Alexandria Resident Council, Inc. v. Alexandria Redevelopment & Housing Authority

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ALEXANDRIA RESIDENT COUNCIL, 
INCORPORATED,
Plaintiff-Appellant,
v.
ALEXANDRIA REDEVELOPMENT &  No. 00-2538
HOUSING AUTHORITY,
Defendant-Appellee.
NORTH VILLAGE L.L.C.,
Movant.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Albert V. Bryan, Jr., Senior District Judge.
(CA-00-1328-A)
Argued: May 7, 2001
Decided: June 6, 2001
Before NIEMEYER, LUTTIG, and KING, Circuit Judges.
Affirmed as modified by unpublished per curiam opinion.
COUNSEL
ARGUED: Paul Anthony Fiscella, PAUL A. FISCELLA, P.C., Alex-
andria, Virginia, for Appellant. Michael Jay Weiser, Alexandria, Vir-
ginia, for Appellee. ON BRIEF: Victor M. Glasberg, VICTOR M.
GLASBERG & ASSOCIATES, Alexandria, Virginia, for Appellant.
2 ALEXANDRIA RESIDENT COUNCIL v. ALEXANDRIA REDEV.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
The Alexandria Resident Council ("ARC") appeals the district
court’s dismissal of this action brought under 42 U.S.C. § 1983against the Alexandria Redevelopment and Housing Authority
("ARHA"). For the reasons set forth below, we affirm the district
court’s judgment, as modified to reflect that ARC’s pendent state-law
claim against ARHA is dismissed without prejudice.
I.
ARHA, the public housing authority for the city of Alexandria,
Virginia, manages the Samuel Madden Downtown Homes (the "Mad-
den Homes") and leases the units to eligible tenants at reduced rates
subsidized by the United States Department of Housing and Urban
Development ("HUD") pursuant to the United States Housing Act of
1937, 42 U.S.C. § 1437 (the "Housing Act"). ARHA designated the
Madden Homes for demolition and, under HUD’s regulations, was
obligated to offer to sell the Madden Homes to the "local resident
council" before receiving HUD’s authorization to demolish the prop-
erty. See 24 C.F.R. § 970.13.
ARC is the local resident council for public housing developments
in Alexandria. When ARHA offered to sell the Madden Homes to a
different entity, ARC filed an action under 42 U.S.C. § 1983, seeking
a declaration and order that it was entitled to receive the offer of sale
as the local resident council. The district court granted summary judg-
ment to ARC, and we affirmed. See Alexandria Resident Council, Inc.
v. Samuel Madden Homes Tenant Council, No. 97-2501, 1998 WL
416726 (4th Cir. July 22, 1998).
ARHA made the required offer of sale to ARC pursuant to the dis-
trict court’s order, and ARC replied with a proposal to purchase,
ALEXANDRIA RESIDENT COUNCIL v. ALEXANDRIA REDEV. 3
which ARHA rejected on numerous grounds. ARC then filed a
motion requesting that the district court order ARHA to accept ARC’s
proposal. In response, the district court directed ARC to pursue its
right to appeal ARHA’s rejection of the purchase proposal to HUD.
See 24 C.F.R. § 970.13(f). On appeal, HUD concluded that most of
ARHA’s bases for rejecting the purchase proposal were erroneous.
However, it agreed with ARHA that ARC had failed to demonstrate
a firm financial commitment to fund the purchase, as required by 24
C.F.R. § 970.13(g)(v), and ordered ARHA to allow ARC ninety days
to cure this deficiency.
ARC submitted a revised purchase proposal, which ARHA again
rejected. Instead of pursuing its appellate rights with HUD, as it had
been directed to do once before, ARC sought injunctive relief from
the district court. The district court ordered ARHA to accept ARC’s
proposal, and we subsequently vacated the order because the district
court exceeded its ancillary jurisdiction in granting ARC’s requested
relief. See Alexandria Resident Council, Inc. v. Alexandria Redev. &
Hous. Auth., 218 F.3d 307 (4th Cir. 2000). In so holding, we
explained that:
[W]e do not necessarily conclude that ARC was without
recourse after ARHA rejected its original and revised pur-
chase offers. ARC could have appealed those rejections to
HUD, as it did after the first rejection but not after the sec-
ond, and may have been able to file an action challenging
any adverse decision by HUD as arbitrary and capricious
under the Administrative Procedure Act.
Id. at 309-10 (emphasis added).
However, because the thirty-day period for appealing ARHA’s
rejection of ARC’s revised purchase proposal to HUD had passed, see
24 C.F.R. § 970.13(f), ARC filed a new complaint under section
1983, wherein it alleged that ARHA violated its rights under the
Housing Act and accompanying regulations by rejecting the revised
purchase proposal. ARC’s complaint also included a pendent state-
law claim seeking specific performance of a contract for the sale of
the Madden Homes allegedly created under Virginia law by an
exchange of letters between ARC and ARHA. The district court
4 ALEXANDRIA RESIDENT COUNCIL v. ALEXANDRIA REDEV.
granted ARHA’s motion for judgment on the pleadings because ARC
failed to exhaust its administrative remedies with HUD, J.A. 97-99,
and this appeal followed.
II.
We have long recognized the "‘settled rule of judicial administra-
tion that no one is entitled to judicial relief for a supposed or threat-
ened injury until the prescribed administrative remedy has been
exhausted.’" See, e.g., Thetford Properties IV Ltd. P’ship v. United
States Dep’t of Hous. and Urban Dev., 907 F.2d 445, 447 (4th Cir.
1990) (quoting Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41,
50-51 (1938)). Because ARC was required to exhaust its administra-
tive remedies under 24 C.F.R. § 970.13(f) as a prerequisite to suing
ARHA in federal court, we affirm the district court’s dismissal of
ARC’s section 1983 claim.
A.
The regulation creating an administrative remedy for a public hous-
ing authority’s rejection of a purchase proposal by a resident council
provides, in pertinent part:
Appeals. The resident management corporation, resident
council or resident cooperative of the affected development
has the right to appeal the PHA’s [public housing authori-
ty’s] decision to the HUD field office. A letter requesting an
appeal has to be made within 30 days of the decision by the
PHA. . . .
24 C.F.R. § 970.13(f). Whether exhaustion of this administrative rem-
edy is required prior to commencing suit in federal court is a matter
of congressional intent. See, e.g., McCarthy v. Madigan, 503 U.S.
140, 144-45 (1992) ("Of ‘paramount importance’ to any exhaustion
inquiry is congressional intent. . . . [A]ppropriate deference to Con-
gress’ power to prescribe the basic procedural scheme under which a
claim may be heard in federal court requires fashioning of exhaustion
principles in a manner consistent with congressional intent and any
applicable statutory scheme.").
ALEXANDRIA RESIDENT COUNCIL v. ALEXANDRIA REDEV. 5
Of course, "[b]y vesting the implementation" of the Housing Act
"in [an] administrative agenc[y]," Congress "did speak ‘clearly’ in
requiring exhaustion." Volvo GM Heavy Truck Corp. v. United States
Dep’t of Labor, 118 F.3d 205, 211-12 (4th Cir. 1997). Congress
assigned to HUD the role of administering the Housing Act, and a
determination of whether a resident council’s offer to purchase a pub-
lic housing development meets the complex requirements of the Act
and its regulations falls squarely within HUD’s expertise. Allowing
ARC to bypass an administrative appeal of ARHA’s rejection would
"weaken [the] agency’s effectiveness by encouraging disregard of its
procedures." McCarthy, 503 U.S. at 145. Further, such a circumven-
tion of administrative remedies would undermine the statutory
scheme, which is based on "the notion, grounded in deference to Con-
gress’ delegation of authority to coordinate branches of Government,
that agencies, not the courts, ought to have primary responsibility for
the programs that Congress has charged them to administer." Id.Accordingly, because ARC failed to pursue an administrative
appeal of ARHA’s rejection of its revised purchase proposal, the dis-
trict court correctly dismissed ARC’s section 1983 claim for failure
to exhaust administrative remedies.
B.
We are not persuaded by ARC’s arguments to the contrary. First,
we disagree with ARC’s contention that this case falls within the
exceptions to the exhaustion requirement recognized by the Supreme
Court in McCarthy. ARC has not alleged that HUD is "biased or has
otherwise predetermined the issue before it," id. at 146-47, nor has
ARC demonstrated that pursuing an administrative appeal would have
caused it irreparable harm due to "an unreasonable or indefinite time-
frame for administrative action," id. at 147. See 24 C.F.R. § 970.13(f)
(requiring HUD to "render a final decision within 30 days"). Neither
does HUD "lack[ ] institutional competence to resolve the particular
type of issue presented." McCarthy, 503 U.S. at 147-48. On the con-
trary, the issue in question — determining the propriety of ARHA’s
rejection of ARC’s purchase proposal — plainly lies within the agen-
cy’s mandate. See 24 C.F.R. § 970.13.
Second, citing Patsy v. Board of Regents, 457 U.S. 496 (1982),
ARC argues that the requirement that a plaintiff exhaust administra-
6 ALEXANDRIA RESIDENT COUNCIL v. ALEXANDRIA REDEV.
tive remedies before seeking relief in federal court does not apply to
actions brought under 42 U.S.C. § 1983. In Patsy, however, the
Supreme Court held only that "exhaustion of state administrative rem-
edies should not be required as a prerequisite to bringing an action
pursuant to § 1983." 457 U.S. at 515 (emphasis added). Furthermore,
the Court expressly reaffirmed that "in determining the application of
the exhaustion doctrine to [section 1983] cases in which federal
administrative remedies are available . . . . courts are guided by con-
gressional intent" — in particular, by "the role Congress has assigned
to the relevant federal agency" and by "whether application of the
[exhaustion] doctrine would be consistent with the statutory scheme."
Id. at 502 n.4 (emphasis added). Thus, because exhaustion is consis-
tent with the role Congress assigned to HUD, see supra at 4-5, Patsy
further buttresses our conclusion that ARC was required to exhaust its
administrative remedies prior to filing this section 1983 action.
III.
Finally, ARC argues that even if the district court correctly dis-
missed its section 1983 claim, the court abused its discretion by exer-
cising pendent jurisdiction over the state-law cause of action and
dismissing the entire case with prejudice. We agree.
Although a federal court has discretion to assert pendent jurisdic-
tion over state claims even when no federal claims remain, see
Rosado v. Wyman, 397 U.S. 397, 402-05 (1970), "certainly[ ] if the
federal claims are dismissed before trial . . . the state claims should
be dismissed" without prejudice, United Mine Workers v. Gibbs, 383
U.S. 715, 726 (1966). See also Wentzka v. Gellman, 991 F.2d 423,
425 (7th Cir. 1993) (remanding case for dismissal of state claims
without prejudice and explaining that "where a federal claim drops
out before trial, a district court should not retain the state claims
absent extraordinary circumstances"). For, when all federal claims are
dismissed early in the litigation, the justifications behind pendent
jurisdiction — "considerations of judicial economy, convenience and
fairness to litigants" — are typically absent. Gibbs, 383 U.S. at 726.
Thus, under the rationale expressed by the Gibbs Court, ARC’s pen-
dent state-law claim should be dismissed without prejudice because
ARC’s sole federal claim was dismissed well before trial.
ALEXANDRIA RESIDENT COUNCIL v. ALEXANDRIA REDEV. 7
Further, we cannot say that the exercise of pendent jurisdiction was
in the interest of "fairness to [the] litigants," id., where ARHA did not
move to dismiss the state-law contract claim, ARC was not on notice
of the need to defend the claim in its reply memorandum, and the dis-
trict court’s order granting the motion to dismiss did not even explic-
itly discuss the state-law cause of action. Indeed, the district court
only addressed the state claim when, in its order denying ARC’s
motion to amend the judgment, it stated conclusorily that the issues
raised in the section 1983 cause of action "are the same as those pre-
sented in the pendent state breach of contract claim." J.A. 109. How-
ever, whether the exchange of letters between ARHA and ARC cre-
ated an enforceable contract under Virginia law, and if so, whether
such contract required ARC to pursue the remedies in 24 C.F.R.
§ 970.13, are questions distinct from those discussed either by the
parties or by the court below.
Accordingly, because the sole federal claim was dismissed at the
outset of the litigation and neither the parties nor the district court
addressed difficult issues related to ARHA’s state-law cause of
action, we modify the district court’s judgment to dismiss the state
claim without prejudice.
CONCLUSION
For the reasons stated herein, the judgment of the district court is
affirmed, as modified to reflect that the dismissal of ARC’s state-law
claim is without prejudice.
AFFIRMED AS MODIFIED