MARY'S HOUSE, INC., et al v. STATE OF NORTH CAROLINA, et al

Filing 30

MEMORANDUM OPINION AND ORDER signed by JUDGE THOMAS D. SCHROEDER on 9/30/2013. Defendants' motion to dismiss (Doc. 21 ) is GRANTED as to all claims against the State of North Carolina, DHHS, DAAS, and OEO for violations of the FHA or U. S. Constitution pursuant to section 1983, and all claims for damages against the remaining defendants (all state officials) for violations of the FHA and U.S. Constitution pursuant to section 1983. In all other respects, Defendants' motion to dismiss is DENIED. (Daniel, J)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

MARY’S HOUSE, INC., Jane Doe 1
through 8,
Plaintiffs,
v.
STATE OF NORTH CAROLINA; NORTH
CAROLINA DEPARTMENT OF HEALTH
AND HUMAN RESOURCES; NORTH
CAROLINA DIVISION OF AGING AND
ADULT SERVICES; NORTH CAROLINA
OFFICE OF ECONOMIC
OPPORTUNITY; BEVERLY PERDUE,
Governor of the State of North
Carolina (in her official
capacity); ALBERT DELIA,
Acting Secretary, North
Carolina Department of Health
and Human Services (in his
official capacity); DENNIS
STREETS, Director, North
Carolina Division of Aging and
Adult Services (in his
official capacity); MARTHA
ARE, Homeless Policy
Specialist, North Carolina
Division of Aging and Adult
Services (in her official
capacity); VERNA BEST,
Director, Office of Economic
Opportunity (in her official
capacity); and MICHAEL LEACH,
Homeless Programs Coordinator,
Adult Services Section, North
Carolina Division of Aging and
Adult Services (in his
official capacity)
Defendants.

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1:12cv169

MEMORANDUM OPINION AND ORDER

THOMAS D. SCHROEDER, District Judge.
Plaintiffs

Mary’s

House,

Inc.

(“Mary’s

House”),

a

non-

profit organization providing housing and treatment to homeless
women recovering from substance abuse, and eight Jane Does who
are former or current residents of Mary’s House challenge the
State of North Carolina’s decision to eliminate funding to them.
Plaintiffs seek declaratory and injunctive relief, as well as
damages, pursuant to 42 U.S.C. § 1983 and the doctrine of Ex
parte Young, 209 U.S. 123 (1908), and allege violations of the
Americans
(“ADA”),

with
the

Disabilities
Fair

Housing

Act,

42

U.S.C.

§§

12101

et

seq.

Act,

42

U.S.C.

§§

3601

et

seq.

(“FHA”), section 504 of the Rehabilitation Act, 29 U.S. § 794
(“RA”),

and

the

U.S.

Constitution,

including

the

Supremacy

Clause and the Equal Protection and Due Process Clauses of the
Fourteenth
Carolina,
Services

Amendment.
the

North

(“DHHS”),

Defendants
Carolina

the

North

are

the

Department
Carolina

of

State

of

North

Health

and

Human

Division

of

Aging

and

Adult Services of DHHS (“DAAS”), and the North Carolina Office
of

Economic

Opportunity

officials

in

their

Governor;

Albert

Delia,

Streets,

Director

of

(“OEO”),

official

as

well

capacities:

Acting
DAAS;

Secretary

Martha

Are,

as

several

Beverly
of

state
Perdue,

DHHS;

Dennis

Homeless

Policy

Specialist at DAAS; Verna Best, Director of OEO; and Michael
Leach, Homeless Programs Coordinator at DAAS.
2

Before
complaint

the

based

court
on

is

lack

Defendants’
of

motion

subject

matter

to

dismiss

the

jurisdiction

and

failure to state a claim, pursuant to Federal Rules of Civil
Procedure 12(b)(1) and 12(b)(6), respectively.

(Doc. 21.)

For

the reasons set forth below, the motion will be granted in part
and denied in part.
I.

BACKGROUND
Mary’s House is a homeless shelter and licensed substance

abuse

rehabilitation

center

(“SARC”)

serving

women

and

their

children in Greensboro, North Carolina.

It has applied for and

received

Shelter

funding

through

the

Emergency

program every year since 2005.

Grant

(“ESG”)

Under the ESG program, states

apply to the federal Department of Housing and Urban Development
(“HUD”)

for

funding

by

submitting

a

consolidated

plan.

HUD

distributes the ESG funds to states, who then distribute the ESG
funds

to

grantees

such

as

Mary’s

House.

Defendants

are

responsible for distributing the ESG funds in North Carolina,
which is done through a non-competitive process in which any
qualified homeless shelter may participate.
In December 2009, Mary’s House was notified by letter that
Defendants had decided to change the definition of “shelter” for
the

ESG

program,

specifically

to

exclude

licensed

SARCs.

Exactly when Defendants began implementing the new definition is
disputed, but it is undisputed that Defendants had to go through
3

an

amendment

process

to

the

State

consolidated

included public notice and comment.

plan,

which

In 2010, Mary’s House’s

application for ESG funding was denied because it was no longer
a qualified shelter under the State’s revised definition.
2011, Mary’s House’s application was again denied.

In

According to

Plaintiffs, Mary’s House had to cut back on services offered to
its residents, reduce staff, change thermostats to lower utility
bills, and delay or forego maintenance of its facilities as a
result of the denial of ESG funding.
Plaintiffs

allege

that

Defendants’

redefinition

of

“shelter” impermissibly discriminates on the basis of disability
or

handicap.

Defendants

assert

several

defenses

in

return,

including sovereign immunity and the statute of limitations, and
contend both that Plaintiffs have failed to allege sufficient
facts to state a claim for relief and that Defendants’ action
did not discriminate impermissibly.
II.

ANALYSIS
A.

12(b)(1) Motion to Dismiss

The

plaintiff

bears

the

subject matter jurisdiction.

burden

of

proving

this

court’s

Richmond, Fredericksburg & Potomac

R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991).
When assessing a challenge to subject matter jurisdiction, the
court may look beyond the face of the complaint and consider
other

evidence

outside

the

pleadings
4

without

converting

the

motion into one for summary judgment.
1213, 1219 (4th Cir. 1982).
federal

subject

matter

Adams v. Bain, 697 F.2d

A court should dismiss for lack of

jurisdiction

“only

if

the

material

jurisdictional facts are not in dispute and the moving party is
entitled to prevail as a matter of law.”
768 (citation omitted).

Richmond, 945 F.2d at

Defendants move to dismiss on three

grounds: Eleventh Amendment sovereign immunity, the statute of
limitations, and lack of standing.

Each will be addressed in

turn.
1.

Eleventh Amendment

Defendants assert they enjoy sovereign immunity under the
Eleventh Amendment.

(Doc. 22 at 3-4, Doc. 28 at 2-3.)

Fourth

not

Circuit

has

conclusively

established

whether

The
a

dismissal based on Eleventh Amendment immunity is a dismissal
for lack of subject matter jurisdiction under Rule 12(b)(1) or
for failure to state a claim under Rule 12(b)(6) of the Federal
Rules of Civil Procedure.

See Andrews v. Daw, 201 F.3d 521,

524-25 n.2 (4th Cir. 2000).
their

Eleventh

Amendment

However, Defendants characterize

argument

court will treat it as such.

as

jurisdictional,

so

the

See Johnson v. N.C. Dep’t of

Health and Human Servs., 454 F. Supp. 2d 467, 471 (M.D.N.C.
2006).
The Eleventh Amendment bars suits against states and any
state instrumentality properly characterized as an “arm of the
5

state.”
30

Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429-

(1997).

Eleventh

however.
Eleventh

To

ensure

Amendment

Amendment
the

immunity

enforcement

permits

suits

for

of

is

not

absolute,

federal

law,

prospective

“the

injunctive

relief against state officials acting in violation of federal
law.”

Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 437 (2004)

(citing Ex parte Young, 209 U.S. at 123).

Federal courts are

thus allowed to order prospective relief, including ancillary
measures,

but

cannot

damages,

unless

the

order
state

retrospective
waives

its

relief,

immunity

or

such

as

Congress

abrogates the state’s immunity in exercising its powers under
the Fourteenth Amendment.

Id.; Coll. Sav. Bank v. Fla. Prepaid

Postsecondary Educ. Expense Bd., 527 U.S. 666, 670 (1999).

A

plaintiff may properly invoke the doctrine of Ex parte Young
when a “straightforward inquiry” reveals that the plaintiff has
alleged an “ongoing violation” of federal law.

Verizon Md.,

Inc. v. Pub. Serv. Comm’n of Md., 535 U.S. 635, 645 (2002)
(citation omitted).
Plaintiffs do not clearly delineate in the complaint which
of their claims they assert against which Defendants.

To the

extent the complaint seeks relief against the State of North
Carolina, DHHS, DAAS, or OEO for violations of the FHA or U.S.
Constitution

pursuant

to

42

U.S.C.

§

1983,

such

claims

barred by Defendants’ assertion of sovereign immunity.
6

are

The FHA

does not abrogate states’ sovereign immunity under the Eleventh
Amendment, see, e.g., Gregory v. S.C. Dep’t. of Transp., 289 F.
Supp.

2d

721,

724-25

(D.S.C.

waived their immunity.

2003),

and

Defendants

have

not

Similarly, “[i]t is now well settled

that a state cannot be sued under [42 U.S.C.] § 1983.”

Kelly v.

Maryland, 267 Fed. App’x 209, 210 (4th Cir. 2008) (citing Will
v. Mich. Dep’t of State Police, 491 U.S. 58, 71 (1989)). 1

Thus,

any claims against those defendants for violations of the FHA or
section 1983 are barred; Defendants’ motion to dismiss those
claims is granted.
However,
violations

of

Plaintiffs’
the

RA

and

claims
ADA

against

stand

on

those
a

Defendants

different

for

footing.

Congress has validly abrogated states’ immunity for violations
of the RA through 42 U.S.C. § 2000d-7: “A State shall not be
immune under the Eleventh Amendment of the Constitution of the
United States from suit in Federal court for a violation of
section 504 of the [RA.]”
2000d-7

to

be

“an

The Fourth Circuit has held section

unambiguous

and

unequivocal

condition

requiring waiver of Eleventh Amendment immunity” that “does not
violate

any

other

constitutional

command.”

Constantine

v.

Rectors & Visitors of George Mason Univ., 411 F.3d 474, 492 (4th

1

See Collins v. Pond Creek Mining Co., 468 F.3d 213, 219 (4th Cir.
2006) (recognizing that “we ordinarily do not accord precedential
value to our unpublished decisions” and that such decisions “are
entitled only to the weight they generate by the persuasiveness of
their reasoning” (citation omitted)).

7

Cir. 2005).

Title II of the ADA may also validly abrogate

states’

sovereign

Insofar

as

immunity. 2

Plaintiffs

Constantine,

also

allege

a

411

F.3d

Fourteenth

at

490.

Amendment

violation, the court will permit the ADA claim to proceed at
this stage.
In

United States v. Georgia, 546 U.S. 151, 159 (2006).

addition

agencies,

to

Plaintiffs

capacities

for

those
sued

claims
State

violations

of

against

the

State

and

officials

in

their

official

federal

law.

To

the

its

extent

Plaintiffs seek injunctive relief against those officials for
violations

of

the

ADA,

RA,

FHA,

and

U.S.

Constitution,

claims fall under the doctrine of Ex parte Young.
argue

that

such

claims

should

not

be

such

Defendants

permitted

because

Plaintiffs do not allege an ongoing violation of federal law, as
the doctrine requires.

Defendants assert that their one-time

decision to change funding practices cannot be “ongoing.”
However, a straightforward inquiry reveals that Plaintiffs
are alleging an ongoing violation of federal law.

Verizon Md.,

535 U.S. at 645 (holding that a prayer for injunctive relief
satisfies the straightforward inquiry as to whether a violation
is

ongoing).

indeed,

if

Plaintiffs
Defendants’

are

seeking

redefinition

2

injunctive
of

relief,

“shelter”

and

violates

The Fourth Circuit has not yet considered what effect United States
v. Georgia, 546 U.S. 151 (2006), has on its holding in Constantine,
but as Defendants do not raise the point, the court will discuss it no
further.

8

federal law, as Plaintiffs contend, then Defendants’ continued
enforcement of its definition would be unlawful.
Plaintiffs also seek damages from the State officials in
their official capacities.

Defendants are correct that Ex parte

Young does not provide a basis for Plaintiffs to do that.
28

at

2.)

However,

Plaintiffs

seek

damages

U.S.C. § 2000d-7 and 29 U.S.C § 794a.
as it was for the State Defendants.

pursuant

(Doc.
to

42

The analysis is the same
State officials acting in

their official capacities are not immune from federal suits to
enforce section 504 of the RA.

Constantine, 411 F.3d at 491-92.

Plaintiffs allege, and Defendants do not refute, that Defendants
accepted

federal

acceptance

of

HUD

funds

funds
waived

through

Eleventh

section 504 claims for damages.
Title

II

of

the

ADA

may

the

ESG

program.

Amendment

immunity

That
to

As with the State Defendants,

also

validly

abrogate

sovereign

immunity, to the extent that Plaintiffs allege conduct that also
violates the Fourteenth Amendment.
U.S. at 159.

Id. at 490; Georgia, 546

Thus, the court will permit the ADA claims against

the State officials to proceed at this time.
To the extent Plaintiffs seek damages from State officials
for violations of the FHA or U.S. Constitution pursuant to 42
U.S.C. § 1983, such claims are barred by sovereign immunity.

As

explained above, the FHA does not abrogate states’ sovereign
immunity, and section 1983 does not give plaintiffs the right to
9

sue state officials in their official capacities for damages.
See Will, 491 U.S. at 71.
The

court

has

considered

all

of

Defendants’

remaining

arguments, including that based on legislative immunity, 3 and
finds they are without merit.
In sum, all claims against the State of North Carolina,
DHHS,

DAAS,

or

OEO

for

violations

of

the

FHA

or

U.S.

Constitution pursuant to section 1983 are barred by sovereign
immunity;

Plaintiffs’

claims

against

those

violations of the RA and ADA are not barred.

Defendants

for

All claims against

the remaining Defendants (all state officials) for damages for
violations of the FHA and U.S. Constitution pursuant to section
1983

are

barred

by

sovereign

immunity;

Plaintiffs’

claims

against those Defendants for damages under the RA and ADA and
injunctive relief under the RA, ADA, FHA, and U.S. Constitution
are not barred. 4

3

Defendants argue that they are entitled to legislative immunity from
section 1983 actions.
(Doc. 28 at 2-3.)
The sole case they cite,
however, is inapplicable.
In Bogan v. Scott-Harris, the acts the
plaintiff challenged were city council members introducing an
ordinance and voting on it, and the mayor signing it into law.
523
U.S. 44 (1998). Such acts are “quintessentially legislative” and are
therefore entitled to absolute legislative immunity.
Id. at 55.
Legislative immunity is extended to executive branch officials only
when they are performing legislative functions, such as signing a bill
into law.
Id.
Here, Defendants were not performing any legislative
function, but were managing the disbursement of federal funds through
a state-run program – a quintessentially administrative function.
4

Claims against a governmental agency and its director in his or her
official capacity may be duplicative. See, e.g., Love-Lane v. Martin,

10

2.

Statute of Limitations

Defendants assert that Plaintiffs’ claims under the ADA,
RA, and FHA are barred by two-year statutes of limitations; they
do not raise any such defense as to the constitutional claims.
(Doc. 22 at 4-6.)

Plaintiffs respond that, even assuming a two-

year statute of limitations, their action did not accrue until
late February 2010 at the earliest and, therefore, the complaint
was timely filed.

(Doc. 27 at 6-9.)

Neither Title II of the ADA nor section 504 of the RA has a
specific limitations period, so the Fourth Circuit has borrowed
the state statute of limitations for the most analogous state
law claim.
347

(4th

A Soc’y Without a Name v. Virginia, 655 F.3d 342,
Cir.

2011),

cert.

denied,

132

S.

Ct.

1960

(2012);

McCullough v. Branch Banking & Trust Co., 35 F.3d 127, 129 (4th
Cir. 1994).

For North Carolina, that statute is the Persons

with Disabilities Protection Act, N.C. Gen. Stat. 168A, which
includes a two-year statute of limitations for non-employment
related actions.

J.W. v. Johnston Cnty. Bd. of Educ., No. 5:11-

CV-707-D, 2012 WL 4425439, at *6 (E.D.N.C. Sept. 24, 2012); N.C.
Gen. Stat. § 168A-12.
period of two years.

The FHA includes a specific limitations
42 U.S.C. § 3613(a)(1)(A).

355 F.3d 766, 783 (4th Cir. 2004).
Because Defendants do not raise
the point, the court will not address it.

11

Although the limitations period may be borrowed from state
law, the determination of the time that a claim accrues is a
matter of federal law.

A Soc’y Without a Name, 655 F.3d at 348.

A claim accrues when the plaintiff “knows or has reason to know
of the injury which is the basis of the action.”

Id. (quoting

Cox v. Stanton, 529 F.2d 47, 50 (4th Cir. 1975)).
Defendants argue that DHHS’ change of policy (rather than
its specific denial of Mary’s House’s application) should serve
as the injury triggering accrual.
however,

dismissal

of

the

warranted at this stage.
the

injury

December

that

14,

is

2009

the
letter

Even assuming that as true,

complaint

as

time-barred

is

not

Contrary to Defendants’ assertions,
basis

of

this

announcing

providing funding for SARCs.

action

that

DHHS

cannot

be

the

would

not

be

According to the allegations of

the complaint, DHHS could not implement the changes announced in
its letter until it issued public notice of the change, held at
least one public hearing (which occurred on February 9, 2010),
allowed for a public comment period of at least thirty days, and
submitted an amendment to the State’s consolidated plan.
1 ¶¶ 59-61.)

(Doc.

Accepting those facts as true, as the court must

at this stage, Plaintiffs’ claim would not have been ripe, and
thus could not have accrued, until DHHS’ action was final.

12

Only final agency actions are ripe for judicial review. 5
Whether an agency action is final depends on two conditions:
“First, the action must mark the ‘consummation’ of the agency’s
decisionmaking process -- it must not be of a merely tentative
or interlocutory nature.
which

‘rights

or

And second, the action must be one by

obligations

have

been

which ‘legal consequences will flow.’”

determined,’

or

from

Bennett v. Spear, 520

U.S. 154, 177-78 (1997) (citations omitted); see also Syngenta
Crop Prot., Inc. v. U.S. Envtl. Prot. Agency, 202 F. Supp. 2d
437, 446 (M.D.N.C. 2002).
The December 14, 2009 letter lacked legal force until the
change in policy contemplated by it had been incorporated as an
amendment to the State’s consolidated plan.

On December 15,

2009,

DHHS

than

could

complain

could

no

more

they

had

enforce
been

the

letter

injured.

At

the

Plaintiffs
earliest,

Plaintiffs’ claims against Defendants did not accrue until the
day

DHHS

had

fully

completed

the

rulemaking

and

amendment

process or, in other words, took final agency action from which
legal consequences flowed.

That the agency action became final

before February 17, 2010 - the date two years before Plaintiffs
filed their complaint - certainly does not “clearly appear[] on
the face of the complaint.”

Goodman v. Praxair, Inc., 494 F.3d

5

To hold otherwise would be to “render an advisory opinion in its most
obnoxious form.” Chicago & S. Air Lines, Inc. v. Waterman S.S. Corp.,
333 U.S. 103, 113 (1948).

13

458, 464 (4th Cir. 2007) (alterations in original) (citation
omitted).

Thus, Defendants’ motion to dismiss on grounds of

statute of limitations will be denied. 6
3.

Standing

Defendants contend that Mary’s House lacks standing because
HUD has redefined the ESG program to focus on permanent housing,
and

therefore,

as

a

homeless

shelter,

interest in the HUD funding.
contend

that

associational

Mary’s
standing

organization

and

Plaintiffs)

lack

House

because

House

(Doc. 22 at 7-8.)
cannot

both

Mary’s

pursue

because

the

it

would-be

standing.

(Id.

at

lacks

They also

the

case

not

a

is

members
8.)

an

through

membership

(the

Jane

Doe

According

to

Defendants, the Jane Does lack a cognizable interest in the HUD
funding because only shelters, not individuals, can apply for
the HUD funding.
Defendants’

(Id. at 2, 8.)
arguments

fail

for

several

reasons.

First,

Defendants base their argument as to HUD’s redirected focus on
information not in the complaint.

Whether HUD has changed the

focus of the ESG program is not a question properly before the
court at this stage.

The complaint specifically alleges that

North Carolina homeless shelters may apply for ESG funding and
6

Contrary to Defendants’ assertions, the fact that Plaintiffs allege
that Defendants had already made their decision before completing the
amendment process and would not be swayed by the comments given during
the public comment period does not change the analysis.
(Doc. 1
¶¶ 64, 67; Doc. 28 at 3)
Legally, Defendants were not permitted to
implement the amendment until the amendment process was completed.

14

receive it, but Mary’s House could not because of its status as
a SARC.

(Doc. 1 ¶ 70.)

Insofar as the court must assume that

the well-pleaded allegations of the complaint are true, Mary’s
House has alleged an actual, concrete, and particularized injury
that is fairly traceable to Defendants’ conduct and that can be
redressed by a favorable decision from this court.
Second, Mary’s House is a 501(c)(3) non-profit entity that
can sue and be sued in its own right.
Although

it

asserts

associational

(Doc. 1 ¶¶ 9, 42.)

standing

in

addition

to

standing in its own right (id. ¶ 43), its claim of associational
standing is superfluous.
in

the

complaint

are

As explained above, the facts alleged

sufficient

at

this

stage

to

find

that

Mary’s House has standing in its own right.
Third, the Jane Does do not lack standing simply because
they personally cannot apply for the ESG funding.
is

whether

they

have

(1)

an

injury

in

fact

The question
to

a

legally

protected interest (2) caused by the conduct complained of (3)
which

is

likely

decision.

to

be

redressed

by

a

favorable

judicial

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61

(1992).

Defendants

assert,

without

explanation

or

citation,

that the Jane Does lack a legally cognizable interest in the ESG
funds.

(Doc. 22 at 8.)

violations

of

the

Jane

Yet, the complaint alleges myriad

Does’

rights

and

details

the

adverse

effects that the Jane Does have suffered because of Defendants’
15

denial of funding.

(Doc. 1 ¶¶ 29-33.)

The Jane Does would be

able to bring suit against Defendants even if Mary’s House were
not party to the litigation, as it is undisputed that Mary’s
House applied for funding in 2010 and 2011 and Defendants admit
that the funding application process was non-competitive.
22 at 15.)
injury.
F.3d

(Doc.

The Jane Does do not assert a vague or speculative

Cf. Friends for Ferrell Parkway, LLC v. Stasko, 282

315,

321

(4th

Cir.

2002)

(finding

that

an

unspecified

“liberty interest in access to [plaintiffs’] community, and in
continuation of their community” was not a legally protected
interest).

Instead, the complaint alleges that the denial of

funding, which was virtually assured to all qualified shelters
who applied, discriminated against the Jane Does on the basis of
their disabilities and against Mary’s House because it serves
disabled people.
thus

alleged

suffered

an

(Doc. 1 ¶¶ 4, 37, 39, 41.)

facts
actual

sufficient
and
that

to

show

particularized
was

fairly

The complaint has

that
injury

traceable

the
to
to

Jane
a

Does

legally

protected

interest

Defendants’

conduct.

As with Mary’s House, a favorable judicial decision

would likely redress those injuries.
In

sum,

Mary’s

House

and

the

Jane

Doe

Plaintiffs

have

alleged sufficient facts to find they have standing to pursue
the action at this stage.

16

B.
A

12(b)(6) Motion to Dismiss
motion

Procedure

to

dismiss

12(b)(6)

pursuant

“challenges

to

the

Federal

legal

Rule

of

Civil

sufficiency

of

a

complaint considered with the assumption that the facts alleged
are true.”

Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir.

2009) (internal citations omitted).

A complaint fails if it

does not “contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its face.’”
Ashcroft

v.

Iqbal,

556

U.S.

662,

678

(2009)

(quoting

Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
1.
To

ADA, RA, and FHA Claims

trigger

plaintiff

must

Defendants

the

protections

allege

contend

a

that

of

the

qualifying
Plaintiffs

ADA,

RA,

disability
have

and
or

stated

FHA,

a

handicap.

mere

legal

conclusions, without sufficient underlying facts, as to whether
the Jane Does and other residents of Mary’s House are “disabled”
under the ADA or RA or “handicapped” under the FHA.
10-12.)
pleading

Plaintiffs

facts.

standard

argue

and

that

that

the

Defendants
complaint

(Doc. 22 at

misunderstand
alleges

the

sufficient

(Doc. 27 at 11-14.)

The parties agree that Plaintiffs have alleged that Mary’s
House’s

residents,

including

the

“recovering substance abusers.”

Jane

Doe

Plaintiffs,

(Doc. 22 at 10.)

are

Recovering

from substance abuse addiction is “unquestionably” an impairment
17

under the ADA.

A Helping Hand, LLC v. Balt. Cnty., Md., 515

F.3d 356, 367 (4th Cir. 2008).

It is also an impairment under

section 504 of the RA, which defines “disability” with reference
to the ADA, 29 U.S.C. § 705(20)(B), and an impairment under the
FHA, 24 C.F.R. § 100.201(a)(2) (specifying drug addiction as a
FHA impairment in HUD’s implementing regulations).

See also

Reg’l Econ. Cmty. Action Program, Inc. v. City of Middletown,
294 F.3d 35, 46 (2d Cir. 2002).
But simply having an impairment is not enough to trigger
protection

under

substantially

these

limit

a

statutes.

major

life

The
activity.

impairment
See

42

must
U.S.C.

§ 12102; 29 U.S.C. §§ 794(a), 705(20)(B); 42 U.S.C. § 3602(h).
At the pleading stage, the court may infer from the fact that a
residential rehabilitation center provides housing to substance
abusers who would otherwise be homeless that they are “limited
in their ability to work, raise children, care for themselves,
and function in everyday life[.]”

Start, Inc., v. Balt. Cnty.,

Md., 295 F. Supp. 2d 569, 577 (D. Md. 2003) (finding that it was
“reasonable to assume” at the pleading stage that the heroin
addicts the residential rehabilitation center would have served
were substantially limited in major life activities because they
would

have

needed

the

services

of

the

methadone

clinic

to

prevent a relapse) (citing cases); see also Reg’l Econ. Cmty.
Action

Program,

294

F.3d

at

47-48
18

(finding

that

alcoholics

living in a proposed halfway house would have been disabled,
even though no individual patient was presented, because the
“inability to live independently without suffering a relapse”
would have been a requirement of residency).
alleged

may

dismiss

as

be

“meager,”

long

as

it

a

complaint

specifically

Although the facts

survives

refers

to

a

motion

the

facts of the disability or perceived disability.

to

underlying

Blackburn v.

Trustees of Guilford Technical Cmty. Coll., 733 F. Supp. 2d 659,
663

(M.D.N.C.

2010).

It

is

“not

required,

at

this

early

pleading stage, to go into particulars about the life activity
affected by [the] alleged disability or detail the nature of
[the] substantial limitations.”
F.3d

203,

213

(3d

Cir.

Fowler v. UPMC Shadyside, 578

2009)

(noting

that

more

specific

disability allegations were not needed, even after Twombly and
Iqbal).
Here, Plaintiffs have alleged that the facility’s purpose
is

“housing,

treating,

training,

educating,

and

supporting

homeless women in recovery from substance abuse or addiction.”
(Doc. 1 ¶ 44.)

They have further alleged that all of the Jane

Does, as well as Mary’s House’s other residents, are recovering
from substance abuse or addiction and that, before they were
admitted to Mary’s House, were “homeless” as defined by HUD.
(Id. ¶ 28.)
a

motion

While more specific facts may be needed to survive
for

summary

judgment
19

or

to

prevail

at

trial,

Plaintiffs’ allegations are adequate at this stage to support
the

inference

substance

that

the

addictions

Jane

that

Does

left

and

other

them

residents
to

unable

had
for

care

themselves and their children and to live independently.
2.
The

Equal Protection

Equal

Protection

Clause

of

the

Fourteenth

Amendment

“direct[s] that all persons similarly situated should be treated
alike.”

City of Cleburne, Tex. v. Cleburne Living Ctr., 473

U.S. 432, 439 (1985).
classifications,

Although laws must inevitably draw some

those

classifications

must

related to a legitimate state interest.”

be

“rationally

Id. at 440.

The

parties in this case dispute two basic points: whether Mary’s
House

is

similarly

situated

to

other

homeless

shelters

and

whether there is a rational basis for Defendants’ action.
First, Plaintiffs assert that Defendants have created two
classes

of

similarly

situated

homeless

shelters

in

North

Carolina, denying ESG funding to one class (those licensed to
provide substance abuse treatment) but not to the other (those
who are not).
contend

that

(Doc. 1 ¶¶ 112-15.)
there

is

only

one

In response, Defendants

class

of

defined by the rule Defendants adopted.
Defendants’
litigation:
Defendants

argument
Does

the

improperly

begs
new

the

narrow

coverage
20

shelters,

(Doc. 22 at 13.)

central

definition

homeless

of

question
“shelter”

under

the

of

But
this

adopted

ESG

by

program?

Defendants

cannot

rely

on

the

rule

being

challenged

in

this

action to say that Mary’s House is by definition not a shelter.
Plaintiffs

have

alleged

that,

according

to

HUD’s

ESG

rules,

Mary’s House is a shelter and that it fits North Carolina’s
definition in every respect except for its status as a SARC.
(Doc. 1 ¶ 112.)

Taking those facts as true, Mary’s House is

similarly situated to other homeless shelters.
Defendants next assert that Mary’s House cannot be both a
homeless shelter and a licensed SARC, and, because Plaintiffs
admit

that

it

is

the

latter,

situated to other shelters.

it

is

therefore

not

(Doc. 22 at 14-15.)

similarly
Defendants

present no information or argument as to why Mary’s House cannot
be both a homeless shelter and a SARC.
multiple

purposes

and,

indeed,

Organizations may have

Plaintiffs

allege

that

Mary’s

House has dual roles as both a homeless shelter and a SARC.
(Doc. 1 ¶¶ 10, 112.)

According to the complaint, the only way

Mary’s House differs from other homeless shelters that receive
ESG funding is that it serves recovering substance abusers, who
have a legally recognized disability.
should

form

sufficient

the

basis

question

of

to

be

a

Whether such a difference

legitimate

addressed

classification

under

is

a

Equal

Protection

Defendants’

“shelter”

Clause jurisprudence.
Finally,
definition

Plaintiffs

discriminates

argue
without
21

that
a

rational

basis.

(Doc.

1

¶¶ 112-15.)

Defendants present a rational basis in response:

SARCs have access to state and federal funding that non-SARC
homeless shelters do not, and so to maximize funding for those
other shelters, Defendants excluded SARCs from the definition of
“shelter.”

(Doc. 22 at 15-16.)

The Fourth Circuit recently had to reconcile “the dilemma
created

when

the

rational

basis

standard

applied to a [12(b)(6)] dismissal[.]”

meets

the

standard

Giarratano v. Johnson,

521 F.3d 298, 303 (4th Cir. 2008) (citation omitted) (internal
quotation marks omitted).

The rational basis standard sets a

high bar for a plaintiff: The government’s action is presumed
valid and a plaintiff must “negate every conceivable basis which
might support” the law.
Auto

Parts

standard,

Co.,

410

however,

Id. (quoting Lehnhausen v. Lake Shore

U.S.

simply

356,

364

requires

(1973)).
the

The

plaintiff

to

pleading
allege

sufficient facts, accepted as true, to “state a claim to relief
that is plausible on its face.”

Twombly, 550 U.S. at 570.

To

resolve this dilemma, the Fourth Circuit adopted the reasoning
of a case from the Seventh Circuit:
While we therefore must take as true all of the
complaint’s allegations and reasonable inferences that
follow, we apply the resulting “facts” in the light of
the deferential rational basis standard. To survive a
motion to dismiss for failure to state a claim, a
plaintiff must allege facts sufficient to overcome the
presumption of rationality that applies to government
classifications.

22

Giarratano, 521 F.3d at 303-04 (quoting Wroblewski v. City of
Washburn, 965 F.2d 452, 460 (7th Cir. 1992)).

In applying that

standard

Circuit

to

Giarratano’s

facts,

the

Fourth

found

a

prisoner’s conclusory assertions that a law excluding inmates
from obtaining information through the Freedom of Information
Act

had

no

rational

basis

presumption of rationality.
Plaintiffs
however.

do

more

was

insufficient

to

overcome

the

Id. at 304.
than

present

conclusory

assertions,

They allege that Mary’s House was excluded from the

definition

of

“shelter”

solely

on

the

basis

that

it

serves

disabled people, who, while not a suspect class, have suffered
recognized irrational discrimination in the past.
U.S. at 450.

Cleburne, 473

Plaintiffs further allege that (1) when Defendants

solicited public comment on the rule change, all public comment
opposed the change; (2) Defendants never responded substantively
to the public comments; and (3) Defendants never “provided any
written

‘reasons’

or

explanation

to

Mary’s

House

or

other

commenters addressing how the amendment to the ESG program was
not discriminatory.”

(Doc. 1 ¶¶ 62-66 (emphasis in original).)

While Defendants articulate a rational basis in their motion to
dismiss
rational

(Doc.
basis

22

at

15-16),

appears

in

no
the

evidence

or

complaint.

allegation
The

of

a

complaint

therefore alleges sufficient facts to “overcome the presumption
of rationality” at this early stage.
23

Giarratano, 521 F.3d at

304 (quoting Wroblewski, 965 F.2d at 460).

Whether Plaintiffs

can ultimately meet the high bar in proving Defendants lacked
any rational basis for the “shelter” definition remains to be
seen.
3.

Due Process Clause

The Due Process Clause of the Fourteenth Amendment prevents
states

from

depriving

people

without due process of law.

of

deprived
without

them
due

of

their

process.

life,

liberty,

or

property

Plaintiffs allege that Defendants

property
(Doc.

1

interest
¶

in

122.)

the

Unsure

ESG
of

funds

whether

Plaintiffs allege a violation of substantive or procedural due
process, Defendants chronicle the procedural protections Mary’s
House received before its funding application was denied.

(Doc.

22 at 16-17.)

But Defendants ultimately argue that, regardless

of

of

which

kind

due

process

Plaintiffs

claim

to

have

been

deprived of, Plaintiffs would need to prove the existence of a
protected property interest and they have failed to do so.

(Id.

at 17-18.)
Defendants

are

correct

that

Plaintiffs

must

prove

the

existence of a protected property interest in either inquiry.
See Sunrise Corp. of Myrtle Beach v. City of Myrtle Beach, 420
F.3d

322,

Calvert

328

Cnty.,

(4th
Md.,

Cir.
48

2005)
F.3d

(citing
810,

826-27

(setting out the elements of each claim).
24

Sylvia

Dev.

(4th

Corp.

Cir.

v.

1995))

The Constitution does

not create property interests; such interests must “stem from an
independent source such as state law[.]”
State

Colleges

v.

Roth,

408

U.S.

564,

Bd. of Regents of

577

(1972);

see

also

Gardner v. City of Balt. Mayor & City Council, 969 F.2d 63, 68
(4th Cir. 1992).

“To have a property interest in a benefit, a

person clearly must have more than an abstract need or desire
for it.

He must have more than a unilateral expectation of it.

He must, instead, have a legitimate claim of entitlement to it.”
Roth, 408 U.S. at 577.
The Fourth Circuit has interpreted that “legitimate claim
of

entitlement”

to

turn

on

whether

the

government

discretion in granting or denying some benefit.
F.2d

at

property

68-69.

Gardner

interest

“only

adopted

when

the

a

standard

discretion

exercised

Gardner, 969
recognizing

of

the

a

issuing

agency is so narrowly circumscribed that approval of a proper
application

is

virtually

assured.”

Id.

at

68

(quoting

RRI

Realty Corp. v. Incorporated Village of Southampton, 870 F.2d
911, 918 (2d Cir. 1989)). 7

7

Defendants note that the Fourth Circuit has questioned whether
Gardner’s no-discretion standard should apply outside the land use
context. (Doc. 28 at 6-7.) Love v. Pepersack, 47 F.3d 120, 123 (4th
Cir. 1995) (assuming without deciding that plaintiff had property
interest).
However, the Fourth Circuit and its district courts
continue to find the extent of discretion in a state actor’s decision
to be a critical factor in determining whether a property interest
exists.
See, e.g., Appiah v. I.N.S., 202 F.3d 704, 709 (4th Cir.
2000); City-Wide Asphalt Paving, Inc. v. Alamance Cnty., 966 F. Supp.
395, 400-01 (M.D.N.C. 1997); Johnson v. Fernandez, Civ. No. PJM 1001719, 2011 WL 3236057, at *4 (D. Md. July 26, 2011).

25

In
admit,

the
that

present
the

competitive.

case,

process

(Doc.

22

Plaintiffs
for

at

allege,

allocating

15.)

receives its share of the funds.

Every

ESG

and

Defendants

funds

qualified

(Doc. 1 ¶ 55.)

is

non-

applicant

Mary’s House

was a qualified applicant and received funds each year from 2005
to 2009 and only stopped being a qualified applicant because
Defendants redefined “shelter.”

(Id. ¶ 3.)

Because the process

is non-competitive, qualified applicants are “virtually assured”
of receiving funding.
of

entitlement

to

Mary’s House thus had a legitimate claim

those

funds,

and

the

Jane

Does

had

a

legitimate claim of entitlement that the organization providing
their

services

would

receive

them.

Whether

their

claim

is

ultimately based on substantive or procedural due process, then,
Plaintiffs have sufficiently alleged that they have a protected
property interest in the ESG funds. 8
4.

Supremacy Clause

Plaintiffs allege that Defendants, as recipients of federal
funding, must abide by federal requirements for how that funding
is distributed and that their failure to do so violates the
Supremacy Clause of the U.S. Constitution.

8

(Doc. 1 ¶¶ 104-08.)

To the extent Plaintiffs’ response brief (Doc. 27 at 17) and
Defendants’ reply (Doc. 28 at 7) address a potential arbitrary
deprivation of a property right in a manner that furthered no
legitimate governmental purpose, the court declines to address it
because Defendants did not raise that issue as grounds for dismissal
in its motion to dismiss.

26

Plaintiffs argue that states cannot impose eligibility standards
for federal funds that entirely exclude certain entities that
would

otherwise

Defendants
federal

receive

contend

law;

to

that

prove

those
North

that

funds.

(Doc.

Carolina’s

point,

Defendants

at

19.)

comports

rule

27

with

offer,

without

citation, the fact that HUD approved of the State’s amended plan
and

that

rules.”

Defendants

adhered

“to

(Doc. 22 at 19-20.)

the

changes

to

the

federal

Defendants also argue that states

have substantial discretion to narrow the scope of the federal
funding they disburse.

(Doc. 28 at 7.)

Whether HUD approved North Carolina’s amended plan does not
appear in the complaint (nor do Defendants contend it is a fact
of which the court should take judicial notice), and Defendants
cannot introduce new facts to support their motion to dismiss.
Similarly, it is unclear what Defendants mean by “adherence to
the

changes

to

the

federal

rules,”

but

if

Defendants

are

referencing HUD’s purported change of focus for the ESG program,
that,

too,

does

not

appear

in

the

complaint.

Taking

the

allegations of the complaint as true for the purposes of the
present motion, Plaintiffs have alleged a violation of federal
requirements

in

administering

the

ESG

program.

As

Plaintiffs have stated a claim under the Supremacy Clause.

27

such,

III. CONCLUSION
For the reasons stated, the court finds that Plaintiffs’
claims are barred by sovereign immunity to the extent they seek
recovery against the State of North Carolina, DHHS, DAAS, and
OEO for violations of the FHA or U.S. Constitution pursuant to
section 1983 and seek damages from the remaining defendants (all
state officials) for violations of the FHA and U.S. Constitution
pursuant to section 1983.

In all other respects, Defendants’

motion to dismiss is denied.
IT

IS

THEREFORE

ORDERED

that

the

Defendants’

motion

to

dismiss (Doc. 21) is GRANTED as to all claims against the State
of North Carolina, DHHS, DAAS, and OEO for violations of the FHA
or U.S. Constitution pursuant to section 1983, and all claims
for

damages

officials)

for

against

the

violations

pursuant to section 1983.

remaining
of

the

FHA

defendants
and

U.S.

(all

state

Constitution

In all other respects, Defendants’

motion to dismiss is DENIED.

/s/
Thomas D. Schroeder
United States District Judge
September 30, 2013

28