Egae, LLC v. Ushud ( 2021 )

FILED
NOT FOR PUBLICATION
APR 21 2021
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
EGAE, LLC et al., No. 20-71187
Petitioners, Agency No. 18-AF-0227-CM-002
v.
MEMORANDUM *
U.S. DEPARTMENT OF HOUSING
AND URBAN DEVELOPMENT,
Respondent.
On Petition for Review of an
Order of the Secretary of Housing and Urban Development
Submitted April 16, 2021* *
Seattle, Washington
Before: GRABER and CALLAHAN, Circuit Judges, and SELNA, Senior District
Judge* * *
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. 34(a)(2).
* **
The Honorable James V. Selna, United States Senior District Judge
for the Central District of California, sitting by designation.
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Petitioners EGAE, LLC and Marlow Family Exempt Perpetual Trust petition
for review of the order of the Secretary of Housing and Urban Development
(“HUD”) affirming the Administrative Law Judge’s (“ALJ”) order imposing civil
money penalties on Petitioners for violating 12 U.S.C. § 1735f-15. We have
jurisdiction under 12 U.S.C. § 1735f-15(e). We review under 5 U.S.C. § 706, and
we deny the petition.
Petitioners’ argument that the ALJ should have considered whether HUD’s
denial of Petitioners’ request to use a master lease precluded the award of civil
money penalties pursuant to § 1735f-15(a) is forfeited because it is raised for the
first time on appeal. Greger v. Barnhart, 464 F.3d 968, 973 (9th Cir. 2006).
Similarly, Petitioners forfeited the argument that HUD’s actions violated the
Regulatory Agreement’s covenants of good faith and fair dealing because it was
not raised until the reply brief. Bazuaye v. I.N.S., 79 F.3d 118, 120 (9th Cir. 1996)
(per curiam).
The ALJ properly consulted relevant factors, listed in 24 C.F.R. § 30.80, to
determine that Petitioners’ failure to submit annual financial reports was “material”
under 24 C.F.R. § 30.10, and the ALJ appropriately disregarded irrelevant factors.
Yetiv v. U.S. Dep’t of Hous. & Urban Dev., 503 F.3d 1087, 1091 (2007). The ALJ
permissibly found materiality due to one factor, gravity of the offense. See
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id., & n.3 (affirming following consideration of one factor). Although both the
statute and the regulation expressly allow the agency to consider the factors also
for other purposes, 12 U.S.C. § 1735f-15(d)(3), 24 C.F.R. § 30.80(k), those
passages do not prohibit the agency from considering the factors for the purpose of
determining materiality. Cf. Motor Vehicle Mfrs. Ass’n of the U.S., Inc. v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (“[A]n agency rule would be
arbitrary and capricious if the agency has relied on factors which Congress has not
intended it to consider.”). The ALJ “considered the relevant factors and articulated
a rational connection between the factors found and the choices made.” Protect
Our Cmtys. Found. v. LaCounte, 939 F.3d 1029, 1034 (9th Cir. 2019) (quoting
City of Sausalito v. O’Neill, 386 F.3d 1186, 1206 (9th Cir. 2004)).
Substantial evidence supports the ALJ’s decision to grant HUD the
maximum amount in civil money penalties. Several factors supported the ALJ’s
decision, such as the inability of HUD to monitor the project, the injury to the
public, and the financial benefit that Petitioners received. We are unpersuaded by
Petitioners’ argument that the record “compel[s] a reasonable finder of fact to
reach a contrary result.” Gebhart v. SEC, 595 F.3d 1034, 1043 (9th Cir. 2010)
(internal quotation marks omitted).
Substantial evidence supports the ALJ’s finding that Petitioners had the
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ability to pay the maximum amount of civil money penalties. Ample evidence
suggested that Petitioners had millions of dollars in equity, and Petitioners
presented no documentary evidence of their inability to pay.
Nor is there a basis for Petitioners’ argument that their rights under the
Equal Protection Clause and the Takings Clause were violated. Since this is an
appeal of the ALJ’s decision to grant HUD civil money penalties against
Petitioners, any issues stemming solely from HUD’s denial of Petitioners’ request
to use a master lease are not properly before us. As Petitioners’ constitutional
arguments solely relate to the denial of the master lease, they cannot form the basis
for reversal of the ALJ’s ruling.
PETITION DENIED.
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