Global Wealth Investments, Inc. v. Secretary, Department of Housing and Urban Development et al

Filing 22

ORDER granting 9 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM filed by Assisted Housing Services Corporation, Columbus Metropolitan Housing Authority; Assisted Housing Services Corporation and Columbus Metropolitan Housing Authority/Columbus Metro Housing Authority terminated. Signed by Judge Michael R. Barrett on 9/25/15. (ba)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

Global Wealth Investments, Inc.,
Plaintiff,

Case No. 1:14cv587

v.

Judge Michael R. Barrett

Shaun L. S. Donovan
Secretary, Department of Housing
and Urban Development, et al.,
Defendants.
OPINION & ORDER
This matter is before the Court upon Defendants Columbus Metropolitan Housing
Authority (“CMHA”) and Assisted Housing Services Corporation’s (“AHSC”) Motion to
Dismiss.

(Doc. 9).

Plaintiff Global Wealth Investments, Inc. filed a Response in

Opposition (Doc. 15) and Defendants filed a Reply (Doc. 17). Defendants argue that
Plaintiff’s Complaint fails to state a claim upon which relief may be granted because no
private right of action exists to enforce the Housing Act or HUD regulations.
I.

BACKGROUND
Plaintiff’s claims center around a property Plaintiff purchased from Brican

Properties in March of 2013. (Doc. 1, ¶¶ 7, 26). The property is a ten-unit residential
apartment building. (Id., ¶ 8). In 2008, Brican had entered into a Housing Assistance
Payment Contract (“HAP Contract”) with AHSC, as an agent for CMHA, and Defendant
U.S. Department of Housing and Urban Development (“HUD”). (Id., ¶ 9). AHSC and
CMHA administered the HAP Contract for HUD. (Id. ¶¶ 10, 11). Pursuant to the HAP
Contract, Brican was to receive subsidy payments from HUD to assist low-income

families living in the apartments. (Id. ¶¶ 12, 17). The payments were made pursuant to
Section 8 of the United States Housing Act of 1937, 42 U.S.C. § 1437f. Plaintiff relied
on the existence of the HAP Contract in deciding to purchase the property, and
anticipated that the HAP Contract would be assigned from Brican to Plaintiff. (Id., ¶¶
25, 27, 29). Immediately after the closing on the property, Plaintiff made substantial
repairs to the property based on communications from HUD, CMHA and AHSC. (Id., ¶¶
30-32).

These repairs were intended to correct deficiencies HUD found during

inspections which took place when Brican owned the property. (Id.) However, after the
repairs, the property failed an inspection in May of 2013, and HUD did not approve the
assignment of the HAP Contract from Brican to Plaintiff. (Id., ¶¶ 48-49).
Plaintiff brings a single claim against CMHA and AHSC of “Breach of Housing
Act.” Plaintiff alleges that CMHA and AHSC are “subject to Section 8 and its related
statutes, regulations, and HUD guidance” and that CMHA and AHSC “violated Section 8
and its related statutes, regulations, and HUD guidance.” (Id., ¶¶ 55-56).
Plaintiff claims that CMHA and AHSC, on HUD’s behalf, violated the Housing Act
when they: (a) abated and withheld payments due under the HAP Contract, (b) failed to
permit Plaintiff the opportunity to correct certain material deficiencies to the Property, (c)
failed to properly review and approve Plaintiff’s request to transfer the HAP Contract,
and (d) terminated the HAP Contract. (Id. ¶ 57).
II.

ANALYSIS
A. Motion to Dismiss Standard
When reviewing a 12(b)(6) motion to dismiss for failure to state a claim, this

Court must construe the complaint in the light most favorable to plaintiff, accept the

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plaintiff's factual allegations as true, and draw all reasonable factual inferences in
plaintiff's favor. See Reilly v. Vadlamudi, 680 F.3d 617, 622 (6th Cir. 2012). To properly
state a claim, a complaint must contain a “short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
B. Housing Act
Congress amended the Housing Act of 1937 to create the Section 8 Housing
Program. See 42 U.S.C. § 1437f, et seq. The Sixth Circuit has held that this section of
the Housing Act does not provide tenants with a private cause of action:
“[a]lthough residents of public housing undoubtedly ‘benefit’ from the
statutory provisions at issue, the language of § 1437f has an aggregate
focus on the entity being regulated, thereby belying any intent to create
rights enforceable by individual tenants.” Johnson v. City of Detroit, 446
F.3d 614, 627 (6th Cir. 2006).
Lewis v. Wheatley, 528 F. App'x 466, 468 (6th Cir. 2013); but see Howard v. Pierce, 738
F.2d 722 (6th Cir. 1984) (plaintiffs have an implied right of action against HUD to
enforce the Brooke Amendment, which places a ceiling on rental prices); Wright v. City
of Roanoke Development & Housing Authority, 479 U.S. 418, 107 S.Ct. 766, 93 L.Ed.2d
781 (1987) (tenants can maintain an action against local housing authorities, under 42
U.S.C. § 1983, for alleged violations of Brooke Amendment). 1
Plaintiff acknowledges that federal case law does generally hold that tenants are
barred from suing under the Housing Act, but argues that this does not equate to a
prohibition against landlord’s private right of action for improper terminations or
violations of a HAP Contract. Plaintiff cites to 42 U.S.C. § 1437f(c)(1), which provides:
“An assistance contract entered into pursuant to this section shall establish the
maximum monthly rent (including utilities and all maintenance and management
1

The Court notes that Plaintiff has not brought a claim pursuant to 42 U.S.C. § 1983.
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charges) which the owner is entitled to receive for each dwelling unit with respect to
which such assistance payments are to be made.” Plaintiff argues that this provision
creates an implied private right of action.
The Sixth Circuit has explained that “[a]bsent an express private right of action,
federal courts may in certain circumstances find an implied right of action.”

Care

Choices HMO v. Engstrom, 330 F.3d 786, 788 (6th Cir. 2003). The Supreme Court has
outline four factors to consider when determining the existence of an implied statutory
cause of action:
First, is the plaintiff one of the class for whose especial benefit the statute
was enacted, that is, does the statute create a federal right in favor of the
plaintiff? Second, is there any indication of legislative intent, explicit or
implicit, either to create such a remedy or to deny one? Third, is it
consistent with the underlying purposes of the legislative scheme to imply
such a remedy for the plaintiff? And finally, is the cause of action one
traditionally relegated to state law, in an area basically the concern of the
States, so that it would be inappropriate to infer a cause of action based
solely on federal law?
Id. at 788-89 (quoting Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26
(1975)).

However, the Supreme Court has warned “that implying a private right of

action ‘is a hazardous enterprise, at best.’” Id. at 789 (quoting Cort, 422 U.S. at 571).
Beyond citing to 42 U.S.C. § 1437f(c)(1), Plaintiff has not specified how the
Housing Act creates a federal right in its favor.

Section 1437f(c)(1) itself only

establishes that a specific term be included in a HAP Contract: “the maximum monthly
rent” an owner is entitled to receive. With regards to the underlying purposes of the
legislative scheme, the Sixth Circuit has explained that the Section 8 program “focuses
on regulating the Secretary and the public housing agencies through the Secretary's
promulgation of housing quality standards.” Johnson v. City of Detroit, 446 F.3d 614,

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627 (6th Cir. 2006) (quoting Johnson v. City of Detroit, 319 F.Supp.2d 756 (E.D.Mich.
2004)). The Housing Act itself states that the policy of the Act is to “remedy the unsafe
housing conditions and the acute shortage of decent and safe dwellings for low-income
families” and “to address the shortage of housing affordable to low-income families.” 42
U.S.C. § 1437(a)(1)(A)-(B). Therefore, there does not appear to be a legislative intent
to create a federal remedy which would allow Plaintiff, as the owner of the unit, to bring
a private right of action based on improper terminations or violations of a HAP Contract.
Based on the foregoing, Defendants Columbus Metropolitan Housing Authority
and Assisted Housing Services Corporation’s Motion to Dismiss (Doc. 9) is GRANTED.
Accordingly, Defendants Columbus Metropolitan Housing Authority and Assisted
Housing Services Corporation are hereby DISMISSED as parties from this matter.
IT IS SO ORDERED.
/s/ Michael R. Barrett
JUDGE MICHAEL R. BARRETT

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