United States of America ex rel. Albert C. Hanna, Plain tiff-Appellan t,
City of Chicago, Defendant-Appellee.
May 19, 2016
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 11 C 4885 -
Andrea R. Wood, Judge.
WOOD, Chief Judge, and POSNER and ROVNER, Circuit Judges.
order to receive federal housing funds, the City of Chicago
must certify that it is in compliance with a number of
federal requirements related to reducing the city's
racial segregation. Albert C. Hanna's suit against the
City alleges that it violated the False Claims Act because
its policies-in particular, "aldermanic privilege"
and strategic zoning of relatively wealthy neighborhoods-have
actually increased segregation, making its
certifications false. But, as the district court properly
recognized, Hanna has not alleged the circumstances of the
purported fraud with sufficient particularity to satisfy
Federal Rule of Procedure 9(b). We therefore affirm its
is, by its own admission, a "highly segregated
city" and has been for more than 50 years. City OF
Chicago, 2010-2014 Consolidated Plan 19 (2010). Whites
predominately live on the North, Northwest, Southwest and far
South Sides, while African-Americans live mostly on the West
and South Sides. Id. at 20. (We omit details about
other racial or ethnic groups, of which there are many,
because they are not central to this case.) This geographic
distribution "has remained fundamentally constant"
since the 1980 census. Id.
is a long-time resident of Chicago's Lincoln Park
neighborhood. For more than half a century, his professional
and personal activities have included real estate
development, real estate financing, civic affairs, and
philanthropy in Chicago. He has "a particular concern
for providing affordable housing in quality neighborhoods,
" and so filed his original qui tarn complaint
in 2011. The United States declined to intervene in 2013. We
evaluate the allegations in his amended complaint; we assume
the truth of these allegations for present purposes.
Tricontinental Indus., Ltd. v. Pricewaterhouse-Coopers,
LLP, 475 F.3d 824, 833 (7th Cir. 2007).
alleges that during the six years before he filed this suit,
the City knowingly made false claims and certifications to
the U.S. government. One such representation was that it had
complied -and would comply-with certain civil rights
requirements. It did this in order to receive more than $1
billion in funds from federal programs administered by the
U.S. Department of Housing and Urban Development (HUD). Those
requirements arise under several laws. Hanna alleges that the
City "was required ... to certify that it [would]
administer each grant in compliance with Title VI, 42 U.S.C.
§ 2000d, et seq. and implementing regulations
at 24 C.F.R. Part 1, " "the Fair Housing Act, 42
U.S.C. § 3601, et seq., and its implementing
regulations at 24 C.F.R. Part 100, " and "42 U.S.C.
§§ 608(e)(5), 5304(b)(2), and 12705(b)(15) and
applicable HUD regulations." Finally, he asserts that
"[a]s defined by HUD and by caselaw, the ... obligation
[affirmatively to pursue fair housing] requires the City to
conduct '[a] comprehensive review of [its] laws,
regulations, and administrative policies, procedures and
practices[, and a]n assessment of conditions, both public and
private, affecting fair housing choice for all protected
classes." He has not, however, given any further details
about which specific statutory and regulatory provisions the
City violated, what those provisions said, or how exactly the
City's conduct violated them.
separates Chicago's neighborhoods into two categories:
those with "lower poverty rates, good community services
and commercial amenities, job opportunities, safe
neighborhoods and good schools" he calls "areas of
opportunity"; those lacking those attributes he labels
"low-opportunity areas." The City knew, Hanna says,
which neighborhoods were typified by segregated living
patterns (more than 75% minority population) and which were
typified by high poverty rates (more than 40% of population
with incomes below the federal poverty line). The City also
knew that there was predictable overlap between these
categories: the desirable areas had larger White populations
and smaller African-American and Latino populations than
Chicago in general.
asserts that despite its knowledge of these facts and its
obligation to take affirmative steps to secure fair housing,
the City knowingly administered its affordable housing and
funding programs, along with its zoning and land use laws,
with the purpose and effect of locating affordable,
multifamily rental housing units in the less desirable areas
and discouraging their location in the better neighborhoods.
Doing so perpetuated and intensified the already-existing
racial and ethnic segregation of Chicago's neighborhoods.
City allegedly enacted these goals through two policies:
"aldermanic privilege" and disproportionately
down-zoning advantaged neighborhoods-that is, rezoning areas
suitable for multifamily development so as to prevent or
limit new construction of such projects. Chicago is divided
into 50 wards, each of which elects an alderman to sit on the
city council. Under "aldermanic privilege, " the
City grants each alderman the "full authority to
determine whether and where affordable, multifamily rental
housing will be built and renovated in the ward."
According to Hanna, aldermen in the desirable, largely White
areas used their authority to prevent such housing from being
built in their wards.
these devices, the City directed hundreds of millions of
dollars in federal funds for affordable housing primarily
into racially or ethnically segregated, low-income areas. In
the 1960s, 1970s, and 1980s, when a majority of the projects
built with these funds were not controlled by the City,
roughly half of the affordable, multifamily rental housing
was located in areas that were already well-to-do. In the
1990s, after the Chicago City Council began administering the
funds, that percentage declined to only ten percent. During
the six years covered by Hanna's complaint, the City
approved funding of more than 2, 600 housing units in 35
developments for low- and moderate-income families and
children. Seven percent of those units were located in
wealthier areas; 93% were located in low-income areas.
complaint also contends that the City grants aldermen control
over zoning, land use, building codes, and decisions about
affordable housing funding and location within their wards.
Aldermen in primarily White, higher-income neighborhoods use
this authority to "downzone" areas suitable for
multifamily development so that this use would be prohibited
or limited. The City's 2004 Zoning Ordinance also
downzoned many advantaged areas, thus preventing the building
of affordable, multifamily housing unless the alderman
personally intervenes to rezone parcels for such use.
to the Mayor's Zoning Reform Commission, the 2004 Zoning
Ordinance's stated purpose was to "reinforce ...
established patterns" and to "preserve neighborhood
character." But Hanna contends that this rationale was a
smokescreen: the true purpose and effect was to limit
development of affordable, multifamily housing units -and
therefore opportunities for African-American and Latino
families-in predominantly White neighborhoods. The City also
downzoned or applied landmark status to more than 5, 200
acres of private, residentially zoned land. (The City's
Historic Preservation Ordinance severely limits redevelopment
of locations designated as "landmarks.") Nearly
two-thirds of that territory was within desirable areas.
Meanwhile, the City did not analyze or disclose in its