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United American, Inc. v. N.B.C.-U.S.A. Housing

November 2, 2005


The opinion of the court was delivered by: Donald C. Pogue United States District JUDGE*fn7


Plaintiff, United American, Inc., brings this action to recover damages from Defendant N.B.C.-U.S.A. Housing, Inc. Twenty Seven ("N.B.C.-U.S.A. Housing") in a contract dispute over the construction of low-income housing for the elderly. Plaintiff also joins the United States Department of Housing and Urban Development ("HUD") as a co-defendant claiming that N.B.C.-U.S.A. Housing was acting on behalf of HUD and that HUD has been unjustly enriched because of its and N.B.C.-U.S.A. Housing's actions. HUD has moved to dismiss under Federal Rule of Civil Procedure ("FRCP") 12(b)(1) asserting that Congress has not waived the government's immunity from suit in this court. Alternatively, HUD moves under FRCP 12(b)(6) to dismiss for Plaintiff's failure to state a claim for which relief can be granted. Because the court agrees that Congress has not waived HUD's immunity from suit before this court, HUD's motion to dismiss is granted.


Pursuant to 12 U.S.C. § 1701q (2000) ("Section 1701q"), HUD is responsible for "assist[ing] private nonprofit corporations, limited profit sponsors, consumer cooperatives, or public bodies or agencies to provide housing and related facilities for elderly or handicapped families." To this end, HUD is authorized to provide capital grants to private nonprofit organizations to fund the housing construction. Id.; 24 C.F.R. §§ 891.100, 891.170(a).

In exercising its authority, HUD allocates a budget for all field offices to expend on projects within their jurisdictions. 24 C.F.R. § 791.401. When allocations are made, HUD publishes a Notice of Funding Availability in the Federal Register, id., after which, interested eligible parties compete for grants. The winners receive grants which are interest free and for which repayment is not required so long as the housing remains available for the intended beneficiaries. Id.

To assure that housing continues to be available for the intended beneficiaries, the grants cannot be repaid to extinguish the housing requirement. Id. In addition, HUD requires a note and a mortgage on the project, a use agreement, a Capital Advance Agreement ("Agreement"), and a regulatory agreement to insure the HUD's interest in the capital advance. 24 C.F.R. §§ 891.170. As is relevant here, the Agreement exists by and between the owner and the Secretary of HUD. The construction contractor is not a direct party to the Agreement. The Agreement further requires that construction follow the designs approved by HUD and that any alteration receive HUD's prior approval.

On June 9, 1997, HUD entered into such an Agreement with Defendant N.B.C.-U.S.A. Housing to construct and manage a senior citizen housing complex known as Upshur House in Washington D.C. Def. Mot. Dismiss or Summ. J. at 5. N.B.C.-U.S.A. Housing, in turn, entered into a construction contract with Plaintiff on September 8, 1997. Compl. at 3.*fn1

Although the construction contract envisioned that the project would be substantially completed by December 23, 1998, the project was delayed by 652 days. Compl. at 5. Plaintiff contends that these delays were because of, inter alia, defective design documents provided by the defendants, the defendants' unreasonable delays in processing requisitions, and the defendants' failure to obtain the contractually required builder's risk insurance. Id. at 4-5. These delays, according to Plaintiff, resulted in damages including increased subcontractor costs and uncompensated loss due to vandalism and theft. Id.

Plaintiff avers that N.B.C.-U.S.A. Housing is "a single asset entity created solely for the purpose of constructing the Upshur House project." Plaintiff claims that it normally would not have entered into a contract with N.B.C.-U.S.A. Housing but for the backing of HUD. Id. at 8. Plaintiff alleges that "[b]ecause N.B.C.-U.S.A. is a single asset entity, and because of HUD's superior lien position on the property," Plaintiff is obligated to complete the project without being provided the financial means of so doing. Id. Accordingly, under Plaintiff's theory, "HUD has [] been enriched by obtaining the value of [P]laintiff's services in furtherance of the Capital Advance Program under a contract which specifically promises to reimburse the [P]laintiff's costs for construction plus a reasonable profit." Id.


As HUD is an agency of the Federal government, see 42 U.S.C. § 3531 et. seq., an action against HUD must satisfy all the requirements for actions commenced against the United States, FDIC v. Meyer, 510 U.S. 471, 475 (1994) ("Absent a waiver, sovereign immunity shields the Federal government and its agencies from suit."). "In any suit in which the United States is a defendant, there must be a cause of action, subject matter jurisdiction, and a waiver of sovereign immunity." Presidential Garden Assocs. v. United States, 175 F.3d 132, 139 (2d Cir. 1999); see also V S L.P. v. HUD, 235 F.3d 1109, 1112 (8th Cir. 2000), First Vir. Bank v. Randolph, 110 F.3d 75, 77 (D.C. Cir. 1997), Trans-Bay Eng'gs & Builders, Inc. v. Hills, 551 F.2d 370, 376 (D.C. Cir. 1976). Although the same provision of law may satisfy more than one of these requirements, see, e.g., Trans-Bay Eng'gs & Builders, Inc., 551 F.2d at 376, each of these requirements is "wholly distinct" and, therefore, must be separately considered, Blatchford v. Native Village of Noatak, 501 U.S. 775, 786-87 n.4 (1990). In thi s case, Plaintiff has properly asserted that its claim falls under the court's federal question jurisdiction. Trans-Bay Eng'gs & Builders, Inc., 551 F.2d at 377-78 & 378 n.17, C.H. Sanders Co., Inc. v. Bristol Constr. Corp., 903 F.2d 114, 119 (2d Cir. 1990) ("We hold that the district court had federal question jurisdiction over Sanders' second cause of action, arising under federal common law and the statute authorizing the loan. 12 U.S.C. § 1701q."). Nevertheless, because a waiver of sovereign immunity is a "prerequisite for jurisdiction," a plaintiff must also demonstrate such a waiver to perfect this court's jurisdiction for claims against the Federal government. United States v. Mitchell, 463 U.S. 206, 212 (1983), United States v. Sherwood, 312 U.S. 584, 586 (1941). Therefore, Plaintiff must demonstrate that Congress has waived HUD's sovereign immunity in order for this court to entertain jurisdiction over its cause of action.

Plaintiff claims such a waiver is found in Title 12 Section 1702 ("Section 1702"). That provision provides, in relevant part:

The Secretary shall, in carrying out the provision of this subchapter and subchapters II, III, V, VI, VII, VIII, IX-B and X of this chapter, be authorized, in his official capacity to sue and be sued in any court of competent jurisdiction, State or Federal.

Plaintiff argues that this provision waives the United States' sovereign immunity for any action arising from the National Housing Act. Under Plaintiff's theory, because the Secretary's authority to "provide assistance to private nonprofit organizations and consumer cooperatives to expand the supply of supportive housing for the elderly" is derived ...

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