II. Failure to State a Claim
Although RMC successfully relies on § 1347r to achieve federal subject matter jurisdiction, the generosity of the substantiality test implies the possibility that RMC may nonetheless fail to state a claim on which relief can be granted. ECM Motor, 76 F.3d at 143. In determining whether RMC states a claim, the Court must go beyond the cursory analysis of the substantiality test and fully examine whether § 1347r establishes a cause of action. Id. While the distinction between these two stages of inquiry may be outdated, Crowley Cutlery Company v. United States, 849 F.2d 273, 277 (7th Cir. 1988) or "may seem medieval in its fineness", ECM Motor, 76 F.3d at 144, the Supreme Court has consistently recognized the distinction. ECM Motor, 76 F.3d at 144.
CHA argues that under the Cort test § 1347r does not imply a private cause of action and even if it did, the cause of action does not support RMC's complaint. As CHA asserts, RMC's allegations do not state a claim under whatever limited cause of action § 1347r may establish.
While § 1347r may establish a right to good faith negotiations, perhaps even one enforceable directly or under § 1983, once those negotiations are held, and especially once those negotiations culminate in a contract, § 1347r offers no more. This point is manifest in the language of both the statute and implementing regulations. Both provide for contract negotiations but are completely silent about any subsequent relations between the housing agency and resident management corporation, whether the negotiations culminate in a contract or not.
RMC argues, however, that § 1347r implies a (federal) right to good faith performance of any resulting contract. Without a (federal) right to good faith performance, RMC argues, the right to good faith negotiations would be meaningless. RMC contends that "there neither is nor can be any question but that if such a contract is entered into, then it must -- by hypothesis -- be enforceable. It is categorically impossible that Congress intended, when it referred to 'contract', that the parties enter into some unenforceable pact." Pl. Resp. Mot. Sum. J. at 4 (emphasis omitted). RMC cites Wright v. City of Roanoke Redevelopment and Housing Authority, 479 U.S. 418, 93 L. Ed. 2d 781, 107 S. Ct. 766 (1987) and Katz v. Cisneros, 16 F.3d 1204, 1207 (Fed. Cir. 1994) in support of its position.
This argument is spurious. A contract between the parties is enforceable whether or not it is enforceable under federal law; it is enforceable under state law.
Congress' scheme to promote resident management of public housing projects clearly relies on state law as a foundation. Congress requires residents desiring to assume management responsibilities of a housing project to form a non-profit corporation under the applicable state law. § 1347r(b)(4). (See also 24 C.F.R. § 964.11.) Congress then requires that this corporation negotiate with the housing agency a contract assigning duties and responsibilities. This scheme allows Congress to use existing state corporate and contract law to provide the necessary rules for governing the resident management corporation. Not only must these rules regulate relations between the resident management corporation and the housing agency, but they also must regulate relations within the corporation, authority to act on behalf of the corporation, relations between the corporation and its employees, and countless other matters addressed by the existing body of state law. The statutory and regulatory silence regarding the period after contract negotiations indicates a scheme wherein existing state law would provide the necessary legal apparatus to support resident management of public housing projects. The contract at issue, in fact, demonstrates this point, specifying that it "shall be interpreted in accordance with and governed by the laws of the state of Illinois." Agreement § 9.03(A). The Court finds no indication that Congress intended to supplement the legal apparatus provided by state law with any duplicative federal law, let alone a good faith requirement already provided in state contract law.
Both cases cited by RMC in support of its contention are inapposite to the Court's finding. In both cases, the dispute concerned particular contractual terms which allegedly violated a federal statute. In Wright, the plaintiff, a public housing tenant, maintained that under her lease the utilities charged by her housing agency resulted in rent in excess of that allowed by the Brooke Amendment, codified as 42 U.S.C. § 1437a. Wright, 479 U.S. at 421-22. The Court noted that the plaintiff claimed a right to sue on the lease under state law, but brought the matter in federal court as the claim required interpretation of a federal statute. Id. at 422. In Katz the plaintiff's claim also involved contract provisions which required interpretation of federal statutes. Katz, 16 F.3d at 1207. Both cases were in federal court to resolve questions involving conflicts between contractual terms and federal statutes. In this case, federal questions regarding the content of the contract at issue, such as those faced in Wright and Katz, simply are not present. Thus, neither case cited by RMC supports RMC's proposition.
Since § 1347r does not establish any enforceable federal rights beyond a possible limited right to good faith contract negotiations, RMC fails to state a claim under § 1347r.
Additionally, RMC also fails to state a claim under § 1983. § 1983 is available to enforce violations of federal statutes by agents of the state.
Wright, 479 U.S. at 423 (citing Maine v. Thiboutot, 448 U.S. 1, 65 L. Ed. 2d 555, 100 S. Ct. 2502 (1980). However, as the Court has held that RMC's allegations do not amount to a violation of § 1347r, and RMC alleges violation of no other federal statute, RMC fails to state a claim under § 1983.
III. Failure to Exhaust Administrative Remedies
CHA also claims RMC has failed to pursue administrative remedies as provided in the Agreement, precluding the Court from hearing this claim. As this matter requires interpretation of the Agreement under Illinois contract law and the Court has already determined that RMC has failed to state a federal claim, the Court declines to address this issue.
For the foregoing reasons, and noting that the parties are presently litigating an action in state court regarding the same subject matter as this action, the Court finds that Plaintiff fails to state a claim against Defendant and dismisses this case without prejudice pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
JOHN A. NORDBERG
United States District Judge
DATED: October 25, 1996
JUDGMENT IN A CIVIL CASE
Decision by Court.
IT IS ORDERED AND ADJUDGED for the foregoing reasons, and noting that the parties are presently litigating an action in state court regarding the same subject matter as this action, the Court finds that Plaintiff fails to state a claim against Defendant and dismisses this case without prejudice.
October 25, 1996