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TRANSCRIPT
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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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v
) ) ) ) ) )
CJVJL ACTION NO 76-0288
CARLA HILLS et al
Defendants
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OPINION i -
November 19 1976
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Jd Tmiddot J
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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
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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
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The Court is of the opinion that a preliminary injunction will ~ ~
most fairly preserve the status quo The burden resulting from I
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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
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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
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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
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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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Imiddot
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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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-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
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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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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
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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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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
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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
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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
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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
- 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
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--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
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
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--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
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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
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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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
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
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
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
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
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
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
~ 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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