NEIGHBORHOOD ASSISTANCE CORPORATION OF AMERICA (NACA) v. U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Filing 15

MEMORANDUM AND OPINION. Signed by Judge Robert L. Wilkins on 8/17/2011.(lcrlw2)

SUMMARY OPINION AND ORDER; NOT INTENDED FOR PUBLICATION

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
NEIGHBORHOOD ASSISTANCE
CORPORATION OF AMERICA,
Plaintiff,
Civil Action No. 11-cv-1312 (RLW)
v.
U.S. DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT,
Defendant.
MEMORANDUM OPINION
This matter is before the Court on Plaintiff Neighborhood Assistance Corporation of
America’s (“NACA”) Motion for Limited Expedited Discovery (Docket No. 5) in advance of a
hearing on its Motion for Preliminary Injunction. For the following reasons, Plaintiff’s Motion is
GRANTED.
NACA has asserted Fifth Amendment and Administrative Procedure Act claims against
Defendant U.S. Department of Housing and Urban Development (“HUD”) in connection with
HUD’s recent passage of a licensing regulation, 24 C.F.R. § 3400.103. NACA alleges that this
regulation is cumbersome and is targeted solely at NACA in bad faith and in retaliation for
NACA’s public criticism of the Obama administration. In its Complaint, NACA sets forth
specific allegations reflecting that, after NACA began to criticize the administration, NACA was
subjected to an extensive HUD audit which ultimately found no wrongdoing on NACA’s part.
Through the affidavit of NACA’s CEO Bruce Marks, NACA sets forth details of statements
made by auditors and HUD officials reflecting that HUD was targeting NACA and that for two
years “people at HUD have been trying to find things on NACA.” Marks Aff. ¶ 21. The audit

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SUMMARY OPINION AND ORDER; NOT INTENDED FOR PUBLICATION

and these statements, according to NACA, were made leading up to the adoption of the licensing
regulation.
In support of its claim of bad faith or retaliation, NACA seeks to depose four individuals
who had dealings with NACA during or after the audit or who were involved with the adoption
of Section 3400.103(e)(7), the specific HUD regulation that NACA is challenging. NACA has
named three specific deponents, and also has asked for the a 30(b)(6) deposition of the HUD
official most familiar with the adoption of Section 3400.103.
HUD argues, and this Court agrees, that federal courts are ordinarily not allowed to
supplement an administrative record in deciding whether an agency violated the APA. HUD
concedes, however, that there are certain circumstances in which a Plaintiff in an APA case may
supplement the record with discovery. Opp. at 7. One of those circumstances is where there is a
strong showing of bad faith or improper behavior on the part of the agency. See Eugene Burger
Management Corp. v. United States Dep’t of Housing and Urban Dev., 192 F.R.D. 1, 12 (D.D.C.
1999) (quoting Saratoga Dev. Corp. v. United States, 21 F.3d 445, 458 (D.C. Cir. 1994)) (stating
that one of the two circumstances in which discovery in an APA case is permitted is where there
has been “a strong showing of bad faith or improper behavior so that without discovery the
administrative record cannot be trusted.”); see also Tummino v. Von Eschenbach, 427 F. Supp.
2d 212, 230-31 (E.D.N.Y. 2006) (stating that despite the general “record rule” governing judicial
review of agency action, an extra-record investigation by the reviewing court may be appropriate
where there has been a strong preliminary showing of bad faith or improper behavior on the part
of the agency); Preserve Endangered Areas of Cobb’s History v. U.S. Army Corps of Eng’rs, 87
F.3d 1242, 1246-47 n.1 (11th Cir. 1996).

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SUMMARY OPINION AND ORDER; NOT INTENDED FOR PUBLICATION

Based on the specific allegations set forth in NACA’s papers and under oath in the Marks
Affidavit, NACA has made a strong preliminary showing that the agency acted improperly or in
bad faith toward NACA leading up to and possibly in connection with the adoption of Section
3400.103(e)(7). In its Opposition, HUD neither squarely addresses NACA’s factual showing of
bad faith nor argues that it would be prejudiced by being required to sit for the depositions. The
Court finds, therefore, good cause to allow limited discovery in advance of the hearing on
NACA’s Motion for Preliminary Injunction. NACA will be restricted to a total of two hours
each for the depositions of Motulski, Stevens and Roman, and a total of three hours for the
deposition of HUD’s 30(b)(6) designee.
CONCLUSION
For the foregoing reasons, Plaintiff’s Motion for Expedited Discovery is GRANTED. An
order accompanies this Memorandum.

Date: August 17, 2011

/s/
ROBERT L. WILKINS
United States District Judge

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