Housing Authority of the City of New Haven v. United States ( 2018 )

In the United States Court of Federal Claims
No. 17-1804C
(Filed: December 10, 2018)
*************************************
HOUSING AUTHORITY OF THE CITY *
OF NEW HAVEN et al., * RCFC 12(b)(1); RCFC 12(b)(6); Housing
* Act of 1937; Public Housing Authorities;
Plaintiffs, * Moving to Work Demonstration Program;
* Section 9 Operating Subsidy; 2012
v. * Appropriations Act; Allocation
* Adjustment; Money-Mandating Source of
THE UNITED STATES, * Law; Presumption That Money Damages
* Are Available for Breach of Contract
Defendant. *
*************************************
Carl A.S. Coan, III, Washington, DC, for plaintiffs.
A. Bondurant Eley, United States Department of Justice, Washington, DC, for defendant.
OPINION AND ORDER
SWEENEY, Chief Judge
Plaintiffs in the above-captioned case are public housing authorities that participate in the
United States Department of Housing and Urban Development’s (“HUD”) Moving to Work
(“MTW”) demonstration program. In 2012, Congress provided that public housing authorities
with excess operating reserves would receive an allocation adjustment to partially offset the
operating subsidies to which they were otherwise contractually entitled pursuant to HUD
guidelines. Plaintiffs allege that although they did not have excess operating reserves, they
improperly saw their operating subsidies reduced by an allocation adjustment as a result of their
status as MTW program participants. They seek relief on breach-of-contract and statutory
grounds, and assert entitlement to approximately $22.4 million in damages plus attorney’s fees
and costs.
Defendant moves to dismiss for lack of subject-matter jurisdiction pursuant to Rule
12(b)(1) of the Rules of the United States Court of Federal Claims (“RCFC”) and, alternatively,
failure to state a claim upon which this court can grant relief pursuant to RCFC 12(b)(6). As
explained below, the court lacks jurisdiction to consider plaintiffs’ statutory claims, but
possesses jurisdiction over plaintiffs’ breach-of-contract claim. Further, plaintiffs have stated a
plausible claim to relief under their breach-of-contract theory. Accordingly, the court grants in
part and denies in part defendant’s motion to dismiss.
I. BACKGROUND
A. Statutory and Regulatory Framework
Congress created the federal public housing program when it passed the United States
Housing Act of 1937 (“1937 Act”).1 The purposes of the 1937 Act are to “assist States and
political subdivisions of States to remedy the unsafe housing conditions and the acute shortage of
decent and safe dwellings for low-income families” and to “address the shortage of housing
affordable to low-income families.” 42 U.S.C. § 1437(a)(1) (2012). The federal government
advances these objectives through local public housing authorities.2 Id. § 1437(a)(1)(C). A
public housing authority is “any State, county, municipality, or other governmental entity or
public body (or agency or instrumentality thereof) which is authorized to engage in or assist in
the development or operation of public housing.” Id. § 1437a(b)(6)(A).
Under Section 8 of the 1937 Act, as amended (“Section 8”), HUD “is authorized to enter
into annual contributions contracts with public housing [authorities] pursuant to which such
[organizations] may enter into contracts to make assistance payments to owners of existing
dwelling units in accordance with [42 U.S.C. § 1437f].” Id. § 1437f(b)(1). Section 8 thus
benefits low-income families through rent subsidies paid directly to landlords. Id. § 1437f(a).
The housing choice voucher program administered pursuant to Section 8 is “the federal
government’s major program for assisting very low-income families, the elderly, and the
disabled to afford decent, safe, and sanitary housing in the private market.” Housing Choice
Vouchers Fact Sheet, U.S. Dep’t of Hous. & Urban Dev., https://www.hud.gov/program_offices/
public_indian_housing/programs/hcv/about/fact_sheet (last visited Dec. 10, 2018)
[https://web.archive.org/web/20181210161151/https://www.hud.gov/program_offices/
public_indian_housing/programs/hcv/about/fact_sheet].
Section 9 of the 1937 Act, as amended (“Section 9”), also assists low-income families by
allowing HUD to “make annual contributions to public housing [authorities] to assist in
achieving and maintaining the lower income character of [public housing authority] projects.”3
42 U.S.C. § 1437c(a)(1). Tenants living in public housing authority projects must generally
1
The facts in this section—which are undisputed for the purpose of resolving
defendant’s motion to dismiss—derive from the complaint, the parties’ submissions (including
attached exhibits), and matters of which the court may take judicial notice pursuant to Rule 201
of the Federal Rules of Evidence. See Rocky Mountain Helium, LLC v. United States, 841 F.3d
1320, 1325-26 (Fed. Cir. 2016).
2
The relevant statutes and regulations generally refer to “public housing agencies” rather
than “public housing authorities.” The distinction is purely semantic. Since the parties refer to
such organizations as “public housing authorities,” the court uses that term as well.
3
HUD may also award grants to public housing authorities for the purpose of
constructing public housing projects pursuant to forty-year contracts. 42 U.S.C. § 1437c(a)(2).
Such development grants are not at issue in the instant case.
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qualify as “low-income” and pay monthly rent (to the public housing authority that owns the
project) in an amount that is limited by their monthly income, which must be reviewed annually
(or every three years for families on fixed incomes). Id. § 1437a(a)(1). A “project” is “housing
[that is] developed, acquired, or assisted” by a public housing authority, including “improvement
of any such housing.” Id. § 1437a(b)(1). Congress provided that HUD “shall embody the
provisions for [Section 9] annual contributions in a contract guaranteeing their payment.” Id.
§ 1437c(a)(1) (emphasis added). These contracts are known as annual contributions contracts.
E.g., Compl. Ex. 3 at 1. Pursuant to HUD regulations, an “annual contributions contract” is:
a contract prescribed by HUD for loans and contributions, which
may be in the form of [an] operating subsidy, whereby HUD
agrees to provide financial assistance and the [public housing
authority] agrees to comply with HUD requirements for the
development and operation of its public housing projects.
24 C.F.R. § 990.115 (2008).
Congress established two sources of funds to accomplish its public housing objectives
under Section 9: the Capital Fund and the Operating Fund. 42 U.S.C. § 1437g(c)(1). The
purpose of the Capital Fund is to “mak[e] assistance available to public housing [authorities] to
carry out capital and management activities.” Id. § 1437g(d)(1). The purpose of the Operating
Fund is to “mak[e] assistance available to public housing [authorities] for the operation and
management of public housing.” Id. § 1437g(e)(1). HUD must allocate annual appropriations to
both the Capital Fund and Operating Fund among eligible public housing authorities based on
statutory formulas. Id. § 1437g(c)(1); see also id. § 1437g(d)(2) (describing the “formula for
determining the amount of assistance provided to public housing [authorities] from the Capital
Fund for a fiscal year”), (e)(2) (describing the “formula for determining the amount of assistance
provided to public housing [authorities] from the Operating Fund for a fiscal year”). Plaintiffs’
claims in the instant case involve disbursements from the Operating Fund for the 2012 fiscal
year.4
To implement the statutory requirements pertaining to the Operating Fund, HUD issued
regulations that are codified in part 990 of title 24 of the Code of Federal Regulations (“part
990”). As relevant here, an “operating subsidy” is the “amount of annual contributions for
operations a [public housing authority] receives each funding period under [Section 9] as
4
The federal government’s fiscal year runs from October 1 through the following
September 30. 31 U.S.C. § 1102 (2012). The “2012 fiscal year” is the fiscal year ending
September 30, 2012. Glossary Term: Fiscal Year, United States Senate,
https://www.senate.gov/reference/glossary_term/fiscal_year.htm (last visited Dec. 10, 2018)
[https://web.archive.org/web/20180924163127/https://www.senate.gov/reference/glossary_term/
fiscal_year.htm]. However, Congress’s 2012 fiscal year appropriations funded public housing
authorities for the 2012 calendar year. HUD has distributed operating subsidies for all public
housing authorities on a calendar-year funding basis since 2005. Revisions to the Public
Housing Operating Fund Program, 70 Fed. Reg. 54,984, 54,993 (Sept. 19, 2005).
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determined by the Operating Fund Formula.” 24 C.F.R. § 990.115. A public housing authority
is eligible to receive an operating subsidy in an amount equal to the excess of its “formula
expense” over its “formula income.” Id. § 990.110(a)(2). Formula income is an estimate of the
public housing authority’s income exclusive of any operating subsidy, and is measured by the
rent charged to tenants and the length of time for which units are leased. Id. § 990.195(a).
Formula expense is the “costs of services and materials needed by a well-run [public housing
authority] to sustain the project . . . such as administration, maintenance, and utilities.” Id.
§ 990.160(a). The regulations provide that “HUD shall make monthly payments equal to 1/12 of
a [public housing authority’s] total annual operating subsidy under the formula.” Id.
§ 990.210(a) (emphasis added). However, since the payment of operating subsidies is limited by
congressional appropriations, id. § 990.110(b)(3), the regulations also provide that HUD may
“revise, on a pro rata basis, the amount of operating subsidy to be paid” to public housing
authorities when “insufficient funds are available,”5 id. § 990.210(c) (emphasis added).
B. The Moving to Work Demonstration Program
In 1996, Congress approved the MTW demonstration program to allow public housing
authorities the
flexibility to design and test various approaches for providing and
administering housing assistance that: reduce cost and achieve
greater cost effectiveness in Federal expenditures; give incentives
to families with children where the head of household is working,
seeking work, or is preparing to work by participating in job
training, educational programs, or programs that assist people to
obtain employment and become economically self-sufficient; and
increase housing choices for low-income families.
Departments of Veterans Affairs and Housing and Urban Development, and Independent
Agencies Appropriations Act, 1996 (“1996 Appropriations Act”), Pub. L. No. 104-134, § 204(a),
110 Stat. 1321, 1321-281. As part of that flexibility, MTW program participants are allowed to
combine Section 9 operating funds with Section 8 assistance funds “to provide housing
assistance for low-income families . . . and services to facilitate the transition to work on such
terms and conditions as the [public housing authority] may propose and [HUD] may approve.”
Id. § 204(b), 110 Stat. at 1321-282. As relevant here, HUD may not reduce the Section 9
operating subsidies of MTW program participants as a result of their participation in the MTW
program. Id. § 204(f), 110 Stat. at 1321-283.
5
Previously, HUD had “complete discretion to revise, on a pro rata or other basis
established by HUD, the amounts of operating subsidy to be paid” to public housing authorities
in the event that Congress did not appropriate sufficient funds for all operating subsidies to be
paid in full. 24 C.F.R. § 990.112(c) (2001). That regulation was replaced by 24 C.F.R.
§ 990.210 effective November 18, 2005. Revisions to the Public Housing Operating Fund
Program, 70 Fed. Reg. 54,984, 55,004 (Sept. 19, 2005).
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To become an MTW program participant, a public housing authority (having previously
entered into an annual contributions contract with HUD) must execute a standard MTW
agreement memorializing the terms of its participation in the program; the agreements—which
include specified attachments A, B, C, and D—are identical for each participant except with
respect to Attachment A (“Calculation of Subsidies”) and the optional Attachment D (“Legacy
and Community-Specific Authorizations”). Pls.’ Opp’n Def.’s Mot. Dismiss (“Opp’n”) App.
67-68 (providing a June 29, 2018 printout of a HUD website describing the standard MTW
agreement). See generally Compl. Ex. 3 (providing a complete copy of the standard MTW
agreement, including attachments, executed by plaintiff Cambridge Housing Authority
(“Cambridge”)); Compl. Ex. 4 (providing a complete copy of Attachment A to the standard
MTW agreement for the remaining plaintiffs). In 2008, HUD executed twenty-nine standard
MTW agreements with public housing authorities. Opp’n App. 67.
Although they are provided with certain flexibility, public housing authorities
participating in the MTW program remain subject to applicable law. Compl. Ex. 3 at 2-3. In
particular, section I.C of the standard MTW agreement provides:
This Restated Agreement only waives certain provisions of
the 1937 Act and its implementing regulations. Other federal,
state[,] and local requirements applicable to public housing shall
continue to apply notwithstanding any term contained in this
Restated Agreement or any Authorization granted thereunder.
Accordingly, if any requirement applicable to public housing,
outside of the 1937 Act, contains a provision that conflicts or is
inconsistent with any authorization granted in this Restated
Agreement, the MTW [program participant] remains subject to the
terms of that requirement. Such requirements include, but are not
limited to, the following: Appropriations Acts, competitive HUD
notices of funding availability under which the [public housing
authority] has received an award, state and local laws, Federal
statutes other than the 1937 Act, and [others].
Id. MTW program participants agree, among other requirements, to:
• use any HUD assistance received under the MTW program in
accordance with the public housing authority’s annual plan;
• ensure that at least 75% of families served qualify as “very
low-income families”;
• assist at least as many eligible low-income families that it
would assist if not participating in the MTW program;
• maintain a “comparable mix” of families, according to size,
that it would assist if not participating in the MTW program;
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• ensure that its public housing projects are “safe, decent,
sanitary, and in good repair”; and
• submit financial and other data, including annual plans, reports,
and audits.
Id. at 3-5, 9-12.
With respect to funding, section II.A of the standard MTW agreement provides:
The amount of assistance received under sections 8 or 9 of
the 1937 Act by [a public housing authority] participating in the
demonstration shall not be diminished by the [public housing
authority’s] participation in the MTW demonstration.
Id. at 3. The standard MTW agreement contains additional funding provisions:
During the term of the MTW demonstration, HUD will
provide the [public housing authority] with public housing
operating subsidies . . . as provided in Attachment A. If the [public
housing authority’s] Attachment A does not describe the funding
methodology for any of these funding streams, the [public housing
authority’s] funding will be calculated according to standard HUD
calculations of [public housing authority] benefits.
....
The [public housing authority] may use [the operating
subsidy] for any activity permissible under Section 9(e)(1) of the
1937 Act or, if the [public housing authority] proposes to use the
funding as part of a block grant in its Annual MTW Plan, it may
use these funds for any eligible activity permissible under Section
8(o), 9(d)(1), and 9(e)(1) [of the 1937 Act] consistent with this
MTW Restated Agreement.
Id. at 7 (emphasis added). Annual reports by MTW program participants must include a listing
of planned versus actual sources and uses of funds, and may also include “planned [versus]
actual reserve balances at the end of the plan year.” Compl. Ex. 3 Attach. B at 6.
MTW program participants are subject to default provisions for failure to correct
deficiencies identified by HUD “within a reasonable period of time,” material
misrepresentations, use of funds for purposes not authorized in the MTW agreement,
noncompliance with applicable requirements (including failure to timely submit required
reports), and material breach of the agreement. Compl. Ex. 3 at 5, 12-13. Public housing
authorities found to be in default are subject to the withholding of funds, forced reimbursement
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of improperly used funds, reductions or offsets to future funding, corrective action, and
termination of the MTW agreement. Id. at 5, 13.
C. Plaintiffs’ MTW Agreements
Each of the seven plaintiffs is an MTW program participant that executed the standard
agreement.6 Attachment A to the MTW agreements executed by plaintiffs Cambridge, Housing
Authority of the City of New Haven (“New Haven”), Delaware State Housing Authority
(“Delaware”), Housing Authority of the City of Pittsburgh (“Pittsburgh”), Housing Authority of
Portland (“Portland”), and Seattle Housing Authority (“Seattle”) contained identical language.7
Compl. Ex. 3 Attach. A; Compl. Ex. 4.8 It provided, with respect to Section 9 operating
subsidies:
During the term of the MTW demonstration, HUD will
provide the [public housing authority] with operating subsidy . . .
assistance as described below.
....
Each year, the [public housing authority] will calculate
[the] Operating Subsidy, in accordance with instructions provided
by HUD. . . .
....
Each [public housing authority] will be subject to the same
subsidy proration as non-MTW [public housing authorities].
Hence, if the Congress appropriates only 97 percent of [funding]
eligibility, [a public housing authority] will receive only 97 percent
of its block grant operating subsidy for that year.
....
[A public housing authority] will submit a consolidated
year-end financial statement for all MTW program activities and
all other reports that HUD may require.
6
There were originally eight plaintiffs in this action. On August 6, 2018, the District of
Columbia Housing Authority voluntarily dismissed its claims pursuant to RCFC 41(a)(1)(A)(i).
7
Only the first page of Attachment A to New Haven’s MTW agreement is contained
within Exhibit 4 of plaintiffs’ complaint.
8
Exhibit 4 to plaintiffs’ complaint is not separately paginated. Therefore, the court uses
the numbers affixed by the court’s electronic case filing system.
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Compl. Ex. 3 Attach. A at 1, 3-4 (emphasis added). Further, with respect to Section 8 assistance,
Cambridge is permitted to utilize “[a]n amount equal to two months’ program costs . . . from
existing [public housing authority] reserves for use as project reserves for MTW-eligible units.”
Id. at 6. Attachment A to plaintiff Orlando Housing Authority’s (“Orlando”) MTW agreement
contained substantially similar language:
HUD will provide the [public housing authority] with operating
subsidy . . . assistance as described below.
. . . The calculation of operating subsidy will continue in
accordance with applicable operating subsidy formula law and
regulations. . . .
....
All funds programmed for MTW purposes will be recorded
and drawn from MTW designated line items on relevant HUD
forms.
Compl. Ex. 4 at 15 (emphasis added).
D. 2012 Appropriations
On February 14, 2011, the White House released the President’s budget for the 2012
fiscal year. See generally Office of Mgmt. & Budget, Exec. Office of the President, Budget of
the United States Government, Fiscal Year 2012 (2011). In that budget, the President requested
$3,961,850,000 for the Public Housing Operating Fund (down from $4.754 billion in 2010).9 Id.
at 97, A560. At that time, the estimated total eligibility for public housing authorities’ 2012
operating subsidies under the Operating Fund formula was $4.962 billion. Id. at A560. The
President expected that his budget request of $3.962 billion plus $1 billion from public housing
authorities’ operating reserves would fully fund the estimated eligibility of public housing
authorities, including those that were MTW program participants. Id. He explained that many
public housing authorities were “holding significant operating reserves accumulated primarily
from prior-year appropriations for the Operating Fund program” and that his budget would
reduce funding allocations only to public housing authorities with “more than sufficient (i.e.,
excess) reserve levels.” Id. at A561. The President posited that all public housing authorities
would “be able to maintain adequate reserve levels to protect against unforeseen circumstances”
because only those with excess reserves would receive a reduced operating subsidy. Id. The
proposed budget also provided that HUD would determine the amount, if any, of “excess
reserves” of each public housing authority and that “if “sufficient reserve-level data” was
9
HUD was operating under a continuing resolution for 2011 when the President
published his 2012 budget because Congress had not yet enacted a full-year 2011 appropriation.
Office of Mgmt. & Budget, supra, at A560. (Page A__ refers to a page number in the
appendix.)
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unavailable for one or more public housing authorities, then HUD could “make a pro rata
reduction” to those public housing authorities, even if they were MTW program participants. Id.
at A560.
In anticipation of Congress enacting the President’s budget, HUD issued, on September
26, 2011, Notice PIH 2011-055, Public Housing Operating Subsidy Calculations for Calendar
Year 2012 (“2011 PIH Notice”). See generally Opp’n App. 60-65 (containing excerpts of the
2011 PIH Notice10). HUD explained that it was providing public housing authorities with
information regarding the 2012 operating subsidy and anticipated implementation procedures in
advance of congressional action so that public housing authorities could “plan accordingly,”
while cautioning that “any allocation adjustment to the operating subsidy is subject to the
language” contained in an appropriations bill. Id. at 60.
As relevant here, HUD directed MTW program participants to submit standard
documents with respect to operating subsidy eligibility. Id. at 61. HUD explained that after it
determined each public housing authority’s 2012 operating subsidy eligibility, it would then
compute an allocation adjustment based on the public housing authority’s operating reserves,
which HUD defined as an “accumulation of funds” that included, among other amounts,
“unspent operating subsidy”; “unspent tenant rent”; “other miscellaneous revenue, including
program income that has expanded uses”; and “unrestricted, unspent insurance proceeds.” Id. at
62. HUD defined excess operating reserves as any amount of total operating reserves exceeding
(1) four months of operating expenses for public housing authorities with 250 or more public
housing units and (2) six months of operating expenses for public housing authorities with 249 or
fewer public housing units. Id. HUD specified the line items from required financial data
schedules that it would use to compute operating reserves and noted that where data was
unavailable, a public housing authority’s allocation adjustment would be based on the “average
amount of the eligibility reduction” for that public housing authority’s “peer group.” Id. at
63-64. Peer groups were based on the number of public housing units operated by a particular
public housing authority:
Group Size Units
Extra Large 10,000+
Large 1,250 – 9,999
High Medium 500 – 1,249
Low Medium 250 – 499
Small 50 – 249
Very Small 1 – 49
10
A complete copy of the 2011 PIH Notice, including all attachments, is available at
https://www.hud.gov/program_offices/public_indian_housing/publications/notices/2011 (last
visited Dec. 10, 2018) [https://web.archive.org/web/20181210160547/https://www.hud.gov/
program_offices/public_indian_housing/publications/notices/2011].
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Id. at 64. HUD also stated that it would consider requests from public housing authorities to
exclude a portion of an authority’s reserves from the allocation adjustment calculation based on
certain specified grounds (e.g., prior obligations of those reserves), none of which is relevant
here. Id. at 65. Additionally, HUD indicated that it would only consider requests for exclusions
when the exclusion would have a “material impact” on the final allocation adjustment, and that it
would not consider requests for exclusions for a public housing authority “with fewer than 250
units that has less than or equal to six months of operating expenses held in reserve or $100,000,
whichever is greater” (since such public housing authorities would not receive an allocation
adjustment to begin with) or MTW program participants. Id. With respect to public housing
authorities participating in the MTW program, HUD explained that, in lieu of calculating an
allocation adjustment, HUD would instead reduce the operating subsidy by a percentage
reflecting the “average reduction of the [public housing authority’s] peer group.” Id.
Congress enacted the Department of Housing and Urban Development Appropriations
Act, 2012 (“2012 Appropriations Act”) on November 18, 2011, as part of an omnibus
appropriations act. Pub. L. No. 112-55, § 4, div. C, tit. II, 125 Stat. 552, 672-703 (2011). The
2012 Appropriations Act provided:
PUBLIC HOUSING OPERATING FUND
For 2012 payments to public housing [authorities] for the
operation and management of public housing . . . , $3,961,850,000
. . . : Provided, That in determining public housing [authorities’],
including Moving to Work [program participants’], calendar year
2012 funding allocations under this heading, [HUD] shall take into
account public housing [authorities’] excess operating fund
reserves, as determined by [HUD]: Provided further, That Moving
to Work [program participants] shall receive a pro-rata reduction
consistent with their peer groups: Provided further, That no public
housing [authority] shall be left with less than $100,000 in
operating reserves: Provided further, That [HUD] shall not offset
excess reserves by more than $750,000,000 . . . .
Id. at 680. In other words, Congress provided the full $3.962 billion requested by the President,
directed that MTW program participants would receive allocation adjustments in accordance
with their peer groups rather than their operating reserve levels, set $100,000 as the minimum
operating reserve level for all public housing authorities, and limited the aggregate allocation
adjustments for all public housing authorities nationwide to $750 million. In addition, Congress
designated $20 million (out of the $3.962 billion) to assist public housing authorities that
experienced “financial hardship” resulting directly from an allocation adjustment to its operating
subsidy. Id.
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E. 2012 Allocation Adjustments
Another judge of this court recently summarized HUD’s implementation of the 2012
Appropriations Act with respect to public housing authorities’ operating subsidies from the
Operating Fund:
HUD’s implementation of the authority it was given under
the 2012 Appropriations Act changed the methodology used for
calculating the amount of operating subsidies to be paid to the
[public housing authorities]. In prior years, pursuant to its
regulations, HUD had reduced each [public housing authority’s]
operating subsidy payment by a uniform percentage that reflected
the shortfall between the total amount Congress had appropriated
and the total amount payable under the Operating Formula.
Because of the changes HUD made to comply with the [2012
Appropriations Act], however, the reduction of the [public housing
authorities’] payments to account for the budget shortfall were not
made on a pro rata basis.
The process HUD employed to implement the reduction
was as follows. First, employing the Operating Formula set forth
in its regulations to each [public housing authority], HUD
determined that the aggregate formula amount to which the [public
housing authorities] were entitled was $4,888,046,046. Then, in
accordance with the methodology set forth in the [2011] PIH
Notice, it determined each [public housing authority’s] excess
operating reserves. The aggregate amount of excess operating
reserves so determined was $738,316,329. HUD then subtracted
the aggregate amount of the [public housing authorities’] excess
operating reserves ($738,316,329) from the aggregate Operating
Formula amount ($4,888,046,046). Finally, it took the difference
($4,149,983,999) and compared it to the total amount Congress
had appropriated for operating subsidies ($3,961,850,000). It then
arrived at the percentage (94.97%) which would be used to adjust
the amount of the [public housing authorities’] subsidy payments
so that HUD would remain within the $3,961,850,000 that
Congress had appropriated to pay operating subsidies.11
With that analysis complete, HUD went on to determine the
operating subsidy payment each individual [public housing
11
The difference between $4,888,046,046 and $738,316,329 is $4,149,729,717. The
amount that Congress appropriated—$3,961,850,000—is 95.47% of the difference (either as
corrected or as indicated in the quoted text) when rounding to two decimal places. These
discrepancies are not relevant to the outcome of this case.
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authority] would receive. As in previous years, the starting point
for this determination was each [public housing authority’s]
eligibility amount under the Operating Formula. But unlike in
previous years, HUD then made an “allocation adjustment” by
offsetting each individual [public housing authority’s] excess
operating reserves against its Operating Formula eligibility
amount. Finally, HUD then multiplied the adjusted amount by
94.97% to determine the payment each [public housing authority]
would actually receive (thus ensuring that HUD did not exceed the
Congressional appropriation).
Because the amount of excess operating reserves varied
from [public housing authority] to [public housing authority], so
did the percentage reduction in their Operating Formula eligibility
amounts. [Public housing authorities] without excess operating
reserves received 94.97% of their formula eligibility while . . .
many [public housing authorities] experienced as much as a 100%
reduction in their operating subsidies below the amount derived
from application of the Operating Formula.
Pub. Hous. Auths. Dirs. Ass’n v. United States, 130 Fed. Cl. 522, 528 (2017) (footnote added)
(citations omitted). In addition, in a December 16, 2011 report to Congress, HUD explained:
The calculation of operating reserves uses specific
Financial Disclosure Statement (FDS) line numbers to capture the
relevant revenue and expense components . . . . HUD is unable to
determine reserve balances for [public housing authorities] that
participate in the [MTW] program given the flexibility that MTW
[public housing authorities] have to combine program funds
between both Section 8 Tenant Based Rental Assistance program
and Section 9 Public Housing funds.
Def.’s Mot. Dismiss (“Mot.”) App. H at 3.
On June 8, 2012, HUD issued Notice PIH 2012-27, Calendar Year 2012 $20 Million
Set-Aside for Financial Hardship due to Public Housing Operating Subsidy Allocation
Adjustment (“2012 PIH Notice”), to provide information “to assist [public housing authorities]
who encounter financial hardship as a direct result of the subsidy allocation adjustment” for
2012. Opp’n App. 77. See generally id. at 77-81 (containing excerpts of the 2012 PIH Notice).12
However, MTW program participants were ineligible for such hardship assistance:
12
A complete copy of the 2012 PIH Notice, including all attachments, is available at
https://www.hud.gov/program_offices/public_indian_housing/publications/notices/2012 (last
visited Dec. 10, 2018) [https://web.archive.org/web/20181210154807/https://www.hud.gov/
program_offices/public_indian_housing/publications/notices/2012].
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Pursuant to [the 2012 Appropriations Act], MTW [program
participants] were included in the calendar year 2012 funding
allocation adjustment. However, because of the flexibility MTW
[program participants] have in using different funding sources to
address operating expenses, all MTW [program participants]
received a pro-rata allocation adjustment [based on] their peer
group(s). Given the fungibility of funding sources available to
MTW [program participants], no determination of “hardship” can
be made. Therefore, MTW [program participants] are not eligible
to receive funding from the $20 million set-aside for [public
housing authorities] that encounter a financial hardship as a direct
result of the allocation adjustment.13
Id. at 81 (footnote added).
Altogether, sixty-two public housing authorities received a 2012 operating subsidy
allocation adjustment based on their peer group rather than operating reserve levels. Id. at 82.
Thirty of these public housing authorities, including all seven plaintiffs, were MTW program
participants; the remaining thirty-two did not submit sufficient financial data from which HUD
could calculate the allocation adjustment. Id. Six of the seven plaintiffs were in the “Large”
peer group, and the seventh—Delaware—was in the “High Medium” peer group. Id. HUD
reduced plaintiffs’ 2012 operating subsidies by the following allocation adjustments:
Public Housing 2012 Allocation
Authority Adjustment
Cambridge $1,539,580
Delaware $662,947
New Haven $2,436,667
Orlando $621,664
Pittsburgh $5,996,528
Portland $1,418,427
Seattle $2,800,102
Compl. ¶¶ 103 (New Haven), 105 (Delaware), 109 (Orlando), 111 (Cambridge), 113 (Portland),
115 (Pittsburgh), 117 (Seattle).
13
HUD did not use the full $20 million to alleviate financial hardship. Approximately
$4 million remained after all eligible public housing authorities received hardship assistance;
these remaining funds were distributed ratably among all public housing authorities that received
a 2012 operating subsidy. Opp’n App. 97.
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F. Procedural History
Plaintiffs filed suit in this court on November 16, 2017, alleging generally that the
calculation of their allocation adjustments was improper because it did not take into account their
operating reserves. Specifically, plaintiffs allege that their operating reserves, including the
amounts above which each plaintiff would have been considered to have excess operating
reserves (i.e., the “excess threshold”), were as follows:
Public Housing Operating Excess
Authority Reserves Threshold
Cambridge $3,519,192 $6,693,292
Delaware –$289,829 $1,148,910
New Haven $2,162,322 $7,414,388
Orlando $2,066,651 $3,098,603
Pittsburgh $9,732,726 $20,067,834
Portland –$133,039 $5,151,057
Seattle $3,897,436 $7,817,214
Id. In other words, plaintiffs contend that none of them had excess operating reserves.
Plaintiffs assert three counts in their complaint. Count I, breach of contract, focuses on
the nondiscrimination provision in section II.A of plaintiffs’ MTW agreements. Id. ¶ 102.
According to plaintiffs, they each received a 2012 allocation adjustment based on their peer
group, not the amount of their operating reserves, because of their status as MTW program
participants, in violation of section II.A. Plaintiffs also argue, in Counts II and III, that HUD
violated the 2012 Appropriations Act. In Count II, plaintiffs posit that a proper reading of the
2012 Appropriations Act would have allowed HUD to base 2012 allocation adjustments on peer
groups rather than operating reserves only if HUD was unable to determine whether an MTW
program participant had excess operating reserves, but instead HUD simply applied an
“automatic pro-rata reduction” for all MTW program participants. Id. ¶¶ 122-23. In Count III,
plaintiffs emphasize that even if HUD was permitted to calculate allocation adjustments based on
peer groups, HUD ignored the provision that no public housing authority could be left with less
than $100,000 in operating reserves. Id. ¶¶ 128-29. Plaintiffs request damages in the amount of
their allocation adjustments plus attorney’s fees and costs.
Defendant moved to dismiss plaintiffs’ complaint on April 18, 2018, emphasizing that the
MTW agreements and the 2012 Appropriations Act are not money-mandating and that, in any
event, plaintiffs seek relief that this court lacks jurisdiction to grant and to which plaintiffs are
not entitled under any law or contract. Oral argument was not requested, and the court deems it
unnecessary. Defendant’s motion is now ripe for adjudication.
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II. DEFENDANT’S RCFC 12(b)(1) MOTION TO DISMISS
A. Standard of Review
Defendant first moves to dismiss plaintiffs’ complaint for lack of subject-matter
jurisdiction pursuant to RCFC 12(b)(1). In determining whether subject-matter jurisdiction
exists, the court “must accept as true all undisputed facts asserted in the plaintiff’s complaint and
draw all reasonable inferences in favor of the plaintiff.” Trusted Integration, Inc. v. United
States, 659 F.3d 1159, 1163 (Fed. Cir. 2011). The plaintiff bears the burden of proving, by a
preponderance of evidence, that the court possesses subject-matter jurisdiction. Id. If
jurisdictional facts are challenged, the court is not limited to the pleadings in determining
whether it possesses subject-matter jurisdiction to entertain a plaintiff’s claims. Banks v. United
States, 741 F.3d 1268, 1277 (Fed. Cir. 2014); Pucciariello v. United States, 116 Fed. Cl. 390, 400
(2014). If the court finds that it lacks subject-matter jurisdiction over a claim, RCFC 12(h)(3)
requires the court to dismiss that claim.
B. Subject-Matter Jurisdiction
Whether the court possesses jurisdiction to decide the merits of a case is a threshold
matter. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94-95 (1998); see also Arbaugh
v. Y&H Corp., 546 U.S. 500, 514 (2006) (explaining that subject-matter jurisdiction cannot be
forfeited or waived because it “involves a court’s power to hear a case” (citing United States v.
Cotton, 535 U.S. 625, 630 (2002))); Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583 (1999)
(“[A] federal court [must] satisfy itself of its jurisdiction over the subject matter before it
considers the merits of a case.”), quoted in Hymas v. United States, 810 F.3d 1312, 1316-17
(Fed. Cir. 2016); Matthews v. United States, 72 Fed. Cl. 274, 278 (2006) (stating that
subject-matter jurisdiction is “an inflexible matter that must be considered before proceeding to
evaluate the merits of a case”). “Without jurisdiction the court cannot proceed at all in any
cause. Jurisdiction is power to declare the law, and when it ceases to exist, the only function
remaining to the court is that of announcing the fact and dismissing the cause.” Ex parte
McCardle, 74 U.S. (7 Wall) 506, 514 (1868). Either party, or the court sua sponte, may
challenge the court’s subject-matter jurisdiction at any time. Arbaugh, 546 U.S. at 506.
The ability of the United States Court of Federal Claims (“Court of Federal Claims”) to
entertain suits against the United States is limited. “The United States, as sovereign, is immune
from suit save as it consents to be sued.” United States v. Sherwood, 312 U.S. 584, 586 (1941).
The waiver of immunity “cannot be implied but must be unequivocally expressed.” United
States v. King, 395 U.S. 1, 4 (1969). The Tucker Act, the principal statute governing the
jurisdiction of this court, waives sovereign immunity for claims against the United States, not
sounding in tort, that are founded upon the United States Constitution, a federal statute or
regulation, or an express or implied contract with the United States. 28 U.S.C. § 1491(a)(1)
(2012). However, the Tucker Act is merely a jurisdictional statute and “does not create any
substantive right enforceable against the United States for money damages.” United States v.
Testan, 424 U.S. 392, 298 (1976). Instead, the substantive right must appear in another source of
law, such as a “money-mandating constitutional provision, statute or regulation that has been
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violated, or an express or implied contract with the United States.” Loveladies Harbor, Inc. v.
United States, 27 F.3d 1545, 1554 (Fed. Cir. 1994) (en banc).
C. Plaintiffs’ MTW Agreements With HUD Are Money-Mandating
Plaintiffs first assert that this court has jurisdiction to entertain their breach-of-contract
claim because their MTW agreements are money-mandating. Specifically, plaintiffs rely on
section II.A of those agreements, which they describe as “an anti-discrimination provision that
prohibits any diminution in the subsidies Plaintiffs receive from HUD because of their status” as
MTW program participants. Compl. ¶ 102. Defendant counters that plaintiffs’ MTW
agreements “cannot be fairly interpreted as mandating the payment of money damages for a
breach.” Mot. 19. Despite the parties’ disagreement with the import of the contractual
provision, nevertheless, the parties therefore do not dispute, and the court agrees, that the MTW
agreements are express contracts.14
It is well understood that “[c]ontract law is a separate source of law compensable under
the Tucker Act” and that in a typical contract case, “the presumption that money damages are
available satisfies the Tucker Act’s money-mandating requirement.” Higbie v. United States,
778 F.3d 990, 993 (Fed. Cir. 2015); accord Griffin & Griffin Expl., LLC v. United States, 116
Fed. Cl. 163, 171 (2014) (“Claims for damages arising out of a contract with the United States
are squarely within the express terms of the Tucker Act.”). However, that presumption can be
overcome because not all contracts are money-mandating for Tucker Act purposes. Rick’s
Mushroom Serv., Inc. v. United States, 521 F.3d 1338, 1343 (Fed. Cir. 2008). Contracts that
“expressly disavow[] money damages,” plea agreements in criminal cases, and cooperative
agreements are not money-mandating contracts. Holmes v. United States, 657 F.3d 1303, 1314
(Fed. Cir. 2011). In other words, when the “underlying claim is . . . for equitable relief” rather
than “a free and clear transfer of money,” the suit is not for “presently due money damages”
under the Tucker Act and thus the Court of Federal Claims would lack jurisdiction to entertain it.
Lummi Tribe of the Lummi Reservation v. United States, 870 F.3d 1313, 1319 (Fed. Cir. 2017).
Defendant argues that the MTW agreements “cannot fairly be interpreted as
contemplating money damages in the event of breach because Congress has explicitly provided
that the relationship between HUD and the [public housing authorities] exclusively involves the
provision of restricted-use funds, not money damages” and therefore the “unrestricted money
damages that plaintiffs now seek . . . are neither contemplated nor authorized by Congress.”
Mot. 25-26 (citation and internal quotation marks omitted). Plaintiffs’ contrary view is that
“contracts with the United States are presumed to have a remedy of money damages upon a
14
To the extent that plaintiffs’ breach-of-contract claim is rooted in statutory and
regulatory obligations, those statutes and regulations must actually be incorporated into the
contracts at issue. Kennedy Heights Apartments, Ltd. I v. United States, 48 Fed. Cl. 574, 577-78
(2001). There does not appear to be any dispute, and the court agrees, that the relevant statutory
and regulatory provisions are indeed incorporated into plaintiffs’ MTW agreements. Of course,
whether a statute or regulation is money-mandating is of no moment in determining whether the
contract into which it is incorporated is itself money-mandating.
-16-
breach of the contract, unless the parties to the contract provide otherwise,” unlike the other
bases for Tucker Act jurisdiction (i.e., constitutional, statutory, or regulatory). Opp’n 13. They
emphasize that they “are not seeking any equitable or prospective relief,” id. at 17, because
“[m]oney damages will make Plaintiffs whole,” id. at 22.
Both sides rely heavily upon Holmes to support their position.15 In Holmes, the plaintiff
sought compensatory damages based on allegations that his former employer violated two Title
VII settlement agreements by failing to remove adverse information from his employment file,
thus preventing him from obtaining subsequent employment. 657 F.3d at 1308, 1310. The
United States Court of Appeals for the Federal Circuit (“Federal Circuit”) held that although the
settlement agreements at issue arose from litigation under the “comprehensive scheme” of Title
VII, the plaintiff’s suit was, at bottom, “a suit to enforce a contract with the [federal]
government” and thus “not per se beyond the Tucker Act jurisdiction of the Court of Federal
Claims.” Id. at 1312. The Federal Circuit then turned to the dispute concerning whether the
plaintiff was required to show that the settlement agreements at issue were money-mandating
given that they were express contracts. Id. After reviewing the jurisprudence distinguishing
between (1) contractual claims and (2) constitutional, statutory, and regulatory claims, id. at
1313-14, the Federal Circuit explained that “in a contract case, the money-mandating
requirement for Tucker Act jurisdiction normally is satisfied by the presumption that money
damages are available for breach of contract, with no further inquiry being necessary.” Id. at
1314. However, as the Federal Circuit remarked, that presumption is not automatic because not
all contracts involve money damages. Id. The Federal Circuit found that the Court of Federal
Claims did not err in requiring the plaintiff, under the unique circumstances of that case, to
demonstrate that the contracts at issue were money-mandating because “settlement of a Title VII
action involving the government could involve purely nonmonetary relief.” Id. at 1315.
Here, as in Holmes, plaintiffs rely on an express contract—in the instant case, the
standard MTW agreement—to establish Tucker Act jurisdiction. Section II.A of that agreement,
which specifies that funding to a public housing authority may not be reduced on account of its
participation in the MTW program, pertains solely to public housing authority funding. Other
language in plaintiffs’ MTW agreements—including, but not limited to, Attachment A—pertains
to funding as well. See supra Sections I.B-C. Thus, unlike in Holmes, it is not plausible that
resolution of a dispute regarding these provisions “could involve purely nonmonetary relief.”
The only relief that will make plaintiffs whole under the facts as alleged in their complaint is
money damages, even if that relief is severely restricted.
15
Defendant also relies on several other decisions in support of its motion to dismiss
plaintiffs’ breach-of-contract claim. These decisions, however, generally address statutory
claims rather than breach-of-contract claims. In particular, defendant relies extensively on
Lummi in arguing that plaintiffs’ contract claim is outside of the court’s jurisdiction because it is
effectively a statutory claim based on the 2012 Appropriations Act, which itself is not
money-mandating (according to defendant). Plaintiffs emphasize that Lummi—unlike the
instant case—did not involve a contract. The court agrees that Lummi is sufficiently
distinguishable from the instant case with respect to plaintiffs’ breach-of-contract claim.
-17-
Further, plaintiffs are not seeking any other form of relief.16 Their breach-of-contract
claim is not merely a disguised equitable claim because, in the context of this case, an order of
specific performance (e.g., enforcing section II.A of plaintiffs’ MTW agreements) or an
injunction (e.g., enjoining HUD from violating section II.A) would be equivalent to an order
requiring the payment of funds owed to plaintiffs.17 To the extent that plaintiffs’
breach-of-contract claim could be characterized as one for specific performance or as a request
for an injunction, it is of no moment. The availability of monetary relief to make plaintiffs
whole forecloses the possibility of equitable relief. Restatement (Second) of Contracts § 359(1)
(Am. Law Inst. 1981).
In other words, the circumstances under which a plaintiff in a breach-of-contract case
must affirmatively demonstrate that the contract at issue is indeed money-mandating—i.e., that
purely nonmonetary relief could be appropriate—are not present here. See Higbie, 778 F.3d at
993-94. There is also no indication that monetary damages are unavailable (for example,
because of an express disclaimer). See Mata v. United States, 107 Fed. Cl. 618, 623 (2012);
Brizuela v. United States, 103 Fed. Cl. 635, 639 (2012). Therefore, defendant cannot overcome
the presumption that money damages are available as a remedy for plaintiffs’ breach-of-contract
claim.
In short, the court has jurisdiction to consider Count I of plaintiffs’ complaint and grant
the requested relief if plaintiffs carry their burden of proof.
D. The 2012 Appropriations Act Is Not Money-Mandating
In addition to asserting entitlement to relief under a breach-of-contract theory, plaintiffs
assert that this court has jurisdiction to entertain their statutory claims because the 2012
Appropriations Act is money-mandating. “A statute or regulation is money-mandating for
jurisdictional purposes if it can fairly be interpreted as mandating compensation for damages
sustained as a result of the breach of the duties it imposes.” Ferreiro v. United States, 501 F.3d
1349, 1351-52 (Fed. Cir. 2007) (citations and internal quotation marks omitted). The
determination of whether a statute is money-mandating is made pursuant to a two-part test:
16
With some exceptions not relevant to the case at bar, the Court of Federal Claims
generally lacks the ability to award equitable relief. See Bowen v. Massachusetts, 487 U.S. 879,
905 (1988) (holding that the Court of Federal Claims lacks the “general equitable powers of a
district court to grant prospective relief”); Brown v. United States, 105 F.3d 621, 624 (Fed. Cir.
1997) (holding that the Tucker Act does not provide independent relief through declaratory or
injunctive judgments); Stephanatos v. United States, 81 Fed. Cl. 440, 445 (2008) (explaining that
the Court of Federal Claims “has no authority to grant equitable relief ‘unless it is tied and
subordinate to a money judgment’” (quoting James v. Caldera, 159 F.3d 573, 580 (Fed. Cir.
1998))).
17
Defendant does not argue that plaintiffs’ breach-of-contract claim could be
characterized as one for specific performance or a request for an injunction.
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First, the court determines whether any substantive law imposes
specific obligations on the Government. If that condition is met,
then the court proceeds to the second inquiry, “whether the
relevant source of substantive law can be fairly interpreted as
mandating compensation for damages sustained as a result of the
breach of the duties the governing law imposes.”
Samish Indian Nation v. United States, 657 F.3d 1330, 1335 (Fed. Cir. 2011) (quoting United
States v. Navajo Nation, 556 U.S. 287, 291 (2009)), vacated in part on other grounds, 568 U.S.
936 (2012) (mem.). In other words, “to satisfy the jurisdictional requirements of the Tucker Act,
a plaintiff must point to an independent, substantive source of law that mandates payment from
the United States for the injury suffered.” Johnson v. United States, 105 Fed. Cl. 85, 91 (2012);
accord Samish, 657 F.3d at 1335-36 (“The Court of Federal Claims has jurisdiction if the
substantive law at issue is ‘reasonably amenable to the reading that it mandates a right of
recovery in damages.’” (quoting United States v. White Mountain Apache Tribe, 537 U.S. 465,
473 (2003))).
According to plaintiffs, the 2012 Appropriations Act is money-mandating because it
contains clear standards for HUD to allocate appropriated funds among public housing
authorities and those standards allowed HUD no discretion in doing so. Specifically, plaintiffs
contend that the 2012 Appropriations Act provided that HUD was supposed to “take into account
whether a [public housing authority] had excess operating reserves” in computing allocation
adjustments and “specifically applied this directive” to MTW program participants. Compl.
¶ 121. Further, plaintiffs assert that the 2012 Appropriations Act “directed that no [public
housing authority], which includes MTW [program participants], should be left with less than
$100,000 in operating reserves by the application of an allocation adjustment . . . even where an
MTW [program participant] receives a pro-rata reduction based on its peer group.” Id.
¶¶ 128-29. Defendant posits that the 2012 Appropriations Act “is plainly not money-mandating”
because although it “generally deals with funding, it affords [HUD] discretion to allocate that
funding among potential recipients.” Mot. 18. Defendant remarks that the 2012 Appropriations
Act “did not provide ‘clear standards’ for paying money to [public housing authorities], nor state
the ‘precise amounts’ payable to them, nor compel payment upon ‘satisfaction of [any]
conditions.’” Id. at 18-19 (second alteration in original) (quoting Samish, 657 F.3d at 1335).
Defendant relies primarily upon Samish in advancing its argument that the 2012
Appropriations Act is not money-mandating. In Samish, the Federal Circuit explained:
The money-mandating condition is satisfied when the text of a
statute creates an entitlement by leaving the Government with no
discretion over the payment of funds. In limited situations, the
money-mandating requirement may also be satisfied if the
Government retains discretion over the disbursement of funds but
the statute: (1) provides clear standards for paying money to
recipients; (2) states the precise amounts that must be paid; or
(3) as interpreted, compels payment on satisfaction of certain
-19-
conditions. . . . [T]he money-mandating analysis must train on
specific rights-creating or duty-imposing statutory or regulatory
prescriptions.
657 F.3d at 1336 (citations and internal quotation marks omitted). The statutes at issue in
Samish provided the United States Bureau of Indian Affairs with considerable discretion in
spending appropriated funds, and failed to “provide a clear standard for paying money to
recognized tribes, state the amounts to be paid to any tribe, or compel payment on satisfaction of
certain conditions,” leading the Federal Circuit to conclude that those statutes were not
money-mandating. Id. at 1336-37.
The 2012 Appropriations Act provides HUD with discretion in the distributions of funds
because even though HUD was required to “take into account” each public housing authority’s
excess operating fund reserves, those excess reserves were to be determined by HUD.
Moreover, the requirement that HUD simply “take into account” excess reserves, even when
coupled with the provision that no public housing authority be left with less than $100,000 in
operating reserves and the $750 million aggregate cap on allocation adjustments, is a far cry
from a clear standard. Nor does the 2012 Appropriations Act specify discrete amounts to be paid
to any particular public housing authority for 2012 or compel payment upon the fulfillment of
certain conditions.
Plaintiffs argue, in opposition to defendant’s motion to dismiss, that Section 9 and its
statutorily required implementing regulations (i.e., part 990) constitute money-mandating sources
of law. Opp’n 29-30. However, as plaintiffs emphasize, “Counts II and III of the Complaint are
based on HUD’s violation of a money-mandating provision of the [2012 Appropriations Act].”
Id. at 26 n.22 (emphasis added). Part 990 implements the relevant portion of Section 9—42
U.S.C. § 1437g—not the 2012 Appropriations Act. 24 C.F.R. § 990.100. Accordingly,
plaintiffs’ reliance on Section 9 and part 990 to establish jurisdiction over Counts II and III of
their complaint is inapposite.
In short, the Federal Circuit’s holding in Samish makes clear that the 2012
Appropriations Act cannot be construed as a money-mandating statute for Tucker Act purposes,
and thus this court lacks jurisdiction to consider Counts II and III of plaintiffs’ complaint.18
18
Allowing plaintiffs to amend their complaint to add a count for violation of Section 9
or part 990 would be superfluous. Regardless of whether Section 9 or part 990 is
money-mandating, those provisions are incorporated into the plaintiffs’ MTW agreements, and
the court has already determined it has jurisdiction to consider plaintiffs’ claim for the breach of
those agreements. See supra Section II.C.
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III. DEFENDANT’S RCFC 12(b)(6) MOTION TO DISMISS
Having determined that it lacks subject-matter jurisdiction to consider plaintiffs’ statutory
claims, but has jurisdiction to consider plaintiffs’ breach-of-contract claim, the court turns to
defendant’s alternative motion to dismiss plaintiffs’ complaint for failure to state a claim upon
which this court can grant relief pursuant to RCFC 12(b)(6). The entirety of defendant’s RCFC
12(b)(6) motion is as follows:
Plaintiffs’ complaint also fails to state a claim upon which
relief can be granted because, to the extent that plaintiffs seek a
money judgment without the strings attached, plaintiffs request
relief to which they are not entitled under any law or contract with
HUD, let alone [section 204 of the 1996 Appropriations Act], the
2012 Appropriations Act, and their respective MTW agreements.
On this basis alone, the Court should dismiss plaintiffs’ claims
pursuant to RCFC 12(b)(6), if the Court does not first dismiss this
suit for lack of subject-matter jurisdiction pursuant to RCFC
12(b)(1).
Mot. 26. With respect to their breach-of-contract claim, the only claim that survives defendant’s
RCFC 12(b)(1) motion to dismiss, plaintiffs proclaim that they “have alleged facts that, if true,
demonstrate that Defendant is liable for HUD’s breach of the contracts between Plaintiffs and
HUD when HUD discriminated against Plaintiffs by improperly reducing the operating subsidies
to which Plaintiffs were entitled in 2012 based on their status as MTW [program participants].”
Opp’n 32.
A. Standard of Review
A claim that survives a jurisdictional challenge remains subject to dismissal under RCFC
12(b)(6) if the claim does not provide a basis for the court to grant relief. See Lindsay v. United
States, 295 F.3d 1252, 1257 (Fed. Cir. 2002) (explaining that an RCFC 12(b)(6) motion to
dismiss is “appropriate when the facts asserted by the claimant do not entitle him to a legal
remedy”). To survive an RCFC 12(b)(6) motion to dismiss, a plaintiff must include in its
complaint “enough facts to state a claim to relief that is plausible on its face” sufficient for the
defendant to have “fair notice” of the claim and the “grounds upon which it rests.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007) (internal quotation marks omitted). In other
words, a plaintiff must “plead[] factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (referencing Twombly, 550 U.S. at 556). In ruling on such a motion, the court
must “accept as true all of the factual allegations contained in the complaint” and any
attachments thereto. Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (referencing
Twombly, 550 U.S. at 555-56); accord RCFC 10(c) (“A copy of a written instrument that is an
exhibit to a pleading is part of the pleading for all purposes.”); Rocky Mountain, 841 F.3d at
1325 (applying RCFC 10(c) and emphasizing that “a court ‘must consider the complaint in its
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entirety, . . . in particular, documents incorporated into the complaint by reference, and matters
of which a court may take judicial notice’” (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd.,
551 U.S. 308, 322 (2007))).
The issue at this stage of litigation is not the sufficiency of the defendant’s potential
defenses or the likelihood of the plaintiff’s eventual success on the merits of its claims, but
simply whether the plaintiff has alleged specific facts describing a plausible claim for relief. See
Chapman Law Firm Co. v. Greenleaf Constr. Co., 490 F.3d 934, 938 (Fed. Cir. 2007) (“The
court must determine ‘whether the claimant is entitled to offer evidence to support the claims,’
not whether the claimant will ultimately prevail.” (quoting Scheuer v. Rhodes, 416 U.S. 232, 236
(1974))).
B. Plaintiffs State a Plausible Breach-of-Contract Claim
To prove a breach of contract, a plaintiff must establish “(1) a valid contract between the
parties; (2) an obligation or duty arising from that contract; (3) a breach of that duty; and
(4) damages caused by the breach.” Century Expl. New Orleans, LLC v. United States, 110 Fed.
Cl. 148, 163 (2013) (referencing San Carlos Irr. & Drainage Dist. v. United States, 877 F.2d 957,
959 (Fed. Cir. 1989)). Once a breach of contract is established, the burden shifts to the
defendant to plead and prove affirmative defenses that excuse the breach. Shell Oil Co. v.
United States, 751 F.3d 1282, 1297 (Fed. Cir. 2014) (referencing Stockton E. Water Dist. v.
United States, 583 F.3d 1344, 1360 (Fed. Cir. 2009)).
Although the parties agree regarding the existence of a contractual relationship between
them, they disagree concerning the nature of their contractual duties and, consequently, whether
one or more of those duties was breached. As it must do at this stage of the proceedings, the
court assumes the truth of plaintiffs’ allegations. Their MTW agreements prohibit HUD from
treating MTW program participants differently than non-MTW public housing authorities with
respect to funding. However, pursuant to the 2012 Appropriations Act, which provided a
different rule for making allocation adjustments to MTW program participants’ operating
subsidies, HUD did not treat plaintiffs in the same manner as it treated non-MTW public housing
authorities. HUD applied an allocation adjustment based on plaintiffs’ peer groups rather than,
as it did with the non-MTW public housing authorities, attempt to calculate plaintiffs’ operating
reserves and then determine whether there was any excess. Plaintiffs allege that had HUD
treated them the same as it treated non-MTW public housing authorities, HUD would have found
that no plaintiffs had excess operating reserves, and thus none of them would have been subject
to an allocation adjustment. In short, plaintiffs allege that HUD’s breach of the
nondiscrimination provision of their MTW agreements caused them damages. These allegations,
if true, support a claim for breach of contract.
Defendant’s argument regarding the fungibility of Section 8 and Section 9 funds for
MTW program participants—i.e., that HUD could not compute the Section 9 operating reserves
for MTW program participants because of their ability to combine Section 8 and Section 9 funds
to achieve program goals—does not advance its position. At this stage of the proceedings, the
court assumes that HUD could have calculated plaintiffs’ operating reserves and expenses
-22-
(including, if necessary, an aggregate figure for Section 8 and Section 9 funds) and thereby
determine whether each plaintiff had excess operating reserves.19 Defendant’s fungibility
argument thus creates, at most, a genuine issue of material fact and thereby fails to clear the
RCFC 12(b)(6) threshold. See, e.g., Anchorage v. United States, 119 Fed. Cl. 709, 715 (2015)
(“Because there is a genuine issue of material fact as to the duties of the parties under the
[agreement], the Court must deny the [RCFC 12(b)(6)] Motion to Dismiss at this stage.”).
In addition, defendant’s contention that sections I.C and I.E of plaintiffs’ MTW
agreements operate to absolve defendant of any potential liability for breach-of-contract is
unavailing for two reasons. First, as plaintiffs observe, section I.E was deleted from the
agreements in October 2008. See Opp’n App. 69-76. Second, as plaintiffs also observe:
HUD was given authority . . . to waive only those statutory
provisions in the 1937 Act, and not in other statutes or
requirements. [Section I.C] merely states the obvious, that both
HUD and MTW [program participants] must comply with
applicable law. These extrinsic requirements, however, are not
incorporated into the MTW Agreement. A future statute, for
example, can be a breach of the MTW Agreement even if the
statute must be complied with by MTW [program participants] and
HUD.
Opp’n 8. Defendant does not challenge these observations.
In short, the court must deny defendant’s RCFC 12(b)(6) motion to dismiss Count I of
plaintiffs’ complaint on its merits because plaintiffs have stated a plausible claim to relief under
their breach-of-contract theory. In addition, the court must deny defendant’s RCFC 12(b)(6)
motion to dismiss Counts II and III of plaintiffs’ complaint as moot because the court lacks
jurisdiction to entertain those claims.
19
This assumption easily meets the plausibility standard set forth in Twombly. First,
plaintiffs’ MTW agreements contain provisions requiring them to provide HUD with extensive
financial data, including “all other reports that HUD may require.” Further, because plaintiffs
are allowed to utilize specified amounts of “program costs” from “existing reserves” for certain
purposes, it is no stretch of the imagination to assume that such costs and reserves could indeed
have been calculated.
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IV. CONCLUSION
The court has considered all of the parties’ arguments. To the extent not discussed
herein, they are unpersuasive, without merit, or unnecessary for resolving the issues currently
before the court.
The court lacks jurisdiction to consider plaintiffs’ statutory claims because the 2012
Appropriations Act is not money-mandating for Tucker Act purposes. However, the court has
jurisdiction to consider plaintiffs’ breach-of-contract claim. Further, plaintiffs have stated a
plausible claim to relief under their breach-of-contract theory.
Therefore, the court GRANTS IN PART (with respect to Counts II and III) and
DENIES IN PART (with respect to Count I) defendant’s motion to dismiss for lack of
subject-matter jurisdiction, and DENIES IN PART (with respect to Count I, on the merits) and
DENIES AS MOOT IN PART (with respect to Counts II and III) defendant’s alternative
motion to dismiss for failure to state a claim upon which this court can grant relief. Counts II
and III of plaintiffs’ complaint are DISMISSED WITHOUT PREJUDICE for lack of
subject-matter jurisdiction. Defendant shall file its answer with respect to Count I of plaintiffs’
complaint no later than Friday, February 8, 2019.
IT IS SO ORDERED.
s/ Margaret M. Sweeney
MARGARET M. SWEENEY
Chief Judge
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