The opinion of the court was delivered by: SHAPIRO
Plaintiffs filed this action on behalf of the class of past, present, and future tenants of Chester Housing Authority public housing against the United States Department of Housing and Urban Development, its secretary Jack L. Kemp, Chester Housing Authority, and its Executive Director Earline Mann. Defendants Henry Cisneros and Jacquelyn M. Pryor were substituted for defendants Kemp and Mann, respectively, pursuant to Fed. R. Civ. P. 25(d).
The Second Amended Complaint ("Complaint") requested declaratory and injunctive relief for alleged violations of federal housing law, the Administrative Procedures Act ("APA"), civil rights laws, and breach of the Annual Contributions Contract ("ACC") between HUD and CHA. With the consent of the parties, the court appointed the Honorable William M. Marutani as mediator to promote discussion between the parties, assist them to develop and exchange pertinent information concerning the issues, and arrive at a mutually acceptable resolution of the controversy. While mediation was underway, HUD declared CHA a "Troubled Housing Authority" in substantial breach of its obligations under the ACC and assumed control of the assets and management of CHA.
Mediation was unsuccessful. On October 25, 1991, plaintiffs filed a motion for a preliminary injunction alleging that dangerous conditions threatened the lives, health, and safety of the tenants. While this motion was pending, HUD took control of CHA and contracted with the Quadel Consulting Corporation ("Quadel"), a professional management firm, to manage CHA and remedy the problems causing the "Troubled Housing Authority" designation. The future operation of CHA was uncertain, so the parties agreed to continue the preliminary injunction hearing several times. At a hearing held on January 9, 1992, plaintiffs withdrew the motion for preliminary injunction to give new management a chance to improve the conditions of which plaintiffs complained. The court placed the case in administrative suspense to enable the parties to complete fact finding and discuss settlement further in light of the new developments.
The defendants conducted a Needs Assessment, prepared a Comprehensive Grant Plan according to the requirements of HUD's Comprehensive Grant Program regulations, 42 U.S.C. § 1437(a)-(o), 24 C.F.R. § 968, and initiated a plan of reconstruction and restoration. Plaintiffs remained dissatisfied and opposed defendants' plan to hire an executive director without "adequate input" from the tenants and the City of Chester. On July 31, 1992, plaintiffs filed a motion to restore the case to active status and preliminarily enjoin the appointment of an executive director.
The court held hearings on plaintiffs' motion for a preliminary injunction for nine days, beginning September 25, 1992. Many tenants testified on behalf of the plaintiffs and aired general grievances against CHA management and housing conditions. The selection of a new executive director--the ostensible reason for the hearing--was scarcely mentioned. The court granted the motion to return the case to active status but declined to enjoin the appointment of an executive director for lack of a showing of irreparable harm. The court set a February 17, 1993 trial date.
Plaintiffs, requesting several extensions of time for discovery, represented that personnel changes at Delaware County Legal Assistance and in the executive branch of the federal government made preparation for trial overly burdensome and possibly unnecessary. Plaintiffs also stated that additional time would enable newly retained counsel to assume significant responsibilities. The court, by order of January 7, 1993, modified the trial schedule to accommodate the plaintiffs. The trial, continued until May 3, 1993, was allowed to proceed on behalf of a plaintiff class consisting of "all current tenants of public housing owned and operated by CHA or HUD." Memorandum and Order of February 17, 1993. A non-jury trial was held on twelve days during the period from May 3, 1993 to July 9, 1993.
II. SUMMARY OF THE COMPLAINT
The plaintiff class claims that defendants have caused constructive demolition ("de facto demolition") of CHA housing by failure to fill vacant units, maintain occupied units in a habitable condition, train maintenance workers, perform routine inspections, and respond promptly to tenant complaints.
Count I of the complaint alleges that CHA took action to demolish a portion of the William Penn Homes without HUD approval and without meeting the statutory criteria required by 42 U.S.C. § 1437p. Although HUD initially approved CHA's demolition plan, CHA withdrew its proposed demolition plan shortly after obtaining funds for comprehensive modernization of the project in September, 1992. This Count will be dismissed as moot.
Count V alleges that HUD's approval of the now-withdrawn plan to demolish a portion of William Penn Homes violated the Administrative Procedures Act ("APA"), 5 U.S.C. §§ 701-06. Plaintiffs also argued at trial that HUD violated the APA by failing to prevent de facto demolition of units prior to November 6, 1991 and making arbitrary and capricious decisions as manager of CHA housing units subsequent to November 6, 1991.
Count VI alleges that defendants have violated the ACC and that plaintiffs are entitled to enforce its provisions against CHA as third party beneficiaries.
Count VII alleges that the defendants' failure to preserve public housing units and defendants' actual and de facto demolition of units have had a racially discriminatory impact in violation of § 3604 of the Fair Housing Act, 42 U.S.C. §§ 3601-3631 ("Housing Act"). Count VIII alleges that HUD violated the Housing Act by failing to protect plaintiffs from racially discriminatory treatment. Count IX alleges that the actions and omissions by defendants are a part of a pattern of intentional discrimination against non-whites in public housing in violation of Title VI of the Civil Rights Act, 42 U.S.C. § 2000d. Plaintiffs presented no evidence regarding Counts VII, VIII, and IX; these counts were dismissed for failure of proof at close of plaintiffs' case.
Count X alleges that CHA violated the Housing Act by including a lease requirement requiring tenants to pay for repairs necessary to restore housing units to habitable conditions. Count X also alleges that CHA violated the Housing Act by requiring tenants to pay for repairs caused by normal wear and tear or acts of third parties.
III. FINDINGS OF FACT AND CONCLUSIONS OF LAW
The court makes the following findings of fact and conclusions of law in accordance with Fed. R. Civ. P. 52(a).
1. Conditions Prior to November 6, 1991
a. Vacancies and Turnaround Time
CHA operates five public housing developments in the City of Chester, Pennsylvania: Ruth Bennett Homes ("Bennett"), Lamokin Village, William Penn Homes ("Penn"), McCaffery Village, and Chester Towers. These developments contain approximately 1,700 public housing units.
According to HUD performance indicators, a vacancy rate of 3% or above is "deficient." 24 C.F.R. § 901.05(k); 24 C.F.R. § 901.10(b)(1)(vii); at that rate, more than 51 vacancies for CHA's 1,700 units would be "deficient" performance. However, HUD allows a Public Housing Authority ("PHA") to deduct units approved for demolition in calculating the vacancy rate, 24 C.F.R. § 901.05(e)(1), and permits adjustment for funded on-schedule modernization. 24 C.F.R. § 901.10(b)(1)(vii)(B).
On December 30, 1987, there were 97 vacant units at the five CHA developments; as of December 30, 1988, this number had increased to 138. Pls.' Ex. 1; Administrative Record ("A.R.") at 20413. By December 30, 1990, there were 262 vacant units; 79 of these units were vacant pursuant to a HUD-approved plan to demolish portions of Penn. Id. On December 30, 1991, the number of vacancies rose to 320; 100 vacancies were in anticipation of the planned demolition at Penn. Pls.' Ex. 1.
According to HUD performance indicators, an annual average of vacancy days per turnaround of 30 or more calendar days is "deficient." 24 C.F.R. § 901.05(k); 24 C.F.R. § 901.10(b)(5). In 1986, the average time for CHA to prepare a vacant unit for occupancy was 62 days; by 1989-90, the average time to prepare a vacant unit for occupancy had risen to 315 days. A.R. at 20414.
On November 1, 1991, William Henderson, Chief of Assisted Housing Management Branch for HUD's Philadelphia regional office, visited Bennett, Lamokin Village, Penn, and McCaffery Village. A.R. at 4289. Henderson did not walk through the Penn project because of concern for his personal safety; however, half of the vacant units that he observed were "not secured and had broken, wide open windows on the second and third floors," and "trash was strewn throughout the site with no indications that it had been recently picked up." A.R. at 4289-90. His opinion was that Penn was "clearly moving towards being an uninhabitable site." A.R. at 4290.
At Bennett, Henderson found that every boarded vacant unit on the first floor had been entered, boarded windows and doors were unsecured, and windows on the second floor were broken and open to rain and vandalism. A.R. at 4289. "Trash was strewn throughout the site with no apparent recent attempts to pick it up in the areas with significant numbers of vacancies." Id. Drug dealers appeared to be on the project grounds, and "there appeared to be a direct relationship between this suspected drug dealing and the serious dilapidation of units." Id. Henderson believed that Bennett was "rapidly sliding to the point that it will be as deteriorated as William Penn in six to twelve months." A.R. at 4290.
At McCaffery, about half of the approximately 38 vacant units had been entered and vandalized; the vandalized second floor units had broken windows. Id. "Junction boxes on the second floor of several units were uncovered exposing the wiring to rain," this created a fire hazard. Id. Henderson suspected that illegal drug activity was also taking place there. Id. While more stable than Bennett or Penn, McCaffery was "at the beginning stages of a serious decline if conditions [were] not quickly reversed." Id. At Lamokin, Henderson observed a drug sale before leaving the site out of concern for his personal safety. A.R. at 4289. Trash collection was a serious problem. Id.
On October 11, 1991, Michael Smerconish, a HUD regional administrator, summarized the state of the projects in a memorandum stating that:
The Authority's housing stock is in disrepair; its projects are not being maintained; the present management lacks the capability to obtain and manage the funds necessary to make needed physical improvements; it is unable to prepare vacant units in a timely fashion; its procurement is deficient resulting in the purchase of supplies and services at excessive prices and without assurance that they are of the highest quality . . . .
A.R. at 20399-400. CHA had "not expressed even the intention to institute the remedial and curative actions to make CHA a viable independent public housing authority." A.R. at 20400. The "vast majority of units" had "basic health and safety" problems. A.R. at 20401. Most of the over 300 vacant units had been seriously vandalized and needed major repairs. A.R. at 20402.
An inspection of the sites on December 3, 1991, by Linda Williams, Underwriting Manager for Foxco Insurance Management Services, Inc., revealed the condition of the projects just after the HUD takeover. Squatters in the projects were "a constant problem"; vacant units had live electrical systems with torn switch boxes and outlet boxes leaving exposed live wires; one unit had a sink torn out and another had a valve left open so that water was dripping into the units below them; some steam radiators had not been shut off (the units were "so hot its [sic] like entering a steam bath" despite the absent or broken windows in those units); hardwood floors in vacant units had been damaged by rain water; numerous windows in occupied and unoccupied units were broken; and debris accumulation in some stairwells at Penn was so bad that "a person would need to have the surefootedness of a mountain goat to get up or down." A.R. at 30501-02. It was evident that CHA had either conducted no routine inspections of the units or was clearly failing to respond to readily observable problems. Id.
A Quadel draft report in February, 1992, based on an assessment conducted from December 2, 1991 to January 31, 1992, stated that although the condition of dwelling units varied from "poor to very good", CHA units suffered from "several chronic problems" such as "frequent sewer back-ups," "leaks from steam and water pipes causing weakened and buckled floors, plaster damage, deterioration to cabinets, sweating walls (from steam condensate), peeling paint and electrical shortages," broken windows, missing screens, and inoperable locks. A.R. at 24345, 24399. Trash collection was a serious problem. "Trash and garbage lie everywhere. Wild dogs, birds and rodents abound on CHA properties, sustained by the bountiful garbage. The situation is totally out of control." A.R. at 24400.
Maintenance of the units at the time of the HUD takeover was very poor. CHA maintenance staff was not capable of maintaining housing units in a decent, safe, and sanitary condition. A.R. at 20412. Quadel, in its draft report to HUD, found that ten of CHA's budgeted forty-three full-time line worker positions were not filled by active workers; staff had been hired in accordance with a "pervasive system of patronage," with "little attention . . . to the skills or work habits of applicants for employment"; staff productivity was low, with some staff "completing as few as one work order per week"; the workforce was "generally under-qualified," although some workers had developed good skills on the job; the quality of work "reflected a wide variety of skill levels"; few maintenance records were kept; CHA did not manage resident work orders in an organized or centralized system; 2,000 work orders logged in 1991 were unaccounted for; the work order process made it "nearly impossible to track employee activity and to hold staff accountable for poor performance"; and although emergencies were usually abated, the quality of work was often poor. A.R. at 24345, 24393-400.
In his October, 1991 memorandum, Smerconish described CHA's financial condition as in a "state of collapse." A.R. at 20418. From 1989 through 1991, actual expenditures had exceeded the budget on controlled line items by $ 432,709; CHA lost $ 582,889 by failing to collect rents owed; and CHA lost $ 556,123 by failing to have vacant units reoccupied. A.R. at 20419-24. In addition, CHA had written off $ 461,944 in collection losses. A.R. at 20419. CHA's operating reserve had dropped from $ 1632,359 in 1989 to $ 290,304 in 1991; however, the reserve was only a paper figure, and Smerconish believed that CHA's bills actually exceeded its available funds. A.R. at 20419. Because of the "precipitous decline" in CHA's financial condition, Smerconish believed that CHA could not "continue to provide basic services for very long." A.R. at 20418.
On November 5, 1991, HUD notified CHA that it had substantially breached and defaulted on the ACC and that HUD was exercising its right under sections 501 and 502 of the ACC to take immediate possession of CHA and its operations. A.R. at 19916-18.
On November 6, 1993, CHA voluntarily surrendered possession of the Authority's assets and property and agreed not to interfere with the operation of CHA by the HUD designee. A.R. at 19954-55. CHA's Board of Commissioners was left with only residual authority; reconstituting the Board was at HUD's sole discretion. A.R. at 19955. CHA's Board of Commissioners has not met since November 5, 1991. Henderson, Tr. 5/6/93 at 15. On November 7, 1993, HUD issued a memorandum delegating "all power and authority necessary to oversee and control the entire operation" of CHA to Henderson. A.R. at 19914. Although HUD took possession of CHA, HUD did not exercise its option to assume title to CHA. The memorandum delegating oversight and control of CHA to Henderson stated that "HUD has assumed oversight of the normal operations of [CHA]." Id. (emphasis supplied).
On November 25, 1991, CHA, through Henderson, entered into a contract with Quadel; Quadel was to provide management, consulting, and technical assistance to CHA for at least six months beginning December 2, 1991, with an option to extend the contract for a one-year period. Pls.' Ex. 85; A.R. at 20664-89. The contract was extended for one year on June 2, 1992. Pls.' Ex. 85. CHA and Quadel entered into a contract for an additional year on June 2, 1993. Cayford, Tr. 6/14/93 at 124.
3. Conditions at Time of Trial
At the time of the HUD takeover in November, 1991, Henderson and Smerconish planned to move quickly to reduce the number of vacancies. Shortly after the HUD takeover, approximately 75 units were rehabilitated for immediate occupancy. Collins, Tr. 5/5/93 at 52. However, that initial plan was abandoned in order to do lead testing and concentrate funds on occupied units. Henderson, Tr. 5/6/93 at 64-65. The subsequent availability of large HUD grants for modernization and reconstruction resulted in a decision not to rehabilitate vacant units for immediate occupancy. Id. at 65. As a result of this decision, the number of vacancies continued to rise. There were 405 vacancies on December 30, 1992, Pls.' Ex. 1, and approximately 440 at the time of trial. Collins, Tr. 5/5/93 at 56. None of these vacancies were pursuant to the demolition plan for Penn, withdrawn shortly after CHA was awarded funds for Major Reconstruction of Obsolete Public Housing ("MROP") in September, 1992. Watts, Tr. 5/12/93 at 201-02; Rotondaro, Tr. 11/2/92 at 79-80.
CHA, managed by HUD ("CHA/HUD"), boarded and sealed units as they became vacant and did not prepare them for immediate occupancy. When a unit became vacant, a CHA/HUD crew secured any immediate hazards, removed trash and debris, and then boarded the unit to seal it without regard to the cost of rehabilitating the unit for immediate occupancy. Id. at 44, 47; Collins, Tr. 5/5/93 at 49. This policy applied to all the developments except Chester Towers. Id. at 51. Because of the proposed comprehensive modernization and reconstruction program, CHA/HUD believed it would be fiscally and managerially more efficient to allow units to remain vacant pending a large-scale modernization and reconstruction program than to perform interim repairs to rehabilitate vacant apartments for immediate occupancy. Henderson, Tr. 5/6/93 at 47; Collins, Tr. 5/5/93 at 49-50. Aside from units at Chester Towers, the only units recently rehabilitated or undergoing rehabilitation were eight four bedroom units for occupancy by families entitled to four bedroom units but in apartments too small for them. Id. at 48.
In the first week of December, 1991, Quadel appointed Paul Collins, a Quadel employee, to serve as CHA's maintenance superintendent. Collins, Tr. 5/5/93 at 6-7. At that time, there were ten maintenance staff positions vacant; Collins hired laborers and aides to fill those positions. Id. at 28. With one exception, the staff employees were not licensed plumbers or electricians, id. at 12-13; however, CHA's union contract was not based on licensed trades. Id. at 13, 26. Some of the staff employees may have had skills equivalent to those in licensed trades. Id. at 28. Collins called experts or contractors when faced with a problem beyond the qualifications or abilities of his staff. Id. at 76-77.
Collins reorganized the maintenance staff into site-based crews, eliminated patronage considerations in hiring, and gave employees basic skills tests. Collins, Tr. 5/12/93 at 7, 9. Collins instituted formal methods of tracking worker productivity. Id. at 11-12. The maintenance department instituted a preventive maintenance plan and hoped to expend approximately 30% of its work on preventive maintenance by the end of 1993. Id. at 16. Collins made considerable personal efforts to have the maintenance department more responsive to tenant complaints and concerns by ...