United States of America v. New Orleans City, et al

Filing 49

ORDER & REASONS denying 44 Motion to Dismiss for Failure to State a Claim. Signed by Judge Martin L.C. Feldman on 4/24/2013. (caa, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
UNITED STATES OF AMERICA

CIVIL ACTION

VERSUS

NO. 12-2011

THE CITY OF NEW ORLEANS and
THE LOUISIANA STATE BOND COMMISSION

SECTION: “F”

ORDER AND REASONS
Before the Court is the Louisiana State Bond Commission's
Rule 12(b)(6) motion to dismiss for failure to state a claim upon
which relief can be granted.

For the reasons that follow, the

motion is DENIED.
Background
This case arises out of the proposed redevelopment of a
former nursing home into an affordable housing apartment complex.
Beginning in 2009, the Gulf Coast Housing Partnership
(“GCHP”), a nonprofit real estate development company whose
principal focus is providing affordable housing, began
redeveloping a building formerly used as a nursing home, located
at 2535 Esplanade Avenue in New Orleans.

GCHP, along with other

nonprofit organizations and developers, planned to convert the
Esplanade property into a forty-unit affordable housing
development.

Half of the proposed units would be reserved for

low-income individuals, and the other half of the units would
serve as “permanent supportive housing” for homeless persons with
1

mental and physical disabilities.

The Esplanade property would

also include an on-site case management office, which would
primarily involve assisting tenants in the transition from
homelessness to independent living.

The project, however, has

had a difficult history;1 the City of New Orleans' alleged role
in that history was discussed at length in this Court's previous
Order and Reasons,2 and the Louisiana State Bond Commission's
alleged role is at issue in this motion.
The main source of funding for the redevelopment project was
to be provided by the Piggyback Program, which was created by the
State of Louisiana to assist in redevelopment efforts postHurricane Katrina.

Under the Piggyback Program, eligible

projects would receive funds from a combination of sources,
including state-issued bonds that require the approval of the

1

For example, the complaint alleges significant opposition
expressed by the neighbors. The United States quotes an unsigned
flier that was allegedly circulated in the neighborhood and
submitted to the Board of Zoning Adjusters. According to the
complaint, the flier states that the proposed Esplanade
apartments would be occupied by “the homeless, ex-offenders,
people with mental illness, HIV/AIDS, people with a history of
drug usage, and others similarly situated in a concept described
as “supportive housing.” . . . NO facility of this nature should
be located in a residential neighborhood, particularly an
Historic Residential Neighborhood!!!!!” (emphasis in original).
The United States’ complaint also cites a letter opposing the
project, written by the president of the Esplanade Ridge & Treme
Civic Organization, which states that “[t]hese are people who
really need more intensive care. In truth, they should be in an
institutional setting.”
2

See Rec. Doc. 25.
2

Louisiana State Bond Commission.

In August 2009, the Bond

Commission adopted a moratorium on approving bond financing under
the Piggyback Program for low-income housing projects, stating
that it needed to study the housing marking in New Orleans.

At

the time, the United States alleges that the Bond Commission knew
that Esplanade and two other affordable housing projects in New
Orleans would be affected by the moratorium; however, the two
other projects, neither of which provide housing for persons with
disabilities, were granted funding as "exceptions" to the
moratorium.
Specifically, on August 4, 2010, the Mayor of New Orleans
wrote to the Chairman of the Bond Commission to request that a
seventy-unit affordable housing project for seniors, known as the
Oretha Castle Haley development, be placed on the August 2010
Bond Commission agenda and approved for funding.

The Bond

Commission subsequently placed this project on its August 2010
agenda and approved its financing.

Similarly, on August 17,

2011, the Mayor wrote to the Chairman in support of bond
financing of the B.W. Cooper mixed-income housing development.
Again, the Bond Commission placed the B.W. Cooper project on the
August 2011 agenda and approved its financing.

In light of these

two "exceptions" to the moratorium, the Esplanade developers, on
numerous occasions, asked the Mayor to similarly request that the
Esplanade project be included on the Commission's agenda.

3

The

Mayor refused such requests without explanation.

The developers

also directly requested the Bond Commission to place the
Esplanade project on the Commission's agenda, and, on each
occasion, the Bond Commission declined to do so with no
explanation.

In April 2010, a state senator, serving in a

representative capacity on the Bond Commission, wrote to the City
Planning Commission and stated that he was "very familiar with
the proposed use" of the Esplanade project and "strongly urge[d]"
its denial.

The letter further stated that the project would "be

occupied by recovering drug addicts, the perennially homeless,
and former convicts, with no direct supervision and unlimited
ingress and egress, . . . . [and] would constitute a death
sentence for the surrounding" neighborhood.
A final study on the low-income housing needs was released
in March 2011, which concluded that the New Orleans’ housing
market would support additional low-income affordable housing.
The moratorium, however, has yet to be lifted (despite the fact
that the housing study was the given reason for imposing the
moratorium).

To date, the Esplanade project has not received

Piggyback funding.
The United States Department of Justice filed suit in this
Court on August 6, 2012, alleging that the City of New Orleans
and the Louisiana State Bond Commission violated the Fair Housing
Act and Title II of the American with Disabilities Act.

4

The

United States seeks injunctive relief to stop the City and the
Bond Commission from continuing to obstruct the Esplanade
project, and retrospective relief for the damages incurred by the
developers due to the City and Bond Commission's delays.

On

September 28, 2012, the City moved for dismissal of the claims
under Federal Rules 12(b)(1) and 12(b)(6), asserting that the
Court lacks subject matter jurisdiction, and that the United
States fails to state a claim upon which relief can be granted;
the motion only requested dismissal as to claims asserted against
the City.

The Court denied this motion on December 6, 2012.

The

Bond Commission now moves to dismiss the United States' claims
under Rule 12(b)(6).

I. Legal Standard
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a party to move for dismissal of a complaint for failure to state
a claim upon which relief can be granted.

Such a motion is

rarely granted because it is viewed with disfavor.

See Lowrey v.

Tex. A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir. 1997) (quoting
Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc.,
677 F.2d 1045, 1050 (5th Cir. 1982)).

In considering a Rule

12(b)(6) motion, the Court “accepts ‘all well-pleaded facts as
true, viewing them in the light most favorable to the
plaintiff.’”

See Martin K. Eby Constr. Co. v. Dall. Area Rapid

5

Transit, 369 F.3d 464 (5th Cir. 2004) (quoting Jones v.
Greninger, 188 F.3d 322, 324 (5th Cir. 1999)).

But, in deciding

whether dismissal is warranted, the Court will not accept
conclusory allegations in the complaint as true.

Kaiser, 677

F.2d at 1050. Indeed, the Court must first identify allegations
that are conclusory and, thus, not entitled to the assumption of
truth.

Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

A

corollary: legal conclusions “must be supported by factual
allegations.” Id. at 678.

Assuming the veracity of the well-

pleaded factual allegations, the Court must then determine
“whether they plausibly give rise to an entitlement to relief.”
Id. at 679.
“‘To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.’” Gonzalez v. Kay, 577 F.3d
600, 603 (5th Cir. 2009)(quoting Iqbal, 556 U.S. at 678)(internal
quotation marks omitted).

“Factual allegations must be enough to

raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true
(even if doubtful in fact).”

Bell Atl. Corp. v. Twombly, 550

U.S. 544, 555 (2007) (citations and footnote omitted). “A claim
has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”

6

Iqbal, 556 U.S.

at 678 (“The plausibility standard is not akin to a ‘probability
requirement,’ but it asks for more than a sheer possibility that
a defendant has acted unlawfully.”).

This is a “context-specific

task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 679.

“Where a complaint

pleads facts that are merely consistent with a defendant’s
liability, it stops short of the line between possibility and
plausibility of entitlement to relief.”

Id. at 678 (internal

quotations omitted) (citing Twombly, 550 U.S. at 557).

“[A]

plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’”, thus, “requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do.”

Twombly, 550 U.S. at 555

(alteration in original) (citation omitted).
In deciding a motion to dismiss, the Court may consider
documents that are essentially “part of the pleadings.”

That is,

any documents attached to or incorporated in the plaintiff’s
complaint that are central to the plaintiff’s claim for relief.
Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th
Cir. 2004) (citing Collins v. Morgan Stanley Dean Witter, 224
F.3d 496, 498-99 (5th Cir. 2000)).

Also, the Court is permitted

to consider matters of public record and other matters subject to
judicial notice without converting a motion to dismiss into one
for summary judgment.

See United States ex rel. Willard v.

7

Humana Health Plan of Tex. Inc.,

336 F.3d 375, 379 (5th Cir.

2003).
II.

Discussion

The Louisiana State Bond Commission contends that the United
States' complaint lacks well-pleaded factual allegations
sufficient to give rise to a cause of action and, therefore,
dismissal under Rule 12(b)(6) is appropriate.

The Court does not

agree.
A.
As a threshold matter, the Court notes that this motion is
simply untimely.

The United States served its amended complaint

on the Bond Commission on December 26, 2012, and the Bond
Commission's answer was due January 16, 2013.3
P. 12(a)(1).

See Fed. R. Civ.

A motion to dismiss under Rule 12(b)(6) must be

made before the time for filing an answer, or, in this case,
before January 16, 2013.

See Fed. R. Civ. P. 12(b).

The Bond

Commission, however, filed this motion and its answer, almost two
months late, on March 22, 2013.

Notably, the Bond Commission

never sought an extension of time in which to file a responsive

3

The United States asserts that the Bond Commission's answer was
due on February 25, 2013; however, the record contains no
indication that defendant timely waived service under Rule 4(d)
to avail itself of the sixty-day time frame. Further, the record
explicitly states that the Commission's answer was due on January
16, 2013. See Rec. Doc. 30, 31. Even assuming the deadline was
February 25, 2013, this motion would nevertheless be untimely
because it was filed on March 22, 2013.
8

pleading.4

The United States, however, never challenged the Bond

Commission's failure to answer before now, and focuses the
majority of its opposition memorandum on the substance of this
motion.5

The Court will therefore treat this untimely Rule

12(b)(6) motion as a motion for judgment on the pleadings under
Rule 12(c), which is well within the Court's discretion.

See Doe

v. MySpace, Inc., 528 F.3d 413, 418 (5th Cir. 2008) ("A motion
for judgment on the pleadings under Rule 12(c) is subject to the
same standard as a motion to dismiss under Rule 12(b)(6).");
Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999) (noting
that a district court may treat an untimely Rule 12(b)(6) motion
as a Rule 12(c) motion).
B.
The Bond Commission urges that the United States has failed
to state a claim for any violation under the Federal Housing Act
or the American with Disabilities Act because "[t]here are no
facts alleging culpable conduct on the part of the Bond
Commission."

To the contrary, the Court finds that the United

4

The Court notes that Local Rule 7.8 requires the Court, upon
request, to grant a twenty-one day extension of time to plead, if
the moving party has not previously obtained an extension of time
(as is the case here with the Bond Commission) and the opposing
party has not objected (the United States indicates that it
requested that the Commission answer or seek an extension of
time, indicating that the United States would likely not object
to such an extension).
5

The only reference to the Bond Commission's untimely response
is in a footnote.
9

States has sufficiently pleaded factual allegations to state a
claim of discrimination in violation of the FHA and ADA, under
both the disparate treatment and disparate impact framework.6
Specifically, the United States alleges that the Bond Commission
discriminated by (1) adopting a moratorium on all affordable
housing in Orleans Parish funded through the Piggyback Program;
(2) creating exceptions to the moratorium for similarly situated
housing projects that did not target prospective tenants with
disabilities or involve community opposition; (3) refusing to
lift the moratorium after the housing study was released; and (4)
refusing the Esplanade developers' multiple requests to be placed
on the Commission's agenda for funding.
Under the FHA, it is unlawful to "discriminate in the sale
or rental, or to otherwise make unavailable or deny, a dwelling
to any buyer or renter because of a handicap of . . . a person
residing in or intending to reside in that dwelling after it is .
. . made available . . . or any person associated with that buyer
or renter."

42 U.S.C. § 3604(f)(1).

Similarly, Title II of the

ADA generously mandates that “no qualified individual with a
disability shall, by reason of such disability, be excluded from
participation in or be denied the benefits of the services,
programs, or activities of a public entity, or be subject to
discrimination by such entity.”

6

42 U.S.C. § 12132.

Both federal

The Court express no opinion on the merits of the claims.
10

statutes apply to governmental zoning and funding decisions.

See

Greater New Orleans Fair Hous. Action Ctr. v. St. Bernard Parish,
648 F. Supp. 2d 805, 808 (E.D. La. 2009); see also Tsombanidis v.
W. Haven Fire Dept., 352 F.3d 565, 573-74 (2d Cir. 2003);
Oconomowoc Residential Programs v. City of Milwaukee, 300 F.3d
782-83 (7th Cir. 2002).
A violation of the FHA and ADA can be established under the
disparate treatment or disparate impact framework.7

See, e.g.,

Artisan/Am. Corp. v. City of Alvin, 588 F.3d 291, 295 (5th Cir.
2009) ("We have recognized that a claim brought under the [FHA]
may be established not only by proof of discriminatory intent,
but also by proof of a significant discriminatory effect."
(internal quotation marks omitted)); Tsombanidis, 352 F.3d at 573
("To establish discrimination under either the FHA or the ADA,
plaintiffs have three available theories:

(1) intentional

discrimination (disparate treatment); (2) disparate impact; and
(3) failure to make a reasonable accommodation."); 24 C.F.R. §
100.500 ("Liability may be established under the [FHA] based on a
practice's discriminatory effect, . . . even if the practice was
not motivated by a discriminatory intent."); 28 C.F.R. §
35.130(b)(3) ("A public entity may not . . . utilize criteria or
methods of administration . . . that have the effect of

7

Case literature often interchangeably uses the term
"intentional discrimination" for disparate treatment and
"discriminatory effect" for disparate impact.
11

subjecting qualified individuals with disabilities to
discrimination on the basis of that disability . . . .").
It is important to note for Rule 12(b)(6) purposes, the
United States need not plead a prima facie case to state a
plausible claim of discrimination.

See, e.g., Flores v. Select

Energy Servs., L.L.C., No. 11-11024, 2012 WL 3530911, at *2 (5th
Cir. Aug. 16, 2012) (citing Swierkiewicz v. Sorema N.A., 534 U.S.
506, 510 (2002)).
C.
To prove disparate treatment under both the FHA and ADA, the
plaintiff must show that the defendant intended to discriminate
or was improperly motivated in making the discriminatory
decision.1

See, e.g., Hanson v. Veterans Admin., 800 F.2d 1381,

1386 (5th Cir. 1986); Greater New Orleans Fair Hous. Action Ctr.,
648 F. Supp. 2d at 808.

The Bond Commission contends that “only

direct culpable conduct on the part of the Bond Commission itself
would be sufficient to impose liability.”
1

The Bond Commission is

The statutes are often interpreted in tandem. In addition, as
the Court expressed in its December 6, 2012 Order and Reasons,
the mixed-motive framework is still available for claims under
antidiscrimination statutes within the Fifth Circuit, with the
exception of the Age Discrimination in Employment Act. See Smith
v. Xerox, 602 F.3d 320 (5th Cir. 2010) (limiting the application
of Gross v. FBL Fin. Servs., Inc. to claims under the ADEA only).
In addition, the Court notes that the Bond Commission is not
challenging whether the prospective tenants of the Esplanade
project are “disabled” within the terms of both statutes, because
addiction and mental illness are considered disabilities under
the law. See 24 C.F.R. § 100.201(a)(1); 28 C.F.R. §
41.31(b)(1)(ii).
12

misguided; direct evidence is not needed.

FHA cases have adopted

the same standard for proving discriminatory intent that governs
an equal protection claim as articulated by the U.S. Supreme
Court in Village of Arlington Heights v. Metropolitan Housing
Development Corp., 429 U.S. 252 (1977).

To assess whether or not

discriminatory intent exists, the Fifth Circuit, faithful to
Arlington Heights, has held the following circumstantial factors
to be both pertinent and non-exhaustive:
1. historical background of the decision;
2. the specific sequence of events leading up to the
decision;
3. departures from the normal procedural sequence;
4. substantive departures; and
5. legislative history, especially where there are
contemporary statements by members of the decision-making
body.
Overton v. City of Austin, 871 F.2d 529, 540 (5th Cir. 1989); see
also Greater New Orleans Fair Hous. Action Ctr., 648 F. Supp. 2d
at 808.

Application of the Arlington Heights factors

demonstrates that the discrimination claims of the federal
government in this case are plausible on their face.
Under the first and second Arlington Heights factors, which
examine the historical background and the specific sequence of
events, the United States alleges that the Bond Commission’s
actions occurred in response to community opposition to the
Esplanade project.

For example, a state senator, serving on the
13

Bond Commission, acknowledged this opposition in a letter to the
Director of the City Planning Commission by stating he was “very
familiar with the proposed use” of the Esplanade project and
“strongly urge[d] its denial” because it would “constitute a
death sentence for the surrounding” neighborhood.

See Greater

New Orleans Fair Hous. Action Ctr., 648 F. Supp. 2d at 811-12
(“[T]he public statements are relevant both as expressing the
general sentiment during the decision making process and also
insofar as public opinion was specifically referenced by the
decision-makers themselves.”);

see also Tsombanidis, 352 F.3d at

850 (“[T]he history of hostility of neighborhood residents . . .
and their pressure on the Mayor and other city officials . . .
supports the [district] court’s finding that this hostility
motivated the City in initiating and continuing its enforcement
efforts.”).

In addition, the historical background illustrates

that the Esplanade developers have repeatedly asked to be placed
on the Commission’s agenda for funding approval.

On every

occasion, the developers were denied their request without any
explanation, while, simultaneously, the Bond Commission placed
similar projects on its agenda (which it then funded).

The Bond

Commission contends that because “no explanation of the denial
was given, this fact cannot be sufficient to state a cause of
action against the Bond Commission because the Court would have
to engage in impermissible speculation as to the reason or basis

14

for denial.”

The Bond Commission appears confused as to the

legal standard for a Rule 12(b)(6):

all factual allegations (not

just this one) must be considered as a whole in deciding whether
a complaint states a plausible claim on its face.

Moreover, a

failure to explain an action may be circumstantial evidence of
intent, especially when the Commission approved other similar
projects.2
The third and fourth Arlington Heights factors address
procedural and substantive departures.

The United States alleges

that the Bond Commission failed to apply the moratorium
consistently, creating “exceptions” for similarly situated
housing projects that did not involve prospective tenants with
disabilities or vocal community opposition.

Further, the

Commission has refused to lift the moratorium despite the fact
its intended purpose—to study the low-income housing situation in
New Orleans—was completed in March 2011; the results of the study
determined that there was a need for additional affordable
housing.

The Bond Commission argues that the moratorium cannot

serve as a basis for liability because any discriminatory
implication is “negated” by the fact the Commission has granted
exceptions.

This argument is wholly without merit: selective

2

In fact, once a plaintiff proves a prima facie case of
discrimination, the law shifts the burden to the defendant to
articulate a legitimate, nondiscriminatory reason for the
challenged action. See Grimes v. Texas Dep’t of Mental Health &
Mental Retardation, 102 F.3d 137, 140 (5th Cir. 1996).
15

enforcement of the moratorium is precisely the kind of allegation
that plausibly infers discrimination.

See, e.g., Coleman v.

Donahoe, 667 F.3d 835, 857 (7th Cir. 2012) (“Such evidence of
selective enforcement of a rule calls into question the veracity
of the employer’s explanation. (internal quotation marks
omitted)); Williams v. City of Valdosta, 689 F.2d 964, 975 (11th
Cir. 1982) (“The City’s formal promotional policy was
inconsistent [and t]his inconsistency supports the conclusion
that . . . [the] requirement was a pretext . . . for unfavorable
treatment.”).
Last, the fifth Arlington Heights factor takes into account
legislative history, in particular statements made by members of
the decision-making body.

As previously mentioned, the amended

complaint, alleges that a member of the Bond Commission stated
that the Esplanade project would “be occupied by recovering drug
addicts, the perennially homeless, and former convicts, with no
direct supervision and unlimited ingress and egress, . . . [and]
would constitute a death sentence for the surrounding"
neighborhood.
As a result, the Court finds that the complaint contains
sufficient factual allegations to state a discrimination claim,
under the disparate treatment framework, in violation of the FHA
and ADA.

16

D.
In addition to prohibiting actions taken with a
discriminatory intent, the FHA and ADA also prohibit actions that
have a discriminatory impact.

See Simms v. First Gibraltar Bank,

83 F.3d 1546, 1555 (5th Cir. 1996) (“A violation of the FHA may
be established not only by proof of discriminatory intent, but
also by a showing of significant discriminatory effect.”); see
also Reg’l Econ. Cmty. Action Program v. City of Middletown, 294
F.3d 35, 52 (2d Cir. 2002) (“The FHA and the ADA provide relief
not only from polices adopted and actions taken with a
discriminatory intent, but also from the application of facially
neutral standards that have an unlawful discriminatory effect
upon a protected class.”).
To prove a disparate impact discrimination claim, the
plaintiff must show the existence of a facially neutral policy or
practice that “actually or predictably results in a disparate
impact on a group of persons or creates, increases, reinforces,
or perpetuates segregated housing patterns because of
[disability].”

24 C.F.R. § 100.500(a); see also 28 C.F.R. §

35.130(b)(3) (corresponding ADA provision).

The Fifth Circuit

has emphasized that the question is “whether a policy, procedure,
or practice specifically identified by the plaintiff has a
significantly greater discriminatory impact on members of a

17

protected class.”

Simms, 83 F.3d at 1555; see also Tsombanidis,

352 F.3d at 574-75.
The Court finds that the United States has pleaded
sufficient factual allegations to state a plausible claim of
disparate impact.3

The amended complaint identifies a facially

neutral policy, namely, the moratorium.

Moratoriums and other

zoning practices are actionable under the FHA and ADA when they
have a discriminatory effect on a protected class.

See Greater

New Orleans Fair Hous. Ctr., 641 F. Supp. 2d at 577-78 (noting
that a moratorium passed in 2008 on construction of multi-family
housing had a discriminatory effect on African-Americans); 24
C.F.R. § 100.70(d)(5) (articulating prohibited housing practices,
which include enacting or implementing land-use rules,
ordinances, policies, or procedures that restrict or deny housing
opportunities or otherwise make unavailable or deny dwellings to
persons because of disability); see also Huntington Branch NAACP
v. Town of Huntington, 844 F.2d 926, 937-38 (2d Cir. 1988)
(involving a zoning ordinance that restricted location of multifamily housing to “urban renewal area”).
The United States submits that the moratorium actually or
predictably results in a disparate impact, because it has a
significantly greater effect on low-income persons with
disabilities, factual allegations that the Court accepts as true
3

Again, the Court expresses no opinion as to the merits of this
claim.
18

for purposes of this Rule 12(b)(6) motion.

The complaint alleges

that approximately 55% of the local homeless population is
disabled, with more than 2,000 disabled persons on a waiting list
for permanent supportive housing, which the Esplanade project
dedicates half of its units toward.

Further, the Bond

Commission’s selective enforcement of the moratorium, it is
urged, increases its impact on persons with disabilities.
The Court finds that the United States’ amended complaint
contains sufficient factual matter, on the present record, that
states a claim for relief that is plausible on its face.
Accordingly, IT IS HEREBY ORDERED that the Louisiana State
Bond Commission’s motion to dismiss is DENIED.
New Orleans, Louisiana, April 24, 2013
______________________________
MARTIN L. C. FELDMAN
UNITED STATES DISTRICT JUDGE

19