Modoc Lassen Indian Housing Authority v. United States Department of Housing and Urban Development et al
MEMORANDUM OPINION AND ORDER: defendants shall restore to the plaintiffs all funds that were illegally recaptured for fiscal years through and including FY 2008. The defendants' obligation to restore such funds is subject to the 6-year limitati ons period provided by 28 U.S.C. § 2401(a); with respect to grant funding for those fiscal years, HUD shall refrain from threatening recapture from the plaintiffs and shall not act upon any threatened recapture; on or before April 15, 2014, the plaintiffs in each civil action shall submit a proposed form of judgment, specifying the amounts to be paid to each tribe ortribal housing entity and the asserted sources of payment; and for any plaintiff who claims entitlement to payment for underfu nding because HUD excluded units from that plaintiff's FCAS in a particular fiscal year, the proposed form of judgment should include a separate itemization for those amounts and may be submitted by May 15, 2014. An Appendix may be provided to explain the calculation of the amount owed and the record support for the claim, by Judge Richard P. Matsch on 3/7/2014. (rpmcd )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior District Judge Richard P. Matsch
Civil Action No. 05-cv-00018-RPM
FORT PECK HOUSING AUTHORITY,
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT,
SHAUN DONOVAN, Secretary of Housing and Urban Development, and
GLENDA GREEN, Director, Housing Management Div. Office of Native American Programs,
Department of Housing and Urban Development, Office of Public and Indian Housing
MEMORANDUM OPINION AND ORDER
For this action and the following coordinated cases:
Civil Action No. 07-cv-01343-RPM; Civil Action No. 08-cv-00451-RPM;
Civil Action No. 08-cv-02570-RPM; Civil Action No. 08-cv-02573-RPM;
Civil Action No. 08-cv-02577-RPM, and Civil Action No. 08-cv-02584-RPM
On May 25, 2006, this court issued a Memorandum Opinion and Order, exercising
jurisdiction granted by the Administrative Procedure Act, 5 U.S.C. §§ 701-706 (APA),
invalidating HUD’s determination that Fort Peck Housing Authority received excess block grant
housing for low income families living on the Fort Peck Indian Reservation for the years 1998
through 2002, and ordering the defendants to take such administrative action as necessary to
implement that ruling. The order declared 24 C.F.R. § 1000.318 invalid as contrary to 25 U.S.C.
§ 4152(b)(1), section 302 of the Native American Housing Assistance and Self-Determination
Act of 1996 (NAHASDA). This court also ruled that even if the regulation could be reconciled
with the statute, the policy of applying the regulation was an impermissible interference with the
principles of Indian self-determination and tribal self governance. This court did not address the
plaintiff’s arguments that HUD’s demands for repayment made by its audit procedure denied the
plaintiff a statutory right to a hearing and that HUD had no authority to recapture amounts
already spent on affordable housing activities.
Almost four years later, on February 19, 2010, the Tenth Circuit Court of Appeals
entered an Order and Judgment, reversing this court on the statutory interpretation to the extent
that it was construed to establish a funding floor based upon the 1997 units.1 The appellate court
said that a reduction equal to the number of dwelling units no longer owned or operated by a
Tribal Housing Entity was valid. The Tenth Circuit’s ruling did not address HUD’s elimination
of units which were still owned by the plaintiff but which in HUD ’s view should have been
conveyed. In a footnote, the Circuit Court acknowledged that NAHASDA was amended in 2008
but did not comment on it.
In a Petition for Rehearing and for Rehearing En Banc dated April 10, 2010, Fort Peck
pointed out that the Tenth Circuit’s decision did not consider HUD’s exclusion of units still
owned and operated by Tribal Housing Entities, including those converted to low rent units,
units not conveyed and demolished units that were replaced. (#62-2). Fort Peck also argued that
because Congress expressly declined to apply the amendment retroactively and essentially
Fort Peck Housing Auth. v. HUD, No. 06-1425 & 06-1447, 367 Fed.Appx. 884 (10th
Cir. Feb. 19, 2010) (unpublished), cert. denied, ––– U.S. –––, 131 S.Ct. 347, 178 L.Ed.2d 148
validated the regulation by legislation there is a strong inference that Congress recognized that
the prior statute did not authorize the regulation.
The petition was denied by the Tenth Circuit without comment.
In amending the factors for determination of need in 25 U.S.C. § 4152(b)(1), Congress
included the following paragraph:
Subparagraphs (A) through (D) shall not apply to any claim arising from a
formula current assisted stock calculation or count involving an Indian housing
block grant allocation for any fiscal year through fiscal year 2008, if a civil action
relating to the claim is filed by not later than 45 days after October 14, 2008.
25 U.S.C. § 4152(b)(1)(E).
Multiple civil actions were filed by other tribal housing entities and tribes before that
deadline and all of the civil actions have been managed by coordination to address common
issues. On August 31, 2012, this court issued a Memorandum Opinion and Order deciding those
issues. (#89). Based on the administrative record, this court concluded that using the auditing
authority in 25 U.S.C. § 4165 [NAHASDA section 405] and following Guidance 98-19, HUD
arbitrarily and capriciously determined that the tribes should not have included in the FCAS
units that they still owned and operated after expiration of the term provided for payment in the
MHOA contracts without regard for the tribes’ reasons for not conveying the property. Those
agency decisions disregarded the terms of those contracts and rights of the tribes and tenants to
interpret and apply the contract provisions.
Such arbitrary disallowance was contrary to the right to a hearing provided by 25 U.S.C.
§ 4161 [NAHASDA section 401] which was applicable to the disputed adjustments as HUD
itself recognized in 24 C.F.R. § 1000.532. HUD’s contention that no hearing was required
because the inclusion of these disputed units is not a substantial non-compliance requiring a
hearing is wrong as it is contrary to a common sense reading of the statute and regulation. As
described in the Memorandum Opinion and Order, there are differing factual circumstances
justifying continued ownership of MHOA units which the tribes could have presented at a
On November 19, 2012, the court held a coordinated hearing to address procedures for
determining the remaining issues. Following that hearing, the court ordered simultaneous
briefing on the issues of HUD’s recapture authority and the scope of this court’s authority under
the APA. The Court also ordered the Plaintiffs to file statements describing the relief being
requested and ordered HUD to respond to the Plaintiffs’ statements.
That briefing is now complete and a coordinated hearing was held on February 12, 2014.
This opinion and order addresses the issues discussed at that hearing.
There is no merit to HUD’s contention that 25 U.S.C. § 4161(d) [NAHASDA section
401(d)] divests this court of jurisdiction over the Plaintiffs’ claims and provides for exclusive,
original jurisdiction in the circuit courts of appeal. Notably, in 2004 Fort Peck had filed a
petition for review in the Ninth Circuit Court of Appeals, and that action was dismissed pursuant
to a Stipulation dated December 3, 2004, in which HUD agreed that “proper venue lies in the
United States District Court for Colorado” and that it would “not dispute that 28 U.S.C. § 1331
confers jurisdiction over Fort Peck’s APA claims.” (#109-1). HUD now acknowledges that it is
bound by that stipulation with respect to Fort Peck, but asserts that the stipulation does not
preclude it from arguing that 25 U.S.C. § 4161(d) deprives this court of jurisdiction over the
claims of other Plaintiffs. That argument lacks candor and, contrary to HUD’s argument, the
circuit courts of appeal do not have exclusive, original jurisdiction over any of these actions.
Circuit court jurisdiction under § 25 U.S.C. § 4161(d) is available only after HUD has provided a
grant recipient with an opportunity for hearing on the question of substantial noncompliance,
which HUD denied to these plaintiffs. “[S]ection 4161 merely authorizes the circuit court to
hear challenges to determinations made under section 4161(a), following the requisite notice and
hearing procedures set forth in that section.” Yakama Nation Housing Auth. v. United States, 102
Fed. Cl. 478, 488 (Fed. Cl. 2011); see also Lummi Tribe of Lummi Reservation v. United States,
99 Fed. Cl. 584, 599 (Fed. Cl. 2011) (stating that it would be “anomalous” to conclude that
section 4161 deprived it of jurisdiction “even where its terms – the filing of a record with a
circuit court – have not been met.”).
This court has jurisdiction under the APA to review the disputed agency actions. HUD’s
argument that the applicable statute of limitations is the four-year period found in 28 U.S.C.
§ 1658 is denied. APA actions are governed by the six-year limitations period provided in
28 U.S.C. § 2401(a). Nagahi v. INS, 219 F.3d 1166, 1171 (10th Cir. 2000).
There is no merit to HUD’s contention that it had inherent authority to recoup grant
overpayments from these Plaintiffs through administrative action. An agency has the inherent
authority to seek recovery of funds mistakenly paid by filing a court action. See United States v.
Wurts, 303 U.S. 414 (1938). That would provide due process to adjudicate disputed facts. Here,
HUD has acted unilaterally and arbitrarily in demanding money from the Tribes through
administrative action without a hearing. This court already determined that HUD’s recapture
authority was constrained by the pre-amendment version of 25 U.S.C. § 4161 and by 25 U.S.C.
§ 4165 and 24 C.F.R. § 1000.532. HUD has no authority to determine and collect overpayments
by its own arbitrary action.
The applicable version of 24 C.F.R. § 1000.532 provides that “grant amounts already
expended on affordable housing activities may not be recaptured or deducted from future
assistance provided on behalf of an Indian tribe.” HUD’s own regulation recognizes that it could
not demand return of grant funds the recipients had already expended on affordable housing
In sum, for Indian Housing Block Grant funds that HUD awarded to the Plaintiffs for
fiscal years 2008 and earlier, HUD’s recapture of purported grant overpayments was arbitrary,
contrary to law, and in excess of its statutory authority.
HUD disputes that conclusion and alternatively argues that if HUD misapplied 24 C.F.R.
§ 1000.318 or failed to follow appropriate administrative process then this court should remand
these actions to HUD for further proceedings. During oral argument on February 12, 2014,
HUD’s counsel represented that the process that the agency would make available upon remand
would be the process set forth in 24 C.F.R. § 1000.336. That regulation does not provide for a
hearing – it provides for an exchange of written information. That is the same process which
HUD provided previously and which this court found was inadequate under the statutory scheme
that existed before NAHASDA’s amendment in 2008. Remand for further proceedings under
24 C.F.R. § 1000.336 would be futile and would further delay the resolution of these disputes.3
24 C.F.R. § 1000.532 was amended on December 3, 2012. See 77 Fed.Reg. 71513-01
(Dec. 3, 2012), 2012 WL 5986952. The pre-amendment version of the regulation applies to
24 C.F.R. § 1000.336 was amended as of May 21, 2007. The pre-amendment version
applies to these disputes and that version did not address FCAS disputes.
The Plaintiffs seek orders requiring HUD to restore the grant funds that HUD recaptured
illegally and injunctive relief prohibiting HUD from future recaptures. HUD disputes this
court’s authority to grant such relief.
With respect to the requested prospective relief, HUD argues that because the Plaintiffs’
claims concern violations of the pre-2008 version of NAHASDA, their requests for prospective
relief are moot. HUD asserts that the alleged unlawfulness of HUD’s FCAS count
determinations ended with the 2008 amendment to 25 U.S.C. § 4152(b)(1) [NAHASDA section
302(b)(1)]. HUD also argues that the court must apply the law in effect at the time the relief is
granted. Those arguments fail. The amended version of NAHASDA does not govern these
actions, which were filed before the deadline described in 25 U.S.C. § 4152(b)(1)(E). Because
HUD exceeded its statutory authority under the pre-amendment version of NAHASDA, HUD
must refrain from threatening recapture from the Plaintiffs and shall not act upon any threatened
recapture with respect to grant funds that HUD awarded to the Plaintiffs for any fiscal year
through fiscal year 2008.
HUD contends that this court lacks authority to order the restoration of grant funds
already recaptured, arguing that such relief is unavailable because the APA’s waiver of
sovereign immunity, 5 U.S.C. § 702, does not encompass claims for money damages against the
The scope of § 702's waiver of sovereign immunity depends on the distinction between
“specific relief” and “compensatory, or substitute relief.” Dep’t of the Army v. Blue Fox, Inc.,
525 U.S. 255, 261-62 (1999). “Damages are given to the plaintiff to substitute for a suffered
loss, whereas specific remedies are not substitute remedies at all, but attempt to give the plaintiff
the very thing to which he was entitled.” Bowen v. Massachusetts, 487 U.S. 879, 895 (1988)
(citations and internal quotation marks omitted).
Throughout this litigation, HUD has asserted that the specific funds that were recaptured
from the Plaintiffs cannot be returned because those funds were distributed to other grant
recipients. HUD argues that providing the Plaintiffs with monetary relief from any other source
would constitute “substitute relief” rather than “specific relief.” HUD thus characterizes the
Plaintiffs’ request for the monetary relief as a claim for “money damages.”
In 2006, this court accepted that argument and found that Fort Peck’s request for
monetary relief was “not an available remedy under the APA because it constitutes money
damages contrary to the restriction in 5 U.S.C. § 702.” (Order, Aug. 1, 2006, #46).
Upon reconsideration, this court finds that its authority under the APA includes the
authority to require HUD to restore NAHASDA funds recaptured illegally from the Plaintiffs.
The Plaintiffs have established that HUD’s arguments rest on a faulty factual premise. That is,
the Plaintiffs have shown that HUD’s own practices and regulations demonstrate that HUD treats
NAHASDA appropriations from different fiscal years as fungible. HUD does not dispute that
unused appropriations remain in the program. The Plaintiffs asserted and HUD did not dispute
that HUD routinely carries forward NAHASDA funds from a fiscal year and distributes such
funds in subsequent fiscal years. The Plaintiffs asserted and HUD did not dispute that in
FY 2008, HUD utilized over $26 million in FY 2008 funds to pay for underfunding that occurred
prior to FY 2003.
HUD’s own regulations are consistent with its practice of treating all NAHASDA funds
as fungible. 24 C.F.R. 1000.536 addresses the question, “What happens to NAHASDA grant
funds adjusted, reduced, withdrawn, or terminated under § 1000.532?” and provides the
Such NAHASDA grant funds shall be distributed by HUD in accordance with the
next NAHASDA formula allocation.
24 C.F.R. § 1000.536.
The Plaintiffs’ request for monetary relief is not a claim for damages for breach of a legal
duty. Rather, the Plaintiffs are seeking the return of funds that were taken from them and to
which they remain entitled. Under these circumstances, this Court’s authority under the APA
includes authority to order restoration of all funds illegally recaptured from the Plaintiffs.
HUD shall restore to the Plaintiffs the funds that HUD recaptured for any fiscal year
through 2008. Where funds have been set aside through escrow for a Plaintiff’s benefit, HUD
shall make restoration from the escrow funds. For Plaintiffs with monetary claims exceeding the
amount set aside or without funds set aside, HUD shall take action to restore the unlawfully
recaptured funds through grant funding adjustments.
To determine the amount of funds to be restored, all low rent units shall be funded as
rental units, without regard to whether such units were converted from Mutual Help Units or
homeownership units to rental units. HUD’s policy of calculating funding for converted units
according to a unit’s pre-1997 status is arbitrary and capricious. At the hearing on February 12,
2014, HUD’s counsel attempted to justify HUD’s policy by stating that when NAHASDA was
enacted, there was an intention to continue funding according to contract rights in effect under
the prior statute. That explanation is contrary to the statutory interpretation that HUD advocated
during the 2006 proceedings in this action and that HUD successfully argued on appeal to the
United States Court of Appeals for the Tenth Circuit. It is incongruous for HUD to rely on the
pre-1997 status quo as a rationale for imposing a funding limit with respect to converted units.
Based on the foregoing it is
ORDERED that defendants shall restore to the plaintiffs all funds that were illegally
recaptured for fiscal years through and including FY 2008. The defendants’ obligation to restore
such funds is subject to the 6-year limitations period provided by 28 U.S.C. § 2401(a); it is
FURTHER ORDERED that with respect to grant funding for those fiscal years, HUD
shall refrain from threatening recapture from the plaintiffs and shall not act upon any threatened
recapture; it is
FURTHER ORDERED that on or before April 15, 2014, the plaintiffs in each civil action
shall submit a proposed form of judgment, specifying the amounts to be paid to each tribe or
tribal housing entity and the asserted sources of payment; and it is
FURTHER ORDERED that for any plaintiff who claims entitlement to payment for
underfunding because HUD excluded units from that plaintiff’s FCAS in a particular fiscal year,
the proposed form of judgment should include a separate itemization for those amounts and may
be submitted by May 15, 2014. An Appendix may be provided to explain the calculation of the
amount owed and the record support for the claim.
The plaintiffs’ requests for attorney’s fees and costs will be addressed after entry of
Date: March 7, 2014
BY THE COURT:
s/Richard P. Matsch
Richard P. Matsch, Senior District Judge
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