TOWNSHIP OF LAKEWOOD, NEW JERSEY et al v. CASTRO

Filing 65

OPINION filed. Signed by Judge Brian R. Martinotti on 4/3/2017. (mmh)

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
TOWNSHIP OF LAKEWOOD, NEW
:
JERSEY, et al.,
:
:
Civil Action No. 15-6325-BRM-DEA
Plaintiff,
:
:
v.
:
:
JULIAN CASTRO,
:
Secretary, United States Department of
:
Housing and Urban Development,
:
:
OPINION
Defendant.
:
____________________________________:
MARTINOTTI, DISTRICT JUDGE
Before this Court is a Motion for Judgment on the Pleadings, pursuant to Fed. R. Civ. P.
12(c), filed by Defendant Julian Castro, Secretary, United States Department of Housing and
Urban Development (“HUD” or “Defendant”). (ECF No. 43.) This motion is opposed by Plaintiffs
Meir N. Hertz, Henya Richter, Rachel Freundlich, Ruth Berl, Broch Jacobs, Sara Lewin, and
Simcha Hoffman (collectively, the “Individual Plaintiffs”) (ECF No. 55), and also by the
Lakewood Tenants Organization, Inc. (“LTO”) and the Township of Lakewood (“Lakewood” or
the “Township”) (collectively, the “Plaintiffs”) (ECF No. 56). Pursuant to Fed. R. Civ. P. 78(b),
no oral argument was heard. For the reasons set forth below, Defendant’s motion is DENIED.

1

BACKGROUND 1

I.
A.

FACTUAL BACKGROUND

Plaintiffs commenced this action for injunctive, declaratory, and legal relief challenging
HUD’s determination that the Township was in violation of HUD’s regulations for administering
certain housing-assistance funds received from HUD. (See ECF No. 30 at ¶ 1.)
The Amended Complaint alleges that, for almost 40 years, the Township, as a public
housing agency (“PHA”), has had a Housing Choice Voucher (“HCV”) Program, pursuant to
Section 8 of the United States Housing Act of 1937 (“Section 8”). (Id. at ¶ 3; see also id. at ¶¶ 3539.) The Township’s HCV Program, called the Lakewood Township Residential Assistance
Program (the “Program” or “LTRAP”), is pursuant to certain Annual Contribution Contracts
(collectively, the “ACCs” and, individually, each is an “ACC”), between the Township and HUD.
(Id.)
“From its inception, the Township has sub-contracted with LTO to administer LTRAP, a
practice often utilized by PHAs.” (Id. at ¶ 4; see also id. at ¶¶ 36-39.) Allegedly, “LTRAP is the
largest private sector, federal-assisted affordable housing program in Ocean County, New Jersey,
and one of the largest in New Jersey. Its Section 8 program presently serves more than 11,400 New
Jersey, low-income households consisting of approximately 8,700 individual Program
beneficiaries,” the majority of which are “elderly, the disabled, and children.” (Id. at ¶ 6.)
According to the Amended Complaint, “[t]he Township forwarded its original sub-contract
with LTO for administration of LTRAP to HUD for approval,” to which “HUD responded by
letter[,] dated August 30, 1977, stating: ‘HUD is not a party to this Contract, and consequently our
review and approval of the Contract is not required. . . .’” (Id. at ¶ 5; see also id. at ¶ 36.) Further,
1

The facts set forth in this Opinion are taken from Plaintiff’s Amended Complaint (ECF No. 30),
the parties’ briefs and related filings.

2

“[d]uring the almost 40 years of its existence, LTRAP has been administered with great success”
and “very few complaints from the Program’s tenants and participating landlords and has
established an outstanding audit track record of fiscal responsibility and program integrity, as well
as regulatory compliance with all applicable HUD policies, practices, and procedures.” (Id. at ¶¶
7, 10.) Specifically, Plaintiffs allege, under “the HUD Section Eight Management Assessment
Program (“SEMAP”)[ 2], the Township’s Program under the administration of LTO has
consistently attained nearly perfect scores and SEMAP’s highest performance rating.” (Id. at ¶ 8.)
In fact, “LTRAP’s average SEMAP score for the most recent 4-year period is 99.34% - one of the
highest in the nation.” 3 (Id. at ¶ 9.)
Beginning in the fall of 2011, however, HUD allegedly “began waging a campaign of
baseless, unjustified, and excessive investigations of the Program, after LTRAP discontinued
assistance to an individual Section 8 tenant, referred to herein as ‘Mr. N,’ whom the LTO and the
Township had determined was illegally collecting double Section 8 subsidies . . .” (Id. at ¶ 11; see
also id. at ¶¶ 41-45.) According to the Amended Complaint, this campaign “became even more
intense approximately one year later when the LTO refused to reinstate Mr. N after a[ HUD]
official . . . contacted LTO and unlawfully demanded that Mr. N’s voucher be reinstated and
threatened retaliation against LTO if this demand was not met.” (Id. at ¶ 12; see also id. at ¶¶ 4662.) When the Township and LTO continued to refuse to reinstate Mr. N, “HUD then initiated
demands that LTO submit to . . . a retroactive audit of LTO’s internal corporate books and ledgers,”

2

SEMAP is “HUD’s method for measuring the annual performance of Section 8 programs,” and
“measures the performance of the [PHAs] that administer the [HCV] program in 14 key areas.”
(Id. at ¶ 8.)
3

“By comparison, the average SEMAP score for Section 8 housing in New Jersey is 77.39%.” (Id.
at ¶ 9; see also id. at ¶ 130 (describing “LTRAP’s unblemished administrative record and very
high overall SEMA scores”.)

3

something “HUD had never before requested.” (Id. at ¶ 13; see also id. at ¶¶ 63-73.) The Amended
Complaint alleges “this retroactive audit of internal LTO books and ledgers [was] over and beyond
the regular annual Independent Public Accountant (IPA) audit of the LTRAP books and ledgers.”
(Id. at ¶ 14; see also id. at ¶¶ 74-77.) As such, “LTO was unable to comply with [HUD’s] demand
because such records were never previously required, and did not exist in the form now being
demanded by HUD.” (Id. at ¶ 14.)
The gravamen of Plaintiffs’ allegations is, “[d]espite LTO’s explanation that the requested
documents did not exist and that its annual filings of IRS Form 990 tax returns identified most of
the information presently being demanded, HUD threatened to terminate, and ultimately attempted
to terminate, the Township’s successful and beneficial Program . . . because LTO did not comply
with HUD’s unwarranted, unprecedented, and unjustified demands that HUD examine the LTO’s
internal, non-programmatic corporate books and ledgers.” (Id. at ¶ 14; see also id. at ¶ 107.)
Additionally, Plaintiffs allege “HUD officials made a number of anti-Semitic remarks to
LTO personnel and questioned LTO personnel about their religious observances.” 4 (Id. at ¶ 15;
see also id. at ¶¶ 108-111.) Plaintiffs further allege “HUD’s excessive and unjustified abuse of
power and disparate treatment of LTO and the Program was the result of anti-Semitism directed
particularly to Orthodox Jewish people and was retaliation for LTO’s fulfilling its responsibilities
to uphold program integrity by refusing to reinstate” Mr. N’s Section 8 benefits. (Id. at ¶ 15.)
According to Plaintiffs, “[t]he purported bases for HUD’s enforcement actions were . . . pretextual”
and “the relentless, non-stop audits and investigations evidence a pattern and practice of religious
bias and anti-Semitic targeting.” (Id. at ¶ 16.)

4

“LTO is run in large part by members of the Orthodox Jewish community, reflecting the fact that
the majority of Lakewood’s population is of the Orthodox Jewish faith.” (Id. at ¶. 15.)

4

Ultimately, “[b]y letter dated December 5, 2014 (the “Threatened Termination Letter”),
HUD threatened to terminate the contract for LTRAP . . . if LTO failed to submit to an audit of
LTO’s internal books and records.” (Id. at ¶ 106.) On February 10, 2015, attorneys for the Plaintiffs
met in person with [several] HUD representative . . . [to] discuss[] the Threatened Termination
Letter and the history of” the parties’ dispute. (Id. at ¶¶ 112-13.) As alleged in the Amended
Complaint, “Plaintiffs’ representatives left the meeting with the impression that HUD would look
into Plaintiffs’ claims and that the parties would work together toward a global resolution of any
outstanding claims.” (Id. at ¶ 113.) In fact, at the meeting, HUD allegedly “agreed to ‘speak to
with [Plaintiffs’ attorneys] before taking any further action against [the] Township or LTO in
regard to the issues [they] discussed, including any formal declaration by HUD that the Township
is in default of the ACC.” (Id. at ¶ 114.) The parties allegedly memorialized this agreement in an
email from Plaintiffs’ attorneys to HUD’s counsel, dated February 17, 2015. (Id.)
Allegedly, however, HUD did not “speak” to Plaintiffs’ attorneys prior to taking action
against the Township or LTO. (Id. at ¶ 115.) Instead, on or about August 7, 2015 and without any
prior notice, Lakewood’s Mayor, Albert Akerman, was contacted by HUD and advised that, in the
following week, HUD would be transferring the Program to the Lakewood Housing Authority
(“LHA”). (Id. at ¶ 116.) Thereafter, at a special meeting called for August 11, 2015, the Board of
Commissioners of LHA voted to accept HUD’s transfer of the Program from the Township and
LTO. (Id. at ¶ 119.) The following day, HUD sent a “Termination Letter” to Plaintiffs, advising
that the Township was in default of its ACC and, as a result, HUD would take control of the
Program and transfer it to LHA effective September 1, 2015. (Id. at ¶ 121.) Plaintiffs maintain
“HUD [did] not tr[y] to resolve the [parties’] issues ‘with good faith negotiations’ and “did not
contact Plaintiffs to resolve any issues following the February 10, 2015 meeting.” (Id. at ¶ 124.)

5

Plaintiffs contend HUD’s conduct “substantially burdened the LTO personnel’s exercise
of the Orthodox Jewish religion by disparaging their religious observances and by ‘profiling’
Orthodox Jews implying they are unethical.” (Id. at ¶ 15; see also id. at ¶ 110.) HUD’s conduct is
also alleged to “contravene the 1937 Housing Act, the Religious Freedom Restoration Act,
Presidential Executive Orders, and HUD’s mission as expressed by Congress.” (Id. at ¶ 16.)
B.

PROCEDURAL HISTORY

Plaintiffs commenced this action on August 21, 2015. (ECF No. 1.) Plaintiffs’ original
Complaint asserted four (4) causes of action: (1) due process violations, for failing to provide
procedural due process and an opportunity to respond; (2) equal protection violations, arising out
of the alleged denial of equal protection and disparate treatment and impact because of HUD’s
discrimination against Orthodox Jews; (3) breach of contract, arising out of HUD’s termination of
the Program; and (4) violations of the Administrative Procedures Act (“APA”), 5 U.S.C. § 701, et
seq., and for relief under the Declaratory Judgment Act, 28 U.S.C. § 2201. (ECF No. 1.) Plaintiffs
sought injunctive, declaratory and other legal relief. (Id.)
On August 24, 2015, Plaintiffs filed a Motion for Order to Show Cause, seeking to
temporarily restrain HUD, pending a determination on the merits of Plaintiffs’ application for a
preliminary injunction, from: (1) taking possession of LTRAP or any property, rights or interest
in connection therewith, or transferring any of the foregoing to the Lakewood Housing Authority
or taking any action based on the Township’s alleged default under the ACC; (2) transferring
current and historical information and documentation relating to the Program; and (3) terminating,
limiting or impairing Plaintiffs’ access to HUD data systems of any kind. (ECF No. 4.)

6

The parties entered into a Stipulation and Consent Order resolving Plaintiffs’ application
for an Order to Show Cause (ECF No. 8), which was So-Ordered by the Honorable Michael A.
Shipp, U.S.D.J., on August 28, 2015 (ECF No. 10). 5
On April 8, 2016, pursuant to the Court’s Initial Scheduling Order (ECF No. 28) and with
HUD’s consent, Plaintiffs filed a First Amended Complaint (ECF No. 30). Plaintiffs’ Amended
Complaint asserts the same causes of action as their original Complaint, and adds a fifth claim for
violations of the Religious Freedom Restoration Act (“RFRA”), 42 U.S.C. 2000bb, for allegedly
placing a substantial burden on the exercise of the Orthodox Jewish religion. (Id. at ¶¶ 185-194.)
HUD now moves for judgment on the pleadings dismissing Counts I-III, V of Plaintiffs’
Amended Complaint, pursuant to Fed. R. Civ. P. 12(c). (ECF No. 43.) 6 Plaintiffs oppose the
motion. (ECF Nos. 55 and 56.)
II.

LEGAL STANDARD
Federal Rule of Civil Procedure 12(c) provides: “After the pleadings are closed – but early

enough not to delay trial – a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c).
“The difference between a motion to dismiss pursuant to Rule 12(b)(6) and Rule 12(c) is only a
matter of timing and the Court applies the same standard to a Rule 12(c) motion as it would to a
Rule 12(b)(6).” Newton v. Greenwich Twp., 2012 WL 3715947, at *2 (D.N.J. Aug. 27, 2012); see
also Muhammad v. Sarkos, 2014 WL 4418059 (D.N.J. Sept. 8, 2014) (“Where a defendant’s
motion is one for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), it

5

This matter was reassigned to the undersigned on August 9, 2016. (ECF No. 40.)

6

In its motion, HUD also requested a stay of discovery. (Id.) Pursuant to a September 13, 2016
Letter Order (ECF No. 47), HUD filed a separate Motion for Protective Order to Preclude
Discovery and Motion to Stay Discovery (ECF No. 48). In an Order, dated February 17, 2017, the
Honorable Douglas E. Arpert, U.S.M.J. denied, without prejudice, HUD’s motion for a protective
order and granted HUD’s Motion to Stay. (ECF No. 64.) As such, this Court will only address that
portion of HUD’s motion seeking judgment on the pleadings, pursuant to Fed. R. Civ. P. 12(c).

7

is treated under the same standards as a Rule 12(b)(6) motion where it alleges that a plaintiff has
failed to state a claim.”) (citing Turbe v. Gov’t of V.I., 938 F.2d 427, 428 (3d Cir. 1991); Gebhart
v. Steffen, 2014 WL 3765715, at *2 (3d Cir. Aug. 1, 2014)).
“In deciding a Rule 12(c) motion, the court does not consider matters outside the pleadings”
and must “view[] the complaint ‘in the light most favorable to the plaintiff’ . . . [to determine
whether] ‘there is no material issue of fact to resolve, and [the moving party] is entitled to judgment
in its favor as a matter of law.’” Mele v. Federal Reserve Bank of New York, 359 F.3d 251, 257
(3d Cir. 2004) (quoting Leamer v. Fauver, 288 F.3d 532, 534 (3d Cir. 2002)); see also Phillips v.
Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008) (pursuant to Fed. R. Civ. P. 12(b)(6), a district
court is “required to accept as true all factual allegations in the complaint and draw all inferences
in the facts alleged in the light most favorable to the [plaintiff].”).
“While a complaint attacked by a Rule 12[] motion . . . does not need detailed factual
allegations,” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007), the “plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action will not do.” Id. (citing Papasan v.
Allain, 478 U.S. 265, 286 (1986)). A court is “not bound to accept as true a legal conclusion
couched as a factual allegation.” Papasan, 478 U.S. at 286. Instead, assuming the factual
allegations in the complaint are true, those “[f]actual allegations must be enough to raise a right to
relief above the speculative level.” Twombly, 550 U.S. at 555.
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). “A claim has facial plausibility when the
pleaded factual content allows the court to draw the reasonable inference that the defendant is

8

liable for misconduct alleged.” Id. This “plausibility standard” requires the complaint allege “more
than a sheer possibility that a defendant has acted unlawfully,” but it “is not akin to a ‘probability
requirement.’” Id. (citing Twombly, 550 U.S. at 556). “Detailed factual allegations” are not
required, but “more than ‘an unadorned, the defendant-harmed-me accusation” must be pled; it
must include “factual enhancements” and not just conclusory statements or a recitation of the
elements of a cause of action. Id. (citing Twombly, 550 U.S. at 555, 557).
“Determining whether a complaint states a plausible claim for relief [is] . . . a contextspecific task that requires the reviewing court to draw on its judicial experience and common
sense.” Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer
more than the mere possibility of misconduct, the complaint has alleged—but it has not
‘show[n]’—‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).
III.

DECISION
Defendant argues judgment on the pleadings should be granted “as to Claim I, II, III, and

V, for failing to state a claim upon which relief can [be] granted” because “Plaintiffs have failed
to allege any plausible or non-conclusory allegations that would support each of those four
respective claims.” (ECF No. 43-1 at 1.) Defendant additionally argues “[c]laim IV, the Plaintiffs’
APA claim, should proceed to Summary Judgment.” (Id.) Essentially, HUD contends Plaintiffs’
Amended Complaint merely “raises a number of ancillary or immaterial issues . . . regarding its
dispute with HUD” because, in HUD’s view, the letter sent “on August 11, 2015, by HUD’s
Principal Deputy Assistant Secretary (PDAS) for Public and Indian Housing, Lourdes Castro
Ramirez . . . determining that Lakewood was in violation of HUD regulations and in breach of its
[ACC]” fully documents and supports HUD’s decision to terminate the Township’s participation
in the Program. (Id. at 2-3.)

9

Plaintiffs oppose the motion, arguing it “is based almost entirely on HUD’s version of facts
which are ‘assumed to be false’ for purposes of this Motion.” (ECF No. 56 at 1.) 7 Defendant’s
motion, they argue, impermissibly relies upon “‘facts’ outside the pleadings” to suggest
“Plaintiffs’ facts are facially implausible.” (Id.) According to Plaintiffs, the Amended Complaint’s
“allegations detail a bad-faith, discriminatory, and shocking campaign by HUD to terminate the
Township’s forty-year-old Section 8 program for illegal reasons with no foundation in law or fact,”
and with a level of specificity and facial-plausibility that “easily surpasses the Rule 12(c)
standard.” (Id.)
The Court agrees with Plaintiffs. Accordingly, and for the reasons discussed below,
Defendant’s motion is denied.
A.

COUNT I – DUE PROCESS CLAIMS

Plaintiffs’ first claim for relief is for “due process” violations. (ECF No. 30 at ¶¶ 135-148.)
“[D]ue process, unlike some legal rules is not a technical conception with a fixed content unrelated
to time, place and circumstances. Due process is flexible and calls for such procedural protections
as the particular situation demands.” Knox v. Union Twp. Bd. of Educ., 13-cv-5875, 2015 U.S.
Dist. LEXIS 21536, at *22 (D.N.J. Feb. 23, 2015) (citing Biliski v. Red Clay Consol. Sch. Dist.
Bd. of Educ., 574 F.3d 214, 220 (3d Cir. 2009)). “The essential requirements of any due process
claim are notice and the opportunity to be heard.” Id. (quoting Zappan v. Pa. Bd. of Probation &
Parole, 152 F. App’x 211, 220 (3d Cir. 2005)). Although not delineated in the Amended
Complaint, Plaintiffs assert both (1) an explicit procedural due process claim relating to

7

Lakewood and LTO, on the one hand, and the Individual Plaintiffs, on the other hand, filed
separate briefs in opposition to Defendant’s motion (ECF Nos. 55 and 56), but all join in the
arguments asserted by the others. As such, for convenience, the Court refers to Plaintiffs’
arguments generically and collectively.

10

Lakewood’s property interest in the Section 8 program funds (ECF No. 30 at ¶¶ 135-148), and (2)
an implicit substantive due process claim alleging Defendant’s actions were “shocking to the
conscience” (id. at ¶ 140).
i.

PROCEDURAL DUE PROCESS

To state a procedural due process claim, Plaintiffs “must show that the Defendant[]
deprived him of a protected property interest and that the state procedure for challenging the
deprivation was constitutionally inadequate.” Perano v. Twp. of Tilden, 423 F. App’x 234, 237 (3d
Cir. 2011) (citing Hill v. Borough of Kutztown, 455 F.3d 225, 233-34 (3d Cir. 2006); Revell v. Port
Auth. of N.Y. & N.J., 598 F.3d 128, 138 (3d Cir. 2010)).
HUD admits “Lakewood’s Section 8 program is a property right protected by [the]
procedural due process requirements of the Fifth Amendment.” (ECF No. 43-1 at 12 (citing LinanFaye, Constr. Co. v. Housing Auth., 49 F.3d 915, 932 (3d Cir. 1995).) Nonetheless, Defendant
argues it “satisfied the procedural requirements in the ACC” and “provided [Plaintiffs] with ample
notice and an opportunity to be heard before HUD staff, while represented by counsel, prior to
HUD taking action to terminate Lakewood’s Section 8 program” and even “has a post-deprivation
judicial remedy in its APA claim.” (Id. at 13-14.) According to HUD, “[t]he sum of these parts
negates any claim of a violation of procedural process.” (Id.)
Defendant’s arguments largely ignore Plaintiffs’ well-plead allegations that HUD and its
agents improperly targeted LTO for illegal and discriminatory reasons, initiated several improper
investigations, repeatedly threatened closure, and ultimately sought to terminate Lakewood’s
Section 8 Program, despite its earlier representations to the contrary. While HUD argues its
determination letter adequately supports its decision and provided sufficient due process, Plaintiffs
allege HUD’s conduct was merely pre-textual. Similarly, while HUD contends the February 10,

11

2015 meeting of counsel was the functional equivalent of a hearing, for due process purposes,
Plaintiffs describe that meeting as a preliminary settlement discussion and maintain they were
never afforded a meaningful opportunity to be heard. Ultimately, this will be a factual
determination, but Plaintiffs have sufficiently alleged a constitutional violation.
Although Defendant correctly argues that “[i]t is the law in [the Third] Circuit that a state
provides adequate due process when it provides ‘reasonable remedies to rectify a legal error by a
local administrative body,’” Bello v. Walker, 840 F.2d 1124 (3d Cir. 1988) (holding that, because
“Pennsylvania affords a full judicial mechanism with which to challenge the administrative
decision” at issue, “plaintiffs have no justifiable due process claim”) (abrogated in part on other
grounds by United Artists Theater Cir. v. Twp. of Warrenton, 316 F.3d 392, 400 (2003)), HUD
offers no support for its argument that constitutional due process is always satisfied whenever an
APA claim is available and the cases HUD does rely upon are distinguishable. Bello, for example,
was decided by the district court at the summary judgment stage, and affirmed by the Third Circuit,
because the plaintiff “set forth [no] behavioral or structural allegations from which [the court
could] infer that process was unconstitutional.” Id. at 1128 (citing Rogin v. Bensalem Twp., 616
F.2d 680, 695 (3d Cir. 1980), cert. denied, 450 U.S. 1029 (1981)). Unlike in Bello, Plaintiffs’
Amended Complaint sets forth both behavioral and structural allegations from which the Court
can infer HUD’s process was unconstitutional.
Whether a discriminatory motive played a part in HUD’s decision to terminate the
Program, as Plaintiffs allege, or whether the Township, in fact, breached the ACC, as HUD
contends, is a factual determination that is ill-suited to resolution on the pleadings alone. 8 At this

8

Indeed, the cases cited by HUD are, for the most part, summary judgment decisions, made after
a full opportunity for discovery. See, e.g., Revell, 598 F.3d at 128 (granting summary judgment on
constitutional due process claims relating to the alleged taking of plaintiff’s firearm); Bello, 840
12

stage, however, Plaintiffs have sufficiently alleged a procedural due process violation such that
their claims should be allowed to proceed.
ii.

SUBSTANTIVE DUE PROCESS

“The core of the concept of due process is protection against arbitrary action.” Kaucher v.
Cnty. of Bucks, 455 F.3d 418, 425 (3d Cir. 2006). “To establish a substantive due process claim, a
plaintiff must prove the particular interest at issue is protected by the substantive due process
clause and the government’s deprivation of that protected interest shocks the conscience.” Chainey
v. Street, 523 F.3d 200, 219 (3d Cir. 2008) (citing United Artists Theatre Circuit, Inc. v. Township
of Warrington, PA, 316 F.3d 392, 400-02 (3d Cir. 2003). The Third Circuit has held “that a
violation of . . . law will constitute conscience shocking behavior when it contains ‘allegations of
corruption, self-dealing, bias against an ethnic group, or additional facts that suggest conscienceshocking behavior.’” Whittaker v. Cnty. of Lawrence, 437 F. App’x 105, 109 (3d Cir. 2011)
(citations omitted).
Despite recognizing that the Amended Complaint “refers to Jews, Judaism, and
antisemitism [sic] over 50 times” (ECF No. 43-1 at 17 (citations omitted)), Defendant argues “the
Court could at best plausibly understand these comments or questions to be uninformed, ignorant,
insensitive, or discourteous” but not that they are “‘shocking’ in any common sense understanding
of the word” (id. at 17-18). The Court disagrees.
Plaintiffs’ Amended Complaint alleges, among other things, that HUD has gone on record
with its concerns over “non-Jewish” discrimination in the Township and sought, under pretext, to
terminate the Program, in part, because it was managed by Orthodox Jews. (See, e.g., ECF No. 30

F.2d 1124 (reversing district court’s order granting summary judgment on substantive due process
claims, but affirming dismissal of procedural due process claims).

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at ¶¶ 41-62.) The Amended Complaint details a years-long crusade and relentless pursuit of this
objective, and describes specific incidents of anti-Orthodox Jewish acts allegedly taken by HUD.
(Id. at ¶¶ 15, 41-73, 96-99, 108-11.) Accepted as true, as they must be for purposes of this motion,
these allegations plausibly suggest that HUD’s actions in seeking to terminate the Program “can
properly be characterized as arbitrary, or conscience shocking, in a constitutional sense.” Kaucher,
455 F.3d at 435.
At this stage of the proceedings, the Court declines to find, as a matter of law, that HUD’s
alleged conduct is not “shocking to the conscience.” To do so would require to Court to accept
HUD’s version of the facts as true and discount Plaintiffs’ well-pled “allegations of . . . bias against
an ethnic groups, [and] additional facts that suggest conscience-shocking behavior,” Whittaker,
437 F. App’x at 109, which would be contrary to Third Circuit precedent and the standards of Rule
12.
B.

COUNT II – EQUAL PROTECTION CLAIM

To state an equal-protection claim, Plaintiffs must allege facts showing: (1) Plaintiffs were
treated differently from others similarly situated; (2) the selective treatment of Plaintiffs was
intentional; and (3) there was no rational basis for the difference in treatment. McCray v. Passaic
County Jail, 13-cv-6975, 2013 U.S. Dist. LEXIS 168481, at *11 (D.N.J. Nov. 25, 2013) (citing
Borough of Kutztown, 455 F.3d at 239); see also Government of V.I. v. Harrigan, 791 F.2d 34, 36
(3d Cir 1986).
The Amended Complaint alleges HUD terminated the Program either because the
Township had a subcontractor or HUD treated Lakewood more harshly than other similarly
situated PHAs. (See, e.g., ECF No. 30 at ¶¶ 40, 91, 155.) To support these allegations, Plaintiffs
attach and refer to a “Table 1,” which lists other PHAs that have Section 8 subcontractors. (Id. at

14

Ex. 1.) HUD argues its “determination letter and ACC . . . contradict these assertions” and “[t]o
the extent Lakewood has characterized HUD’s termination of the Section 8 program as differential
treatment of Lakewood, it would be mistaken because the other PHAs are not in default of their
ACCs, so they are not similarly situated.” (ECF No. 43-1 at 19-20.) 9
While HUD’s denials might ultimately prove true, resolution of Plaintiffs’ equal-protection
claim requires the Court to decide disputes issues of fact. At the pleadings stage, however, the
Court is required to view the allegations in the light most favorable to Plaintiffs and resolve any
disputed issues of fact in their favor. Because HUD asks the Court to do the exact opposite, its
motion must be denied.
C.

COUNT III – BREACH OF CONTRACT CLAIM

Defendant argues that Plaintiffs’ breach of contract claim fails because (1) only Lakewood
is a party to any contract with HUD and (2) “Lakewood fails to plead damages for its contract
claim.” (ECF No. 43-1 at 25.) Plaintiffs concede the first point, but note that even HUD has
suggested at times that LTO is, in fact, the PHA counter-party to the ACC. (See id. at p 2 n.1.)
Regardless, the Court finds Plaintiffs have sufficiently plead and requested money damages –
namely, an Order requiring HUD to honor and perform under the ACC, including HUD’s payment
of the monies provided for in the ACC.
HUD cites no case law to support its argument that a plaintiff must quantify its loss (see
ECF No. 43-1 at 27), and the Court is aware of none. To the contrary, this District’s Local Civil
Rules expressly require: “A pleading which sets forth a claim for relief in the nature of unliquidated

9

It did not go unnoticed that HUD’s claims regarding similarly situated PHAs are not supported
by any citation to the administrative record or other evidence. While a district court generally will
not consider documents outside the pleadings on a Rule 12 motion, HUD relies almost exclusively
on outside documents in support of its other arguments, and HUD’s failure to do so here only
underscores why judgment cannot be granted in its favor on the basis of the pleadings alone.

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money damages shall state in the ad damnum clause a demand for damages generally without
specifying the amount.” L.Civ.R. 8.1; see also Fed. R. Civ. P. 8(a); Decosta v. English, 11-cv2651, 2012 WL 528760, at *6 (D.N.J. Feb. 16, 2012) (“at this stage of the litigation [on a Rule
12(b)(6) motion], ‘the Federal Rules do not require the Plaintiff to . . . specify damages that were
incurred.’”) (quoting RehabCare Group East, Inc. v. Trenton Convalescent Operating Co., 06-cv2128, 2006 WL 2711496, at *2 (D.N.J. Sept. 20, 2006)). Thus, there is no support for HUD’s
contention that “Plaintiffs must prove they suffered a ‘quantifiable loss’” for their Amended
Complaint to withstand a Rule 12 motion. (See ECF No. 43-1 at 26.)
HUD also fails to show the requested relief is barred either by statute or because an award
would gravely impair HUD’s fundamental functions. FHA v. Burr, 209 U.S. 242, 245 (1940)
(holding that waivers of sovereign immunity, like those set forth in the Housing Act of 1937, are
to be liberally construed and are only limited to the extent the Government agency can show the
relief sought would gravely impair the agency’s fundamental functions.”); FDIC v. Meyer, 510
U.S. 471, 480-81 (1994) (explaining “Burr makes it clear that sue and be sued clauses cannot be
limited by implication unless there has been a clea[r] show[ing] that certain types of suits are not
consistent with the statutory or constitutional scheme, that an implied restriction of the general
authority is necessary to avoid grave interference with the performance of a governmental
function, or that for other reasons it was plainly the purpose of Congress to use the ‘sue and be
sued’ clause in a narrow sense.”).
In any event, the Amended Complaint’s ad damnum clause is broad enough to encompass
a request for monetary damages. But, even if it were not, nothing about the specifically-requested
relief – a declaration that the proposed termination of the Program would be a breach of contract
and an injunction precluding such a breach – interferes in any meaningful way with HUD’s

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fundamental functions or the intent of the Program. In short, Plaintiffs have sufficiently pled
damages for their breach of contract claim that are neither barred by statute nor the terms of the
contract.
D.

COUNT V – RFRA CLAIM

The “RFRA prohibits the ‘Government from substantially burdening a person’s exercise
of religion even if the burden results from a rule of general applicability unless the Government
‘demonstrates that application of the burden to the person- (1) is in furtherance of a compelling
governmental interest; and (2) is the least restrictive means of furthering that compelling interest.’”
Burwell v. Hobby Lobby Stores, Inc., 134 S.Ct. 2751, 2761 (2016) (citing 42 U.S.C. 2000bb1(a),(b)) (internal marks omitted).
HUD argues Plaintiffs’ RFRA claim fails because the Amended Complaint does not
“identif[y] any generally applicable HUD rule that substantially inhibits [Plaintiffs’] engagement
in activities fundamental to [their] faith” or “any particular written directives . . . emails or any
other personal communication from HUD staff . . . regarding . . . any HUD-imposed negative
consequences for their current practices.” (ECF No. 43-1 at 28.) Instead, HUD asserts “[t]here are
no generally applicable Office Public and Indian Housing Notices that apply to Lakewood that
govern PHA business hours cited by Lakewood.” (Id.) According to HUD, its “[q]uestions and a
few comments, even those perceived as negative, d[id] not ‘significantly inhibit’ any Lakewood
employees from exercising their religion.” (Id. (citing Hobby Lobby, 134 S.Ct. at 2775-76).)
HUD’s arguments, however, rest entirely upon its own self-serving denials of fact and
interpretations of law.

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Initially, the Court rejects HUD’s contention that a substantial burden, in violation of the
RFRA, can only be shown by identifying a formal, written policy, rule, or directive. 10 “Although
RFRA does not explicitly define the term ‘substantial burden,’ [the Third Circuit] ha[s] explained
that a substantial burden exists where (1) ‘a follower is forced to choose between following the
precepts of his religion and forfeiting benefits otherwise generally available to other[s] versus
abandoning one of the precepts of his religion in order to receive a benefit;’ or (2) ‘the government
puts substantial pressure on an adherent to substantially modify his behavior and to violate his
beliefs.’” Mack v. Warden Loretto FCI, 2016 WL 5899173, at *11-12 (3d Cir. Oct. 11, 2016)
(quoting Washington v. Klem, 497 F.3d 272-80 (3d Cir. 2007)). In Mack, the plaintiff-inmate
alleged he was terminated from his paid work assignment for complaining to prison officials about
two officers’ anti-Muslim harassment, specifically that “the combination of Officer Roberts’ antiMuslim harassment and Officer Venslosky’s tacit approval created a hostile work environment
that caused him to stop praying at work.” Id. at *11. “Although Mack concede[d] that the officers
did not directly command him to cease praying,” the Third Circuit explained “a burden can be
‘substantial’ even if it involves indirect coercion to betray one’s religious beliefs.” Id.; see Lyng v.
N.W. Indian Cemetery Protective Ass’n., 485 U.S. 439, 450 (holding “indirect coercion or penalties
on the free exercise of religion, not just outright prohibitions, are subject to scrutiny”). In short,

10

The only case cited by HUD, Harless v. Darr, 937 F. Supp. 1339, 1346 (S.D. Ind. 1996), is
neither controlling nor persuasive. Nothing in Harless suggests the referenced “threshold
showing” for an RFRA claim requires a plaintiff to identify a specific rule or written directive that
significantly inhibits the exercise of religion. In fact, quite the opposite. As the Harless court
explicitly recognized, under Seventh Circuit law, both “a widespread practice that, although not
authorized by written law or express municipal policy” and “an allegation that the constitutional
injury was caused by a person with final policymaking authority” can give rise to a violation, even
in the absence of a formal rule or directive. Id. at 1347-48. Harless, therefore, does not support
HUD’s position.

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there is no support for HUD’s contention that the RFRA violation alleged here can only be
established by identifying some official “rule” or other “written directive.”
Additionally, and contrary to HUD’s assertions, the Amended Complaint makes clear that
Plaintiffs allege far more than mere “discriminatory statements, racial slurs[,] epithets, and
offensive speech.” While HUD contends its “[q]uestions and a few comments, even those
perceived as negative, d[id] not ‘significantly inhibit’ any Lakewood employees from exercising
their religion,” this is merely a denial of Plaintiffs’ well-pled allegations which the Court must
accept as true for purposes of this motion. Here, Plaintiffs allege and identify disparaging
statements made by HUD during its allegedly unlawful campaign against the Township
manifesting in hostility to Jews and the practice of Orthodox Judaism. (See ECF No. 30 at ¶¶ 15,
53, 108-09, 190.) HUD admits several of the alleged statements are attributable to HUD personnel.
(See, e.g., ECF No. 37 at ¶ 109.) The Individual Plaintiffs further allege these statements “caused
LTO employees to fear that they would lose their livelihood because they were Orthodox Jews and
observed the Orthodox Jewish religion.” (Id. at ¶ 53.) One of the Individual Plaintiffs, for example,
alleges she “feared that she might lose her livelihood that was necessary to support her large
immediate family” because HUD’s questions related “more to religious affiliation and religious
practice than to work-related subjects.” (Id. at ¶ 190.)
The Court finds Plaintiffs’ allegations plausibly suggest HUD’s conduct imposed a
substantial burden on Plaintiffs’ exercise of their faith, in violation of the RFRA. Accordingly,
HUD’s motion for dismissal of Plaintiffs’ RFRA claim is denied.

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IV.

CONCLUSION
For the reasons set forth above, HUD’s Motion for Judgment on the Pleadings (ECF No.

43) is DENIED. An appropriate Order will follow.
Date: April 3, 2017

/s/ Brian R. Martinotti___________
HON. BRIAN R. MARTINOTTI
UNITED STATES DISTRICT JUDGE

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