Housing & Redevelopment Insurance Exchange v. Fudge

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF PENNSYLVANIA

HOUSING & REDEVELOPMENT :

INSURANCE EXCHANGE,

:

Petitioner CIVIL ACTION NO. 3:22-1565

:

v. (JUDGE MANNION)

:

MARCIA FUDGE, SECRETARY

OF THE UNITED STATES :

DEPARTMENT OF HOUSING

AND URBAN DEVELOPMENT, :

Respondent :

MEMORANDUM

Pending before the court is petitioner’s motion for temporary

restraining order and preliminary injunction (“TRO/PI”) or, in the alternative,

a motion for stay of final agency action (Doc. 2) and a motion to expedite

(Doc. 24). Upon review, the petitioner’s motion for TRO/PI or, in the

alternative, a motion for stay of final agency action will be DENIED and the

petitioner’s motion to expedite will be DISMISSED AS MOOT.1

1 It is noted that the petitioner had requested in its motion that the court

schedule a preliminary injunction hearing. Rule 65 of the Federal Rules of

Civil Procedure does not require a hearing. See Fed.R.Civ.P. 65(a)(1)

(requires only “notice to the adverse party”). See also Bradley v. Pittsburgh

Bd. of Educ., 910 F.2d 1172, 1175 (3d Cir. 1990) (“The applicable Federal

Rule does not make a hearing a prerequisite for ruling on a preliminary

injunction.” It is in the discretion of the court whether to hold an evidentiary

(footnote continued on next page)

Documentation submitted by the parties reflects that certain Housing

and Urban Development (“HUD”) programs are administered by local public

housing agencies (“PHAs”). See 42 U.S.C. §1437, et seq. An Annual

Contributions Contract (“ACC”) between HUD and the PHAs requires the

PHAs to maintain certain insurance coverages. See 42 U.S.C. §1436c, 24

C.F.R. §965.205(a). Usually, the required insurance must be obtained

through “open and competitive bidding.” See 24 C.F.R. §965.205(a).

However, such competitive bidding is not required if a PHA purchases the

insurance from a HUD-approved nonprofit insurance entity owned and

controlled by PHAs, referred to as a Qualified PHA-Owned Insurance Entity

(“QPIE”). Id.

hearing where there is an absence of genuine factual dispute. Bradley, 910

F.2d at 1175-76 (“[A] district court is not obliged to hold a hearing when the

movant has not presented a colorable factual basis to support the claim on

the merits or the contention of irreparable harm.”)

Here, the court allowed ample time and leeway for briefing on the

motion and indicated that it would determine whether a hearing was

necessary after briefing was complete. In conjunction with the motion and

briefing, the parties submitted various exhibits. While the petitioner made

conclusory arguments with respect to the irreparable harm factor, it provided

no support for its contentions. Respondent pointed this out in its briefing.

Despite filing other materials, the petitioner did not attempt to remedy this

deficiency. As discussed herein, because the court finds that the petitioner

has presented no colorable basis for its contention of irreparable harm, a

factor critical to its success on the pending motion, the court decides the

motion without a hearing.

In accordance with Congressional instruction, in 1993, HUD

promulgated a regulation which provides the standards for QPIEs. See 24

C.F.R. §965.205. Pursuant to the regulation, an eligible QPIE must be

created by PHAs and limit participation to PHAs and to nonprofit entities

associated with PHAs that engage in activities or perform functions only for

housing authorities or housing authority residents. 24 C.F.R. §965.205(a),

(c). If a QPIE does not meet the requirements of the regulation, HUD may

revoke its approval. See 24 C.F.R. §965.205(e).

The relevant procedural background of this case demonstrates that on

February 24, 1989, HARIE was approved to forego the competitive bidding

process when offering insurance to PHAs.2 Years later, on or about July 1,

1995, HARIE began insuring non-PHA municipalities and their political

subdivisions, which apparently led to an indication by HUD that HARIE’s

QPIE status would be revoked. (Id.). With various communications being

passed between HUD and HARIE over the course of years with respect to

2 The procedural background has been taken from the Secretary’s

order denying HARIE’s appeal of the decision of the ALJ with which HARIE

has noted no dispute. (Doc. 1-1, Ex. A). In any event, the court may take

judicial notice of the procedural background set forth therein. See Assaad v.

Fudge, 2022 WL 17338050, at *2 (D.D.C. Nov. 30, 2022) (citing Vasser v.

McDonald, 228 F. Supp. 3d 1, 10 (D.D.C. 2016) (“[C]ourts have taken judicial

notice of Final Agency Decisions, especially for background information such

as dates of filings[.]”)).

this issue, ultimately, a letter dated October 10, 2000, was sent from HUD to

HARIE indicating that HUD was “withdrawing the pending non-approval of

HARIE as a PHA-owned insurance organization that qualifies as complying

with 24 C.F.R. §965.” Id.

Nothing further occurred with respect to the matter until February 2017

when the parties again began exchanging communications over a period of

time with respect to whether HARIE was compliant with the bid exemption

regulation. On the premise that HARIE was non-complaint with the

requirements of the regulation, HUD indicated HARIE had two options: (1)

create a distinct entity to legally separate HARIE’s public housing from non-

public housing business; or (2) request a waiver of the regulation’s

requirements. According to the record, HARIE did neither.

On September 14, 2018, HUD informed HARIE of its intent to revoke

HARIE’s approval as a QPIE under 24 C.F.R. §965 Subpart B within sixty

days. On September 20, 2018, HARIE requested a hearing to challenge the

revocation in accordance with 24 C.F.R. §965.205(e), after which HUD

indicated it would take no action on the matter until a decision was made by

a hearing officer. On September 28, 2018, HUD notified the Pennsylvania

Public Housing Agency that it had initiated the process to revoke HARIE’s

approval under 24 C.F.R. §965.205, that a hearing had been requested, and

that no action would be taken pending the hearing.

No further action was taken by HUD on the revocation until September

24, 2021, when a “Superseding Notice of Withdrawal” was issued

withdrawing approval of HARIE as a QPIE pursuant to 24 C.F.R.

§965.205(e). It was noted that this letter superseded any prior

correspondence and “serve[d] to notify HARIE of HUD’s determination and

provide the opportunity and procedure to request a hearing to challenge this

determination.” HARIE was notified of the procedures to challenge the

withdrawal action in accordance with 24 C.F.R. Part 26 Subpart A. Again,

HARIE requested a hearing on the revocation, and a hearing was set to

commence before an administrative law judge (“ALJ”) on March 14, 2022.3

In the meantime, HUD filed a complaint setting forth two bases for revoking

HARIE’s approval as a QPIE: (1) HARIE was not exclusively owned and

controlled by PHAs, and (2) HARIE did not limit participation to PHAs. HARIE

filed an answer to the complaint with affirmative defenses on December 3,

2021.

3 Upon request of the parties, the hearing was rescheduled to May 23,

2022.

On February 23, 2022, the ALJ granted HUD’s motion to strike

HARIE’s affirmative defenses, in part, striking HARIE’s defenses that the

regulation exceeded statutory authority. The ALJ denied the motion, in part,

declining to strike HARIE’s defenses as to deprivation of due process,

waiver, ratification, and estoppel.

The parties then filed dispositive motions. Initially, on April 22, 2022,

HARIE filed a motion to dismiss HUD’s complaint on four grounds: (1) HUD

had not promulgated a regulation requiring exclusivity in ownership or

control; (2) Congress had not enacted a statute requiring QPIEs to be

exclusively owned or controlled by PHAs; (3) the terms of ownership and

control are not defined by the relevant regulation or statute; and (4) HARIE

was not in violation of the regulation or statute because it “insures

municipalities and their political subdivisions as the same exclusively and

solely provide essential services to PHAs and housing authority residents

including but not limited to water services, sewer services, police protection,

fire protection, waste collection, public education, etc.”

On the same date, HUD filed a motion for summary judgment arguing:

(1) there was no genuine issue of material fact; (2) HARIE does not limit

participation to PHAs and entities only serving PHAs because it insures

municipalities and their subdivisions; (3) HARIE is not solely owned and

controlled by PHAs because the majority of its voting members were non-

PHAs, and one of HARIE’s board members represented a non-PHA

member; and (4) HARIE’s affirmative defenses of estoppel, ratification, and

denial of due process failed as a matter of law.

Shortly after the dispositive motions were filed, by order dated April 26,

2022, the ALJ ruled upon a motion to compel discovery by HARIE. In doing

so, the ALJ noted that HUD was previously directed to provide a

supplementary privilege log. In all other respects HARIE’s motion to compel

was denied.

On May 13, 2022, the ALJ ruled on the parties’ dispositive motions.

The ALJ denied HARIE’s motion to dismiss Counts 1 and 2. The ALJ further

denied HUD’s motion for summary judgment as to Count 1 finding that HUD

“had not established every material fact regarding the ownership and control

of [HARIE].” The ALJ granted the motion for summary judgment as to Count

2 finding that HUD demonstrated that material facts were not in dispute and

material facts supported Count 2 because HARIE does not limit participation

to PHAs and admitted that it provides insurance to municipalities and other

local government subdivisions. The ALJ found that a QPIE must meet all

eligibility requirements in order to be approved to retain approval as a QPIE.

The ALJ dismissed Count I of the complaint without prejudice as moot and

ordered that HARIE’s status as an approved QPIE be revoked.

On June 10, 2022, HARIE filed an appeal of the ALJ’s May 13, 2022,

decision to the Secretary of HUD. By order dated August 31, 2022, the

Secretary denied HARIE’s appeal and the ALJ’s May 13, 2022, ruling on the

dispositive motions was affirmed. Specifically, it was found that the ALJ

correctly denied HARIE’s motion to dismiss and granted HUD’s motion for

summary judgment as to Count 2 of the complaint. It was further found that

HARIE’s affirmative defenses of due process, ratification and estoppel were

not legally sufficient. Finally, it was found that HARIE failed to preserve the

ALJ’s ruling on the motion to compel for appeal and waived its objection to

the notice of hearing. (Doc. 1-1).

By way of this civil action, HARIE has now filed a petition for review of

final agency action under the Administrative Procedures Act (“APA”), 5

U.S.C. §§701-706, challenging HUD’s revocation of its prior approval as a

QPIE. (Doc. 1). In conjunction with this action, HARIE has filed the pending

TRO/PI motion seeking to have the court order HUD to immediately restore

it to an approved qualified PHA-owned insurance entity under 24 C.F.R.

§965, Subpart B arguing that PHAs and redevelopment authorities will be

immediately and negatively impacted in their ability to plan and budget their

insurance coverages upon their renewal period.

The TRO/PI motion presents that HUD’s decision to rescind HARIE’s

prior approval as a qualified PHA-owned insurance entity violates applicable

HUD regulations and any such action is arbitrary, capricious and an abuse

of discretion, and otherwise not in accordance with the law. HARIE contends

it has been denied due process in that it has not been provided an

administrative remedy for review of HUD’s decision under 24 C.F.R.

§965.205(e) or any other administrative means. Further, HARIE argues that

HUD’s order revoking its status is in excess of statutory jurisdiction, authority

and/or limitations, and is without observance of procedure required by law.

As a result of HUD’s actions, HARIE argues that PHAs and Redevelopment

Authorities will be immediately and negatively impacted because their ability

to plan and budget their insurance coverages will be impacted if the status

quo is not preserved. HARIE requests that the court issue a TRO/PI enjoining

HUD from revoking its prior approval as a qualified PHA-owed insurance

entity.

Federal Rule of Civil Procedure 65 is the rule which governs TROs and

PIs. These motions are judged against exacting legal standards. Injunctive

relief “is not granted as a matter of right.” Kershner v. Mazurkiewicz, 670 F.

2d 440, 443 (3d Cir. 1982). It “is an ‘extraordinary remedy.’” Doe by & through

Doe v. Boyertown Area Sch. Dist., 897 F.3d 518, 526 (3d Cir. 2018) (quoting

Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004)). A motion

for TRO/PI is properly granted only in cases where such relief is the “only

way of protecting the plaintiff from harm.” Instant Air Freight Co. v. C.F. Air.

Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989). The grant or denial of a

motion for injunctive relief is within the sound discretion of the district judge.

Kershner v. Mazurkiewicz, supra. (citing Eli Lilly & Co. v. Premo

Pharmaceutical Laboratories, Inc., 630 F.2d 120, 136 (3d Cir. 1978), cert.

denied, 449 U.S. 1014 (1980)). “It has been well stated that upon an

application for a preliminary injunction to doubt is to deny.” Madison Square

Garden Corp. v. Braddock, 90 F.2d 924, 927 (3d Cir. 1937).

“When evaluating a motion for preliminary injunctive relief, a court

considers four factors: (1) has the moving party established a reasonable

likelihood of success on the merits (which need not be more likely than not);

(2) is the movant more likely than not to suffer irreparable harm in the

absence of preliminary relief; (3) does the balance of equities tip in its favor;

and (4) is an injunction in the public interest?” Reed v. Garcia, 2023 WL

1864885, at *2 (M.D. Pa. Feb. 9, 2023) (quoting Fulton v. City of

Philadelphia, 922 F.3d 140, 152 (3d Cir. 2019) reversed on other grounds by

141 S. Ct. 1868 (U.S. 2021)). “The first two factors are prerequisites for a

movant to prevail.” Id. (quoting Holland v. Rosen, 895 F.3d 272, 286 (3d Cir.

2018)). “[A] failure to show a likelihood of success or a failure to demonstrate

irreparable injury must necessarily result in the denial of a preliminary

injunction.” In Re Arthur Treacher’s Franchise Litigation, 689 F.2d 1137,

1143 (3d Cir. 1982). “If these gateway factors are met, a court then considers

the remaining two factors and determines in its sound discretion if all four

factors, taken together, balance in favor of granting the requested

preliminary relief.” Reed, 2023 WL 1864885, at *2 (quoting Reilly v. City of

Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017)).

Looking at the prerequisites, perhaps the most important prerequisite

for the issuance of a preliminary injunction is a demonstration that if it is not

granted, the applicant is likely to suffer irreparable harm before a decision on

the merits can be rendered. See Continental Group, Inc. v. Amoco Chems.

Corp., 614 F.2d 351, 356 (3d Cir. 1980) (emphasis added). Irreparable injury

is “potential harm which cannot be redressed by a legal or equitable remedy

following a trial.” Instant Air Freight, 882 F.2d at 801. A court may not grant

preliminary injunctive relief unless “[t]he preliminary injunction [is] the only

way of protecting the plaintiff from harm.” Id. The relevant inquiry is whether

the party moving for the injunctive relief is in danger of suffering the

irreparable harm at the time the preliminary injunctive relief is to be issued.

Id. Speculative injury does not constitute a showing of irreparable harm.

Continental, 614 F.2d at 359; see also Public Serv. Co. v. West Newbury,

835 F.2d 380, 383 (1st Cir. 1987). “The possibility that adequate

compensatory or other corrective relief will be available at a later date, in the

ordinary course of litigation, weighs heavily against a claim of irreparable

harm.” Instant Air Freight, 882 F.2d at 801 (quoting Sampson v. Murray, 415

U.S. 61, 90 (1964)).

Without more, HARIE claims that, if its prior approved status as a QPIE

is rescinded by HUD, it will suffer immediate irreparable injury because the

potential economic loss would be so great as to threaten destruction of its

PHA business. HARIE posits that approximately 50% of its policies are

underwritten for PHAs. Where the economic loss involved in a matter would

be so great as to threaten destruction of the moving party’s business, HARIE

argues that a preliminary injunction should be issued to maintain the status

quo.

Under 24 C.F.R. 965, Subpart B, HARIE argues that it enjoys a bidding

waiver that allows PHAs to obtain their insurance without the necessity of

competitive bidding. According to HARIE, this waiver allows it to offer quality

insurance coverage to PHAs at a cost effective premium while providing

comprehensive coverage since PHAs operate under restricted budgets.

HARIE argues that for thirty-seven (37) years it has been providing low-cost

affordable insurance to housing and redevelopment authorities upon which

these authorities can rely and budget accordingly. As argued by HARIE,

revocation of its QPIE status will not only negatively impact it but will also

negatively impact PHAs which rely on HARIE for affordable and dependable

insurance coverage. HARIE argues that revocation of its QPIE status will

return PHAs to the times prior to the idea of reciprocal exchange when PHAs

paid exorbitant premium costs for insurance coverage.

In considering HARIE’s arguments relating to irreparable injury, the

court first notes that while it is admirable that HARIE is concerned about the

economic impact of its QPIE status upon PHAs, HARIE has not

demonstrated that it has standing to seek injunctive relief on behalf of the

PHAs. As emphasized above, the applicant for injunctive relief must show

that it will suffer immediate irreparable harm if an injunction is not issued.

Here, HARIE must demonstrate that it will suffer irreparable harm and cannot

rely on any potential harm to PHAs to support its request for injunctive relief.

To the extent HARIE argues that revocation of its QPIE status

threatens destruction of its business, it provides no factual support. Although

HARIE puts forth that approximately 50% of its insurance policies are for

PHAs, it has not put forth any facts demonstrating the affect the income

generated from the PHAs has on the bottom line of its business. Moreover,

HARIE has not put forth any facts that loss of its QPIE status would affect its

bottom line at all since it is still able to obtain PHA business by participating

in the competitive bidding process. HARIE has provided no factual support

that participation in the competitive bidding process to procure PHA policies

would adversely affect or lead to the loss of its business.

Although courts have recognized that loss of a business or being

forced out of business may constitute irreparable harm warranting injunctive

relief, the movant faces a substantial burden to demonstrate that, absent

injunctive relief, the risk of that harm is more than speculative. See e.g.,

Minard Run Oil Co. v. United States Forest Serv., 670 F.3d 236, 255 (3d Cir.

2011) (“As a general matter, a purely economic injury, compensable in

money, cannot satisfy the irreparable injury requirement, but an exception

exists where the potential economic loss is so great as to threaten the

existence of the movant’s business.” (internal citations and quotation

omitted)). But see also, In re Arthur Treacher’s Franchisee Litig., 689 F.2d

1137, 1146 (3d Cir. 1982) (finding that injunctive relief was not warranted

because the plaintiff did not establish that it would in fact be forced into

bankruptcy without the injunction); Instant Air Freight Co., 882 F.2d at 802

(finding that injunctive relief was not warranted because the plaintiff did not

proffer evidence that it would, in fact, go out of business without the

injunction); Newlife Homecare Inc. v. Express Scripts, Inc., 2007 U.S. Dist.

LEXIS 33031, at *11-14, 2007 WL 1314861 (M.D. Pa. May 4, 2007) (“[T]he

law requires convincing proof that a business will in fact cease to exist or be

forced into bankruptcy for such an eventuality to be considered irreparable

harm.”); Hillard v. Guidant Corp., 37 F.Supp.2d 379, 383 (M.D. Pa. 1999).

HARIE has argued that it will suffer economic loss so great as to

threaten destruction of its business if an injunction is not issued. HARIE has

not however factually supported that argument. It has therefore not

demonstrated that it is entitled to injunctive relief.

In addition to failing to demonstrate that any economic harm it would

suffer would be destructive to its business, HARIE has also failed to

demonstrate that any alleged economic harm is imminent. The moving party

must establish that the harm is imminent and probable. Anderson v. Davila,

125 F.3d 148, 164 (3d Cir. 1997). In order to be imminent, the injury cannot

be remote or speculative; it must be poised to occur before the court can

decide the matter on the merits. See BP Chems. Ltd. v. Formosa Chem. &

Fibre Corp., 229 F.3d 254, 263-64 (3d Cir. 2000). As pointed out by HUD,

PHAs are not required to renew their insurance contracts annually and are

permitted to modify existing contracts with respect to the period of

performance. HARIE has not presented any facts with respect to how many

PHAs are currently up for renewal such that an injunction must issue to

prevent any alleged economic harm prior to a decision on the merits in this

case.

In light of the foregoing, HARIE has not demonstrated it will suffer

immediate irreparable injury as a result of HUD’s revocation of its QPIE

status. Because HARIE has not demonstrated what has been considered the

most important of the prerequisite factors, the court need not consider the

other factors for obtaining injunctive relief. HARIE’s motion for TRO/PI will

be denied.

As alternative relief, HARIE seeks a stay of agency action pending

judicial review pursuant to 5 U.S.C. §7054. As the court has found that HARIE

4 Pursuant to 5 U.S.C.A. § 705,

When an agency finds that justice so requires, it may postpone the

effective date of action taken by it, pending judicial review. On such

conditions as may be required and to the extent necessary to prevent

irreparable injury, the reviewing court, including the court to which a case

may be taken on appeal from or on application for certiorari or other writ to a

reviewing court, may issue all necessary and appropriate process to

postpone the effective date of an agency action or to preserve status or rights

pending conclusion of the review proceedings.

5 U.S.C.A. §705.

has failed to demonstrate irreparable injury, any request for a stay under

§705 will be denied.

As a final matter, HARIE has pending before the court a motion to

expedite a hearing on its motion for TRO/PI (Doc. 24). In the court’s

discretion, it has determined that the motion can be resolved without the

need for a hearing. As such, HARIE’s motion to expedite will be dismissed

as moot.

An appropriate order shall issue.

s/ Malachy E. Mannion

MALACHY E. MANNION

United States District Judge

DATE: March 29, 2024

22-1565-01