3. HUD violated its own regulations by selling the project to a corporation which is in reality the alter ego of the defendant Charles C. Hibbs, who at all times pertinent to this case has been on the "debarred list" by reason of his having been earlier convicted of criminal offenses in connection with other dealings with HUD.
4. HUD violated its own regulations, and the Environmental Protection Act, by failing to prepare and file and process an environmental impact statement.
Among other things, plaintiffs, by reason of the foregoing alleged violations, seek to set aside the conveyance to the corporation, and to have the property restored to its "public housing" status, so as to enable low-income tenants to continue to occupy the project at prices they can afford to pay.
I am satisfied that there is jurisdiction with respect to the claim against the federal defendants under 28 U.S.C. § 1337, see Davis v. Romney, 490 F.2d 1360, 1365-66 (3d Cir. 1974); and 28 U.S.C. § 1361, see Langevin v. Chenango Court, Inc., 447 F.2d 296 (2d Cir. 1971); Hahn v. Gottlieb, 430 F.2d 1243, 1245 n. 1 (1st Cir. 1970). Since plaintiffs' claims against the remaining defendants arise in part under the same statutes, since the corporate defendant is the grantee in the conveyance which plaintiffs seek to set aside, and since all of the non-federal defendants are proper targets for the interim injunctive relief which plaintiffs seek in order to preserve the status quo pending determination of their underlying claims, I am likewise persuaded that this Court has jurisdiction over all claims asserted against all parties. Fed.R.Civ.P. 19(a); Langevin v. Chenango Court, Inc., supra, at 300.
On the present record, it seems clear that these plaintiffs are persons whose interest in low-cost housing is within the "zone of interests" protected by the National Housing Act, and that they have suffered and will suffer injury in fact. Thus, the two-pronged test for standing is met in this case. Association of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (1970); Davis v. Romney, supra, at 1365.
III. Probability of Success on the Merits
At this preliminary stage, plaintiffs are not required to prove a cause of action in its entirety, but they must, as a condition precedent to consideration of the grant of injunctive relief, establish that there is a reasonable likelihood that they will be successful in proving that they are entitled to relief. And it is, of course, unnecessary for plaintiffs now to show that all of their claims are meritorious, so long as they can show a reasonable likelihood of success on one or more of their claims.
On the basis of the record to date, I believe plaintiffs have met their burden with respect to HUD's failure to give adequate consideration to alternate methods of disposition of the project in a manner more clearly consistent with the aims and objectives of national housing policy. Undoubtedly, HUD had the right, in its discretion, to sell the project for cash, with no strings attached, if HUD concluded that disposition to a buyer or buyers who would continue to operate the property as a low-income housing project was not feasible. And even an erroneous judgment on that subject would probably be beyond the reach of judicial review. The difficulty in the present case, however, is that HUD appears to have reached its decision on a virtually irrational basis.
The record discloses that the decision was reached as follows: HUD concluded that it was not necessary to notify the tenants of the proposed sale, or to offer them an opportunity to form a cooperative, or to interest some non-profit corporation in acquiring the property, on the assumption that the capital investment required would be in the neighborhood of $ 900,000. This would result in a per unit price of around $12,000, obviously far beyond the means of the tenants. But when the property was exposed for bids, the undisclosed "upset price" was pegged at $318,000. At no time did HUD give consideration to whether the property, at that price, might be susceptible to cooperative, condominium, or non-profit corporation acquisition.
Moreover, the "upset price" was fixed on the basis of capitalizing the rents which the property would produce on a regulated basis (i. e., on the assumption that the purchaser would not be free to raise rents except in modest percentages). But, when the property was sold to the present private owner at a net price of $318,250, HUD decided not to impose any rental restrictions.
The HUD "Property Disposition Handbook Multi-family Properties," RHM 4315.1 provides (§ 290(a), p. 109):
". . . In developing analysis report and recommendation for sale of an acquired multi-family project, the local office shall include consideration of the condominium approach. An analysis shall be made for the purpose of determining whether a greater financial return can be realized or, in the case of a project housing families in the lower income group, a financial return approximately equal to that which could be anticipated from sale of the project as rental housing."
The same manual also provides (§ 290-1(b), p. 114):
". . . In considering the disposition of an acquired multi-family property where home ownership and tenant responsibility are important factors for the continued operation of the project, the local office shall include consideration of the cooperative approach . . . Multi-family projects housing many lower income families, including elderly and handicapped, should also be considered for cooperative sale provided a financial return will be approximately equal to that which can be expected from the sale of the project as rental housing . ."