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Mannarino v. United States Dep't of Housing and Urban Development

April 2, 2009

JULIA MANNARINO AND RON TESKA, PLAINTIFFS,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND KIM KENDRICK, ASSISTANT SECRETARY FOR FAIR HOUSING AND EQUAL OPPORTUNITY, DEFENDANTS.



The opinion of the court was delivered by: Robert C. Mitchell United States Magistrate Judge

MEMORANDUM OPINION

Plaintiffs, Julia Mannarino and Ron Teska, proceeding pro se, bring this action against Defendants, the United States Department of Housing and Urban Development ("HUD") and Kim Kendrick, acting in her official capacity as Assistant Secretary for Fair Housing and Equal Opportunity at HUD, alleging a claim under the Administrative Procedures Act, 5 U.S.C. §§ 701-06 ("APA"). They seek review of HUD's investigation of the failure of Dunkard Township and the Pennsylvania Department of Community and Economic Development ("DCED") to comply with section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. § 1701u. Plaintiffs operated a "section 3 business concern" known as Southwestern Community Ventures ("SCV"), which entitled them to priority in the awarding of contracts paid for by Community Development Block Grant ("CDBG") funds. In 1997, Plaintiffs filed a complaint with HUD raising the section 3 violations by Dunkard Township and the DCED. HUD did not act on Plaintiffs' complaint until December 2006, when it issued a determination that Dunkard Township had violated section 3. In 2008, HUD imposed a resolution against the DCED. Plaintiffs were dissatisfied with the resolution because the lengthy delay contributed to the dissolution of SCV and because they contend that the resolution did not "mitigate" the effects of Dunkard Township's actions because it provided only that all sub-recipients in the jurisdictions where SCV qualified as a section 3 business issue pre-bid invitations to SCV and set priority preference to bid proposals submitted by SCV for three years even though SCV had long been out of business. Plaintiffs requested that monetary sanctions be imposed on Dunkard Township, but HUD responded that it had no authority to do so.

Presently before this Court for disposition is a motion for summary judgment, brought by Defendants. For the reasons that follow, the motion will be granted.

Facts

Plaintiffs state that they established SCV as a partnership in 1989 and filed its last income tax return in 2003. (Compl. ¶ 4). In 1997, Julia Mannarino, d/b/a SCV, filed a complaint with HUD alleging that the Dunkard Township Supervisors and the DCED violated section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. § 1701u. Plaintiffs allege that when Dunkard Township received CDBG funds in 1996 from the DCED (which, in turn, received those funds from HUD), Dunkard improperly failed to solicit bids from section 3 business concerns, including SCV. (Defs.' App. Ex. A at 1.)*fn1

Plaintiffs' complaint with HUD was originally filed on January 28, 1997 and it was refiled on July 21, 1997. (Pls.' App. Ex. A.)*fn2 HUD initially dismissed Plaintiffs' complaint on April 30, 1998, for lack of jurisdiction, but it notified them on June 23, 1998, that it had reopened its investigation as it had become aware of additional information. (Pls.' App. Exs. I, J.) Plaintiffs alleged that HUD took no further action on its complaint.

According to HUD's documentation, the case was dismissed a second time on September 7, 2004, but was once again reopened on successful appeal by SCV. (Pls.' App. Exs. K, L.)*fn3 Plaintiffs allege that during this lengthy period of time, DCED continued to send federal funds to Dunkard Township. (Pls.' App. Ex. H.)

Finally, on December 15, 2006, HUD issued a determination that "Dunkard violated 24 CFR § 135.9(b)(2) by failing to provide contracting opportunities, to the greatest extent feasible, to Section 3 business concerns such as your company, [SCV]." (Defs.' App. Ex. A; Hampton Decl. ¶ 5.*fn4

Assistant Secretary Kim Kendrick attempted an informal resolution in May 2007 by sending Plaintiffs a draft Voluntary Compliance Agreement ("VCA"). (Defs.' App. Ex. B.) On May 30, 2007, Plaintiffs sent a letter to HUD with their comments. They objected to the fact that the proposed VCA addressed only future violations by Dunkard Township and made no effort to relieve the effects of past violations that resulted in the grievance and finding of non-compliance. They also noted that the VCA overlooked any responsibility of DCED and erroneously included a space for County officials to sign when they had no involvement in the events underlying the grievance. (Defs.' App. Ex. C.)

Because Plaintiffs rejected the terms of the proposed VCA, HUD imposed a resolution in the matter on January 3, 2008. (Defs.' App. Ex. D; Hampton Decl. ¶¶ 6-9.) The Imposed Resolution requires the DCED to train all sub-recipients (such as Dunkard Township) receiving section 3 covered funds on the administration and implementation of HUD's section 3 program. (Defs.' App. Ex. D ¶ II.B). The Imposed Resolution also requires the DCED to submit plans to HUD concerning how they intend to ensure that sub-recipients comply with section 3 requirements, and that they sponsor training for all communities within its jurisdiction concerning the section 3 program. (Id. ¶ III.1.) The Imposed Resolution requires that all sub-recipients in the jurisdictions where SCV qualifies as a section 3 business issue pre-bid invitations to SCV, and provide priority preference to bid proposals submitted by SCV for three years. (Id. ¶ III.4.)

Plaintiffs received a copy of the Imposed Resolution and on January 14, 2008, they filed an appeal therefrom. They noted that the VCA directed compliance by DCED and not Dunkard Township, that SCV had been forced out of business several years before and thus HUD's relief was no longer a viable option, and that they had not been consulted during the entire investigation. They requested monetary compensation as relief. (Defs.' App. Ex. F.)

On March 3, 2008, Kim Kendrick responded to Plaintiffs' appeal as follows: 1) DCED was the primary recipient of section 3 covered financial assistance and was ultimately responsible for ensuring that the township complied with the statutory and regulatory requirements of section 3; 2) the regulations do not provide for monetary compensation in an imposed resolution; and 3) Plaintiffs had submitted comments in response to the draft VCA on May 30, 2007 and HUD had presented them to DCED but was unable to negotiate a voluntary resolution. Kendrick invited Plaintiffs to submit recommendations for alternative types of relief other than monetary compensation. (Defs.' App. Ex. G.)

Plaintiffs submitted a letter in response on March 24, 2008, in which they requested a hearing before an impartial decision maker and reiterated the arguments that Dunkard Township was not being required to mitigate its past actions, that they were not consulted during the VCA process and that monetary sanctions are not prohibited by statute or regulations and are therefore permissible. (Defs.' App. Ex. H.) On June 16, 2008, Kendrick responded as follows: 1) she stated that neither the statute nor the regulations provide for administrative hearings in conjunction with the investigation or resolution of section 3 complaints and thus their request for a hearing was denied; 2) the HUD Handbook Plaintiffs cited listed several types of relief that "may" be available to a grievant through section 3 conciliation agreements, but provides for monetary compensation only if all parties to the complaint agree and DCED did not (although HUD had advocated for DCED to pay monetary sanctions); 3) HUD's strategy for the VCA process is to present a draft VCA to all parties for their review and consideration and thus Plaintiffs did have the opportunity to participate in the process; and 4) because neither the section 3 statute nor the implementing regulations expressly cover the award of monetary compensation as a result of findings of non-compliance in section 3 investigations, HUD is limited to imposing sanctions listed in the regulations, namely "debarment, suspension and limited denial of participation in HUD programs." (Defs.' App. Ex. I) (quoting 24 C.F.R. § 135.76(g).)

Plaintiffs submitted a final letter to HUD on June 20, 2008. In it, they acknowledged that their administrative remedies through HUD had been exhausted, but reiterated the complaints that Dunkard Township was not being included as a party to the final resolution and that the terms of the imposed resolution would in no way mitigate the effects of Dunkard Township's actions as to them. (Pls.' App. Ex. D.)

Defendants note that Plaintiffs filed several other section 3 complaints against various municipalities in Greene County, Pennsylvania between 1993 and 1998. (Defs.' App. Ex. A at 1.) Plaintiffs settled section 3 complaints against Wayne Township, Jackson Township, and Rices Landing Borough; in particular, the violating parties in those cases paid Plaintiffs $13,000 for each complaint, for a total of $39,000.00. (Munir Decl. ¶¶ 4-5.)*fn5

In addition, as the result of a lawsuit in this Court at Civ. A. No. 99-2058 against Morgan Township, Plaintiffs were awarded $16,225.00 after a bench trial. (Defs.' App. Ex. L.) In total, Plaintiffs have already recovered over $55,225.00 as the result of section 3 violations. (Munir Decl. ¶ 5.) Defendants note that none of Plaintiffs' cases against Morgan Township, Wayne Township, Jackson Township and Rices Landing Borough involved an imposed resolution by the Agency.

Procedural History

Plaintiffs filed this action on July 14, 2008. As noted, the complaint alleges a claim under the APA based on HUD's failure to comply with is own regulations because:

HUD's imposed resolution, which includes opportunities for future contracts but does not include any monetary compensation to plaintiffs, does nothing to mitigate the consequences of the deficiency as our business no longer exists.

HUD staff was very aware of this fact. No other types of relief were ever suggested/recommended by HUD at any time during the resolution process. (Compl. ¶ 13.) They allege that their business's failure "is related to the inexcusably large amount of time HUD has taken to go through the grievance process" and contend that it is impossible for them to re-create their business at this time. (Compl. ¶ 14.) They allege that HUD's actions are arbitrary and not in accordance with law. (Compl. ¶ 15.) As relief, they seek: a judgment that enjoins defendant HUD to include monetary compensation to plaintiffs, from recipient Dunkard Township as a result of their noted non-compliance, in the amount of $16,500, to mitigate the lost income to which plaintiffs were entitled plus all court costs and to grant such further and additional relief as may be just and proper.

(Compl. ¶ 17.)

On September 15, 2008, Defendants filed a motion to dismiss or, in the alternative, for summary judgment, citing Federal Rules of Civil Procedure 12(b)(1), 12(b)(6) and 56. They argued that: 1) there is no subject matter jurisdiction because the APA's waiver of sovereign immunity does not extend to actions for which there is a remedy in court and Plaintiffs could file suit against Dunkard Township seeking monetary compensation; 2) no judicial review of HUD's imposed resolution is permitted because the agency acted within its discretion; 3) res judicata bars this action because the issue of lack of subject matter jurisdiction was raised and found dispositive in both Civ. A. No. 00-796 and Civ. A. No. 99-2058; and 4) HUD cannot direct Dunkard Township to award Plaintiffs monetary damages in any event, and thus the claims fails.

On November 18, 2008, an order was entered denying this motion, which was construed as a motion to dismiss for lack of subject matter jurisdiction or for failure to state a claim upon which relief could be granted. The Court held that: 1) Defendants did not identify a means by which Plaintiffs could sue Dunkard Township, and at least two courts have concluded that no private cause of action is available to enforce § 1701u and that § 1983 may not be used to bring such a claim; moreover, Plaintiffs' grievance at this point was not against the Township but against HUD for its extraordinary delay and imposed resolution that failed to provide Plaintiffs with any relief; 2) Defendants did not support their argument that review of this matter was foreclosed because HUD acted within its agency discretion; 3) res judicata would not apply based on the prior case; and 4) to the extent that Defendants argued that HUD was not ...


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