Sims v. Texas Department of Housing and Community Affairs et al

Filing 16

REPORT AND RECOMMENDATIONS re 10 Motion to Dismiss filed by Paul Oxer, Tim Irvine, Texas Department of Housing and Community Affairs.. Signed by Judge Andrew W. Austin. (dm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
RICK SIMS
V.
TEXAS DEPARTMENT OF HOUSING
AND COMMUNITY AFFAIRS, et al.

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NO. 1:16-CV-906-LY

REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
TO:

THE HONORABLE LEE YEAKEL
UNITED STATES DISTRICT JUDGE
Before the Court are Defendants’ Motion to Dismiss Plaintiff’s Amended Complaint (Dkt.

No. 10); Plaintiff’s Opposition to Defendants’ Motion to Dismiss and Request for Reasonable
Accommodation from the District Court (Dkt. No. 11); and Defendants’ Reply (Dkt. No. 13). The
District Court referred the above motion to the undersigned Magistrate Judge for report and
recommendation pursuant to 28 U.S.C. §636(b)(1)(A), FED. R. CIV. P. 72, and Rule 1(c) of Appendix
C of the Local Rules.
I. BACKGROUND
Rick Sims, who is proceeding pro se, brings this action against the Texas Department of
Housing and Community Affairs, Department Chairman Paul Oxer, and Executive Director of the
Department Tim Irvine (collectively, “TDHCA”). In his Complaint, Sims alleges violations of the
Fair Housing Act (“FHA”), 42 U.S.C. § 12111, et seq.; the Americans with Disabilities Act
(“ADA”), 42 U.S.C. §3605; Section 504 of the Rehabilitation Act, 29 U.S.C. § 794; and the Equal
Protection Clause of the Fourteenth Amendment. This is not the first time that Sims has sued the
TDHCA; two prior lawsuits addressed similar issues. See Sims v. Tex. Dept. of Hous. & Comty.

Affairs (Sims I), No. H-05-2842, 2005 WL 3132184 (S.D. Tex. Nov. 21, 2005); Sims v. Tex. Dept.
of Hous.& Comty. Affairs (Sims II), No. H-07-4511, 2008 WL 4552784 (S.D. Tex. Oct. 7, 2008).1
However, this is the first time that Sims alleges an equal protection violation.
In 2015 and 2016, Sims applied for tax credits from the Low-Income Housing Tax Credits
(LIHTC) program. Section 42 of the Internal Revenue Code authorizes states to provide incentives
to developers building low-income housing. 26 U.S.C. § 42. In Texas, the TDHCA is designated
to operate the program that distributes the LIHTC tax credits. TEX. GOV’T CODE § 2306.053(b)(10).
TDHCA allocates two types of credits: a 4% tax credit available year-round that is non-competitive,
and a 9% tax credit that is more competitive and must provide units that are rent-restricted and
occupied by low income residents. Sims challenges only the allocation of the 9% tax credit.
To receive the benefits under the LIHTC, a state must have a “qualified allocation plan” with
“selection criteria to be used to determine housing priorities of the housing credit agency which are
appropriate to local conditions.” 26 U.S.C. § 42(m)(1)(B). The Texas Government Code regulates
TDHCA’s administration of the program by setting out the evaluation criteria and process. TEX.
GOV’T CODE §§ 2306.6701-6710. TDHCA relies on a point system that prioritizes “above the line”
criteria, but allows for consideration of “below the line” criteria so long as the below the line points
do not outweigh above the line points. Tex. Att’y Gen. Op. No. GA-0208, 2004 WL 1434796 at *4
(2004). The staff reviews any applications submitted pursuant to the statute and underwrites highscoring applications to determine the “financial feasibility” of each plan. TEX. GOV’T CODE §
1

TDHCA relies heavily on the prior decisions in its motion to dismiss. While the
Rehabilitation Act claims are the same, Sims relies on different statutes for both of his FHA and
ADA claims. In the two prior lawsuits, Sims alleged violations of 42 U.S.C. § 12131 of the ADA
and 42 U.S.C. § 3604(f)(1) of the FHA. Sims I, 2005 WL 3132184. Here, his claims arise from 42
U.S.C. § 12111 and 42 U.S.C. § 3605.
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2306.6710(d). The high-scoring applications are then recommended to the TDHCA Board, which
issues the final commitments. Id. § 2306.6724(e).
Sims applied for 9% tax credits on four applications: three in 2015 and one in 2016. Of
these, at least one application was recommended to TDHCA’s board, but ultimately was not
approved. Dkt. No. 8 at 6. Selinsky Supportive Housing—the plan submitted in 2015 that was
recommended to the board—allegedly would have provided housing for persons with disabilities.
Id. Sims claims that this application was the only one designated as “supportive housing” in his
region that year, and that he was “the only minority major principle and the only protected
characteristic” to apply that year. Id. He therefore challenges TDHCA’s allocation of the LIHTC
tax credits for violations of the FHA, ADA, Rehabilitation Act, and Equal Protection Clause.
TDHCA moves to dismiss for lack of subject matter jurisdiction and failure to state a claim upon
which relief may be granted.2
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss an action for
failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). Pro se complaints
2

The TDHCA first asks this Court to dismiss pursuant to sovereign immunity under the
Eleventh Amendment. However, as Sims does not allege any claims that survive a Rule 12(b)(6)
motion, this Court need not address this issue. See Groceman v. United States Department of
Justice, No. CIV.A.301CV1619G, 2002 WL 1398559 (N.D. Tex. June 26, 2002), aff’d 345 F.3d 411
(5th Cir. 2004) (granting dismissal on Rule 12(b)(6) rather than Rule 12(b)(1)). Moreover, the case
law in this area is not entirely clear. In McCardell v. United States Dept of Hous., 794 F.3d 510 (5th
Cir. 2015), the court granted the TDHCA sovereign immunity. See also Sims II, 2008 WL 4552784
at *1. However, not all courts have granted sovereign immunity to the TDHCA. Inclusive
Communities Proj. v. Tex. Dep’t of Hous. & Comty. Affairs, 860 F. Supp. 2d 312, 331-32 (N.D. Tex.
2012) (stating that the TDHCA was not entitled to sovereign immunity); Tex. Dep’t of Hous. &
Comty. Affairs v. Verex Assur., Inc., 68 F.3d 922, 926-28 (5th Cir. 1995) (finding that the
predecessor agency was not an arm of the state). Lastly, TDHCA does not provide any reasoning
to support its claim.
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are liberally construed in favor of the plaintiff. Haines v. Kerner, 404 U.S. 519, 520-21 (1972). In
deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, “[t]he court accepts all
well-pleaded facts as true, viewing them in the light most favorable to the [nonmovant].” In re
Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks omitted),
cert. denied, 552 U.S. 1182 (2008). While a complaint attacked by a Rule 12(b)(6) motion does not
need detailed factual allegations in order to avoid dismissal, the plaintiff's factual allegations “must
be enough to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007). A plaintiff’s obligation “requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do.” Id. The Supreme Court has
explained that a complaint must contain sufficient factual matter “to state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at
570). “A claim has facial plausibility when the [nonmovant] pleads factual content that allows the
court to draw the reasonable inference that the [movant] is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
III. ANALYSIS
Sims alleges violations of the FHA, ADA, Rehabilitation Act, and Equal Protection Clause.
While in the two prior lawsuits, Sims alleged similar violations, he relied on different portions of
the FHA and ADA. See Sims I, 2005 WL 3132184 (dismissing FHA claim made under 42 U.S.C.
§ 3604, and ADA claim pursuant to 42 U.S.C. § 12131); Sims II, 2008 WL 4552784 (same). Sims’s
Rehabilitation Act claims remain the same as the prior cases. As in the prior lawsuits, this Court
finds that Sims fails to state a claim upon which relief may be granted.

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A.

Fair Housing Act
Sims argues that the TDHCA discriminated against him on the basis of his race and

disability. First, Sims alleges that the allocation by TDHCA racially discriminates against those
applying for LIHTC tax credits. Second, he claims that the TDHCA discriminated against him on
the basis of his disabilities.
Here, Sims does not allege either a cognizable race or disability discrimination claim against
the TDHCA. Section 3605 of the FHA prohibits discrimination in “residential real estate-related
transactions.” 42 U.S.C. § 3605. For a claim of discrimination under Section 3605, a plaintiff must
allege that the defendant made “unavailable” because of race or disability “financial assistance for
constructing dwellings.” Inclusive Community Projects v. Tex. Dept. of Hous. & Comty. Affairs, No.
3:08-CV-546, 2008 WL 5191935, at *3 (N.D. Tex. 2008). TDHCA’s tax credit program would
likely be considered a “real estate-related transaction.” See Texas Dept. of Hous. & Comty. Aff. v.
Inclusive Community Projects, 135 S.Ct. 2507 (2015) (allowing a claim of disparate impact against
TDHCA for the allocation of tax credits); United States v. Mass. Indus. Finance Agency, 910 F.
Supp. 21, 28-29 (D. Mass. 1996) (finding that a tax-exempt bond qualified as “financial assistance”
under Section 3605). However, claims brought under this statute must show discrimination to
prospective residents, not prospective developers.3 Sims relies mainly on the Supreme Court
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See Havens Realty Corp. v. Coleman, 455 U.S. 363, 372 (1982) (granting standing when the
fair housing organization suffered monetary injuries from the defendant’s discriminatory efforts
against clients of the organization); Artisan/American Corp. v. City of Alvin, 588 F.3d 291, 295 (5th
Cir. 2009) (addressing claims by a developer for disparate impact against prospective Hispanic
residents); Oti Kaga, Inc. v. S.D. Hous. Devel. Auth., 342 F.3d 871, 880-81 (8th Cir. 2003) (finding
that a developer corporation had standing under the FHA for a claim of disparate impact when the
allocation of tax credits discriminated against potential residents of a proposed building); Germain
v. M&T Bank Corp., 111 F. Supp. 3d 506, 524 (S.D.N.Y. 2015) (finding that “absent allegations that
the discrimination . . . was directed at prospective residents of the property, [the transaction] does
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decision in Inclusive Community Projects for his discrimination claims, but in that case, the
organization alleged discrimination against prospective tenants and buyers of real estate. Inclusive
Community Projects, 135 S.Ct. at 2514. Here, Sims alleges he was discriminated against in his
capacity as a developer applying for a tax credit. Though Inclusive Community Projects recognized
that a disparate impact claim is possible under the FHA, Sims’ reliance on this case is misplaced and
provides no basis for his claim of discrimination under the FHA. Similarly, the same analysis
applies to Sims’s claim for discrimination on the basis of his disability.
It is unclear whether Sims is attempting to allege that the TDHCA discriminated against the
prospective residents of the supportive housing project, Selinksy. Sims notes that his application
related to the Selinsky project—which would provide housing for persons with disabilities—was
rejected, so this Court will take a moment to address this argument. To the extent Sims is making
such a claim, he does not meet the pleading standards required. Though Sims asserts that housing
at Selinsky would have been for persons with disabilities, he provides no factual pleading or other
allegation that the Selinsky application was denied because it was intended as supportive housing.
Nor does he allege that TDHCA’s allocation of tax credits disparately impacted housing for persons
with disabilities. In fact, TDHCA lists “supportive housing” as one of the three designations an
applicant may make when submitting plans for consideration. The mere fact that the Selinsky
project—allegedly the sole project in the region to offer a plan for supportive housing—was rejected

not qualify as a ‘residential real estate-related transaction”); United States v. Mass. Indus. Finance
Agency, 910F. Supp. 21, 28-29 (D. Mass. 1996) (allowing a claim under § 3605 for the denial of a
tax-exempt bond when it allegedly discriminated against handicapped students in the development
of a residential school); Inclusive Community Projects v. Town of Flower Mound, No. 4:08-CV-433,
2009 WL 2145909 at * (E.D. Tex. July 15, 2009) (holding that ICP had alleged a sufficient indirect
injury by showing that the alleged discrimination was directed at ICP’s clients in finding housing for
them).
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is not enough evidence to raise a claim that TDHCA discriminated on this basis above the
speculative level. Therefore, Sims’s claim under the FHA should be dismissed for failure to state
a claim.
B.

American with Disabilities Act
Second, Sims’ claim under the ADA also fails. Sims alleges that the TDHCA did not provide

reasonable accommodations for Sims’s disability. He references 42 U.S.C. § 12112, which prohibits
discrimination in job applications and employment, but an application for LIHTC tax credits would
not fit within this statute. 42 U.S.C. § 12112. Reading his complaint liberally, at best Sims’ claim
would perhaps fit under 42 U.S.C. § 12132, which prohibits “exclu[sion] from participation in or
[denial of] the benefits of the services, programs, or activities of a public entity.” The court need not
decide whether LIHTC tax credit allocations would be a program or service to which the statute
applies, as Sims has alleged no facts that would evidence a violation of this statute even assuming
it did apply. He does assert he suffers from a disability—ADD or ADHD (he references both), as
well as being a recovered drug addict—but fails to provide any factual basis for a claim that TDHCA
discriminated against him because of these disabilities (e.g., he fails to allege that TDHCA was even
aware of the alleged disabilities). Sims claims that the TDHCA failed to provide reasonable
accommodations for his disabilities and that the process of reviewing the requests is “ineffective and
fraught with difficulties.” Dkt. No. 1 at 2. He further notes that “deaf employees” are not given
reasonable accommodations, but fails to show how this applies to the LIHTC tax credits or him.
Sims similarly gives the court no indication what accommodations he requested or how or why the
requests were “ignored as always.” Dkt. No. 8 at 6.

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Moreover, as long as a person is not denied “meaningful access” to participate in or enjoy
the benefits of a program, there is no ADA violation. Alexander v. Choate, 469 U.S. 287, 301 (1985)
(“The balance struck . . . requires that an otherwise qualified handicapped individual must be
provided with meaningful access to the benefit that the grantee offers.”). Sims admitted that at least
one of his applications was recommended for consideration by the Board, though it ultimately was
rejected. Dkt. No. 8 at 6. He makes no allegations in his complaint to suggest how his ability to
apply for the tax credits was in any way impaired by TDHCA on the basis of his disabilities, and
therefore has failed to plead the he was denied meaningful access to participate in the program. Sims
has thus failed to state a claim under the ADA.
C.

Rehabilitation Act
Third, Sims asserts that the tax allocations violate 29 U.S.C. § 794(a) in that the “program

or activity” discriminates against Sims on the basis of his disability. This claim fails for the same
reasons set forward above.

This Court should therefore dismiss Sims’s claim under the

Rehabilitation Act as well.
D.

Equal Protection
Lastly, Sims asserts that the TDHCA violated the Equal Protection Clause. Though the

complaint is not entirely clear, Sims appears to be trying to make a disparate impact claim on the
basis of race. Sims states that the LIHTC tax credit allocations “keep[] blacks as inferior and
dependent to non blacks.” Dkt. No. 8 at 4. He notes that the “allocation formula . . . is race neutral
but has no provision for race conscienceness [sic] and is designed to only provide affordable housing
for blacks as tenants but unable to have equality as non blacks as principles [sic] in the economic
development of the United States in the area of housing and community development.” Id. As Sims
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agrees that the allocation formula is race neutral, this Court must assume that Sims contends the
TDHCA’s allocation of tax credits has a disparate impact on African American applicants—similar
to his claim under the FHA.
However, as the TDHCA notes, the Fourteenth Amendment does not allow disparate impact
claims. Village of Arlington Heights v. Metropolitan Hous. Devel. Corp., 429 U.S. 252, 264-65
(1977) (“Proof of racially discriminate intent or purpose is required to show a violation of the Equal
Protection Clause.”). Even assuming the facts as true, statistics by themselves do not provide a basis
for an Equal Protection claim. Sims does not state that there is a discriminatory intent or purpose
behind the allocation, but only that by “[G]oogl[ing] the persons to determine the race if [he] is not
familiar with the name,” he contends the allocation of tax credits disproportionately disadvantages
African American developers. Dkt. No. 8 at 5. Moreover, Sims appears to argue that the lack of
“race [sic] conscienceness” in the application process violates the Equal Protection Clause. Dkt. No.
8 at 5. However, this argument misconstrues the line of cases that assess whether race conscious
programs violate the Constitution. See Fisher v. University of Texas at Austin, 136 S. Ct. 2198
(216); Grutter v. Bollinger, 539 U.S. 306 (2003); Regents of University of California v. Bakke, 438
U.S. 265 (1978). Sims’s Equal Protection claim therefore should be dismissed as well.
IV. RECOMMENDATION
The undersigned RECOMMENDS that the District Judge GRANT Defendants Texas
Department of Housing and Community Affairs, Pual Oxer, and Tim Irvine’s Motion to Dismiss
Plaintiff’s Amended Complaint, and DISMISS WITH PREJUDICE all claims by the Plaintiff for
failure to state a claim on which relief may be granted.

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V. WARNINGS
The parties may file objections to this Report and Recommendation. A party filing
objections must specifically identify those findings or recommendations to which objections are
being made. The District Court need not consider frivolous, conclusive, or general objections. See
Battle v. United States Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the Report
shall bar that party from de novo review by the District Court of the proposed findings and
recommendations in the Report and, except upon grounds of plain error, shall bar the party from
appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the
District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53, 106 S. Ct. 466,
472-74 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) (en
banc).
To the extent that a party has not been served by the Clerk with this Report &
Recommendation electronically pursuant to the CM/ECF procedures of this District, the Clerk is
directed to mail such party a copy of this Report and Recommendation by certified mail, return
receipt requested.
SIGNED this 18th day of November, 2016.

_____________________________________
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE

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