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Feemster v. BSA Limited Partnership

January 11, 2007


The opinion of the court was delivered by: Reggie B. Walton United States District Judge


This is an action seeking a declaratory judgment, injunctive relief, and damages under the Multifamily Assisted Housing Reform and Affordability Act of 1997, as amended, 42 U.S.C. § 1437f (1997) ("MAHRAA"); the National Housing Act ("NHA"), 12 U.S.C. § 1701, et. seq. (2004); the District of Columbia Human Rights Act ("DCHRA"), D.C. Code § 2-1402.21 (2001); the District of Columbia Consumer Protection Procedures Act, D.C. Code § 28-3901 et. seq. (2001); and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202 (2000). Second Amended Complaint ("Compl."). at 2, 4-5. The dispute between the parties centers around BSA Limited Partnership's ("BSA") September, 2004 decision to opt-out of the project-based Section 8 Housing Assistance program and its refusal to accept enhanced vouchers as payment for rent from the plaintiffs since that time. Id. at 2. Currently before the Court are the Defendant's Motion for Summary Judgment and the Plaintiffs' Motion for Partial Summary Judgment and Opposition to Defendant's Motion for Summary Judgment.*fn1 For the reasons set forth below, both motions are granted in part and denied in part.

I. Factual Background*fn2

The Bates Street Townhomes are a number of single-family and multi-family townhouses located in Northwest Washington, D.C. Compl. at 12. The tenants in this case have been living in some of the townhomes for up to 25 years. Memorandum of Points and Authorities in Support of Plaintiffs' Motion for Partial Summary Judgment and Opposition to Defendant's Motion for Summary Judgment ("Pls.' Mem.") at 10. Sometime during the 1980s, the owner of the townhomes and the United States Department of Housing and Urban Development ("HUD") executed a Housing Assistance Payment Contract ("HAP contract") for the provision of project-based Section 8 assistance to residents of the Bates Street Townhomes. Id. After renting the townhomes with the assistance of the project-based subsidies for over two decades, BSA's project-based contract with HUD expired. Pls.' Mem. at 10. Consequently, BSA provided the plaintiffs and the other Section 8 residents at the Bates Street Townhomes with letters giving them a one-year notice of its decision to opt-out of the Section 8 HAP contract, effective September 30, 2004, id. at 11 (citing Exhibit ("Ex.") B (Opt-out letter dated September 30, 2003). The letter informed the tenants that they were eligible for tenant-based Section 8 vouchers. Specifically, the letter stated:

Federal law allows you to elect to continue living at this property provided that the unit, the rent, and we, the owners, meet the requirements of the Section 8 tenant-based assistance program. As an Owner, we will honor your right to remain at the property on this basis as long as it continues to be offered as rental housing, provided that there is no cause for eviction under Federal, State or local law.

Id., Ex. B.

According to the plaintiffs, beginning in the summer of 2004, BSA started to pressure the Bates Street tenants to move out of their homes and employed two individuals to assist in the effort. Pl.'s Mem. at 11. The tenants felt they were being pressured to vacate their homes because the two employees who repeatedly visited them to assist with the process of applying for tenant-based vouchers also offered them money as an incentive to vacate their homes within 30 days of receiving their vouchers. Id. In addition, the plaintiffs were informed that they could not use their vouchers to remain at their Bates Street homes, and that they had no option other than to relocate. Id. In anticipation of the defendant's opt-out decision, the District of Columbia Housing Authority ("DCHA") convened a meeting with the tenants of the Bates Street Townhomes to address the process of converting their project-based subsidies to the tenant-based program. Id. at 11-12. The plaintiffs, along with other residents, were provided information about the opt-out process and their opportunity to receive, through the DCHA, tenant-based vouchers which they could use to remain at Bates Street Townhomes or to acquire rental property at other locations. Id.

Following the meeting with the DCHA, plaintiff Feemster contacted BSA to inquire about using her voucher to remain in her townhouse and was informed that BSA would not accept her voucher. Id. BSA's counsel initially denied that it refused to accept Feemster's voucher, but in late September 2004, the plaintiffs received letters from BSA refusing to accept their enhanced vouchers as payment for the rental of their homes. Id. The letters reiterated that the Section 8 HAP contract was being terminated and informed the plaintiffs that BSA would not sign or execute "any lease agreements or lease addenda . . . ." Id. at 12-13 (citing Ex. C (letters sent to the plaintiffs)). BSA stated, however, that it would accept the rent for the units if the plaintiffs personally paid it. Id.

BSA's refusal to execute lease agreements or lease addenda left the plaintiffs unable to use their vouchers to pay rent for their Bates Street residences. Id. at 13. Consequently, in November, 2004, the plaintiffs filed their initial complaint in this action, along with an application for a Temporary Restraining Order ("TRO"). Id. at 13. The Court granted the TRO and required the defendant "to initiate the process of accepting [the p]laintiffs' enhanced vouchers, to wit: immediately sign, complete, and submit any necessary papers to the [DCHA] to begin the 'lease-up'*fn3 process so that [the p]laintiffs will be able to use their enhanced vouchers at their current homes . . . ." Id.; see also TRO dated November 5, 2004.*fn4 The defendant complied with the TRO and submitted "lease-up packages" to the DCHA, but has refused to complete the voucher process or pay the plaintiff the utility allowances as had been the case under the project-based contract. Pls.' Mem. at 13. After issuance of the TRO, BSA issued the plaintiffs offers to purchase their homes in November, 2004. Id. at 14. Four of the ten plaintiffs responded by submitting letters of interest, and they have since purchased their units. Id.; see also Joint Status Report at 1.

On or about January 6, 2005, BSA served the plaintiffs who had not responded to the purchase offers with 180-day Notices to Vacate for Discontinuance of Housing Use. Pls.' Mem. at 14 (citing Ex. 3 to Defendant's Motion for Summary Judgment ("Def.'s Mem.")). The notices indicated that the units were going to "be renovated and sold for home-ownership." Id. On January 11, 2005, BSA entered into a contract with TMS Investments, LLC ("TMS") for TMS to purchase several vacant units at the Bates Street Townhomes. Id. (citing Ex. 1 to Def.'s Mem. (Sales Contract between BSA and TMS)). The contract provided that TMS would purchase additional units as they became vacant, and the initial closing date was scheduled for April 1, 2005; however, that date was extended to July 12, 2005. Id. (citing Ex. J (amendment to sales contract for purchase of vacant Bates Street Townhomes)). The contract explicitly conditioned the purchase of any individual units on such units being free of tenants at the time of the closing date. Id. (citing Ex. 1 to Def.'s Mem.).

The plaintiffs filed their initial complaint in this action on November 4, 2004, and filed their second amended complaint on March 17, 2005. Both parties have now moved for summary judgment. BSA requests summary judgment on all counts of the second amended complaint and the plaintiffs request partial summary judgment with respect to Counts I, II, and III of their second amended complaint based on alleged violations of the MAHRAA, the NHA and the DCHRA. The plaintiffs also seek to enjoin the defendant from interfering with their right to remain in their residences by refusing to accept their enhanced vouchers. See Compl. at 2. Specifically, the plaintiffs' argue that BSA's refusal to accept payment in full for their homes if their rental payments are in the form of enhanced vouchers violates both federal and District of Columbia law. Pls.' Mem. at 2. On the other hand, the defendant justifies its refusal to accept the enhanced vouchers, stating that it has lawfully opted out of the Section 8 project based program, has a contract to sell the units to a third party, and has complied with all local laws necessary to remove the units from the rental housing market in anticipation of selling the property. Def.'s Mem. at 1.

II. Standard of Review

Courts will grant a motion for summary judgment under Rule 56(c) "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). When ruling on a summary judgment motion, courts must view the evidence in the light most favorable to the non-moving party. Bayer v. Dep't of Treasury, 956 F.2d 330, 333 (D.C. Cir. 1992); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (holding that courts must draw "all justifiable inferences" in the nonmoving party's favor and accept the nonmoving party's evidence as true). "[T]he nonmoving party 'must do more than simply show that there is some metaphysical doubt as to the material facts,'" Bias v. Advantage Int'l., Inc., 905 F.2d 1558, 1561 (D.C. Cir. 1990) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986)), but rather must "provide evidence that would permit a reasonable [fact-finder] to find" in the non-moving party's favor. Laningham v. U.S. Navy, 813 F.2d 1236, 1242 (D.C. Cir. 1987). Under Rule 56, "if a party fails to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial," summary judgment is warranted. Hazward v. Runyon, 14 F. Supp. 2d 120, 122 (D.D.C. 1998) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). Finally, in considering a motion for summary judgment, "the court . . . may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000).

III. Discussion

A. The Multifamily Assisted Housing Reform and Affordability Act of 1997 (as amended) (42 U.S.C. § 1437f); and the National Housing Act, 12 U.S.C. § 1701, et seq. (Counts I and II)

1. Statutory Background

In 1974, Congress enacted the Section 8 New Construction and Substantial Rehabilitation Program, which was established for the purpose of "aiding low-income families in obtaining a decent place to live and of promoting economically mixed housing . . . ." Pls.' Mem. at 3 (quoting 42 U.S.C. § 1437(a)). This "project-based Section 8" program authorized by Congress and administered by HUD, provides rental assistance payments to owners of residential rental properties on behalf of low-income tenants. Id. (citing 42 U.S.C. § 1437f(a)). Property owners may "opt out" of the project based Section 8 program at the end of a specified period of time. Id., Ex. M (HUD Policy Guide) Ch. 8 at 1. In 1997, Congress enacted the MAHRAA. The underlying purpose of the MAHRAA is to protect tenants impacted by the termination of expiring project-based Section 8 contracts and to prevent their displacement. Id. at 3-4; 42 U.S.C. § 1437f(a). Specifically, the MAHRAA provides that "the Secretary shall make enhanced voucher assistance under section 8(t) of the United States Housing Act of 1937 (42 U.S.C. §1437f(t)) available on behalf of each low income family who, upon the date of such expiration [of the project-based Section 8 program], is residing in an assisted dwelling unit in the covered project." Pls.' Mem. at 4 (quoting Pub. L. No. 106-74, § 531, 113 Stat. 1047, 1113 (1999) (emphasis added).*fn5 Enhanced vouchers are part of the federal housing subsidy scheme and are administered locally by the DCHA. Id. (citing 42 U.S.C. § 1437f(o)). This program is distinguishable from the project-based program because it is a tenant-based subsidy that attaches to an individual rather than to a particular apartment or other types of residential rental property. See 42 U.S.C. § 1437f(f)(6)-(7). The enhanced voucher program requires the tenant to pay approximately 30 percent of his or her income as rent, and the local housing authority pays the remainder of the rent directly to the landlord each month. Pls.' Mem. at 4 (citing 42 U.S.C. § 1437f(o)(2)). In conjunction with the tenant's right to remain in his or her housing unit, is a landlord's obligation to complete the requirements necessary to participate in the voucher program. To that end, both federal and local law require landlords to complete the paperwork necessary to participate in the voucher program. See generally 42 U.S.C. § 1437f(o)(7); 24 C.F.R. § 982.305(b)(ii) (stating that before the lease term commences "[t]he landlord and the tenant [must] have executed the lease (including the HUD-prescribed tenancy addendum[.]")); Pls.' Mem., Ex. M (Housing Choice Voucher Program Guidebook #7420.10G) at Chap. 11 at 11-14 (stating that "[t]he PHA shall require the owner to use a lease provided by the PHA" and "[t]he owner must sign the HUD tenancy addendum with the [] tenant.").

Because the underlying purpose for enacting the MAHRAA -- to give families the right to remain in their units after the expiration of a project-based contract -- was not sufficiently clear, in 2000, Congress acted to clarify that under the MAHRAA families residing in project-based Section 8 units at the time an opt-out decision is exercised, have the right to continue living in their current homes. Pls' Mem. at 4-5 (citation omitted); see also 42 U.S.C. §1437f(t)(1)(B). In this regard, the National Housing Act, 12 U.S.C. § 1701, et. seq., compliments the MAHRAA by providing that "the Secretary shall assure that . . . project owners not interfere with the efforts of tenants to obtain rent subsidies or other public assistance;" 12 U.S.C. § 1715z-1b(b)(2).

In conjunction with the amendment to the MAHRAA, HUD issued two publications that provide guidance to tenants regarding their right to remain in their homes when landlords decide to exercise their opt-out prerogative. Pls.' Mem. at 5. The first publication, entitled Section 8 Renewal Policy Guide ("HUD Policy Guide") and issued on January 19, 2001, specifically provided that "[t]enants who receive an enhanced voucher have the right to remain in their units as long as the units are offered for rental housing when issued an enhanced voucher sufficient to pay the rent charged for the unit, provided that the rent is reasonable." Id. (citing Ex. M (HUD Policy Guide) Ch. 11 at 3). The HUD Policy Guide also requires owners who have decided to opt-out of the project-based Section 8 program to certify that they "will comply with the requirement to allow families receiving enhanced vouchers who elect to remain do so as long as the property remains a rental property, unless the owner has just cause for eviction." Id. at 5-6 (citing Ex. M., Ch. 1 at 9 & Attachment ("Attach.") 3A-1 at 6A.2. (requiring owners to "certify that they agree to honor the tenants' right to remain at the property, provided that the [local Public Housing Agency] approves a rent equal to the new rent, and the rent is reasonable")). The second publication, issued on November 14, 2001, addressed the right of Section 8 tenants to remain in their residences stating that "[a] family that receives an enhanced voucher has the right to remain in the project as long as the units are used for rental housing and are otherwise eligible for housing choice voucher assistance . . . ." Id. at 6 (citing Ex. M (U.S. Department of Housing and Urban Development Office of Public and Indian Housing, Notice PIH 2001-41 (HA)) at 15). Both HUD publications provide that "[i]f an owner refuses to honor the tenants right to remain, the tenant's remedy will depend on State and local law." See Pls.' Mem., Ex. M, (HUD Policy Guide) Ch. 11 at 3; U.S. Department of Housing and Urban Development Office of Public and Indian Housing, Notice PIH 2001-41 (HA)) at 15.

In the District of Columbia, the rights and obligations of landlords and tenants are governed principally by two statutory enactments.*fn6 The Rental Housing Act, D.C. Code § 42-3501.01 et seq. (2001), governs the termination of tenancies and evictions, while the Rental Housing Conversion and Sale Act, D.C. Code § 42-3401.01 et. seq. (2001), governs landlords ability to sell or convert rental property and the rights of tenants' in such circumstances. Pls.' Mem. at 6; Defendant's Memorandum of Law in Support of Its ...

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