Marshall Fincher v. South Bend Heritage Foundation ( 2010 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 09-1964
M ARSHALL F INCHER,
Plaintiff-Appellant,
v.
S OUTH B END H ERITAGE F OUNDATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Indiana, South Bend Division.
No. 3:07-CV-308—Philip P. Simon, Chief Judge.
A RGUED F EBRUARY 26, 2010—D ECIDED M AY 10, 2010
Before F LAUM and W OOD , Circuit Judges, and S T. E VE,
District Judge.Œ
F LAUM, Circuit Judge. Defendant-appellee South Bend
Heritage Foundation (“SBHF”) denied plaintiff-appellant
Marshall Fincher’s application for Section 8 housing in
its building because Fincher had a prior eviction within
Œ
Hon. Amy St. Eve, District Judge for the Northern District of
Illinois, is sitting by designation.
2 No. 09-1964
three years. Fincher brought a suit against SBHF on the
theory that he was denied due process of law, or, in the
alternative, that SBHF breached a contract with the United
States Department of Housing and Urban Development
(“HUD”) to which Fincher was a third-party beneficiary.
On appeal, Fincher recognizes that the controlling prece-
dent in this Circuit holds that there is no cause of action
for a person in his position. See Eidson v. Pierce, 745
F.2d 435 (7th Cir. 1984). Fincher asks us to overturn our
precedent on this issue. For the reasons set forth below,
we choose not to overrule Eidson and we affirm the
district court’s grant of summary judgment.
I. Background
The facts of this case are straightforward and not in
dispute for the purpose of this appeal. South Bend
Housing Authority (“SBHA”) evicted plaintiff-appellant,
Marshall Fincher from one of its public housing units.
Fincher then applied to live in an apartment building
owned by SBHF as a Section 8 1 tenant. SBHF denied
Fincher’s application because of his recent eviction from
SBHA housing. SBHF did not grant Fincher a hearing
concerning the denial of his application for tenancy.
Fincher filed suit against both SBHA and SBHF in state
court alleging a number of violations of Section 8 and
other housing laws. SBHA removed the case to federal
1
Section 8 is used throughout this opinion to refer to Section 8
of the United States Housing Act, as amended, 42 U.S.C. § 1437f.
No. 09-1964 3
court. However, the district court remanded the claims
involving SBHA back to state court because they were
inherently tied to the state court eviction proceedings
and thus fell under the Rooker-Feldman doctrine. In an
earlier opinion we dismissed the appeal of the district
court’s decision regarding the SBHA claims because “[a]n
order remanding a case to the State court from which
it was removed is not reviewable on appeal or other-
wise.” Fincher v. South Bend Housing Authority, 578 F.3d 567,
568 (7th Cir. 2009) (citing 28 U.S.C. § 1447(d)). The district
court retained jurisdiction over the claims against SBHF
and granted summary judgment in favor of SBHF. In
granting summary judgment, the district court relied
on the settled Seventh Circuit precedent that Section 8
housing applicants do not have a defined property right
in receiving housing at a specific location that would
entitle them to a due process hearing. The district
court also rejected Fincher’s claim that Fincher had en-
forceable rights as a third-party beneficiary to a con-
tract between HUD and SBHF.
II. Discussion
On appeal, Fincher advances two main arguments for
why we should reverse the district court’s grant of sum-
mary judgment: (1) we should overturn our prior prece-
dent and find that Section 8 housing applicants do have
an enforceable property right such that it warrants a
due process hearing when they are denied housing at a
specific Section 8 housing location; and (2) he put forth
sufficient evidence to create a triable issue of fact re-
4 No. 09-1964
garding his claim as a third-party beneficiary to a
contract between SBHF and HUD. We review a district
court’s grant of summary judgement de novo. Darst v.
Interstate Brands Corp., 512 F.3d 903, 907 (7th Cir. 2008).
Summary judgment is proper where “there is no
genuine issue of material fact and the moving party is
entitled to a judgment as a matter of law.” Id.; Fed. R.
Civ. P. 56(c).
A. Revisiting Eidson v. Pierce
Fincher recognizes that the holding of Eidson v. Pierce,
745 F.2d 453 (7th Cir. 1984) controls this case and
squarely contradicts the outcome he is seeking. However,
Fincher encourages us to overrule Eidson and adopt the
analysis from a Ninth Circuit opinion on this issue that
pre-dates Eidson and finds that there is an enforceable
property right in this situation. Fincher also points to a
case out of the District of New Jersey and a case from
the Supreme Judicial Court of Massachusetts, both of
which came after Eidson, to support his position that
courts are now following the Ninth Circuit approach
and therefore we should revisit the issue.
We start by reviewing the analysis in Eidson. In
Eidson, we addressed the same question presented here:
do Section 8 housing applicants who meet all Section 8
requirements and have already been deemed eligible
for Section 8 have a protected right that entitles them
to some form of due process when they are rejected
from a specific Section 8 housing unit? Eidson held that
No. 09-1964 5
they do not. The court in Eidson first looked to the
language of Section 8. Section 8 authorizes the Secretary
of HUD to make “assistance payments . . . with respect
to existing, newly constructed, and substantially rehabili-
tated housing” for the purpose “of aiding lower-
income families in obtaining a decent place to live and
of promoting economically mixed housing.” Eidson, 745
F.2d at 457 (citing 42 U.S.C. § 1437f(a) (1982)). These
payments to the owner are intended to make up the
difference between what the Section 8 tenant pays and a
maximum fair market rent established in the contract
between HUD and the private owner. 42 U.S.C.
§ 1437f(c)(3). Under the contract, the private owner re-
mains responsible for the operation and management
of the housing units. Section 8 directs that the con-
tract between the Secretary and the private owner
[S]hall provide that all ownership, management, and
maintenance responsibilities, including the selection
of tenants and the termination of tenancy, shall be
assumed by the owner (or any entity . . . with which
the owner may contract for the performance of
such responsibilities), except that the tenant selec-
tion criteria shall give preference to families which
occupy substandard housing or are involuntarily
displaced at the time they are seeking housing assis-
tance under this section.
Eidson, 745 F.2d at 457 (citing 42 U.S.C. § 1437f(e)(2)
(1982)). Under the regulations promulgated in response
to this statute, the owner may consider whether a tenant
is “otherwise acceptable” in addition to considering
6 No. 09-1964
whether the tenant meets the statutory requirements for
Section 8 housing. 24 C.F.R. §§ 880.218(b)(3) and (4). The
HUD Handbook reinforces this discretion by stating
that “each Owner should develop reasonable Tenant
selection procedures . . . designed to select applicants
who will not only meet the Tenant eligibility require-
ments for HUD’s subsidy programs but will also be
responsible tenants.” Eidson, 745 F.2d at 459 (citing HUD
Handbook ¶¶ 2-8, Germain App. at 38). Based on these
statutory provisions and regulations, the court in Eidson
recognized a tension between the lofty goals of Section 8
and the reality that there is a gap between Section 8
resources and the needs of all those eligible for Section 8.
The court in Eidson reasoned that Congress intended to
remedy this tension in a practical manner by allowing
private owners to consider less tangible factors, such as
whether an individual would be a responsible tenant,
in addition to statutory eligibility.
Against this backdrop, the court then turned to
whether an applicant for a specific Section 8 resi-
dence has a due process right to a hearing if he is denied
housing. The court looked to our previously adopted
statement that a legitimate claim of entitlement to war-
rant a due process hearing occurs “only when the
statutes of regulations in question establish a framework
of factual conditions delimiting entitlements which are
capable of being explored at a due process hearing.” Id. at
459-60 (quoting Geneva Towers Tenants Organization v.
Federated Mortgage Investors, 504 F.2d 483 (9th Cir. 1974)
(Hufstedler, J. dissenting)). Applying this definition to
Section 8, it is clear that there is no legitimate claim to
No. 09-1964 7
entitlement for individuals rejected from a specific
housing unit. Under Section 8, even if a plaintiff proved
that the landlord relied on false information in coming
to its decision to deny the plaintiff housing, the plaintiff
still would not be entitled to the housing so long as the
housing went to another eligible candidate. Id. Therefore,
the due process hearing would be meaningless. Id. The
court illustrated this point by distinguishing Section 8
from the Hill Burton Act, 42 U.SC. §§ 291 et seq., which
was at issue in Davis v. Ball Memorial Hospital Association,
640 F.2d 30, 42 (7th Cir. 1980). Under the Hill-Burton
Act, hospitals receiving federal funding must provide “a
reasonable volume of services to persons unable to pay
therefor” to the extent that the financial condition of the
facility permits. Davis, 640 F.2d at 32 (citing 42
U.S.C. § 291c(e)). As one may expect, free hospital
care suffers from the same scarcity problem as public
housing. However, the Hill-Burton Act set out a clear first-
come-first-serve basis for establishing an entitlement. Id.
at 42-43. Therefore, a hearing could establish facts suffi-
cient for a neutral hearing officer to determine if the
individual was entitled to these services. Unlike the Hill-
Burton Act, Section 8 provides no clear decision-making
structure. Rather, Section 8 provides landlords with a
series of guidelines to apply when choosing between
two eligible candidates and leaves the landlord with
considerable discretion in making the final decision.
Our circuit and other circuits have relied on Eidson
in addressing similar cases. The Eighth Circuit
specifically adopted the reasoning from Eidson when
8 No. 09-1964
deciding a nearly identical case. Hill v. Group Three Housing
Development Corporation, 799 F.2d 385 (8th Cir. 1986). Also,
this Court applied the reasoning from Eidson in Talley v.
Lane, 13 F.3d 1031 (7th Cir. 1994), to reject an alleged
due process violation when the plaintiff was rejected
from the Chicago Housing Authority’s housing program
for the disabled because of his extensive criminal history.
13 F.3d at 1035. These cases demonstrate that courts,
including ours, have reconsidered and endorsed the
reasoning from Eidson.
Fincher raises several issues in his argument for why
we should overturn Eidson. First, he repeatedly points to
Ressler v. Pierce, 692 F.2d 1212 (9th Cir. 1982), a Ninth
Circuit case that directly contradicts Eidson. The problem
with this reliance is that this Court has already
specifically rejected the reasoning from Ressler in Eidson.
Eidson, 745 F.2d at 460. The court in Eidson did not
follow Ressler because the decision in Ressler rested on a
definition of “claim of entitlement” that our circuit had
previously rejected. Id. (“As noted above, however, this
circuit has consistently followed the reasoning of
Judge Hufstedler’s dissent in Geneva Towers rather than
the majority opinion relied on in Ressler. In our view,
that reasoning compels the conclusion that these plain-
tiffs do not have protected property interests.”).
Fincher next directs our attention to Baldwin v. Housing
Authority of the City of Camden, N.J., 278 F. Supp. 2d 365(D.N.J. 2003). However, Baldwin is not instructive
here. The court in Baldwin dedicates nearly a page to
distinguishing that case from Eidson. 278 F. Supp. 2d at 379.
No. 09-1964 9
In Baldwin the question was whether an individual had
a right to a due process hearing when she was denied
eligibility for the Section 8 housing program in Camden,
New Jersey. This is a different issue than the one
addressed in Eidson. In Eidson we did not address the
issue of what due process rights an individual has when
his application for eligibility for Section 8 is denied.
Rather, we addressed the issue of what due process
rights an eligible applicant has when he is denied
housing at a specific residence. By applying the standard
for an entitlement right that we applied in Eidson, the
decision in Baldwin comports with the reasoning in
Eidson. When addressing the eligibility of an individual
for a Section 8 voucher, there is a framework of factual
conditions that could be explored at a due process hear-
ing. A neutral hearing officer could find certain facts and
order a remedy—that the individual be found to be
eligible for a Section 8 voucher. This is different from the
situation where an eligible applicant has been rejected
from a specific residence. In this latter situation,
a hearing officer would be powerless to change the situ-
ation under the statutory scheme regardless of what
facts the hearing officer found.
Lastly, Fincher cites Madera v. Secretary of the Executive
Office of Communities & Development, 636 N.E.2d 1326(Mass. 1994) as new authority on the issue at hand. How-
ever, Madera addresses a situation where the defendants
were allegedly in violation of numerous state public
housing regulations that set forth mandatory priority and
preference categories. 636 N.E.2d at 1330. The Madera court
specifically recognized the difference between the state
10 No. 09-1964
regulations at issue in that case and the federal regula-
tions at issue in Eidson. Id. at 1330-31. Therefore, Madera
does not call into question the reasoning from Eidson.
Fincher’s last argument on the due process issue is that
the district court erred by not considering whether
SBHF was a state actor when determining if Eidson pre-
cluded a suit under the due process clause. For the due
process claim to survive to the summary judgment stage
of litigation, the district court had to assume that SBHF
was a state actor. If SBHF was not a state actor, there
would be no due process claim at all. Contrary to
Fincher’s argument, the district court assumed that
SBHF was a state actor and still found that Fincher had
no due process right to a hearing as a tenant rejected
from a specific Section 8 housing location.
Because Eidson was a well-reasoned opinion, and no
significant changes in the law have occurred between
when we decided that case and now, we decline the
invitation to overturn Eidson and affirm the district
court on the due process challenge.
B. Fincher as a Third-Party Beneficiary to a Contract
Fincher next asserts that he is entitled to bring suit as
a third-party beneficiary of a contract entered into
between SBHF and its funding agencies, namely HUD. The
district court rejected this claim because Fincher did not
produce the contract nor did Fincher identify any
contract terms or provisions he believes provide him
with the basis for a claim as a third-party beneficiary.
No. 09-1964 11
Fincher claims the district court erred by requiring him
to cite a contract or contractual provision for which he
is a third-party beneficiary. He relies on Lloyd v. Regional
Transportation Authority, 548 F.2d 1277 (7th Cir. 1977) for
the proposition that “the third-party beneficiary status
in federally funded programs stems alone from the exis-
tence of administrative rules imposed by the funding
source and the recipient of those funds.” However, at
both the district court level and on appeal, Fincher
did not point to any specific regulations that could stand
in the place of a contract to support his claims. In his
reply brief, Fincher cites to 24 C.F.R. § 880.550(a), which
requires that there exists some contract between HUD and
Section 8 landlords. This argument misses the point.
Fincher still must point to specific regulations (or
contract provisions) that are being violated in this case
to give rise to a cause of action. It is possible that this
absence is intentional because, as pointed out by Eidson,
the regulatory structure does not provide any enforce-
able rights to individuals applying to live in a specific
Section 8 residence. Without pointing to some con-
tractual provision (or regulation) that grants him these
rights and that SBHF has violated, this claim cannot
stand. The district court correctly granted summary
judgment on this issue.
III. Conclusion
For the above stated reasons, we A FFIRM the district
court’s grant of summary judgment in favor of SBHF.
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