Sandpiper Residents Association v. United States Department of Housing and Urban Development ( 2022 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SANDPIPER RESIDENTS ASSOCIATION,
et al.,
Plaintiffs,
v. Civil Action No. 20-1783 (RDM)
UNITED STATES DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT,
Defendant.
MEMORANDUM OPINION
Compass Pointe Apartments, also known as Sandpiper Cove, is a privately owned
apartment complex in Galveston, Texas, that is subsidized by the U.S. Department of Housing
and Urban Development (“HUD”) through a contract with Sandpiper Cove’s owner under
HUD’s Project Based Rental Assistance (“PBRA”) program. HUD’s contract with the property
owner and HUD regulations require the owner to maintain the apartment’s PBRA units in
decent, safe, and sanitary condition. In this action, Plaintiffs—two tenants and the tenant
association of Sandpiper Cove—allege that Sandpiper Cove’s owner has failed to maintain the
apartment’s units in a habitable condition, in violation of the owner’s contractual and regulatory
obligations. In May 2019, HUD shared that assessment and issued a Notice of Default to
Sandpiper’s prior owner, after an inspection found an array of deficiencies, including missing or
inoperable smoke detectors, pest infestations, leaking or clogged pipes, missing or inoperable
kitchen appliances, holes in walls, and damaged doors.
Plaintiffs do not, however, bring this action against the owner of the property. Rather,
they have sued HUD on the theory that issuance of the Notice of Default, along with imminent
health and safety risks to the tenants posed by the deplorable conditions at the apartment
complex, triggered an obligation by HUD to provide “Tenant Protection Vouchers” to the
Sandpiper Cove tenants. Those vouchers, in turn, would enable the tenants to relocate to
different housing that meets HUD’s decent, safe, and sanitary standard. On Plaintiff’s telling,
HUD’s failure to issue the vouchers violates the Administrative Procedure Act (“APA”), 5
U.S.C. § 701 et seq., and amounts to intentional discrimination on the basis of race and ethnicity
in violation of the Fifth Amendment and the Fair Housing Act, 42 U.S.C. § 3604(a). As a result,
Plaintiffs seek an injunction compelling HUD to issue Tenant Protection Vouchers to any
qualified Sandpiper Cove tenant who wishes to leave the complex. Dkt. 25 at 59–60 (2d Am.
Compl. ¶ 212).
Before the Court is Plaintiff’s motion for a preliminary injunction, Dkt. 26, and HUD’s
motion to dismiss the complaint for lack of jurisdiction and for failure to state a claim, Dkt. 36.
For the reasons set forth below, the Court will DENY Plaintiff’s motion for a preliminary
injunction and will GRANT HUD’s motion to dismiss.
I. BACKGROUND
Statutory Background
Section 8 of the United States Housing Act authorizes HUD to provide financial
assistance to “aid[] low-income families in obtaining a decent place to live” and to “promot[e]
economically mixed housing.” 42 U.S.C. § 1437f(a). Under the Act, HUD may disburse this
assistance through various programs, which generally take on one of two forms: (1) “tenant-
based assistance,” in which assistance is linked to individual households, or (2) “project-based
assistance,” in which assistance is linked to specific housing units and payments are made to the
units’ owners pursuant to a Housing Assistance Payment contract. See id. § 1437f(b), (f)(6)–(7),
(o); see also 24 C.F.R. §§ 886.309, 982.1(b)(1).
2
Tenant-based assistance is provided through the Housing Choice Voucher Program,
which is funded by HUD but administered by local public housing authorities. Under this
program, local public housing agencies issue housing vouchers to individual households based
on availability and need. See 42 U.S.C. § 1437f(o)(6). Once a household is issued a voucher, it
is responsible for finding a housing unit and a landlord who is willing to rent to it, which it must
then submit to the public housing authority for approval. 24 C.F.R. § 982.302(a)–(b). The
public housing authority undertakes a process to approve the tenancy, which includes an
inspection of the unit, an analysis to determine if the rent is reasonable, and a review of the
owner. See id. §§ 982.305, 982.306. Once the tenancy is approved, HUD makes monthly
financial assistance payments equal to the amount by which the household’s rent exceeds a
certain percentage of its monthly income. 42 U.S.C. § 1437f(o)(2)(A).
The units in question at Sandpiper Cove are subsidized through project-based assistance,
not tenant-based assistance. Under a project-based assistance program, HUD does not have a
contractual relationship with tenants. Instead, HUD enters into Housing Assistance Payments
(“HAP”) contracts with private landlords to designate certain units they own as project-based
assistance units. Id. § 1437f(c). These contracts set forth the terms under which HUD will make
annual assistance payments to landlords and subject the landlords to HUD oversight and
enforcement. Id. The landlords, in turn, enter into private lease agreements directly with
tenants. Id. § 1437f(d)(1)(B). HUD does not select the tenants who live in project-based
assistance units; rather, landlords are authorized to select their own tenants, subject to any
preferences or restrictions placed by the statute or the applicable HAP contract. Id.
§ 1437f(d)(1)(A). Tenants then make rental payments to their landlord based on their income
and ability to pay, Cisneros v. Alpine Ridge Grp., 508 U.S. 10, 12 (1993); see 42 U.S.C.
3
§§ 1437a(a), 1437f(c), and HUD pays the landlord the “difference between the tenant’s
contribution and a ‘contract rent’ agreed upon by the landlord and HUD,” Cisneros, 508 U.S. at
12; 42 U.S.C. § 1437f(c)(2)(C)(3). As of 2021, approximately 1.2 million households received
project-based rental assistance at 17,200 multifamily housing properties. See U.S. Dep’t of
Housing & Urban Dev., Fiscal Year 2021 Congressional Justifications 21-1,
https://www.hud.gov/sites/dfiles/CFO/documents/FY21_HUDCongressionalJustifications.pdf.
HUD has promulgated numerous regulations implementing its housing assistance
programs, including under Section 8. See 24 C.F.R. pt. 5 (general HUD program requirements);
24 C.F.R. pt. 886 (Section 8 program requirements). Among many other things, these
regulations require PBRA unit owners to provide housing that is “decent, safe, sanitary, and in
good repair” and to “provide all the services, maintenance, and utilities” required by the owner’s
HAP contract with HUD. Id. §§ 5.703, 886.123(a). To satisfy these conditions, owners must
comply with various “physical condition standards,” which generally require HUD housing to be
“structurally sound,” “secure,” “habitable,” and “free of health and safety hazards.” Id.
§ 5.703(a)–(f). In addition to these standards, HUD housing owners must continue to comply
with “State and local codes for building and maintenance,” which the HUD regulations “do not
supersede or preempt.” Id. § 5.703(g).
HUD ensures compliance with these requirements through periodic inspections, id.
§ 886.123(c), which are performed by HUD’s Real Estate Assessment Center (“REAC”), id.
§ 200.857(a)(1). The REAC inspects a sample of a property’s units and then scores the property
on a 100-point numerical scale. Id. § 200.857. A PBRA property fails its REAC inspection if it
receives a score of 60 or less. See Consolidated Appropriations Act, 2021, Pub. L. No. 116-260,
§ 219(b) & (c), 134 Stat. 1182, 1897-98 (2020). Under the 2021 Consolidated Appropriations
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Act (the “Act”), a failing REAC score triggers a mandatory enforcement action by HUD, which
is required, within fifteen days, to “[p]rovide the owner with a Notice of Default” that includes
“a specified timetable, determined by [HUD], for correcting all deficiencies.” Id. at § 219(c)(1),
134 Stat. at 1898.
The Act then prescribes a range of discretionary enforcement actions that HUD “may”
take “if the owner fails to fully correct [the] deficiencies” within the specified timetable,
including:
(A) requir[ing] immediate replacement of project management with a
project management agent approved by the Secretary;
(B) impos[ing] civil money penalties, which shall be used solely for the
purpose of supporting safe and sanitary conditions at applicable properties, as
designated by the Secretary, with priority given to the tenants of the property
affected by the penalty;
(C) abat[ing] the [S]ection 8 contract, including partial abatement, as
determined by the Secretary, until all deficiencies have been corrected;
(D) pursu[ing] transfer of the project to an owner, approved by the
Secretary under established procedures, which will be obligated to promptly
make all required repairs and to accept renewal of the assistance contract as long
as such renewal is offered;
(E) transfer[ing] the existing [S]ection 8 contract to another project or
projects and owner or owners;
(F) pursu[ing] exclusionary sanctions, including suspensions or
debarments from Federal programs;
(G) seek[ing] judicial appointment of a receiver to manage the property
and cure all project deficiencies or seek[ing] a judicial order of specific
performance requiring the owner to cure all project deficiencies;
(H) work[ing] with the owner, lender, or other related party to stabilize
the property in an attempt to preserve the property through compliance, transfer
of ownership, or an infusion of capital provided by a third-party that requires
time to effectuate; or
(I) tak[ing] any other regulatory or contractual remedies available as
deemed necessary and appropriate by the Secretary.
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Id. at § 219(c)(2), 134 Stat. 1898.
One option available to HUD under the Act is to issue Tenant Protection Vouchers to
residents in the affected property. Tenant Protection Vouchers are a specific form of tenant-
based rental assistance authorized annually through a lump-sum congressional appropriation.
See PIH Notice 2021-10 at 4–7 (Mar. 24, 2021). The relevant paragraph of the 2021
Consolidated Appropriations Act provides in part:
$116,000,000 shall be for [S]ection 8 rental assistance for relocation and
replacement of housing units that are demolished or disposed of pursuant to
Section 18 of the Act, conversion of [S]ection 23 projects to assistance under
[S]ection 8, the family unification program under [S]ection 8(x) of the Act,
relocation of witnesses in connection with efforts to combat crime in public and
assisted housing pursuant to a request from a law enforcement or prosecution
agency, enhanced vouchers under any provision of law authorizing such
assistance under [S]ection 8(t) of the Act, Choice Neighborhood vouchers,
mandatory and voluntary conversions, and tenant protection assistance including
replacement and relocation assistance or for project-based assistance to prevent
the displacement of unassisted elderly tenants currently residing in [S]ection 202
properties financed between 1959 and 1974 that are refinanced pursuant to
Public Law 106-569, as amended, or under the authority as provided under this
Act[.]
134 Stat. at 1869.1 The paragraph then places several conditions on the use or issuance of
Tenant Protection Vouchers. As relevant here, one of these conditions states:
[T]he Secretary may provide [S]ection 8 rental assistance from amounts made
available under this paragraph for units assisted under a project-based subsidy
contract funded under the “Project-Based Rental Assistance” heading under this
title where the owner has received a Notice of Default and the units pose an
imminent health and safety risk to residents[.]
1
Substantially the same language has appeared in prior years’ appropriations, with the only
difference being the amount appropriated. See Consolidated Appropriations Act, 2019, Pub. L.
No. 116-6, div. G, tit. II, 133 Stat. 13, 435–36; Consolidated Appropriations Act, 2020, Pub. L.
No. 116-94, div. L, tit. II, “Public and Indian Housing,” “Tenant-Based Rental Assistance,” ¶ 2,
133 Stat. 2534, 2976 (2019).
6
Id. (emphasis added). Thus, Congress has authorized HUD to issue vouchers to tenants of a
PBRA property if, and only if, (1) the property owner has received a Notice of Default and (2)
the tenants’ PBRA units not only fail the decent, safe, and sanitary requirement, but also pose an
“imminent health and safety risk to residents.”
Factual Background
Sandpiper Cove became a project-based rental assistance property in 1984, when HUD,
through its contract administrator the Southwest Housing Compliance Corporation, executed a
HAP contract with the owner of the apartment complex for a term of five years. See Dkt. 36-2 at
2 (Gamez Decl. ¶ 3). In the ensuing years, Sandpiper Cove’s HAP contract has been renewed
multiple times, most recently in 2012 for a term of twenty years. Dkt. 25 at 23 (2d Am. Compl.
¶ 61). At the time of the 2012 renewal, the owner of the property was Sandpiper Cove
Apartments, LLC. Id. In March 2015, Sandpiper Cove’s HAP contract was assigned (with HUD
approval) to Compass Pointe Apartments, LLC (the “Previous Owner”). Id.On May 8, 2019, the REAC conducted an onsite inspection of Sandpiper Cove. Id. at 24(2d Am. Compl. ¶ 65). The resulting report gave the property a score of 33c out of a possible
100 points and listed six categories of deficiencies found in many of the units examined: (1)
missing or inoperable smoke detectors; (2) insect and roach infestations; (3) poor plumbing,
including leaking faucets and pipes and clogged drains; (4) inoperable, damaged, or missing
kitchen ranges and stoves; (5) damaged walls and ceilings; and (6) damaged door frames and
windows. Id. at 5, 11 (2d Am. Compl. ¶¶ 3, 19); see also Dkt. 36-2 at 18. Based on the
property’s failing REAC score, HUD issued a Notice of Default to the Previous Owner on May
15, 2019. Dkt. 25 at 5 (2d Am. Compl. ¶ 3). That notice gave the Previous Owner sixty days to
“[c]onduct a survey of the entire Project, identifying all physical deficiencies” and to “[c]orrect
7
all physical deficiencies identified at the Project from the Owner’s survey and REAC’s
inspection report.” Id. at 11–12 (2d Am. Compl. ¶ 20).
In response to the Notice of Default, the Previous Owner submitted an “Action Plan” to
HUD, which HUD approved on September 16, 2019. Dkt. 36-2 at 2 (Gamez Decl. ¶ 7). The
Action Plan included a survey of the property, the status of the deficiencies that had been
identified, and a plan and estimated time frame for correcting those deficiencies. Id. HUD
approved updated Action Plans on October 7, 2019; July 28, 2020; and July 14, 2021. Id. In
addition to the Action Plan, HUD required the Previous Owner to replace its management
company at Sandpiper Cove, and on April 1, 2020, the Previous Owner hired J. Allen
Management Co. (“J. Allen”) to run the property. Id. at 3 (Gamez Decl. ¶ 8).
Through the efforts of the new management company, the Previous Owner made certain
repairs to the property pursuant to the Notice of Default and Action Plan. Id. (Gamez Decl. ¶ 9).
In particular, the management company improved the plumbing at the property, repaired
inoperable air conditioning and heating units, corrected electrical issues with several building
lights, fixed potholes and tripping hazards in the parking lot and walkways, and repaired fences
and bannisters. Dkt. 25 at 12–13 (2d Am. Compl. ¶ 23). J. Allen also undertook “make ready”
repairs and painting for 26 units between April 2020 and May 2021. Id. at 12 (2d Am. Compl.
¶ 23). HUD monitored the status of repairs and improvements at the property at bi-weekly
meetings with the Previous Owner, the new management company, and HUD’s contract
administrator. Dkt. 36-2 at 3 (Gamez Decl. ¶ 10).
These repairs did not, however, address several of the deficiencies cited in the Notice of
Default, including problems with smoke detectors, insect infestations, damaged or missing
kitchen appliances, damaged walls and ceilings, and damaged doors and windows. Dkt. 25 at 13
8
(2d Am. Compl. ¶ 25). According to Plaintiffs, those deficiencies still had not been corrected as
of November 2021, when they filed their second amended complaint. Id. (2d Am. Compl. ¶ 26).
As part of its enforcement strategy, HUD encouraged a sale of Sandpiper Cove to a new,
rehabilitation-focused owner. See id. at 20–22 (2d Am. Compl. ¶¶ 53–58). In a letter to a state
housing agency, HUD expressed its commitment to “retaining and preserving” Sandpiper Cove
because the “market for affordable housing is very limited on Galveston Islands, and [Sandpiper
Cove] is the only Project Based Section 8 housing on the Island.” Id. at 21 (2d Am. Compl.
¶ 54). In early 2021, the Previous Owner proposed a sale of the property to Galveston 3916
Winnie Street GP, LLC (the “New Owner”). Id. at 20–21 (2d Am. Compl. ¶ 53). HUD
supported the sale, citing the New Owner’s “proven track record of successfully obtaining and
turning around other similarly distressed and troubled affordable properties.” Id. at 21 (2d Am.
Compl. ¶ 53). The Previous Owner and New Owner executed the sale of the property on
October 15, 2021, and HUD approved the assignment of the HAP contract to the New Owner on
October 29, 2021. Dkt. 36-2 at 3 (Gamez Decl. ¶¶ 11–12). According to HUD, this “approval
concluded the enforcement action based on the Notice of Default that had been issued to the
Previous Owner on May 15, 2019.” Id. at 3 (Gamez Decl. ¶ 12).
The New Owner plans to make significant improvements to the property and to that end
has secured $16.7 million in financing, for an average of $86,900 per unit. Id. (Gamez Decl.
¶ 13). The proposed improvements include new roofs, plumbing, flooring, cabinetry,
countertops, fixtures, appliances, and paint. Id. As of December 2021, construction was set to
begin in February 2022, id., and is expected to last fifteen months, Dkt. 25 at 16 (2d Am. Compl.
¶ 37). Although many of the issues identified in the 2019 REAC inspection remain uncorrected
pending that rehabilitation effort, see id. at 15 (2d Am. Compl. ¶¶ 32–35), to date, HUD has not
9
found the New Owner to be in breach of the HAP contract and has not issued a Notice of Default
to the New Owner, Dkt. 36-2 at 4 (Gamez Decl. ¶ 14).
Procedural Background
Plaintiffs commenced this action on June 30, 2020. Dkt. 1 (Compl.). On October 30,
2020, HUD moved to transfer the case to the Southern District of Texas pursuant to 28 U.S.C.
§ 1404(a), Dkt. 13, which Plaintiffs opposed, Dkt. 14. On June 23, 2021, the Court denied
HUD’s motion in a Memorandum Opinion and Order, Dkt. 17, concluding that HUD had “failed
to carry its burden of demonstrating that the Southern District of Texas constitutes a more
convenient forum than this one,” id. at 6.
On September 8, 2021, HUD moved to dismiss the complaint for lack of jurisdiction and
for failure to state a claim. Dkt. 20. Plaintiffs responded by amending their complaint, Dkt. 21
(Am. Compl.), and, in light of that development, the Court denied HUD’s motion to dismiss
Plaintiffs’ original complaint as moot, Minute Order (Sept. 22, 2021). Nearly two months later,
on November 15, 2021, Plaintiffs amended their complaint a second time (with HUD’s consent).
Dkt. 25 (2d Am. Compl.); see Dkt. 24. Plaintiffs amended their complaint to eliminate their
claim based on a regulation, 24 C.F.R. § 886.323(e), which arguably imposed a mandatory
requirement that HUD issue vouchers if an owner (1) fails to maintain a dwelling in a decent,
safe, and condition; (2) the owner fails to take corrective action; and (3) the tenant “wishes to be
rehoused in another dwelling unit.” As Plaintiffs explained, they dropped this claim because
“counsel have been unable to confirm that the Sandpiper Cove PBRA project was the subject of
the sale of HUD-owned multifamily rental housing projects or to the foreclosure of a HUD-held
mortgage” and, thus, could not confirm that § 886.323 applies to Sandpiper Cove. Dkt. 24 at 2.
And, although the regulation applicable in this case is similar in some respects to § 886.323, “it
does not include the assistance provision [that is] set out” in § 886.323. Id. On the same day
10
that Plaintiffs filed their second amended complaint, they also moved for a preliminary
injunction, Dkt. 26. On December 17, 2021, HUD opposed the motion for a preliminary
injunction and moved to dismiss the second amended complaint for lack of jurisdiction and for
failure to state a claim, Dkt. 36.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(1)
Federal courts are courts of limited subject-matter jurisdiction and “possess only that
power authorized by the Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994). Given “the nature and limits of the judicial power of the United
States,” the Court must assess its jurisdiction “as a threshold matter” and may not decide the
merits of a case without first addressing the issue of jurisdiction. Steel Co. v. Citizens for a
Better Env’t, 523 U.S. 83, 94–95 (1998) (quoting Mansfield, C. & L.M. Ry. Co. v. Swan, 111
U.S. 379, 382 (1884)). The plaintiff bears the burden of establishing jurisdiction. Kokkonen,
511 U.S. at 377. “[S]ubject matter jurisdiction may not be waived.” NetworkIP, LLC v. FCC,
548 F.3d 116, 120 (D.C. Cir. 2008) (quotation marks omitted).
A motion to dismiss under Rule 12(b)(1) challenges the Court’s jurisdiction to hear a
claim and may raise a “facial” or “factual” challenge to the Court’s jurisdiction. See Hale v.
United States, No. 13-1390, 2015 WL 7760161, at *3–4 (D.D.C. Dec. 2, 2015). A facial
challenge to the Court’s jurisdiction contests the legal sufficiency of the jurisdictional allegations
contained in the complaint. See Erby v. United States, 424 F. Supp. 2d 180, 182 (D.D.C. 2006).
For a facial challenge, the Court must accept the allegations of the complaint as true and must
construe “the complaint in the light most favorable to the non-moving party.” Id.; see I.T.
Consultants, Inc. v. Republic of Pakistan, 351 F.3d 1184, 1188 (D.C. Cir. 2003). In this sense,
the Court must resolve the motion in a manner similar to a motion to dismiss under Rule
11
12(b)(6). See Price v. Socialist People’s Libyan Arab Jamahiriya, 294 F.3d 82, 93 (D.C. Cir.
2002).
Alternatively, a Rule 12(b)(1) motion may pose a “factual” challenge to the Court’s
jurisdiction. Erby, 424 F. Supp. 2d at 182–83. For factual challenges, the Court “‘may not deny
the motion to dismiss merely by assuming the truth of the facts alleged by the plaintiff and
disputed by the defendant,’ but ‘must go beyond the pleadings and resolve any disputed issues of
fact the resolution of which is necessary to a ruling upon the motion to dismiss.’” Id. (quoting
Phoenix Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. Cir. 2000)). In this
context, the factual allegations of the complaint are not entitled to a presumption of validity, and
the Court is required to resolve factual disputes between the parties. Id. at 183. The Court may
consider the complaint, any undisputed facts, and “the [C]ourt’s resolution of disputed facts.” Id.(quoting Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992)).
A motion to dismiss a complaint as moot is properly brought under Rule 12(b)(1) because
mootness deprives the court of jurisdiction. See DL v. District of Columbia, 187 F. Supp. 3d 1, 5
(D.D.C. 2016). “Federal courts lack jurisdiction to decide moot cases because their
constitutional authority extends only to cases or controversies.” Conservation Force, Inc. v.
Jewell, 733 F.3d 1200, 1204 (D.C. Cir. 2013) (quoting Iron Arrow Honor Soc’y v. Heckler, 464
U.S. 67, 70 (1983)). A case becomes moot “when the issues presented are no longer live or the
parties lack a legally cognizable interest in the outcome.” Larsen v. U.S. Navy, 525 F.3d 1, 3
(D.C. Cir. 2008) (quotation marks omitted). A party lacks a legally cognizable interest in the
outcome of a case “when, among other things, the court can provide no effective remedy because
a party has already obtained all the relief [it has] sought,” Conservation Force, Inc., 733 F.3d at
1204 (quotation marks omitted), or “when intervening events make it impossible to grant the
12
prevailing party effective relief,” Lemon v. Geren, 514 F.3d 1312, 1315 (D.C. Cir. 2008)
(quotation marks omitted); see also Spencer v. Kemna, 523 U.S. 1, 18 (1998) (noting that a case
is moot when “there is nothing for [the court] to remedy, even if [it] were disposed to do so”).
The “heavy burden” of establishing mootness rests on the party raising the defense. County of
Los Angeles v. Davis, 440 U.S. 625, 631 (1979); Motor & Equip. Mfrs. Ass’n v. Nichols, 142
F.3d 449, 458–59 (D.C. Cir. 1998).
Federal Rule of Civil Procedure 12(b)(6)
A motion to dismiss for failure to state a claim upon which relief can be granted under
Rule 12(b)(6) “tests the legal sufficiency of the complaint.” Browning v. Clinton, 292 F.3d 235,
242 (D.C. Cir. 2002). In evaluating a Rule 12(b)(6) motion, the Court “must first ‘tak[e] note of
the elements a plaintiff must plead to state [the] claim to relief,’ and then determine whether the
plaintiff has pleaded those elements with adequate factual support to ‘state a claim to relief that
is plausible on its face.’” Blue v. District of Columbia, 811 F.3d 14, 20 (D.C. Cir. 2015)
(alterations in original) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 675, 678 (2009)). The
complaint, however, need not include “detailed factual allegations” to withstand a Rule 12(b)(6)
motion. Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007). A plaintiff may survive a Rule
12(b)(6) motion even if “recovery is . . . unlikely,” so long as the facts alleged in the complaint
are “enough to raise a right to relief above the speculative level.” Id. at 555–56 (quotation marks
omitted). For the purposes of assessing a Rule 12(b)(6) motion, the Court may consider only
“the facts contained within the four corners of the complaint, along with any documents attached
to or incorporated into the complaint, matters of which the court may take judicial notice, and
matters of public record.” Afanasieva v. Wash. Metro. Area Transit Auth., No. 21-1881, 2022
WL 621398, at *3 (D.D.C. Mar. 3, 2022) (quotation marks omitted).
13
Federal Rule of Civil Procedure 65
A preliminary injunction “is an extraordinary remedy never awarded as of right,” Winter
v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008), but “only when the party seeking the relief,
by a clear showing, carries the burden of persuasion,” Cobell v. Norton, 391 F.3d 251, 258 (D.C.
Cir. 2004). To secure a preliminary injunction, a plaintiff “must establish [1] that he is likely to
succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of
preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in
the public interest.” Winter, 555 U.S. at 20.
Before the Supreme Court’s decision in Winter, the D.C. Circuit applied a “sliding-scale”
approach to the preliminary injunction analysis under which “a strong showing on one factor
could make up for a weaker showing on another.” Sherley v. Sebelius, 644 F.3d 388, 392 (D.C.
Cir. 2011). Since Winter, however, the court of appeals has “suggested, without deciding, that
Winter should be read to abandon the sliding-scale analysis in favor of a ‘more demanding
burden’ requiring a plaintiff to independently demonstrate both a likelihood of success on the
merits and irreparable harm.” Standing Rock Sioux Tribe v. U.S. Army Corps of Eng’rs, 205 F.
Supp. 3d 4, 26 (D.D.C. 2016) (quoting Sherley, 644 F.3d at 392–93); see also Archdiocese of
Wash. v. Wash. Metro. Area Transit Auth., 897 F.3d 314, 334 (D.C. Cir. 2018) (observing that
Winter may be “properly read to suggest a ‘sliding scale’ approach to weighing the four factors
be abandoned”).
Before the Court may consider whether Plaintiffs have met their burden with respect to
these factors, however, the Court must first confront whether it has jurisdiction over Plaintiffs’
suit. See Steel Co., 523 U.S. at 94–95. “This inquiry is antecedent to the question of preliminary
relief because, where a court lacks jurisdiction, a plaintiff is ‘not entitled to any relief, let alone
the extraordinary remedy of a preliminary injunction.’” McCray v. Biden, No. 21-2882, 2021
14
WL 5823801, at *5 (D.D.C. Dec. 7, 2021) (quoting Schindler Elevator Corp. v. Wash. Metro.
Area Transit Auth., 514 F. Supp. 3d 197, 212 (D.D.C. 2020)).
III. ANALYSIS
HUD presses several arguments in favor of dismissal. First and foremost, HUD argues
that the Court lacks jurisdiction because the sale of Sandpiper Cove to a new owner rendered
Plaintiffs’ APA claims moot. Dkt. 36 at 27–31. Even if Plaintiffs claims are not moot, however,
HUD maintains that the complaint fails to state a claim upon which relief can be granted because
the issuance of Tenant Protection Vouchers is committed to agency discretion by law, id. at 31–
39; Plaintiffs have not identified a “final agency action” that is reviewable under the APA, id. at
40–42; and HUD does not have a legal duty to issue Tenant Protection Vouchers such that it may
be compelled to do so under the APA, id. at 42–45. With respect to Plaintiffs’ intentional
discrimination claims, HUD argues that dismissal is warranted because Plaintiffs’ statutory claim
is barred by sovereign immunity, id. at 46–47, and because the complaint fails adequately to
plead discriminatory intent, id. at 47–51.
For the reasons that follow, the Court concludes that Plaintiffs’ APA and intentional
discrimination claims are moot, and, accordingly, will grant HUD’s motion to dismiss for lack of
jurisdiction and will deny Plaintiffs’ motion for a preliminary injunction.
A. Administrative Procedure Act Claims
In their second amended complaint, Plaintiffs allege that HUD’s decision to withhold
Tenant Protection Vouchers from Plaintiffs violates the Administrative Procedure Act because it
was arbitrary, capricious, an abuse of discretion, and not in accordance with the 2021, 2020, and
2019 Appropriations Acts or HUD’s affirmative statutory duty to promote fair housing under 42
U.S.C. § 3608(e)(5). In response, HUD maintains that it no longer has the statutory authority to
15
issue the Tenant Protection Vouchers because the Notice of Default issued to the Previous
Owner lapsed upon the transfer of the HAP contract to a New Owner and no new Notice of
Default has issued against the New Owner. As a result, according to HUD, Plaintiffs’ APA
claims are now moot. The Court agrees with HUD and will therefore dismiss Plaintiffs’ APA
claims for lack of jurisdiction.
As explained above, the Consolidated Appropriations Act places two conditions on the
issuance of Tenant Protection Vouchers to PBRA tenants: (1) “the owner” of the PBRA units at
issue “has received a Notice of Default,” and (2) “the units [assisted under the project-based
subsidy contract] pose imminent health and safety risks to residents.” 134 Stat. at 1869. Those
requirements are necessary conditions: If both are met, then HUD “may” issue the vouchers; but
if either condition is unmet, then HUD lacks authority to do so. See U.S. Const. art. I, § 9, cl. 7
(“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by
Law.”).
All agree that HUD issued a Notice of Default to the Previous Owner in May 2019. The
problem for Plaintiffs, however, is that HUD has not issued a Notice of Default to the New
Owner. That means that “the owner” of the PBRA units has not “received a Notice of Default,”
and, consequently, one of the two statutory preconditions for the issuance of Tenant Protection
Vouchers to Sandpiper Cove residents is missing. Plaintiffs resist this conclusion on four
grounds, none of which is persuasive.
First, they maintain that the Notice of Default issued to the Previous Owner remains
extant, and so the sale of the property and assignment of the HAP does not pose an obstacle to
the issuance of Tenant Protection Vouchers. Dkt. 39 at 25. On Plaintiffs’ telling, all that matters
for present purposes is that a Notice of Default was issued to the then-current owner of the
16
property and that the deficiencies noted in the Notice of Default have not yet been corrected. Id.
at 21. And although Plaintiffs acknowledge that the relevant PBRA units now have a new
owner, they contend that the sale of the property and assignment of the HAP contract “did not
extinguish or otherwise cause the Notice of Default to cease to exist.” Id. at 25. Rather, in their
view, “[t]he Notice of Default continues to be the predicate for the compliance plan,” which is
premised on “the need to remedy the conditions in breach of the obligation to provide decent,
safe, and sanitary housing [that are specified in] the Notice of Default.” Id. This theory fails for
several reasons.
Starting with the statutory text, as the Court must, see Sebelius v. Cloer, 569 U.S. 369,
376 (2013), Plaintiffs’ reading of the 2021 Consolidated Appropriations Act is untenable. The
Act provides that HUD may issue Tenant Protection Vouchers only “where the owner has
received a Notice of Default,” 134 Stat. at 1869 (emphasis added). The statute, notably, does not
say “an owner,” nor does it permit the issuance of vouchers “where a Notice of Default has been
issued with respect to the property.” Rather, HUD may issue Tenant Protection Vouchers only
if, at the time of the issuance of such vouchers, a Notice of Default has been received by the
owner of the property. Because the owner of Sandpiper Cove is the New Owner, and the New
Owner has not received a Notice of Default, this condition is no longer satisfied.
In construing statutes, courts often look “to Congress’s choice of verb tense to ascertain a
statute’s temporal reach.” Carr v. United States, 560 U.S. 438, 447 (2010). Here, that endeavor
is complicated by the fact that Congress used the present perfect tense in the 2021 Consolidated
Appropriations Act. The present perfect tense draws a link between the present and the past
through the use of a present tense auxiliary verb (here, “has”) and a past participle (here,
“received”). See Chi. Manual of Style § 5.132 (17th ed. 2017); see also id. §§ 5.103, 5.110,
17
5.153. Both verbs apply to the same subject (here, “the owner”) and operate with respect to the
same object (here, the “Notice of Default”). Although the present perfect tense is imprecise in
certain respects (that is, it typically refers to some undefined point in the past), that imprecision
has no bearing on the question presented here, which simply asks whether the Secretary is
authorized to issue Tenant Protection Vouchers when, at the time the Secretary acts, the current
owner has not received a Notice of Default. Under the plain language of the provision, the
answer to that question is plain: The Secretary may issue Tenant Protect Vouchers if and only if
(1) at the time the Secretary acts, “the owner” “has” (present tense), (2) “received a Notice of
Default” (past tense). The problem Plaintiffs face is that at the present time, the owner of
Sandpiper Cove did not at some undefined point in the past receive a Notice of Default. Where,
as here, the statutory text is unambiguous, “that is the end of [the] judicial inquiry ‘in all but the
most extraordinary circumstances,’” United States v. Braxtonbrown–Smith, 278 F.3d 1348, 1352
(D.C. Cir. 2002) (quoting Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 474 (1992)).
In response to this clear statutory text, Plaintiffs invoke the legislative history of the
provision, which they contend shows that “Congress provided these tenant protection vouchers
and standards for the issuance of these vouchers for this exact situation.” Dkt. 39 at 34. In
support of that contention, they quote a length from a floor statement made by the provision’s
sponsor, Senator Marco Rubio. But even if (contrary to settled precedent) the Court could
“resort to legislative history to cloud a statutory text that is clear,” Ratzlaf v. United States, 510
U.S. 135, 147–48 (1994), Senator Rubio’s floor statement sheds no light on the question
presented in this case. To be sure, his statement highlights the deplorable conditions that exist at
some PBRA apartment complexes around the country and the failure of certain owners to
remedy those conditions, and it stresses the need to make Tenant Protection Vouchers available
18
to “tenants living in units where the owner has been declared in default of a HUD Housing
Assistance Payments contract due to physical deficiencies.” 162 Cong. Rec. S2946 (daily ed.
May 18, 2016). But that says nothing about whether Congress intended to make Tenant
Protection Vouchers available where a new owner has acquired the property and HUD has not
found that owner in default.
Second, to the extent that any question remains as to whether the Notice of Default might
have transferred to the New Owner along with the assignment of the HAP contract—such that
the Notice of Default remains extant and, consequently, the New Owner could be deemed
constructively to have “received” the Notice of Default—HUD has represented that its
“approv[al] [of] the assignment of the HAP contract to the New Owner . . . concluded the
enforcement action based on the Notice of Default that had been issued to the Previous Owner on
May 15, 2019,” Dkt. 36-2 at 3 (Gamez Decl. ¶ 12), and, as a result, “[t]he Notice of Default no
longer is in effect,” Dkt. 42 at 7. The question whether an enforcement action is extant falls
uniquely within the competence and authority of the executive branch, cf. Heckler v. Cheney,
470 U.S. 821, 831–32 (1985); N.Y. State Dep’t of Law v. FCC, 984 F.2d 1209, 1214–15 (D.C.
Cir. 1993), and the Court has no reason to doubt HUD’s good faith representation that its
enforcement action against the Previous Owner ended with the sale of the property to the New
Owner.
HUD’s position that the Notice of Default lapsed upon the sale of the property and
assignment of the HAP contract to the New Owner, moreover, coheres with the structure of the
enforcement scheme enacted by Congress. The HAP contract is between HUD and the “owner”
of the “dwelling units covered by [the] [c]ontract,” Dkt. 36-2 at 7, and the Notice of Default is
19
issued to the “owner,” who is in breach of its contractual undertaking “to provide decent, safe,
and sanitary housing,” id. at 18. Here, the May 2019 Notice of Default states:
This letter constitutes formal notice (Notice of Default) by the Secretary of the
United States Department of Housing & Urban Development (“HUD”) [that]
Compass Pointe Texas Ltd. (“Owner”), owner of Compass Pointe Apartments
Texas (“Project”), is in default of the above referenced project-based housing
assistance payments (“HAP”) Contract, as authorized under section 8 of the
United States Housing Act of 1937 (“Act”).
Dkt. 36-2 at 18. Thus, the Notice of Default itself makes clear that it was issued specifically to
the Previous Owner—Compass Pointe Texas Ltd.—because Compass Pointe Texas Ltd. was in
default of its contractual obligations. Under the 2021 Consolidated Appropriations Act,
moreover, a Notice of Default is issued to “the owner,” along “with a specified timetable . . . for
correcting all deficiencies.” See 134 Stat. at 1898. “[I]f the owner fails to fully correct [the]
deficiencies” identified in the Notice of Default within the specified time frame, then the Act
authorizes HUD to take actions of varying severity against the owner to compel compliance. Id.
These actions include requiring the immediate replacement of the property’s management;
abating HAP contract payments to the owner; imposing civil money penalties against the owner;
seeking a judicial order of specific performance requiring the owner to cure all deficiencies; or
pursuing exclusionary sanctions against the owner, including suspensions or debarments from
federal programs. Id. If these enforcement actions fail to induce the owner to correct the
identified deficiencies, then HUD may seek to end the owner’s relationship with HUD by
“pursu[ing] [a] transfer of the project to [a new] owner,” id.; “transfer[ring] the existing section 8
contract to another project or projects and owner or owners,” id.; “work[ing]. . . to stabilize the
property in an attempt to preserve the property though . . . transfer of ownership[] or an infusion
of capital provided by a third-party that requires time to effectuate,” id.; or “tak[ing] any other
regulatory or contractual remedies available as deemed necessary and appropriate by the
20
Secretary,” id., including “terminat[ing] th[e] [HAP] [c]ontract in whole or in part,” Dkt. 36-2 at
11 (HAP Contract § 26(b)).
This structure confirms that a Notice of Default initiates an enforcement action against a
specific owner and thus, absent further action by HUD, lapses when (1) that owner remedies the
deficiencies, (2) the property and HAP contract are transferred to a new owner, or (3) the HAP
contract is terminated. If the rule were otherwise, upon transfer, the new owner of the property
would immediately be in default and, as a result, would be subject to the wide array of remedies
available to HUD under the statute, regulation, and contract, including civil penalties and
suspensions or debarments from federal programs. It is difficult to reconcile those possible
consequences with use of transfers as a remedy for the prior owner’s default. HUD would find
fewer willing buyers, particularly rehabilitation-minded owners prepared to undertake time- and
capital-intensive renovations, if there was a risk that HUD might, at any moment, impose civil
penalties or even suspend or bar the new owner from federal programs.
Plaintiffs do not grapple with these structural considerations. Rather, they maintain that
the Notice of Default must have carried over to the New Owner because HUD’s usual
assignment and approval contract provides that “[n]othing in th[e] [assignment] [a]greement
shall in anyway . . . affect or impair any rights, powers, or remedies under the HAP Contract,”
Dkt. 39 at 24 (quoting Dkt. 29-16 at 2), and the Notice of Default “is clearly a remedy under the
HAP contract,” id. Even assuming this language was used in the assignment at issue,2 it does not
support Plaintiffs’ theory. The quoted language from the assignment contract merely clarifies
2
Plaintiffs acknowledge that “HUD has not produced the documents upon which the assignment
of the housing assistance payment contract is set out and upon which HUD relied in approving
the assignment” in this case, and so Plaintiffs assume that HUD “used the HUD form assignment
and approval required under the Project Based Rental Assistance Program.” Dkt. 39 at 24.
21
that the assignment contract does not “alter, waive, annul, vary, or affect” any provision of the
HAP contract, “except as . . . specifically provided.” Dkt. 29-16 at 2. In other words, this
language preserves the availability of all of HUD’s rights and remedies under the HAP contract
for use when the facts so warrant, but it does not follow that the language perpetuates any
existing enforcement actions taken against the previous owner. That construction of the contract
is a not a reasonable one and, as discussed above, conflicts with the structure and purpose of the
enforcement scheme enacted by Congress.
Third, even assuming that the Notice of Default was not received by the New Owner and
that it is no longer operative, Plaintiffs argue that “[t]he next inspection is likely to result in
another Notice of Default” because the underlying health and safety risks at Sandpiper Cove
have not been repaired. Dkt. 39 at 29. This argument is too speculative and proves too much.
As Plaintiffs acknowledge, HUD has not yet issued a Notice of Default to the New Owner
because the agency has yet to conduct a REAC inspection of the premises, much less an
inspection resulting in a failing score of 60 or lower. If that occurs, then HUD will be obligated,
by statute, to issue a new Notice of Default “[w]ithin 15 days,” 134 Stat. at 1898. At present,
however, the Court cannot speculate as to whether the New Owner will fail its next REAC
inspection and cannot ignore the statutory condition for issuance of Tenant Protection
Vouchers—that is, that “the owner has received a Notice of Default,” 134 Stat. at 1869
(emphasis added).3
3
In their motion to dismiss, HUD explains that, “[i]n response to the COVID-19 pandemic, in
March 2020, HUD suspended most in-person housing inspections by the Real Estate Assessment
Center” but that “HUD increased housing Real Estate Assessment Center inspections on June 1,
2021.” Dkt. 36 at 19 n.9. This pause in operations may explain why Sandpiper Cove has not
undergone a further REAC inspection since May 2019. In the meantime, HUD’s contract
administrator, the Southwest Housing Compliance Corporation, has conducted at least two non-
22
Finally, Plaintiffs insist that the Court should nevertheless review HUD’s decision not to
issue Tenant Protection Vouchers because that decision falls within the “capable of repetition but
evading review exception to mootness.” Dkt. 39 at 30. This exception to the mootness doctrine
is available if Plaintiffs can demonstrate that “(1) the challenged action was in its duration too
short to be fully litigated prior to its cessation or expiration, and (2) there [i]s a reasonable
expectation that the same complaining party w[ill] be subjected to the same action again.” Sec’y
of Labor, Mine Safety & Health Admin. v. M-Class Mining, LLC, 1 F.4th 16, 24 (D.C. Cir. 2021)
(quoting J.T. v. District of Columbia, 983 F.3d 516, 523 (D.C. Cir. 2020)).
Here, Plaintiffs have failed to meet their burden of showing that HUD’s decision not to
issue Tenant Protection Vouchers prior to the transfer of ownership was “in its duration too short
to be fully litigated.” As discussed, HUD issued its Notice of Default to the Previous Owner on
May 15, 2019, and it set forth a sixty-day period for the Previous Owner to correct the identified
deficiencies. Dkt. 25 at 11 (2d Am. Compl. ¶ 20). After that period expired in July 2019, more
than two years passed before HUD effected a transfer of the project and HAP contract to the
New Owner in October 2021. Dkt. 36-2 at 3 (Gamez Decl. ¶¶ 11–12); cf. LaRouche v. Fowler,
152 F.3d 974, 978 (D.C. Cir. 1998) (observing that “orders of less than two years’ duration
ordinarily evade review . . . as a rule-of-thumb”). And although Plaintiffs filed this action in
June 2020, they did not move for a preliminary injunction until November 2021, one month after
the change in ownership occurred.
REAC inspections known as “Management and Occupancy Reviews” in September 2019, Dkt.
25 at 28 (2d Am. Compl. ¶ 83), and again in February 2022, see Dkt. 43-1; Dkt. 44-1. Because
these reviews were not conducted by the REAC, they would not, in any event, trigger a Notice of
Default under the Appropriations Acts in the event of a failing score. See 134 Stat. at 1898.
23
Nor have Plaintiffs demonstrated that HUD’s decisions concerning Tenant Protection
Vouchers are “by [their] very nature short in duration, so that [they] could not, or probably
would not, be able to be adjudicated while fully live.” LaRouche, 152 F.3d at 978 (quoting
Conyers v. Reagan, 765 F.2d 1124 ,1128 (D.C. Cir. 1985)). Unlike election cycles, see id.,certain construction projects, United Bhd. of Carpenters & Joinders of Am. v. Operative
Plasterers’ & Cement Masons’ Int’l Ass’n of U.S. & Can., 721 F.3d 678 (D.C. Cir. 2013), or
orders of limited duration, S. Pac. Terminal Co. v. Interstate Com. Comm’n, 219 U.S. 498(1911), a decision by HUD to withhold Tenant Protection Vouchers from PBRA tenants lacks a
natural expiration date: it lasts indefinitely until it is reversed, the complained-of deficiencies are
corrected, the HAP contract is terminated, or the HAP contract is transferred to new ownership.
The former two situations give PBRA tenants the relief they seek. The latter two situations are
also designed to remedy the deficiencies, and, in any event, there is no set time limit within
which either action must occur. Here, moreover, HUD has already transferred the HAP contract
once to new ownership, and there is no reason to believe it would do so again within a short
period of time, nor is there reason to believe that HUD would terminate the HAP contract
altogether, see Dkt. 25 at 21 (2d. Am. Compl. ¶ 54) (“HUD is committed to[] retaining and
preserving this affordable housing on Galveston Island.”). Accordingly, Plaintiffs have not
demonstrated that any future decision by HUD to withhold Tenant Protection Vouchers (after
issuance of a Notice of Default) would evade review if the necessary preconditions for issuing
such vouchers were to recur.
Putting this all together, the Court concludes that one of the two statutory prerequisites
for the issuance of Tenant Protection Vouchers is no longer present because the transfer of the
HAP contract to the New Owner resolved the Notice of Default issued to the Previous Owner,
24
and HUD has not issued a Notice of Default to the New Owner of Sandpiper Cove. Because
“the [C]ourt cannot order [HUD] to violate an act of Congress,” Alfonso v. District of Columbia,
464 F. Supp. 2d 1, 8 (D.D.C. 2006), nor order HUD to pay money without a congressional
appropriation, see OPM v. Richmond, 496 U.S. 414, 424–31 (1990), “intervening events” have
“ma[de] it impossible to grant [Plaintiffs] effective relief,” Lemon, 514 F.3d at 1315. As a result,
Plaintiffs’ APA claims are now moot, and the Court, accordingly, will dismiss those claims for
lack of jurisdiction.4
Even if Plaintiffs’ APA claims were not moot, and the Court were to conclude that HUD
does not lack the authority to issue Tenant Protection Vouchers, it is likely that Plaintiffs’ APA
claims would nevertheless fail for lack of standing. In its recent decision in Marino v. Nat’l
Oceanic & Atmospheric Admin., No. 20-5151 (D.C. Cir. May 17, 2022), the D.C. Circuit held
that plaintiffs lacked standing to bring an APA challenge to the National Marine Fisheries
Service’s (NMFS) refusal to enforce a condition in a permit the NMFS had issued to a facility
that publicly displays marine animals. Id. (slip op. at 4). The NMFS declined to enforce the
condition because, in the agency’s view, a 1994 statute “extinguish[ed] its authority to enforce
marine mammal permits.” Id. Plaintiffs disagreed. They maintained that the agency’s
interpretation of the 1994 law was arbitrary and capricious and, consequently, requested an order
declaring that NMFS violated the APA and vacating the agency’s non-enforcement decision. Id.(slip op. 4, 6). Without taking a view on the scope of NMFS’s statutory authority, the D.C.
Circuit held that plaintiffs lacked standing because they “fail[ed] to establish that the relief they
4
Because Plaintiffs’ APA claims fail for lack of jurisdiction, the Court does not have occasion to
consider HUD’s nonjurisdictional challenges to the complaint, including whether the decision to
issue Tenant Protection Vouchers is committed to agency discretion by law or whether Plaintiffs
have challenged a final agency action. See Steel Co., 523 U.S. at 94–95.
25
[sought] would redress the injury they allegedly suffered.” Id. (slip op. at 5). The court of
appeals explained that, “it is of no moment whether, as the plaintiffs contend, the 1994 [statute]
did not extinguish the NMFS’s ability to enforce its permit conditions, because the NMFS has
prosecutorial discretion not to enforce them,” and the plaintiffs failed to allege that the agency
was likely to exercise its prosecutorial discretion differently on remand. Id. (slip op. at 6).
The D.C. Circuit’s decision in Marino poses similar hurdles for Plaintiffs in this case.
Although Plaintiffs here seek an injunction ordering HUD to issue Tenant Protection Vouchers,
the relief that is typically available in an APA arbitrary-and-capricious case is a remand to the
agency to take action consistent with the court’s decision. See N. Air Cargo v. U.S. Postal Serv.,
674 F.3d 852, 861 (D.C. Cir. 2012) (“When a district court reverses agency action and
determines that the agency acted unlawfully, ordinarily the appropriate course is simply to
identify a legal error and then remand to the agency.”); see also Hurry v. Fed. Deposit Ins.
Corp., No. 18-2435, 2022 WL 670857, at *18 (D.D.C. Mar. 7, 2022). With that basic tenet of
administrative law in mind, Plaintiffs’ APA claim appears to raise a redressability problem
similar to the one presented in Marino. As with NMFS’s decision to enforce permit conditions
in Marino, the issuance of Tenant Protection Vouchers is a discretionary one under the
Appropriations Act, which provides only that the agency “may” rather than “shall” issue
vouchers under the conditions at issue here, see Consolidated Appropriations Act, 2021, 134
Stat. at 1869, and which lists the issuance of vouchers to address “imminent health and safety
risks” as only one of several potential uses of Congress’s lump-sum appropriation that HUD
might select, id.; see Lincoln v. Vigil, 508 U.S. 182, 191-92 (1993); Int’l Union, United Auto.,
Aerospace & Agric. Implement Workers of Am. v. Donovan, 746 F.2d 855, 861 (D.C. Cir. 1984).
Even more to the point, the complaint fails to identify any mandatory duty or to allege facts
26
sufficient to support a claim that HUD would exercise its discretion to issue Tenant Protection
Vouchers differently if the case were remanded to the agency.5 Ultimately, however, the Court
need not decide whether Marino compels dismissal for lack of standing because, for the reasons
explained above, Plaintiffs’ APA claims are, in any event, moot.
Three final observations bear note. First, the limitation on HUD’s authority to issue
Tenant Protection Vouchers only in situations where the current owner of a PBRA unit “has
received” a Notice of Default makes sense in light of the structure of the PBRA program. That is
because HUD is not in contractual privity with PBRA tenants; rather, the tenants have a private
contractual relationship with their PBRA unit owner. A decision by HUD to issue a Tenant
Protection Voucher intrudes on that private contractual relationship—it requires HUD either to
abate or to terminate the PBRA tenant’s obligation to pay rent to her present landlord to enable
the tenant to enter a new rental agreement with a different landlord. See Dkt. 36 at 37; Dkt. 42 at
16 n.9. Under the HAP contract, however, the only mechanism at HUD’s disposal to abate a
tenant’s obligation to pay rent does not become available until after HUD issues a Notice of
Default to the owner. See Dkt. 36 at 37; Dkt. 36-2 at 11 (HAP Contract § 26(b)). Against this
backdrop, it makes sense that the Appropriation Act would not authorize the Secretary to issue
Tenant Protection Vouchers until the owner of the property has received a Notice of Default.
5
As explained above, prior versions of the complaint invoked 24 C.F.R. § 886.323(e), which
employs mandatory language, arguably requiring HUD to “provide assistance in finding [another
dwelling] unit for [a] family” where (1) “HUD notifies the owner that he/she has failed to
maintain a dwelling unit in decent, safe, and sanitary condition, and the owner fails to take
corrective action within the time prescribed in the notice” and (2) “the family wishes to be
rehoused in another dwelling unit.” See Dkt. 1 at 20, 44–45 (Compl. ¶¶ 60, 137–39); Dkt. 21 at
36, 57, 58 (Compl. ¶¶ 120, 199–201). The second amended complaint, however, drops any
references to that regulation, and so the Court does not address it further here. See Dkt. 25 (2d
Am. Compl.); Dkt. 36 at 43 n.19.
27
Second, although the Court concludes that HUD lacks the authority, at present, to issue
Tenant Protection Vouchers to Plaintiffs, that determination does not tie the agency’s hands in
carrying out its statutory duty to ensure that PBRA unit owners provide housing that is decent,
safe, and sanitary. Even though HUD is only statutorily required to issue a Notice of Default to
a PBRA unit owner within 15 days of a failing REAC score, Consolidated Appropriations Act,
2021, 134 Stat. at 1898, the agency nevertheless retains the discretion, pursuant to its HAP
contract with the owner, to issue a Notice of Default under several additional circumstances.
These include when the owner has (1) “violated or failed to comply with any provision or
obligation of [the HAP contract];” (2) “asserted or demonstrated an intention not to perform
some or all of his/her obligations under [the HAP contract] or any lease;” (3) “violated or failed
to comply with any applicable HUD regulation;” or (4) “furnished any false statements or
misrepresentations to HUD.” Dkt. 36-2 at 11 (HAP Contract § 26(a)). Thus, if HUD determines
that any of these conditions applies, it need not wait for a new failing REAC score to issue a
Notice of Default to the new owner.
Finally, if and when a Notice of Default is issued to the New Owner, Tenant Protection
Vouchers are one of only several enforcement tools available to HUD to address a PBRA unit
owner’s failure to maintain decent, safe, and sanitary conditions. In addition to changing the
PBRA owner’s management company and effecting a transfer of the property and assignment of
the HAP contract, both of which HUD pursued here, HUD may, among other options, request a
court-appointed receiver to manage the property, take possession of the project itself, or impose
civil money penalties on the owner and use those funds to correct deficiencies in PBRA units.
Consolidated Appropriations Act, 2021, 134 Stat. at 1898; Dkt. 36-2 at 11 (HAP Contract
§ 26(b)).
28
Because the New Owner has not received a Notice of Default with respect to the PBRA
units at Sandpiper Cove, however, the Court concludes that HUD lacks the authority to issue
Tenant Protection Vouchers to Plaintiffs. Accordingly, the Court will dismiss Plaintiffs’ APA
claims for lack of jurisdiction.
B. Intentional Discrimination Claims
In addition to their APA claims, Plaintiffs claim that HUD’s failure to issue the Tenant
Protection Vouchers constituted an act of intentional discrimination, in violation of the Fair
Housing Act, 42 U.S.C. § 3604(a), and the equal protection guarantee of the Fifth Amendment,
U.S. Const. amend. V. Plaintiffs allege that “HUD’s final decision to withhold the assistance . . .
including Tenant Protection Vouchers . . . necessary for Plaintiffs to obtain decent, safe, and
sanitary housing elsewhere makes the decent, safe, and sanitary housing that would be available
with that assistance unavailable to a group that is predominantly Black or African American and
almost exclusively minority,” Dkt. 25 at 59 (2d Am. Compl. ¶ 210); accord id. at 58 (2d Am.
Compl. ¶ 207), and thus constitutes an act of “intentional discrimination on the basis of race and
ethnicity” in violation of 42 U.S.C. 2604(a) and the Fifth Amendment, id. at 58, 59 (2d Am.
Compl. ¶¶ 208, 211).
HUD urges the Court to dismiss Plaintiffs’ intentional discrimination claims for two
reasons: first, it contends that sovereign immunity bars Plaintiffs’ Section 3604(a) claim, Dkt. 36
at 46, and, second, it maintains that both the statutory and constitutional claims fail because the
complaint does not allege any facts that could plausibly give rise to an inference of
discriminatory intent by HUD, id. at 47.
As an initial matter, the Court concludes that HUD’s sovereign immunity challenge to
Plaintiffs’ Section 3604(a) fails. “It is axiomatic that the United States may not be sued without
29
its consent and that the existence of consent is a prerequisite for jurisdiction.” United States v.
Mitchell, 463 U.S. 206, 212 (1983). “Absent a waiver, sovereign immunity shields the Federal
Government and its agencies from suit.” FDIC v. Meyer, 510 U.S. 471, 475 (1994).
HUD argues that the Court lacks jurisdiction over Plaintiffs’ Section 3604(a) claim
because the Fair Housing Act does not contain a waiver of the sovereign immunity of the United
States. The premise of HUD’s argument is true, but its conclusion is wrong. Although HUD is
correct that the Fair Housing Act does not include a waiver of sovereign immunity, that
observation is immaterial because Plaintiffs’ claim is covered by the general waiver of sovereign
immunity contained in the Administrative Procedure Act. See 5 U.S.C. § 702. For the purposes
of § 702, it makes no difference that Plaintiffs’ cause of action does not arise under the APA. As
the D.C. Circuit has observed, “[t]here is nothing in the language of . . . § 702 that restricts its
waiver to suits brought under the APA. The sentence waives sovereign immunity for ‘[a]n
action in a court of the United States seeking relief other than money damages,’ not for an action
brought under the APA.” Trudeau v. Fed. Trade Comm’n, 456 F.3d 178, 186 (D.C. Cir. 2006).
Here, Plaintiffs seek only injunctive relief, and they “claim that an agency or an officer or
employee thereof acted or failed to act in an official capacity or under color of legal authority” in
a manner that caused Plaintiffs to “suffer [a] legal wrong.” 5 U.S.C. § 702. To invoke Section
702’s waiver, that is all they are required to do.
Ordinarily that would leave HUD’s Rule 12(b)(6) arguments for dismissal. But before
the Court may turn to those arguments, it must first consider a further, threshold jurisdictional
question: whether Plaintiffs’ intentional discrimination claims, like their APA claims, are now
moot in light of the transfer of the property to the New Owner, who has not received a Notice of
Default. HUD does not argue this point in its motion to dismiss. “A case that becomes moot at
30
any point during the proceedings,” however, “is ‘no longer a “Case” or “Controversy” for
purposes of Article III,’ and is [therefore] outside the jurisdiction of the federal courts.” United
States v. Sanchez-Gomez, 183 S. Ct. 1532, 1537 (2018) (quoting Already, LLC v. Nike, Inc., 568
U.S. 85, 91 (2013)); see also Conservation Force, Inc., 733 F.3d at 1204. Because federal courts
lack jurisdiction to adjudicate a case that is constitutionally moot, the courts have a
corresponding duty to address mootness sua sponte. United States v. Baucum, 80 F.3d 539, 541
(D.C. Cir. 1996). Here, the Court concludes that Plaintiffs’ intentional discrimination claims are
moot because HUD no longer has the statutory authority to provide the relief that Plaintiffs
seek—that is, issuance of Tenant Protection Vouchers premised on the no-longer-operative
Notice of Default issued to the Previous Owner. In other words, Plaintiffs’ intentional
discrimination claims, like their APA claim, are no longer redressable. See City of Los Angeles
v. Lyons, 461 U.S. 95, 102–12 (1983).
At an initial glance, Plaintiffs’ discrimination claims appear to challenge a broader swath
of agency conduct than simply HUD’s decision to withhold Tenant Protection Vouchers. Certain
allegations in the complaint, for example, fault HUD for maintaining superior housing in
majority white non-Hispanic PBRA units and census tracts but not at Sandpiper Cove, where the
tenants are overwhelmingly Black. Dkt. 25 at 48–56, 58, 59 (2d Am. Compl. ¶¶ 164–198, 206,
209). Plaintiffs allege, moreover, that this disparity “is based at least in part on the race of
Plaintiffs and the other tenants.” Id. at 58, 59 (2d Am. Compl. ¶¶ 206, 209).
More careful study, however, reveals that the only specific agency action that Plaintiffs
challenge in their intentional discrimination claims is HUD’s decision to withhold Tenant
Protection Vouchers from Plaintiffs. See Dkt. 25 at 58 (2d Am. Compl. ¶ 208) (“HUD’s final
decision to withhold the assistance and the Tenant Protection Vouchers is intentional
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discrimination on the basis of race and ethnicity in violation of 42 U.S.C. § 3604(a).”); id. at 59(2d Am. Compl. ¶ 211) (“HUD’s final decision to withhold the assistance and the Tenant
Protection Vouchers is intentional discrimination on the basis of race and ethnicity in violation of
the Equal Protection component contained in the due process clause of the Fifth Amendment.”).
Even more to the point, Plaintiffs do not seek monetary relief as a remedy for HUD’s alleged
discriminatory acts, nor do they ask the Court to order HUD to remedy the more sweeping racial
disparities that they allege throughout their complaint. Instead, they ask the Court to issue an
injunction ordering HUD to provide Plaintiffs with relocation assistance “to obtain affordable
decent, safe, and sanitary housing in neighborhoods without substandard conditions”—
specifically, “an injunction ordering HUD to provide Plaintiffs with Tenant Protection
Vouchers.” Id. at 60 (2d Am. Compl. ¶ 212.B). As the Court has already explained, such an
order would run counter to the 2021 Consolidated Appropriations Act, under which HUD may
issue Tenant Protection Vouchers to PBRA tenants only “where the owner has received a Notice
of Default and the units pose an imminent health and safety risk to residents.” 134 Stat. at 1869.
Although those conditions might have existed before the sale of Sandpiper Cove to the New
Owner in October 2019, “intervening events,” have since “ma[de] it impossible to grant
[Plaintiffs] effective relief,” Lemon, 514 F.3d at 1315.
The Court pauses here to consider one possibility that might save Plaintiffs’
discrimination claims from mootness. At times, certain paragraphs of the complaint gesture
toward other forms of relocation assistance that HUD could potentially provide to Plaintiffs
beyond Tenant Protection Vouchers. Plaintiffs’ intentional discrimination claims, for example,
refer to “relocation assistance and relief necessary to obtain decent, safe, and sanitary housing
elsewhere, including Tenant Protection Vouchers,” Dkt. 25 at 58 (2d Am. Compl. ¶ 207)
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(emphasis added); accord id. at 59 (2d Am. Compl. ¶ 210), and Plaintiffs’ prayer for relief
generally requests “an injunction ordering HUD to provide Plaintiffs with the assistance
necessary to obtain . . . housing” elsewhere and also asks the Court to issue “an injunction
ordering HUD to provide Plaintiffs with Tenant Protection Vouchers,” id. at 59–60 (2d Am.
Compl. ¶ 212).
Despite these references, the Court concludes that the only relocation assistance Plaintiffs
meaningfully identify in their complaint are Tenant Protection Vouchers. At no point do
Plaintiffs identify an alternative statutory source of relocation assistance for which they might be
eligible other than Tenant Protection Vouchers. The factual allegations in the complaint,
moreover, single-mindedly focus on Tenant Protection Vouchers and do not discuss (or even
identify) other sources of relocation assistance that they requested and that HUD declined to
provide to them. See, e.g., id. at 33–35 (2d Am. Compl. ¶¶ 106–22). Absent any specificity (in
Plaintiffs’ 60-page complaint) regarding some plausible, alternative form of relief, the second
amended complaint’s vague references to other forms of relocation assistance—which may or
may not exist—cannot salvage the complaint as currently pleaded.6
Accordingly, the Court will dismiss Plaintiffs’ Fair Housing Act and Fifth Amendment
intentional discrimination claims for lack of jurisdiction.
6
For similar reasons, the complaint’s reference to “other relocation assistance authorized by the
2021 and 2020 and the 2019 Appropriations Acts” as a partial basis for Plaintiffs’ APA claim for
HUD’s alleged violation of 42 U.S.C. § 3608(e), Dkt. 25 at 57 (2d Am. Compl.), does not save
that claim from mootness. As currently pleaded, the complaint does not identify another form of
relocation assistance under the Appropriations Acts for which Plaintiffs arguably might be
eligible.
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C. Preliminary Injunction
Upon filing their second amended complaint, Plaintiffs simultaneously moved for
preliminary injunctive relief. Dkt. 25. That motion, however, necessarily fails because the Court
lacks jurisdiction to consider Plaintiffs’ claims on the merits. The Court will, accordingly, deny
Plaintiffs’ motion. See McCray, 2021 WL 5823801, at *5.
CONCLUSION
For the foregoing reasons, the Court will DENY Plaintiffs’ motion for a preliminary
injunction, Dkt. 26, and will GRANT Defendant’s motion to dismiss the complaint, Dkt. 36. A
separate order will issue.
/s/ Randolph D. Moss
RANDOLPH D. MOSS
United States District Judge
Date: May 21, 2022
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