled to judgment as a matter of law.
As it stands today, the record does not support summary judgment in favor of the CHA based on these defenses. Material questions of fact exist concerning the CHA's efforts to maintain Horner and whether inadequate funding is in fact the root of the problems at the Horner developments. At trial, with the benefit of a more complete record, the Court will give these defenses whatever weight they deserve.
The HUD defendants' arguments with respect to Count IV are meritless. Defendants argue that plaintiffs are not third party beneficiaries of the ACC when this Court has already held that they are. Henry Horner, 780 F. Supp. at 515-16. The HUD defendants' other argument is that §§ 201 and 209 of the ACC impose duties on the CHA but not HUD. Unfortunately for HUD, plaintiffs' breach of contract count is not limited to those particular ACC provisions. Other provisions of the ACC refer to HUD's obligation to enforce violations of the ACC by the CHA. Sections 501 and 502 of the contract state that upon the CHA's substantial breach or default the CHA, upon HUD's demand, shall convey possession or title to the property to the federal government. This court is not alone in its conclusion that under the ACC tenants have enforceable rights as third party beneficiaries against HUD. See Ashton v Pierce, 230 U.S. App. D.C. 252, 716 F.2d 56, 66 (D.C. Cir. 1983), modified on other grounds, 723 F.2d 70 (D.C. Cir. 1983); Tinsley, 750 F. Supp. at 1012.
V. PLAINTIFFS' RULE 56(f) MOTION
Plaintiffs filed a Rule 56(f) motion in conjunction with their motion for summary judgment. In their motion, plaintiffs describe three factual areas in which they have had inadequate opportunity to obtain discovery. As explained below, the Court believes that further factual development in one of the three areas cited by plaintiffs would aid the Court in resolving this case at trial.
The CHA defendants have asserted in their fact statement that between 1983 and 1991 the CHA requested $ 1.7 billion from HUD under the CIAP program, but only received $ 317 million. In support of their summary judgment motion, the CHA contends that this "funding shortage of $ 750,000,000" is an important factor limiting the agency's ability to meet the "unlimited demands and needs" of Chicago's public housing developments. This shortage of funds also undergirds the CHA's asserted defense of "partial impracticability." Plaintiffs contend, and we think with some justification, that unless they know the total amount of CIAP funds the CHA requested for Horner between 1983 and 1991, the CHA's request during that period of $ 1.7 billion from HUD for all its developments has no probative value. In short, the $ 1.7 billion figure needs to be put in context.
According to plaintiffs, the CHA has already provided the necessary information regarding CIAP funding requests for the years 1989-1991. Because the Court finds that the CHA's requests for funding under CIAP between 1983 and 1988 are relevant to this case, the Court will allow plaintiffs the opportunity to take further discovery on this issue.
For the reasons stated in footnote 10 of this opinion, the Court sees no need for further discovery regarding the statements in the press attributed to defendant Lane in late 1992. Nor is further discovery necessary concerning the CHA's rehabilitation efforts at Lakefront Properties. The similarities and differences between the CHA's rehabilitation efforts at Lakefront and Horner are sufficiently developed in the record before the Court. Given the differences cited by plaintiffs--the CHA's Memorandum of Accord with the Lakefront tenants and the establishment of a rehabilitation schedule there--the Court finds that the CHA's comparison between Lakefront and Horner is only marginally relevant to this case.
James B. Zagel
United States District Judge
Date: MAY 26 1993