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Crow Tribal Housing Authority v. United States Dept. of Housing and Urban Development

United States District Court, D. Montana, Billings Division

February 14, 2013

CROW TRIBAL HOUSING AUTHORITY, Plaintiff,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, et al., Defendants.

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[Copyrighted Material Omitted]

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Roger J. Renville, Executive Branch of the Crow Nation, Crow Agency, MT, for Plaintiff.

Victoria L. Francis, Office of the U.S. Attorney, Billings, MT, for Defendants.

ORDER RE: CROSS-MOTIONS FOR SUMMARY JUDGMENT

RICHARD F. CEBULL, District Judge.

I. INTRODUCTION

Plaintiff Crow Tribal Housing Authority (" CTHA" ) brings this action against Defendant U.S. Department of Housing and Urban Development (" HUD" ) under the Administrative Procedure Act challenging the HUD's agency action of recouping alleged over-payments of Indian Housing Block Grants (" IHBG" ) to CTHA under the Native American Housing Assistance and Self-Determination Act of 1996 (" NAHASDA" ), 25 U.S.C. § 4101 et seq. Pending before the Court are cross-motions for summary judgment. Docs. 51 & 60. For the following reasons, the Court concludes this case must be remanded to HUD for a proper hearing.

II. FACTUAL BACKGROUND

CTHA has been receiving monies from HUD under the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) since 1998. NAHASDA, directs the Secretary of HUD to provide annual grants to Indian tribes or tribal housing authorities in support of their need for affordable housing.

In 2001, HUD audited numerous tribal housing authorities across the nation to determine whether these housing authorities were improperly receiving federal payments through NAHASDA to be applied toward federally-funded lease-to-own housing programs. Federal payments under NAHASDA were made through a block-grant formula that included two separately calculated components: 1) Formula Current Assisted Housing Stock units; and 2) Need. 24 C.F.R. § 1000.301-1000.340. Formula Current Assisted Stock (" FCAS" ) units include low rent, Mutual Help and Turnkey III housing units.[1] The amount of grant money each tribe is to receive based in part on the recipient's FCAS— the inventory of rental units and lease-to-own units owned by the recipient as of September 30, 1997, the effective date of NAHASDA.

The FCAS units calculation for an individual Tribal Housing Authority begins with the number of dwelling units owned or operated by that entity at the time of NAHASDA's enactment. Beginning in 1997, Plaintiff Crow Tribal Housing Authority was responsible for maintaining,

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repairing, insuring and accounting for approximately 600 houses, including rentals, Mutual Help and Turnkey houses. 42 U.S.C. § 1437d. Over the years, some lease-to-own units would become eligible to be transferred from the CTHA's initial inventory or be otherwise disposed of based on the terms of the agreement between the CTHA and the housing unit's occupant. At that time, title to the residence would be transferred from the CTHA to the occupant.

On an Annual Formula Response Form, the Tribal Housing Authority would report this transfer and HUD would make a downward adjustment in the FCAS units calculation. 24 C.F.R. § 1000.312. This adjustment would be equal to the number of dwelling units a tribe " no longer has the legal right to own, operate, or maintain ... whether such right is lost by conveyance, demolition, or otherwise." 24 C.F.R. § 1000.318(a). Units are to be removed from a Tribal Housing Authority's inventory " as soon as practicable after the unit becomes eligible for conveyance." 24 C.F.R. § 1000.318(a)(1). Downward adjustments in FCAS units would result in less Indian Housing Block Grant money received by the tribe.

HUD informed CTHA that they were one of the Tribal Housing Authorities under review. During the course of the review, the record reflects that there were ongoing communications between the parties regarding eligibility of certain Mutual Help and Turnkey housing units from 1998-2002. Ultimately, HUD concluded that CTHA had improperly received payments for a number of units that were no longer FCAS eligible under 24 C.F.R. § 1000.318(a). Under 24 C.F.R. § 1000.318(a), Mutual Help and Turnkey III eligibility for federal payments generally do not exceed 25 years since that is the term of the lease-purchase agreement when the title was conveyed or should have been conveyed. Under the regulation, at that the conclusion of the lease-to-own period, the Tribal Housing Authorities have no legal right to own, operate, or maintain these premises and therefore are ineligible for federal payments for these units under NAHASDA. HUD provided CTHA with numerous opportunities to provide information to show that the excluded units should be counted under FCAS. When CTHA failed to respond, HUD adjusted future Indian Housing Block Grant payments to CTHA in order to recoup the prior years' over-payed funds.

In April 2004, CTHA requested HUD perform an on-site review of CTHA's tenant housing files. In August 2004, HUD personnel visited CTHA's facility and reviewed 220 of CTHA's Mutual Help and Turnkey tenant housing files. After the visit, HUD concluded that of those 220 houses, 42 had been paid off and conveyed, 9 had been paid-off but not conveyed, 53 were occupied by subsequent homebuyers and 114 were past their 25-year lease, were not paid-off, were not conveyed and were still occupied by original lessee/homebuyers. AR 618-620. Consequently, HUD disqualified the 114 housing units from CTHA's FCAS count.

Citing 24 C.F.R. § 1000.318(a), HUD noted that the FCAS allocation formula required that these 114 housing units no longer be counted after they were conveyed or should have been conveyed under the terms of the lease-purchase agreement. To the extent that homebuyers were delinquent on payments due under the lease-purchase agreement, conveyance, for purposes of FCAS counting, was still practical because a promissory note could be issued. AR 525-526 (NAHASDA Guidance, No. 98-19).

Ultimately, HUD calculated that CTHA had been over-payed in the amount of

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$1,919,666 and initiated reductions in the Crow Tribe's NAHASDA block grants in subsequent grant years in order to recoup these monies. AR 618-621.

III. STANDARD OF REVIEW

The Administrative Procedures Act (" APA" ) requires that a reviewing court " shall ... hold unlawful and set aside agency action, findings, and conclusions found to be-arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). This arbitrary and capricious standard is deferential and as such, an agency will be reversed as arbitrary and capricious " only if the agency relied on factors Congress did not intend it to consider, entirely failed to consider an important aspect of the problem, offered an explanation that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise." Ecology Ctr. v. Castaneda, 574 F.3d 652, 656 (9th Cir.2009).

Nevertheless, the Court must review the administrative action to ensure that the agency has sufficiently " examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a ‘ rational connection between the facts found and the choice made.’ " Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443(1983) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)). In reviewing the agency's explanation, the court must " consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Id. (quoting Bowman Transp. Inc. v. Arkansas-Best Freight System, 419 U.S. 281, 285, 95 S.Ct. 438, 42 L.Ed.2d 447 (1975)); see also Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971).

Exercising jurisdiction under the APA, the court must determine whether the agency's action was " arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A). " Statutory interpretation begins with the words Congress has chosen." Fort Peck Hous. Auth. v. United States Dep't of Hous. and Urban Dev., 367 Fed.Appx. 884, 889 (10th Cir.2010), cert. denied, __ U.S. __, 131 S.Ct. 347, 178 L.Ed.2d 148 (2010). The court enforces the statute's plain meaning. Id. If the language is clear and unambiguous, the court's inquiry ends. However, where an ambiguity exists or " irrational results arise from the statute's literal wording," the court is to apply additional interpretive tools to ascertain and give effect to Congress's intent. Id.

IV. ANALYSIS

There is apparently no dispute as to the relevant facts. The motions raise the following issues:

(1) Whether HUD has acted beyond its authority by reducing CTHA's grants based on alleged noncompliance, or by recapturing and deducting grant amounts already expended on affordable housing activities?
(2) Whether HUD failed to follow the procedures required by law by taking actions affecting grant amounts without providing notice and opportunity for a hearing?
(3) Whether HUD's FCAS decision was unsupported by substantial evidence where HUD made no determination that CTHA had lost the legal right to own, operate and maintain the disputed houses?

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(4) Whether HUD's FCAS decision was arbitrary and capricious where Congress required CTHA's grant allocations to be based on the number of 1937 Act houses owned or operated by CTHA and HUD ...

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