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

September 7, 2010


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


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"),*fn2 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., and the Housing and Community Development Act ("HCDA"), 42 U.S.C. § 5301 et seq. 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. Before the Court is Keegan's motion to dismiss and for a transfer of venue [#28]. Upon consideration of the motion, the opposition thereto, and the record of this case, the Court concludes that the motion to dismiss should be granted in part and denied in part and the motion to transfer should be denied.


A. Factual Background

In 2005, Hurricanes Katrina and Rita caused catastrophic damage to much of the Gulf Coast, including New Orleans, Louisiana. 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 121 Stat. at 1343-44 (authorizing spending $3 billion on supplemental grants to Louisiana); 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).

Louisiana designated approximately $11 billion of those funds for the Road Home Program. The LRA, in consultation with HUD, developed the Road Home 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. At this time, a relatively small number of Option 1 applicants have yet to receive their awards.

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. 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.

B. Procedural History

Plaintiffs initiated this action in November 2008. In their complaint, they allege that the reliance on home values in calculating Option 1 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 Option 1 grants are more likely than white recipients to receive only the amount of the pre-storm value of their homes. Compl. ¶¶ 54-57. Consequently, plaintiffs allege, African-American homeowners are likely to have a larger gap than white recipients between the amount of their awards and the cost of rebuilding. Id.

Plaintiffs assert that the discriminatory effects of the Option 1 formula violate the FHA and the HCDA. Specifically, Count I of their complaint alleges that defendants have (1) "made unavailable or denied housing to African American homeowners because of their race in violation of" section 3604(a) of the FHA; (2) "discriminated against African Americans because of their race in the availability of, and in the terms of conditions of, real estate-related transactions in violation of" section 3605(a) of the FHA; (3) "failed to administer housing-related programs and activities in a manner that affirmatively furthers fair housing, in violation of" sections 3608(d) and 3608(e)(5) of the FHA. Compl. ¶¶ 74-76. Count II alleges that defendants "failed to administer the Community Development Block Grant Program in a manner that affirmatively furthers fair housing, in violation of Title I of [the HCDA], 42 U.S.C. § 5304(b)(2)." Id. ¶ 77. 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.

Keegan and HUD both filed motions to dismiss this case.*fn5 On May 24, 2010, the Court issued an order scheduling a hearing on those motions [#45], indicating that the parties should address legal and factual issues regarding the application of Ex parte Young, 209 U.S. 123 (1908), to this case; in particular, the Court was concerned-as explained in some detail in a Clarification filed on June 4, 2010 [#52]-that the plaintiffs sought, in large part, retroactive relief that would impermissibly call on this Court to order payment from the state treasury. In response, plaintiffs filed a motion for a temporary restraining order ("TRO") and preliminary injunction. They sought to have Keegan enjoined from spending any surplus funds-that is, Program funds not already designated for any specific use-until the merits of their case were resolved. The Court denied the motion largely for the reasons explained in the Clarification, see Greater New Orleans Fair Hous. Action Ctr. v. U.S. Dep't of Hous. & Urban Dev., - F. Supp. 2d -, 2010 WL 2718164 (July 6, 2010), which are also relevant to the resolution of Keegan's motion to dismiss. Plaintiffs then filed a second motion for a TRO and preliminary injunction, which sought only to enjoin Keegan from disbursing initial Road Home Program awards to Option 1 applicants using a formula that takes into account the pre-storm value of an individual's home. The Court granted that motion. See Greater New Orleans Fair Hous. Action Ctr. v. U.S. Dep't of Hous. & Urban Dev., - F. Supp. 2d -, 2010 WL 3221968 (August 16, 2010). Both of the Court's opinions are currently on appeal to the D.C. Circuit.

Although the Court addressed in its opinions some of the issues crucial to ruling on Keegan's motion to dismiss, it has not resolved all of the issues Keegan raises nor has it ruled on Keegan's motion to transfer. It now turns to these motions.


A. Motion to Dismiss

Keegan seeks dismissal of plaintiffs' claims as against her on the ground that the Eleventh Amendment bars them. In the alternative, she argues that the complaint fails to state a claim on which relief can be granted as to Count I, the FHA claims and may not be brought by a private plaintiff as to Count II, the HCDA ...

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