Village West Associates v. Rhode Island Housing and Mortgage Finance Corp.

618 F. Supp. 2d 134, 2009 U.S. Dist. LEXIS 44685, 2009 WL 1513391
CourtDistrict Court, D. Rhode Island
DecidedMay 20, 2009
DocketC.A. 08-192
StatusPublished
Cited by4 cases

This text of 618 F. Supp. 2d 134 (Village West Associates v. Rhode Island Housing and Mortgage Finance Corp.) is published on Counsel Stack Legal Research, covering District Court, D. Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Village West Associates v. Rhode Island Housing and Mortgage Finance Corp., 618 F. Supp. 2d 134, 2009 U.S. Dist. LEXIS 44685, 2009 WL 1513391 (D.R.I. 2009).

Opinion

DECISION AND ORDER

WILLIAM E. SMITH, District Judge.

Third Party Defendant Secretary of the United States Department of Housing and Urban Development (“HUD”) moves to dismiss Defendant and Third Party Plaintiff Rhode Island Housing and Mortgage Finance Corporation’s (“RIHMFC”) complaint. HUD’s argument is that the United States Court of Federal Claims has exclusive jurisdiction over RIHMFC’s impleader claims. As then Circuit Judge Scalia once remarked, “[i]f there is a less profitable expenditure of the time and resources of federal courts and federal litigants than resolving a threshold issue of which particular federal court should have jurisdiction, it does not come readily to mind.” Sharp v. Weinberger, 798 F.2d 1521, 1522 (D.C.Cir.1986). And so it is here. After careful consideration, HUD’s motion will be granted.

I. Background

The United States Housing Act of 1937, as amended in 1974 and most commonly referred to as “Section 8,” created a national low-income housing program. 42 U.S.C. § 1437f. Under the program, low-income tenants pay rent for privately-owned housing based on their income and ability to pay. The federal government, through HUD, provides housing assistance payments to private owners to make up the difference between what the low-income tenant contributes and a pre-determined monthly “contract rent” for a particular dwelling or apartment unit. The higher the contract rent, the more HUD pays to the private owner.

HUD provides rent subsidies in two ways. In the first instance, HUD contracts directly with an owner through a Housing Assistance Payments (“HAP”) contract. HAP contracts establish an agreed upon contract rent, and HUD pays the subsidy to the owner. In the second instance, a public housing agency is involved. HUD enters into an Annual Contributions Contract (“ACC”) with the public housing agency, and the agency enters into a HAP contract with the owner. The ACC obligates HUD to provide funding to the agency so the agency can pay the subsidy to the owner under its respective HAP contract. In both scenarios, HUD provides all funding for the subsidies and prescribes, approves and directs the form of the HAP and ACC agreements. See generally 24 C.F.R. § 883. The public agency acts as a contract administrator between HUD and the owner, and administers the HAP contract in accordance with HUD’s requirements and directives. See 24 C.F.R. § 883.602-607.

*136 This case fits within the second scenario. In 1981, RIHMFC entered into an ACC contract with HUD pursuant to 42 U.S.C. 1437, et seq. Thereafter, RIHMFC entered into a HAP contract effective March 1, 1982 with Plaintiff Village West Associates (“Village West”), a limited partnership that owns a 35-unit multifamily rental housing project located in Woonsocket, Rhode Island. The term of the RIHMFC/Village West HAP contract for the Woonsocket project extends through automatic renewals until 2012. RIHMFC has similar Section 8 agreements for numerous Rhode Island properties.

The details of the evolution of the Section 8 program would add little value to the instant jurisdictional discussion. 2 Suffice it to say HAP contract rents paid by HUD were not static. Rather, as first set forth in 42 U.S.C. § 1437f(c)(2), HAP contracts provide for rent adjustments on at least an annual basis, based on adjustment factors the Government determines. These factors, published in the Federal Register, are used to calculate the annual rent increases to which participating owners are entitled under HAP contracts. 24 C.F.R. § 888.201. During the 1980s and 1990s, Congress revisited Section 8 and tweaked the procedures and requirements for HAP adjustments. Needless to say, owners and agencies pushed for higher rents and favorable procedures, and sparred with HUD over the adjustment methods. Still concerned that subsidies were too high, Congress amended Section 8 in 1994 in two key ways. See 42 U.S.C. 1437f(c)(2)(A); Pub.L. No. 103-327, 108 Stat. 2298, 2315 (1994) (“1994 amendments”).

The 1994 amendments required owners in some circumstances to demonstrate that an adjusted rent would not exceed the rent for a similar unassisted housing unit. Id. They also reduced the annual rent adjustment factor where a given housing unit was occupied by the same tenant during a prior year. Id. On March 7, 1995, HUD issued Notice H 95-12 to implement the 1994 amendments. 3 Although there is more to the story, the gist of the matter is that following the 1994 amendments, rents were often not increased at all, increased less than they had previously been, and/or increased only after owners submitted required materials.

II. Procedural Travel

Village West filed a complaint in May of 2008 against RIHMFC alleging breach of contract. Under its HAP contract with RIHMFC, Village West contends it is entitled to annual rent increases based on published adjustment factors; yet because of the 1994 amendments and subsequent HUD Notices, RIHMFC has failed to increase rents in accordance with the contract since 1995, thus damaging Village West. Understandably, RIHMFC filed a third party complaint against HUD pursuant to Fed.R.Civ.P. 14(a). RIHMFC alleges in this complaint that if it is liable to Village West for breach of the HAP contract, then HUD is liable to it because the 1994 amendments and HUD Notices are why RIHMFC cannot meet its obligations to Village West. In other words, its hands are tied. RIHMFC’s complaint contains *137 three counts: I (Administrative Procedure Act, or APA); II (Contract/Indemnification); and III (Declaratory Judgment).

It is worth noting that the substantive issues behind this procedural quandary are not novel. Other owners with pre-1994 contracts have launched similar challenges against HUD. 4 See Park Props. Assocs., L.P. v. United States, 74 Fed.Cl. 264, 274-76 (2006) (requiring rent comparability studies constituted repudiation of HAP contract but reduction for non-turnover units did not); Statesman II Apartments, Inc. v. United States, 66 Fed.Cl. 608, 625 (2005) (reduction for non-turnover units constituted breach of HAP contract); Cuyahoga Metro. Hous.

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618 F. Supp. 2d 134, 2009 U.S. Dist. LEXIS 44685, 2009 WL 1513391, Counsel Stack Legal Research, https://law.counselstack.com/opinion/village-west-associates-v-rhode-island-housing-and-mortgage-finance-corp-rid-2009.