Electrical submetering means landlords buy electricity in bulk and charge tenants according
to the amount each uses, based on a remotely-read meter in each apartment. In buildings that are heated by electricity, the electric bills can be enormous - particularly where the tenants cannot control how much heat they are getting and the buildings are not energy efficient.
Where tenants can't pay their electric bills, should they face a cut-off of electricity (as would happen if they had a direct contract with Con Ed), or will they be evicted? The state's housing agency has a standard lease that lets landlords evict tenants. That should be changed.
The plaintiffs are tenants in the Riverview, which used to be a Mitchell-Lama development. When it left the M-L program, tenants got federal Section 8 enhanced vouchers and new leases from the NYS HCR. Unfortunately, those leases describe "electrical submetering bills" as "additional rent." So instead of cutting off people's electricity if they can't pay the rent, landlords are allowed to try to evict them. Thus a bunch of tenants falling behind in their electric bills found themselves in court for eviction.
The tenant said that HCR's standard lease clause about "additional rent" is not legal under HUD regulations. HUD declined to determine that. But all tenants should fight to ensure that submetering NOT be "additional rent".
The case clearly explains "decoupling" and submetering bills and is worth reading. However, the tenants lost on procedural grounds: the court said mainly that HUD didn't have to determine whether the NYS Homes & Community Renewal lease was OK under HUD rules, and that the federal court shouldn't get involved where a Yonkers court had already ruled against the tenants or they had settled with the landlord.
EXCERPTS of the decision are below. If you would like to read the full decision, please contact Sue [ at ] janak [d o t] org.
EXCERPTS from DECISION by the
U.S. DISTRICT COURT
for the SOUTHERN DISTRICT OF NEW YORK
Brenda Thompson, Carl Sparaci, Milred Hernandez, Victoria Guerrero, Fatoumata Thiam, David Romero, and Kwadwo Poku, Plaintiffs
v.
Shaun Donovan, in his official capacity as Secretary of the United States Department of Housing and Urban Development, and the United States Department of Housing and Urban Development; and Darryl C. Towns, in his official capacity as Commissioner/CEO of New York State Homes & Community Renewal, Defendants, 13-CV-2988
October 24, 2014
Cite as: Thompson v. Donovan, 13-CV-2988, NYLJ 1202674333381, at *1 (SDNY, Decided October 14, 2014)
13-CV-2988
District Judge Cathy Seibel
Decided: October 14, 2014
OPINION AND ORDER
Before the Court are the Motions to Dismiss of Defendants United States Department of Housing and Urban Development ("HUD") and its Secretary, Shaun Donovan, (collectively, "HUD"), and Darryl C. Towns, Commissioner of the New York State Division of Housing and Community Renewal ("HCR"), (Docs. 33, 35).1 For the reasons set forth below, the Motions to Dismiss are GRANTED.
I. BACKGROUND
For purposes of the instant Motions to Dismiss, I accept as true the facts, but not the conclusions, as set forth in the SAC.
Plaintiffs are current or former tenants of Riverview II Court ("Riverview"), an apartment complex in Yonkers, New York, and recipients of government housing assistance in the form of enhanced vouchers under Section 8 of the United States Housing Act of 1937, 42 U.S.C. §1437f. (SAC ¶¶20-27, 74.)2 Riverview, although privately owned, receives federal mortgage interest assistance under Section 236 of the National Housing Act of 1934, 12 U.S.C. §1715z-1, in exchange for providing housing to low-income families. (Id. ¶¶20, 38.)
Plaintiffs allege that their landlord, Riverview II Preservation L.P. ("Landlord"), has submetered utilities in their building and, pursuant to a lease form mandated by HCR ("HCR Lease" or "Lease"), has charged those utilities as "'additional rent,'" which Plaintiffs have been unable to pay, causing their eviction or putting them at risk for eviction. (Id. ¶¶8, 20.) Plaintiffs bring this action not against Landlord, but against HUD and HCR Commissioner Towns. (See generally SAC.)
A. Section 236 Mortgage Assistance and Section 8 Housing Vouchers
Section 236 of the National Housing Act of 1934 provides that the "Secretary [of HUD] is authorized to make…periodic interest reduction payments on behalf of the owner of a rental housing project designed for occupancy by lower income families." 12 U.S.C. §1715z-1(a).
Under Section 236, HUD may continue to make these interest reduction payments for a mortgage that has been refinanced if the owner "enters into such binding commitments as the Secretary may require…to ensure that the owner will continue to operate the project in accordance with all low-income affordability restrictions." Id. §1715z-1(e)(2).
This process — whereby the interest reduction payments are separated from the original mortgage — is known as "decoupling." (SAC ¶77.) The Secretary of HUD is further authorized to enter into contracts with local or state entities, such as HCR, to "monitor[] and supervis[e]…the management" of these Section 236 arrangements. See 12 U.S.C. §1715z-1(p).
Section 8 of the United States Housing Act of 1937 is a federal housing assistance program that provides rental assistance to eligible low-income tenants who reside in units owned by participating landlords, including the tenant-based Section 8 Housing Choice Vouchers ("HCV") program at issue in this case. See 42 U.S.C. §1437f(a), (o). In the HCV program, an eligible family is issued a voucher by a state or local public housing agency ("PHA"), which
administers the Section 8 program in a particular geographic area. See id. The eligible family uses the voucher to rent a dwelling unit from a landlord that is willing to participate in the Section 8 program. See id. The PHA has a Housing Assistance Payment ("HAP") contract with the landlord on behalf of the family. Id. §1437f(c), (o)(7). The eligible family in turn pays a portion of its income as rent directly to the landlord. HUD provides funding to the PHA for its HAP contract payments to the landlord. Id. §1437f(b).
B. HCR Lease and Riverview Decoupling
On October 18, 2006, HCR issued a directive requiring all federally assisted housing companies, including Landlord, to use a lease in the form of the HCR Lease. (SAC ¶104; see id. Ex. A, at 1.) At issue in this case is Section 15 of the HCR Lease, which deems submetered electricity charges to be "additional rent" under the Lease. (Id. Ex. A §15.) This denomination is consequential, because ordinarily the remedy for non-payment of a utility bill under New York law is to shut off the service, see N.Y. Pub. Serv. Law §32(2)(a) (McKinney 2006), but if the utility cost is considered to be rent, a landlord may pursue eviction for non-payment. Thus, a tenant who fails to pay electric utilities may be evicted for non-payment of rent, even though (according to Plaintiffs) such an outcome is contrary to federal law. (SAC ¶119.) Landlord adopted the HCR Lease and used the Lease to enter into landlord-tenant relationships with Plaintiffs. (Id. ¶105.)
From late 2007 to early 2008, Landlord refinanced its original Section 236 mortgage for Riverview. (Id. ¶76.) After the refinancing was complete, Landlord applied to HUD for permission to decouple the project's Section 236 subsidies from the original mortgage. (Id. ¶77.) By letter dated April 10, 2008, HUD approved Landlord's plan on the condition that "(1) no tenant would be involuntarily displaced as a part of the decoupling transaction, and (2) Landlord would execute a Section 236 use agreement." (Id. ¶78.) Following this approval, HUD entered into an Agreement for Interest Reduction Payments ("IRP Agreement") that completed the decoupling transaction and provided that Landlord would continue to receive interest reduction payments after the mortgage refinancing. (Id.; see id. Ex. B.)3 HCR became HUD's "contract administrator" and "state supervising agency" with respect to Riverview. (Id. ¶31.)
In connection with this refinancing, Landlord requested, by petition dated April 16, 2008, that the New York State Public Service Commission ("PSC") allow it to submeter electricity for its tenants in Riverview. (Id. ¶81.) The PSC approved the application on August 27, 2008, after which the Riverview Tenants Association ("Association") applied to the PSC to stay or vacate the approval arguing, among other things, that submetering would result in tenant eviction because the HCR Lease deemed electric utilities charges as "additional rent." (Id. ¶¶82-83.) The PSC allowed Landlord to consider the electricity payment as "additional rent" in light of the fact that Landlord did not have the equipment to terminate electrical service to individual units and thus would have no remedy for non-payment if it could not treat the electricity bill as additional rent. (Berg Decl. Ex. 2, at 27.)4 The PSC further required that before any such eviction proceeding, Landlord had to provide the same procedural protections required under state law for the termination of utility service. (Id.)
By letter dated September 15, 2009, the Association argued to HUD that submetering violated the HUD Handbook, which states in Section 6-4(B) that Landlord, as a participant in the Section 236 program, is required to use the HUD Model Lease (not the HCR lease). (SAC ¶¶ 84-85; see id. Ex. C.) By letter dated February 16, 2010, HUD rejected the Association's argument, concluding that Landlord had not violated the terms of the HUD Handbook but rather had engaged in an acceptable amendment, and that submetering would not result in tenant eviction. (Id. ¶¶86-87; see id. Ex. D.) HUD nonetheless postponed any further submetering until Landlord complied with all tenant notice requirements, and indicated that "it would continue to monitor events at Riverview" to ensure that the Section 236 decoupling did not result in tenant displacement." (Id. ¶¶88-89; see id. Ex. D, at 8.) In September and October 2010, HCR advised HUD of Landlord's compliance with the notification procedures and recommended that HUD approve the submetering conversion at Riverview. (Id. ¶93; see id. Ex. E, at 3-4.) HUD in turn approved the submetering at Riverview, (see id. Ex. H, at 4), and approved utility allowances — or reductions in rent — for tenants in Riverview as a result of the submetering, (Id. ¶94).6 Landlord resumed submetering in or around December 2010. (Id. ¶95.)
C. Yonkers City Court Proceeding
Submetering is designed to save energy. (Id. Ex. E, at 5.) The tenant's allowance is calculated based on typical utility costs of energy conservative households in the locality. See 24 C.F.R. §982.517. "If a tenant's utility bill exceeds the allowance, the tenant must make up the difference; if the allowance exceeds the bill, the difference may be pocketed." McDowell v. Phila. Hous. Auth., 423 F.3d 233, 236 (3rd Cir. 2005).
Plaintiffs here fell behind on their utility payments. In 2011, Landlord filed in Yonkers City Court a petition to evict three plaintiffs — Brenda Thompson, Victoria Guerrero and David Romero — for non-payment of submetered electricity charges. (SAC ¶¶156, 230, 272.) These eviction proceedings were consolidated with several others for motion practice under the caption Riverview II Preservation LP v. Roberts. (See id. Ex. G ("Yonkers City Court Decision").) The tenants moved to dismiss the petitions, and Landlord cross-moved for summary judgment. (See id.) Among the arguments advanced by Plaintiffs was that treating electricity charges as additional rent, per the HCR Lease, violated federal laws, rules and regulations. (See id. Ex. G, at 3.) On June 11, 2012, Judge Martinelli of the Yonkers City Court denied the tenants' motion and granted Landlord's motion. (See id. Ex. G, at 7.) Judge Martinelli first held that submetering utilities was lawful, and in doing so, afforded substantial deference to the rulings and regulations of federal agencies, such as PSC, HUD and HCR. (See id. Ex. G, at 4-6.) Judge Martinelli further concluded that the HCR Lease "explicitly contemplates sub-metering, whereby the landlord would reduce the tenant's rent by the applicable utility allowance and begin charging the tenant for his/her electricity consumption." (See id. Ex. G, at 6.)
Thompson, Guerrero and Romero filed a notice of appeal with the Appellate Term of the New York Supreme Court, but withdrew the appeal pursuant to a settlement they reached with Landlord. (See Berg Decl. Ex. 12.) The Stipulation of Settlement was signed in November 2012, and so ordered by Judge Martinelli on April 3, 2013. (SAC ¶156; see Berg Decl. Ex. 13 ("Stipulation of Settlement").) In the Stipulation of Settlement, the tenants expressly waived the right to appeal the decision of the Yonkers City Court, signed deferred payment agreements, in which they agreed to pay their electricity arrears over time, and promised to stay current with future rent and additional rent payments. (See Stipulation of Settlement §§3, 5, 8.) Subsequent to the settlement, however, Thompson was again unable to pay her submetered electricity bills, and she alleges that she was "compelled to move out [of Riverview] to ensure that she and her family [were] able to receive adequate heat without being subjected to eviction." (SAC ¶¶157, 159, 161.)
Landlord initiated eviction proceedings against the other Plaintiffs as well, (id. ¶¶177, 205, 230, 248, 272, 294), although these Plaintiffs — rather than proceeding through motion practice — directly entered into stipulations of settlement whereby they agreed, among other things, to pay future utility charges as additional rent, (id. ¶¶178, 206, 231, 273, 295; see Berg Decl. Exs. 19, 20).
While the Yonkers proceeding was still pending, Plaintiffs' counsel, on May 8, 2012, wrote to HUD regarding Plaintiffs' concern that submetering was resulting in tenant displacement at Riverview and requesting HUD's intervention in the matter. (SAC ¶¶112-13; see id. Ex. F.) Plaintiffs' counsel expressed concern over Judge Martinelli's forthcoming decision on whether utilities are "rent" under the relevant federal statutes, and whether the HUD Model Lease permits utilities to be defined as "rent," because Judge Martinelli had intimated that, absent a statement to the contrary from HUD or HCR, he was inclined to allow Landlord to recover utility payments as rent, regardless of whether they exceeded the total limits of tenant payment. (See id. Ex. F, at 3.) Accordingly, Plaintiffs' counsel "petition[ed]" HUD to "[i]nvestigate the submetering" at Riverview "to determine whether it has resulted in displacement;" "[i]ssue a clarification regarding whether utilities are 'rent' and, even if so, whether the statutory limits on 'rent' govern utilities;" and "issue an order prohibiting [L]andlord from evicting any tenants at Riverview [] or commencing eviction proceedings…pending [HUD's] investigation and determination." (See id.)
On June 11, 2012, Plaintiff's counsel sent an e-mail to HUD attaching a copy of the Yonkers City Court decision. (Id. ¶116; see id. Ex. H.) Counsel sent a follow-up letter on June 13, 2012, apparently in response to a discussion counsel had with a HUD representative the previous day, in which counsel "renew[ed] and elaborate[d] their request for an as-applied investigation of submetering at Riverview…, an order staying evictions pending such an investigation, and a determination that electricity is not 'rent' or, even if so, is subject to rent limits under federal law." (Id.) Plaintiffs allege that, "[t]o date, HUD has not answered" their request. (Id. ¶119.)
Plaintiffs initiated this action by filing a complaint on May 3, 2013, (Doc. 1), which they have twice amended, (Docs. 13, 26). Plaintiffs seek declaratory and injunctive relief against HUD and Commissioner Towns. (SAC ¶1.)7
Plaintiffs allege that HUD has violated the Administrative Procedure Act ("APA"), 5 U.S.C. §§551 et seq., 701 et seq., by failing to take sufficient action in response to Plaintiffs' concerns about the HCR Lease. Specifically, Plaintiffs allege that HUD has (1) failed to issue a determination as to whether utilities may be considered "additional rent" under federal law, and if so, whether the "additional rent" when added to regular rent may exceed federal statutory rent limits; (2) failed to investigate Plaintiffs' complaints regarding Riverview; (3) improperly allowed HCR to use a lease that is not the HUD Model Lease and, in doing so, failed to supervise and administer the management of Riverview in compliance with federal law; and (4) failed to investigate whether submetering has resulted in tenant displacement at Riverview. (SAC ¶¶303-26.)
Plaintiffs allege that Commissioner Towns has violated 42 U.S.C. §1983 by directing Landlord to use the HCR Lease with the "additional rent" clause. (Id. ¶327-30.) Specifically, they assert that Commissioner Towns has subjected Plaintiffs to "a deprivation of their constitutionally protected property interests in their housing and in paying no more for 'rent' than is permitted by federal law and has caused them to be denied equal protection of the laws." (Id. ¶328.)
Finally, Plaintiffs request a preliminary injunction preventing the taking of any steps to evict Plaintiffs or other tenants from Riverview on the ground of non-payment of electricity or electric utilities as "rent." (Id. ¶331-39.)8 They also seek a declaration from this Court that Plaintiff Thompson was involuntarily displaced based on "HUD's action or inaction." (Id. at 47.)
HUD and Commissioner Towns move to dismiss the Second Amended Complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) or, in the alternative, for failure to state a claim under Fed. R. Civ. P. 12(b)(6). (Docs. 33, 35.)
[section on Legal Standards is omitted here]
III. PLAINTIFFS' CLAIMS AGAINST HUD
[Section A. on the standards for whether the court can review what HUD did or didn't do is omitted here]
B. Discussion
1. Failure to Issue a Determination
Section 8 of the United States Housing Act of 1937 is a federal housing assistance program that provides rental assistance to eligible low-income tenants who reside in units owned by participating landlords, including the tenant-based Section 8 Housing Choice Vouchers ("HCV") program at issue in this case. See 42 U.S.C. §1437f(a), (o). In the HCV program, an eligible family is issued a voucher by a state or local public housing agency ("PHA"), which
administers the Section 8 program in a particular geographic area. See id. The eligible family uses the voucher to rent a dwelling unit from a landlord that is willing to participate in the Section 8 program. See id. The PHA has a Housing Assistance Payment ("HAP") contract with the landlord on behalf of the family. Id. §1437f(c), (o)(7). The eligible family in turn pays a portion of its income as rent directly to the landlord. HUD provides funding to the PHA for its HAP contract payments to the landlord. Id. §1437f(b).
B. HCR Lease and Riverview Decoupling
On October 18, 2006, HCR issued a directive requiring all federally assisted housing companies, including Landlord, to use a lease in the form of the HCR Lease. (SAC ¶104; see id. Ex. A, at 1.) At issue in this case is Section 15 of the HCR Lease, which deems submetered electricity charges to be "additional rent" under the Lease. (Id. Ex. A §15.) This denomination is consequential, because ordinarily the remedy for non-payment of a utility bill under New York law is to shut off the service, see N.Y. Pub. Serv. Law §32(2)(a) (McKinney 2006), but if the utility cost is considered to be rent, a landlord may pursue eviction for non-payment. Thus, a tenant who fails to pay electric utilities may be evicted for non-payment of rent, even though (according to Plaintiffs) such an outcome is contrary to federal law. (SAC ¶119.) Landlord adopted the HCR Lease and used the Lease to enter into landlord-tenant relationships with Plaintiffs. (Id. ¶105.)
From late 2007 to early 2008, Landlord refinanced its original Section 236 mortgage for Riverview. (Id. ¶76.) After the refinancing was complete, Landlord applied to HUD for permission to decouple the project's Section 236 subsidies from the original mortgage. (Id. ¶77.) By letter dated April 10, 2008, HUD approved Landlord's plan on the condition that "(1) no tenant would be involuntarily displaced as a part of the decoupling transaction, and (2) Landlord would execute a Section 236 use agreement." (Id. ¶78.) Following this approval, HUD entered into an Agreement for Interest Reduction Payments ("IRP Agreement") that completed the decoupling transaction and provided that Landlord would continue to receive interest reduction payments after the mortgage refinancing. (Id.; see id. Ex. B.)3 HCR became HUD's "contract administrator" and "state supervising agency" with respect to Riverview. (Id. ¶31.)
In connection with this refinancing, Landlord requested, by petition dated April 16, 2008, that the New York State Public Service Commission ("PSC") allow it to submeter electricity for its tenants in Riverview. (Id. ¶81.) The PSC approved the application on August 27, 2008, after which the Riverview Tenants Association ("Association") applied to the PSC to stay or vacate the approval arguing, among other things, that submetering would result in tenant eviction because the HCR Lease deemed electric utilities charges as "additional rent." (Id. ¶¶82-83.) The PSC allowed Landlord to consider the electricity payment as "additional rent" in light of the fact that Landlord did not have the equipment to terminate electrical service to individual units and thus would have no remedy for non-payment if it could not treat the electricity bill as additional rent. (Berg Decl. Ex. 2, at 27.)4 The PSC further required that before any such eviction proceeding, Landlord had to provide the same procedural protections required under state law for the termination of utility service. (Id.)
By letter dated September 15, 2009, the Association argued to HUD that submetering violated the HUD Handbook, which states in Section 6-4(B) that Landlord, as a participant in the Section 236 program, is required to use the HUD Model Lease (not the HCR lease). (SAC ¶¶ 84-85; see id. Ex. C.) By letter dated February 16, 2010, HUD rejected the Association's argument, concluding that Landlord had not violated the terms of the HUD Handbook but rather had engaged in an acceptable amendment, and that submetering would not result in tenant eviction. (Id. ¶¶86-87; see id. Ex. D.) HUD nonetheless postponed any further submetering until Landlord complied with all tenant notice requirements, and indicated that "it would continue to monitor events at Riverview" to ensure that the Section 236 decoupling did not result in tenant displacement." (Id. ¶¶88-89; see id. Ex. D, at 8.) In September and October 2010, HCR advised HUD of Landlord's compliance with the notification procedures and recommended that HUD approve the submetering conversion at Riverview. (Id. ¶93; see id. Ex. E, at 3-4.) HUD in turn approved the submetering at Riverview, (see id. Ex. H, at 4), and approved utility allowances — or reductions in rent — for tenants in Riverview as a result of the submetering, (Id. ¶94).6 Landlord resumed submetering in or around December 2010. (Id. ¶95.)
C. Yonkers City Court Proceeding
Submetering is designed to save energy. (Id. Ex. E, at 5.) The tenant's allowance is calculated based on typical utility costs of energy conservative households in the locality. See 24 C.F.R. §982.517. "If a tenant's utility bill exceeds the allowance, the tenant must make up the difference; if the allowance exceeds the bill, the difference may be pocketed." McDowell v. Phila. Hous. Auth., 423 F.3d 233, 236 (3rd Cir. 2005).
Plaintiffs here fell behind on their utility payments. In 2011, Landlord filed in Yonkers City Court a petition to evict three plaintiffs — Brenda Thompson, Victoria Guerrero and David Romero — for non-payment of submetered electricity charges. (SAC ¶¶156, 230, 272.) These eviction proceedings were consolidated with several others for motion practice under the caption Riverview II Preservation LP v. Roberts. (See id. Ex. G ("Yonkers City Court Decision").) The tenants moved to dismiss the petitions, and Landlord cross-moved for summary judgment. (See id.) Among the arguments advanced by Plaintiffs was that treating electricity charges as additional rent, per the HCR Lease, violated federal laws, rules and regulations. (See id. Ex. G, at 3.) On June 11, 2012, Judge Martinelli of the Yonkers City Court denied the tenants' motion and granted Landlord's motion. (See id. Ex. G, at 7.) Judge Martinelli first held that submetering utilities was lawful, and in doing so, afforded substantial deference to the rulings and regulations of federal agencies, such as PSC, HUD and HCR. (See id. Ex. G, at 4-6.) Judge Martinelli further concluded that the HCR Lease "explicitly contemplates sub-metering, whereby the landlord would reduce the tenant's rent by the applicable utility allowance and begin charging the tenant for his/her electricity consumption." (See id. Ex. G, at 6.)
Thompson, Guerrero and Romero filed a notice of appeal with the Appellate Term of the New York Supreme Court, but withdrew the appeal pursuant to a settlement they reached with Landlord. (See Berg Decl. Ex. 12.) The Stipulation of Settlement was signed in November 2012, and so ordered by Judge Martinelli on April 3, 2013. (SAC ¶156; see Berg Decl. Ex. 13 ("Stipulation of Settlement").) In the Stipulation of Settlement, the tenants expressly waived the right to appeal the decision of the Yonkers City Court, signed deferred payment agreements, in which they agreed to pay their electricity arrears over time, and promised to stay current with future rent and additional rent payments. (See Stipulation of Settlement §§3, 5, 8.) Subsequent to the settlement, however, Thompson was again unable to pay her submetered electricity bills, and she alleges that she was "compelled to move out [of Riverview] to ensure that she and her family [were] able to receive adequate heat without being subjected to eviction." (SAC ¶¶157, 159, 161.)
Landlord initiated eviction proceedings against the other Plaintiffs as well, (id. ¶¶177, 205, 230, 248, 272, 294), although these Plaintiffs — rather than proceeding through motion practice — directly entered into stipulations of settlement whereby they agreed, among other things, to pay future utility charges as additional rent, (id. ¶¶178, 206, 231, 273, 295; see Berg Decl. Exs. 19, 20).
While the Yonkers proceeding was still pending, Plaintiffs' counsel, on May 8, 2012, wrote to HUD regarding Plaintiffs' concern that submetering was resulting in tenant displacement at Riverview and requesting HUD's intervention in the matter. (SAC ¶¶112-13; see id. Ex. F.) Plaintiffs' counsel expressed concern over Judge Martinelli's forthcoming decision on whether utilities are "rent" under the relevant federal statutes, and whether the HUD Model Lease permits utilities to be defined as "rent," because Judge Martinelli had intimated that, absent a statement to the contrary from HUD or HCR, he was inclined to allow Landlord to recover utility payments as rent, regardless of whether they exceeded the total limits of tenant payment. (See id. Ex. F, at 3.) Accordingly, Plaintiffs' counsel "petition[ed]" HUD to "[i]nvestigate the submetering" at Riverview "to determine whether it has resulted in displacement;" "[i]ssue a clarification regarding whether utilities are 'rent' and, even if so, whether the statutory limits on 'rent' govern utilities;" and "issue an order prohibiting [L]andlord from evicting any tenants at Riverview [] or commencing eviction proceedings…pending [HUD's] investigation and determination." (See id.)
On June 11, 2012, Plaintiff's counsel sent an e-mail to HUD attaching a copy of the Yonkers City Court decision. (Id. ¶116; see id. Ex. H.) Counsel sent a follow-up letter on June 13, 2012, apparently in response to a discussion counsel had with a HUD representative the previous day, in which counsel "renew[ed] and elaborate[d] their request for an as-applied investigation of submetering at Riverview…, an order staying evictions pending such an investigation, and a determination that electricity is not 'rent' or, even if so, is subject to rent limits under federal law." (Id.) Plaintiffs allege that, "[t]o date, HUD has not answered" their request. (Id. ¶119.)
Plaintiffs initiated this action by filing a complaint on May 3, 2013, (Doc. 1), which they have twice amended, (Docs. 13, 26). Plaintiffs seek declaratory and injunctive relief against HUD and Commissioner Towns. (SAC ¶1.)7
Plaintiffs allege that HUD has violated the Administrative Procedure Act ("APA"), 5 U.S.C. §§551 et seq., 701 et seq., by failing to take sufficient action in response to Plaintiffs' concerns about the HCR Lease. Specifically, Plaintiffs allege that HUD has (1) failed to issue a determination as to whether utilities may be considered "additional rent" under federal law, and if so, whether the "additional rent" when added to regular rent may exceed federal statutory rent limits; (2) failed to investigate Plaintiffs' complaints regarding Riverview; (3) improperly allowed HCR to use a lease that is not the HUD Model Lease and, in doing so, failed to supervise and administer the management of Riverview in compliance with federal law; and (4) failed to investigate whether submetering has resulted in tenant displacement at Riverview. (SAC ¶¶303-26.)
Plaintiffs allege that Commissioner Towns has violated 42 U.S.C. §1983 by directing Landlord to use the HCR Lease with the "additional rent" clause. (Id. ¶327-30.) Specifically, they assert that Commissioner Towns has subjected Plaintiffs to "a deprivation of their constitutionally protected property interests in their housing and in paying no more for 'rent' than is permitted by federal law and has caused them to be denied equal protection of the laws." (Id. ¶328.)
Finally, Plaintiffs request a preliminary injunction preventing the taking of any steps to evict Plaintiffs or other tenants from Riverview on the ground of non-payment of electricity or electric utilities as "rent." (Id. ¶331-39.)8 They also seek a declaration from this Court that Plaintiff Thompson was involuntarily displaced based on "HUD's action or inaction." (Id. at 47.)
HUD and Commissioner Towns move to dismiss the Second Amended Complaint for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) or, in the alternative, for failure to state a claim under Fed. R. Civ. P. 12(b)(6). (Docs. 33, 35.)
[section on Legal Standards is omitted here]
III. PLAINTIFFS' CLAIMS AGAINST HUD
[Section A. on the standards for whether the court can review what HUD did or didn't do is omitted here]
B. Discussion
1. Failure to Issue a Determination
[The court notes that HUD didn't deny the tenants' request for review of the standard "additional rent" lease. HUD just didn't review it. Failure to act is not the same as denying a request. (Talk about hair splitting.) The court says HUD wasn't required to act - at least under the laws that the plaintiffs claimed.]
2. Failure to Investigate Plaintiffs' Complaints
[The court says that although HUD may have promised to keep an eye on the landlord to make sure that submetering wouldn't result in evictions, HUD had discretion to decide whether to act or not.]
3. Failure to Administer its own Statutes and Regulations
[Since the tenants argued that if HUD approves the standard HCR lease with its "additional rent" clause, that would violate HUD's own rules, the court held that this was hypothetical: it hadn't yet happened and so the court wouldn't rule on it.]
Plaintiffs' third claim for relief, as explained by their memorandum of law, is contingent on HUD first issuing a determination that Landlord is allowed, under federal law, to charge utilities as "additional rent."16 But HUD has yet to issue such a determination; in fact, Plaintiffs' first claim for relief complains about HUD's failure to make any determination on the subject. (See SAC ¶¶303-308.) For this reason, Plaintiff's third claim for relief must be dismissed as unripe for review.17
4. Failure to Investigate Submetering
Plaintiffs' final claim for relief against HUD is that it has failed to investigate whether submetering at Riverview has resulted in tenant displacement, and in doing so, "breached its statutory and regulatory duty to ensure that a Section 236 Decoupling does not result in tenant displacement under 12 U.S.C. §4112(a)(2)(C) and 24 C.F.R. §248.141." (SAC ¶¶323-24.) But as HUD points out, (see HUD's Mem. 21), Sections 4112 and 248.141 do not provide a basis for APA review of HUD's alleged failure to act on Plaintiffs' complaints that tenants are being displaced at Riverview. Rather, these Sections simply provide direction as to when HUD "may approve a plan of action" for the extension or termination of "low-income affordability restrictions on any eligible low-income housing." See 12 U.S.C. §4112(a) (criteria for approval of a plan of action for extension of restrictions); 24 C.F.R. §248.141 (criteria for approval of a plan involving termination of restrictions). They mandate no post-approval monitoring in the Section 236 context.
Plaintiffs' reliance on a February 16, 2010 letter from HUD, (SAC Ex. D), in which HUD stated that it would continue to monitor the developments and potential tenant displacement at Riverview after the decoupling process was complete, is misplaced. (See Ps' Opp. 47.) That letter did not obligate HUD to take any discrete action or constitute a forfeiture of its discretion to investigate or not, as it sees fit. . . . . Moreover, that a court may choose to accord some deference to a well-reasoned informal agency opinion hardly means that other sorts of informal statements of an agency are somehow transformed into legally enforceable mandates. A document such as the HUD letter here cannot fairly be read to create a legal obligation that may be enforced via the APA. Indeed, were this Court to interpret it as such, it would discourage agencies from engaging in informal communication with interested parties.
In sum, I do not find that HUD has a duty to make a determination as to whether utilities may be considered "additional rent" under federal law or to investigate Plaintiffs' allegations at issue in the Second Amended Complaint.18 For this reason, Plaintiffs' claims against HUD under the APA are dismissed.19
IV. CLAIMS AGAINST COMMISSIONER TOWNS
A. Rooker-Feldman Doctrine
2. Failure to Investigate Plaintiffs' Complaints
[The court says that although HUD may have promised to keep an eye on the landlord to make sure that submetering wouldn't result in evictions, HUD had discretion to decide whether to act or not.]
3. Failure to Administer its own Statutes and Regulations
[Since the tenants argued that if HUD approves the standard HCR lease with its "additional rent" clause, that would violate HUD's own rules, the court held that this was hypothetical: it hadn't yet happened and so the court wouldn't rule on it.]
Plaintiffs' third claim for relief, as explained by their memorandum of law, is contingent on HUD first issuing a determination that Landlord is allowed, under federal law, to charge utilities as "additional rent."16 But HUD has yet to issue such a determination; in fact, Plaintiffs' first claim for relief complains about HUD's failure to make any determination on the subject. (See SAC ¶¶303-308.) For this reason, Plaintiff's third claim for relief must be dismissed as unripe for review.17
4. Failure to Investigate Submetering
Plaintiffs' final claim for relief against HUD is that it has failed to investigate whether submetering at Riverview has resulted in tenant displacement, and in doing so, "breached its statutory and regulatory duty to ensure that a Section 236 Decoupling does not result in tenant displacement under 12 U.S.C. §4112(a)(2)(C) and 24 C.F.R. §248.141." (SAC ¶¶323-24.) But as HUD points out, (see HUD's Mem. 21), Sections 4112 and 248.141 do not provide a basis for APA review of HUD's alleged failure to act on Plaintiffs' complaints that tenants are being displaced at Riverview. Rather, these Sections simply provide direction as to when HUD "may approve a plan of action" for the extension or termination of "low-income affordability restrictions on any eligible low-income housing." See 12 U.S.C. §4112(a) (criteria for approval of a plan of action for extension of restrictions); 24 C.F.R. §248.141 (criteria for approval of a plan involving termination of restrictions). They mandate no post-approval monitoring in the Section 236 context.
Plaintiffs' reliance on a February 16, 2010 letter from HUD, (SAC Ex. D), in which HUD stated that it would continue to monitor the developments and potential tenant displacement at Riverview after the decoupling process was complete, is misplaced. (See Ps' Opp. 47.) That letter did not obligate HUD to take any discrete action or constitute a forfeiture of its discretion to investigate or not, as it sees fit. . . . . Moreover, that a court may choose to accord some deference to a well-reasoned informal agency opinion hardly means that other sorts of informal statements of an agency are somehow transformed into legally enforceable mandates. A document such as the HUD letter here cannot fairly be read to create a legal obligation that may be enforced via the APA. Indeed, were this Court to interpret it as such, it would discourage agencies from engaging in informal communication with interested parties.
In sum, I do not find that HUD has a duty to make a determination as to whether utilities may be considered "additional rent" under federal law or to investigate Plaintiffs' allegations at issue in the Second Amended Complaint.18 For this reason, Plaintiffs' claims against HUD under the APA are dismissed.19
IV. CLAIMS AGAINST COMMISSIONER TOWNS
A. Rooker-Feldman Doctrine
[A federal court shouldn't get involved where the state court has acted, if certain conditions are present.]
First, the federal-court plaintiff must have lost in state court. Second, the plaintiff must complain of injuries caused by a state-court judgment. Third, the plaintiff must invite district court review and rejection of that judgment. Fourth, the state-court judgment must have been rendered before the district court proceedings commenced.
First, the federal-court plaintiff must have lost in state court. Second, the plaintiff must complain of injuries caused by a state-court judgment. Third, the plaintiff must invite district court review and rejection of that judgment. Fourth, the state-court judgment must have been rendered before the district court proceedings commenced.
[The court ruled that since the Yonkers City Court had ruled against the plaintiffs, all the conditions are present, and therefore the federal court should not get involved in the case.]
[V. Leave to Amend - section omitted here]
[V. Leave to Amend - section omitted here]
VI. CONCLUSION
For the reasons stated above, the Motions to Dismiss are GRANTED. The Second Amended Complaint is DISMISSED for lack of subject matter jurisdiction. The Clerk of Court is respectfully directed to terminate the pending Motions, (Docs. 33, 35), and close the case.
SO ORDERED.
Dated: October 14, 2014
White Plains, New York
[all footnotes omitted here]
I write as someone familiar with the details and advantages of sub-metering in reducing the conventional (non-heat) costs of electricity --when handled properly--in large urban apt. buildings. Sub-metering, handled properly, can in many instances reduce electricity bills for all and save energy--it's original intent. This occurs via several mechanisms such as the advantages of bulk buying via an intermediate provider, efficient installaton and administration, new accurate metering and the ability ot help tenants/residents via low cost instruments to monitor thier own usage.
ReplyDeleteTHAT SAID: obviously energy savings and a reduction in costs for tenants/residents does NOT occur when LL's deliberately provide heat via sub-metered electricity--and bundle the cost of heat from electricity into overall "normal" electricity usage --and that on top of "rent". In this case, it seems obvious that LL's are deliberately subverting the legal obligation to provide heat to tenants as part of historically normal lease provisions: after all who wants to rent an apartment without heat--or even one heated by high cost electricity?
The probable sub-agenda of LL's who mis use what started out as a way to reduce fossil fuel use to generate electricity seems obvious: raise rental costs on order to evict tenants caught up in a web of high electricity costs on top of rent--evict and then also raise the base "rent" of the next round of hapless occupants: increasing overall costs t tenants.
Unhappily, HUD and now an unwitting Court--have bought into LL chicanery--by deeming the variable costs of electricity for heat and lights and appliances can be bundled and billed as an additional legal charge for "rent" on top of normal services provided by a lease.
I note that other "political" issues also pop out: 1/ What happened the original intent of NYS/ NYSERDA in encouraging sub-metering as a way of controlling both cost of electricity and making its use MORE efficient--on large part by permitting bulk buying and helping tenants to monitor their usage and costs via cost devises within apts?
2/ In no instances that this writer can recall, was the system popularized by NYS/NYSERDA in order to give LL's additional rent disguised as the cost of electricity--whether for normal electricity usage or that PLUS heat. To the contrary sub-metering was touted as part of good enery policy. 3/ Nor were States or Housing Depts. consulted when an ignorant? uninformed? bureaucrat at HUD --let alone someone who prized LL's over tenants--undermined/redefined conventional obligations of a rental lease to allow additional charges for electric heat--tho I add: NOT for heat provided by conventional gas or oil systems.
The pro-LL Court "decision" needs to be appealed up the hierarchy of Courts until it is overturned. Cities with large numbers of rental housing as well as subsidized housing developments need to do some homework--and make it illegal for any LL to switch to electric heat--whether or not sub-metered--in order to generate increased revenue from tenants--as well as churn tenant turnover.
ksfworld@gmail.com