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PENNSYLVANIA v. LYNN

July 23, 1973

COMMONWEALTH OF PENNSYLVANIA et al., Plaintiffs,
v.
James T. LYNN et al., Defendants


Charles R. Richey, District Judge.


The opinion of the court was delivered by: RICHEY

CHARLES R. RICHEY, District Judge.

 This suit was initially brought by the Commonwealth of Pennsylvania, the Maine State Housing Authority, five non-profit corporations which claim to be potential sponsors of FHA subsidized housing, and various community and civil rights organizations, purportedly on behalf of all others similarly situated. A later Motion to Intervene as a Party Plaintiff, brought by the Board of Supervisors of Fairfax County, Virginia, was also granted. The Plaintiffs seek declaratory and injunctive relief to compel the defendants, James T. Lynn, Secretary of the Department of Housing and Urban Development (HUD), and Roy L. Ash, Director of the Office of Management and Budget (OMB), to begin reprocessing pending or new applications for federal financial assistance in the Section 235, 236 and rent supplement programs *fn1" which were suspended by the Secretary of HUD on January 8, 1973. Plaintiffs contend that they are directly aggrieved by Defendants' suspension of these programs and that Defendants' actions will prevent the completion of Plaintiffs' proposed projects and the inception of any new ones under the applicable statutory programs. They allege that HUD is required to continue implementation and operation of these programs and that the Secretary's action is unlawful, unconstitutional and discriminatory.

 Plaintiffs have filed Motions for Preliminary Injunction and Summary Judgment. The latter Motion seeks to make permanent the relief sought in the former, namely, the permanent enjoining of Defendants from refusing to accept applications for subsidies, to process existing and new applications in accordance with the Defendants' own regulations and to approve and complete the processing of those projects found by Defendants to be qualified under Defendants' own regulations. It also seeks to have Defendants' suspension of Section 235, 236 and rent supplement programs and their refusal to accept new applications or process applications pending on that date declared unlawful. Defendants have filed a Motion to Dismiss and/or for Summary Judgment upon the ground that Plaintiffs have failed to state a claim upon which relief can be granted in that the Court lacks jurisdiction over the subject matter of the action. For the reasons stated below, the Court has determined that Plaintiffs' Motion for Summary Judgment should be granted.

 I. BACKGROUND

 In 1949, Congress declared that the general welfare of the nation requires major federal efforts to assist private industry and local public bodies in achieving "the realization as soon as feasible of the goal of a decent home and a suitable living environment for every American family . . .", and directed HUD's predecessor to carry out this policy. *fn2" In 1968, Congress reaffirmed this goal and directed its achievement by, inter alia, the construction and rehabilitation in the decade 1968-1978 of six million units of low and moderate income housing. *fn3" Sections 235, 236 and 101 of the Housing and Urban Development Acts were enacted in implementation of this goal.

 Sections 235, 236 and 101 are administered by the Secretary of HUD, and provide federal subsidies for housing constructed by private enterprise for low and moderate income families. Section 235, 12 U.S.C. § 1715z, assists lower income families to buy newly constructed, rehabilitated or existing homes by providing mortgage insurance and periodic assistance payments to mortgagees that reduce the effective mortgage interest rate to as low as one per cent. *fn4" Section 236, 12 U.S.C. § 1715z-1, affords subsidized rental housing opportunities to lower income families in newly constructed or rehabilitated buildings, by providing mortgage insurance and periodic interest reduction payments to mortgagees on behalf of nonprofit or limited profit sponsors of such housing. *fn5" Under both of these sections, the Secretary of HUD is authorized to make contracts with the mortgagees for the assistance payments. *fn6" Section 101 assists tenants of privately owned federally assisted projects whose income would otherwise qualify them for low-rent public housing, by providing periodic rent supplement payments to the owners of such private projects. *fn7" Contracts are made by HUD with qualified housing owners for such payments. *fn8"

 Housing constructed or rehabilitated under these programs is built by private for-profit or non-profit "sponsors" and, if rental or coop, managed by private non-profit sponsors. A private sponsor wishing to build Section 235, 236 or 101 housing must make extensive financial and organizational commitments before it can obtain a Feasibility Letter, in the case of Section 236, or a Fund Reservation, in the case of Section 235, which constitutes the government's initial indication that a project may be eligible for approval. *fn9" If an application for Section 236 housing is approved after the applicant's submission of detailed plans and specifications, HUD will issue a Firm Commitment providing that it will insure a mortgage note in a specified amount for the project. A Firm Commitment for Section 235 Housing is made on a unit-by-unit basis only after the housing unit is completed and the home-purchaser located.

 On January 8, 1973, then Secretary of HUD Romney issued orders to all regional HUD offices terminating the Section 235, 236 and 101 programs. The orders provided that as of January 5, 1973 no more applications would be accepted for projects under the programs; that no feasibility letters or fund reservations would be issued for applications already on file; and that no conditional or firm commitments would be issued for any project unless a feasibility letter or fund reservation had already been issued prior to the close of business on January 5, 1973. As of this time, the total amount of unobligated contract authority available for Section 235, 236 and 101 programs and thus withheld by the Defendants is $431,040,000. *fn10"

 II. THE CLASS ACTION ISSUE

 A. The Court Will Certify This Matter As a Class Action Under Rules 23(b)(1)(A), 23(b)(1)(B) and 23(b)(2) of The Federal Rules of Civil Procedure.

 Plaintiffs have filed an Amended Complaint seeking to bring this action on their own behalf and on behalf of all others similarly situated. Defendants argue that the class action allegations should be dismissed as unmanageable because of the mass of unidentifiable members of the alleged class.

 The Court is of the opinion that this matter is properly maintainable as a class action on behalf of all those who have participated in efforts to obtain nondiscriminatory access of minority and low and moderate income persons to statutorily created housing subsidy, mortgage loan insurance and rent supplement programs and particularly those applicants or potential applicants for Section 235, 236 or 101 subsidies whose applications have not been or will not be processed, or who have been or will be deterred from filing such applications by virtue of the Defendant Secretary's order of January 8, 1973. The prerequisites of Rule 23(a) are clearly met. *fn11" There is a commonality of interest in the basic question of law involved, i.e., whether the actions of the Secretary in suspending the subsidy programs were lawful, and the basic fact common to the members of the class is simply that no applicant can have his application considered as long as Defendants' order is in effect. Moreover, Plaintiffs' suit fits appropriately into several of the molds available under Rule 23(b). It is appropriate under Rule 23(b)(1)(A) in that the prosecution of separate actions by members of the class will create the risk of inconsistent adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the Defendants. It is appropriate under Rule 23(b)(1)(B) in that an adjudication as to the individual Plaintiffs alone will as a practical matter be dispositive of the interests of other members of the class not parties to the litigation. It is appropriate under Rule 23(b)(2) in that Defendants have acted on grounds generally ...


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