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April 20, 1989

SAMUEL R. PIERCE, JR., Secretary of the United States Department of Housing and Urban Development, Defendant

Charles R. Richey, United States District Judge.

The opinion of the court was delivered by: RICHEY


 Before the Court is the motion of the plaintiff, Housing Authority of the County of King ("HACK"), to reconsider and amend this Court's judgment of October 13, 1988. On that date the Court, considering cross motions for summary judgment, granted judgment in favor of the defendant, the Department of Housing and Urban Development ("HUD"). Upon reconsideration, the Court concludes that its prior judgment displayed insufficient sensitivity to the concerns of due process. The Court, therefore, shall amend its prior judgment so as to grant HACK a limited right of discovery, and to permit HACK an opportunity to present its full views to HUD for consideration by an official with authority to render a binding decision in HACK's case. *fn1"

 The dispute between HACK and HUD arises out of utility subsidies HUD provided HACK during the period from 1981 to 1983. *fn2" In a nutshell, HUD contends that HACK failed to compute its utility expenses for that period in accordance with an "Interim Regulation" relating to such expenses that HUD had published in September of 1980. HACK's failure to do so, according to HUD, caused HUD to overcompensate HACK between 1981 and 1983 by some $ 570,611.

 HUD initially notified HACK of its contention regarding the overpayments on November 9, 1983. At that time HUD invited HACK to respond in detail to HUD's position. HACK did so, disputing the precise details of HUD's conclusions, as well as expressing its position that the Interim Regulation was not applicable during the period. It appears that HUD took no action for a lengthy period after receiving HACK's response.

 On August 6, 1986, HUD's Seattle Office notified HACK that HUD intended to take action regarding the alleged overpayments. HUD directed HACK to compute the amount of the overpayments and to return that amount to HUD. HACK refused to do so, and instead drafted, through counsel, a detailed letter to HUD's Seattle Office challenging the legality of HUD's position. For the most part, the letter attacked the propriety of the Interim Rule's adoption under the Administrative Procedures Act (the "APA"). However, the letter also requested advice as to "any administrative remedies" which HACK might be entitled to pursue before resorting to litigation.

 HUD's Seattle office responded by rejecting HACK's APA challenge, and by informing HACK that, in the event "subsidy offset" were required in order to recoup the overpayments, HUD would proceed pursuant to 24 C.F.R. § 17 et seq. That provision, which expressly grants a hearing and discovery to aggrieved parties, is HUD's regulatory response to the Federal Claims Collection Act (the "Collection Act"), 31 U.S.C. § 3701 et seq. The Collection Act generally prescribes the procedures by which the federal government may enforce money claims against private parties.

 Believing that HUD intended to act pursuant to 24 C.F.R. § 17 et seq., HACK wrote on February 24, 1987, to Samuel Pierce, Secretary of HUD. HACK reiterated, but with substantially more detail, its opposition to HUD's proposed actions, and made a specific discovery request pursuant to 24 C.F.R. § 17.105. The request sought materials which HACK regards as necessary to formulate its opposition to HUD's position. Receiving no response, HACK wrote again on April 24 to restate its request for documents.

 HUD responded with a letter dated May 4, 1987, which stated that HUD was "currently reviewing all materials associated with the matter" and which promised to inform HACK of the "need for a hearing and/or the outcome of [HUD's] review as soon as a determination has been made." On November 30, 1987, HACK again wrote to request compliance with its discovery request.

 HACK apparently received no response until February 4, 1988. On that date, HUD's General Counsel notified HACK that HUD would effect the recapture, not pursuant to 24 C.F.R. § 17 et seq., but pursuant to 24 C.F.R. § 990.110(e), which, according to HUD, "authorizes downward adjustments in the amount of operating subsidy." The latter provision does not provide for any type of hearing or discovery, and HUD therefore denied HACK's request on those points. The letter also mentioned that Secretary Pierce had notified the Washington congressional delegation some time before that HUD had determined to move forward with the recapture of funds, and that HUD's Seattle office had been so notified. However, the record indicates that this letter was HACK's first notice that a final decision had been reached.

 HACK immediately brought suit in this Court. HACK argued (1) that HUD is bound by the terms of 24 C.F.R. § 17, et seq., to grant HACK a full discovery and a hearing before taking any action, and (2) that, even if those regulatory provisions are not expressly applicable, HUD denied HACK's Fifth Amendment right to procedural due process in reaching its decision. *fn3"

 On October 13, 1988, this Court granted summary judgment in HUD's favor on both arguments. HACK has moved to amend the Court's judgment on the latter point, i.e., that notwithstanding the inapplicability of 24 C.F.R. § 17, et seq., the procedures that HUD actually followed in reaching a final decision were consistent with the requirements of due process. In its earlier opinion, the Court concluded that because HACK had been able to present its case through extensive correspondence, HACK had been given an opportunity to be heard at a meaningful time and in a meaningful manner. However, upon further reflection, the Court reluctantly concludes that its earlier judgment was in error. The record suggests that HUD's last-minute change in position may well have prejudiced HACK's ability to present its case. Further, HUD's unwillingness to provide HACK with even minimal discovery denied HACK the ability to tailor its arguments to the information upon which HUD ...

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