Diaz v. HUD

• Court: Court of Appeals for the Second Circuit
• Decided: March 8, 2024
• Docket: 23-397
• Status: Unpublished

Opinion

23-397 Diaz v. HUD

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of The United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 8th day of March, two thousand twenty-four.

PRESENT: DENNIS JACOBS, BETH ROBINSON, ALISON J. NATHAN, Circuit Judges. _________________________________________

LYDIA GONZALEZ DIAZ, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, VANESSA WALSH, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, NINA CRAWFORD, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, SAMANTHA COLEMAN, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, MILTON CRUZ, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, MARYANNE HAYES, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, WILLIAM HEARN, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, FRANCISCO HERNANDEZ, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, GAIL JONES, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, MARC POLITE, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, RALPH WAITERS, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, LATRINA WILLIAMS, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, LINDA BOLTON, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, SHARON HOSKINS, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, JOVAN JOHNSON, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, REINA VESQUEZ, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, SONYA TAVARAS, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses, STEVEN TAVAREZ, on behalf of a class of similarly situated tenants of the New York City Housing Authority at Harlem River Houses,

Plaintiffs-Appellants,

v. No. 23-397

UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, NEW YORK CITY HOUSING AUTHORITY,

2 HARLEM RIVER PRESERVATION * LLC, C+C APARTMENT MANAGEMENT LLC,

Defendants-Appellees. _________________________________________

FOR APPELLANTS: ARTHUR Z. SCHWARTZ, Advocates for Justice, Chartered Attorneys, New York, NY

FOR APPELLEE U.S. DEPARTMENT MARK OSMOND, Assistant United States OF HOUSING AND URBAN Attorney (Benjamin H. Torrance, DEVELOPMENT: Assistant United States Attorney, on the brief), for Damian Williams, United States Attorney for the Southern District of New York, New York, NY

FOR APPELLEE NEW YORK Andrew M. Lupin, for David Rohde, CITY HOUSING AUTHORITY: † Executive Vice President for Legal Affairs and General Counsel, New York City Housing Authority, New York, NY

Appeal from a judgment of the United States District Court for the

Southern District of New York (Preska, Judge).

UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the judgment entered on February 21, 2023

is AFFIRMED.

* The Clerk’s office is directed to amend the caption as reflected above.

†Counsel for Defendant-Appellees Harlem River Preservation LLC and C+C Apartment Management, LLC entered an appearance but did not file a responsive brief on appeal.

3 Plaintiffs-Appellants are residents of the Harlem River Houses, a public

housing development originally owned by Defendant-Appellee New York City

Housing Authority (“NYCHA”) and funded under Section 9 of the Housing Act

of 1937. In 2022, following approval by Defendant-Appellee United States

Department of Housing and Urban Development (“HUD”), the Harlem River

Houses were converted from a publicly owned Section 9 housing development

to a privately owned development funded pursuant to Section 8 of the Housing

and Community Development Act of 1974.

After HUD approved the conversion and multiple entities conducted

multiple transactions implementing it, Plaintiffs challenged the conversion in a

March 2022 lawsuit. The district court dismissed for lack of standing. Diaz v.

United States Department of Housing and Urban Development, 657 F. Supp. 3d 372

(S.D.N.Y. 2023). We assume the parties’ familiarity with the underlying facts,

procedural history, and arguments on appeal, to which we refer only as

necessary to explain our decision to affirm.

A motion to dismiss for lack of Article III standing is brought pursuant to

Federal Rule of Civil Procedure 12(b)(1) because it challenges the federal court’s

exercise of subject matter jurisdiction. See Carter v. HealthPort Technologies, LLC,

4 822 F.3d 47, 56 (2d Cir. 2016). Where, as here, the defendant’s 12(b)(1) motion to

dismiss is based on evidence outside the pleadings, we review the district court’s

legal conclusions without deference and its findings of fact for clear error. Id. at

57; SM Kids, LLC v. Google LLC, 963 F.3d 206, 210 (2d Cir. 2020).

A federal court lacks subject matter jurisdiction—and therefore cannot

consider a lawsuit’s merits—unless three constitutional standing requirements

are met. First, the plaintiff must have suffered an “injury in fact.” Spokeo, Inc. v.

Robins, 578 U.S. 330, 338 (2016). Second, that injury must be “fairly traceable” to

the defendant’s challenged conduct. Id. And third, it must be “likely” that the

injury will be “redressed by a favorable judicial decision.” Id. As “[t]he party

invoking federal jurisdiction,” Plaintiffs bear the burden of establishing Article

III standing. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).

The district court granted Defendants’ motion to dismiss because it

concluded that Plaintiffs’ alleged injuries cannot be redressed by a favorable

judicial decision. Diaz, 657 F. Supp. 3d at 381. We agree.

“Though federal courts possess great authority, they lack the power, once

a bell has been rung, to unring it.” Presidential Gardens Associates v. U.S. ex rel.

5 Secretary of Housing and Urban Development, 175 F.3d 132, 143 (2d Cir. 1999). 1 We

have explained that the federal courts cannot feasibly undo certain complex

commercial and real estate transactions since “restoration of the status quo may

be impossible.” Bank of New York Co. v. Northeast Bancorp, Inc., 9 F.3d 1065, 1067

(2d Cir. 1993). In such cases, “the legality of the challenged merger or acquisition

may become essentially a moot question.” Id. at 1067; see also Presidential Gardens,

175 F.3d at 143–44.

The Court in both Presidential Gardens and Bank of New York assessed

whether the plaintiffs’ claims were moot because the relevant financial

transactions could not feasibly be undone. “Mootness is ‘standing set in a time

frame.’” Stafford v. International Business Machines Corporation, 78 F.4th 62, 67 (2d

Cir. 2023) (quoting Arizonans for Official English v. Arizona, 520 U.S. 43, 68 n.22

(1997)). And although mootness and standing are distinct doctrines, see Friends of

the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U.S. 167, 189–93

(2000), that distinction makes no difference here. Plaintiffs’ suit is not

redressable for the same reasons the suits in Presidential Gardens and Bank of New

1 In quotations from caselaw and the parties’ briefing, this opinion omits all internal quotation marks, alterations, footnotes, and citations, unless otherwise noted.

6 York were moot—complex commercial transactions have made it infeasible to

redress plaintiffs’ alleged injuries.

Here, we see no error in the district court’s conclusion that the Harlem

River Houses’ conversion from a Section 9 to Section 8 housing project cannot

feasibly be undone. As the court pointed out, the Harlem River Houses has

already been converted. The conversion raised more than $274 million of debt

and equity financing, including approximately $63 million in periodic historic

tax credit equity investments from Chase Community Equity, LLC and $34.75

million in mortgage loans financed by individual debtholders, as part of more

than $209 million of debt. That financing has been allocated across both for-

profit and non-profit entities, many of which are not named parties to this

lawsuit. Multiple parties also have effectuated a 99-year ground lease of the

Harlem River Houses property; and the Harlem River Houses’ original

declaration of trust, which is required for a housing project to be funded under

Section 9, has been released. Further, NYCHA’s Harlem River Houses workforce

has been replaced; and renovations are well underway, with estimated

rehabilitation costs exceeding $145 million.

7 Based on this record, the district court did not clearly err in finding that

“[t]here has been a ‘commingling of assets and other substantial changes in the

structures of the enterprise involved’” that make it infeasible to revert the

Harlem River Houses back to Section 9 status. Diaz, 657 F. Supp. 3d at 381

(quoting Bank of New York, 9 F.3d at 1067).

We also reject Plaintiffs’ argument that injunctive relief can be granted

because “the key parties are all before the Court, and all the matter[s] undertaken

(mortgages and repairs) involve money.” Appellant’s Br. at 45–46. As the above

facts demonstrate, effective injunctive relief would require far more than an

injunction from this Court rescinding HUD’s approval of the conversion and a

check from NYCHA returning investment dollars. Effective relief would—at a

minimum—unwind hundreds of millions of dollars of commingled assets, debts,

and investments; halt ongoing renovations; re-trigger Section 9’s statutory and

regulatory requirements; and compel NYCHA to hire a new workforce to

manage the Harlem River Houses. Additionally, it’s not clear that all key parties

are actually before this Court. For example, the individual debtholders, whose

investments would be affected by injunctive relief, are not named parties.

8 Accordingly, the district court correctly dismissed Plaintiffs’ claim for

injunctive relief for lack of standing.

The court also appropriately dismissed Plaintiffs’ claim for declaratory

relief. “[J]ust like suits for every other type of remedy, declaratory-judgment

actions must satisfy Article III’s case-or-controversy requirement.” California v.

Texas, 593 U.S. 659, 672 (2021). Plaintiffs haven’t satisfied this requirement

because they haven’t explained how they would benefit from declaratory relief.

As Plaintiffs’ counsel conceded during oral argument, a judgment declaring

NYCHA ineligible to participate in such housing conversions would only

potentially advance the claims of other tenants at other projects.

Contrary to Plaintiffs’ argument, declaratory relief cannot be granted

under the doctrine of “prudential mootness.” As Plaintiffs admit, that doctrine

“is concerned, not with the court’s power under Article III to provide relief, but

with the court’s discretion in exercising that power.” Appellant’s Reply Br. 19

(quoting Penthouse International, Ltd. v. Meese, 939 F.2d 1011, 1019 (D.C. Cir.

1991)). Since Plaintiffs lack Article III standing to sue, however, there’s no power

to exercise. See Warth v. Seldin, 422 U.S. 490, 498 (1975) (explaining that Article III

9 standing is “the threshold question in every federal case, determining the power

of the court to entertain the suit”).

Finally, the parties dispute whether Plaintiffs could have sought

preliminary relief and whether they have alleged a cognizable injury. Because

we hold that Plaintiffs’ alleged injuries are not redressable, we express no

opinion as to whether they could have sought preliminary relief under Section

705 of the Administrative Procedure Act or the All Writs Act. Nor do we decide

whether Plaintiffs have alleged a cognizable injury in fact.

* * *

We have considered Plaintiffs’ remaining arguments and conclude that

they are without merit. Accordingly, the district court’s judgment of dismissal is

AFFIRMED.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court