Egae, LLC v. Ushud

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 21, 2021
• Docket: 20-71187
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION APR 21 2021

UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

EGAE, LLC et al., No. 20-71187

Petitioners, Agency No. 18-AF-0227-CM-002

v. MEMORANDUM * U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,

Respondent.

On Petition for Review of an Order of the Secretary of Housing and Urban Development

Submitted April 16, 2021* * Seattle, Washington

Before: GRABER and CALLAHAN, Circuit Judges, and SELNA, Senior District Judge* * *

* This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. 34(a)(2). * ** The Honorable James V. Selna, United States Senior District Judge for the Central District of California, sitting by designation. 1 Petitioners EGAE, LLC and Marlow Family Exempt Perpetual Trust petition

for review of the order of the Secretary of Housing and Urban Development

(“HUD”) affirming the Administrative Law Judge’s (“ALJ”) order imposing civil

money penalties on Petitioners for violating 12 U.S.C. § 1735f-15. We have

jurisdiction under 12 U.S.C. § 1735f-15(e). We review under 5 U.S.C. § 706, and

we deny the petition.

Petitioners’ argument that the ALJ should have considered whether HUD’s

denial of Petitioners’ request to use a master lease precluded the award of civil

money penalties pursuant to § 1735f-15(a) is forfeited because it is raised for the

first time on appeal. Greger v. Barnhart, 464 F.3d 968, 973 (9th Cir. 2006).

Similarly, Petitioners forfeited the argument that HUD’s actions violated the

Regulatory Agreement’s covenants of good faith and fair dealing because it was

not raised until the reply brief. Bazuaye v. I.N.S., 79 F.3d 118, 120 (9th Cir. 1996)

(per curiam).

The ALJ properly consulted relevant factors, listed in 24 C.F.R. § 30.80, to

determine that Petitioners’ failure to submit annual financial reports was “material”

under 24 C.F.R. § 30.10, and the ALJ appropriately disregarded irrelevant factors.

Yetiv v. U.S. Dep’t of Hous. & Urban Dev., 503 F.3d 1087, 1091 (2007). The ALJ

permissibly found materiality due to one factor, gravity of the offense. See

2 id., & n.3 (affirming following consideration of one factor). Although both the

statute and the regulation expressly allow the agency to consider the factors also

for other purposes, 12 U.S.C. § 1735f-15(d)(3), 24 C.F.R. § 30.80(k), those

passages do not prohibit the agency from considering the factors for the purpose of

determining materiality. Cf. Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State

Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (“[A]n agency rule would be

arbitrary and capricious if the agency has relied on factors which Congress has not

intended it to consider.”). The ALJ “considered the relevant factors and articulated

a rational connection between the factors found and the choices made.” Protect

Our Cmtys. Found. v. LaCounte, 939 F.3d 1029, 1034 (9th Cir. 2019) (quoting

City of Sausalito v. O’Neill, 386 F.3d 1186, 1206 (9th Cir. 2004)).

Substantial evidence supports the ALJ’s decision to grant HUD the

maximum amount in civil money penalties. Several factors supported the ALJ’s

decision, such as the inability of HUD to monitor the project, the injury to the

public, and the financial benefit that Petitioners received. We are unpersuaded by

Petitioners’ argument that the record “compel[s] a reasonable finder of fact to

reach a contrary result.” Gebhart v. SEC, 595 F.3d 1034, 1043 (9th Cir. 2010)

(internal quotation marks omitted).

Substantial evidence supports the ALJ’s finding that Petitioners had the

3 ability to pay the maximum amount of civil money penalties. Ample evidence

suggested that Petitioners had millions of dollars in equity, and Petitioners

presented no documentary evidence of their inability to pay.

Nor is there a basis for Petitioners’ argument that their rights under the

Equal Protection Clause and the Takings Clause were violated. Since this is an

appeal of the ALJ’s decision to grant HUD civil money penalties against

Petitioners, any issues stemming solely from HUD’s denial of Petitioners’ request

to use a master lease are not properly before us. As Petitioners’ constitutional

arguments solely relate to the denial of the master lease, they cannot form the basis

for reversal of the ALJ’s ruling.

PETITION DENIED.