MEMORANDUM OPINION AND JUDGMENT*
I. INTRODUCTION
Star page 1*1 When Congress passed the American Rescue Plan Act of 2021 (ARPA) to help Americans respond to the COVID-19 pandemic,1 it created a Homeowner Assistance Fund to provide states with funds to support homeowners who were struggling financially.2 ARPA specified the purposes for which the funds could be used,3 but it did not establish limits on the amount that states could award to any individual person.4
After a homeowner fell behind on mortgage payments, he applied for assistance from the Alaska Housing Finance Corporation (AHFC), which administered the ARPA assistance program.5 AHFC awarded him the amount needed to pay his remaining debt after his mortgage holder restructured his loan. He argued to AHFC that he was entitled to the entire amount of his arrearage, before the mortgage was restructured. After an internal AHFC appeal upheld the award, he sued AHFC in superior court. He argued that the award violated federal law and his due process rights and lacked a rational basis in law. The superior court rejected all the homeowner's claims.
The homeowner appealed. We affirm the superior court's decision.
II. FACTS AND PROCEEDINGS
A. Facts
Section 3206 of ARPA established the Homeowner Assistance Fund within the United States Treasury “to mitigate financial hardships associated with the coronavirus pandemic.”6 Specifically, Treasury was charged with allocating money to states “for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship ... through qualified expenses related to mortgages and housing.”7 Qualified expenses included “mortgage payment assistance” and “financial assistance to allow a homeowner to reinstate a mortgage or to pay other housing related costs related to a period of forbearance, delinquency, or default.”8
Treasury provided the states guidance for disbursing the funds. The guidance reiterated that the ARPA funds could be used for the qualified expenses listed in the statute and explained that homeowners were “eligible to receive” awards for qualified expenses if they met hardship qualifications and provided appropriate documentation. Treasury's guidance also explained that ARPA funds were a source of last resort; states were encouraged to avoid using these funds to replace other loss-mitigation resources that might be available to homeowners.
AHFC received Alaska's allocated assistance funds and set up programs for mortgage payment assistance and for mortgage reinstatements. Qualifying homeowners were eligible for an award of up to $40,000. The payment assistance program provided awards prospectively to reduce monthly mortgage payments and other property-related expenses. The mortgage reinstatement program awarded money to “eliminate or reduce past due payments” and to bring an account fully current. The mortgage reinstatement program required that the award “be used only to supplement other loss mitigation options offered by the [mortgage or loan] servicer under investor requirements or where, without [the] funds, the homeowner would not qualify for that loss mitigation option.”
Star page 2*2 AHFC permitted applicants who disputed the amount of their award to appeal. It set up a process for the applicants to submit an appeal to an online portal, where it would be reviewed by an AHFC supervisor.
Farooque Malik applied for assistance from AHFC in March 2022. At the time of his application, Malik had accrued $28,568.50 in past-due payments on his mortgage with Wells Fargo and the mortgage was in forbearance.
Facing the imminent end of his forbearance period, Malik called AHFC in April to ask if accepting a loan modification from Wells Fargo would disqualify him from receiving payment assistance. After AHFC assured him that he would not be disqualified, Malik proceeded with the modification, which brought his account current and reinstated his mortgage. By the time the modification was completed, Malik's past-due balance had grown to $36,093.80. The modification reduced the past-due balance to $2,052.38. Wells Fargo reported the loan as current in September 2022, and in October AHFC awarded Malik $2,052.38.
Malik pursued an internal appeal of the award with AHFC. The appeal was informal and done partly by email, resulting in a limited record. Malik argued he had only accepted the loan modification because AHFC staff had told him to do so and that as a result he was awarded less than he should have been. He alleged that AHFC staff had assured him that accepting the modification would not affect the amount of funds he received. Malik argued that he was entitled to the “$34,000 [he was behind] at the time of application.”
AHFC denied the appeal, explaining that it had advised him the loan modification would not disqualify him from the program. And it observed that the amount he received was the amount Wells Fargo reported would reinstate his mortgage, after the modification brought his mortgage account current. Malik attempted to dispute the denial, but AHFC reiterated its reasoning and closed the appeal.
B. Proceedings
Representing himself, Malik filed a complaint against AHFC in superior court seeking $32,000, the sum he felt he was “rightfully owed.” He asked the court for “redress due to misinformation” from AHFC “concerning the Federal COVID Mortgage Relief Program.” The complaint alleged that AHFC staff had told him that accepting a loan modification would not affect the amount of money he would receive. Malik also sought “to ensure the correct application of the Federal COVID Mortgage Relief Program” and to require AHFC to “adhere[ ] to federal guidelines.”
AHFC filed a motion to dismiss Malik's claim of misrepresentation and to convert his remaining allegations to an administrative appeal. It argued that if Malik was seeking damages on a tort claim for misrepresentation, that complaint should be dismissed because torts against the state are barred by sovereign immunity. But it argued that Malik's complaints that AHFC had violated ARPA or Treasury guidance should be converted to an administrative appeal.
Reading Malik's complaint liberally,9 the superior court dismissed Malik's claim for damages due to misrepresentation, holding that any misrepresentation claim was barred by sovereign immunity. Then, the court converted Malik's claim that AHFC misapplied federal law to an administrative appeal because the claim required the court to decide whether AHFC's decision was legal.
Star page 3*3 In the administrative appeal, Malik again claimed that AHFC staff had assured him the amount of his award would not change and that the award violated federal law. He also argued that the internal appeal process violated due process.
The court affirmed AHFC's decision. It held that federal law did not limit AHFC's discretion to choose the size of the award. It also held that Malik had not shown that AHFC staff had told him to expect an award of a certain size, or that the internal appeal process was handled improperly.
III. STANDARD OF REVIEW
“We review a superior court's grant of a motion to dismiss a complaint for failure to state a claim under Alaska Civil Rule 12(b)(6) ... de novo. In reviewing a Rule 12(b)(6) dismissal, we liberally construe the complaint and treat all factual allegations in the complaint as true.”10
“Whether a civil action in a superior court is properly converted to an administrative appeal is a question of law which we decide independently, adopting the best rule in light of precedent, policy and reason.”11
“When the superior court acts as an intermediate court of appeal, we independently review the agency decision.”12 The standard of review applied to agency decisions “depends on whether agency expertise is implicated.”13 “[W]here the case concerns ‘statutory interpretation or other analysis of legal relationships about which courts have specialized knowledge and expertise,’ ”14 such as review of “non-technical statutory terms,” the substitution of judgment standard applies.15 Under the substitution of judgment standard, “we exercise our independent judgment” and “adopt ‘the rule of law that is most persuasive in light of precedent, reason, and policy.’ ”16
“We apply our ‘independent judgment to a due process claim because it raises a question of law that does not involve agency expertise.’ ”17
IV. DISCUSSION
A. The Superior Court Did Not Err By Dismissing The Misrepresentation Claim.
Malik argues that the superior court did not reach the merits of his challenge because it improperly “invok[ed] sovereign immunity” instead of addressing his claims that AHFC's award did not follow federal law. But the superior court did not err by dismissing any tort claim Malik was making.
The superior court did address his claims that AHFC's award did not follow federal law; those claims were not barred by sovereign immunity and became part of the converted administrative appeal.
Star page 4*4 As for the claim that the superior court characterized as a tort claim of misrepresentation, the court did not err by dismissing it. The court liberally interpreted Malik's complaint because he was representing himself.18 The court interpreted Malik's complaint to be saying that AHFC gave him bad advice, and that bad advice cost him $32,000 in his award. On appeal, Malik does not disown this argument. But this is a tort claim, and tort claims against the state — in this case the superior court labelled the claim “misrepresentation” — are generally barred by statute.19 The superior court did not err by dismissing this claim.
B. The Superior Court Did Not Err By Converting Malik's Action To An Administrative Appeal.
Malik's apparent argument that the court did not address his claims when it converted his case — minus the tort claim — to an administrative appeal also fails. “We have consistently held that ‘[h]owever denominated, a claim is functionally an administrative appeal if it requires the court to consider the propriety of an agency determination.’ ”20 If the superior court “could not grant the relief requested without reversing the prior agency determination, the claim should be treated as an administrative appeal.”21
The claims in Malik's complaint — considered liberally22 — allege that AHFC's decision to award him only the remaining debt on his mortgage violated federal law and lacked a reasonable basis in law. Those claims “require[d] the court to consider the propriety”23 of AHFC's decision and would require the superior court to “revers[e] the prior agency determination”24 to grant relief. His remaining allegations therefore amounted to an administrative appeal and the court properly converted it to one.
C. AHFC's Decision Did Not Lack A Reasonable Basis In Law.
Malik alleges that AHFC staff explicitly told him that accepting the loan modification would not affect the amount of money he would receive. He argues that because AHFC later considered the modification when it determined the amount of his award, its decision was arbitrary and lacked a reasonable basis in law.25 But the record before us does not indicate that AHFC told Malik that accepting the modification would not affect his award.
We recognize that the unique circumstances of both the ARPA assistance program's creation in the face of a pandemic and the need for an expedited process of disbursing the assistance funds created little in the way of a record for appeal. The agency appeal process was an informal one, mostly carried out through email.
Malik cites emails sent and received in relation to his appeal of the award amount. He claims that AHFC's internal email correspondence about his application provides evidence that AHFC told him the loan modification would not affect his eligibility for an award covering his original past-due balance. But internal emails among AHFC staff do not provide firsthand evidence of what AHFC told Malik. More importantly, the emails do not show that AHFC told Malik anything about his eligibility for a specific award amount. The emails show that AHFC staff discussed how to answer the question they thought Malik was asking: whether accepting the loan modification would prevent him from being eligible for the assistance program at all.
Star page 5*5 Malik also claims that the internal emails support his allegation because one email explained that his application would move to the “current – pay ahead side” after he finalized the loan modification. But that email says nothing about whether Malik was promised a specific amount of money. “[C]urrent – pay ahead side” appears to refer to AHFC's program for prospective mortgage payment assistance — i.e., that the money for his award would be provided through that program once his loan was brought current. Ultimately, Malik's award was provided through the mortgage reinstatement program instead, but this actually gave him a larger award than he would have received under the prospective assistance program. Internal AHFC records explain that for current loans (such as Malik's after he restructured his loan) AHFC was paying “the greater of [three] regular monthly payments or the outstanding past due.” In Malik's case, his outstanding past-due amount of $2,052.38 was greater than three monthly payments of prospective relief, so he was awarded $2,052.38.
There is no evidence that AHFC promised any amount of funding to Malik — neither in AHFC's call log nor in AHFC's internal emails. A single call log note reflects that “[Malik] is going with the loan modification and it will not affect the mortgage relief.” But that note is consistent with the discussion in AHFC internal emails: accepting the loan modification would not disqualify him from the program. The record does not demonstrate that AHFC's decision was arbitrary or without a reasonable basis.
D. AHFC's Award Did Not Violate Federal Law.
Malik argues that the award he received violated both ARPA and Treasury guidance because both “envisioned homeowners receiving full arrearage coverage in addition to any loan modifications.” He claims that Section 3206 of ARPA “expressly provides that [the assistance funds] ‘must be used’ to prevent mortgage delinquencies and defaults caused by COVID-19.” He also claims that the Treasury guidelines “explicitly instruct that [the] funds be used in addition to, not in lieu of, a borrower's own loss-mitigation options.” And he argues that the “purpose” of the homeowners’ assistance program was to provide qualifying homeowners “full arrearage coverage,” up to $40,000. Malik is mistaken.
Malik's argument requires us to determine the purpose of the ARPA program. This is a statutory interpretation question to which we apply our independent judgment.26
Neither ARPA nor Treasury guidance require AHFC to award applicants any particular amount of money. ARPA Section 3206 “provid[es]” funds “to eligible entities [such as AHFC] for the purpose of preventing homeowner mortgage delinquencies, defaults, foreclosures, loss of utilities or home energy services, and displacements of homeowners experiencing financial hardship ... through qualified expenses related to mortgages and housing.”27 It lists qualifying expenses28 and it specifies the purposes for which the funds must be used, but it does not require AHFC to award a certain amount of money to applicants.
Similarly, the Treasury guidance states that the funds “may not be used for any use other than those provided for in this section” and instructs how to determine homeowner eligibility. Like ARPA itself, it does not require AHFC to award eligible homeowners a particular amount of money. In fact, the guidance “encourages participants to avoid using [the] funds in a manner that replaces other loss-mitigation resources that would otherwise be available.” (Emphasis added.) Not only did AHFC have discretion to determine how it would use the funds, it complied with Treasury guidance when it exercised its discretion by not awarding Malik the balance on his loan that was eliminated by the loan modification. AHFC's award allowed Malik to reinstate his modified mortgage by covering his remaining arrearages.29 Federal law required nothing more of AHFC.
Star page 6*6 Malik's argument that AHFC's decision had no reasonable basis in law fails for the same reason. AHFC's decision did not violate federal law and it exercised the discretion granted to it by federal law within the bounds of that law. Also irrelevant are the programs from other states cited by Malik, which handed out more generous awards than AHFC.30
E. AHFC Did Not Violate Malik's Due Process Rights.
Finally, Malik argues that AHFC violated his due process rights by not giving him notice that accepting the loan modification would affect the amount of his award, not notifying him how it would calculate the award, and failing to disclose internal emails to him during the internal appeals process.31
“To determine whether a government action impermissibly denies a person procedural due process, we apply the framework outlined by the United States Supreme Court in Mathews v. Eldridge.”32 Under that framework, due process
generally require[s] consideration of ... the private interest that will be affected by the official action; ... the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.[33]
The first step in this process is to determine “whether there is a deprivation of an individual interest of sufficient importance to warrant constitutional protection,”34 which includes determining the nature of the private interest at stake.35 “[T]he ‘types of interests protected as property are varied,’ ” but we must at least find “a property entitlement ‘grounded in’ law.”36 Property entitlements “grounded in law”37 are those that “support claims of entitlement to those benefits.”38 Thus, “[t]he hallmark of property ... is an individual entitlement grounded in state law, which cannot be removed except for cause.”39
Star page 7*7 In this case, the law does not require AHFC to award any specific amount of funds to assist struggling homeowners. Malik therefore had no claim of entitlement to a specific award amount. Because he had no claim of entitlement, he did not have a property interest in which he had a right to due process.40 He was not deprived of due process when AHFC awarded him the amount that he owed on his mortgage after it was modified.
V. CONCLUSION
The superior court judgment affirming AHFC's award to Malik is AFFIRMED.