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City of East St. Louis v. United States Department of Housing and Urban Development

United States District Court, S.D. Illinois

January 15, 2015

City of East St. Louis, et al., Plaintiffs,
v.
United States Department of Housing and Urban Development, et al., Defendants.

ORDER

DAVID R. HERNDON, District Judge.

I. INTRODUCTION

This matter is before the Court on the defendants' (the United States Department of Housing and Urban Development ("HUD"), Shaun Donovan, Secretary of HUD, and John Finger) motion to dismiss plaintiffs' claims for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure (Doc. 36).

II. BACKGROUND

A. Public Housing Program

The public housing program established by the United States Housing Act of 1937, 42 U.S.C. §§ 1437-1440 (the "Act" or "Housing Act"), is a federal grant program under which HUD provides formula-based assistance to local public housing authorities ("PHAs") for the development, operation, maintenance and modernization of public housing projects. Responsibility for administering housing programs is vested in local PHAs rather than in the federal government. See 42 U.S.C. § 1437 ("It is the policy of the United States... to vest in local public housing agencies the maximum amount of responsibility in the administration of their housing programs."). Under the Housing Act, HUD provides monetary assistance to PHAs for the development, operation, and maintenance of low-income housing. 42 U.S.C. §§ 1437b-1437i. In exchange for the subsidy, PHAs must comply with federal regulations promulgated by HUD under the Housing Act. See generally id. § 1437 et seq. The terms of this grant agreement are set forth in Annual Contributions Contracts between HUD and the PHA. See id. § 1437d.

If a PHA substantially defaults on its obligation under such contract, the Housing Act - and in particular, paragraph (3) of section 6(j) of the Act (42 U.S.C. 1437d(j)(3)) - grants HUD broad discretion to deal with the problematic PHA. See id. § 1437d(j)(3). For example, it authorizes HUD to: solicit proposals for alternative management of the housing or programs of the PHA, § 1437d(j)(3)(A)(i); petition certain courts for the appointment of a "receiver" of the PHA, § 1437d(j)(3)(A)(ii); take possession of all or part of the PHA, § 1437d(j)(3)(A)(iv); and require the PHA to make other arrangements that are acceptable to HUD and in the best interest of housing program beneficiaries, § 1437d(j)(3)(A)(v).

The Housing Act expressly prohibits judicial review of any decision that the Secretary makes under paragraph (3). Specifically, the Act states: "A decision made by the Secretary under this paragraph shall not be subject to review in any court of the United States, or in any court of any State, territory, or possession of the United States." 42 U.S.C. 1437d(j)(3)(E).

B. The Instant Litigation

At issue in the instant case, is HUD's decision to exercise its discretion under paragraph (3) to "take possession" of the ESLHA and the operation of its federally supported projects in accord with § (A)(iv) of paragraph (3). This section of paragraph (3) allows HUD to "take possession" of a problematic PHA on its own initiative, without petitioning for a receiver or otherwise involving a court. Likewise, in conducting the affairs of the PHA, paragraph (3) specifically authorizes HUD to take various actions similar to those that receivers are specifically authorized to take, such as abrogating contracts, demolishing or disposing of PHA properties, preempting State or local civil service laws, or seeking consolidation of a PHA into other PHAs. Id. § 1437d(j)(3)(D)(i)(I)-(V).

In 1985, HUD determined that the ESLHA had substantially defaulted on its obligations. Accordingly, HUD exercised its discretion under paragraph (3) and elected to take possession of the ESLHA and the operation of its federally supported projects. Thereafter, HUD appointed a HUD employee, commonly referred to by HUD as an "administrative receiver, " to exercise, control over the Housing Authority and its projects and programs. The ESLHA has remained under HUD's control ever since.

On August 22, 2013, the ESLHA, acting under HUD's control, decided to transfer control of one of the programs administered by the ESLHA, commonly known as the "Section 8 voucher program, " to the St. Clair County Housing Authority ("SCCHA"). The SCCHA now controls the voucher program in East St. Louis. Although the voucher program's operation was transferred to SCCHA, the ESLHA retains control over its public housing program, a separate and distinct program under the Housing Act. See, e.g., Paris v. Department of Housing and Urban Development, 843 F.2d 561, 563-64 (1st Cir. 1988) (discussing the two distinct programs).

Plaintiffs' First Amended Complaint asserts two claims related to the above series of events. Count I asks the Court to "terminate the HUD receivership, " end HUD's control over the ESLHA, and "return it to the Local Commissioners" (Doc. 20 ¶ 73). Count II asserts that the 2013 transfer of the Section 8 voucher program was illegal and asks the Court to declare the transfer "null and void, " and to enter an order ...


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