Virgil Dotson v. U.S. Department of Housing and Urban Development

731 F.2d 313, 1984 U.S. App. LEXIS 23882

• Court: Court of Appeals for the Sixth Circuit
• Decided: April 3, 1984
• Docket: 83-3037
• Status: Published

Opinions

NATHANIEL R. JONES, Circuit Judge.

Appellants, Virgil Dotson, et al. (Dotson) are presently before this Court to appeal an order of the district court denying their motions for enforcement and modification of two stipulations into which they entered with the City of Toledo (The City) and the Department of Housing and Urban Development (HUD). Dotson contends that the district court erred in failing to judge HUD’s compliance with those stipulations in accordance with the standard of “all necessary, reasonable and appropriate steps” as required by the 1977 stipulation. Upon consideration of the issues presented by this appeal, we agree that the district court erred in judging HUD’s compliance in accordance with a less stringent “reasonableness” standard.

In December, 1974, a class of low income individuals ¹ filed suit alleging that actions taken by HUD and the City of Toledo violated the constitution and federal fair housing laws'. After three years of litigation the parties entered into a Stipulation and Settlement. That Stipulation was approved by the Northern District of Ohio on December 17, 1977 (The 1977 Decree). The Settlement imposed upon the defendants-appel-lees the burden of assuring low income individuals access to housing. In pertinent part, the Stipulation and Settlement provided:

a) HUD would take all steps reasonable and necessary, consistent with statutory authority, to make available during a four (4) year period ending September 30, 1981, funds for at least two thousand (2,000) subsidized family housing units. Furthermore, HUD agreed to use best efforts to promote and facilitate, consistent with federal regulations, the development, construction, and occupancy of those units;

b) The City would cooperate with HUD in planning, developing, constructing, and having occupied at least two thousand (2,000) low income housing units;

c) HUD and the City would take all steps reasonable, necessary and appropriate, consistent with the valid exercise of their powers, to accomplish the twin goals of reducing the geographic compartmentalization of racial and income groups in Toledo, and fostering more diverse and vital neighborhoods by city-wide dispersal of housing opportunities for minorities and families of low and moderate incomes;

d) The City would prepare and execute, consistent with the valid exercise of its powers, a five year housing plan which would result in the placement of a fair share of federally subsidized housing in each of the eleven (11) Toledo Urban Planning Districts:

e) HUD and the City would take all steps reasonable and necessary to comply with the terms and conditions of the Stipulation and Settlement.

In 1980, the City and HUD approved three subsidized low income family housing projects for the Reynolds Planning District. A dispute arose when it became evident that this approval violated the 1977 stipulation by drawing funds from subsidized, non-minority areas.

On October 10, 1980, the parties entered into another Settlement, entitled Stipulation and Order (the 1980 Decree), which was designed to resolve this dispute over the failure of the City and HUD to comply with the 1977 Settlement. That 1980 Decree provided inter alia:

2. This Stipulation and Order is not, and should not be construed as an amendment to the September 15, 1977 Stipulation and Settlement. [With one exception], the parties retain all rights granted under the September 15, 1977 Stipulation and Settlement____

4. During fiscal years 1981 and 1982, [HUD] shall allocate sufficient funding to provide for and they shall advertise for the new construction of twenty (20) units of Section 8 family housing in the Southside Planning District ... and seventy (70) units of Section 8 family housing in the West Toledo Planning District ..., and one hundred fifty (150) units of Section 8 family housing units in the Westgate Planning District____ It is agreed that funding for these units shall be provided from either the HUD central office reserve subject to an adequate allocation being provided by Congress, or funds recaptured by HUD and that provision of these units shall in no way diminish any funding that would otherwise be allocated for subsidized housing in the Toledo Metropolitan Area.

5. The Housing Units mentioned in paragraph 4 above may be reduced by forty-nine (49) in the event the ARC/COR I project is relocated and construed in one of the planning districts mentioned in paragraph 4 (emphasis added).

HUD was thereby required to fund and advertise private developer proposals for the construction of 240 housing units of Section 8 family housing in Southside, West Toledo and Westgate planning districts. These locations were chosen because of (1) the virtual absence of subsidized housing, (2) a history of the lack of subsidized housing in these areas due to the high cost of land development and racial opposition, and (3) the fact that these areas had been specifically identified for new construction housing in the 1977 decree’s five year plan. The 1980 settlement essentially provided funds and advertising for the development of low cost housing in these specific planning districts.

The housing in these districts is categorized as Section 8 housing. The Section 8 New Construction program is a 20 year rent subsidy program financed by HUD. The low income tenants are required to pay about one quarter of their income toward rent. HUD predetermines the amount of rent. See 42 U.S.C. § 1437f, 24 C.F.R. Ch. 880. HUD subsidized housing is attractive to private developers because they are as-’ sured of a steady stream of occupants. Before a developer is assured that HUD has committed itself to a district, several administrative steps are typically followed. The HUD office first allocates funds on the regional level and suballocates those funds within each region. In the case at bar, HUD agreed in the 1980 Decree to suballo-cate funds requisite to the development of 240 low cost units in the selected districts.

After receipt of funds, the Field Office typically prepares an advertisement and developers’ package. A Notification of Fund Availability (NOFA) is also published to solicit housing proposals from developers. The NOFA ad usually is published once a week for two consecutive weeks. See 24 C.F.R. § 880.304 and 24 C.F.R. § 881.304. An interested developer must then contact HUD, obtain a developer’s package, locate and secure a site, develop architectural plans, locate potential financing, gain zoning approvals, obtain building permits, and finally submit an application.

HUD examines the developer’s completed proposal, routes the proposal to intra-agency review boards and then to the Housing Programs Branch. After a proposal has been approved, notification is sent to the developer and funding is sent to the Field Office. Construction begins when funding has been received and the developer has complied with technical building requirements.

All of these steps must occur before the end of the fiscal year (September 30); otherwise, under normal circumstances, HUD may recapture the funds. In fiscal year 1981, the HUD field office advertised a NOFA for 70 units in the Southside planning district. The NOFA was published on February 11 and February 18, 1981. No proposals were received for the Southside district. HUD ultimately approved and funded one project for 40 units in the West Toledo district. But HUD made no proposals for Westgate.

On March 29, 1982 the HUD field office in Cleveland was granted funding for 157 units of Section 8 housing. This allocation, which was transferred from the Chicago office, was made “in accordance with the Dotson litigation.” The City of Toledo, in conjunction with plaintiffs’ counsel, recommended 101 units in Westgate, 30 units in West Toledo, 20 units for South Toledo and West Toledo and 6 units for the handicapped.

On May 5 and May 12, 1982, HUD advertised fund availability for all of these 151 units. The Cleveland office received three proposals for Westgate, four for West Toledo and two for Southside. HUD approved a 26 unit proposal for Westgate, a 30 unit proposal for West Toledo and a 20 unit proposal for Southside. These proposals were approved and funded through the necessary HUD procedures.

On September 29, 1982, HUD received a fourth proposal for Westgate. This proposal was not processed through HUD’s typical procedural channels. Cleveland Multi-Family Housing Representative, C. Edward Caldwell, stated that the proposal probably would not have met approval. As the 1982 fiscal year closed, therefore, 75 Westgate units remained unapproved. Funding for the units would be returned to HUD.

The district court’s alleged failure to enforce adequately the terms of the 1977 and the 1980 Stipulations is the primary subject of this appeal. In particular, HUD agreed in the 1980 Stipulation to advertise and provide in 1981 and 1982 funding for construction of certain designated housing units necessary to the dispersal of housing in Toledo. The appellants argue in chief that the district court failed to apply this provision of the Settlement.

On March 4, 1982, the plaintiffs moved the district court for a temporary restraining order which would prohibit HUD from withdrawing funds for 75 units of low income family housing in Toledo and which would require HUD to readvertise in Toledo. After a hearing, the Court granted the TRO.

On November 16,1981, the district court, however, denied the plaintiffs’ motion to enforce the two settlement decrees. The district court did order HUD to escrow the funds earmarked for the 75 units pending the outcome of plaintiffs’ appeal. Appellants filed a notice of appeal on January 14, 1983.

They contend that the district court failed to interpret properly the scope of the 1980 and 1977 Stipulations.² They argue that the 1977 decree requires the district court to apply the “all necessary, reasonáble and appropriate steps” standard to judge HUD’s conduct. Thus although the facts of this case are quite complex, appellants’ initial argument involves a question of contractual interpretation.

The district court concluded that HUD’s conduct must be judged in light of the terms of the 1980 decree. That decree is silent as to the time for performance. The district court, therefore, implied a “reasonable time” for performance, claiming

When a contract fails to state a specific time for performance, the law will imply a reasonable time ... (emphasis supplied).

The district court applied a reasonableness test in determining that the publication of a NOFA less than five months before the end of the 1982 fiscal year did not constitute a breach of the 1980 decree. Appellants argue that the “necessary, reasonable and appropriate” standard of the 1977 decree should read into the 1980 decree.

A consent decree is a strange hybrid in the law; it is both a contract that has been negotiated by the parties and a court order which can be altered by a court if circumstances warrant. Brown v. Neeb, 644 F.2d 551 (6th Cir.1981). This Court has held that “since consent decrees and orders have many attributes of ordinary contracts, they should be construed basically as contracts.” Neeb, 644 F.2d at 557; citing United States v. ITT Continental Baking Co., 420 U.S. 223, 236-37, 95 S.Ct. 926, 934-35, 43 L.Ed.2d 148 (1975).

The terms of a consent decree, unlike those of a simple contract, however, have unique properties. See ITT Continental Baking Co., 420 U.S. at 236 n. 10, 95 S.Ct. at 934 n. 10. The circumstances surrounding the formation of the decree help determine the purpose for which the decree was entered. Neeb, 644 F.2d at 562; United States v. Bechtel Corp., 648 F.2d 660 (9th Cir.), cert. denied, 454 U.S. 1083, 102 S.Ct. 638, 70 L.Ed.2d 617 (1981). The binding substantive commands of a consent decree are embodied within decree’s “four corners.” United States v. Armour & Co., 402 U.S. 673, 91 S.Ct. 1752, 29 L.Ed.2d 256 (1971). A decree embodies the legal constraints which govern the behavior of the parties during the life of the decree. ITT Continental, 420 U.S. at 236, 95 S.Ct. at 934. If the language of the decree is ambiguous, however, the court’s interpretation of its substantive commands may depart from the “four corners.” United States v. Motor Vehicles Manufacturers Association, 643 F.2d 644, 648 (9th Cir. 1981).

The initial question for review is whether the appellees breached their duty under the express and implied terms of the decree. The district court properly found that the “four corners” of the 1980 decree did not provide explicit guidance on the intent of the parties. In the face of the decree’s apparent “silence,” the district court implied a “reasonable time” for performance. Citing, Bach v. Friden Calculating Machine Co., 155 F.2d 361 (6th Cir. 1946). The court’s implication of a “reasonable time” is supported by Section 2-309(1) of the Uniform Commercial Code. That section provides that where the parties have neglected to specify the “time for delivery,” that time shall be a “reasonable time.” See also White and Summers, Uniform Commercial Code, p. 105. This practice is appropriate in the commercial contract field because it encourages the formation of binding contracts among business entities. But this commercial law policy has little place in the field of fair housing decrees. Section 2-309, in fact, does not apply at all where the time for performance is geared toward completion of a specific project United States Industries v. Semco, 562 F.2d 1061 (8th Cir.), cert. denied, 434 U.S. 986, 98 S.Ct. 613, 54 L.Ed.2d 480 (1977). Although the district court properly went beyond the explicit language of the 1980 decree to ascertain the parties’ intent, we find that it improperly supplied that intent with a reasonableness term.

In the context of a fair housing consent decree, which is geared toward the completion of a specific project, the district court erred in not interpreting the decree in light of the “circumstances surrounding its formation.” See Neeb, 644 F.2d at 562. One such “circumstance” is the existence of the 1977 decree. In that decree, HUD promised to “take all steps reasonable and necessary ... to make available during a four (4) year period ending September 30, 1981 funds for at least two thousand (2000) subsidized family units.” In addition, HUD agreed to use its “best efforts to promote and facilitate ... the development, construction and occupancy of those units.” According to the express terms of the 1977 decree, the City of Toledo was required to prepare and execute a “five year housing plan which would result in a fair share of federally subsidized housing in each of the eleven (11) Toledo Urban Planning Districts.” Finally the decree required HUD and the City to take “all steps reasonable, necessary and appropriate” consistent with the twin goals of:

reducing the geographic compartmentalization of racial and income groups in Toledo, and fostering more diverse and vital neighborhoods by city wide dispersal of housing opportunities for minorities and families of low. and moderate income.

The terms of this decree were in effect when a dispute arose between the parties in 1980. The plaintiffs feared that the allocation of funds to a district not involved in the “five-year plan” (Reynolds) would necessarily detract from those funds available for the areas involved in the plan. The plaintiffs therefore sought a court decree which would reaffirm the fund allocations contemplated by the 1977 decree. These events therefore provide the circumstances which should have informed the district court’s interpretation of the 1980 decree.

That decree should have been interpreted as a quid pro quo which did not sacrifice any of the plaintiffs’ rights under the 1977 decree. The 1980 decree indeed states that this “Stipulation and Order should not be construed as an amendment” to the earlier decree, (emphasis added). The district court interpreted this language to mean that the 1980 decree was separate from and not guided by the 1977 decree. But the next sentence of the 1980 decree clearly refutes this interpretation. The parties agreed that

Except as provided in paragraph 6 of this Stipulation and Order, the parties retain all rights granted under the September 15, 1977 Stipulation and Settlement.

In Paragraph 6, the plaintiffs agree to forego only the specific dispersal requirements under the 1977 decree with respect to Hilltop and Southgate Woods district. The plaintiffs allowed HUD to divert those dispersals to the Reynolds district. Paragraph 6, therefore, was clearly a specific concession made by the plaintiffs in return for the assurance of HUD actions in accord with the 1977 decree. The plaintiffs forfeited their right to demand HUD compliance in Hilltop and Southgate Woods in return for the reaffirmation of their remaining rights under the 1977 decree. Paragraph 6 is the only provision in the new decree which specifically and explicitly “amends” the older decree. The parties clearly intended to retain “all” other rights secured under the 1977 decree.

Those rights include the right to require the City and HUD to take all reasonable, necessary and appropriate steps to secure the goal of racial integration through dispersal of funds for low cost housing. One of those “steps” is required specifically by the 1980 decree. Paragraph 4 provides that, “[d]uring fiscal year 1981 and 1982, Federal defendants shall allocate sufficient funding to provide for and they shall advertise for new construction” in Southside, West Toledo and Westgate.

The standard for compliance with this explicit requirement, while it is not explicit in the 1980 decree, is clearly provided in the catch-all provision which upholds all rights under the 1977 decree. The defendants’ obligation to “take all steps reasonable necessary and appropriate” to effectuate the goals secured under the 1977 decree is nowhere excused under the 1980 decree. We conclude that the district court erred in applying to HUD’s performance under the 1980 decree a mere “reasonableness” test. We therefore remand this case to the district court for a determination of whether HUD took “all steps reasonable necessary and appropriate” to meet its obligations under the 1977 and 1980 decrees. If the district court finds that HUD has not met those obligations, that court has the authority to order funding for the 75 Toledo units.

Accordingly, the order of the district court denying enforcement of the 1977 and 1980 decrees is Reversed and this cause is hereby Remanded for proceedings consistent with this opinion.

1 . The class and subclass were certified:

All low income residents of the City of Toledo who have been, or who are, scheduled to be displaced, poorly housed, or otherwise substantially affected by the City of Toledo’s Urban Renewal Neighborhood Development, Workable Programs, Community Development, and other related activities which have previously been implemented or are planned by the defendants.

2 . Before we reach the question of whether the district court applied the proper standard in reviewing HUD’s compliance, we must consider the scope of the judiciary's remedial, power to insulate from congressional recapture the funds originally earmarked for that compliance. This Court concludes that HUD had authority to use previously appropriated funds in between fiscal year 1981 and the next congressional appropriation and that the district court had authority to prevent the recapture after fiscal year 1982 of funds originally set aside for compliance with the 1980 decree.

Section 5(c) of the U.S. Housing Act, 42 U.S.C. § 1437c(c), provides HUD with permanent authority to commit funds to Section 8 program housing. That authority has no temporal constraints; the funds in fact are available until Congress terminates HUD's authority. Through specific appropriations acts, Congress periodically provides HUD with additional funds. In fiscal year 1981, Congress appropriated to HUD sufficient funds for compliance with the decree. Those funds effectively remained available through the relevant compliance period. P.L. 96-526, 94 Stat. 3044; 42 U.S.C. § 1437c(c)(l). Congress therefore empowered HUD to use previously appropriated Section 8 funds to fulfill its obligations under the 1980 decree even after the end of fiscal year 1981. HUD clearly does not, nor could it, rely upon the lack of authority to use previously allocated funds as a justification for its non-compliance.

We find in addition that the district court has the authority to prevent the recapture of earmarked funds after fiscal year 1982 and to order their use toward compliance. Because HUD's authority to employ Section 8 appropriations is "permanent" (42 U.S.C. § 1437c(c)), HUD did not require specific authorization on September 30, 1982 to permit it to continue to fund housing with previously appropriated funds. As of September 30, 1982, Congress had not terminated HUD's general authority to pursue section 8 housing. No lapse therefore existed in HUD’s funding authority.

In National Association of Regional Councils v. Costle, 564 F.2d 583 (D.C.Cir.1977), the court found well-accepted the power of a court to enjoin an agency from recapturing funds where its order is entered before a lapse in the agency’s funding authorization. 564 F.2d at 588-89. Congress did not terminate HUD’s authority to enter into Section 8 contracts until December 21, 1982. (P.L. 97-377, 96 Stat. 1907). Before that termination, the district court had ordered the reservation of funds for the 75 housing units which are the subject of this litigation. Those funds therefore were not subject to recapture when HUD’s general authority was terminated. HUD in fact obtained a specific authorization from Congress to fund an additional 900 section 8 units to cover its potential litigation commitments. P.L. 98-63, 97 Stat. 301, 319-20. The 75 units at issue in the case at bar are included within that 900 unit authorization. We conclude therefore that the district court has the authority to order the commitment of funds for those 75 units.