# Petition — STATE OF NEW YORK, et al. v. MILTON FORMAN, et al. (Nos. 74-647, 74-157)

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1974

## Text

_—

74-647 4 | “FILED.

"NOV 25 1974

MICHAEL RODAK. Geof

OCTOBER TERM, 1974

No. 74....

Tue Srate or New York and the New York Stare Hovustna
Finance AGENCY,
Petitioners,

against
Mitton Forman and E.xten Formay, et al.,

Respondents,
and

Unitep Hovstne Founnpation, Inc., et al.,
Additional-Respondents.

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

Louis J. LEFKowI!Tz
Attorney General of the
State of New York
Attorney for Petitioners
State of New York and
New York State Housing
Finance Agency
Office & P. O. Address
Two World Trade Center
New York, New York 10047

Tel. (212) 488-3446

TABLE OF CONTENTS

PAGE
ED cicunrheavenducnadsatodduiedbacens 2
Jurisdiction of This Court ...................0.5. 2
The Questions Presented .................ceeecuee 3
The Statutes and Rules Involved .................. 3
RT ere rrr 3
PLE 6 cdavcedaiucatscbsnecekacesbads 4
Reasons for Granting Certiorari .................. 4
PT t-ccacadusestbdndenadeesadebesncswccael 15
SE EP ac baednuenbadcueschecwendustvndeneese 17
SE OO kin bee eadcckescadcsdbenbersdecsnsasnes 18
TABLE OF AUTHORITIES
Cases:
DeVoe v. Ostrander, Civ. No. C 3, 74-95 (S.D. Ohio,
decided October 18, 1974) .................... 15
Dugan v. Rank, 372 U.S. 609, 620 (1963) .......... 13, 14
Edelman v. Jordan, 415 U.S. 651 (1974) ..... 6, 8,9, 10, 15
Employees v. Missouri Public Health Employees, 411
ae Ee ED bcccchedcennncuceses 6, 8, 9, 10, 11, 15

Ford Motor Co. v. Department of Treasury of In-
diana, 323 U.S. 459, 465-466, 65 S.Ct. 347, 89

Se Se I occa bucckevadcdssnasens 12, 13
Great Northern Life Ins. Co. v. Read, 322 U.S. 47,
54, 64 S.Ct. 873, 877, 88 L.Ed. 1121 (1944) ...... 12,14

J. I. Case v. Borak, 377 U.S. 426, 12 L. Ed. 2d 423,
BS De, Ge, BRD CEG < i ccccccvcecdcscesscessees 7

ii TABLE OF CONTENTS

Jordan v. Gilligan, 400 F 2d 701, 706 .............. 15

Kennecott Copper Corp. v. State Tax Comm., 327
U.S. 573, 577, 66 S.Ct. 745, 90 L.Ed. 862 (1946) 13

Knight v. State of New York, 443 F. 2d 415 ...... 12, 13, 15
MacKethan v. Commonwealth of Virginia, 370 F.
ees, 3 Ge, TA Wek BUD veecccecccncudccsasce 11
Mader v. Armel, 402 F.2d 158 (6th Cir. 1968) ...... 8
Maryland v. Wirtz, 392 U. S. 183 (1968) .......... 9
Mathews v. Fisher, No. 8482 (S. D. Ohio 1974) ..... 11
Murray v. Wilson Distilling Co., 213 U.S. 151, 171,
53 L. Ed., 742, 29 S. Ct. 458 (1909) ........... 8
Parden v. Terminal Railway of Alabama Docks De-
partment, 377 U.S. 184 (1964) ..... 5, 6, 8, 9, 10, 11, 14
People v. Brooklyn Garden Apartments, 283 N.Y. 373
SEED d6encbccusceseisnacnencasecdcsucessens 15
Petty v. Tennessee-Missouri Bridge Comm’n., 359
By Ek Ee ED Nwredueedccnccccccssontesacens 8
Rothstein v. Wyman, 467 F. 2d 226, 238 (2nd Cir.
1972), cert. den. 411 U.S. 921 (1973) .......... 14
Whitten v. State University Construction, 42 LW
2506 (decided March 5, 1974) ................ 15
Statutes:

New York Private Housing Finance Law,
DEE neckeeskeshedsnesneacensecnseesees 3, 4, 12, 17

TABLE OF CONTENTS

New York Public Housing Law,

Securities Act of 1933,
Section 17(a)
Section 18

Securities Exchange Act of 1934,
Section 10(b)
Rule 10b-5

SP Ge DU. cxccecncunecesneseweebuseeuéaeeeel
BD We BUD wo cncavencccccsvedscccuseckeniehes

Miscellaneous:

1964 New York State Legislative Annual, p.

DO Skunk sdedeideddeiteseuencuaeenaswaneeens

eoeeeoeveeeeeeeeeeeeeeeeeeeeeeeeeeseee @

OTD bide sdivnsndnidcnennciendédccuuees

Dae ves

12

In THE

Supreme Court of the United States

OCTOBER TERM, 1974

No. 74....

A.
—

Tue Srate or New Yor« and the New York Strate Hovsine
FuNance AGENCY,
Petitioners,
against

Mitton Forman and Euxien Formay, et al.,

Respondents,
and

Unirep Hovusine Founpation, Inc., et al.,
Additional-Respondents.

’
vv

PETITION FOR A WRIT OF CERTIORARI TO
THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

Petitioners, the State of New York and State Housing
Finance Agency, respectfully pray that a Writ of Cer-
tiorari issue to review the judgment of the United States
Court of Appeals for the Second Circuit, dated June 12,
1974, reversing a judgment of the United States District
Court for the Southern District of New York, which had
dismissed the complaint in this action.

Another petition has been filed for such a writ by the
other defendants herein (No. 74-157). At the time of such

2

filing, the State petitioners still had pending before the
Second Circuit a motion for rehearing. Such rehearing
was denied on September 12, 1974.

The State petitioners now join in the petition filed by
the other petitioners. To avoid repetition, we state that
we adopt the position of those petitioners: that “member-
ship” in or share ownership in a state-financed and super-
vised non-profit cooperative housing corporation. as de-
scribed by the District Court (Exh. B, p. 4), did not
constitute a “security” within the ambit of the Securities
Act of 1933 and the Securities and Exchange Act of 1934
for the reasons, among others, stated in their petition (No.
74-157). .

This petition is presented on additional grounds which
affect only the State petitioners: the immunity of the State
from suit in the federal courts by reason of the provisions
of the Eleventh Amendment; and the gross misinterpreta-
tion by the Second Circuit of the provisions of a state stat-
ute, New York Private Housing Finance Law, 4 32(5)
providing for only a limited waiver of sovereign immunity.

Opinions Below

The opinion of the Court of Appeals is reported at 500
F 2d 1246; and is set forth in Appendix A to the connected
petition (No. 74157). The opinion of the District Court
is reported at 366 F. Supp. 1117; and is set forth in Ap-
pendix B to that petition (No. 74-157).

Jurisdiction of This Court

The judgment sought to be reviewed was entered on
June 12, 1974 and is set forth in Appendix C to petition
74-157. The petitioners’ motion for rehearing was denied
by Court of Appeals order, dated September 12, 1974 and
is set forth in Appendix D to this petition.

3

The Questions Presented

In addition to the questions presented by petition 74-157,
this petition presents the following questions:

1. Does a State waive its Eleventh Amendment im-
munity from suit in the federal courts by regulating the
issuance of share membership in a cooperative housing cor-
poration and by supervision of the construction of a low
and middle income housing project, essentially non-profit
in nature, particularly where such a corporation is fur-
nished substantial subsidies through the aid in financing it
received through mortgages provided at low interest rates
by the State Housing Finance Agency?

2. Did the Court of Appeals misconstrue New York
Private Housing Finance Law $§32(5) by giving it a
blanket waiver construction (not shown to be attributed to
it by the New York courts), even though the statute permits
the State its Commissioner or its “supervising agency”
(which the Housing Finance Agency is not) to be sued in
the same manner as a private person, but only as to duties
and liabilities arising out of Article 2 of the New York
Private Housing Finance Law (known as the Mitchell-
Lama Law)?

The Statutes and Rules Involved

The statutes and Rules involved are: those set forth in
petition 74-157 ; and, in addition, as to the State petitioners,
New York State Finance Law, § 32(5), which we reproduce
herein as Appendix E.

Statement of the Case

We adopt, for the purpose of this additional petition,
the statement set forth in petition 74-157 (pp. 4-9).

4

Proceedings Below

The portion of the prior petition’s analysis of the pro-
ceedings below is accurate; and we adopt that analysis as
to those proceedings insofar as they affect all defendants.

As to the state petitioners, it should be noted, however,
that the Second Circuit passed upon Eleventh Amendment
and immunity issues which the District Court, in dismiss-
ing the complaint herein, did not even reach. The Court of
Appeals held the New York State Housing Finance Agency
to be a “person” within the meaning of 42 U.S.C., § 1983;
and found that the State itself had expressly waived im-
munity by the provisions of New York Private Housing
Finance Law, §32(5). See Appendix A to petition 74-157
(pp. 20-22).

Reasons fer Granting Certiorari

(1)

We support fully the reasons set forth in the petition
filed by the other petitioners-defendants (no. 74-157, pp.
11-27).

(2)

Additional reasons for granting a writ of certiorari stem
from the unnecessary burden which will be imposed upon
New York taxpayers and the federal courts by the con-
tinued presence in this litigation of the New York State
Housing Finance Agency and the State itself as defendants.
Even more significant from a national point of view is the
implication of the Court of Appeals decision that a State
has voluntarily subjected itself, by a limited waiver of im-
munity, to liability in the federal courts for the acts or omis-
sions of a state regulatory agency it. supervising the spon-
sorship, planning, development, construction and initial
management of a state-aided real estate project, con-
structed entirely within the geographical limits of the
State.

5

(A)

In the event that this Court permits the State’s regula-
tion of the development and financing of this new City
to become the subject of litigation in federal Courts, it
may be anticipated that an appropriate review of the
details of such development and financing will also en-
cumber the calendars of one or more District Court
judges for years.

As a matter of court administration, this Court, even
though it might not ordinarily choose to pass prior to
final judgment, upon the Eleventh Amendment and im-
munity issues which we urge were erroneously decided
by the Second Circuit, will surely recognize that it is
judicially desirable not to burden the District Court with
the task of reviewing unnecessarily the extraordinary
issues which the State’s defense of its regulatory processes
will entail.

If the case goes back to the District Court in its present
posture, with the Second Circuit’s rulings on the Eleventh
Amendment and immunity issues as the law of the case,
the State may be obligated, upon a step-by-step basis, to
attempt to justify each of the regulatory decisions in-
volved in the development, construction and financing of
the new City of 15,400 housing units. Our new Rome was
not built ina day. Moreover, it was built during a period
when an unprecedented inflationary economy caused the
developers and regulatory agency to reevaluate prior
judgments repeatedly to meet constantly changing con-
ditions. A mass of material may accumulate in this single
trial which will approach the volume presented to this
Court in its current October Term. If this accumulation
ean be dispensed with, it should be.

(B)

The Second Circuit opinion, with reference to the State’s
Eleventh Amendment argument for dismissal, relied on the
decision in Parden v. Terminal Railway of Alabama Docks

6

Department, 377 U.S. 184 (1964) ; but completely and bliss-
fully disregarded this Court’s decision in Edelman v. Jor-
dan, 415 U.S. 651 (1974), which had been decided less than
three months before and which effectively distinguished the
Parden decision.

We shall argue, if certiorari is granted, that the Court
of Appeals decision conflicts with the rationale of this
Court’s recent decision in Edelman, supra. By reason of
a similar lapse and a failure, in addition, to understand
the history of New York’s efforts to develop adequate hous-
ing facilities, it found Employees v. Missouri Public Health
Dept., 411 U.S. 279 (1973) to be distinguishable, 500 F. 2d
1246, 1256, fn. 13.

We shall also assume, for the purpose of this subdivision
of our argument that the State was engaged in the regu-
lation of “securities” in the development of this coopera-
tively organized, state subsidized and state-aided housing
development. Of course, we adhere to the argument pre-
sented by our co-defendants that the State’s regulation did
not relate to “securities” as federally defined.

(1)

In determining whether Congress has, in a particular
instance, exercised its power to require waiver of immunity,
federal courts must, of course, exercise their skills in statu-
tory construction. Fortunately, this Court has given a
great deal of recent guidance in how these skills are to be
exercised.

The first question which must be answered is whether
Congress has authorized suit of the sort sought to be
brought against a class of defendants which includes the
States. Justice Rehnquist stated this requirement in
Edelman, supra, as follows (p. 678) :

“But in this case the threshold fact of congressional
authorization to sue a class of defendants which liter-
ally includes States is wholly absent.”

7

When the instant case is measured against that stand-
ard, it fails. Congress has never authorized suit under
either the 1933 or 1934 Acts against a class of defendants
including States for violations of Section 17(a) of the 1933
Act or Section 10(b) of the 1934 Act.

Consider first the 1934 Act, upon which the plaintiffs
principally rely. That statute contains no section author-
izing a private right of action against any defendant for
violation of Section 10(b). Section 10(b), as written by
Congress, was to be enforced by the Securities Exchange
Commission.

Of course, the courts have implied a private right of
action for violations of Section 10(b) and Rule 10b-5. But
Mr. Justice Rennquist makes it clear that an implied
right of action will not satisfy the “threshold” test of
Edelman (p. 679):

“And while this Court has, in cases such as J. J. Case
v. Borak, 377 U. 8. 426, 12 L. Ed. 2d 423, 84S, Ct. 1555
(1964), authorized suits by one private party against
another in order to effectuate a statutory purpose, it
has never done so in the context of the Eleventh
Amendment and a state defendant.”

The logic of Justice Rehnquist’s position is convincing.
The question before a court looking at an asserted implied
waiver of the Eleventh Amendment is whether Congress
intended to require that waiver. Surely no Congressional
intent to require waiver can be found in court creation of
a private right of action.

Just as there is no Congressional authorization under the
1934 Act to sue a class of defendants including States, so
also there is no such authorization under the 1933 Act for
violations of Section 17(a). Section 17 of the 1933 Act is
a criminal provision, obviously intended by Congress to be
enforced as are all federal criminal laws. Congress created
no private right to sue for violation of Section 17.

8

Some courts have implied a private right of action for
violation of Section 17(a), Mader v. Armel, 402 F. 2d 158
(6th Cir. 1968). But an implied private right of action
does not meet the “threshold” test of Edelman.

In sum, neither statute relied upon by the plaintiffs is
sufficient to satisfy the test of Edelman v. Jordan. In
neither act has Congress authorized suit against States for
the sorts of violations alleged in the Complaint here.

(2)

In addition, this Court requires a showing that Congress
intended to abrogate State immunity.

“The question of waiver or consent under the Eleventh
Amendment was found in those cases [Employees,
Parden and Petty v. Tennessee-Missouri Bridge
Comm’n., 359 U. S. 275 (1959)] to turn on whether
Congress had intended to abrogate the immunity in
question, and whether the State by its participation in
the program authorized by Congress had in effect con-
sented to the abrogation of that immunity.” Edelman,
supra, at 678.

This showing must be a strong one, since

“Constructive consent is not a doctrine commonly asso-
ciated with the surrender of constitutional rights...”
Id.

The court in Edelman adhered to its previous standard of
explicit abrogation of the immunity,

“we will find waiver only where stated ‘by the most
express language or by such overwhelming implica-
tions from the text as will leave no room for any other
reasonable construction.’ Murray v. Wilson Distilling
Co., 213 U. S. 151, 171, 53 L. Ed. 742, 29 S. Ct. 458
(1909).” Id.

&,. .-3 . >

Even if there were a right of action against States under
the 1933 and 1934 Acts, that would not necessarily imply
Congress intended federal court jurisdiction of that right.
In Employees, supra, the court affirmed its previous hold-
ing (Maryland v. Wirtz, 392 U. S. 183 (1968)) that Con-
gress had created a right of action against the States. But
the court denied this right implied any remedy by suit in
federal court. In fact, the teaching of Employees is that
Congress can and does create rights without remedies, at
least where the remedy sought is a suit against an uncon-
senting State in federal court.

In both the 1933 and 1934 statutes, Congress carefully
preserved the jurisdiction of the States to regulate securi-
ties. Section 18 of the 1933 Act provides:

“Nothing in this subchapter shall affect the jurisdiction
of the securities commission (or any agency or office
performing like functions) of any State or Territory
of the United States, or the District of Columbia, over
any security or any person.” (15 U.S.C. § 77r)

In nearly identical language, Section 28 of the 1934 Act
preserves State jurisdiction under that Act (15 U.S.C.
§ 78bb). It would be strange, indeed, to discover that Con-
gress had taken such great pains to protect explicitly State
regulation of securities and then silently intended that, if
any State exercised that jurisdiction, it would forfeit its
Eleventh Amendment immunity.

Indeed, the very argument is absurd. If States had to
risk federal court damage suits for huge amounts of money
by regulating securities, they would all surely abandon the
field. But that is clearly not what Congress intended when
it so explicitly protected their jurisdiction.

In Parden, there was a statute which satisfied the “thresh-
old” test of Edelman (See Edelman opinion at 678), but
that is certainly not the case here. Entirely apart from

OO eee |

10

Edelman, the reach of Parden is severely restricted by
Employees. Mr. Justice Douglas explained (p. 256):

“Parden involved the railroad business which Ala-
bama operated ‘for profit.’ [citation omitted. } Parden
was in the area where private persons and corpora-
tions normally ran the enterprise.”

Alabama was engaged in what Justice Douglas called an
an “isolated state activity” of a proprietary nature usually
performed by private enterprise. There was no logical
reason to exclude the tiny minority of railroad workers
employed by States from the coverage of the FELA; the
court found Congress intended no such exclusion. Proprie-
tary operation of a railroad is no essential governmental
function and Alabama entered into it, the court found,
knowing it would waive its Eleventh Amendment immunity
thereby.

But the kind of implicit waiver in Parden is as far as
this Court would go. Justice Dove tas found the operation
of state hospitals involved in Employees was not a proprie-
tary, bu. a governmental, function. (Jd. at 256). And
Justice MarsHALL, concurring, found Missouri had no real
choice about operating its hospitals and thus did not “‘con-
sent” to federal jurisdiction by continuing to operate them
after the FLSA was amended. He said (p. 263):

‘‘For me at least, the concept of implied consent or
waiver relied upon in Parden approaches, on the facts
of that case, the outer limit of the sort of voluntary
choice which we generally associate with the concept
of constitutional waiver . . . [In contrast with Par-
den]. It obviously is a far different thing to say that
a State must give up established facilities, services,
and programs or else consent to federal suit.”

If the ownership and operation of state hospitals is not
a proprietary act which waives Eleventh Amendment im-

ll

munity, a fortiori a purely governmental act such as regu-
lation of securities does not do so.

In MacK ethan v. Commonwealth of Virginia, 370 F. Supp.
1 (E. D. Va. 1974), Judge Merhige faced precisely the same
issue which is now before this Court. There also a re-
ceiver of a savings and loan association sought to hold the
Virginia banking authorities liable under the federal se-
curities legislation on grounds of negligent supervision.
Judge Merhige dismissed the Complaint, stating (370 F.
Supp. 1, 4):

“Plaintiff now attempts to extend the Parden doctrine
into the area of pure governmental regulation. Such
effort, in the Court’s view, must fail. The impetus
toward application of the Employees rationale is
stronger here than in the case in which it was an-
nounced. While the operation of hospitals is not nec-
essarily a governmental function, the specific nature
of the hospitals involved in Employees gave state ac-
tivity in that area a traditional base. In the present
context, the state activity attacked is necessarily of
a governmental nature. Regulation of securities is
not an endeavor in which private persons are free to
participate.”

There is no language in the 1933 or 1934 Acts to sup-
port the plaintiffs’ theory of waiver. Employees hol’s
waiver must be supported by explicit language and fails
to find it in the semi-proprietary activity of owning and
operating hospitals. Judge Merhige in MacKethan sup-
ports conclusion here that the securities situation is even
clearer than Employees. See also the opinion of Judge
Hogan in Mathews v. Fisher, No. 8482 (S. D. Ohio 1974).
The Second Circuit’s theory of waiver is not sound in any

respect.

12
(C)

The Second Circuit demonstrated a complete lack of
familiarity with the functioning of the Mitchell-Lama Act
and other provisions of New York’s Private Housing
Finance Law.

To illustrate: the panel’s rejection of the State’s claim
of immunity is predicated upon its citation of Private
Housing Finance Law, § 32(5). A footnote in that opin-
ion sets forth that section, with emphasis added (500 F. 2d
1246, 1256, fn. 12):

“With regard to duties and liabilities arising out of
this article the state, the commissioner or the super-
vising agency may be sued im the same manner as a
private person. No costs shall be awarded against the
commissioner, the state, or the supervising agency, as
the case may be, in any such litigation.””*

With reference to State immunity from suit in federal
courts, the panel completely ignored the caveat by Judge
Frienpiy in Knight v. State of New York, 443 F. 2d 415,
in a decision by this very same Circuit, where he carefully
noted (p. 419):

“the Supreme Court has admonished that federal
courts ought not ‘to be astute to read the consent to
embrace a Federal as well as state courts and that
only a ‘clear indication’ of the state’s intention to sub-
mit to suit in federal courts will surmount the Elev-
enth Amendment’s bar, Great Northern Life Ins. Co.
v. Read, 322 U.S. 47, 54, 64 S.Ct. 873, 877, 88 L.Ed.
1121 (1944). See, to the same effect, Ford Motor Co.

* The first sentence of this paragraph merely incorporated, with
an appropriate addition of the words, ‘‘the supervising agency”’,
the suability provision previously contained in Public Housing
Law, § 15, as to the housing commissioner and the State. See 1964
New York State Legislative Annual, p. 342.

te

© memes wee ~ es ee

Ree ee a

13

v. Department of Treasury of Indiana, 323 U.S. 459,
465-466, 65 S.Ct. 347, 89 L.Ed. 389 (1945); Kennecott
Copper Corp. v. State Tax Comm., 327 U.S. 573, 577,
66 S.Ct. 745, 90 L.Ed. 862 (1946). We find no such
‘clear indication’ here.”

With reference to the Housing Finance Agency, the panel
completely overlooked the fact that the term “supervising
agency” contained in the section quoted by Judge Oakes is
strictly defined in Public Housing Law, $2, as follows
(Subd. 15):

“The comptroller in a municipality having a comp-
troller; in a municipality having no comptroller, the
chief fiscal officer of such municipality; except that in
the city of New York it shall be the housing and devel-
opment administration.”

Further confusion in this litigation could be avoided by
a complete deletion from the Second Circuit’s opinion of
its analysis relating to the defenses of the State and
its Agency. The fact that the Agency is an “agency” does
not qualify it as a “supervising agency”.* In fact, it is a
financing agency. Private Housing Finance Law, Art. 3.
And if the purpose of this litigation is to impose any lia-
bility upon it, that liability may be borne ultimately by the
State itself, regardless of any prior statutory commitments
or prohibitions. In this aspect of the case, this Court can
not blink its eyes at the fact that in Knight v. State, 443
F. 2d 415, this same Circuit Court also pointed out (443
F. 2d, at p. 420) that Knight’s suit against state officers
could be deemed a suit against the State, improperly
brought; and noted the general rule in Dugan v. Rank, 372

* Supervision of a state-aided limited profit company is assigned
to the State Commissioner of Housing and Community Renewal, a
person who has not even been made a party to this lawsuit. See
Private Housing Finance Law, Art. 2; and Public Housing Law,
§ 3, subd. 1, Definitions (L. 1961, ¢. 398).

14

U.S. 609, 620 (1963) that:

“a suit is against the sovereign if ‘the judgment sought
would expend itself on the public treasury or domain,
or interfere with the public administration,’ * * * or
if the effect of the judgment would be ‘to restrain the

Government from acting, or to compel it to act.’”

See also the opinion of Judge McGowan for a unanimous
court (Frrenpiy, Ch. J. and Trmsers, C.J.) in Rothstein y.
Wyman, 467 F. 2d 226, 238 (2nd Cir. 1972), cert. den. 411
U.S. 921 (1973) rehearing den. 411 U.S. 988 (1973), under-
lining the rule that any waiver of the shield of the Eleventh
Amendment must be shown to be clear and unequivocal,
citing Great Northern Life Ins. Co. v. Read, 322 U.S, 47,
54 (1944) and effectively distinguishing Parden (supra).

The waiver set forth in Private Housing Finance Law ean
not, on its face, be deemed to be a clear and unequivocal
relinquishment of the State’s immunity from federal court
suit. Moreover, the Second Circuit’s analysis completely
disregards the fact that, as to obligations issued by the
Agency itself specific judicial remedies are provided by
New York Private Housing Law, §$ 50.

If the terms of the Finance Agency’s mortgages are to
be subjected to change by the federal district courts, and
supervision of non-profit state-subsidized projects are to
be subjected to the vagaries of a single District Judge's
conception of a tenant’s expectation of profit from parti-
cipation in a non-profit cooperative enterprise, the District
Court’s assumption of jurisdiction for that purpose will
be self-defeating. The wisdom and propriety of any addi-
tional subsidies to the plaintiffs should be determined by
the people’s representatives in the Legislature, not by the
federal courts.

15

Conclusion

The Second Circuit’s decision ignores this Court’s deci-
sion in Edelman v. Jordan (supra). To avoid any further
confusion in this action and to avoid the risk, which the
Court of Appeals decision presents, of impairing the viabil-
ity of the State’s Mitchell-Lama housing program, a writ
of certiorari should be granted. On its face, the panel’s
decision completely ignores the Circuit’s own holding in
Knight v. State, supra, 443 F. 2d 415. It also ignores the
philosophy of the First Circuit decision in Whitten v. State
University Construction, 42 LW 2506 (decided March 5,
1974). And its attempt to distinguish the recent decision in
Employees v. Missouri Public Health Employees, 411 U.S.
279 (1973), on the ground that the State’s housing activity
came after the enactment of the federal securities laws is
predicated upon a completely factual misconception; and a
failure to recognize New York’s long history of seeking to
solve its housing problems by various methods including a
State Housing Law (L. 1926, C. 823), which provided for
limited divided housing companies (akin to limited-profit
companies authorized by the Mitchell-Lama Act) and state
supervision long before the Federal Securities Act of 1933.
See People v. Brooklyn Garden Apartments, 283 N.Y. 373
(1940). See also DeVoe v. Ostrander, Civ. No. C 3, 74-95
(S.D. Ohio, decided Oct. 18, 1974), where the Forman rea-
soning as to waiver of State immunity for alleged improper
regulation has already been rejected; and the cases cited
therein.

The purpose of the Eleventh Amendment was to protect
the States’ fiscal integrity from attack in federal court.
Jordan v. Gilligan, 400 F 2d 701, 706. If the Second Cir-
cuit’s theory in this case were adopted, it would substan-
tially undermine that constitutional policy, for States would
be target defendants in virtually every stock fraud case
where they had done any regulation. States would be faced

16

with huge contingent liabilities or the option of abandoning
securities regulaition. Neither result was intended by the
Congress or the framers of the Eleventh Amendment.

Respectfully submitted,

Lovis J. LErKOwITz
Attorney General of the
State of New York
Attorney for Petitioners
State of New York and
New York State Housing
Finance Agency
Office & P. O. Address
Two World Trade Center
New York, New York 10047
Tel. (212) 488-3446

by Danie, M. Conen
Assistant Attorney General and
Member of the Bar of the United

States Supreme Court

17

APPENDIX D
(Prior Appendices are contained in No. 74-157)

UNITED STATES COURT OF APPEALS
Seconp Crecuit

At a Stated Term of the United States Court of Appeals,
in and for the Second Circuit, held at the United States
Court House, in the City of New York, on the ninth day of
September, one thousand nine hundred and seventy-four.
Present:

How. Pavt R. Hays

Hon. James L. Oakes,
Cireuit Judges,
Hon. A. SHERMAN CHRISTENSEN,
District Judge
Docket No. 73-2613

4
- 4

Mruron and Exvten Forman, Earce and Patricia McFre.p,
Micuaet and Puyius Sicmiaxn, Jack and Diuye R.
Biackix, Cart and Atma Trost, Ropert and PavLine
Carrincton, Gitsert and Giorta Narins, Murray and
Hevtene Victor, Jerome and Leonare Barr, Haroip
Asyix, Josern S. and Wanna D. O’Conwnor, et al.,

Plaintiffs-Appellants,

Vv.

Community Services, Ixc., Unrrep Hovsine
FounparTIon, et al.,
Defendant-Appellee.

.

A petition for a rehearing having been filed herein by
counsel for the appellee,

Upon consideration thereof, it is
Ordered that said petition be and hereby is denied.

A. Dawytet Fvsaro
Clerk

18

APPENDIX E
§ 32. Supervision and regulation

The commissioner or the supervising agency, as the case

may be, may:
> . . > * .

5. (a) Administer oaths, take affidavits, hear testimony
and take proof under oath at public or private hearings;
(b) subpoena and require the attendance of witnesses and
the production of books and papers pertaining to any in-
vestigations and inquiries authorized by this article and ex-
amine them in relation to any matter concerning which the
power to investigate is granted; (c) issue commissions for
the examination of witnesses who are out of the state or
unable to attend or are excused from attendance; (d) in-
vestigate into the affairs of a company and into the deal-
ings, transactions or relationships of such company with
third persons and into the affairs of any person, firm, cor-
poration or other entity having a financial interest, whether
direct or indirect, in the design, construction, acquisition,
reconstruction, rehabilitation, improvement, financing or
operation of any project undertaken by a company (e)
intervene, as a matter of right, in any action or proceeding
of which notice shall be given affecting the project of a
company; (f) take such steps in such action or proceeding
as may be necessary to protect the public interest.

With regard to duties and liabilities arising out of this
article the state, the commissioner or the supervising
agency may be sued in the same manner as a private per-
son. No costs shall be awarded against the commissioner,
the state, or the supervising agency, as the case may be,
in any such litigation.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385003_0195%3A1. Public record. Not legal advice.