Gibbons and James Rosen,*fn* Circuit Judges, and Layton, District Judge.
This matter is before the court of appeals for the third time, and the end appears nowhere in sight. The case originated with a complaint, filed on August 15, 1969, in which North City Area-Wide Council, Inc., (NCAWC), a Pennsylvania non-profit corporation, and a number of individual plaintiffs, purporting to act on behalf of all individuals residing in and organizations operating in the target area of the Philadelphia Model Cities Program,*fn1 sought injunctive relief against the Secretary of Housing and Urban Development (HUD), the City of Philadelphia, and the federal and city administrators of the Philadelphia Model Cities Program. The basic dispute arose over the extent of participation by NCAWC in the Philadelphia demonstration program funded by HUD pursuant to the Demonstration Cities and Metropolitan Development Act of 1966, 42 U.S.C. § 3301 et seq. The dispute between NCAWC and HUD, as disclosed in the complaint, was principally over the degree of control by NCAWC over a group of non-profit corporations proposed to be formed for the purpose of assuming the operation, as distinguished from the planning, of various programs in the target area. As proposed in the city's April 30, 1969 supplemental application to HUD, a majority of the directors of four of the operating corporations and at least sizable minorities of the directors of three others were to be chosen by NCAWC. HUD envisioned a potential conflict of interest in that arrangement, since NCAWC would be responsible for evaluating the performance of the operating corporations. It therefore proposed an amendment whereby (1) no member of the board of directors of an operating corporation could be a member (director, presumably) of NCAWC, and (2) after the initial nominations no board member of an operating corporation would be selected by NCAWC. That suggested change was, and is, the basic bone of contention between HUD and NCAWC.
The district court refused to grant a preliminary injunction. It did not consolidate the hearing on plaintiffs' motion for a preliminary injunction with the trial on the merits. See Rule 65(a)(2), Fed.R.Civ.P. On November 12, 1969, it granted the city defendants' motion for summary judgment and dismissed the complaint.*fn2 On December 10, 1969, a notice of appeal was filed on plaintiffs' behalf. No application was made to the district court or to this court for injunctive relief pending appeal. Thus between November 12, 1969 and July 14, 1970, when this court decided the appeal, the city defendants remained free to do what in the stipulation filed by the parties they had disclosed they intended to do; that is, organize a new citizen participation group.
The first opinion*fn3 of this court thus was a review of the grant of a motion for summary judgment. The analysis of the legal issues proceeded on the assumption that, as alleged in the complaint, final federal agency action had taken place on July 3, 1969, when HUD responded to the city's June 9, 1969 supplementary statement designed to meet HUD's conflict of interest objections. The opinion refers to the language in § 103(b)*fn4 and § 103(a)(2)*fn5 of the Act, and to a HUD statement of policy.*fn6 Accepting at face value the allegation that the July 3, 1969 HUD letter represented final agency action within the meaning of section 10(c) of the Administrative Procedure Act, 5 U.S.C. § 704, this court concluded that the action was both reviewable and illegal. The case was "remanded to the District Court for further proceedings consistent with this opinion." 428 F.2d at 758.
A hearing began on September 9, 1970, and continued through eight subsequent court days. Following that hearing the district court filed an opinion*fn7 containing detailed findings of fact and conclusions of law. The district court declined to issue a preliminary injunction and dismissed the complaint. An appeal to this court followed, this time on a full record.
The opinion of this court*fn8 recognizes that while the lawsuit has been pending a new citizen participation organization has come into existence and that the Model Cities Program has gone forward, and states:
"It is possible and we hope probable that the passage of time may have sweetened the minds of the parties to this suit and their representatives.
We must reverse the judgment and we will direct the District Court upon remand to enter an order providing:
1. That plaintiff, Area-Wide Council, be reinstated forthwith insofar as it may be the citizen participation organization for the Philadelphia Model Cities Program.
2. That Area-Wide Council as such citizen representation organization negotiate in good faith with the existing citizen structure for the purpose of integrating that structure into the organization of the Area-Wide Council.
3. That the City of Philadelphia negotiate with the Area-Wide Council in good faith for the purpose of entering into an agreement with it for the Council to act as the citizen representation organization for the Philadelphia Model Cities Program, the form of contract dated June 30, 1969 (Exhibit P-11) to serve as a basis for these negotiations, it being understood, however, that in accepting any contract, Area-Wide Council will not be bound by the illegal changes made in the Philadelphia Model Cities Program by the Hyde letter of May 27, 1969, the Watson memorandum of June 9, 1969, or the Baida letter of July 3, 1969.
4. That HUD and the City negotiate in good faith with the Area-Wide Council concerning all changes made in the Philadelphia Model Cities Program since May 27, 1969." 456 F.2d at 818.
In June the parties were back before the district court for the entry of a judgment in accordance with the direction of this court. The district court took evidence in open court, which apparently has not been ...