Savannah Heights Limited Partnership v. District of Columbia Housing Authority ( 2021 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SAVANNAH HEIGHTS LIMITED )
PARTNERSHIP )
) FILED
and )
) JAN - 4 2021
BOWLING GREEN APARTMENTS ) Clerk, U.S. District & Bankruptey
LIMITED PARTNERSHIP, ) Courts for the District of Columbia
)
Plaintiffs, )
)
V. ) Civil Action No. 20-155 (RJL)
)
DISTRICT OF COLUMBIA )
HOUSING AUTHORITY, )
)
Defendant. )
Su OPINION
(January , 2021) [Dkt. # 7]
Savannah Heights Limited Partnership and Bowling Green Apartments Limited
Partnership (“plaintiffs”) brought this action against District of Columbia Housing
Authority (“DCHA” or “defendant’’) in the Superior Court of the District of Columbia on
December 18, 2019, for breach of contract. Defendant timely removed the case to federal
court. See Notice of Removal [Dkt. #1]. Plaintiffs claim that DCHA is contractually liable
for its alleged failure to comply with federal law and regulations governing how rental rates
must be calculated for subsidized housing. On March 12, 2020, DCHA moved to dismiss
the action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), or in
the alternative, for a more definite statement pursuant to Rule 12(e). Upon consideration
of the pleadings, the relevant law, and for the reasons stated below, defendant’s motion to
dismiss is GRANTED, and this case is DISMISSED.
BACKGROUND
Plaintiffs own two apartment buildings in Washington, D.C. Compl. ¥§ 9-10 [Dkt.
|-2]. These apartment buildings each have a certain number of units that are rented to
tenants whose rent is paid through the Housing Choice Voucher Program (“HCVP”), a
federal tenant assistance program locally managed by DCHA. Jd. §§ 11-12.
The United States Department of Housing and Urban Development (“HUD”)
provides rental subsidies to eligible families through the HCVP to help them “afford
decent, safe, and sanitary housing.” 24 CFR § 982.1(a)(1). HUD provides housing
assistance funds and program administration funds to State and local governmental entities
called public housing agencies, which administer the HCVP. See id. In D.C., this program
is administered by DCHA. Compl. § 11-12. HUD regulations provide that families “select
and rent units that meet program housing quality standards,” and, upon approval of a
family’s unit and tenancy, public housing agencies like DCHA contract with the unit
owners to make rent subsidy payments on behalf of the tenant families. See id. §
982.1(a)(2). Regulations further provide that public housing agencies “may not approve a
tenancy unless the rent is reasonable.” Jd.
While the HCVP is governed by Section 8 of the United States Housing Act of 1937,
42 U.S.C. § 1437f, and multiple regulations, see 24 CFR § 982 et seq, select public housing
authorities are permitted to seek exemption from existing rules through the Moving to
Work Demonstration Program (““MTW”). See generally Moving to Work (MTW) FAQ,
Dep’t of Hous. And Urban Dev., https:/\www.hud.gov/program_offices/public indian _
housing/programs/ph/mtw/faq. DCHA entered into its current MTW Agreement with
HUD in 2010 (the “2010 Agreement’’), which specifies HUD’s authorizations and waivers
of certain provisions of the Housing Act of 1937 and statutory requirements. As relevant
to this case, the 2010 Agreement authorizes DCHA to “adopt and implement any
reasonable policy to establish payment standards, rents or subsidy levels for tenant-based
assistance;” “calculate the tenant portion of the rent;” “determine contract rents and
increases and to determine the content of contract rental agreements;” and “develop a local
process to determine rent reasonableness,” each of which may “differ from the current
mandated program requirements” of the 1937 Act and its implementing regulations. See
2010 Agreement, Att. C, Section D, 2(a)-(c).
LEGAL STANDARDS AND ANALYSIS
A Rule 12(b)(6) motion to dismiss “tests the legal sufficiency of a complaint.”
Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). To survive a motion to dismiss,
a complaint “must contain sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal
quotation marks omitted). A claim is facially plausible when the complaint allegations
allow the Court to “draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Jd. Although the standard does not amount to a “probability
requirement,” it does require more than a “sheer possibility that a defendant has acted
unlawfully.” Jd. “Threadbare recitals of the elements of a cause of action, supported by
mere conclusory statements,” are not sufficient to state a claim. /gbal, 556 U.S. at 678.
In resolving a Rule 12(b)(6) motion, the Court “assumes the truth of all well-pleaded
factual allegations in the complaint and construes reasonable inferences from those
allegations in the plaintiff's favor|.]” Sissel v. U.S. Dep’t of Health & Human Servs., 760
F.3d 1, 4 (D.C. Cir. 2014). In addition to the complaint’s factual allegations, the Court
may consider “documents attached to or incorporated in the complaint, matters of which
courts may take judicial notice, and documents appended to a motion to dismiss whose
authenticity is not disputed, if they are referred to in the complaint and integral to a claim.”
Harris v. Amalgamated Transit Union Local 689, 825 F.Supp.2d 82, 85 (D.D.C. 2011).
Plaintiffs claim that DCHA has breached its contractual obligations to comply with
HUD requirements when making rent reasonableness determinations. Under D.C. law,
“{t]o prevail on a claim of breach of contract, a party must establish (1) a valid contract
between the parties; (2) an obligation or duty arising out of the contract; (3) a breach of
that duty; and (4) damages caused by breach.” Brown v. Sessoms, 774 F.3d 1016, 1024
(D.C. Cir. 2014) (quoting Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 187 (D.C. 2009)).
Plaintiffs base their allegations entirely on the 1937 Act and its implementing regulations,
and ignore the 2010 Agreement. The 2010 Agreement, reviewed and approved annually
by HUD and currently extended through 2028, authorizes DCHA to “develop a local
process to determine rent reasonableness,” which may “differ from the current mandated
program requirements” of the 1937 Act and its implementing regulations, and otherwise
waives certain regulatory requirements. See 2010 Agreement, Att. C, Section D, 2(a)-(c).
4
Therefore, the supposed contractual provisions breached by DHCA were in fact waived by
the 2010 Agreement.
Moreover, the Housing and Economic Recovery Act of 2008 (“HERA”) did not
change the waivers in the 2010 Agreement, despite plaintiffs’ contentions. HUD continued
to approve DCHA’s agreement annually, and, a result of Congress passing the
Consolidated Appropriations Act of 2016, DCHA’s MTW Agreement was modified and
extended to the end of its Fiscal Year 2028. Accordingly, because the alleged contractual
obligations upon which plaintiffs base their claim are not applicable to DCHA by operation
of the 2010 Agreement, no relief may be granted based on the factual matter contained in
plaintiffs’ Complaint.
CONCLUSION
For the foregoing reasons, DCHA’s motion to dismiss is hereby GRANTED, and
this case is DISMISSED. A separate order consistent with this decision accompanies this
Memorandum Opinion.
RICHARD J. LE
United States District Judge