Rodriguez et al v. Torres-Springer et al
Filing
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MEMORANDUM OPINION AND ORDER. Plaintiffs' motion for a permanent injunction is GRANTED. By separate Order, the Court will enjoin Defendants to remit $7200 to Plaintiff Rodriguez and $8798 to Plaintiff Pichardo within 30 days of the date of this Memorandum Opinion and Order. SO ORDERED. (Signed by Judge Jesse M. Furman on 8/14/19) (yv)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ROBERT RODRIGUEZ, et al.,
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Plaintiffs,
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-v:
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BEN CARSON, in his official capacity as Secretary of
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Housing and Urban Development, et al.,
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Defendants.
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17-CV-4344 (JMF)
MEMORANDUM OPINION
AND ORDER
JESSE M. FURMAN, United States District Judge:
In County of Suffolk v. Sebelius, 605 F.3d 135 (2d Cir. 2010), the Second Circuit held that
the Constitution’s Appropriations Clause limits the relief available in an equitable action for
reimbursement of funds from the federal Treasury. In particular, the Court held that a plaintiff is
limited to reimbursement from the specific appropriation that authorized the original expenditure
and may not recover when the original appropriation has been “lawfully distributed — and
therefore exhausted.” Id. at 138. The question presented here, one of first impression, is
whether that holding extends to claims for reimbursement directed at appropriated funds that
have been contractually obligated to third parties, but not yet disbursed. For the reasons that
follow, the Court holds that County of Suffolk does not extend that far. Accordingly, and because
Defendants’ reliance on County of Suffolk was their sole ground for resisting an injunction in this
case, the Court orders Defendants to reimburse Plaintiffs out of existing appropriated funds
notwithstanding the fact that they have already been contractually obligated.
BACKGROUND
The Court presumes substantial familiarity with the background of this case, which is set
forth in more detail in its Opinion and Order entered March 29, 2019. Rodriguez v. Carson, 377
F. Supp. 3d 401 (S.D.N.Y. 2019) (“Rodriguez I”). Put briefly, tenants who receive housing
assistance pursuant to Section 8 of the United States Housing Act of 1937 (“Housing Act”),
brought this suit arguing that Defendant United States Department of Housing and Urban
Development’s (“HUD”) interpretation of one provision of that Act had been requiring them to
pay more in rent than the statute prescribed. The Court agreed, and granted two Plaintiffs —
Robert Rodriguez and Jovanny Pichardo (“Plaintiffs”) — a declaratory judgment to that effect.
See Rodriguez I, 377 F. Supp. 3d at 412. On remand, HUD revised the relevant formula, but
applied the new formula only prospectively — meaning, at least as to Plaintiffs, that no
reimbursements for overpayments prior to July 1, 2019, would be forthcoming. See ECF No.
108; ECF No. 119, at 8 n.3. Plaintiffs then sought injunctive relief directing HUD to reimburse
them for those past overpayments. See ECF No. 113. (As discussed below, conventional
damages are unavailable because the case was brought under the Administrative Procedure Act,
which waives the United States’ sovereign immunity only as to actions against federal agencies
and officers “seeking relief other than money damages.” 5 U.S.C. § 702.)
Significantly, Defendants’ “sole basis for opposing the requested relief” was that the
Second Circuit’s decision in County of Suffolk forbade it. Rodriguez v. Carson (“Rodriguez II”),
No. 17-CV-4344 (JMF), 2019 WL 3296961, at *1 (S.D.N.Y. July 22, 2019); see ECF No. 119.
In a Memorandum Opinion and Order entered on July 22, 2019, the Court agreed with
Defendants as to most, but not all, of the disputed funds, holding that County of Suffolk
foreclosed relief with respect to any overpayments made in Fiscal Years 2011-2018 because
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HUD had exhausted the relevant appropriations. See Rodriguez II, 2019 WL 3296961, at *2.
Because it was not clear that the same was true of all funds relating to Fiscal Year 2019,
however, the Court reserved decision on Plaintiffs’ remaining claims. Id. at *2-3. The record,
now supplemented by the parties with additional undisputed facts, indicates that HUD has
disbursed approximately $11.8 billion of the relevant $20 billion appropriation for Fiscal Year
2019. Compare ECF No. 120 (“Fontanez Decl.”) ¶ 7, with ECF No. 125 (“Durham Decl.”) ¶ 3.
The remaining funds have been obligated, but not yet disbursed. See Durham Decl. ¶ 3.
DISCUSSION
The Administrative Procedure Act (“APA”) waives the United States’ sovereign
immunity as to actions against federal agencies and officers “seeking relief other than money
damages.” 5 U.S.C. § 702. As the Supreme Court has explained, however, “[t]he fact that a
judicial remedy may require one party to pay money to another is not a sufficient reason to
characterize the relief as money damages.” Bowen v. Massachusetts, 487 U.S. 879, 893 (1988)
(internal quotation marks omitted). Instead, because the APA authorizes suits against the United
States for “the recovery of specific property or monies,” id. at 893 (emphasis added), a plaintiff
can recover money pursuant to the APA if that money is “the very thing to which he was
entitled,” id. at 895 (internal quotation marks omitted). Thus, for example, the APA waives
sovereign immunity as to a plaintiff’s claim for reimbursement of “funds to which a statute
allegedly entitles it,” but not as to the same plaintiff’s claim for “money in compensation for the
losses, whatever they may be, that [it] will suffer or has suffered by virtue of the withholding of
those funds.” Id. at 901 (internal quotation marks omitted).
In County of Suffolk, the Second Circuit applied these principles in the context of a
lawsuit that, like this one, sought an injunction directing reimbursement of funds to which the
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plaintiff claimed a statutory entitlement. The Second Circuit explained, first, that Section 702
“only functions as an effective waiver of the government’s sovereign immunity to the extent that
plaintiffs seek to force [the government] to return property” — that is, a specific res. County of
Suffolk, 605 F.3d at 140-41. Noting that the Appropriations Clause provides that “[n]o Money
shall be drawn from the Treasury, but in Consequence of Appropriations made by Law,” U.S.
Const. art. I, § 9, cl. 7, meaning that “no money can be paid out of the Treasury unless it has
been appropriated by an act of Congress,” the Second Circuit held that, “in cases challenging an
agency’s expenditure of funds, the res at issue is identified by reference to the congressional
appropriation that authorized the agency’s challenged expenditure.” County of Suffolk, 605 F.3d
at 141 (internal quotation marks omitted). “To seek funds from another source,” the court
explained, “is to seek compensation rather than the specific property the plaintiff aims to
recover,” and would therefore “fall[] outside the scope” of Section 702’s waiver of sovereign
immunity. Id. Therefore, in an APA action “[w]here . . . the congressional appropriations
relating to the funds sought by private litigants have been lawfully distributed — and therefore
exhausted — by a federal agency, courts lack authority to grant effectual relief in the context of
an Article III case or controversy.” Id. at 138.
Applying County of Suffolk to the undisputed facts of this case, the Court previously held
that Plaintiffs could not obtain reimbursement for their overpayments in Fiscal Years 2011-2018
because the relevant appropriations for those years have been exhausted. Rodriguez II, 2019 WL
3296961, at *2. The Court noted, however, that the rule of County of Suffolk may not extend (as
the D.C. Circuit’s similar rule appears to extend) to appropriated funds that the agency has
obligated, but not yet disbursed. See Rodriguez II, 2019 WL 3296961, at *2 (citing City of
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Houston v. Dep’t of Hous. & Urban Dev., 24 F.3d 1421, 1426-27 (D.C. Cir. 1994)). 1 That
question is now squarely presented because it is undisputed that the appropriated funds from
which Plaintiffs could be reimbursed for their Fiscal Year 2019 overpayments have been fully
obligated, but not yet fully disbursed. Defendants contend that County of Suffolk precludes relief
not only from disbursed funds, but also from obligated funds. See ECF No. 124 (“Defs.’ Suppl.
Mem.”), at 2-4. In the alternative, they contend that, given the principles underlying the Second
Circuit’s decision, the distinction between obligated and disbursed funds should make no
difference to the analysis. See id. The Court disagrees on both scores.
First, County of Suffolk does not, by its terms, extend to funds that have been obligated
but not yet disbursed. Defendants argue that the County of Suffolk court recognized and adopted
“two independent grounds” upon which City of Houston’s holding rested, Defs.’ Suppl. Mem. 3
(quoting County of Suffolk, 605 F.3d at 142), “one of which was that HUD had ‘contractually
obligated’ the applicable ‘appropriation from Congress,’” id. (quoting City of Houston, 24 F.3d
at 1427). But a quick glance at County of Suffolk debunks that claim. Of course, City of Houston
recognized that the funds at issue there had been contractually obligated (hence this Court’s
order directing supplemental briefing on this question). But the “two independent grounds” that
the County of Suffolk court recognized were that before the plaintiff had brought suit in City of
Houston, “two events [had] occurred: (1) HUD awarded the funds at issue to other grant
1
On closer inspection, it is not, in fact, even clear that the D.C. Circuit treats obligated
funds the same as disbursed funds. In Population Institute v. McPherson, 797 F.2d 1062 (D.C.
Cir. 1986) — which City of Houston cited favorably, see 24 F.3d at 1426-27 — the court held
that a plaintiff’s claim for injunctive relief remained viable (and satisfied the irreparable-harm
requirement) precisely because, “[a]lthough the government ha[d] obligated [the] funds to other
organizations, as yet no money ha[d] been disbursed.” Population Inst., 797 F.2d at 1081. The
Court need not delve more deeply into D.C. Circuit law, however, given that it is bound to
follow Second Circuit law.
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recipients, thereby exhausting the relevant FY 1986 appropriation; and (2) the FY 1986
appropriation authorizing the grants expired and therefore lapsed.” County of Suffolk, 605 F.3d
at 141. The Second Circuit explained that these two events precluded relief “because the
Appropriations Clause prevents additional funds from being paid out of the Treasury.” Id. at 142
(emphasis added). Neither of those two “independent grounds,” however, involved the mere
obligation of appropriated funds.
Defendants are wrong, meanwhile, to place the weight they do on the Second Circuit’s
statement that it would “follow” City of Houston. Defs.’ Suppl. Mem. 3; see County of Suffolk,
605 F.3d at 142. The Second Circuit stated its holding clearly: that because the “res at issue” in
a reimbursement suit is the appropriation that authorized the challenged expenditure, id. at 141,
where those appropriations have “been lawfully distributed — and therefore exhausted — by a
federal agency, courts lack authority to grant effectual relief in the context of an Article III case
or controversy,” id. at 138. Indeed, the Second Circuit made clear that its “analysis turn[ed] on
the fact that . . . [the agency] had exhausted” the appropriations at issue, id. at 142, and even took
care to note that its holding was “no broader than the facts of the case before [it],” id. at 142 n.9.
Given that, the Court does not read the Second Circuit’s statement that it would “follow” City of
Houston to incorporate any more of City of Houston than was necessary to support the holding in
County of Suffolk. And because, in County of Suffolk, the Second Circuit confronted a record
indicating the relevant funds had been “expend[ed],” id. at 141, the Court does not read County
of Suffolk to decide this case, where the funds have not been expended. See County of Nassau v.
Leavitt, No. 07-CV-816 (JS), 2009 WL 10703093, at *1 (E.D.N.Y. Mar. 31, 2009) (addressing
the contention that the plaintiff’s claims were moot “because the grant monies for the [relevant]
fiscal years [had] already been paid out”), aff’d sub nom. County of Suffolk, 605 F.3d 135.
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Second, the Court is unpersuaded by Defendants’ contention that, even if County of
Suffolk does not extend to obligated (but undisbursed) funds by its own terms, its logic should
yield the same result as a matter of first impression. Defs.’ Suppl. Mem. 3-4. Defendants argue
that “[t]he analysis in County of Suffolk centered on whether the court could grant ‘effectual
relief’” and that, because “the at-issue res was disbursed and thus no longer available, the
plaintiffs’ claims were moot.” Defs.’ Suppl. Mem. 3 (citation omitted) (quoting County of
Suffolk, 605 F.3d at 144). But that holding turned on a straightforward application of the
Appropriations Clause. That is, where funds have been expended, “federal courts are without
authority to provide monetary relief because the Appropriations Clause prevents additional funds
from being paid out of the Treasury.” 605 F.3d at 142 (internal quotation marks omitted). That
limitation does not apply where, as here, Congress has appropriated funds and those funds are
still around; to comply with a court order requiring those funds to be used for reimbursement, no
other money would need to be “drawn from the Treasury.” U.S. Const. art. I, § 9, cl. 7
(emphasis added). In other words, there is a crucial difference between obligated and disbursed
funds as far as the Appropriations Clause is concerned. The Appropriations Clause is “a
restriction upon the disbursing authority of the Executive department,” which “means simply
that no money can be paid out of the Treasury unless it has been appropriated by an act of
Congress.” Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937) (emphases added).
The fact that HUD may have incurred liabilities in a legal or accounting sense of the term may
have significant consequences, including as a matter of contract or statutory law, but those
consequences do not implicate the Appropriations Clause. See Reeside v. Walker, 52 U.S. (11
How.) 272, 291 (1850) (explaining that the Clause prohibits unauthorized disbursements even
where a “judgment of indebtedness” is “entered on the books of the Treasury Department,”
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leaving the creditor “as far from having a claim on the Secretary . . . to pay” as before the
accounting entry was made); see also Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 425
(1990) (discussing Reeside). Put differently, funds that remain in the Government’s possession
are not “unavailable” as a source of specific relief as far as the Appropriations Clause and
County of Suffolk are concerned. Other legal or equitable rights may attach to such funds, but
that is hardly exceptional when it comes to disputed property — and Defendants have not cited
such considerations for denying Plaintiffs relief from the funds that are still available.
CONCLUSION
In short, neither the Appropriations Clause nor County of Suffolk speaks to the question
of whether Plaintiffs here are entitled to reimbursement from the Fiscal Year 2019 funds that are
not yet expended. There may well be other legal or equitable arguments that would justify
denying reimbursement to a plaintiff where, as here, funds have been contractually obligated by
a federal agency. Critically, however, Defendants make no such arguments — and, thus, have
forfeited them. See, e.g., Roberts v. Bennaceur, 658 F. App’x 611, 616 (2d Cir. 2016) (“[A]
party may forfeit a right or defense by actively litigating other issues and forgoing the
opportunity to litigate that right or defense.”); McCoy v. Dave & Buster’s, Inc., No. 15-CV-0465
(JFB), 2018 WL 550637, at *4 n.5 (E.D.N.Y. Jan. 24, 2018) (holding that a party’s failure to
raise an issue in an opposition brief waives the issue). Put simply, Defendants put all their eggs
in the County of Suffolk and Appropriations Clause basket, see Rodriguez II, 2019 WL 3296961,
at *1; see ECF No. 119; Defs’ Suppl Mem., and, for the reasons stated above, that basket does
not suffice for purposes of undisbursed Fiscal Year 2019 funds. Accordingly, the Court
concludes that Plaintiffs are entitled to an injunction directing reimbursement for their Fiscal
Year 2019 overpayments — that is, their overpayments from October 1, 2018 through June 30,
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2019 (after which the new formula took effect). Plaintiffs’ undisputed evidence shows that
during that nine-month period, Plaintiff Rodriguez overpaid by $800 per month, while Plaintiff
Pichardo overpaid by $886 in October 2018 and $989 per month thereafter. See ECF No. 112-5.
The Court will enjoin Defendants to reimburse Plaintiffs accordingly.
For the foregoing reasons, and to the extent set forth above, Plaintiffs’ motion for a
permanent injunction is GRANTED. By separate Order, the Court will enjoin Defendants to
remit $7200 to Plaintiff Rodriguez and $8798 to Plaintiff Pichardo within 30 days of the date of
this Memorandum Opinion and Order.
SO ORDERED.
Dated: August 14, 2019
New York, New York
__________________________________
JESSE M. FURMAN
United States District Judge
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