One for all you civil procedure and jurisdiction wonks. The background facts are a bit detailed, so please bear with us.
Normandy Apartments in Tulsa, Oklahoma made a series of agreements with the federal government: in return for Normandy agreeing to rent to low-income Section 8 tenants and maintain the premises, the Department of Housing and Urban Development would pay the difference between the tenant’s contribution and the rent. The last of these agreements was not with HUD, but with the Oklahoma Housing Finance Authority, although the terms were essentially the same. Normandy also agreed with HUD that in return for renting to low-income tenants, Normandy could prepay its HUD-backed mortgage. Like the Section 8 contract, this agreement obligated Normandy to maintain the premises, a standard enforced by HUD inspections.
Normandy failed several inspections, and after some back-and-forth about whether Normandy was entitled to correct the alleged failings, HUD informed it that Normandy had defaulted under the Section 8 agreement. HUD told Normandy that it should stop taking in new low-income tenants because the rent subsidies were stopping, even though it was obligated to continue honoring the below-market rents of existing tenants. Normandy tried to sell the building, but after HUD withheld its consent, the deal fell through.
Normandy sued in U.S. District Court, and sought an injunction ordering HUD to keep making the rent subsidy payments. The District Court punted, concluding that the Court of Federal Claims had exclusive jurisdiction because this was, in essence, a Tucker Act claim for damages. The Tenth Circuit partly agreed, holding that at least Normandy’s request for nonmonetary relief was proper under the Administrative Procedures Act.
But Normandy apparently didn’t pursue this, and instead filed a claims for breach of contract and for a Penn Central taking in the CFC. The CFC dismissed the contract claim because the agreement which Normandy claimed was breached was not with HUD, but was with a state agency, the Oklahoma Housing Finance Authority, and the court thus lacked jurisdiction. As for the takings claim, the CFC granted the feds summary judgment, concluding that HUD did not effect a taking because it was exercising its regulatory authority when it stopped subsidy payments.
In a 2-1 decision, the Federal Circuit affirmed the jurisdictional dismissal of the contract claim, and summary judgment on the takings claims. The majority rejected Normandy’s claim that it had an investment-backed expectation to collect minimum rents under its HUD agreements, and pointed out that “[t]hough Normandy broadly addresses the first and second Penn Central factors, it does so without specificity[,]” and “Normandy fails to at all address the third Penn Central factor, the character of the government regulation.” Slip op. at 16. The right to receive rent subsidies was based on the HUD-Normandy contracts, and was totally voluntary. HUD’s ceasing the payments was a part-and-parcel of its regulatory authority, which Normandy had agreed to.
One judge dissented on the contract claim, asserting that the government blew hot and cold jurisdictionally. It obtained dismissal in the District Court by arguing that the case belonged in the CFC, but then once in the CFC, it changed its tune and argued that the case belonged in the District Court:
Thus the United States obtained dismissal of the contract claims by the Oklahoma district court and the Tenth Circuit on the argument that the contracts are with the United States and can be litigated only in the Court of Federal Claims. The United States then obtained dismissal of the contract claims by the Court of Federal Claims on the argument that the contracts are not with the United States, but with the Oklahoma Contract Administrator. Normandy has exhausted the supply of courts in which it can seek resolution of its claim for breach of contract. In its shifting positions, the government avoided judicial determination of the merits for eight years.
Dissent at 3. The dissenting judge passed on a ruling on the merits of the contract claim, but would have remanded for a determination: “This is not the process envisioned by President Lincoln, his words carved at the entrance to this courthouse: ‘It is as much the duty of government to render prompt justice against itself in favor of citizens as it is to administer the same between private individuals.'” Dissent at 9. Although the dissent did not take issue with the majority’s takings analysis, there are lessons here for you takings mavens, because even though the dissent does not use the words “Tucker Act shuffle,” those of you familiar with this process know exactly what the judge is writing about.
The majority rejected the dissent’s view, concluding that the judge misread the government’s position, which was always consistent. See slip op. at 17.
An interesting sidebar: the judge who joined the majority (but did not author the main opinion) filed a separate opinion, which was joined by the judge who wrote the majority opinion, to “explain why our opinion raises troubling concerns.” He was concerned that HUD has insulated itself from liability in these type of cases, because the property owner’s contract was not with HUD, but with a state agency, which effectively barred Normandy from any recovery. Although “justice is hard to find in this case,” the majority shrugged its shoulders, and told the owners that their remedy are with “another branch of government.” Yeah, that’ll work.
Normandy Apts, Ltd. v. United States, No. 14-5135 (Fed. Cir. Nov. 20, 2015)