Hilburn, et al v. Vilsack, et al
Opinion and Order - Defendants' Motion to Dismiss the Second Amended Complaint (ECF 53 ) is DENIED. Signed on 2/8/2018 by Judge Michael H. Simon. (mja)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
LISA McFALLS, MICHAEL McFALLS,
FRED WOODRING, and COMMUNITY
ACTION RESOURCE ENTERPRISES,
Case No. 3:16-cv-2116-SI
OPINION AND ORDER
SONNY PURDUE, Secretary of the
Department of Agriculture; ROGER
GLENDENNING, Undersecretary for Rural
Development; RICH DAVIS, Administrator
Rural Housing Service; and JOHN E.
HUFFMAN, Oregon Rural Development
Juhi S. Aggarwal, Ellen Johnson, Michael Pijanowski, and Edward Johnson, OREGON LAW
CENTER, 230 NE Second Avenue, Suite F, Hillsboro, OR 97124; Gideon A. Anders and Jessica
L. Cassella, NATIONAL HOUSING LAW PROJECT, 703 Market Street, Suite 2000, San Francisco,
CA 94103. Of Attorneys for Plaintiffs.
Billy J. Williams, Unites States Attorney, James E. Cox, Jr., Assistant United States Attorney,
and Sean E. Martin, Assistant United States Attorney, UNITED STATES ATTORNEY’S OFFICE,
DISTRICT OF OREGON, 1000 SW Third Avenue, Suite 600, Portland, OR 97204. Of Attorneys for
PAGE 1 – OPINION AND ORDER
Michael H. Simon, District Judge.
Plaintiffs Lisa McFalls, Michael McFalls, and Fred Woodring (the “Individual
Plaintiffs”) are low-income renters who live in federal subsidized housing at the Golden Eagle II
(“GE”) apartment building in Tillamook, Oregon. Plaintiff Community Action Resource
Enterprises, Inc. (“CARE”) is a nonprofit organization based in Tillamook County, Oregon.
CARE assists low-income persons in obtaining affordable housing in Tillamook County,
including at GE.
GE is an affordable housing unit for low-income persons. GE was financed with a direct
government loan and also receives operating subsidies from the United States Department of
Agriculture (“USDA”) Rural Housing Service and Rural Development (“RD”) agencies.
Plaintiffs sue Defendants Sonny Purdue, Secretary of the USDA; Roger Glendenning,
Undersecretary for RD; Rich Davis, Administrator of the USDA’s Rural Housing Service; and
John E. Huffman, Oregon State Director of RD, all in their official capacities.
In their original complaint, Plaintiffs challenged RD’s initial Civil Rights Impact
Analysis (“CRIA I”), which concluded that prepayment of GE’s loan would not materially affect
minority housing opportunities and approved the request by GE’s owner’s to prepay the loan.
This prepayment would have reduced the protections provided to GE’s tenants under RD’s
program and might have resulted in the displacement of the Individual Plaintiffs. After Plaintiffs
filed their original complaint and moved for a preliminary injunction to enjoin the approval of
the requested loan prepayment, Defendants rescinded their approval. RD then issued a second
Civil Rights Impact Analysis (“CRIA II”), which found that prepayment would materially affect
minority housing opportunities. Based on that finding, RD required that GE be offered for sale to
a nonprofit or public agency for 180 days in order to try to maintain GE as affordable housing.
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Defendants state that the mandatory 180-day waiting period began on October 17, 2017, and will
conclude on April 15, 2018.
After RD issued CRIA II, Plaintiffs filed a Second Amended Complaint. Plaintiffs allege:
(1) Defendants violated the Administrative Procedures Act (“APA”), 5 U.S.C. §§ 701 et seq., by
implementing regulations inconsistent with the governing statute with respect to analyzing the
effect of prepayment on minority housing; (2) RD violated the APA by failing to establish
standards or guidance for determining the effect of prepayment on minority housing
opportunities; (3) RD violated the APA by administering the Rural Voucher Program in an
arbitrary and capricious manner; and (4) RD’s regulations authorizing the termination of use
restrictions violates the Emergency Low Income Housing Preservation Act (“ELIHPA”), 42
U.S.C. § 1472. Defendants move to dismiss Plaintiffs’ Second Amended Complaint, arguing that
Plaintiffs lack standing, the Court lacks subject-matter jurisdiction because there is no final
agency action for the Court to review, and Plaintiff’s First and Fourth Claims for Relief alleged
in the Second Amended Complaint fail to state a claim upon which relief can be granted because
they are time-barred.1 For the reasons that follow, Defendants’ motion to dismiss is denied.
A. Article III Standing
The U.S. Constitution confers limited authority on the federal courts to hear only active
cases or controversies brought with standing. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 154647 (2016); Already, LLC v. Nike, Inc., 133 S. Ct. 721, 726 (2013). Standing “limits the category
In their reply and at oral argument, Defendants raised additional arguments and asserted
arguments against other causes of action. The Court, however, only considers arguments that
Defendants present in their opening motion. See Graves v. Arpaio, 623 F.3d 1043, 1048 (9th Cir.
2010) (noting that “arguments raised for the first time in a reply brief are waived”); United States
v. Puerta, 982 F.2d 1297, 1300 n.1 (9th Cir. 1992) (“New arguments may not be introduced in a
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of litigants empowered to maintain a lawsuit in federal court to seek redress for a legal wrong.”
Spokeo, 136 S. Ct. at 1547.
To have standing, a plaintiff must have a “personal interest . . . at the commencement of
the litigation.” Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 189
(2000). The constitutionally required personal interest must satisfy three elements: (1) an injuryin-fact, i.e., an invasion of a legally protected interest that is concrete and particularized, as well
as actual or imminent; (2) a causal connection between the injury-in-fact and the defendant’s
challenged behavior; and (3) likelihood that the injury-in-fact will be redressed by a favorable
ruling. Id. at 180-81, 189; see also Spokeo, 136 S. Ct. at 1547 (reiterating that the “irreducible
constitutional minimum” of standing consists of “an injury in fact . . . fairly traceable to the
challenged conduct of the defendant, and . . . likely to be redressed by a favorable judicial
An injury is “particularized” if it “affect[s] the plaintiff in a personal and individual
way.” Spokeo, 136 S. Ct. at 1548 (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 n.1
(1992)). An injury is “concrete” if it is “‘de facto’; that is, it must actually exist,” meaning that it
is “‘real’ and not ‘abstract.’” Id. “‘Concrete’ is not, however, necessarily synonymous with
‘tangible.’ Although tangible injuries are perhaps easier to recognize, [the Supreme Court has]
confirmed in many . . . previous cases that intangible injuries can nevertheless be concrete.” Id.
Although Article III’s injury requirement cannot be displaced by statute, when a statute
creates a legal right, the invasion of that legal right may create standing. See Spokeo, 136 S. Ct.
at 1549 (noting that Congress “is well positioned to identify intangible harms that meet minimum
Article III requirements” and “has the power to define injuries and articulate chains of causation
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that will give rise to a case or controversy where none existed before,” but emphasizing that
“Article III standing requires a concrete injury even in the context of a statutory violation”);
Edwards v. First Am. Corp., 610 F.3d 514, 517 (9th Cir. 2010) (noting that standing can exist by
virtue of “statutes creating legal rights, the invasion of which creates standing”). When a person
claims standing based on a violation of a statute, that person must also show that he or she has
what has been variously referred to as “statutory standing,” “prudential standing,” or “zone of
interest standing.” See generally Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S.
Ct. 1377, 1386-88 (2014).
The relevant question for statutory standing in this case is whether the “statutory
provision on which the claim rests properly can be understood as granting persons in the
plaintiff’s position a right to judicial relief.” Edwards, 610 F.3d at 517. This can be established
by pleading a violation of a right conferred by statute, provided the plaintiff alleges “a distinct
and palpable injury to himself, even if it is an injury shared by a large class of other possible
litigants.” Warth v. Seldin, 422 U.S. 490, 501 (1975). A “violation of a procedural right granted
by statute can be sufficient in some circumstances to constitute injury in fact. In other words, a
plaintiff in such a case need not allege any additional harm beyond the one Congress has
identified.” Spokeo, 136 S. Ct. at 1549 (emphasis in original). A plaintiff cannot, however,
“allege a bare procedural violation [of a statute], divorced from any concrete harm, and satisfy
the injury-in-fact requirement of Article III.” Spokeo, 136 S. Ct. at 1549 (providing, by way of
example of a procedural violation that would not likely present any material risk of harm, an
allegation that a credit reporting agency disseminated a report containing an incorrect zip code).
Additionally, in statutorily created causes of action, the plaintiff also must demonstrate that he or
she is within the “zone of interests” protected by the law invoked in order to have standing to sue
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for a violation of the statute. See Lexmark, 134 S. Ct. at 1388-89. Whether a plaintiff has stated a
basis for statutory standing is generally tested under Rule 12(b)(6) of the Federal Rules of Civil
Procedure, rather than Rule 12(b)(1). See Maya v. Centex Corp., 658 F.3d 1060, 1067 (9th Cir.
B. Motion to Dismiss Under Rule 12(b)(1)
Federal courts are courts of limited jurisdiction. Gunn v. Minton, 133 S. Ct. 1059, 1064
(2013) (quotation marks omitted). As such, a court is to presume “that a cause lies outside this
limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting
jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994) (citations
omitted); see also Robinson v. United States, 586 F.3d 683, 685 (9th Cir. 2009); Safe Air for
Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). A motion to dismiss under
Rule 12(b)(1) for lack of “subject-matter jurisdiction, because it involves a court’s power to hear
a case, can never be forfeited or waived.” United States v. Cotton, 535 U.S. 625, 630 (2002). An
objection that a particular court lacks subject-matter jurisdiction may be raised by any party, or
by the court on its own initiative, at any time. Arbaugh v. Y&H Corp., 546 U.S. 500, 506 (2006);
Fed. R. Civ. P. 12(b)(1). The Court must dismiss any case over which it lacks subject-matter
jurisdiction. Fed. R. Civ. P. 12(h)(3).
A motion to dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1) may be
either “facial” or “factual.” See Safe Air for Everyone, 373 F.3d at 1039. A facial attack on
subject-matter jurisdiction is based on the assertion that the allegations contained in the
complaint are insufficient to invoke federal jurisdiction. Id. “A jurisdictional challenge is factual
where ‘the challenger disputes the truth of the allegations that, by themselves, would otherwise
invoke federal jurisdiction.’” Pride v. Correa, 719 F.3d 1130, 1133 n.6 (9th Cir. 2013) (quoting
Safe Air for Everyone, 373 F.3d at 1039)). When a defendant factually challenges the plaintiff’s
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assertion of jurisdiction, a court does not presume the truthfulness of the plaintiff’s allegations
and may consider evidence extrinsic to the complaint. See Terenkian v. Republic of Iraq, 694
F.3d 1122, 1131 (9th Cir. 2012); Robinson, 586 F.3d at 685; Safe Air for Everyone, 373 F.3d at
1039. A factual challenge “can attack the substance of a complaint’s jurisdictional allegations
despite their formal sufficiency.” Dreier v. United States, 106 F.3d 844, 847 (9th Cir. 1996)
(citation and quotation marks omitted).
C. Motion to Dismiss Under Rule 12(b)(6)
Lack of statutory standing requires dismissal for failure to state a claim. See Maya, 658
F.3d at 1067. A motion to dismiss for failure to state a claim may be granted only when there is
no cognizable legal theory to support the claim or when the complaint lacks sufficient factual
allegations to state a facially plausible claim for relief. Shroyer v. New Cingular Wireless Servs.,
Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). In evaluating the sufficiency of a complaint’s factual
allegations, the court must accept as true all well-pleaded material facts alleged in the complaint
and construe them in the light most favorable to the non-moving party. Wilson v. HewlettPackard Co., 668 F.3d 1136, 1140 (9th Cir. 2012); Daniels-Hall v. Nat’l Educ. Ass’n, 629
F.3d 992, 998 (9th Cir. 2010). To be entitled to a presumption of truth, allegations in a complaint
“may not simply recite the elements of a cause of action, but must contain sufficient allegations
of underlying facts to give fair notice and to enable the opposing party to defend itself
effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). All reasonable inferences from
the factual allegations must be drawn in favor of the plaintiff. Newcal Indus., Inc. v. Ikon Office
Sol., 513 F.3d 1038, 1043 n.2 (9th Cir. 2008). The court need not, however, credit the plaintiff’s
legal conclusions that are couched as factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678-79
PAGE 7 – OPINION AND ORDER
A complaint must contain sufficient factual allegations to “plausibly suggest an
entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the
expense of discovery and continued litigation.” Starr, 652 F.3d at 1216. “A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
A federal court does not have jurisdiction “to give opinions upon moot questions or
abstract propositions, or to declare principles or rules of law which cannot affect the matter in
issue in the case before it.” Church of Scientology of Cal. v. United States, 506 U.S. 9, 12 (1992)
(quoting Mills v. Green, 159 U.S. 651, 653 (1895)). “A claim is moot if it has lost its character as
a present, live controversy.” Rosemere Neighborhood Ass’n v. U.S. Envtl. Prot. Agency, 581
F.3d 1169, 1172-73 (9th Cir. 2009) (quoting Am. Rivers v. Nat’l Marine Fisheries Serv., 126
F.3d 1118, 1123 (9th Cir. 1997)). To determine mootness, “the question is not whether the
precise relief sought at the time the application for an injunction was filed is still available. The
question is whether there can be any effective relief.” Nw. Envtl. Def. Ctr. v. Gordon, 849
F.2d 1241, 1244-45 (9th Cir. 1988) (quoting Garcia v. Lawn, 805 F.2d 1400, 1403 (9th
Cir. 1986)) (emphasis in original). If a course of action is mostly completed but modifications
can be made that could alleviate the harm suffered by the plaintiff’s injury, the issue is not moot.
Tyler v. Cuomo, 236 F.3d 1124, 1137 (9th Cir. 2000). A case becomes moot “only when it is
impossible for a court to grant any effectual relief whatever to the prevailing party.” Chafin v.
Chafin, 133 S.Ct. 1017, 1023 (2013) (emphasis added) (citation omitted). The party alleging
mootness bears a “heavy burden” to establish that a court can provide no effective relief. Karuk
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Tribe of Cal. v. U.S. Forest Serv., 681 F.3d 1006, 1017 (9th Cir. 2012) (quoting Forest
Guardians v. Johanns, 450 F.3d 455, 461 (9th Cir. 2006)).
“Standing and mootness are similar doctrines: Both require some sort of interest in the
case, and both go to whether there is a case or controversy under Article III.” Jackson v. Cal.
Dept. of Mental Health, 399 F.3d 1069, 1072 (9th Cir. 2005). The doctrines, however, have
important differences—standing doctrine ensures that scarce judicial resources are devoted to
disputes in which the parties have a concrete stake, and “[m]ootness issues arise later in the case,
when the federal courts are already involved and resources have already been devoted to the
dispute.” Id. at 1072-73. That is why the Supreme Court recognizes exceptions to mootness that
are not allowed as exceptions to standing, such as the exceptions for “voluntary cessation” and
“capable of repetition, yet evading review.” See Laidlaw, 528 U.S. at 189-90.
A. Statutory Background
Sections 515 and 521 of the Housing Act of 1949 (“Housing Act”), 42 U.S.C. §§ 1485,
1490a, provide for the development of low- and moderate-income housing in rural areas. This
program was originally managed by USDA Farmers Home Administration, which was later
incorporated into the Rural Housing Service. See Schroeder v. United States, 569 F.3d 956, 95859 (9th Cir. 2009).
Under the Housing Act, owners of housing units are given government loans at favorable
interest rates and other governmental subsidies in exchange for an agreement to rent units to
qualified low-income, elderly, and disabled rural residents for the duration of the loan. Among
other things, the housing program allows an “Interest Credit” subsidy, which reduces the interest
rate on the loan to an effective rate of one percent. 42 U.S.C. § 1490a(a)(1)(B). Under the
Interest Credit subsidy, owners establish a “basic rent” for each unit, which is generally less than
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the market rate. Residents benefitting from the Interest Credit subsidy pay the higher of 30
percent of their income or the basic rent. 7 C.F.R. § 3560.203(a).
The housing program also provides a “Rental Assistance” subsidy. This is a subsidy
passed through to low and very low income residents as lowered rent. The program allows such
tenants to pay no more than 30 percent of their income for rent, regardless of the basic rent
amount. 42 U.S.C. § 1490(a)(2)(A). RD enters into agreements with owners specifying the
number of units in a development that will receive Rental Assistance. In GE, 19 of the 32
households receive the Rental Assistance subsidy, and the remaining households pay the higher
of 30 percent of income or basic rent (the Interest Credit subsidy).
As originally drafted, property owners who developed rural low income housing had a
contractual right to prepay their loans and leave the program, usually after a particular period of
time, ending the borrower’s obligation to rent to qualified individuals. See Franconia Assocs. v.
United States, 536 U.S. 129, 135 (2002); Airport Rd. Assocs., Ltd. v. United States, 120 Fed.
Cl. 706, 708 (2015). Concerned that the number of borrowers who were exercising their
prepayment option was threatening the goals of the program, in 1979 Congress passed an
amendment to the Housing Act that restricted certain prepayments to “to stem the loss of lowcost rural housing due to prepayments.” Franconia, 536 U.S. at 135. In 1980, however, Congress
again amended the Housing Act to remove any prepayment restrictions from loans made before
December 21, 1979. Id. “By 1987, Congress had again become concerned about the dwindling
supply of low- and moderate-income rural housing in the face of increasing prepayments of
mortgages under § 515.” Id. at 136. Thus, in 1988 Congress enacted ELIHPA, which “amended
the Housing Act of 1949 to impose permanent restrictions upon prepayment of § 515 mortgages
entered into before December 21, 1979.” Id.
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Under ELIHPA and its corresponding regulations, before the USDA can accept
prepayment of a § 515 mortgage, it “shall make reasonable efforts to enter into an agreement
with the borrower under which the borrower will make a binding commitment to extend the low
income use of the assisted housing and related facilities for not less than the 20-year period
beginning on the date on which the agreement is executed.” 42 U.S.C. § 1472(c)(4)(A). ELIHPA
provides that the government may include incentives to reach agreement with the borrower. See
Franconia, 536 U.S. at 136 (citing § 1472(c)(4)(B)). If the borrower and the government cannot
reach an agreement after a “reasonable period,” the borrower seeking prepayment must “offer to
sell the assisted housing and related facilities involved to any qualified nonprofit organization or
public agency at a fair market value determined by 2 independent appraisers . . . .” 42 U.S.C.
§ 1472(c)(5)(A)(i). The government may accept prepayment if an offer to purchase by a
qualified nonprofit organization or public agency is not made within 180 days, or may require
refinancing in accordance with the statute. See Franconia, 536 U.S. at 137; see also 42 U.S.C.
B. Regulatory Background
The regulations implementing the Housing Act and ELIHPA provide that the regulations’
requirements “support the Agency’s commitment to the preservation of decent, safe, sanitary,
and affordable multi-family housing (MFH) for very low-, low-, and moderate-income
households.” 7 C.F.R. § 3560.651. The regulations, following the requirements in ELIHPA,
provide that before accepting an offer to prepay from a borrower, the USDA must make a
reasonable effort to enter into an agreement with the borrower to extend the low-income use of
the property, offering appropriate incentives. Id. §§ 3560.655, 3560.656. If no agreement can be
reached, the USDA can accept prepayment if: (1) the borrower agrees to sign restrictive-use
provisions to extend restrictive use by 10 years from the date of prepayment and after those 10
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years agrees to offer to sell the housing to a qualified nonprofit organization or public agency; or
(2) “[i]f housing opportunities for minorities would be lost as a result of prepayment, the
borrower will offer to sell the housing to a qualified nonprofit organization or public body.”
Id. § 3560.658(a).
If the borrower does not agree to either of those two options, then the USDA must
“assess the impact of prepayment on two factors: housing opportunities for minorities and the
supply of decent, safe, sanitary, and affordable housing in the market area.” Id. § 3560.658(b).
Earlier versions of the implementing regulations mirrored ELIHPA’s text by requiring
consideration of whether “housing opportunities for minorities will not be materially affected as
a result of the prepayment . . . .” 7 C.F.R. Part 1965, Subpart B, Exhibit E, ¶ IV A.2 (1988). The
rules were amended in 1990, but this provision was left unchanged.
In 2003, RD proposed new rules to consolidate and recodify many § 515 regulations. 68
Fed. Reg. 32872 (June 2, 2003). The draft proposed rules did not change the provision relating to
consideration of the effect on minorities of prepayment. The interim final rules, however,
significantly changed the provision. The interim final rule states in relevant part: “The Agency
will review relevant information to determine the availability of comparable affordable housing
for existing tenants in the market area and if minorities in the project, on the waiting list or in the
market area will be disproportionately adversely affected by the loss of affordable rental housing
units.” 69 Fed. Reg. 69032, 69170 (Nov. 26, 2004) (now codified at 7 C.F.R. § 3560.658(b))
The USDA explained this change by stating that comments were received asking for
additional information on how the determination of minority impact is reached. The Agency
responded: “[t]he Agency agreed that ‘adverse impact’ needed further clarification and has
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clarified that the adverse impact should be disproportionate. . . . Additional details on how the
Agency will review relevant information is available in Agency guidance about program
procedures.” 69 Fed. Reg. 69032, 69094 (Nov. 26, 2004). A disproportionate adverse effect “is
defined as an impact predominately born by a minority or low-income population, is suffered by
the minority and/or low-income population, and is appreciably more severe or greater in
magnitude than what would be experienced by the non-minority or non low-income population.”
USDA Nat’l Appeals Division, Appeals Determination, Case No. 2011E000625 (Sept. 12, 2011)
(citing USDA Administrative Notice 4501, Att. 2, Question 5).2
The “additional details” referenced in the rule are contained in Exhibit E of RD
Instruction 1965, Subpart E, titled “Administrative Guidance for Making Prepayment
Determinations” (“Exhibit E”).3 Exhibit E provides that the analysis regarding the adverse effect
on minorities must address and document: (1) the percentage of minorities in the prepaying
project and in the project’s market area to which displaced residents are likely to move; (2) the
impact of potential prepayment on minority residents in the project and in the market area;4
(3) the vacancies and length of waiting lists at the prepaying project and in projects with similar
minority concentrations in the geographic area of the prepaying project; and (4) whether the
Available at https://usda-nad-local1.entellitrak.com/etk-usda-nad-prodtemp/page.request.do?page=page.highlightedFile&id=64119&query_text=&query_text2=&citati
on= (last visited on January 29, 2018).
These considerations were originally included as a proposed rule, but ultimately were
not included in the regulation. See 55 Fed. Reg. 29601, 29619 (July 20, 1990) (Proposed
If either the project or market area is an area of minority concentration, the agency must
determine whether minority tenants and members of the community will be forced to move to
areas with traditional discrimination practices. If both the project and market areas do not have
minority concentration, the agency must determine whether minorities will be forced to move to
an area of minority concentration if the subject housing is prepaid.
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prepayment will negatively affect the opportunity for decent, safe and sanitary, and affordable
housing of minority residents in the community who do not currently live at the project.
Exhibit E was published internally in RD Instructions and forwarded to all field offices in 2003.
Thus, the USDA now reviews whether minorities will be disproportionately adversely
affected by the loss of the affordable rental housing unit. If the USDA “determines that
prepayment will have an adverse impact on minorities, then the borrower must offer to sell to a
qualified nonprofit organization or public body.” Id. § 3560.658(b)(2). If the USDA “determines
that the prepayment will not have an adverse effect on housing opportunities for minorities” and
“there is not an adequate supply of decent, safe, and sanitary rental housing affordable to
program eligible tenant households in the market area, the loan may be prepaid only if the
borrower agrees to sign restrictive-use provisions . . . to protect tenants at the time of
prepayment.” Id. § 3560.658(b)(3). If the USDA “determines that there is no adverse impact on
minorities and there is an adequate supply of [affordable] decent, safe, and sanitary rental
housing,” then prepayment can be accepted without further restrictions. Id. § 3560.658(b)(4).
Within 30 days of receiving a completed prepayment request, the USDA must send a
prepayment request notice to each tenant, and borrowers must post the prepayment request notice
in the public areas of the housing project from the date of the notice through final resolution of
the prepayment request. The notice must state a date and place when and where tenants can meet
with USDA personnel and must advise tenants that they may review all information submitted
except the borrower’s financial information and that they have 30 days from the date of the
prepayment request to submit comments. Id. § 3560.654. After the USDA agrees to accept
prepayment, it must then notify borrowers in writing of the conditions under which it accepts
prepayment, including the specific restrictive-use provisions to which the borrower has agreed.
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Id. § 3560.660(a). The USDA must notify tenants if the prepayment is expected to result in
increased net tenant contributions, displacements, or involuntary relocations and notify tenants of
their right to request a Letter of Priority Entitlement (“LOPE”). Id. § 3560.660(b).
C. Factual and Procedural Background of this Case
The loan for the development of GE was made in 1976, with a repayment term of 50
years. The loan may be prepaid, but only under the conditions set forth in ELIHPA. On June 22,
2015, RD sent a notice of prepayment letter to all GE tenants, explaining that GE’s owner has
requested permission to prepay the loan. ECF 23-1. The notice informed tenants that it was
unclear whether GE would remain affordable housing, that rents could be increased, and that RD
could determine that prepayment would require certain tenant protections.
On September 19, 2016, RD sent to GE’s owner a letter confirming acceptance of
prepayment on GE’s financing, with conditions. ECF 23-2 at 1-5. This letter explained that RD
had concluded from its “needs and impact analysis” that the proposed prepayment will not cause
any adverse impact to minorities, but that there is an insufficient supply of affordable housing in
the market area and thus the prepayment will be accepted with the condition of a Restrictive Use
Covenant, which was attached. Id. at 1. This acceptance letter further explained the timing
requirements for payment and that certain previously-identified repairs would need to be
completed before prepayment. Id. at 1-2.
Also on September 19, 2016, RD sent a notice to GE tenants that RD had accepted the
owner’s prepayment request. ECF 23-2 at 6-8; see also ECF 23-3. This notice informed tenants
that rents may be increased in the future, that the owner could not evict tenants without good
cause, and that tenants could enforce the legal agreement made by the owner. The tenants also
were notified that they may be eligible for a USDA Voucher to provide short-term rental subsidy
to supplement the rent payment and allow tenants to remain in GE or move elsewhere. The
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notice also attached a document informing tenants that they may apply for a LOPE and may be
eligible for an RD Voucher because “rents may increase thereby making the housing
unaffordable to tenants.” ECF 23-2 at 8.
Plaintiffs filed this lawsuit on November 4, 2016. On November 23, 2016, Plaintiffs filed
an amended complaint and moved for a preliminary injunction. The Court set a hearing date of
January 4, 2017, on Plaintiffs’ motion. Several days before the hearing, the Court sent the parties
the Court’s tentative Opinion and Order granting Plaintiff’s motion. At the hearing, Defendants
stated that RD had decided voluntarily to rescind its approval of the prepayment request for GE’s
loan. Defendants acknowledged that there were flaws in its analysis in CRIA I and that RD
would perform a new CRIA. Thus, Defendants argued, the preliminary injunction the Court had
tentatively indicated it would order was no longer needed because the prepayment could no
longer move forward until the new CRIA was completed. The Court agreed and denied
Plaintiffs’ motion without prejudice. The Court, however, ordered that Defendants could not
accept any prepayment on GE without giving Plaintiffs 60 days’ notice. The Court also ordered
Defendants to comply with all statutory and regulatory notice requirements, so that Plaintiffs
could timely renew their motion for preliminary injunction, if needed. ECF 30.
RD conducted its second CRIA, after which RD concluded that prepayment would have a
disproportionate effect on minority housing. ECF 38-1. Accordingly, RD required GE’s owner to
offer GE for sale to a nonprofit or public agency for a period of 180 days. On or about May 11,
2017, GE’s owner advised RD that it would comply with RD’s decision and offer the
development for sale after an appraisal of the property had been completed. ECF 49 ¶ 22.
There are five additional RD § 515 rental housing developments in Tillamook County.
There is a 12-unit family development with all units subsidized with Rental Assistance; a 34-unit
PAGE 16 – OPINION AND ORDER
elderly development with 19 of the units subsidized with Rental Assistance; a 32-unit family
development with 20 of the units subsidized with Rental Assistance; a 30-unit family
development with all the units subsidized with Rental Assistance; and a 17-unit elderly
development with 16 of the units subsidized with Rental Assistance. The loans for at least three
of these developments are currently eligible for prepayment.
In their motion to dismiss, Defendants argue that Plaintiffs do not have standing because
they do not allege sufficient facts showing injury from the regulations or alleged agency
practices. Defendants also argue that the Court lacks jurisdiction because there has been no final
agency action, which is a jurisdictional prerequisite to claims under the APA. Finally,
Defendants argue that Plaintiffs’ first and fourth causes of action are time-barred because the
regulations that Plaintiffs challenge were issued more than six years ago.
Plaintiffs respond by arguing primarily that this case is justiciable for three reasons. First,
the issue now before the court is one of mootness and not standing, which presents a higher
burden for Defendants that has not been met. Second, RD’s initial approval of CRIA I constitutes
final agency action sufficient to allow suit under the APA, as does the issuance of CRIA II.
Third, the first and fourth claims are not barred by the statute of limitations because the
challenges are “as-applied” challenges, rather than “facial” challenges and thus the statute of
limitations begins when the regulation has been applied, not when it was promulgated.
Plaintiffs assert that they had standing when this case was originally filed, that standing is
considered as of the filing of the original complaint, and that Defendants’ arguments relating to
RD’s rescission of the prepayment approval go to mootness and not standing. Defendants do not
dispute these points, and instead argue that Plaintiffs’ mootness-versus-standing argument is a
PAGE 17 – OPINION AND ORDER
distinction without a difference. Defendants contend that regardless of whether the Court
considers the issue to be a question of mootness or standing, Plaintiffs cannot maintain their
claims. The majority of Defendants’ arguments, however, challenge Plaintiffs’ standing, based
on the facts as they exist as of the filing of the Second Amended Complaint.
As an initial matter, the Court agrees with Plaintiffs that Article III standing is evaluated
by considering the facts as they existed at the time of the commencement of the action. See
Laidlaw, 528 U.S. at 180 (noting that “we have an obligation to assure ourselves that FOE had
Article III standing at the outset of the litigation”); Barry v. Lyon, 834 F.3d 706, 714 (6th
Cir. 2016) (“To uphold the constitutional requirement that federal courts hear only active cases
or controversies, as required by Article III, section 2 of the federal constitution, a plaintiff must
have a personal interest at the commencement of the litigation (standing) that continues
throughout the litigation (lack of mootness).”); Skaff v. Meridien N. Am. Beverly Hills, LLC, 506
F.3d 832, 838 (9th Cir. 2007) (“The existence of standing turns on the facts as they existed at the
time the plaintiff filed the complaint.”); Focus on the Family v. Pinellas Suncoast Transit
Auth., 344 F.3d 1263, 1275 (11th Cir. 2003) (“Importantly, in reaching this [standing]
determination, we note that Article III standing must be determined as of the time at which the
plaintiff’s complaint is filed.”); Cleveland Branch, NAACP v. City of Parma, 263 F.3d 513, 524
(6th Cir. 2001) (“[S]tanding does not have to be maintained throughout all stages of litigation.
Instead it is to be determined as of the time the complaint is filed.”); Becker v. Fed. Election
Comm’n, 230 F.3d 381, 386 n.3 (1st Cir. 2000) (noting that Lujan “clearly indicat[es] that
standing is to be ‘assessed under the facts existing when the complaint is filed’” and that
evaluating standing when facts later change “conflates questions of standing with questions of
mootness: while it is true that a plaintiff must have a personal interest at stake throughout the
PAGE 18 – OPINION AND ORDER
litigation of a case, such interest is to be assessed under the rubric of standing at the
commencement of the case, and under the rubric of mootness thereafter”); White v. Lee, 227
F.3d 1214, 1243 (9th Cir. 2000) (“Standing is examined at ‘the commencement of the
litigation.’”); Wadsworth v. Talmage, 2017 WL 3271722, at *3 (D. Or. Aug. 1, 2017) (noting
that standing turns on the facts as of the time of the original complaint, except when the court
had allowed a supplemental complaint under Rule 15(d) of the Federal Rules of Civil Procedure
to correct a defective complaint and circumvent the unnecessary steps of dismissal of one action
and the filing of a new action); Nw. Envtl. Def. Ctr. v. U.S. Army Corps of Engineers, 2013
WL 1294647, at *7-8 (D. Or. Mar. 27, 2013) (rejecting the defendant’s arguments that standing
should be considered based on the facts at the time of the second amended complaint, when the
government had voluntarily disbanded the challenged conduct, discussing the difference between
standing and mootness); see also Already, LLC v. Nike, Inc., 568 U.S. 85, 91-93 (2013) (noting
that both parties had standing “[a]t the outset of this litigation” but that after Nike dismissed its
claims with prejudice, the issue became one of mootness, and then analyzing the voluntary
cessation exception to mootness).
The Court holds that Plaintiffs had standing at the time they commenced the action. Thus,
the relevant question is whether the issuance of CSRIA II or the rescission of the prepayment
agreement has rendered the case moot.
Plaintiffs argue that none of Defendants’ actions after the filing of this case have mooted
Plaintiffs’ claims that the implementing regulations on CRIAs violate the APA because they are
inconsistent with the governing statute and result in arbitrary and capricious prepayment
determinations, that the voucher program violates the APA because it is arbitrary and capricious,
and that the regulations authorizing the termination of use restrictions violates ELIHPA.
PAGE 19 – OPINION AND ORDER
Plaintiffs also argue that even if their claims were rendered moot, they are subject to the
exception to mootness of voluntary cessation.
Defendants respond that mootness is the doctrine of standing at a certain point in time,
Plaintiffs no longer have standing, and thus the case is moot. This argument, however, has been
rejected by the Supreme Court. In Laidlaw, the Supreme Court explained in detail why the
description of mootness as “standing set in a time frame”5 is not comprehensive—primarily
because of the exceptions to mootness that are not available in considering standing. 528 U.S.
at 190-92. The voluntary cessation exception to mootness, argued by Plaintiffs as applying in the
pending case, is one of the exceptions discussed by the Supreme Court in Laidlaw.
The Court assumes without deciding that Defendants’ conduct in rescinding its approval
of GE’s prepayment, withdrawing CRIA I, and issuing CRIA II, has mooted Plaintiffs’ original
claims. The Court now considers Plaintiffs’ argument that the voluntary cessation exception to
mootness applies. The Supreme Court has explained the voluntary cessation exception as
It is well settled that a defendant’s voluntary cessation of a
challenged practice does not deprive a federal court of its power to
determine the legality of the practice. Such abandonment is an
important factor bearing on the question whether a court should
exercise its power to enjoin the defendant from renewing the
practice, but that is a matter relating to the exercise rather than the
existence of judicial power.
In Laidlaw, the Supreme Court explained courts’ previous reliance on this description:
“The confusion is understandable, given this Court’s repeated statements that the doctrine of
mootness can be described as ‘the doctrine of standing set in a time frame: The requisite personal
interest that must exist at the commencement of the litigation (standing) must continue
throughout its existence (mootness).’ Arizonans for Official English, 520 U.S. [43,] 68 n.22
 (quoting United States Parole Comm’n v. Geraghty, 445 U.S. 388, 397 (1980), in turn
quoting Monaghan, Constitutional Adjudication: The Who and When, 82 Yale L.J. 1363, 1384
(1973) (internal quotation marks omitted).” Laidlaw, 528 U.S. at 189-90.
PAGE 20 – OPINION AND ORDER
City of Mesquite v. Aladdin’s Castle, Inc., 455 U.S. 283, 289 (1982). As the Supreme Court
further explained, in a footnote:
“The test for mootness in cases such as this is a stringent one. Mere
voluntary cessation of allegedly illegal conduct does not moot a
case; if it did, the courts would be compelled to leave ‘[t]he
defendant . . . free to return to his old ways.’ A case might become
moot if subsequent events made it absolutely clear that the
allegedly wrongful behavior could not reasonably be expected to
recur. . . . Of course it is still open to appellees to show, on
remand, that the likelihood of further violations is sufficiently
remote to make injunctive relief unnecessary. This is a matter for
the trial judge. But this case is not technically moot, an appeal has
been properly taken, and we have no choice but to decide it.”
Id. n.10 (quoting United States v. Concentrated Phosphate Export Ass’n, 393 U.S. 199, 203-04
(1968) (alterations in original) (citations omitted); see also Laidlaw, 528 U.S. at 189 (describing
the voluntary cessation exception, citing to City of Mesquite and Concentrated Phosphate).
Defendants voluntarily ceased part of the alleged wrongful conduct—the approval of
prepayment of the loan on GE and reliance on the allegedly improper CRIA I. But Defendants
did not cease much of the alleged wrongful conduct—retaining allegedly improper regulations,
failing to have standards that result in allegedly arbitrary and capricious analyses, and operating
an allegedly arbitrary and capricious voucher program. For example, RD has not changed its
regulations more closely to mirror the statutory text with respect to CRIAs, as Plaintiffs allege it
should with respect to evaluating the effect on minority housing. Instead, when faced with the
Court’s tentative decision on Plaintiff’s motion for preliminary injunction, RD decided to
withdraw its particular CRIA relating to a single property, reissue that CRIA, and then rescind
the prepayment approval on that one property. Changing that single decision, however, does not
change the underlying wrongful conduct that Plaintiffs’ allege resulted in that allegedly wrongful
decision, which Defendants appear to have conceded was a wrongful decision when they
rescinded that action.
PAGE 21 – OPINION AND ORDER
RD voluntarily agreed to reconsider its CRIA and prepayment approval relating to GE.
RD did not, however, change any policy or make any procedural changes to the regulations and
procedures challenged by Plaintiffs. The Ninth Circuit has found that “an executive action that is
not governed by any clear or codified procedures cannot moot a claim” and falls within the
voluntary cessation exception. McCormack v. Herzog, 788 F.3d 1017, 1025 (9th Cir. 2015).
Even if RD’s reconsideration of GE’s CRIA indicates some intention of changing its policy
going forward, without a more rigorous policy statement or change to its regulations, the Ninth
Circuit advises courts to be “less inclined to find mootness where the ‘new policy . . . could be
easily abandoned or altered in the future.’” Rosebrock v. Mathis, 745 F.3d 963, 972 (9th
Cir. 2014) (finding that this type of conduct falls within the voluntary cessation exception).
Defendants’ voluntary cessation may have rendered certain aspects of Plaintiffs’
originally-alleged harm no longer imminent (such as facing higher rents and eviction at GE), but
Defendants have a “heavy burden” to show that it is “absolutely clear” that their allegedly
wrongful behavior “could not reasonably be expected to recur.” Laidlaw, 528 U.S. at 189
(quoting Concentrated Phosphate, 393 U.S. at 203). This alleged wrongful behavior includes, for
example, conducting CRIAs using an improper standard or operating an improper voucher
program. Because the same regulations and procedures (or lack thereof) are still in place, the
allegedly wrongful behavior can reasonably be expected to recur.
Defendants argue that their allegedly wrongful conduct of performing improper CRIAs or
implementing improper voucher programs cannot serve to keep this case a live case or
controversy because it cannot harm Plaintiffs. Defendants contend that although Plaintiffs assert
there are other low income properties in Tillamook County that are eligible for prepayment,
Plaintiffs “provide no evidence” that any other property is currently in the prepayment process,
PAGE 22 – OPINION AND ORDER
other than GE. Defendants also assert that whether the Individual Plaintiffs will need vouchers
will not be known until after it is known whether GE is purchased by a nonprofit organization
and retained as low income housing or allowed to be prepaid without use restrictions (after
the 180-day waiting period expires). Even if the GE loan becomes eligible for prepayment,
Defendants argue that it will still be speculative as to whether any particular Individual Plaintiff
will need a voucher. Thus, argue Defendants, even if Defendants improperly perform some of
the functions within the prepayment or voucher process, any argument that such impropriety
would harm Plaintiffs is speculative.
The Ninth Circuit rejected similar arguments in Rosemere Neighborhood Ass’n v. U.S.
Envtl. Prot. Agency, 581 F.3d 1169 (9th Cir. 2009). In Rosemere, the plaintiff originally sought a
declaration that the EPA was not timely considering administrative complaints and an injunction
compelling the EPA to complete its investigation into an underlying administrative complaint
brought by the plaintiff. Id. at 1171. After the lawsuit was filed, the EPA completed its
investigation and argued that the lawsuit was moot. The plaintiff filed an amended complaint and
sought an injunction requiring that the EPA consider all of the plaintiff’s administrative
complaints going forward for the next five years within the deadlines required by the EPA’s
governing regulations. Id. at 1172. The district court dismissed the plaintiff’s claims as moot.
The plaintiff argued that the claims were subject to the voluntarily cessation exception to
mootness. The EPA argued that because no other administrative complaints were pending, the
prospect that there would be any new administrative complaint by the plaintiff and that
adjudication of any new administrative complaint would be delayed was speculative. Id. at 1173.
The Ninth Circuit rejected this argument, noting that it impermissibly shifted the burden onto the
plaintiff to prove that it would file a new administrative complaint when the “heavy burden” is
PAGE 23 – OPINION AND ORDER
on the defendant (the party arguing mootness) to show that the plaintiff would not file a new
complaint in the future, and that the defendant could not meet this burden by merely arguing that
the plaintiff had not done enough to show future harm. Id. at 1173-74. The Ninth Circuit also
noted that a plaintiff’s stated intention to resume the activity that led to litigation is sufficient. Id.
Plaintiffs argue in their response that if RD does not change its allegedly improper
regulations or start using proper prepayment standards of review, RD will continue to violate
ELIHPA, which “will continue to frustrate CARE’s mission and increase CARE’s financial and
personnel burdens in Tillamook County. . . . CARE will have to spend more time assisting its
clients in finding affordable housing, challenging RD’s illegal acceptance of prepayment
requests, and providing additional financial assistance.” ECF 57 at 9 (emphasis added).
Additionally, at oral argument counsel for CARE confirmed that CARE would continue to file
lawsuits in the future if additional properties receive prepayment approval. This is a sufficient
stated intention to resume activities by Plaintiff to satisfy the requirements set by the Ninth
Circuit. Rosemere, 581 F.3d at 1174; S. Or. Barter Fair v. Jackson Cty., 372 F.3d 1128, 1134
(9th Cir. 2004).
The “heavy burden” is on Defendants to show that it is “extremely unlikely” that the
Individual Plaintiffs will not be subject to RD’s voucher program and that CARE will not file a
future lawsuit. Rosemere, 581 F.3d at 1173 (stating that one way the defendant could meet its
burden of showing that it is “absolutely clear” that the challenged conduct would not reoccur is
“by showing that it is extremely unlikely that Rosemere will file another complaint (and thus
come before the agency again)” and the other is to show that the agency would timely respond to
any future complaint). Defendants have submitted a declaration from J. Wesley Cochran, the
PAGE 24 – OPINION AND ORDER
Multi-Family Housing Program Director from the Oregon State Office of Rural Development,
stating that he is aware of all prepayment applications for § 515 properties and that there are no
pending applications for prepayment within Tillamook County other than for GE. The fact that
no applications are currently pending, however, is insufficient evidence standing alone. In
Rosemere, there were no pending administrative complaints by the plaintiff, but that was
insufficient to show that there would not be a future complaint. 581 F.3d at 1172-73. Further, in
Barter Fair, the plaintiff hoped to obtain funding at some point in the future to hold another fair,
even though it had not been able to raise sufficient funds for many years, and the Ninth Circuit
found the prospect of a future fair not to be too speculative because the barriers were not
“insurmountable.” 372 F.3d at 1134. Similarly, it is not an insurmountable hurdle or extremely
unlikely that a property in Tillamook County will seek repayment in the future and CARE will
challenge the RD’s process for considering such a repayment.
Defendants offer no evidence regarding the future applicability of the voucher program to
Plaintiffs, which is unknown until the 180-day waiting period expires on or about April 17, 2018.
At oral argument, counsel for Plaintiffs noted that the voucher program has run out of funding
for the past several years and that the funding in the most recent budget proposed by Congress
(though not yet approved) was significantly decreased. Thus, argue Plaintiffs, it is a near
certainty that the voucher program will run out of funds. Plaintiffs also contend that voucher
funds are being mishandled and distributed in a manner contrary to the statute, which harms all
Plaintiffs because it results in monies not being available that otherwise would be available to
program participants. At this stage in the proceedings, Defendants have not met their “heavy
burden” of showing that it is “absolutely clear” that the alleged wrongful conduct cannot reoccur.
PAGE 25 – OPINION AND ORDER
Defendants also cite to Summers v. Earth Island Inst., 555 U.S. 488 (2009), and Cierco v.
Mnuchin, 857 F.3d 407 (D.C. Cir. 2017), to support their argument that Plaintiffs’ claims are
moot. Defendants’ reliance on Summers is misplaced. In Summers, the Supreme Court held that
the plaintiffs could not continue litigating whether agency regulations were improper after the
parties settled their underlying dispute on a timber sale, which was the only application of the
regulations that gave the plaintiffs standing in the case. 555 U.S. at 494 (“We know of no
precedent for the proposition that when a plaintiff has sued to challenge the lawfulness of certain
action or threatened action but has settled that suit, he retains standing to challenge the basis for
that action (here, the regulation in the abstract), apart from any concrete application that
threatens imminent harm to his interests.” (emphasis added)). That case did not involve the
voluntary cessation exception to mootness because it involved a completely different context—
the parties had settled their dispute. In the pending action, the parties have not settled their
dispute. Defendants’ reliance on Cierco is similarly unavailing because Cierco, like Summers,
did not involve the voluntary cessation exception to mootness. The concerns giving rise to the
voluntary cessation exception (that a defendant might voluntarily cease the challenged conduct to
avoid judicial scrutiny but would later return to its wrongful ways after the case ended) were not
present in Ciero or Summers.
Defendants’ remaining arguments relate to standing, instead of mootness. Defendants
argue the implications of facts as they exist at the time of Plaintiffs’ filing of the Second
Amended Complaint and assert that those facts demonstrate that Plaintiffs lack standing. As
discussed earlier, however, that is not the proper analysis. Standing is determined based on the
facts that existed when the action was commenced.
PAGE 26 – OPINION AND ORDER
C. Final Agency Decision
The Supreme Court has reiterated the standards for evaluating whether an agency
decision is “final” under the APA. In U.S. Army Corps of Eng’rs v. Hawkes Co., 136 S. Ct. 1807
(2016), the Supreme Court explained that there are “two conditions that generally must be
satisfied for agency action to be ‘final’ under the APA.” Id. at 1813. The first is that “the action
must mark the consummation of the agency’s decisionmaking process—it must not be of a
merely tentative or interlocutory nature.” Id. (quoting Bennett v. Spear, 520 U.S. 154, 177-78
(1997)). The second is that “the action must be one by which rights or obligations have been
determined, or from which legal consequences will flow.” Id. (quoting Bennett, 520 U.S. at 178).
Defendants argue that CRIA II is not a final agency decision because denying
prepayment under CRIA II does not end the decisionmaking process. First, the Court notes that
the final agency decision originally challenged in this lawsuit is CRIA I. The subsequent
conduct, the issuance of CRIA II, may be relevant for mootness purposes, but the Court has
found that it did not serve to moot Plaintiffs’ claims.
Second, even if CRIA II were the relevant agency decision, it is a final agency decision.
Defendants assert that based on RD’s decision in CRIA II and the requirement that GE be
offered for sale, if an offer is made, the agency will have to make further decisions. Defendants
contend that these additional decisions include whether the offer offeror qualifies as a “nonprofit
organization or public agency” under 42 U.S.C. § 1472(c)(5)(B)(i)-(ii) and whether an offer is
bona fide.6 If an offer is found to be bona fide and from a qualified offeror, then GE’s owner
Defendants do not cite to any statute or regulation defining “bona fide” or discussing
RD’s authority or process to determine a bona fide offer. The regulation governing these types of
offers does not use the term “bona fide,” but instead discusses the process for obtaining market
value appraisals and the requirement to inform nonprofit and public agency purchasers of the
“minimum value of the housing project based on the market value determined in accordance”
with those appraisals. 7 C.F.R. § 3560.659(b)(3).
PAGE 27 – OPINION AND ORDER
must accept the offer or withdraw the request for prepayment. If there is no bona fide offer from
a qualified offeror, then GE’s owner can prepay the loan without any restrictions. Thus, argue
Defendants, RD’s final agency decision has not yet been made.
Plaintiffs argue that CRIA II is a final agency decision because it is not a tentative
decision or interlocutory decision, it is a decision from which rights and obligations were
determined. Plaintiffs assert that in CRIA II, RD determined that GE’s owner’s prepayment
requested materially affected minority housing and thus could not be accepted unless GE’s
owner first offered the property for sale to nonprofit and public agencies, and RD then required
GE’s owner to offer the property for sale. Plaintiffs argue that any remaining agency decisions
are “administrative” and that the primary substantive decision has already been made that affects
the rights of the parties. Defendants respond that whether the GE loan can be prepaid, and thus
whether the tenants of GE (including the Individual Plaintiffs) will be subject to the voucher
program, are decisions that have not yet been made because they hinge on whether a bona fide
offer from a qualified offeror is submitted, and thus the remaining decisions are not merely
Although there may be outstanding issues, the important ones do not turn on
discretionary agency decisionmaking. They turn on the decisions of outside parties—whether
any nonprofit organization or governmental agency decides it wants to purchase GE. The only
agency decisionmaking left is to determine, if an offer is made, whether the offeror meets the
criteria for “nonprofit organization or public agency.” If no offer is made, the agency determines
whether to accept prepayment or refinancing. The Court finds that these decisions are more
ministerial than substantive. The agency has regulations setting forth the criteria for an eligible
nonprofit organization and how to prioritize if multiple nonprofit organizations or public bodies
PAGE 28 – OPINION AND ORDER
make offers. 7 C.F.R. § 3560.659. The agency decision from which most of the rights and
obligations were determined, and legal consequences flowed, was CRIA II. Notably, GE’s owner
had the right to administratively appeal the determination of CRIA II. If it was not a decision
from which rights were determined and legal consequences flowed, GE’s owner would not have
had needed the right to appeal it.
Additionally, if no offers are received, the agency has no substantive decision left to
make. Defendants do not argue that there is any decisionmaking remaining by the agency if no
offers are submitted. Thus, CRIA II would be a final agency decision if no offer is received. It
would be anomalous, to say the least, to conclude CRIA II is a final agency decision if no offer is
received but is not a final agency decision if an offer were to be received, making whether it is a
final agency decision turn on something that might occur 180 days after the decision is made and
based on matters entirely outside of the control of the agency.7
Defendants’ reliance on DBSI/TRI IV Ltd. Partnership v. United States, 465 F.3d 1031
(9th Cir. 2003), also is unavailing. DBSI/TRI IV held that a case is not ripe “where the existence
of the dispute itself hangs on future contingencies that may or may not occur.” Id. at 1039. In the
pending case, the existence of the dispute does not depend on a future contingency. Plaintiffs’
claims relating to Defendants’ alleged improper CRIA procedures and termination of use
restrictions do not hang on whether there are or are not any bona fide offers by qualified offerors
(the only remaining “decisions” Defendants argue are left for the agency to make). Although
Plaintiffs’ standing relating to their voucher claim requires a prepayment approval decision, as
discussed above, standing is determined as of the commencement of the action, which was based
Under Defendants’ argument, the Court would need to stay deciding this motion until
after the 180-day waiting period, and if no offer is made then CRIA II would become a final
agency decision and Defendants’ motion on this ground would be rendered moot.
PAGE 29 – OPINION AND ORDER
on CRIA I. Defendants’ argument that the voucher-based claim has become moot is rejected by
the Court, as discussed earlier. Regardless, Defendants’ mootness argument does not determine
whether CRIA II is a final agency decision.
Defendants argue that Plaintiffs’ first and fourth claims are time-barred because Plaintiffs
assert that regulations 7 C.F.R. §§ 3560.662(f) and 3560.658(b) are improper, but those
regulations were promulgated more than six years ago. Plaintiffs respond that they are making an
“as applied” challenge and thus the six-year limitation has not run. Defendants argue Plaintiffs
cannot be making an “as applied” challenge because CRIA II found that GE’s prepayment
materially affected minority housing and thus the agency action was not an adverse application
of the regulation to Plaintiffs. Again, Defendants are confusing what facts the Court considers.
For standing and timeliness, the Court looks to the facts as they existed at the time the
lawsuit was commenced. See cases cited in Section A, supra. In the pending case, those facts
included CRIA I and the agency’s finding of no material effect on minority housing and its
approval of GE’s prepayment offer. That was an adverse application of the challenged
regulations to Plaintiffs. It is thus an “as applied” challenge and these claims are not time-barred
under the applicable statute of limitations. See Wind River Mining Corp. v. United States, 946
F.2d 710, 715 (9th Cir. 1991) (noting that a plaintiff may challenge “the substance of an agency
decision as exceeding constitutional or statutory authority . . . later than six years following the
decision by filing a complaint for review of the adverse application of the decision to the
particular challenger”); Coal. for a Sustainable Delta v. Fed. Emergency Mgmt. Agency, 812 F.
Supp. 2d 1089, 1106 (E.D. Cal. 2011) (noting that one way a plaintiff can substantively
challenge the validity of a regulation after the six-year statute of limitations has run is “through
PAGE 30 – OPINION AND ORDER
an ‘as applied’ challenge requesting judicial review of the agency’s adverse application of the
rule to the particular challenger” (quotation marks omitted)).
Mootness is a different question. Because the Court has concluded that the voluntary
cessation exception applies, as discussed earlier, Plaintiffs’ claims are not moot and, for the same
reasons, have not been rendered untimely by Defendants’ conduct subsequent to the filing of the
Defendants’ Motion to Dismiss the Second Amended Complaint (ECF 53) is DENIED.
IT IS SO ORDERED.
DATED this 8th day of February, 2018.
/s/ Michael H. Simon
Michael H. Simon
United States District Judge
PAGE 31 – OPINION AND ORDER
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