Neighborhood Assistance Corporation of America (Naca) v. U.S. Department of Housing and Urban Development

• Court: District Court, District of Columbia
• Decided: August 17, 2011
• Docket: Civil Action No. 2011-1312
• Status: Published

Opinion

SUMMARY OPINION AND ORDER; NOT INTENDED FOR PUBLICATION

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA,

Plaintiff, Civil Action No. 11-cv-1312 (RLW) v.

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,

Defendant.

MEMORANDUM OPINION

This matter is before the Court on Plaintiff Neighborhood Assistance Corporation of

America’s (“NACA”) Motion for Limited Expedited Discovery (Docket No. 5) in advance of a

hearing on its Motion for Preliminary Injunction. For the following reasons, Plaintiff’s Motion is

GRANTED.

NACA has asserted Fifth Amendment and Administrative Procedure Act claims against

Defendant U.S. Department of Housing and Urban Development (“HUD”) in connection with

HUD’s recent passage of a licensing regulation, 24 C.F.R. § 3400.103. NACA alleges that this

regulation is cumbersome and is targeted solely at NACA in bad faith and in retaliation for

NACA’s public criticism of the Obama administration. In its Complaint, NACA sets forth

specific allegations reflecting that, after NACA began to criticize the administration, NACA was

subjected to an extensive HUD audit which ultimately found no wrongdoing on NACA’s part.

Through the affidavit of NACA’s CEO Bruce Marks, NACA sets forth details of statements

made by auditors and HUD officials reflecting that HUD was targeting NACA and that for two

years “people at HUD have been trying to find things on NACA.” Marks Aff. ¶ 21. The audit

1 SUMMARY OPINION AND ORDER; NOT INTENDED FOR PUBLICATION

and these statements, according to NACA, were made leading up to the adoption of the licensing

regulation.

In support of its claim of bad faith or retaliation, NACA seeks to depose four individuals

who had dealings with NACA during or after the audit or who were involved with the adoption

of Section 3400.103(e)(7), the specific HUD regulation that NACA is challenging. NACA has

named three specific deponents, and also has asked for the a 30(b)(6) deposition of the HUD

official most familiar with the adoption of Section 3400.103.

HUD argues, and this Court agrees, that federal courts are ordinarily not allowed to

supplement an administrative record in deciding whether an agency violated the APA. HUD

concedes, however, that there are certain circumstances in which a Plaintiff in an APA case may

supplement the record with discovery. Opp. at 7. One of those circumstances is where there is a

strong showing of bad faith or improper behavior on the part of the agency. See Eugene Burger

Management Corp. v. United States Dep’t of Housing and Urban Dev., 192 F.R.D. 1, 12 (D.D.C.

1999) (quoting Saratoga Dev. Corp. v. United States, 21 F.3d 445, 458 (D.C. Cir. 1994)) (stating

that one of the two circumstances in which discovery in an APA case is permitted is where there

has been “a strong showing of bad faith or improper behavior so that without discovery the

administrative record cannot be trusted.”); see also Tummino v. Von Eschenbach, 427 F. Supp.

2d 212, 230-31 (E.D.N.Y. 2006) (stating that despite the general “record rule” governing judicial

review of agency action, an extra-record investigation by the reviewing court may be appropriate

where there has been a strong preliminary showing of bad faith or improper behavior on the part

of the agency); Preserve Endangered Areas of Cobb’s History v. U.S. Army Corps of Eng’rs, 87

F.3d 1242, 1246-47 n.1 (11th Cir. 1996).

2 SUMMARY OPINION AND ORDER; NOT INTENDED FOR PUBLICATION

Based on the specific allegations set forth in NACA’s papers and under oath in the Marks

Affidavit, NACA has made a strong preliminary showing that the agency acted improperly or in

bad faith toward NACA leading up to and possibly in connection with the adoption of Section

3400.103(e)(7). In its Opposition, HUD neither squarely addresses NACA’s factual showing of

bad faith nor argues that it would be prejudiced by being required to sit for the depositions. The

Court finds, therefore, good cause to allow limited discovery in advance of the hearing on

NACA’s Motion for Preliminary Injunction. NACA will be restricted to a total of two hours

each for the depositions of Motulski, Stevens and Roman, and a total of three hours for the

deposition of HUD’s 30(b)(6) designee.

CONCLUSION

For the foregoing reasons, Plaintiff’s Motion for Expedited Discovery is GRANTED. An

order accompanies this Memorandum.

Date: August 17, 2011 /s/ ROBERT L. WILKINS United States District Judge