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SZMODIS v. ROMNEY

November 3, 1969

Louis SZMODIS, individually and on behalf of all other taxpayers similarly situated and Pembroke, Inc.
v.
George ROMNEY, Secretary of the Department of Housing and Urban Development; Bethlehem Housing Authority; Ralph J. Bartholomew, Secretary and Executive Director of said Authority; and C. N. Zumas and M. N. Zumas t/a C & M Zumas Co.



The opinion of the court was delivered by: LUONGO

 This matter is before the court on motion for preliminary injunction. Plaintiffs, Louis Szmodis and Pembroke, Inc., seek to enjoin the Secretary of the Department of Housing and Urban Development (HUD), the Bethlehem Housing Authority (BHA), and C. M. Zumas and M. N. Zumas trading as C & M Zumas (Zumas) from proceeding with meetings and negotiations looking to the award of a contract for the construction of two housing projects for the elderly in Bethlehem, Pennsylvania.

 Prior to commencement of the hearing on the motion for preliminary injunction, the Secretary of HUD moved to dismiss the complaint on the grounds, inter alia, that plaintiffs lack standing to sue and that plaintiffs failed to state a claim upon which relief can be granted. The motion was taken under advisement, the hearing was held and evidence was received.

 The motion to dismiss for lack of standing will be granted. I have also concluded that plaintiffs have failed to state a claim upon which relief can be granted, but since, to arrive at that conclusion, I have considered evidence presented at the hearing on the motion for preliminary injunction, I will treat the motion to dismiss for failure to state a claim as a motion for judgment under Rule 56. See Rule 12(b) F.R.Civ.P.

 The facts out of which this controversy arises are the following:

 On April 22, 1969 the four sites recommended by the BHA were inspected by Thomas Anderson, a representative of HUD, and Ralph Bartholomew and Henry Bodder, members of the BHA. After inspecting the four sites Anderson, Bartholomew and Bodder agreed that the two Zumas sites were the more desirable. On June 6, 1969, HUD transmitted a letter to the BHA "concurring" in the selection of the two Zumas sites. At a regular meeting on June 9, 1969, the BHA, by a vote of four-to-one, approved the selection of the two Zumas sites. One member challenged the validity of this vote apparently because he believed that HUD had either misinterpreted the BHA's earlier recommendations from the March 31-April 1 meeting or that HUD was making the initial selection of sites in contravention of what this member believed to be the requirements of the "Low-Rent Housing Manual." *fn2" Thereafter, a meeting was held with HUD officials on July 1, 1969 at which the alleged procedural improprieties were discussed. On July 7, 1969 at a special meeting, the BHA rejected, by a three-to-two vote, a motion to rescind the action taken on June 9, 1969. The BHA, HUD and Zumas are presently engaged in the step-by-step process *fn3" outlined in HUD Regulations for reaching a final agreement for the construction of these turnkey projects. At this point, plaintiffs have been excluded from further negotiations with the two administrative agencies and plaintiffs seek to enjoin defendants from proceeding with their negotiations.

 I. Plaintiffs' Standing as Taxpayers.

 The Secretary's motion to dismiss contests plaintiffs' standing to maintain this suit. Plaintiffs contend that they have standing under the Supreme Court's recent decision in Flast v. Cohen, 392 U.S. 83, 88 S. Ct. 1942, 20 L. Ed. 2d 947 (1968).

 Specifically, plaintiffs have alleged that the methods and procedures used by BHA and HUD in selecting sites and proposals for these turnkey projects violated HUD regulations *fn4" and thereby arbitrarily excluded plaintiffs from consideration for the award of the contracts on these projects. Plaintiffs argue that their "right to work" which they claim is protected under the Due Process Clauses of the Fifth and Fourteenth Amendments, and their right to equal protection of the law under the Fifth and Fourteenth Amendments, have been infringed and that they and all other effected taxpayers will be subjected to increased tax liabilities as a result.

 To establish standing under the Flast decision a taxpayer must show a logical nexus between the status asserted as a taxpayer and the claim sought to be adjudicated so that the complaint will be presented in the adversary context required by Article III of the Constitution. To challenge the constitutionality of an exercise of congressional power under the taxing and spending clause, *fn5" a taxpayer must show that the challenged enactment exceeds specific constitutional limitations imposed upon the taxing and spending power. It is not sufficient to allege "an incidental expenditure of tax funds in the administration of an essentially regulatory statute * * * " since this is not a challenge to the enactment itself. Further, an allegation that one is deprived of property without due process of law because of an increase in tax liability does not charge the type of "specific constitutional limitation" which creates standing for a taxpayer to challenge a congressional enactment. Flast v. Cohen, supra.

 Plaintiffs here do not challenge the constitutionality of a legislative enactment under the taxing and spending clause of the Constitution, rather they attack an incidental expense in the administration of a statute. Their attack does not focus on the violation of constitutional rights of taxpayers generally, that is, on "specific constitutional limitations" on congressional taxing and spending power, but only on a specific infringement of plaintiffs' alleged constitutional right to be awarded a contract. Plaintiffs seek standing as taxpayers but in reality their status is that of unsuccessful bidders who are, coincidentally, taxpayers. As such, they have no standing to sue on the alleged constitutional grounds. *fn6" Friend v. Lee, 95 U.S.App.D.C. 224, 221 F.2d 96 (1955); Contel Constr. Corp. v. Parker, 261 F. Supp. 428 (E.D.Pa.1966).

 II. Plaintiffs' Failure to Set Forth a Valid Claim.

 The Secretary's motion to dismiss also raises the question whether the complaint sets forth a claim upon which relief can be granted. Plaintiffs have attempted to state a valid claim ...


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