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Greater New Orleans Fair Housing Action Center v. United States Dep't of Housing and Urban Development

July 6, 2010

GREATER NEW ORLEANS FAIR HOUSING ACTION CENTER, ET AL. PLAINTIFFS,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT AND ROBIN KEEGAN, EXECUTIVE DIRECTOR OF THE LOUISIANA RECOVERY AUTHORITY, DEFENDANTS.



The opinion of the court was delivered by: Henry H. Kennedy, Jr. United States District Judge

MEMORANDUM OPINION

Greater New Orleans Fair Housing Action Center, the National Fair Housing Alliance, and five individuals who own homes in New Orleans (collectively "plaintiffs")*fn1 bring this action against Robin Keegan, in her official capacity as Executive Director of the Louisiana Recovery Authority ("LRA"), and the U.S. Department of Housing and Urban Development ("HUD"), asserting that defendants have violated the Fair Housing Act ("FHA"), 42 U.S.C. § 3601 et seq.*fn2

This case arises from the alleged racially discriminatory effect of a formula used to distribute grants as part of the Road Home Homeowner Assistance Program ("Road Home Program" or "Program"), a housing redevelopment initiative designed to help homeowners affected by Hurricanes Katrina and Rita. Plaintiffs seek an injunction requiring recalculation of Program awards to homeowners in New Orleans using a formula that does not have a disparate impact on African Americans.

On June 29, 2010, the Court issued an order that denied plaintiffs' motion for a temporary restraining order and a preliminary injunction [#50] which sought to enjoin Keegan from spending surplus funds that remain available to the Road Home Program, or seeking any additional Program funds from HUD, while this case is pending. This opinion explains the reasoning on which that order was based.

I. BACKGROUND

In 2005, Hurricanes Katrina and Rita caused catastrophic damage to New Orleans, Louisiana, and other nearby places. In response, Congress created a block grant program to assist in recovery of the region, which it funded through three appropriations statutes. See Pub. L. No. 109-148, 119 Stat. 2680, 2779-81 (Dec. 30, 2005); Pub. L. No. 109-234, 120 Stat. 418, 472-73 (June 15, 2006); Pub. L. No. 110-116, 121 Stat. 1295, 1343-44 (Nov. 13, 2007). Pursuant to these statutes and HUD regulations, the State of Louisiana was to receive $13.4 billion. See 71 Fed. Reg. 7666, 7666 (Feb. 13, 2006) (allocating $6.2 billion from the first appropriation to Louisiana); 71 Fed. Reg. 63,337, 63,338 (Oct. 30, 2006) (allocating $4.2 billion from the second appropriation to Louisiana); 121 Stat. at 1343-44 (appropriating $3 billion for supplemental grants to Louisiana).

Louisiana designated approximately $11 billion of those funds for the Road Home Program. The LRA, in consultation with HUD, developed the Program; HUD approved it and disburses the money Congress has appropriated for it to the LRA; and the LRA administers it. Under a portion of the Program called Option 1, an individual whose house was damaged by the hurricanes may choose to receive a grant to repair or rebuild her home.*fn3 Each beneficiary of an Option 1 grant receives an award in the amount of either the value of her home before the storms or the cost of repairing her home, whichever is less, but not in excess of $150,000. Since plaintiffs initiated their suit, the LRA has created Additional Compensation Grants ("ACGs"), supplemental awards available to Option 1 beneficiaries whose incomes are at or below eighty percent of the median in their areas. Regardless of the pre-storm values of their homes, these individuals may receive ACGs such that their total awards from the Road Home Program reach the cost of repairs to their homes, still subject to the $150,000 cap.

Since the Road Home Program's inception, the LRA has distributed Option 1 awards to tens of thousands of homeowners. As of the time of the briefing regarding plaintiffs' current motion, only 179 individuals who applied for Option 1 grants had yet to receive their awards. The LRA has money set aside to fund grants for those individuals, to continue to distribute ACGs to eligible individuals, and for other projects within the Road Home Program. The LRA is currently seeking approval to use much of the Program money not yet designated to a specific use for "Action Plan Amendment 43," a construction lending program designed to assist Road Home Program beneficiaries who have not been able to complete repairs to their homes. Keegan estimates that she has $554.5 million remaining in the Program budget.

Individual plaintiffs Gloria Burns, Rhonda Dents, Almarie Ford, Daphne Jones, and Edward Randolph are African Americans who own homes in New Orleans that were severely damaged by Hurricane Katrina, and subsequent flooding, in 2005.*fn4 Each applied for a Road Home Program grant under Option 1, and each received an award based on the pre-storm value of her or his home rather than the cost of repairing that home.*fn5 Since receiving their initial grants, Burns and Jones have been deemed eligible to receive ACGs such that their total awards will amount to $150,000.

In their complaint, plaintiffs allege that the LRA's reliance on home values in calculating awards "has a discriminatory disparate impact on African Americans living in historically segregated communities." Compl. ¶ 52. Specifically, they argue that because "African American homeowners in New Orleans are more likely than white homeowners in New Orleans to own homes with lower values," African-American recipients of Road Home Program grants are more likely than white recipients to receive only the amount of the pre-storm value of their homes and, consequently, to have a larger gap than white recipients between the amount of the grant and the cost of rebuilding. Compl. ¶¶ 54-57. This effect, plaintiffs assert, constitutes a violation of the Fair Housing Act.*fn6 Ultimately, plaintiffs seek injunctive relief, "including but not limited to ordering Defendants to cease immediately their violation of Plaintiffs' rights, and to remedy the invidious effects of their violations by recalculating Road Home homeowner grants in a nondiscriminatory manner." Compl. at 17.

At this time, plaintiffs seek a preliminary injunction enjoining Keegan from spending any surplus funds-that is, Program funds not already designated for the remaining 179 Option 1 awards, ACGs, or any other specific use-until the merits of their case are resolved. They make this request because Keegan will only be able to distribute recalculated awards, should plaintiffs prevail on the merits, if sufficient Road Home Program funds remain available for that purpose.

Plaintiffs' motion for a preliminary injunction is accompanied by evidence they allege supports their allegation that the Option 1 formula has a discriminatory effect. Specifically, they point to statistics from the U.S. Census showing that in New Orleans, homes owned by African Americans have lower values, on average, than homes owned by whites. Pls.' Mot. for TRO, Ex. P. They attached to their motion a study by PolicyLink, "a national independent research organization," which concludes that on average, African-American applicants to the Road Home Program received funds in amounts further below the costs to rebuild their homes than white applicants. Id. at 11-12; id., Ex. S. They also assert that Paul Rainwater, Keegan's predecessor at the LRA, told a subcommittee of the U.S. House of Representatives that home values in African-American neighborhoods tend to be lower than in white neighborhoods and that he was "sure" that African-American homeowners were more likely than whites to receive awards based on the value of their homes than the cost of repairs. Id. at 15-16; id., Ex. N at 23-24. Finally, they attach to their motion the declaration of Carol Johnson, president of a Louisiana mortgage company, who asserts she has expertise in the mortgage industry and that she has "observed that because of the formula employed, Road Home Program grant calculations result in homeowners in predominantly African American areas received lower grant awards than homeowners in predominantly White areas." Id., Ex. T ¶ 7.*fn7

II. ANALYSIS

This court may issue a preliminary injunction only when the movant demonstrates: (1) "a substantial likelihood of success on the merits"; (2) "that it would suffer irreparable injury if the injunction is not granted"; (3) "that an injunction would not substantially injure other interested parties"; and (4) "that the public interest would be furthered by the injunction." Mova Pharm. Corp. v. Shalala, 140 F.3d 1060, 1066 (D.C. Cir. 1998) (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C. Cir. 1995)). "These factors interrelate on a sliding scale and must be balanced against each other." Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1318 (D.C. Cir. 1998). Because preliminary injunctions are "extraordinary and drastic" forms of judicial relief, district courts should not grant them "unless the movant, by a clear showing, ...


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