Alpine Ridge Group v. Kemp

764 F. Supp. 1393, 1991 U.S. Dist. LEXIS 6387, 1990 WL 293844
CourtDistrict Court, W.D. Washington
DecidedApril 16, 1991
DocketC89-1654R
StatusPublished
Cited by4 cases

This text of 764 F. Supp. 1393 (Alpine Ridge Group v. Kemp) is published on Counsel Stack Legal Research, covering District Court, W.D. Washington primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alpine Ridge Group v. Kemp, 764 F. Supp. 1393, 1991 U.S. Dist. LEXIS 6387, 1990 WL 293844 (W.D. Wash. 1991).

Opinion

ON SUMMARY JUDGMENT

ROTHSTEIN, Chief Judge.

THIS MATTER comes before the court on plaintiffs’ and defendants’ cross-motions for summary judgment. Having reviewed the motions together with all documents filed in support and in opposition, having heard oral argument and being fully advised, the court finds and rules as follows:

I. FACTUAL BACKGROUND

Plaintiffs in this case are owners of housing projects which fall under Section 8 of the United States Housing Act of 1937 as amended, 42 U.S.C. § 1437f. The Section 8 housing program is administered by defendants Secretary and Department of Housing and Urban Development (collectively “HUD”). Pursuant to Section 8 as enacted in 1974, private developers were encouraged to submit proposals to HUD for the construction and operation of federally subsidized low-income housing. The developers chosen by HUD then entered into Housing Assistance Payment (HAP) contracts either with HUD directly or with local public housing agencies authorized by HUD to act as contract administrators. Among other things, these HAP contracts provided for the periodic adjustment of the maximum monthly rent to reflect fair market rents in the local area.

In the early 1980’s, a dispute arose between certain Section 8 project owners and HUD concerning the proper method for determining rent adjustments. The owners insisted that, pursuant to their HAP contracts, they were entitled to rent adjustments based on the application of Automatic Annual Adjustment Factors (AAAFs) published each year by HUD. HUD, on the other hand, asserted that it had the right in its discretion to conduct rent comparability studies based on individualized market surveys.

The Ninth Circuit settled the dispute in Rainier View Associates v. United States Department of Housing and Urban Development, 848 F.2d 988 (9th Cir.1988), by holding that the HAP contracts into which HUD had entered clearly and unambiguously required HUD to apply the AAAFs in adjusting rents. The court noted that while the statutory language of Section 8 would have permitted HUD to use either the AAAFs or comparability studies, HUD had made a binding election of the AAAFs method under the contract and could not change its mind.

In 1989, however, Congress revisited Section 8 by passing an amendment known as Section 801 of the Department of Housing and Urban Development Reform Act of 1989, Pub.L. No. 101-235, 103 Stat.1987, Dec. 15, 1989. In brief, Section 801 prospectively authorizes HUD to adjust rents based on rent comparability studies. As for its retroactive effect, Section 801 applies to all owners whose rents were previously adjusted on the basis of comparability studies or whose contracts required them to request an adjustment and who failed to do so because of an anticipated negative adjustment. Regarding those owners, Section 801 authorizes HUD to adjust the rents from 1980 to the present by either applying the AAAFs to that portion of the contract rent not attributable to the debt service, or by multiplying 30% of the applicable AAAF by the entire contract rent, whichever is greater.

Plaintiffs in this case allege that Section 801 is unconstitutional on the grounds that it violates their rights to due process under the Fifth Amendment to the United States Constitution. 1 They contend that it does so *1396 by impairing their vested contractual rights to rent adjustments based on the AAAFs as provided in their HAP contracts with HUD or authorized public housing agencies. HUD is equally insistent on the constitutionality of Section 801. Both plaintiffs and HUD now cross-move for summary judgment.

II. LEGAL ARGUMENT

A. Ripeness

Before turning to the substance of the case, HUD asserts that, insofar as the prospective effect of Section 801 is concerned, plaintiffs’ claims are not ripe because HUD has not yet issued regulations implementing Section 801. 2 Accordingly, no final decisions have been made regarding the application of the regulations to any particular housing project.

This argument has no merit. Plaintiffs make it perfectly clear that they are challenging the constitutionality of the legislation on its face as violative of their contract rights. They are not asking the court to examine the manner in which Section 801 will be applied to each individual housing project; instead they request a broad declaratory ruling that the legislation is unconstitutional because it conflicts with the language of their HAP contracts guaranteeing them the right to rent increases based on the AAAFs. Thus, the court has no need to consider the effect of regulations or to wait and see what steps HUD takes to implement Section 801.

B. Analysis of Constitutionality

Although plaintiffs and HUD reach entirely different conclusions, they do agree on the elements of the analysis to be applied in determining the constitutionality of Section 801. The following questions must be addressed:

1. Pursuant to the HAP contracts, do plaintiffs have a contractual right to rent adjustments based on the AAAFs?

2. If plaintiffs do have a contractual right, is it vested?

3. If plaintiffs have a vested contract right, does Section 801 substantially impair the exercise of that right?

4. If there is a substantial impairment of plaintiffs’ vested contract rights, then is the congressional purpose sufficiently important to permit abrogation of those rights?

The court will consider each of these questions in turn:

1. Existence of Contract Rights

Plaintiffs and HUD agree that, in order to assert a due process claim under the Fifth Amendment, plaintiffs must establish that they have a cognizable property right arising out of the HAP contracts. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 54-55, 106 S.Ct. 2390, 2397-98, 91 L.Ed.2d 35 (1986); Peterson v. United States Department of Interior, 899 F.2d 799, 807 (9th Cir.1990).

Plaintiffs argue that the answer is plain. As discussed above, the Ninth Circuit unequivocally held in Rainier View that plaintiffs have a contractually guaranteed right to rent adjustments based on the AAAFs:

Under the [Section 8] statute, HUD could choose either a market survey method or a formula method. In the contract, HUD elected the formula method. Having made its choice, HUD cannot now change its mind. The overall limitation provision *1397 of the statute 3

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Bluebook (online)
764 F. Supp. 1393, 1991 U.S. Dist. LEXIS 6387, 1990 WL 293844, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alpine-ridge-group-v-kemp-wawd-1991.