Corner et al v. Housing Authority of New Orleans et al
Filing
94
ORDER & REASONS that Plaintiff's 70 Motion for Order to Show Cause why defendants should not be held in contempt for failing to comply with the consent decree is GRANTED. After hearing oral argument on this motion, the Court instructed the parties to meet and confer and submit a development schedule for the off-site housing units to the Court. On August 8, 2014, the parties submitted the development schedule. On that same day, the Court issued an Order establishing the proposed deve lopment schedule. IT IS FURTHER ORDERED that the development schedule (Rec. Doc. 92) is hereby incorporated into this Order and Reasons. The parties should inform the Court immediately if any problems arise, regarding the newly established develop ment schedule, which require Court intervention. At this time, the Plaintiffs motion for attorneys' fees is DENIED. However, the Plaintiff retains the right to, at a later date, make a claim for attorneys fees for all past work done in connection with this motion as well as all future work, in the event that the Defendants fail to perform their obligations as set forth in the development schedule. Signed by Judge Eldon E. Fallon on 8/9/14. (dno)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DASHA CORNER, ET AL.
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versus
THE HOUSING AUTHORITY
NEW ORLEANS, ET AL.
CIVIL ACTION
No. 06-10751
SECTION “L”
ORDER & REASONS
On July 10, 2014, the Court held a show cause hearing, instructing Defendants to show
cause why they should not be held in contempt for failing to comply with the consent decree.
The Court has reviewed the briefs and the applicable law and now issues this Order and Reasons.
I.
BACKGROUND
On December 4, 2006, Plaintiffs Dasha Corner and Greater New Orleans Fair Housing
Action Center ("GNOFHAC") filed the present lawsuit against Defendants The Housing
Authority of New Orleans ("HANO") and HRI/River Garden for alleged violations of the Fair
Housing Act. (Rec. Doc. 1 at 1-2).
According to Plaintiffs, in 2000, St. Thomas Housing Development ("St. Thomas") was
demolished and slated for redevelopment as "River Garden Apartments." Administrative
complaints were filed with the United States Department of Housing and Urban Development
(“HUD”) by former St. Thomas residents. As a result, the parties (HUD, former residents,
HANO, and the City of New Orleans) entered into an "Enforcement Agreement." (Rec. Doc. 1
at 4). The Enforcement Agreement stated that former residents of St. Thomas would get
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preference for public housing units built during the redevelopment. Plaintiff Corner was a
former resident of St. Thomas until she had to evacuate for Hurricane Katrina.
According to Plaintiffs in this case, HANO and HRI/River Garden breached the
Enforcement Agreement when, after Hurricane Katrina, they rented the public housing units to
employees of HANO and households who did not have preference and/or were ineligible for
public housing. (Rec. Doc. 1 at 4).
In June 2007, GNOFHAC, HANO and HRI/River Garden entered into a Consent Decree,
resolving the claims that Plaintiffs brought under the Fair Housing Act. On July 5, 2007, this
Court approved the Consent Decree. On July 11, 2007, the Court dismissed the case. Under the
terms of the consent decree, Hano and HRI/River Garden are required to construct:
1) CS-1 Rental – 296 total units, 122 unites of which are ACC1 housing;
2) Elderly Rental – 57 affordable units for the eldery, 62 years or older
3) Homeownership – 73 total homes, 15 of which are for first time
homebuyers at the affordable purchase price specified in the
aforementioned Development Agreement.
4) Historic Buildings – 37 affordable units.
5) CS-2 Rental – 310 total units, including 60 ACC units and 64
affordable units.
6) 100 units of three-bedrooms and four-bedrooms of off-site rental
housing units on lots that were acquired by HANO in 2004.
(Rec. Doc. 54 at 8-9).
II.
PRESENT MOTION
1
ACC is an acronym used by HUD to mean "annual contributions contract." This refers
to a contract between HUD and a local public housing authority, like HANO, under which HUD
agrees to pay an amount certain in any given year for the purpose of providing housing
assistance to low and moderate income citizens.
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A.
GNOFHAC’s Motion
On April 8, 2014, GNOFHAC filed a motion for order to show cause why Defendants
should not be held in contempt for failure to comply with the Consent Decree. (Rec. Doc. 70).
GNOFHAC claims that while HANO and HRI/River Garden have performed the other
requirements of the Consent Decree, they have not yet begun construction of any of the required
100 units of three-bedrooms and four-bedrooms of off-site rental housing and they do not have a
concrete plan for doing so. Further, GNOFHAC claims that it recently learned that HANO sold
or transferred several properties that were set aside for the off-site units. GNOFHAC claims that
this sale/transfer without prior authorization is a violation of the Consent Decree. GNOFHAC
claims that good faith negotiations, which are mandated by the Consent Decree, have failed and
that Defendants should be subject to contempt sanctions and reasonable attorneys’ fees.
Accordingly, GNOFHAC asked this Court to order that Defendants show cause why they should
not be held in contempt for failure to comply with the Consent Decree.
B.
HANO's Opposition (Rec. Doc. 79)
HANO filed an opposition in which it claims that it has been unable to build the 100 offsight units because it does not have the necessary funds. HANO argues that civil contempt is
inappropriate when, as here, the party does not have the ability to comply with the order. (Rec.
Doc. 79 at 3) (citing Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1296 (11th Cir. 2002)).
HANO points out that immediately after the Consent Decree was confirmed, it tried to comply
with the terms of the Decree. However, HANO’s attempts were allegedly thwarted when the
sub-contractor who it hired for the project was debarred. HANO also claims that its funding has
steadily decreased every year since 2010 and that, more recently, it has had to deal with
Congressional sequestration and budget cuts. (Rec. Doc. 79 at 4-5).
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HANO points out that its mission is "to provide and encourage the development of
quality, affordable housing and the preservation of healthy, vibrant neighborhoods for the
citizens of New Orleans in a manner that promotes self-sufficiency and economic opportunity."
(Rec. Doc. 79 at 6). HANO claims that it does not have the funds necessary to fulfill this
mission in the manner that GNOFHAC seeks.
C.
HRI/River Garden's Opposition (Rec. Doc. 80)
HRI/River Garden filed an opposition in which it argues that it is not responsible for
developing off-site rental units under the Consent Decree. According to HRI/River Garden, it is
a single-purpose entity with the sole purpose of owning Phase I development at the River Garden
apartments. HRI/River Garden claims that the Consent Decree incorporated the terms of the
"Development Agreement," which provided that Historic Restoration Incorporated (“HRI”)
would serve as HANO’s agent with respect to the off-site units. (Rec. Doc. 80 at 5).
Disadvantaged business entities were to serve as developer. HRI/River Garden argues that, as
Agent, it could not develop the off-site units and cannot be held responsible for the principal's
failure to perform.
D.
GNOFHAC's Reply (Rec. Doc. 81-2)
In response, GNOFHAC argues that Defendants have the burden of proving inability to
comply with the Consent Decree and that they have not met this burden by simply stating that
they have insufficient funds. (Rec. Doc. 81-2 at 2). GNOFHAC claims that construction of the
off-site units requires a multiplicity of steps and funding sources, which Defendants have not
pursued. Specifically, GNOFHAC alleges that Defendants must first enter into a subcontract
with a developer who can then pursue various financing and funding sources. (Rec. Doc. 81-2 at
4). GNOFHAC admits that Defendants' first contractor was debarred, but points out that the
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Defendants have not done anything to try to secure a new one. GNOFHAC argues that
Defendants have not shown that they are unable to build the units, but instead that they are
unwilling to try. (Rec. Doc. 81-2 at 5).
GNOFHAC argues that the fact that HRI/River Garden is not the developer of the off-site
properties does not relieve it of the responsibility under the Consent Decree, which they agreed
to. GNOFHAC argues that orders are binding on parties and their agents. (Rec. Doc. 81-2 at 6).
Furthermore, GNOFHAC claims that HRI/River Garden was a party to the Decree and if it
contested its authority, it should have raised that at the time the Decree was entered.
GNOFHAC asks the Court to order that the Defendants submit a development schedule
with a timeframe for procurement of a subcontractor and the completion of development
milestones. (Rec. Doc. 81-2 at 6).
E.
HANO’s Sur-Reply (Rec. Doc. 88)
Defendant HANO filed a sur-reply and attached a copy of its FY 2014 budget. HANO
reiterates that it does not have the funds to build additional housing. HANO also provides an
affidavit from its CFO, which summarizes the budgetary constraints.
III.
LAW AND ANALYSIS
The Fifth Circuit has explained that "[c]onsent decrees have elements of both contracts
and judicial decrees. A consent decree embodies an agreement of the parties and is also an
agreement that the parties desire and expect will be reflected in, and be enforceable as, a judicial
decree that is subject to the rules generally applicable to other judgments and decrees." United
States v. City of Jackson, Miss., 359 F.3d 727, 732 (5th Cir. 2004) (quoting Frew ex rel. Frew v.
Hawkins, 540 U.S. 431 (2004)); see also U.S. v. Alcoa, Inc., 533 F.3d 278, 286 (5th Cir. 2008)
(“consent decrees are more than contracts. They are enforceable judicial orders.”). "A party
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may be held in contempt if he violates a definite and specific court order requiring him to
perform or refrain from performing a particular act or acts with knowledge of that order."
Whitfield v. Pennington, 832 F.2d 909, 914 (5th Cir. 1987). “[D]istrict courts have the power
and ordinarily must hold parties to the terms of a consent decree.” Alcoa, 533 F.3d at 286.
“[D]istrict courts have wide discretion to enforce decrees and to implement remedies for decree
violations.” Alcoa, 533 F.3d at 286; see also Cook v. Ochsner Foundation Hospital, 559 F.2d
270, 272 (5th Cir. 1977) (“Courts have, and must have, the inherent authority to enforce their
judicial orders and decrees in cases of civil contempt. Discretion, including the discretion to
award attorneys’ fees, must be left to a court in the enforcement of its decrees.”)
"The movant in a civil contempt proceeding bears the burden of establishing by clear and
convincing evidence: (1) that a court order was in effect; (2) that the order required certain
conduct by the respondent; and (3) that the respondent failed to comply with the court’s order.”
Petroleos Mexicanos v. Crawford Enterprises, Inc., 826 F.2d 392, 401 (5thCir. 1987); see also
Travelhost, Inc. v. Blandford, 68 F.3d 958, 961 (5th Cir. 1995) ("In a civil contempt proceeding,
the movant bears the burden of establishing the elements of contempt by clear and convincing
evidence."). Once a violation of the order is demonstrated, the burden shifts to the violating
party to "show either mitigating circumstances that might cause a district court to withhold the
exercise of its contempt power, or a substantial compliance with the consent order." Whitfield,
832 F.2d at 914 (citing Louisiana Educ. Ass'n v. Richland Parish School Bd., 421 F.Supp. 873,
977 (W.D. La. 1976), aff'd 585 F.2d 518 (5th Cir. 1977)).
The respondent can also defend by showing "a present inability to comply with the
subpoena or order.” Petroleos Mexicanos v. Crawford Enterprises, Inc., 826 F.2d 392, 401 (5th
Cir. 1987) (citing U.S. v. Rylander, 460 U.S. 752, 757 (1983)). "Where compliance is
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impossible, neither the moving party nor the court has any reason to proceed with the civil
contempt action." Rylander, 460 U.S. at 757. The defendant has the burden of production when
raising the defense of inability to comply. Rylander, 460 U.S. at 757; see also Pierce v. Vision
Investments, Inc., 779 F.2d 302, 304 (5th Cir. 1986) (holding that contempt judgment was
available and remanding case to the district court for a hearing to determine the contemner's
ability to comply with the consent order).
A.
The Consent Decree
Section III of the Consent Decree, entitled “Affordable and ACC Units” (Rec. Doc. 54 at
7) states that “HANO and HRI/River Garden shall construct or have constructed . . . 100 units of
three-bedrooms and four-bedrooms of off-site rental housing units on lots that were acquired by
HANO in 2004.” This Section also states that “HANO and HRI/River Garden, and any other
assigned developer or any other selected or designated developer, shall develop, in accordance
with the terms and conditions of that certain Development Agreement dated October 28, 1999, as
amended” by subsequent amendments. (Rec. Doc. 54 at 7). The relevant portion of the
Development Agreement states that “[w]ith respect to the Off-Site Development, HRI shall serve
as an Agent of HANO. . . . As the Agent of HANO, HRI shall contract with one or more small
disadvantaged businesses. . . .” (Rec. Doc. 80-2 at 71). Section 16.07 of the Development
Agreement (as Amendment by the Third Amendment) is entitled “Off-Site Development” and
provides that “HRI agrees, and is hereby obligated, to serve as the Agent of HANO for the OffSite units. Execution of this Agreement by HANO shall constitute approval and notice to
proceed to HRI. No competitive bid process shall be required in the selection by the Agent of
HANO and any developer. As the Agent of HANO, HRI shall make every effort to include
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women- and/or minority-owned businesses as developers. In addition, HRI, as the Agent of
HANO, shall develop a selection process for the Off-Site developers, which process must be
approved by the City’s Director of Housing and the City Council.” (Rec. Doc. 80-2 at 75).
The Consent Decree also states that “[t]he Court in this action shall retain jurisdiction in this
action for all purposes relating to the enforcement of this Consent Decree.”
B.
Defendants’ Non-compliance
The Defendants do not dispute that they entered into a Consent Decree with the Plaintiffs
in this case. Further, the Defendants acknowledge that the Consent Decree calls for the
construction of 100 off-site three-bedroom and four-bedroom rental housing units. The parties
also agree that these units have not yet been constructed. Accordingly, the Court finds that the
Plaintiffs have met their initial burden of showing that civil contempt is in order. See Petroleos
Mexicanos, 826 F.2d at 401. The burden, therefore, shifts to the Defendants to show an inability
to comply. The Court finds that the Defendants have been unable to meet this burden.
The evidence in the record indicates that a construction project of this magnitude requires
multiple steps, procedures, and funding sources. HANO cannot prove an inability to comply
with the Consent Decree by simply pointing to its constrained budget. HANO has put forth no
evidence to suggest that it has tried to build the units or that it has taken affirmative steps toward
the construction. HANO admits that it never hired a new subcontractor or developer after the
first subcontractor was debarred in 2008. When asked what steps HANO has taken toward the
construction of these units, HANO’s counsel explained that it has been unsuccessfully searching
for the funding sources and brainstorming ideas. However, as to specific funding sources,
HANO was unable to put forth any evidence that it attempted to acquire funding and failed. For
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instance, the St. Thomas Revitalization Plan provides a list of anticipated funding sources for
off-site units. This list includes: low income housing tax credits, home funds, private equity, and
community development block grants. Whether or not this Plan is applicable here, which
HRI/River Garden contests, it is still suggestive of the types of funding sources that can be used
in a construction project of this nature. HANO has put forth no evidence that it has
unsuccessfully sought any of this funding. Nor has HANO hired a subcontractor or developer to
assist in attaining funding. Seven years is too long for HANO to simply think about constructing
the units. The time has come for HANO to put in place a development schedule with various
timelines that this Court can monitor and enforce.
B.
HRI/River Garden
HRI/River Gardens argues that it is an improper party in this proceeding. HRI/River
Garden claims that it is a single purpose entity, which was created to own Phase I Development
of that River Garden Apartments. Whether or not HRI/River Garden was created for a single
purpose, it signed the Consent Decree and bound itself. As stated previously, the Consent
Decree unambiguously states that HANO and HRI/River Garden will construct or have
constructed the 100 units. If HRI/River Garden was unable to comply with this provision, it
should have raised this issue before signing the Consent Decree. At oral argument, counsel for
HRI/River Garden stated that HRI/River Garden is still a functional corporation. HRI/River
Garden put forth no evidence regarding an inability to comply with the Consent Decree due to
financial constraints. Accordingly, the Court finds that HRI/River Garden is in violation of the
Consent Decree.
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IV.
CONCLUSION
For the foregoing reasons,
IT IS ORDERED that Plaintiff’s motion is hereby GRANTED.
After hearing oral argument on this motion, the Court instructed the parties to meet and
confer and submit a development schedule for the off-site housing units to the Court. On August
8, 2014, the parties submitted the development schedule. On that same day, the Court issued an
Order establishing the proposed development schedule.
IT IS FURTHER ORDERED that the development schedule (Rec. Doc. 92) is hereby
incorporated into this Order and Reasons. The parties should inform the Court immediately if
any problems arise, regarding the newly established development schedule, which require Court
intervention.
At this time, the Plaintiff’s motion for attorneys’ fees is DENIED. However, the
Plaintiff retains the right to, at a later date, make a claim for attorneys’ fees for all past work
done in connection with this motion as well as all future work, in the event that the Defendants
fail to perform their obligations as set forth in the development schedule.
New Orleans, Louisiana, this 9th day of August, 2014.
________________________________
UNITED STATES DISTRICT JUDGE
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