to adjust the rents for the period of 1980 to the present by either applying the AAAFs to the portion of the total contract rent that would not be used by the owner to service his debt on the property, or by multiplying thirty percent of the proper AAAF by the entire contract. HUD was directed to apply whichever approach resulted in the greater payment to the owner. 42 U.S.C. § 1437f(c)(2)(C).
This case was first assigned to a different district judge on this court. While it was before that judge, HUD brought a motion to dismiss, arguing 1) that the passage of section 801 rendered Carmichaels Arbors' claim moot; and 2) that this court did not have jurisdiction to entertain a declaratory judgment action on a claim on a contract to which the United States was a party and that instead the suit should have been brought in the United States Claims Court. HUD's Motion to Dismiss at p. 1. Carmichaels Arbors did not file a brief in opposition; instead it filed a Motion to Defer Disposition of the case pending review by the Ninth Circuit of a district court opinion holding that section 801 was unconstitutional. In the Motion to Defer Disposition of the case, Carmichaels Arbors identified the "critical issue" facing the court to be whether section 801 was constitutional. Carmichaels Arbors also filed two Notices of Decisions in which district courts within the Ninth Circuit found that section 801 was unconstitutional.
On February 14, 1991, the judge issued an opinion denying HUD's Motion to Dismiss. Responding to HUD's argument that the intervening passage of section 801 rendered Carmichaels Arbors' claim moot, the judge noted that this line of reasoning assumed the constitutionality of section 801, and declined to consider HUD's mootness argument without examining section 801's constitutionality. He held that section 801 was unconstitutional with regard to its retroactive provision, but constitutional with regard to its prospective provision. Opinion on Motion to Dismiss at 8-10. The judge also held that this court had jurisdiction to issue a declaratory judgment ruling in cases involving contracts to which the United States was a party.
On February 3, 1992, this case was reassigned to the undersigned judge. Both parties have now moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure.
A. The Doctrine of Law of the Case
Carmichaels Arbors first argues in favor of its Motion for Summary Judgment that the court's Opinion on Motion to Dismiss already stated that section 801 was unconstitutional in its retroactive effect. Carmichaels Arbors considers this favorable judicial pronouncement to constitute the law of the case, which the court should not reexamine on this Motion.
The doctrine of law of the case states that a successor judge should respect a decision made by a predecessor judge on the same case. See TCF Film Corp. v. Gourley, 240 F.2d 711, 713 (3d Cir. 1957); United States v. Wheeler, 256 F.2d 745, 746 (3d Cir.), cert. denied 358 U.S. 873, 79 S. Ct. 111, 3 L. Ed. 2d 103 (1958). The most common rationales advanced for this rule include the need to preserve the "orderly functioning of the judicial system," Gourley, 240 F.2d at 714, and to avoid unseemly conflicts and protracted litigation, Sutherland Paper Co. v. Grant Paper Box Co., 9 F.R.D. 422, 423 (W.D. Pa. 1949).
Nevertheless, the rule is more a statement of policy than a reflection of the limits of the successor judge's power. See Glenn, Annotation, "Propriety of Federal District Judge's Overruling or Reconsidering Decision or Order Previously Made in Same Case by Another District Judge," 20 A.L.R. Fed. 13, 30 (1974). The rule should be balanced against the party's right to request that the court reconsider an earlier judgment implicit in Rules 52(a), 59 and 60 of the Federal Rules of Civil Procedure. In the Third Circuit, the balance is struck in favor of permitting the successor judge to reconsider the decision of the predecessor judge if the predecessor judge is unavailable to reconsider the decision, as in this case. Gourley, 240 F.2d at 714; United States Gypsum Co. v. Schiavo Bros., Inc., 668 F.2d 172, 176-77 (3d Cir. 1981), cert. denied 456 U.S. 961, 102 S. Ct. 2038, 72 L. Ed. 2d 485 (1982); Degregorio v. O'Bannon, 86 F.R.D. 109, 113 (E.D. Pa. 1980). The requirement of the predecessor judge's unavailability satisfies the policy concerns of avoiding unseemly conflicts and preserving order in the judicial system.
Therefore this judge is free to reconsider the predecessor judge's pronouncements regarding the constitutionality of section 801. This conclusion is anchored by the consideration that the predecessor judge did not have the benefit of HUD's views on section 801's constitutionality when he issued his opinion.
An evaluation of section 801's constitutionality follows.
B. Constitutionality of Section 801
Section 801 affects the HAP contract between the parties in two ways: first, it expressly authorizes HUD to use comparability studies in all future rental adjustments; and second, it directs HUD to make payments to, inter alia, owners whose rents in the past had been reduced by the application of comparability studies. Carmichaels Arbors claims that these directives interfere with its right under the HAP contract to regular rental adjustments calculated in a prescribed manner. In Carmichaels Arbors' view, section 801 represents a Congressional attempt to abrogate through legislative fiat a debt owed by the United States to a private party. Debt avoidance by the United States is permitted by the Constitution in only very narrow circumstances, none of which are present in this case.
HUD asserts that the Constitution is not implicated by section 801 because, contrary to the position adopted by Carmichaels Arbors, the HAP contract does not grant the owner a right to any specific manner of calculation of the rental adjustments. The due process clause of the Fifth Amendment, like the due process clause of the Fourteenth Amendment, protects life, liberty, and property interests only. See Jolly v. Listerman, 672 F.2d 935, 941 (D.C. Cir. 1982); Federal Deposit Ins. Corp. v. Morrison, 747 F.2d 610, 613 (11th Cir. 1984), reh. denied, 763 F.2d 419, cert. denied 474 U.S. 1019, 106 S. Ct. 568, 88 L. Ed. 2d 553 (1985). If the claimed right cannot be found in the contract, Carmichaels Arbors would has no property right on which to base standing to attack the constitutionality of section 801.
Carmichaels Arbors characterizes its right under the HAP contract as an entitlement to rental adjustments on an annual basis calculated using the aforementioned AAAFs. 42 U.S.C. § 1437f(c)(2)(A) provides for annual adjustments "to reflect changes in the market rentals established in the housing area for similar types of dwelling units or, if the Secretary determines, on the basis of a reasonable formula." Carmichaels Arbors interprets this wording to require that the Secretary choose to make the annual adjustments either based on a market survey or on the basis of a reasonable formula. It argues that this interpretation comports with HUD's understanding of the law as well. The HAP contract specifies that:
On each anniversary date of the Contract, the Contract Rents shall be adjusted by applying the applicable Automatic Annual Adjustment Factor most recently published by the Government.