nhlp | advancing housing justice 04 fn 143 lefort v...in the spring of 1976, herman smith, a loan...

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. :," ,. DJ:STIUCT COURT OF THE UNITED STATES .' . ..' ." .. ' .-" '. FOR THE DISTRICT OF RHODE J:SLAND ,.' .... LEFORT, et al., : ",.,..- .!.. Plaintiffs v. ,,: :' CARLA HILLS, et a1., : r .. ' - .. " .,"' ... Defendants ) JUDy SOLAN, et al., '- ; . I '.' Plaintiffs v. : .CARLA HILLS, et al., :" - Defendants . ' ;-".: THERESA POWERS, et al., " Plaintiffs : ' ) ) ) 1 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ACTJ:ON No. ACTION NO. 76-0287 , "!O' . . " v. ) ) ) ) ) ) CJ:VJ:L ACTION NO. 76-0288 . CARLA . HILLS , et al., Defendants .) ) ) .' it .. •· .OPINION i, ".......... .- . . November 19, 1976 ..... .' .. .- -. "; :", . ' ...... . " I \ J .... J 'd , T·, J .'.

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Page 1: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

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DJSTIUCT COURT OF THE UNITED STATES -

FOR THE DISTRICT OF RHODE JSLAND

LEFORT et al -

Plaintiffs

v

CARLA HILLS et a1 r ~ -

Defendants

) JUDy SOLAN et al

-

~

I

Plaintiffs

v

CARLA HILLS et al

-~

Defendants

- THERESA POWERS et al

Plaintiffs

) ) )

1 ) ) ) ) )

) ) ) ) ) ) ) ) )

CI~L ACTJON No 76~0286

CI~L ACTION NO 76-0287

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CJVJL ACTION NO 76-0288

CARLA HILLS et al

Defendants

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OPINION i -

November 19 1976

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- ~ ~

I J

Jd Tmiddot J

~ ~ - 1- ~ amp

DAY Senior District Judge middotIn each of these three civil

~ctions the plaintiff and members of the class he or she proposes

to represent are tenants in certain federally subsidized housing

projects owned and operated by private entities (hereinafter

private defendants) and regulated pursuant to provisions~f the National Housing Act by the Secretary of the Department of

Housing and Urban Development (BUD) and her agents (hereinafter y federal defendants-)

The plaintiffs allege that neither the federal nor the

private defendants satisfied their obligations under 24 CPR

sect 4011 et seq in processing rent increase applications for

units in the housing projects herein involved This it is con-

tended constitutes not only an ~ctionable violation of the said

regulations but also an infringement of the plaintiffs due pro-

cess rights under the Fifth Amendment to the united States Con-

st1tution It is further a~leged ~a~ certain approved rent

increases unlawfully pass on to the plaintiffs increases in utility

costs and local property taxes which should be borne by BUD in

accordance with the provisions of 12 USC 55 1715 z-l (f) (3)

and (g) The jurisdiction of this Court is invoked pursuant to

11 By order of September 10 1976 this Court consolidated these actions for all purposes pursuant to Rule 42(a) Federal Rules of

Civil Procedure

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5 USC sect 702 and 28 USC sectsect 1331 1337 and 1361 Both de- i_

claratory and injunctive relief are sought against said rent -

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increases

At the hearing on this matter september 10 1976 this

Court denied the defendants motions for dismissal and for summary -judgment The Court now addresses the plaintiffs motions for a

preliminary injunction and class certification upon which it re-

~

served decision at the close of said hearing

The housing project involved in CA No 76-286 Plaza

Village Apartments is owned by a limited partnership called-

Plaza Village Group Defendants Ferland Corporation and National

~ Housing Partnership of Washington D C are general partners of ~

Plaza Village Group Slater Hill Apartments the project involved

in CA No 76-287 is owned ~ a limited partnership named Cecam

Associates of which the defenda~t Jolin ~Marshall XXI is the

general partner Slater House involved in CA No 76-288 is owned ~ Project 236 a limited partnership of which the defendant

Marshall contractors lnc is the general partner The defendant

Ferland Management Corporation is solely responsible for the

management of the three projects

Each housing project is financed by a mortgage insured

- -3 -

In the Spring of 1976 Herman Smith a loan management

specialis~ in the Providence Insuring Office of BUD reviewed

financial information then available to him and by 14ay 18 1976

determined that each of the said projects needed a rent increase

~hese determinations were not technically a part of the rent

increase procedure as provided in the aforementioned regulations

HUD did not formally approve any rent increases on May 18 1976

At that time Smith was aware however of the private defendants

intention to apply officially for rent increases and Smith did

convey his conclusions to the private defendants

On May 28 1976 the private defendants mailed to each

tenant in each of sa~d projects a n~tice complying with the re-

quirements of 24 CFR S 4012 The following day the private

defendants posted notices of the proposed rent increases in con-

spicuous places in each project~and delivered to the federal

defendants a copy of said notice 1_ a _letter regarding notice opound

intention to file for a rent increase and a copy of an audited

annual statement of Profit and Loss Form HUD-92410 for 1975 for

each project Said HOD regulations require the submission of

these three items plus an unaudited accrual form for the period

intervening since the date of the annual statement simuluaneeusly

-with said notification to tenants 24 CFR sect 4013 Not until

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June 23 1976 did the private defendants submit an unaudited

accrual form for each project covering only the first quarter of y

1976 At 900 am on that day these forms were made available

for tenant inspection and comment but the tenants were not then

informed by the private defendants that they were availablefor

inspectio~

copies of all materials which were submitted by the

private defendants to the federal defendants for slater House and

slater Hill Apartments were retained at the offices of Farland

Management Company in Partucket Rhode Island The same was done

for materials submitted on behalf of Plaza Village Apartments at

the project site office in Woonsocket Rhode Island There was

some evidence that prior to June 9 1976 the said materials were

not readily available for tenant inspection Any deficiencies in

this regard however were cured by the exchange of information

between an agent of the private ~efendants and counsel for th~ - tenants at a meeting held for that purpose June 9 1976

Y The plaintiffs do not contend that said thirty-day tenant comment period commences only upon the private defendants comshypliance with 24 CFR sect 4013 Accordingly this Court expresses no opinion on the matter but does note with concern the potential in the late submission of one or more of the items required by said regulation for effectively reducing tenant comment periods from thirty to a mere five days

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On June 28 1976 the private defendants delivered to

the federal defendants formal applications for rent ~creases

for the said projects Later that same day counsel for the

tenants delivered to the federal defendants detailed summaries

of tenants comments on the proposed increases Said Herman Smith

informed counsel without reviewing said comments that the rent

increases had already been approved It was Smith s ~pinion that

these latest tenants submissions were not t~ely since he

believed the tenant comment period had expired Counsel for the

tenants was aware as ofmiddot the afternoon ofJune 28 1976 that the

private defendants had submitted their applications for approval

of rent increases and that letters purporting to approve increases in the maximum allowed rents for the projects had already been

typed though not Signed by the federal defendants By letters

dated June 29 1976 and si9ned either that or the prevtous Qay

the federal defendants did in fact approve increases in the maxi-

mum allowed rents for units in the said projects Said letters

directed the private defendants to submit a certain BUD Form-92458

for each project properly assigning actual rents not exceeding the

approved maximum rents and stated that new rents would be granted

upon receipt and review of the completed HUD Form-92458 The

federal defendants did not review the tenants comments delivered

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to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

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Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

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Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

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regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

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~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

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The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

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~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

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By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

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alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

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and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

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resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

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USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

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rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

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make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

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rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

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Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

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decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

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forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

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because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 2: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

~ ~ - 1- ~ amp

DAY Senior District Judge middotIn each of these three civil

~ctions the plaintiff and members of the class he or she proposes

to represent are tenants in certain federally subsidized housing

projects owned and operated by private entities (hereinafter

private defendants) and regulated pursuant to provisions~f the National Housing Act by the Secretary of the Department of

Housing and Urban Development (BUD) and her agents (hereinafter y federal defendants-)

The plaintiffs allege that neither the federal nor the

private defendants satisfied their obligations under 24 CPR

sect 4011 et seq in processing rent increase applications for

units in the housing projects herein involved This it is con-

tended constitutes not only an ~ctionable violation of the said

regulations but also an infringement of the plaintiffs due pro-

cess rights under the Fifth Amendment to the united States Con-

st1tution It is further a~leged ~a~ certain approved rent

increases unlawfully pass on to the plaintiffs increases in utility

costs and local property taxes which should be borne by BUD in

accordance with the provisions of 12 USC 55 1715 z-l (f) (3)

and (g) The jurisdiction of this Court is invoked pursuant to

11 By order of September 10 1976 this Court consolidated these actions for all purposes pursuant to Rule 42(a) Federal Rules of

Civil Procedure

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bull middot t

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5 USC sect 702 and 28 USC sectsect 1331 1337 and 1361 Both de- i_

claratory and injunctive relief are sought against said rent -

-

increases

At the hearing on this matter september 10 1976 this

Court denied the defendants motions for dismissal and for summary -judgment The Court now addresses the plaintiffs motions for a

preliminary injunction and class certification upon which it re-

~

served decision at the close of said hearing

The housing project involved in CA No 76-286 Plaza

Village Apartments is owned by a limited partnership called-

Plaza Village Group Defendants Ferland Corporation and National

~ Housing Partnership of Washington D C are general partners of ~

Plaza Village Group Slater Hill Apartments the project involved

in CA No 76-287 is owned ~ a limited partnership named Cecam

Associates of which the defenda~t Jolin ~Marshall XXI is the

general partner Slater House involved in CA No 76-288 is owned ~ Project 236 a limited partnership of which the defendant

Marshall contractors lnc is the general partner The defendant

Ferland Management Corporation is solely responsible for the

management of the three projects

Each housing project is financed by a mortgage insured

- -3 -

In the Spring of 1976 Herman Smith a loan management

specialis~ in the Providence Insuring Office of BUD reviewed

financial information then available to him and by 14ay 18 1976

determined that each of the said projects needed a rent increase

~hese determinations were not technically a part of the rent

increase procedure as provided in the aforementioned regulations

HUD did not formally approve any rent increases on May 18 1976

At that time Smith was aware however of the private defendants

intention to apply officially for rent increases and Smith did

convey his conclusions to the private defendants

On May 28 1976 the private defendants mailed to each

tenant in each of sa~d projects a n~tice complying with the re-

quirements of 24 CFR S 4012 The following day the private

defendants posted notices of the proposed rent increases in con-

spicuous places in each project~and delivered to the federal

defendants a copy of said notice 1_ a _letter regarding notice opound

intention to file for a rent increase and a copy of an audited

annual statement of Profit and Loss Form HUD-92410 for 1975 for

each project Said HOD regulations require the submission of

these three items plus an unaudited accrual form for the period

intervening since the date of the annual statement simuluaneeusly

-with said notification to tenants 24 CFR sect 4013 Not until

- 5 -

--I

June 23 1976 did the private defendants submit an unaudited

accrual form for each project covering only the first quarter of y

1976 At 900 am on that day these forms were made available

for tenant inspection and comment but the tenants were not then

informed by the private defendants that they were availablefor

inspectio~

copies of all materials which were submitted by the

private defendants to the federal defendants for slater House and

slater Hill Apartments were retained at the offices of Farland

Management Company in Partucket Rhode Island The same was done

for materials submitted on behalf of Plaza Village Apartments at

the project site office in Woonsocket Rhode Island There was

some evidence that prior to June 9 1976 the said materials were

not readily available for tenant inspection Any deficiencies in

this regard however were cured by the exchange of information

between an agent of the private ~efendants and counsel for th~ - tenants at a meeting held for that purpose June 9 1976

Y The plaintiffs do not contend that said thirty-day tenant comment period commences only upon the private defendants comshypliance with 24 CFR sect 4013 Accordingly this Court expresses no opinion on the matter but does note with concern the potential in the late submission of one or more of the items required by said regulation for effectively reducing tenant comment periods from thirty to a mere five days

- 6 -

E

Imiddot

j r

On June 28 1976 the private defendants delivered to

the federal defendants formal applications for rent ~creases

for the said projects Later that same day counsel for the

tenants delivered to the federal defendants detailed summaries

of tenants comments on the proposed increases Said Herman Smith

informed counsel without reviewing said comments that the rent

increases had already been approved It was Smith s ~pinion that

these latest tenants submissions were not t~ely since he

believed the tenant comment period had expired Counsel for the

tenants was aware as ofmiddot the afternoon ofJune 28 1976 that the

private defendants had submitted their applications for approval

of rent increases and that letters purporting to approve increases in the maximum allowed rents for the projects had already been

typed though not Signed by the federal defendants By letters

dated June 29 1976 and si9ned either that or the prevtous Qay

the federal defendants did in fact approve increases in the maxi-

mum allowed rents for units in the said projects Said letters

directed the private defendants to submit a certain BUD Form-92458

for each project properly assigning actual rents not exceeding the

approved maximum rents and stated that new rents would be granted

upon receipt and review of the completed HUD Form-92458 The

federal defendants did not review the tenants comments delivered

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I ~ t middot bull tmiddot ~ ~ bull

to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

- 8 -

~

f

-JiIl

I (

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

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r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

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~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

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bull

I

I

bull I

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j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

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~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

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-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

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i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

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I f I

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t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

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v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

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Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 3: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

-

5 USC sect 702 and 28 USC sectsect 1331 1337 and 1361 Both de- i_

claratory and injunctive relief are sought against said rent -

-

increases

At the hearing on this matter september 10 1976 this

Court denied the defendants motions for dismissal and for summary -judgment The Court now addresses the plaintiffs motions for a

preliminary injunction and class certification upon which it re-

~

served decision at the close of said hearing

The housing project involved in CA No 76-286 Plaza

Village Apartments is owned by a limited partnership called-

Plaza Village Group Defendants Ferland Corporation and National

~ Housing Partnership of Washington D C are general partners of ~

Plaza Village Group Slater Hill Apartments the project involved

in CA No 76-287 is owned ~ a limited partnership named Cecam

Associates of which the defenda~t Jolin ~Marshall XXI is the

general partner Slater House involved in CA No 76-288 is owned ~ Project 236 a limited partnership of which the defendant

Marshall contractors lnc is the general partner The defendant

Ferland Management Corporation is solely responsible for the

management of the three projects

Each housing project is financed by a mortgage insured

- -3 -

In the Spring of 1976 Herman Smith a loan management

specialis~ in the Providence Insuring Office of BUD reviewed

financial information then available to him and by 14ay 18 1976

determined that each of the said projects needed a rent increase

~hese determinations were not technically a part of the rent

increase procedure as provided in the aforementioned regulations

HUD did not formally approve any rent increases on May 18 1976

At that time Smith was aware however of the private defendants

intention to apply officially for rent increases and Smith did

convey his conclusions to the private defendants

On May 28 1976 the private defendants mailed to each

tenant in each of sa~d projects a n~tice complying with the re-

quirements of 24 CFR S 4012 The following day the private

defendants posted notices of the proposed rent increases in con-

spicuous places in each project~and delivered to the federal

defendants a copy of said notice 1_ a _letter regarding notice opound

intention to file for a rent increase and a copy of an audited

annual statement of Profit and Loss Form HUD-92410 for 1975 for

each project Said HOD regulations require the submission of

these three items plus an unaudited accrual form for the period

intervening since the date of the annual statement simuluaneeusly

-with said notification to tenants 24 CFR sect 4013 Not until

- 5 -

--I

June 23 1976 did the private defendants submit an unaudited

accrual form for each project covering only the first quarter of y

1976 At 900 am on that day these forms were made available

for tenant inspection and comment but the tenants were not then

informed by the private defendants that they were availablefor

inspectio~

copies of all materials which were submitted by the

private defendants to the federal defendants for slater House and

slater Hill Apartments were retained at the offices of Farland

Management Company in Partucket Rhode Island The same was done

for materials submitted on behalf of Plaza Village Apartments at

the project site office in Woonsocket Rhode Island There was

some evidence that prior to June 9 1976 the said materials were

not readily available for tenant inspection Any deficiencies in

this regard however were cured by the exchange of information

between an agent of the private ~efendants and counsel for th~ - tenants at a meeting held for that purpose June 9 1976

Y The plaintiffs do not contend that said thirty-day tenant comment period commences only upon the private defendants comshypliance with 24 CFR sect 4013 Accordingly this Court expresses no opinion on the matter but does note with concern the potential in the late submission of one or more of the items required by said regulation for effectively reducing tenant comment periods from thirty to a mere five days

- 6 -

E

Imiddot

j r

On June 28 1976 the private defendants delivered to

the federal defendants formal applications for rent ~creases

for the said projects Later that same day counsel for the

tenants delivered to the federal defendants detailed summaries

of tenants comments on the proposed increases Said Herman Smith

informed counsel without reviewing said comments that the rent

increases had already been approved It was Smith s ~pinion that

these latest tenants submissions were not t~ely since he

believed the tenant comment period had expired Counsel for the

tenants was aware as ofmiddot the afternoon ofJune 28 1976 that the

private defendants had submitted their applications for approval

of rent increases and that letters purporting to approve increases in the maximum allowed rents for the projects had already been

typed though not Signed by the federal defendants By letters

dated June 29 1976 and si9ned either that or the prevtous Qay

the federal defendants did in fact approve increases in the maxi-

mum allowed rents for units in the said projects Said letters

directed the private defendants to submit a certain BUD Form-92458

for each project properly assigning actual rents not exceeding the

approved maximum rents and stated that new rents would be granted

upon receipt and review of the completed HUD Form-92458 The

federal defendants did not review the tenants comments delivered

- 7 --

-~ -- ----

r l

-I i t )

I ~ t middot bull tmiddot ~ ~ bull

to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

- 8 -

~

f

-JiIl

I (

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

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I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 4: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

In the Spring of 1976 Herman Smith a loan management

specialis~ in the Providence Insuring Office of BUD reviewed

financial information then available to him and by 14ay 18 1976

determined that each of the said projects needed a rent increase

~hese determinations were not technically a part of the rent

increase procedure as provided in the aforementioned regulations

HUD did not formally approve any rent increases on May 18 1976

At that time Smith was aware however of the private defendants

intention to apply officially for rent increases and Smith did

convey his conclusions to the private defendants

On May 28 1976 the private defendants mailed to each

tenant in each of sa~d projects a n~tice complying with the re-

quirements of 24 CFR S 4012 The following day the private

defendants posted notices of the proposed rent increases in con-

spicuous places in each project~and delivered to the federal

defendants a copy of said notice 1_ a _letter regarding notice opound

intention to file for a rent increase and a copy of an audited

annual statement of Profit and Loss Form HUD-92410 for 1975 for

each project Said HOD regulations require the submission of

these three items plus an unaudited accrual form for the period

intervening since the date of the annual statement simuluaneeusly

-with said notification to tenants 24 CFR sect 4013 Not until

- 5 -

--I

June 23 1976 did the private defendants submit an unaudited

accrual form for each project covering only the first quarter of y

1976 At 900 am on that day these forms were made available

for tenant inspection and comment but the tenants were not then

informed by the private defendants that they were availablefor

inspectio~

copies of all materials which were submitted by the

private defendants to the federal defendants for slater House and

slater Hill Apartments were retained at the offices of Farland

Management Company in Partucket Rhode Island The same was done

for materials submitted on behalf of Plaza Village Apartments at

the project site office in Woonsocket Rhode Island There was

some evidence that prior to June 9 1976 the said materials were

not readily available for tenant inspection Any deficiencies in

this regard however were cured by the exchange of information

between an agent of the private ~efendants and counsel for th~ - tenants at a meeting held for that purpose June 9 1976

Y The plaintiffs do not contend that said thirty-day tenant comment period commences only upon the private defendants comshypliance with 24 CFR sect 4013 Accordingly this Court expresses no opinion on the matter but does note with concern the potential in the late submission of one or more of the items required by said regulation for effectively reducing tenant comment periods from thirty to a mere five days

- 6 -

E

Imiddot

j r

On June 28 1976 the private defendants delivered to

the federal defendants formal applications for rent ~creases

for the said projects Later that same day counsel for the

tenants delivered to the federal defendants detailed summaries

of tenants comments on the proposed increases Said Herman Smith

informed counsel without reviewing said comments that the rent

increases had already been approved It was Smith s ~pinion that

these latest tenants submissions were not t~ely since he

believed the tenant comment period had expired Counsel for the

tenants was aware as ofmiddot the afternoon ofJune 28 1976 that the

private defendants had submitted their applications for approval

of rent increases and that letters purporting to approve increases in the maximum allowed rents for the projects had already been

typed though not Signed by the federal defendants By letters

dated June 29 1976 and si9ned either that or the prevtous Qay

the federal defendants did in fact approve increases in the maxi-

mum allowed rents for units in the said projects Said letters

directed the private defendants to submit a certain BUD Form-92458

for each project properly assigning actual rents not exceeding the

approved maximum rents and stated that new rents would be granted

upon receipt and review of the completed HUD Form-92458 The

federal defendants did not review the tenants comments delivered

- 7 --

-~ -- ----

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-I i t )

I ~ t middot bull tmiddot ~ ~ bull

to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

- 8 -

~

f

-JiIl

I (

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

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v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 5: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

June 23 1976 did the private defendants submit an unaudited

accrual form for each project covering only the first quarter of y

1976 At 900 am on that day these forms were made available

for tenant inspection and comment but the tenants were not then

informed by the private defendants that they were availablefor

inspectio~

copies of all materials which were submitted by the

private defendants to the federal defendants for slater House and

slater Hill Apartments were retained at the offices of Farland

Management Company in Partucket Rhode Island The same was done

for materials submitted on behalf of Plaza Village Apartments at

the project site office in Woonsocket Rhode Island There was

some evidence that prior to June 9 1976 the said materials were

not readily available for tenant inspection Any deficiencies in

this regard however were cured by the exchange of information

between an agent of the private ~efendants and counsel for th~ - tenants at a meeting held for that purpose June 9 1976

Y The plaintiffs do not contend that said thirty-day tenant comment period commences only upon the private defendants comshypliance with 24 CFR sect 4013 Accordingly this Court expresses no opinion on the matter but does note with concern the potential in the late submission of one or more of the items required by said regulation for effectively reducing tenant comment periods from thirty to a mere five days

- 6 -

E

Imiddot

j r

On June 28 1976 the private defendants delivered to

the federal defendants formal applications for rent ~creases

for the said projects Later that same day counsel for the

tenants delivered to the federal defendants detailed summaries

of tenants comments on the proposed increases Said Herman Smith

informed counsel without reviewing said comments that the rent

increases had already been approved It was Smith s ~pinion that

these latest tenants submissions were not t~ely since he

believed the tenant comment period had expired Counsel for the

tenants was aware as ofmiddot the afternoon ofJune 28 1976 that the

private defendants had submitted their applications for approval

of rent increases and that letters purporting to approve increases in the maximum allowed rents for the projects had already been

typed though not Signed by the federal defendants By letters

dated June 29 1976 and si9ned either that or the prevtous Qay

the federal defendants did in fact approve increases in the maxi-

mum allowed rents for units in the said projects Said letters

directed the private defendants to submit a certain BUD Form-92458

for each project properly assigning actual rents not exceeding the

approved maximum rents and stated that new rents would be granted

upon receipt and review of the completed HUD Form-92458 The

federal defendants did not review the tenants comments delivered

- 7 --

-~ -- ----

r l

-I i t )

I ~ t middot bull tmiddot ~ ~ bull

to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

- 8 -

~

f

-JiIl

I (

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

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I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 6: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

On June 28 1976 the private defendants delivered to

the federal defendants formal applications for rent ~creases

for the said projects Later that same day counsel for the

tenants delivered to the federal defendants detailed summaries

of tenants comments on the proposed increases Said Herman Smith

informed counsel without reviewing said comments that the rent

increases had already been approved It was Smith s ~pinion that

these latest tenants submissions were not t~ely since he

believed the tenant comment period had expired Counsel for the

tenants was aware as ofmiddot the afternoon ofJune 28 1976 that the

private defendants had submitted their applications for approval

of rent increases and that letters purporting to approve increases in the maximum allowed rents for the projects had already been

typed though not Signed by the federal defendants By letters

dated June 29 1976 and si9ned either that or the prevtous Qay

the federal defendants did in fact approve increases in the maxi-

mum allowed rents for units in the said projects Said letters

directed the private defendants to submit a certain BUD Form-92458

for each project properly assigning actual rents not exceeding the

approved maximum rents and stated that new rents would be granted

upon receipt and review of the completed HUD Form-92458 The

federal defendants did not review the tenants comments delivered

- 7 --

-~ -- ----

r l

-I i t )

I ~ t middot bull tmiddot ~ ~ bull

to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

- 8 -

~

f

-JiIl

I (

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 7: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

to them June 23 1976 prior to releasing its said approval letter

dated June 29 1976

The said tenants comments focus on inter alia the

physical condition of the projects the accuracy of figures

supplied by the private defendants the financial manage~ent of

the projects and the failure to take into consideration in cal-

culating the need for proposed rent increases the operating sub-

sidies BUD was authorized to pay to the projects to cover increases

in utility costs and local property taxes

The said tenaBts~t comments were mailed to the private

defendants on June 29 1976 On June 30 1976 the private de-

fendants delivered to the federal d~fendants a completed HUD~

Form-92458 for each of the pr~jects On that same day the federal

defendants formally approved actual rent increases for units in

the said projects Prior to issuing this approval said Herman

Smith did read the tenants comment~ His immediate supervisor

Christano Neves read most of the comments Smith and Neves

neither conferred on the issues raised by the comments nor re-

viewed their computatiQns in light of said co~~ents Neves

immediate supervisor Edward Giblin did not review the rent

increase applications in any fashion Giblins supervisor

Sirrouko Howard is the director of the Providence Insuring Office

of HUD and the individual who actually approved the rent increases

- 8 -

~

f

-JiIl

I (

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 8: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

Howard apparently did not review the said tenants comments

The only computation forms completed by BUD in review-

ing the need for rent increases were HUD Form-92547 and an I unnumbered form entitled middotSection 236 Rent Formula- The federal

defendants completed both forms for each project prior to May 19 -1976 and made only one minor change in their computations prior ~

to final approval of the increases The tenant comment period

as noted above commenced on May 28 1976

The evidence at the hearing on the prel~inary injunction

indicated that potential BUD payments under the operating su~sidy

prog~am were not considered in determining the need for the instant

rent increases HOD has no intention of voluntarily implementing ~

said operating subsidy program or of devising any interim plan

utilizing funds designated for said program pending adjudication

of its responsibilities under said program The evidence further

indicated that HOD officials Neves and Smithhad little familiarity ~

with the operating subsidy program and were not instructed by the

secretary of HUD to consider said program when reviewing rent

increase applications A significant portion of the approved rent

increases is attributable to increases ~ costs of utilities and

local property taxes

The plaintiffs are not in a position to pay the rent

- 9 -

Ill -I f r r

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 9: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

I increases approved by the federaldefendants It is likely

that said plaintiffs would be forced to move from their apart-

ments or a~ the very least suffer irreparable financial hard-

ship if no injunctive relief is granted by this Court

I

The issues in count I of the complaint in each of these

actions are whether the defendants have satisfied therequirements

of 24 CFR sect 4011 et seq for processing increases in the maxi-

mum permissible rents for units in the said projects and if not

whether such non-compliance entities the plaintiffs to any relief

The plaintiffs contend that the defend~~ts aid not comply

with said regulations and that such non-compliance itself provides

a basis for the courts rescinding the said approval of rent in-

creases It is further contended that the federal defendants

violation of their own regulations arises to a denial of consti-

tut10nal due process Th~ defendants deny having violated the-said

I

I The private defendants intimated that a certain amount of said rent increases might be offset by additional rent supplement payments under 12 USCsect 1715 z-l (f) (2) bull NO precise figures were given by the defendants who are better able than the plainshytiffs to supply this information Accordingly the defendants did not successfully rebut the plaintiffs showing of potential irreparable harm

10 -

- l bull ~

r middot -I bull i Ishy-bull r bull

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 10: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

regulations and in the alternative assert that any violations

were minor did not prejudice the plaintiffs and do not give rise

to a cause of action

Jurisdiction is conferred upon this Court by 28 USC

sectsect 1331 1337 and 1361 The evidence amply demonstrated the

defendants non-compliance with both the letter and the spirit of

the provisions of 24 CFR sect 4011 et seq This Court rests its

granting of injunctive relief on violations of the letter of the v

law

The private defencants officially notified the plantiffs

and the federal defendants of the proposed rent increases on

t1ay 28 1976 Bad all the information required by 24 CFR sect 4013

been submitted simultaneously with said notification the tenant

comment period would have expired thirty days later The private

defendants did not however accompany said notification with un-

audited accrual forms for the period December 31 1975 to May 28 bull

1976 No QXCUSe was offered at the hearing for the belated filing

en June 23 1976 of unaudited accrual forms covering only the

first quarter of fiscal year 1976

i t

r f L il

~ If lIS ~

~ ~ a ~ -i v- ~ t l FJ r-~ v The Courts function in reviewing the defendants compliance ~

with 24 CPR sect 4011 et seq is limited No attempt is made to ~

evaluate the said tenants comments to determine how much oJeight ~

should be given them by the federal defendants in their determinations~ Similarly the Court is not in a position to review the merit of each ~

and every comment to determine the significance of the defendantsmiddot - failure to consider it in accordance with said regulations gt

- 11 -

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 11: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

The Court will assume consistent with the contentions

4 of the parties that these sulrnisraquoitDu on the twenty-sixth day fo llow- i ing the postingofmiddot saidnotification triggered the excension pro- ~

vided in 24 CFR sect 4012 rather than signalled the commencement

of the thirty-day period Said regulation provides that the

Uinspection and comment period will be extended to give tenants

five days to inspect and comment on any materials to be submitted

in support of the application that are not ava~lable during the

first 25 days of the 30-day period It makes no difference

whether the said five days extension is simply tacked onto ~e y

thirty days to create a thirty-five day period or instead

begins to run from the day following the filing of the said un-1

audited accrual forms Pursuant to either interpretation the

tenant comment period could not have expired June 27 1976 as

the defendants contended at the hearing

While Rule ~Ja) Federal Rules of Civil Procedure dpes

not control the computation of the instant five days extension

2 Moores Federal Practice 604 at 150016 this Court will

Y This interpretation is in accord with the position of the plaintiffs and the defendant HOIard Director of the Providence Insuring Office of HUD ~ Plaintiffs Exhibit 47

1 This is the interpretation of counsel for the federal deshyfendants and counsel for the private defendants

- 12 -

bull

I

I

bull I

bull

j

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 12: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

~ a~ply by analogy the principles underlying said rule since it finds

no contrary and controlling rule of construction in the said regu-

lations ~~S Union National Bank v Lamb 337 U s 38

(1949) Bledsoe v Department of Housing and Urban Development

398 F Supp 315 320 (ED Pa 1975)1 pennsylvania Public Utilit~~middot

Commission v United states 311 F Supp 1024 1028 (MDPa 1970)

Said rules approach is consistent with modern common law ~d~ bull S

J Aron amp Co v sIs Olga Jacob 527 F2d 416 (5th Cir 1976)

Wirtz v Local Union 169 International HOD carriers Building and

Common Laborers Union of America AFL-CIO 246 F su~p

741 750-752 (D Nev 1965) According to Rule 6 a period of

t~e begins to run f~om the day fol~owing the designated event

If the last day of the period is a Saturday or Sunday the period

extends through the next business day In addition whenmiddota de-

signated period is less than seven days intermediate saturdays

and Sundays are excluded in the comp~tation Applying said rule

by analogy the tenant comment period should have extended at a

min~um through June 30 1976 This extension is especially

appropriate in the instant cases since unaudited accrual forms

should normally be available for inspection and comment for a full

thirty days and since the private defendants did not actually inform

the tenants on June 23 1976 that they were submitting said forms

- 13 -

bull

r I

I --B 1

~

i r I r t

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 13: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

By delivering their final applications for incr~ases

on June 28 1976 the private defendants cut short the tenant

comment period and foreclosed the possibility of their evaluating

in accordence with 24 CFR sect 4014(a) (3) those comments given

to BUD that day and sent to them the following day The federal

defendants approved increases in the max~um permissible rents

and then approved actual unit rental increases before the tenant

comment period had expired The cursory reading of the said

comments by Smith and Neves without the benefit of the private

defendants evaluations thereof and without serious consideration

after the federal defendant Howard approved increases in the

maximum permissible rents does not cure the defendants failure

to satisfy the requirements of the said regulations

The aforementioned regulations setting QUe procedures

for requesting increases in maximum permissible rents were adopted

by BUD to protect tenants interestsand afford tenants certain

limited rights They were not intended merely to govern internal

agency procedures Having published these regulations it ill

befits the federal defendants to contend that the substantial pro-

cedural deviations herein have a de minimis effect on themiddot rent

increase determinations This Court therefore has the authority

and obligation to require BUD to abide by its own regulations See

- 14 -

-middot ~ middot bull ~ -G a -~

t~ t

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 14: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

alooUnited States v Leahey 434 F2d 7 10-11 (~st Cir 1970)

Violations By Agencies Of-Their Own Regulations 87 Harv L Rev

629 (1974) service v Dulles 354 us 363 (1957)

Hahn v Gottlieb 430 F2d 1243 (1st Cir 1970) cited

by the defendants is inapposite Hahn stands for the proposition

that there is no inherent constitutional due process right for

tenants to a hearing prior to the approval of rent increases in

federally subsidized housing projects That decision which pre-

dated publication of 24 CFR sect 4011 et seq did not reach

the question whether courts may intervene where an administrative

agency ignores a statutory dutj ~ at 1251 The tenants

~ l~ited right to be heard was created by HOD itself pursuant to

and consistent with the National Housing Act Several COU~ while

holding that tenants have no constitutional right to a he~ring

have implied that an independent fight to limitated participation

in the rent increase decision process arises for tenants in s~b-

sidized housing from 24 CFR sect 4011 et seq ~ ~~

Rodriguez v Towers Apar~~ents Inc 416 F Supp 304307n7

(D PR 1976) Fenner v Bruce Manor Inc 409 F Supp 1332

1347 (D Md 1976)

It is this Courts opinion that the plaintiffs have met

their burden for the granting of a preliminary injunctionon this

- claim by establishing both a likelihood of success on the merits

- 15 -

-

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 15: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

and the probability that absent a preliminary injunction the

plaintiffs will be forced to vacate their apartments during the

pendency of this action This Courts inaction could effecti~ely

moot the claims of those individuals

Accordingly this Court enjoins the implementation of

the rent increases approved by the federal defendants June 30

1976 until further order of the Court or such time as the de-

fend ants have complied with the provisions of 24 CFR sect 4011

et seq to the fol~owing extent

1 The tenant comlnent period is reopened for a period of five(5) days

2 The private defendants after the close of said five (5) days submit their applishycations for rent increases in accordance

with 24 CFR sectsect 4014 (a) and 4014 (b)

3 The federal defendants carefully review the application and all tenant comments submitted in relation thereto and the defendants comply w~th 24 CPR sect 401~5

The Court feels this second option effectively protects the legi-

t1rnate interests of the tenants without ~ne~essarily compelling

the defendants to recommence the lengthy rent increase process

The said relief on this claim will be entered in favor

of all tenants now residing or who come to reside in said three

housing projects who are subject to an increase in their rent

- 16 -

--IIlI

-~ t -I bull ~

~ -~ ~ bull I

i

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 16: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

resulting from the said June 30 1976 approval of increases

A class is hereby certified in each action as to this claim

to include a~l such tenants

Since this Court holds that said regulation itself

creates enforceable rights and obligations it need not reach the

plaintiffs due process claim under the Fifth Amendment to the

United states Constitution ~ HagCl1l9v Lavine 415middot US 528

(1974)

II

Pursuant to count II of the complaint in each of these

actiQns the plaintiffs seek orders of this Court enjoining rent

r- increases for these ~rojects until the federal defendants exclude

from their determinations of need for higher rents those project

expenses attributable to increases in utility costs and p~operty

taxes It is contended that since BUD is obligated to implement

an operating subsidy program to cover certain increases in utLlity

costs and said taxes any rent increase~ which passes these ex-

penses on to the plaintiffs is unlawful

The said operating subsidy program was established by

Congress to alleviate the economic difficulties of housing pro-

jects and their low income tenants confronted with inflationary

operating costs See 12 USC sect 1715 z-l (f) (3) and (g)~ 1974

- 17 -

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 17: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

USCCAN 4273 4302-3 Said program providesfor payments

from HOD to project owners to offset the costs of local property

taxes and utilities which exceed initial operating expense levels

HUD is not making payments under the operating subsidy if

program to the projects herein involved It insists that the

making of payments under said program is a matter within its dis-

cretion It is undisputed however that the instantprojects

are technically eligible for said subsidies and that there exist

fUnds designated for distribution under said program In addition

the defendants contend that the plaintiffs can be assessed the

approved increases i~ utility costs and property taxes irre-

spective of whether or not the operating subsidy program is imple-

mented

All tenants of a particular project may benefit ~rom

the implementation of the said operating subsidy program The

program was specifically deSigned to assist however thos~

tenants whose rent includes utilities who are paying in excess

of 30 of their adjusted monthly income and those tenants whose

if The said operating subsidy program has however been implemented in some areas of the country pursuant to Court order ~ ~~ Carberry v~ Hills CA No 76-52l-F (D Mass March 8 1976) Dubose v Hills 405 F bull Supp 1277 (D Conn 1975)

- 18 -

middot1

J

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 18: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

rent does not include all utilities who are paying rent in excess

of 25 of their adjusted monthly income It is therefore this

particular group of tenants rather than tenants in general that

has standing to press this claim ~ Warth v seldin 422 us

490 509 (1975) The named plaintiffs are qualified to represent

on count II of these actions classes of tenants similarly situated

Rule 23 (b) Federal Rules of Civil Procedure

Accordingly classes are hereby certified in CA 76-287

and CA 75-288 to consist of all tenants in Slater Hill Apart-

ments and Slater House who are or will be paying rent in excess

of 3~1o of their adjusted monthly income A class is certified in

r CA No 76-286 to consist of tenants at Plaza Village Apartments

whose rents do not include all utilities who are or will be paying

rent in excess of 25 of their adjusted monthly income

The District Courts decision in Underwood v Hills

CA No 76-469 (DDC June 8 1976) is of critical significance

to the instant actions That District Court determined that BUD

was obligated to implement the operating subsidy program and ordered

implementation as soon as pract~cally possible The nationwide

class of low income tenQIlts certified by the Court in Underwood

encompasses the instant plaintiff classes This Court therefore

need not redetermine HUDs responsibility to the plaintiffs to

- 19 -

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 19: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

make payments under the operating subsidy program

Both the District Court and the Circuit Court of Appeals

for the District of columbia refused to stay said judgment in

UnderOlood pending appeal On October 18 1976 a date subsequent

to the hearing herein the United states Supreme Court stayed

said judgment without reaching the merits of the decision

Hills v Underwood 45 USLll 3305 (1976) there remains in

effect in Underwood a Circuit Court order enjoining HUD from

disbursing funds designated for the operating subsidy program to

other programs

Ihe defendants contend that in light of the District

Court judgment in Underwood the instant actions are barred by the

doctrine of res judicata Ihe claim presently before ~is Court

however is not precisely the same as that which was resolved in

Underwood Ihat judgment directed HUD to implement the operating

subsidy program Ihe plaintiffs herein seek an order prevent~ng

the defendants from passing offfontothem in the first instance

those increased expenses whic~ said subsidies were deSigned to

offset

Ihe plaintiffs claim actually raises several questions

Ihe primary question is whether the defendants must take projected

operating subsidy payments into consideration in calculating the

- 20 -

I f I

-I II bull i

t

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 20: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

rent increases which will be assessed the plaintiffs The alter-

native to this procedure would be to charge the increases in pro-

perty taxes and utility costs to the plaintiffs in the first

instance then have the federal defendants re~burse the projects

for the said increases assumedly for the benefit of the plaintiffs

who survive the initial assessment

A second important question which arises is whether the

plaintiffs must bear the burden of said increases pending HUns

organization and implementation of said operating subsidy program

The District Court in Underwood v Hills suora held that HUD

had been responsible for implementing said program since February

18 1975 and orderedHUD to make back payments accordingly As

early as February 26 1975 the private defendants requested

assistance from the federal defendants pursuant to the provisions

of the said program If the District Courts judgment in Underwood

is affirmed it would then be most unfair at least until said back

paym~nts are made irregardless of future implementation procedures

for the defendants to assess plaintiffs the instant increases pass-

ing onto them expenses which should have been and should be sub-

sidized It is also likely that if Underwood is affirmed there

will be additional delays before operating subsidy payments are

-actually made ~Application for a stay of the Judgment in

- 21 -

r I

I l

= ~

r

0

I ~ -~~-e~~~~~~~~~t-~~~j~c~~~~~~~~e~~-_~ ~ ~~

v-~ ~1 ~ ~ -rr- - ~~ ~ f ~ - JIfl-bull ~f )~middot - -_ ~1~~lt r -~~~~ ~ ~~~e~~~ b t Ii bull ~ bull ~ ~~~IA ~ ~ bull - ~ ~middot~middot~ ~_~~1 p~-d~~ ~ ------------------~--- ------ --

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 21: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

j r

Underwood v Hills supra filed by lIUD in the United states

Supreme Court at 12-13

The burden of showing the meaning of the former adjudi-

cation is on the party asserting the bar of res judicata McNellis

v~ First Federal savings and Loan Association 364 F2d 251 257 n8

(2d Cir 1966) Nothing submitted to this Court to date indicates

that the Undertvood decjsion deals with the aforementioned questions

The Findings of Fact and Conclusions of Law entered

therein by the District Court are confined to the issue of whether

the operating subsidy provisions of 12 USC sect 1715 z-l are manda-

tory Underwood v Hills supra at 10 i 9 ~ also Defendants

Objections to Proposed Findings of Fact in Underwood at 3-4 and

8 The plaintiffs assert that they conferred with counsel for the

plaintiffs in Underwood who informed them that the issue of enjoin-

ing rent increases has not been tried This Court will not base a

denial of relief herein upon the inference that the said rent in-

crease issue has already been litigated in Underwood simply be-

cause the complaint raises such an issue ~ Ylarren v Lawler

343 F2d 351 359 (9th Cir 1965)

Basic to the claim of the instant plaintiffs is the

assumption that HUD must implement the operating subsidy program

It is probable that that assumption will be proven correct every

- 22 -

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 22: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

decision of which this court is aware has held that HUD must

implement the said program ~ Underwood v Hills supra

Abrams v Hills 415 F Supp 550 (DD Cal 1976) Ross v Com-

munity Services Inc 405 F Supp 831 (D Md 1975) affd

No 76-1294 (4th eire Oct 6 1976) Dubose v Hills 405 F Supp

1277 (D Conn 1975) Sicuro v Hills 415 F Supp 553 (OD Cal

~97p) Harrison v Hills CA No 75-938 (WD Pa 1979) Carberry

v Hills CA No 76-521-F (D l-lass 1976) Parker Square Tenants

Association v BUD CA No 75-577 (WD 1middot10 1976) Battles Farm

Co v Hills CA NO 76-393 (D DC 1976) Lane v Hillsmiddot

CA No 76-546 (D NJ 1976) Gertsch v Hills CA No C 75-513

(D Utah 1975) Campbell v HUD CA No c 75-471 (ND Ohio1975)

Folsom Gardens Action Committee v Hills CA No S 76~3-TJM

(ED Cal 1976)

The ultimate resolution of this issue through the appeal

of the Underwood decision could be ~ontrolling in the instan~

action consequently this Court will defer from entering any

final judgment until the said appeal in Undervood is decided The

most pressing question therefore is whether the plaintiffs must

bear the ~urden of increased utility costs and property taxes

pending judicial resolution of Under ood

The evidence was that the plaintiffs herein would be

- 23 -

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 23: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

forced to vacate their apartments or suffer other irreparable I

-~ hardship if forced to absorb the said rent increases There was

I no substantial evidence that the defendants would suffer irre-

I

t

parable harm should the Court preliminarily enjoin the passing of

the disputed increases to the plaintiffs The obvious effect of

any delays in the appeals in Underwood and the staying of the

District Courtmiddots judgment therein is to increase greatly the threat

of irreparable harm to the plaintiffs Unlike the situation oJhich

existed in Ross v Community Services Inc 396 F Supp 278

(D Hd 1975) and Lane v Hills supra where rent increases were

not enjoined pending implementation of said operating subsiay

program there is little hope that these plaintiffs will benefit

in the ~ediate future from operating subsidy program payments

The plaintiffs have shown a probability of succ~ssfully

establishing that they should not actually be assessed the said

approved rent increases to the extent they reflect increases ~n

local property taxes and utility costs See S Rep tro 94-749

94th Cong 2d Sess 10 (1976) Especially in light of the sub~

stantial period of non-implementation of said operating subsidy

program it makes little difference herein whether or not the rent

increase procedure is schematically distinct from the operating

subsidy program If tenants are forced to vacate the projects

- 24 -

- ~ - ----~ -----

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 24: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

because they cannot absorb the increases future subsidies are

of little consolation Preliminary relief is not only necessary

to prevent irreparable harm but to enable the plaintiffs to remain

tenants long enough to litigate their claims as well

The Court is aware that the operating subsidy program

is not the only scheme of federal assistance relevant to these

projects and the instant rent increases It may be that more

federal money is available to the projects by way of Mdeep subsidy

payments or rental supplementsM when utility costs and local

property taxes are not offset by project~d operating subsidy funds

in the formal calculation of rent increases This-matter was not

thoroughly eplored at the hearing For this reason the Court will

not enjoin the defendants from calculating rent increases as they

presently do The Court will however preliminarily enjoin the

defendants from actually assessinq the named plaintiffs and members

of the classes certified on this 9laim any portion of the calculated

rent which is attributable to increases in utility costs and local

prop~rty taxes It is incumbent upon the private defendants to

provide the federal defendants and the plaintiffs with information

indicating the proportion of proposed rent increments which is

attributable to ~~e said increases

I f ~ ~ i I ~

I ~ r r f t j r II j

The Court is of the opinion that a preliminary injunction will ~ ~

most fairly preserve the status quo The burden resulting from I

~ bull

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 25: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

certain inflationary expenses is not to fallon those least able

to bear it

In addition this Court hereby stays fur~~er considera-

tion of these actions except matters pertaining to the implementa-

tion or modification of the decision herein until final resolution

of the aforementioned appeal in Underwood v Hills supra or

further order of the Court

counsel for the plaintiffs will prepare and submit for

entry an order in conformity with this opinion

senior District Judge

26

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976

Page 26: NHLP | Advancing Housing Justice 04 FN 143 LeFort v...In the Spring of 1976, Herman Smith, a loan management specialis~ in the Providence Insuring Office of BUD, reviewed financial

I

I~~I 1iIAl)Tftl LA~ wfL ( __ awc_cuw~~ilL-____ uarJuu~__ gMiIQ (

CA 16-0286 CA 76-0287 CA 76-0288

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF RHODE ISLAND

RI CHARD LEFORT et a 1 Plaintiffs

v CARLA HILLS et ale

Defendants

JUDY SOLA~ et ale Plaintiffs

v bull

CARLA HILLS et ale Defendants

THERESA pmmRS et middotal

v CARLA HILLS

Plaintiffs

et ale Defendants

OPINION

November 19 1976