Appendix — Burroughs v. Pierce

Bob boats usr & Office-Supreme Court, US

SUPREME COURT, U.S. 4 = J] 36 eit Eo on

WASHINGTON, D.C. 20543

No , JAN 13 068

STEVAR,

CLERK

In THE

Supreme Court of the Anited States

Octoser TERM, 1984

LEO BURROUGHS, JR., et al,

Petitioners,

Vv.

CARLA HILLS, Secretary, Department of

Housing and Urban Development, et al.,

Respondents.

———

—=a

APPENDIX TO THE

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Rosert L. GraHam

(Counsel of Record)

Tomas J. McCartuy

JENNER & BLOCK

One IBM Plaza

Chicago, Illinois 60611

(312) 222-9350

Attorneys for Petitioners

January 12, 1985

United States Law Printing Co., Chicago 60618, (312) 525-6581

RE tla PN Re 4 CANE. NP Ae aE T

TABLE OF APPENDICES

APPENDIX A Judgment of the United

States Court of Appeals for

the Seventh Circuit

(August 15, 1984)

APPENDIX B Order of the United States

Court of Appeals for the

Seventh Circuit Denying

Petition for Rehearing and

Suggestion for Rehearing en

Banc (October 22, 1984)

APPENDIX C Memorandum Order of the

United States District

Court for the Northern

District of Illinois Grant-

ing Summary Judgment (March 8,

1983 )

APPENDIX D Minute Order of the United

States District Court for

the Northern District of

Illinois Denying Taxation

of Costs (May 10, 1983)

APPENDIX E Memorandum Order of the

United States District

Court for the Northern

District of Illinois Denying

the Motions to Dismiss

APPENDIX F Relevant Statutory and

Regulatory Provisions

-

Asha

eg ah

Oa aes

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1984

LEO BURROUGHS, JR.,

et al.,

Petitioners,

Vv.

CARLA HILLS, Secretary,

Department of Housing

and Urban Development,

et al.,

Respondents.

APPENDIX

A-1

APPENDIX A

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 83-1604, 83-2289

LEO BURROUGHS, JR., ET AL.,

Plaintiffs-Appellants,

; Cross-A ppellees,

H Vv.

:

: CARLA HILLS, SECRETARY, DEPARTMENT OF HOUSING AND

{ URBAN DEVELOPMENT, ET AL.,

Defendants-Appellees,

Cross-Appellants.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 76 C 1604—James B. Moran, Judge.

ARGUED APRIL 11, 1984—DECIDED AUGUST 15, 1984

Before POSNER and FLAUM, Circuit Judges, and

NICHOLS,* Senior Circuit Judge.

PER CURIAM. The court is unanimously of the opinion

that the decision of District Judge Moran on summary

judgment dismissing the petition, ought to be affirmed,

and judgment is entered to that effect. The court is also

unanimously of the opinion that the decision of the same

district judge, denying costs to the prevailing parties,

* The Honorable Philip Nichols, Jr., of the United States Court

of Appeals for the Federal Circuit, is sitting by designation.

a

A-2

ought to be reversed, and judgment is entered to that

effect. The judges of this panel differ somewhat in stating

their reasons and, therefore, the views of each judge are

separately appended. However, Judge Posner joins in Judge

Nichols’ opinion except Part IV B, and except for that

part, it may therefore be taken as the opinion of the court.

Affirmed in No. 83-1604 and reversed in No. 83-2289.

NICHOLS, Senior Circuit Judge. This action was

brought in the Northern District of Illinois by eight in-

dividuals and a voluntary community organization, against

former Housing and Urban Development (HUD) Secretary

Carla Hills, various regional and local HUD officials, and

Seward Rist, Area Management Broker. Hills is no longer

Secretary, but successors have not been formally substi-

tuted as parties. Plaintiffs originally sought injunctive

relief but now seek money damages only, on account of

injury they allege they suffered as nearby residents be-

cause defendants allowed certain Chicago residential prop-

erty acquired by foreclosure to be vacant and a hazard

to health and safety of community residents from acquisi-

tion, November 1974, through disposal, July 19, 1976, all

contrary to Federal law, state law, municipal ordinance,

and in Mr. Rist’s case, his contract. A motion to dismiss

was early denied, but this holding is passed over here

because not assigned as error in any party’s appeal. The

injunctive relief issue has been considered mooted since

the disposal of the property shortly after the suit was

filed.

On March 8 and 10, 1983, District Judge Moran, hav-

ing before him cross-motions for summary judgment and

a fact stipulation signed by all the parties, granted de-

fendant’s motion and dismissed the petition, but denied

the defendants their costs. Burroughs v. Hills, 564 F.

Supp. 1007 (N.D. Ill. 1983). This appeal followed and there

is a cross-appeal relating to costs only.

Facts

The stipulated facts represent a somewhat unhappy

situation from the Federal taxpayer’s point of view. The

case is said to be representative of others, and a test.

The property in question is a three-story residential struc-

ture at 7228 S. Coles Avenue in Chicago. Becoming title-

holder by foreclosure, HUD allowed the building to be

unoccupied and unguarded, with no watchman on duty,

and unfenced. Glass was broken throughout, rats, mice,

other rodents and insects were present, foundations were

cracked, exterior walls needed tuckpointing, floors were

unstable, exterior doors were unsecured, the front steps

and back porch were in disrepair, debris was scattered

around the building, including rubble, refuse, and lumber

material ‘‘knocked down by vandals’ for whom the build-

ing was “a frequent target.” Mr. Rist as contract “area

management broker’’ (AMB) inspected seven times and

reported the building was secured, the windows boarded,

the grass cut, and the lot free of debris. (Evidently the

parties mean to imply that Mr. Rist reported falsely.) Mr.

Rist had the management of 150-200 government-owned

buildings and so far as appears is the only defendant who

actually saw this property, but the official defendants had

independent means of knowing what was occurring so far

as they were aware of plaintiffs’ complaints.

HUD originally considered the property had a fair

market value of $40,000, less needed repairs at $17,389,

making it available at $22,600. Some $285 was spent on

maintenance pursuant to Mr. Rist’s invoices. HUD paid

all the taxes. On July 19, 1976, HUD sold the property

to the city for $1, which could, under the applicable pro-

gram, be done only if the appraised value was under

$5,000. Chicago conveyed it to the South Shore Senior

Citizens Association, which was stipulated to be pro-

ceeding with repairs estimated to cost over $40,000, to be

financed by HUD by “block grant.’”’ Thus the stipulated

facts indicate a precipitate decline in market value dur-

A-4

ing the period of HUD ownership, and we assume that

this occurred, with an increase in the repairs needed.

Plaintiffs are eight individuals who resided as tenants

within 500 feet of this derelict property, plus the Five

Block Club, a voluntary organization formed for the pur-

pose of combating neighborhood blight. The interest of

the individual plaintiffs was their concern for the health

and safety of themselves and their families. They feared

increased crime and drug activity because the building

was ‘‘a likely hideout for criminals and gangs.”’ They rou-

tinely passed the immediate area and saw the building

each day. None of them claim to own any real property

in the neighborhood.

We note that dwelling within 500 feet of such an offend-

ing structure is a fact that confers special status under

Illinois law, whether one is owner or tenant. If his prop-

erty or person are “substantially affected’”’ by an alleged

violation, in addition to other remedies, he may sue for

injunction, without having to “prove any special or uni-

que damage to himself or his property from the alleged —

violation.”” Chapter 24, paragraph 11-13-15 of Illinois

Revised Statutes, as amended and in effect when the com-

plaint was filed.

Plaintiff Burroughs first complained to defendant Waner

on Merch 19, 1975, and on April 2 the Five Block Club

presented Waner with petitions signed by 107 members,

one of » om oddly enough was defendant Rist. At that

time they urged immediate sale to a buyer who would

rehabilitate. They frequently communicated afterwards to

Mr. Rist, but it is stipulated that the official defendants

obtained no more information as to the bad condition of

the building until the suit was filed. The stipulation

describes their duties, from which we are perhaps ex-

pected to infer that it was their duty to know. Mr. Rist

was a party to a contract with the government by which

he was to perform, as to properties to which HUD ac-

quired title, various services including inspection, and tak-

ing the necessary steps when repairs were found neces-

sary. |

A-5

The stipulation closes with a curious provision that if

the official defendants are liable, they are liable jointly

and severally in the amount of $1,000, and if Rist is liable,

it is in the amount of $350. The stipulation is silent, and

we are not informed what liability might be asserted in

companion cases, if any, should what we here hold sug-

gest such liabilities and what we say treated as stare

decisis.

II

Theory of the Action

Defendant Hills and the other official defendants are held

by plaintiffs to be liable in their official capacities under

Federal law. The official defendants, except Hills, are said

to be liable in their individual capacities also under Fed-

eral law. Mr. Rist is liable under his contract with HUD,

and under state and local law, they contend.

The district judge also dealt with what he considered

to be pendent jurisdiction claims under the doctrine of

United Mineworkers of America v. Gibbs, 383 U.S. 715,

726 (1966). He pointed out that under the state law relied

on, injunctive relief only is provided and he denied dam-

ages on that ground. Plaintiffs do not argue any reason

why this is erroneous. This, however, does not preclude

consideration of local law because in HUD operations, as

we will point out, Federal law requires property manage-

ment in conformity to local law, and thus if a breach of

state law occurs, it may ipso facto be a breach of duties

under Federal law, and it may not be necessary for the

court to rely on pendent jurisdiction. HUD properties do

not become like some Federal properties, enclaves exempt

from local law. Merrill Tenant Council v. HUD, 638 F.2d

1086 (7th Cir. 1981).

Plaintiffs admit that the National Housing Act, 12

U.S.C. §1701 and ff is the authority under which the

United States insured and then foreclosed the mortgage

on the involved property, becoming owner of record, and

under which the Federal defendants acted. 12 U.S.C.

§§ 1713(k), 1710(g). They also admit that the act contains

A-6

no language expressly authorizing suits against the Secre-

tary of HUD, or any of her subordinates, to enforce of-

ficial or personal liability for not executing the granted

powers in a proper manner. The theory of the action, in

its most basic form therefore, is that the litigation rights

asserted herein are among those which can be held to

have been implied by the legislative scheme, according

to the standards stated in Cort v. Ash, 422 U.S. 66 (1975)

or in the progeny of that case.

insofar as the suit is against the defendant officers in

their official capacities, it is understood by the parties and

held by the district judge, that the Secretary may sue

and be sued in her official capacity by 12 U.S.C. § 1702

which, as a practical matter, means that the ““Mortgage

Insurance Fund,” or possibly other government funds,

may be used to pay judgments and that issues of sover-

ei,n immunity and consent to be sued are eliminated.

Merrill Tenant Council v. HUD, supra at 1091. But sec-

tion 1702 does not of its own force create a private cause

of action. Shivers v. Landrieu, 674 F.2d 906, 911 n. 21

(D.C. Cir. 1981). It would seem that so far as official funds

are concerned, naming the Secretary as a defendant suf-

fices and other officials need not have been joined.

The pleadings, the stipulations, and pronouncements of

counsel make it clear, however, that personal damages

recoverable from individual officials are also sought.

Originally this is on a tort theory. Evidently this mulcting

of personal rather than official funds would make some

changes in application of the Cort v. Ash factors: the detri-

ment to other beneficiaries of the program by depletion

of available housing funds would be eliminated, but on the

other hand, there would be created a disincentive to any-

one accepting appointment as a HUD official. These dif-

ferences between the two kinds of relief sought are sur-

prisingiy little discussed by the parties, and the district

judge seems to disregard the possibility that the official

defendants, except Hills, may be personally liable.

The theory of Mr. Rist’s liability is necessarily a little

different. He contracted to do. things for HUD which, had

A-7

he done them, would have lessened or eliminated any

detriment to the plaintiffs. They presumably sue him as

third-party beneficiaries under his contract. Cf. Merrill

Tenant Council v. HUD, supra at 1093. This may elimi-

nate Cort v. Ash as controlling authority in his case, but

if they are to show that they were intended contract bene-

ficiaries, they must have to make a showing that in ef-

fect he was working for them.

The supposed pendent state law claims are really claims

that the policy of the Housing Act, 12 U.S.C. § 1701 and

ff, requires that when HUD becomes owner of real prop-

erty located within sovereign states, acting under the

General Welfare clause and not under specific Federal con-

stitutional grants of power, HUD must conform to con-

struction codes, etc., of local law just as the previous but

now foreclosed mortgagors had to do. The existence of

such a policy of law is not in dispute and is illustrated

by quotes from HUD documents which need not be de-

tailed. For example, Mr. Rist’s contract required him to

prepare local tax returns and see that HUD was duly ad-

vised of tax liabilities. It is therefore plain that plaintiffs

can, as they do, buttress their Federal claims by refer-

ences to breaches of local law.

Ili

Statutes, Regulatory Provisions, and

Contract Provisions Relied On

These are placed in Appendix A and are given verbatim

as plaintiffs quote them in their brief.

The HUD Handbook is quoted and relied on by plain-

tiffs as a government regulation. It appears on its face

to be intended for internal use for the information and

guidance of HUD officials. Such handbooks are usual in

the Executive Branch of the United States Government.

Uncertainty often exists whether a handbook is meant to

be, or is inadvertently made to be, an independent source

of legal rights or claims against the United States Govern-

ment and its officials. See treatment of this problem in

A-8

Fiorentino v. United States, 607 F.2d 963 (Ct. Cl. 1979),

cert. denied, 444 U.S. 1083 (1980). See also Litton Systems,

Inc. v. Whirlpool Corp., 728 F.2d 1428, 1439 (Fed. Cir.

1984), which says of the Manual of Patent Office Examin-

ing Procedure, “(tlhe MPEP has no binding force on us,

but is entitled to notice so far as it is an official inter-

pretation of statutes or regulations with which it is not

in conflict.” That is the weight we give the HUD Hand-

book here. Mr. Rist’s contract is on a standard govern-

ment form for Area Brokers.

IV

Discussion

A. The principal appeal.

In view of the very conspicuous inability of the plain-

tiffs to cite any statute granting them expressly a right

to sue in the Federal courts on account of the kind of

inadequate performance by HUD officials described in the

stipulation, or by their contractors, it is necessary for

them to show that Congress granted them by implication

a right to sue under a Cort v. Ash analysis. They under-

took to make such a showing to the district court and

partly persuaded it. Judge Moran held, to summarize brief-

ly his carefully reasoned analysis, that a breach of duty

owed towards these plaintiffs clearly occurred, but to en-

force it by money damages in his court would be counter-

productive because it would “ultimately come from the

pocket of a beneficiary” meaning apparently that payment

would deplete the Mortgage Insurance Fund and that it

would provide “some balm to some undefined and virtual-

ly undefinable class of people for continuing coexistence

with substandard housing”’ but not even necessarily deter

future derelictions of duty by HUD officials; the theory

here again being that funds would be diverted to give

balm to aggrieved individuals rather than being used to

bring housing wp to standard. Here again there seems to

be the unspoken assumption that the HUD defendants are

sued only in their official capacities and will not be re-

A-9

quired to make plaintiffs whole out of their own pockets.

The stipulation does not say this and we fail to see where

it so implies. It says all named defendants are “obiigated”

to pay the sums stated. The official group are “jointly

and severally obligated.” If public funds were to be used,

it would have sufficed to say that the Secretary was “obli-

gated.” Moreover, the class of possible claimants is not

all that open-ended. They were not certified as a class,

but they defined themselves as persons dwelling within 500

feet of the offending structure. This is treated as a distinct

category under local law, conferring standing to enforce

local statutes as we have shown.

Judge Moran’s analysis places him in the position of one

perceiving the occurrence of a legal wrong yet denying

any remedy to the persons wronged. This does not, by

itself, establish that he is in error, but it does invite our

thoughtful analysis. Though we agree with Judge Moran’s

result, we deem it necessary to undertake our own Cort

v. Ash analysis, adding ourselves to the many other cir-

cuit judges who have undertaken this task in line of duty.

To understand Cort v. Ash fully, it is necessary to note

that it is a case where the proponent of an implied cause

of action lost, by unanimous vote of all the Justices. The

four standards explain why that claimant lost. Had he

won, their meaning might be different. It is always an

error to separate statements by Justices or judges from

their context. The questions there stated to be the right

ones are summarized. (422 U.S. at 78.)

First, is the plaintiff ‘‘one of the class for whose

especial benefit the statute was enacted?” [Emphasis

in original.]

Second, is there any indication of legislative intent,

explicit or implicit, either to create such a remedy

or to deny one?

Third, is it consistent with the underlying purposes

of the legislative scheme to imply such a remedy?

Finally, is the cause of action one traditionally rele-

gated to state law?

A-10

Appellants make a valiant effort to show their entitle-

ment to an implied Federal cause of action under all four

Cort v. Ash factors, but it is suggested that this court

in Indiana National Corp. v. Rich, 712 F.2d 1180, 1182

(1983), treated the Cort v. Ash factors as somewhat out-

moded. We cited Touche Ross & Co. v. Redington, 442

U.S. 560, 575 (1979) as establishing that the “factors were

not of equal weight, but that the central inquiry, at which

the first three factors were all directed, was one of con-

gressional intent.’”’ We referred also to Transamerica

Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 18 (1979)

which anticipates Judge Moran in allowing implication of

some private remedies, but denying enforcement by

money damages. We do not think later Supreme Court

cases, if they really modify Cort v. Ash, do so in a man-

ner helpful to appellants’ case. It cannot be unfair to them

to make a full Cort v. Ash analysis, whether or not their

failure on the second or intent issue is by itself decisive.

We surmise that any dissatisfaction with the factors arises

from cases, such as Touche Ross where the intermediate

courts have applied them too readily in favor of an implied

cause of action.

In applying the first Cort v. Ash factor, we ask if

nonproperty owners residing within 500 feet of an offend-

ing structure are persons for whose “especial benefit the

statute was enacted.” Here we need not doubt that Con-

gress and the agency, HUD, all wanted the Housing Act

to be admininstered in such a way that plaintiffs’ class

and others would not be avoidably harmed. The damage

they might suffer from the neighborhood of dilapidated,

abandoned, or vandalized government-owned structures

was foreseen and so far as possible guarded against. But,

bearing in mind that the necessity of foreclosure arises

when a primary program has already failed, and that the

object of administration between foreclosure and disposal

is clearly to limit or avert the government’s fiscal loss,

and replenish the insurance fund, can it possibly be said

the plaintiffs are special beneficiaries?

A-11

As regards the second factor, there is no indication of

congressional intent to create a legal remedy, i.e. a

lawsuit, either in the statutory text or in the legislative

history. There is plenty of evidence of expectation, if the

HUD officials do a proper job, keeping the premises in

repair, stopping vandalism, excluding drug users and

criminal gangs, it will benefit the public fise and inciden-

tally make a better community. Plaintiffs are not enforc-

ing a property right by the instant suit, for they claim

to have none. They are not contract claimants. The idea

that they have special rights by virtue of membership in

the class of persons dwelling within 500 feet of the of-

fending structure, stems from state law giving them ac-

cess to state courts if they are in that category. It is not

at all apparent that Congress intended to give special

benefits to members of that identifiable group, in one par-

ticular state, in the special form of entry to the Fed-

eral courts to bring a lawsuit, where no such right is

granted to others who might suffer incidental or indirect

injury elsewhere if HUD officials do not do a proper job.

No legislative history is cited to supply what the statutory

language clearly does not supply.

It is not in any way inconsistent to say that Congress

intended HUD officials to conform to local law in their

management of foreclosed property in that location, yet

that Congress did not intend the vagaries of other local

law to confer implied causes of action on persons in that

locality even though no such cause might have been im-

plied in other !ocalities.

As to the third factor, the rernedies asserted are not

consistent with the underlying legislative scheme. The offi-

cials are expected to act promptly as responsible business-

men would if similarly situated, for example, officers of

a bank which has had to foreglose and finds itself willy-

nilly in the business of real éstate management and dis-

posal. An invitation to Federal judges to peer over the

shoulders of the management and interfere in the de-

tails of this business, would not further the underlying

purposes. We are not here concerned with public-owned

A-12

facilities, such as post offices, in whose management the

public has an abiding interest lacking here. Enforcement

by damages assessed against officials individually, as here

proposed, would tend to make HUD management reluc-

tant to foreclose, and thus they might fail to make the

best use of the tools given them, the mortgage instru-

ments, to limit and control government financial loss. Or

are we also to visualize suit by members of the 500-foot

class against HUD officials who have failed to foreclose?

Finally, the fourth Cort v. Ash factor is the only one

which is even neutral so far as plaintiffs are concerned.

The assessment of damages against Federal officials for

nonperformance of official duties is not one normally

relegated to state law.

The four factors, taken all together, fail to support the

implication of a private remedy in the Federal courts

under the housing legislation, of any form or description.

That the HUD officials appear by the stipulation (as they

do) not to have done things they ought to have done, is

true, but irrelevant. They owe their primary duty to their

employer, the United States Government, and that em-

ployer has ample means at its disposal to enforce diligence

by them, if it chooses to exercise its rights and sees them

as thwarting its purposes.

Efforts to enforce implied causes of action under the

National Housing Legislation or the HUD Handbook, have

frequently come under consideration of appellate courts,

and have always failed. Cases are:

M. B. Guran Co. v. City of Akron, 546 F.2d 201

(6th Cir. 1976)—(Disappointed bidder’s suit to enjoin

award of a HUD-subsidized contract in alleged viola-

tion of a HUD Handbook. Court applies Cort v. Ash

factors and states that the persons for ‘“‘whose espe-

cial benefit the statute was enacted” are those who

inhabit inadequate housing.)

Falzarano v. United States, 607 F.2d 506 (1st Cir.

1979)—(No Cort v. Ash implied right of action ac-

corded to tenants of HUD-subsidized housing for low,

moderate income persons.)

A-13

City of Rohnart Park v. Harris, 601 F.2d 1040 (9th

Cir. 1979)—(Suit by city as parens patriae on behalf

of persons injured to enjoin HUD and developers

from developing a regional shopping center as part

of a urban renewal project. Violation of various rules

of Housing Act alleged. Cort v. Ash factors applied

adversely to city.)

Shivers v. Landrieu, 674 F.2d 906 (D.C. Cir.

1981)—(Past and present tenants of HUD mortgage-

insured property have no right under Cort v. Ash

standards to sue to enforce compliance with HUD

regulations.)

Jackson v. Lyons, 506 F.2d 233 (D.C. Cir. 1974)—

(No implied right of action against HUD for insur-

ing housing that did not conform to D.C. Housing

Regulations, contrary to Section 221(dX2) of Housing

Act. This case decided before Cort v. Ash.)

In United States v. Winthrop Towers, F.2d 1028 (7th

Cir. 1980), this court reviewed the legality of a HUD fore-

closure in a foreclosure suit brought by HUD. However,

it held that HUD’s main duty was to the mortgagee, not

the mortgagor, and that negligent management and in-

spection were not affirmative defenses. That conclusion

seems to accord with ours.

Mr. Rist by his contract undertook to perform duties

as to management of foreclosed properties that otherwise

the defendant HUD officials would have had to perform

themselves. By his contract, he was to render various serv-

ices as set forth in the appendix. There is nothing in

the contract to show he was working for any outside per-

sons as third-party beneficiaries. His duty was to protect

the fiscal interests of the government. Nor does it ap-

pear that the Cort v. Ash factors work out more favorably

for plaintiffs in their suit against him, than they do as

to the HUD officials.

The short of it is that there are no provisions that ex-

press or imply an action in the Federal courts based on

the kind of nonfeasance stipulated here. Since no such ac-

y

tion is shown to lie, the question if ic did lie, what kind

of relief would be available to plaintiffs who have proved

their case, whether injunction, declaratory judgment, or

money damages, is an issue simply not reached. So far

as the duties of the Federal officiais included conformity

to local law, this conclusion embraces those laws as well

as Federal law.

As a matter of pendent jurisdiction, and as a separate

issue, and in his discretion, the district judge also or again

took up the breaches of local law that are stipulated, and

held that by local law injunctive relief only was allowed.

Since such relief was no longer sought, he entered sum-

mary judgment on the state claims as well. We do not

understand that this part of his decision is before us on

this appeal and therefore no further consideration of it

is called for. We affirm the summary judgment as entered.

A-14

B. The cross-appeal.

The official defendants cross-appeal respecting the refusal

of the district judge to award costs to them, having de-

cided in their favor. In his order he noted that the case,

though not a “landmark,” did present novel questions of

public interest and importance, that plaintiffs were of

limited means (not stated to be indigent) and were not

suing for commercial advantage or private gain. He cited

Delta Air Lines, Inc. v. Colbert, 692 F.2d 489 (7th Cir.

1982). These grounds for relieving a loser from what is

by Fed. R. Civ. P. 54(d) the “‘of course” normal conse-

quence of losing, are not by themselves sufficient to avoid

abuse of discretion under the rule.

This conclusion sufficies to dispose of the cross-appeal,

and any discussion whether the suit was frivolous is tempt-

ing though not strictly relevant. It cannot be denied that

plaintiffs had a legitimate grievance, whether or not a

cause of action. By the commonly accepted belief of the

lay public, one thinking he has such a grievance has a

Constitutional right to sue in the most convenient court,

without too nice a study of the jurisdiction and juris-

A-15

prudence of the selected tribunal. If he has chosen the

wrong one, its judge is not aggrieved because he has only

to throw the case out or transfer it to the proper court.

Understandably this view lacks a following among judges,

but all must be aware of its existence as a tide they must

swim with or against. What use is made of the first op-

portunity afforded under the Rules of the chosen court

to get rid of a misfiled case thus takes on more impor-

tance than many realize. To use this opportunity, if the

case does not belong in the court chosen, is to swim with

the tide, so to speak, whereas to labor on with the case

is not. Here, the first opportunity was a motion by de-

fendants to dismiss on the pleadings, that came before

another district judge, not Moran. Under date of October

11, 1978, it was held that the motion was denied because

a cause of action was stated under 42 U.S.C. § 1441. (See

Appendix for text of this section). Record Vol. I, Item

27. It appears the denial was legal error as the petition

did not state a cause of action within the limited jurisdic-

tion of the Federal courts—could not have if our decision

is right. This act lent dignity to the case and set the stage

for the forensic combat that followed. It was made unethi-

cal for counsel not to prosecute the claim as he did. In

these circumstances, responsibility for causing waste of

judicial resources on an unmeritorious case does not rest

wholly or even primarily upon plaintiffs and their counsel.

Here the cause was failure of the judicial machinery to

operate as it was intended to under the F.R.C.P.

A-16

APPENDIX A

Relevant Statutory Provisions

The Housing Act of 1949, 42 U.S.C. § 1441, provides in

pertinent part:

The Congress hereby declares that the general

welfare and security of the Nation and the health and

living standards of its people require housing produc-

tion and related community development sufficient to

remedy the serious housing shortage, the elimination

of substandard and other inadequate housing through

the clearance of slums and blighted areas, and the

realization as soon as feasible of the goal of a decent

home and a suitable living environment for every

American family, thus contributing to the develop-

ment and redevelopment of communities and to the

advancement of the growth, wealth, and security of

the Nation... . The Department of Housing and

Urban Development, and any other departments or

agencies of the Federal Government having powers,

functions, or duties with respect to housing, shall ex-

ercise their powers, functions, and duties under this

or any other law, consistently with the national hous-

ing policy declared by this Act and in such manner

as will facilitate sustained progress in attaining the

national housing objective hereby established... .

The Department of Housing and Urban Development Act,

as amended, 42 U.S.C. § 1441a, provides:

a) The Congress finds that the supply of the Na-

‘lon’s housing is not increasing rapidly enough to

meet the national housing goal, established in the

Housing Act of 1949, of the “realization as soon as

feasible of the goal of a decent home and a suitable

living environment for every American family”. The

Congress reaffirms this national housing goal and

determines that it can be substantially achieved

within the next decade by the construction or re-

A-17

habilitation of twenty-six million housing units, six

million of these for low and moderate income families.

(b) The Congress further finds that policies designed

to contribute to the achievement of the national hous-

ing goal have not directed sufficient attention and

resources to the preservation of existing housing and

neighborhoods, that the deterioration and abandon-

ment of housing for the Nation’s lower income

families has accelerated over the last decade, and that

this acceleration has contributed to neighborhood

disintegration and has partially negated the progress

toward achieving the national housing goal which has

been made primarily through new housing construc-

tion.

(c) The Congress declares that if the national hous-

ing goal is to be achieved, a greater effort must be

made to encourage the preservation of existing hous-

ing and neighborhoods through such measures as

housing preservation, moderate rehabilitation, and

improvements in housing management and mainte-

nance, in conjunction with the provision of adequate

municipal services. Such an effort should concentrate,

to a greater extent than it has in the past, on hous-

ing and neighborhoods where deterioration is evident

but has not yet become acute.

The National Housing Act, 12 U.S.C. § 1718, provides in

pertinent part:

(k) Acquisition of property by conveyance or fore-

closure. The Secretary is hereby authorized either to

(1) acquire possession of and title to any property,

covered by a mortgage insured under this section

and assigned to him, by voluntary conveyance in ex-

tinguishment of the mortgage indebtedness, or (2) in-

stitute proceedings for foreclosure on the property

covered by any such insured mortgage and prosecute

such proceedings to conclusion... .

A-18

(l) Handling and disposal of property; settlement of

claims. Notwithstanding any other provisions of law

relating to the acquisition, handling, or disposal of

real and other property by the United States, the

Secretary shall also have power, for the protection

of the interests of the Genera’ Insurance Fund, to

pay out of the General Insurance Fund all expenses

or charges in connection with, and to deal with, com-

plete, reconstruct, rent, renovate, modernize, insure,

make contracts for the management of, or establish

suitable agencies for the management of, or sell for

cash or credit or lease in his discretion, any prop-

erty acquired by him under this section . .

The National Housing Act, as amended, 12 U.S.C. § 1702,

provides, in pertinent part:

The powers conferred by this Act shall be exercised

by the Secretary of Housing and Urban Development

(hereinafter referred to as the “Secretary’’). In order

to carry out the provisions of this title and titles II,

III, V, VI, VII, VIII, [X, X, and XI, the Secretary

may establish such agencies, accept and utilize such

voluntary and uncompensated services, utilize such

Federal officers and employees, and, with the con-

sent of the State, such State and local officers and

employees, [and appoint such other officers and em-

ployees as he may find necessary . . . .] The Sec-

retary shall, in carrying out the provisions of this title

and titles II, III, V, VI, VII, VIII, IX, X, and XI

be authorized, in his official capacity, to sue and be

sued in any court of competent jurisdiction, State or

Federal.

Ill. Rev. Stat. ch. 24, § 11-31-1, as amended, provides, in

pertinent part:

§ 11-31-1. The corporate authorities of each munici-

pality may demolish, repair or cause the demolition

or repair of dangerous and unsafe buildings or un-

completed and abandoned buildings within the ter-

A-19

ritory of any such municipality .... No building

may be boarded up or otherwise enclosed.

The Municipal Code of the City of Chicago, § 39-13, pro-

vides, in pertinent part:

39-13. Any person or persons owning, maintaining,

operating, collecting rents for, or having any legal

or equitable interest in any vacant and open build-

ing, or any uncompleted abandoned building, or any

vacant boarded-up building or any otherwise enclosed

vacant building must have a watchman on duty upon

the premises on which any one of such aforementioned

buildings is situated every day continuously between

the hours of 4:00 P.M. and 8:00 A.M.

Said watchman required under the provisions of

this ordinance shall remair on duty daily during the

required hours until such building is either occupied

or razed ....

The Municipal Code of the City of Chicago, § 99-4, pro-

vides, in pertinent part:

99-4. No building, vehicle, structure, receptacle,

yard, lot, premises, or part thereof, shall be made,

used, kept, maintained, or operated in the city if such

use, keeping, maintaining, or operating shall be the

occasion of any nuisance, or shall be dangerous to life

or detrimental to health.

Every building or structure constructed or main-

tained in violation of the building provisions of this

code, or which is in an unsanitary condition, or in

an unsafe or dangerous condition, or which in any

manner endangers the health or safety of any per-

son or persons, is hereby declared to be a public

nuisance. Every building or part thereof which is in

an unsanitary condition by reason of the basement

or cellar being covered with stagnant water, or by

reason of the presence of sewer gas, or by reason

of any portion of a building being infected with

A-20

disease or being unfit for human habitation, or which

by reason of any other unsanitary condition, is a

source of sickness, or which endangers the public

health, is hereby declared to be a public nuisance.

Relevant Portions of the HUD Property Disposition

Handbook

Paragraph 23, Chapter 2, of the HUD Handbook provides,

in pertinent part:

b.

The repair program shall include all repairs

necessary to create maximum sales appeal and

eliminate existing or potential structural, me-

chanical and other deficiencies. In addition, the

repair program should include such upgrading

which, because of type and location of the prop-

erties, the Director determines necessary to

generate sales, or to stabilize or improve neigh-

borhoods. In establishing the repair program,

particularly where inner-city, core-area prop-

erties are involved, it is important to be aware

of the salutary effect that will probably result.

The timely provision of repair or substantial

rehabilitation may he critica! to the preservation

of blocks and even neighborhoods in older areas

of our cities and suburbs. Typically, in older but

still sound neighborhoods, the rehabilitation of

one house on the block can lead to investment

in upgrading other houses on the block. The

result of the repair program with respect to

deteriorating or substandard housing should be

to create a structure in like-new condition, with

all components operable, and with no major ex-

pense in the offing for several years. All major

repair work shall be accomplished in accordance

with established formal contracting and purchase

order procedures.

* * *

Immediate Protective Repairs. Irrespective of

whether full repairs are delayed, immediate at-

A-21

tention shall be given to those repairs required

to prevent undue deterioration and eliminate

hazardous conditions that may be dangerous to

the public.

h. Initial Cleanup and Maintenance. It is essential

that unsightly conditions be corrected prompt-

ly. Immediately upon taking possession the Area

Management Broker (AMB) or the local office,

if an AMB is not available, shall make arrange-

ments to have all rubbish removed and the

premises given a thorough cleaning, including

cutting of grass, weeding, and trimming of

shrubbery if needed.

i. Continued Maintenance. In addition to the in-

itial cleaning, arrangements shall also be made

for continued “housekeeping”’ maintenance, such

as care of shrubbery and lawns, snow removal

and broom cleaning. Unoccupied properties must

be maintained in clean and presentable condition.

Paragraph 185, Chapter 7 of the HUD Handbook pro-

vides, in pertinent part:

Repair and Maintenance Objectives.

a. The overall objective is to (a) place properties

in first-class condition to create maximum sales

appeal at the highest obtainable sales price in

order to contribute to maintenance of a firm real

estate market; (b) eliminate potential default

hazard attributable to physical deficiencies; and

(c) eliminate a!l structural, (including termite in-

festation) mechanical and surface deficiencies

which, if not eliminated, would result in major

repair or replacement expenditures by the pur-

chaser, or demands upon HUD under the terms,

of the warranty on the Sales Contract, Form

2384.

Paragraph 80, Chapter 3, of the HUD Handbook, provides

in pertinent part:

“t

A-22

80. Supervision of Area Management Brokers. In

order to obtain quality performance on a time-

ly basis, the CPO shall be responsible for assur-

ing that each area management broker (AMB)

understands what is expected of him, and that

he is familiar with the standards of acceptable

performance established by the local office for

all activities under his supervision. The CPO

shall supervise the activities of each AMB to the

extent necessary to develop and maintain top

quality management services. Where an AMB is

new to the program, the CPO shall expend a

sufficient amount of time, either personally or

by a qualified staff member, in training and

supervising the AMB and his employees who are

engaged in performing the services required

under the broker contract.

Relevant Portions of Seward Rist’s AMB Contract

The AMB Contract, Article 3, provides, in pertinent part:

ARTICLE 3.-FACILITIES, MATERIALS, LABOR

AND SERVICES TO BE FURNISHED BY THE

CONTRACTOR:

In consideration for compensation as stipulated in this

contract the Contractor agrees to perform in accord-

ance with the following requirements at no additional

expense to the Government except as provided here-

in. Bar ige:

d. SERVICES: The requisite time, attention and

effort of the principals and employees regularly en-

gaged in the established business of the Contractor

to properly discharge the obligations and responsi-

bilities of the Contractor as established hereunder,

including supervision of all repair, maintenance and

operating activities.

RMS BT ee Aen |

wher:

A-23

The AMB Contract, Article 4, provides, in pertinent part:

ARTICLE 4.-INITIAL SERVICES TO BE PER-

FORMED BY THE CONTRACTOR

The Contractor shall perform the foilowing initial

services stipulated with his regular employees at no

additional expense to the Government.

d. Informing the Government promptly concerning

all damage resulting from vandalism, fire, windstorm,

and other causes at the outset and thereafter as cir-

cumstances require.

The AMB Contract, Article 5, provides:

ARTICLE 5.-INITIAL SERVICES TO BE OB-

TAINED BY THE CONTRACTOR

The Contractor shall arrange for and supervise the

following initial services in accordance with all the

terms and conditions herein and specifically Article

9 and the limitations imposed under Article 10. The

actual repair or maintenance costs shall be reim-

bursable from project funds or through the U.S.

Treasury, or paid direct by the Government through

the U.S. Treasury, as appropriate.

a. Winterizing of all operating systems and equip-

ment, as to all properties vacant at the outset or

subsequently vacated or at such other time as condi-

tions require;

b. Removal from the premises of all trash and

debris, both as to interior and grounds;

ce. Securing the properties against unauthorized

entry and damage by the elements at the outset and

thereafter as needed;

d. Mowing the grass and trimming the shrubbery(.]

A-24

The AMB Contract, Article 7, provides in pertinent part:

The

ARTICLE 7..CONTINUING SERVICES TO BE

OBTAINED BY THE CONTRACTOR

The Contractor shall arrange for and supervise the

following continuing services in accordance with all

the terms and conditions hereof and specifically Ar-

ticle 9 and the limitations imposed under Article 10.

The actual repair or maintenance costs shall be re-

imbursable from project funds or through the U.S.

Treasury, or paid direct by the Government through

the U.S. Treasury, as appropriate.

a. Continuing maintenance of buildings and grounds

AMB Contract, Article 8, provides, in pertinent part:

ARTICLE 8.-CUSTODIAL SERVICES:

The Contractor shall perform custodial services on

vacant properties assigned hereunder which are en-

cumbered by mortgages assigned to the Secretary

under contracts of mortgage insurance or when the

property has been a>andoned and the Secretary holds

a purchase money mortgage taken back in connec-

tion with the sale of Such property or other form of

legal possession of which the Secretary does not hold

free and clear title to such property.

Contractor shall also provide for the protection and —

preservation of such properties. However, actions of

this nature shall be limited to those necessary for the

prevention of health hazards and minimum security

measures to prevent damage to the property by the

elements or by vandalism.

A-25

PosNnER, Circuit Judge, concurring. I join Judge Nichols’

opinion, but his laconic disposition of the cross-appeal leads

me to add a statement of my own view oi why the district

court’s refusal to award the defendants, as the winning

parties, their costs of suit under Rule 54(d) should be

reversed.

Under the rule, “costs shall be allowed as of course to

the prevailing party unless the [district] court otherwise

directs.” As an original matter this language could be in-

terpreted te give the district judge an essentially un-

reviewable discretion to award or not to award costs to

the winning party as the judge pleased. But this court

has not interpreted the rule thus. We have said it estab-

lishes a “ ‘principle of preference’ ” (quoting Friendly, In-

discretion About Discretion, 31 Emory L.J. 747, 768

(1982)) that in all but exceptional cases requires the judge

to award costs to the winning party, whether plaintiff or

defendant. See Coyne-Delany Co. v. Capital Development

Bd., 717 F.2d 385, 392 (7th Cir. 1983); Delta Air Lines,

Ine. v. Colbe ‘, 692 F.2d 489, 490 (7th Cir. 1982); Peveil

Bros., Inc. v. Schick Elec., Inc., 516 F.2d 772, 774-76 (7th

Cir. 1975). Since “‘the ingredients of a proper decision [to

withhold costs] are objective factors . . . accessible to the

judgment of a reviewing court,” Coyne-Delany Co. v.

Capital Development Bd., supra, 717 F.2d at 392, we

must determine whether such factors are present here.

The plaintiffs argue only two factors. The first, that they

are persons of limited monetary means, is entitled to little

weight in a case such as this where the defendants are

(with the exception of a broker hired by HUD to manage

the property in question) public officials whose expenses

of suit were borne by the United States, which is to say

by the federal taxpayer. Most taxpayers are persons of

limited means; most government revenue is raised from

such persons, and not from the wealthy few. The denial

of costs to the defendants in this case will not contribute,

however slightly, to a more egalitarian distribution of the

nation’s wealth.

The second factor that the plaintiffs ask us to consider

is whether, if they had won the case, it would have been

A-26

a “landmark” decision; they argue that the efforts of

litigants who press for fundamental changes in the law

should be subsidized, lest the high risk of losing deter

such litigants. I question the validity of this argument in

today’s legal climate. The federal courts are choking with

litigation, much of it completely meritless; fear of losing

seems not to be much of a deterrent. And to reward the

loser of what would have been a landmark case if he had

won creates the following paradox: the more frivolous the

suit,\the greater the landmark it would establish in the

unlikely eventsthat it succeeded, and hence the stronger

the argument for denying the winner his costs. A suc-

cessful suit to overrule Brown v. Board of Education, 347

U.S. 483 (1954), and thus make racial segregation in public

schools once again lawful, would be one of the all-time

legal landmarks. No one takes the landmark argument for

forgiving the loser’s costs that seriously; no one argues

for interpreting Rule 54(d) to encourage the bringing of

lawsuits that have no reasonable chance of succeeding,

merely because if they did succeed they would work a

legal revolution. The present lawsuit had no reasonable

chance of succeeding, and in fact borders on the frivolous.

As part of its program for subsidizing the housing needs

of veterans, the poor, and others, HUD guarantees mort-

gage loans on houses in which members of these groups

live. It is said that the high rate of default on its loans

to owners of housing for poor people has made HUD,

through foreclosure, the biggest owner of slum property

in the United States. After foreclosure, with the prop-

erty standing tenantless, deterioration often is rapid and

complete, and was in this case, where HUD lost its en-

tire investment in the property and the neighbors got a

blight, an eyesore, and maybe even a menace, to contend

with. Such are the unintended effects of public benevo-

lence. They are very unfortunate; but to think, as these

plaintiffs did, that the federal courts are authorized to pro-

vide a remedy is wishful thinking. They would be author-

ized only if there had been an invasion of the plain-

tiffs’ federal legal rights; but as Judge Nichols explains,

there is nothing in 42 U.S.C. § 1441a, the statute on which

A-27

this suit is founded, to suggest that Congress meant to

provide legal protection to neighbors of subsidized hous-

ing from the side effects—foreclosure, abandonment, de-

terioration—of federal housing subsidies. When the statute

speaks of “ ‘a suitable living environment,’ ”’ “the preser-

vation of existing housing and'neighborhoods,” and “neigh-

borhood disintegration” and “deterioration,” it is refer-

ring not to the neighbors of the subsidized homeowners

but to the subsidized homeowners themselves. It is their

living conditions, not those of their neighbors, that the

subsidy programs seek to protect and improve. To give

the neighbors rights of action against HUD and its

officials—whether equitable, to force HUD to spend what-

ever money is necessary to prevent a building that it has

taken over by foreclosure from deteriorating, or legal, to

compensate the neighbors for the nuisance created by

HUD’s neglect—will only compound the cost to HUD of

having to foreclose on its loans. Instead of just having

to write off a loan, which is bad enough, HUD would,

under the plaintiffs’ interpretation of the statute, have to

pay out additional money to the mortgagor’s neighbors—

money that would otherwise be available to improve the

stock of housing. The program would be made more ex-

pensive, and the intended beneficiaries would obtain no

net benefit from the additional expenses. The plaintiffs

ask us to bring about this result by playing a purely

verbal trick: defining “neighborhood” to mean the set of

neighbors of subsidized housing, though in the statute the

word simply means the area where the inhabitants of sub-

sidized housing live. Compare Neighborhood Development

Programs Act, 42 U.S.C. §§ 1469 et seq.

In tracing out the likely consequences of the plaintiffs’

interpretation of the statute, I have assumed that they

are seeking damages just from HUD. The idea that Carla

Hills, who was President Ford’s Secretary of Housing and

Urban Development, might be personally liable for the

untoward consequences of HUD’s programs during her

tenure—a liability that might run into the hundreds of

millions of dollars—is almost too silly for words, especial-

ly when one considers that there is no indemnification of

A-28

federal officers against whom a judgment is levied. But

public liability would be bad enough. It would as I have

said increase the costs of the government’s housing pro-

grams and do so for the benefit of those frequently im-

placable opponents of the programs, the neighbors of the

subsidy recipients. See, e.g., Gautreaux v. Pierce, 707

F.2d 265 (7th Cir. 1983). To seek a warrant for such liabil-

ity in the housing law itself requires the exercise of an

inflamed rather than merely creative legal imagination and

should not be encouraged by giving the Don Quixotes who

brought this suit the moral victory (slight as it is) of being

excused from paying the defendants’ costs.

It does not matter in this case which approach we take

to the question of deciding whether a statute that does

not expressly create a private remedy for its violation is

nevertheless enforceable by private persons. As Judge

Nichols explains, the plaintiffs flunk the multi-factored test

laid down in Cort v. Ash, 422 U.S. 66 (1975). Although

Cort is still cited often enough, there is some doubt

whether its test remains authoritative. See California v.

Sierra Club, 451 U.S. 287, 302-03 (1981) (concurring

opinion). The more recent cases suggest a simpler test,

whether Congress intended the courts to create a private

remedy. See, e.g., Daily Income Fund, Inc. v. Fox, 104

S. Ct. 831, 839 (1984). The plaintiffs flunk this test too. And

even under the most liberal test (no longer in vogue)—

that of Texas & Pac. Ry. v. Rigsby, 241 U.S. 33, 39

(1916)—whereby if a violation of the statute “results in

damage to one of the class for whose especial benefit the

statute was enacted, the right to recover the damages

from the party in default is implied,” the plaintiffs could

not win this case. They are not among the statute’s in-

tended beneficiaries.

I have said that the suit had no fair chance of suceed-

ing. This is evident even if we consider the plaintiffs’

pendent claims, whose dismissal by the district judge the

plaintiffs have not appealed. Because the federal claim was

dismissed on motion for summary judgment, it was not

proper for the district judge even to reach the merits of

~

~

s »

*A-29

any of the pendent claims; he should have relinquished

jurisdiction over them. When the federal claims in a case

are dismissed before trial, the considerations of judicial

economy that underlie the doctrine of pendent jurisdic-

tion are diminished and are outweighed by the inroads

that the doctrine makes into the autonomy of state courts

in matters of state law. It is therefore the rule that,

unless there are special circumstances, dismissai of the

federal claim before trial requires the district judge to

decline to exercise pendent jurisdiction over any state-

law claims. United Mine Workers of America v. Gibbs,

383 U.S. 715, 726 (1966); Bernstein v. Lind-Waldock &

Co., No. 83-2420, slip op. at 13 (7th Cir. June 18, 1984).

There were no special circumstances here. Although the

suit had been going on for a long time, and the district

judge was concerned that the plaintiffs would have a

statute of limitations problem if they started over in state

court, they would not have. See Ill. Rev. Stat., ch. 110,

q1°-217. They district court also noted that the defen-

dants would be entitled by 28 U.S.C. § 1442(aX1) to

remove a state court action brought against them. See

Willingham v. Morgan, 395 U.S. 402 (1969). But the

district court should not have made the decision to remove

for the defendants by retaining the pendent claims.

Finally, personal sympathy is not a proper basis for

withholding an award of costs under Rule 54(d). The

district judge, reacting as a citizen, did not like the way

in which a federal program was administered in this case,

and so he punished the government by denying the defen-

dants their costs. If I thought it relevant to my judicial

duty I would attempt to evaluate the program in this light

and in the end might agree with his assessment. But it

is no business of mine as a judge whether government

pregrams work well or badly, fairly or unfairly, provided

they do not violate anyone’s legal rights; and it seems

to me clear beyond argument that nothing the defendants

did or failed to do in this case violated any legal right

of these plaintiffs that was within the district court’s

power to enforce.

A-30

FLAUM, Circuit Judge, concurring in result. I agree

with my brethren that we should affirm the district

court’s rejection of the plaintiff's claims, and that the

district court abused its discretion in denying the defend-

ants their costs under rule 54(d).

As a line of recent Supreme Court cases makes clear,

the ultimate issue in a case such as this is whether Con-

gress intended to create a private right of action at the

time it enacted the statute in question. See, e.g., Daily

Income Fund v. Fox, 104 S. Ct. 831, 838 (1984); Merrill

Lynch, Pierce, Fenner & Smith v. Curran, 456 U.S. 353,

377-78 (1982); Texas Industries v. Radcliff Materials, Inc.,

451 U.S. 630, 639 (1981); Transamerica Mortgage Advisors

v. Lewis, 444 U.S. 11, 15-16 (1979). Thus, “(t]he question

is not simply who would benefit from the Act, but

whether Congress intended to confer federal rights upon

those beneficiaries.” California v. Sierra Club, 451 U.S.

287, 294 (1981). Congressional intent may be discerned by

examining a number of factors, including the statute’s

legislative history, the statute’s purpose, the overall legis-

lative scheme, the identity of the class for whose par-

ticular benetit the statute was passed, the existence of

express statutory remedies adequate to serve the leg-

islative purpose, and the traditional role of the states

in affording the relief claimed. See Daily Income Fund

v. Fox, 104 S. Ct. at 839; Texas Industries v. Radcliff

Materials, Inc., 451 U.S. at 639.

The ultimate goal of our national housing policy, in-

cluding that policy embodied in the National Housing

Act, is ‘a decent home and suitable living environment for

every American fantily. . . .” 12 U.S.C. § 1701t (1982); 42

U.S.C. § 1441 (1982). The plaintiffs have argued that an

important part of this national housing policy is the main-

tenance and preservation of urban neighborhoods. While

I do not question this proposition, see 42 U.S.C. § 144la

& b (1982), there is no legislative history or other evidence

indicating that Congress intended to address the problem

of neighborhood disintegration by conferring on neighbors

of HUD-owned property the right to sue HUD for dam-

A-31

ages suffered as a result of the deterioration of that prop-

erty. In fact, it is not clear that providing neighbors of

HUD-owned property with such a right is even consis-

tent with the ultimate goal of national housing policy, the

provision of decent housing for all Americans. The plain-

tiffs argue that providing them with a damage remedy

will serve the purpose of “deterring defendants’ policy

of neglect in the future.” Appellants’ Brief at 14. It may

be, however, that the problems associated with HUD’s

property disposition program are of such complex origin

that they do not lend themselves to a simple solution. I

would not find an implied private right of action here on

the basis of such a speculative deterrence theory. The

plaintiffs also argue that the Housing Act gives them a

right to a decent neighborhood, which entitles them to

damages in this case. However, even assuming that the

Housing Act did give them some rights as neighbors,

these rights certainly are not as important in the legis-

lative scheme as the rights of persons to whom HUD ac-

tually provides housing. This is significant because, as the

court below observed, “[t]o grant neighborhood residents

a damage remedy for injuries resulting from their prox-

imity to hazardous housing would just divert funds from

the provision of adequate housing.’”’ Burroughs v. Hills,

564 F. Supp. 1007, 1017 (N.D. Ill. 1983). Thus, there is

no reason to find an implied private right of action for

damages in this case.

Because the plaintiffs’ claim for injunctive relief became

moot in the court below, there is an argument that the

issue of whether they would have had a private right of

action for injunctive relief under the Housing Act is not

before us. Neither party has made this argument, how-

ever. In fact, the defendants have argued that the plain-

tiffs have no private right of action at all, and the plain-

tiffs have argued that the district court erred because it

found that the plaintiffs did have rights as neighbors

under the Housing Act, but it failed to give them an

effective means for vindicating those rights (a damage

remedy) in this case. I agree with the parties that the

A-32

injunctive relief and damages issues are interwined, and,

since the district court’s opinion might be interpreted as

suggesting that the plaintiffs would have had a cause of

action for injunctive relief, I believe it is appropriate that

we decide whether the Housing Act provides the plain-

tiffs with any private right of action to force HUD to

maintain its property.

I can find no evidence that, in enacting the Housing Act,

Congress intended to create a private right of action for

injunctive relief for persons such as the plaintiffs in this

case. There is no legislative history suggesting such an

intention, and my view that neighbors of HUD-owned

property are not the primary beneficiaries of the Hous-

ing Act further militates against our finding a private

right of action in this case. In addition, this is a case in

which we should consider “the traditional role of the

states in affording the relief claimed.” Daily Income Fund

v. Fox, 104 S. Ct. at 839. Persons harmed unreasonably

by conditions on neighboring property traditionally have

been able to enjoin those conditions through suits based

on state common law theories or state or local statutes.

In this case, for example, the plaintiffs originally sought

injunctive relief in part based on an Illinois statute, Il.

Rev. Stat. ch. 24, § 11-13-15, which provides that owners

or tenants who are adversely affected by their neighbor’s

violation of certain municipal ordinances may sue to re-

strain, correct, or abate the violation. Even assuming it

considered the matter at all, Congress undoubtedly would

have been aware of the traditional role played by state

and local law in providing injunctive relief for persons in-

jured by conditions on their neighbor’s property. This con-

sideration lends further support to the conclusion that

Congress did not intend that there be any private right

of action for the plaintiffs in this case.?

1 This position assumes that Congress did not intend that HUD

be immune from such suits. In 12 U.S.C. § 1702 (1982), Congress

per that the Secretary of HUD may “sue and be sued” in

er official capacity in connection with the carrying out of certain

(Footnote continued on following page)

A-33

Turning to the question of costs under rule 54(d), I find

that the district court’s refusal to award the defendants

their costs was an abuse of discretion. In this circuit,

there is a presumption that costs should be awarded to

the prevailing party, and the losing party must overcome

this presumption to avoid liability for costs. Delta Air

Lines, Inc. v. Colbert, 692 F.2d 489, 490 (7th Cir. 1982).

Historically, this court has found the presumption to be

overcome only where there has been some fault, miscon-

duct, default, or other action worthy of penalty on the

1 continued

provisions of the National Housing Act, including the provisions

relevant to this case. This court has not decided whether the

§ 1702 waiver provision would apply where the Secretary of HUD

is sued under state law to force her properly to maintain or repair

property that HUD had acquired through mortgage foreclosure.

Although there is no need to decide this question here, I note that

there is significant authority suggesting that § 1702 was meant to

permit such suits. In Federal Housing Administration v. Burr,

309 U.S. 242 (1940), the Supreme Court interpreted § 1702 broad-

ly. It stated that absent a clear showing that a particular type

of suit is inconsistent with the statutory scheme or would grave-

ly interfere with the performance of a governmental function, or

that Congress plainly intended to use the “sue and be sued” clause

in a narrow sense, “it must be presumed that when Congress

launched a governmental agency into the commercial world and

endowed it with the authority to ‘sue or be sued,’ that agency

is not less amenable to judicial process than a private enterprise

under like circumstances would be.” 309 U.S. at 245. See also

Merrill Tenant Council v. HUD, 638 F.2d 1086, 1090 (7th Cir.

1981) (HUD not immune from suit brought by tenants of HUD-

owned or operated property to recover interest on security

deposits owed them under state law); Knox Hill Tenant Council

v. Washington, 448 F.2d 1045, 1050-53 (D.C. Cir. 1971) (holding,

under different federal housing laws than those involved here, that

tenants of HUD-owned property may sue HUD for declaratory

and injunctive relief under local and federal law regarding aileged

failure properly to maintain property); Estrada v. Hills, 401 F.

Supp. 429, 433 (N.D. IIl. 1978) (§ 1702 permits suit against HUD

officials by neighbors of HUD-owned property alleging failure prop-

erly to maintain that property, though officials whose duties are

discretionary are immune from liability for money damages).

A-34

part of the prevailing side. Jd. Recently, this court held

that a losing party also may overcome the presumption

by a showing of indigency. Badillo v. Central Steel &

Wire Co., 717 F.2d 1160, 1165 (7th Cir. 1983).

The plaintiffs have not argued, and the court below did

not find, that the defendants deserve to be penalized for

their conduct in this litigation. Although the district court

did state that the plaintiffs are “of limited means,” I do

not interpret this as a finding of indigency. Thus, none

of the previously recognized grounds for refusing costs

to the prevailing party are present in this case. More-

ovr, there is no need to expand existing law in this area.

While this case may have presented novel questions of

public interest and importance, as the district court found,

this is an insufficient reason to depart from the normal

rule of awarding costs to the prevailing party. The Dis-

trict of Columbia Circuit has explained: “Unlike attorneys’

fees, whose magnitude and unpredictability have dis-

couraged parties with otherwise meritorious claims from

litigation, the small and predictable costs of court fees,

printing, and court reporters’ fees have customarily been

viewed as necessary and reasonable incidents of litigation,

properly reimbursable to the winning party.” Baez v.

United States Department of Justice, 684 F.2d 999, 1003

(D.C. Cir. igo2). Thus, in the absence of a finding that

the plaintiffs are indigent, there is no realistic concern

that awarding costs to the defendants here will discourage

persons from attempting to vindicate their rights in fed-

eral court. In short, there is no compelling reason in this

case to alter the normal rule of awarding costs to the pre-

vailing party.

Finally, with regard to the plaintiffs’ state law claims,

the denial of those claims by the district court was not

appealed to this court. Thus, I[ find it not only unneces-

sary but also inappropriate for this court to decide

whether those claims should have been entertained by the

district court.

A-35

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

A-36

JUDGMENT - ORAL ARGUMENT

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

60604

Chicago, Illinois

August 22, 1984

Before

Hon. RICHARD A. POSNER, Circuit Judge

Hon. Joel M. Flaum, Circuit Judge

Hon. Philip Nichols, Jr.,

Senior Circuit

Judge*/

Nos. 83 - 1604, 83-2289

LEO BURROUGHS, JR., et al.,

Plaintiffs-Appellants,

Cross-Appellees,

Vv.

CARLA HILLS, SECRETARY,

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT, et al.,

Defendants-Appellees,

Cross-Appellants.

ll i i i i i ee a eo a

Appeal

from the

United

States

District

Court for

the

Northern

District

of

Illinois,

Eastern

District

No. 76 C 1640

JAMES B.

MORAN,

Judge

*/ Honorable Philip Nichols, Jr. of

the Uinted States Court of Appeals for

the Federal Circuit, sitting by designa-

tion.

A-37

This cause was heard on the

record from the United States District

Court for the Northern District of

Illinois, Eastern Division, and was

argued by counsel.

On consideration whereof, IT

IS ORDERED AND ADJUDGED by this Court

that the judgment of the said District

Court in this cause appealed from be,

and the same is hereby, AFFIRMED IN

NO. 83-1604 and REVERSED IN NO. 83-2289,

in accordance with the opinion of this

Court filed this date. Costs on appeal

are awarded to defendants-appellees,

cross-appellants.

B-1

APPENDIX B

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

October 22, 1984

Before

Hon. RICHARD A. POSNER, Circuit Judge

Hon. JOEL A. FLAUM, Circuit Judge

Hon. PHILIP NICHOLS, JR., Senior Judge*/

LEO BURROUGHS, JR., et al., ) Appeal

) from the

Plaintiffs-Appellants, ) United

Cross-Appellees, ) States

) District

Nos. 83-1604 vs. ) Court for

83-2289 ) the

) Northern

CARLA HILLS, Secretary, ) District

Department of Housing and } of

Urban Development, et al. ) Illinois

)

Defendants-Appellees, ) Eastern

Cross-Appellants. ) Division.

) No. 76 C 1604

) James B.

) Moran,

) Judge.

ORDER

On September 7, 1984, plaintiff-

appellants, cross-appellees, Leo

*/ Hon. Philip Nichols, Jr., of the

United States Court of Appeals for the

Federal Circuit, sitting by designation.

B-2

Burroughs, Jr. et al., filed a petition ;

for rehearing with suggestion for rehear-

i Saiki) at

ing en banc. All of the judges on the

Original panel have voted to deny the

petition, and none of the active members

of the court has requested a vote on the

suggestion for rehearing en banc. The

petition is therefore DENIED.

C-1

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LEO BURROUGHS, JR.,

ESTHER ROBINSON,

DONALD SCHATZ,

EARL WHATLEY,

STEVEN GOLDSMITH,

ANTON SEALS, ISHMAEL

SEYE, LIZZIE MAE BONNER,

and the FIVE BLOCK CLUB,

Plaintiffs,

vs.

CARLA HILLS, Secretary,

Department of Housing

and Urban Development;

JOHN WANER, individually

and in his official

Capacity as Director of

the Chicago area office

of the Department of

Housing and Urban

Development;

MARTIN ROGAN,

individually and in his

official capacity as

Deputy Director of the

Chicago area office of

the Department of

Housing and Urban

Development;

WILLIAM MILLER,

al a a a a th th tt i i

No.

76 C 1640

C-2

individually and in his

official capacity as

Director of the Housing

Management Division of

the Chicago area office

of the Department of

Housing and Urban

Development; JOHN DAVIS,

individually and in his

official capacity as

Director of Property

Division of the Chicago

area office of the

Department of Housing

ana Urban Development;

STANLEY C. NYKIEL,

individually and in his

official capacity as

realty specialist in the

Housing Management

Division of the Chicago

area office of the

Department of Housing

and Urban Development;

and SEWARD RIST,

ll i ee ee oe oe

Defendants.

MEMORANDUM AND ORDER

This action was instituted in

1976, charging various officials of the

United States Department of Housing and

OR. SEN SPEND >

C-3

Urban Development ("HUD") with viola-

tions of state and federal law in con-

nection with the maintenance of HUD-

owned property in Chicago. It is now

before the court on the parties' cross-

motions for summary judgment upon a

stipulation of facts.

STIPULATION OF FACTS

The building that is the

subject of this lawsuit is a three-story

residence located at 7228 South Coles

Avenue in Chicago. HUD acquired title

to the property in November 1974, after

entry of a decree of foreclosure on the

owner's mortgage. During the period of

HUD's ownership the building was unin-

habited, boarded up, and in a state of

disrepair. The building had structural

problems, including a cracked founda-

tion, dilapidated porch and steps,

C-4

unstable floors, and broken windows. It

was infested with rodents and debris was

scattered around the building. There

was neither a night watchman on the

premises nor a fence around the build-

ing, as required by sections 39-13 and

99-4.1 of the Municipal Code for the

City of Chicago ("municipal code").

During the period of its ownership HUD

expended $285.00 in repairs on the

building. In addition, pursuant to an

Area Management Broker Contract, it paid

defendant Seward Rist ("Rist") $17.50

per month to oversee the building.

HUD's disposition policy with

respect to one- to four-unit buildings

at the time it acquired the building in

question was to maximize sales on a

"cash only, as-is, without warranty"

begin When, in August 1975, the late

C-5

Mayor Richard J. Daley objected to this

policy, HUD agreed to place a moratorium

on such sales of HUD-owned Chicago

property pending development of a

"Chicago Plan". Under the subsequently

developed Chicago Plan, a purchaser of

certain HUD-owned properties paid, in

addition to the purchase price, $2,000.00

to be placed in an escrow fund and to be

refunded to the purchaser upon certifi-

cation by a City inspector that there

were no major violations of the munici-

pal code. The building in question was

ultimately classified as eligible for

disposition by this method.

HUD had a second property

disposition program which operated in

coniunction with the Chicago Plan.

Under the Property Release Option

Program ("PROP"), HUD would sell a

C-6

qualifying building for $1.00 to the

City and the City in turn would convey

it to a not-for-profit organization for

rehabilitation.

Shortly atter HUD's acquisi-

tion of the property in question, Rist

reported that it had a fair market value

of $40,000.00. HUD then commissioned a

repair specification study which indi-

cated that, in March 1975, $17,389.00 in

repairs would be necessary to bring the

building into compliance with the munic-

ipal code. A study commissioned by the

South Shore Senior Citizens Center in

April 1976 indicated that it would cost

$41,581.25 to rehabilitate the building.

In May of 1976, Charles J. Snepard, of

the City of Chicago Department of Urban

Renewal, inspected the building and

determined that it would cost $40,718.40

C-7

to bring the building into compliance

with the occupancy requirements of the

municipal code.

In March 1975 piaintiff Leo

Burroughs wrote on behalf of plaintiff

Five Block Club, an organization com-

posed of individuals concerned with

securing a safe, comfortable and healthy

community environment and with advancing

the community's interests, to defendant

John Waner, Director of the Chicago Area

Office of HUD, expressing concern over

the deterioration of HUD-owned properties

in the area. In April, seven members of

the Five Block Club met with Waner and

another HUD official to present them

with a petition signed by 107 of the

members of the Club and by defendant

Rist, which requested immediate sale of

the Coles property to a buyer who would

C-8

rehabilitate the building. After this

meeting HUD expended $40.00 to re-secure

four windows in the building.

Shortly after the meeting Rist

informed the Five Block Club, by letter,

that the building was for sale and

requested that members immediately

report problems with the building to

Rist or to the police. Copies of this

letter were sent to Waner and defendant

Stan Nykiel, a realty specialist in the

Property Disposition Branch of the

Housing Management Division of HUD's

Chicago Area Office. Subsequently,

several members communicated concern

about the building to Rist. In June of

1975 defendant John Davis, Director of

Property Disposition for HUD's Chicago

Area Office, wrote to members of the

Five Block Club expressing appreciation

for their concern about the building.

ox

In April of 1976 t.e City of

Chicago requested that HUD keep the

building off the real estate market for

possible purchase by the City under

PROP. Sometime in July, 1976, pursuant

to PROP guidelines, HUD sold the build-

ing to the City for $1.00 and the City

reconveyed it to the South Shore Senior

Citizens Center for rehabilitation.

THE LITIGATION

Before HUD disposed of the

building, the Five Block Club and eight

of its members (Leo Burroughs, Jr.,

Esther Robinson, Donald Schatz, Earl

Whatley, Steven Goldsmith, Anton Seals,

Ishmael Seye, and Lizzie Mae Bonner)

filed suit against defendants Rist,

Waner, Nykiel, and Davis, as well as

Carla Hills, then Secretary of HUD,

Martin Rogan, Deputy Director of HUD's

C-10

Chicago Area Office, and William Miller,

Director of the Housing Management

Division of HUD's Chicago Area Office.

The complaint charged that these de-

fendants had violated their duties under

the National Housing Act ("NHA"),

12 U.S.C. §1701 et seg., and HUD regu-

lations to maintain and repair HUD-owned

properties. It also charged them with

violations of Illinois statutes and

Chicago's municipal code. The original

complaint sought an injunction against

these continuing violations of federal,

state, and local law. Plaintiffs also

requested money damages for the hazards

to their health, safety, and welfare

allegedly resulting from the improper

maintenance of the building.

After HUD sold the building

plaintiffs amended their complaint,

C-li

deleting the request for injunctive

relief. Defendants subsequently filed a

motion to dismiss for failure to state a

Claim, and both plaintiffs and defen-

dants moved for summary judgment.

Judge Leighton denied all motions,

concluding that plaintiffs had stated a

claim under the NHA and HUD regulations,

and that the existence of material

factual issues as to the condition of

the building precluded summary judgment.

He did not reach the question whether

federally-owned property is subject to

state and local housing laws. Burroughs,

et al. v. Hills, et al., No. 76 C 1640

(N.D. Ill. October 11, 1978).2/

THE MOTIONS FOR SUMMARY JUDGMENT

A. Introduction

The stipulation of facts sub-

mitted by the parties makes it abundantly

C-12

clear that HUD owned a building in

Chicago, as a result of foreclosure, for

a 19-month period beginning in 1974 and

continuing into 1976; that it contracted

routine maintenance of the building to

defendant Rist; and that the building,

due to neglect and vandalism, substa..-

tially deteriorated during the period of

HUD ownership. The building was then

sold to a non-profit organization for

rehabilitation. The parties have stipu-

lated that the total damages recover-

able, assuming liability, is $1,000.00

against the HUD defendants and $350.00

against Rist. This suit has survived

the conveyance and subsequent rehabili-

tation of the property primarily as a

vehicle to determine whether neighbors

of blighted HUD-owned property have a

cause of action for damages as a means

C-13

of compelling HUD and its agents to act.

Stripped to barest essentials, defendants'

contentions are that federal law imposes

no duties upon them enforceable at the

behest of these plaintiffs and that they

are not answerable under state and local

law.

B. The :ederal Claims

The initial question presented

by the cross-motions for summary judg-

ment is whether plaintiffs have a right

of action for damages under the appli-

cable provisions of the NHA and the HUD

regulations?’ developed thereunder. The

parties?’ agree that there is no express

provision for such an action by neigh-

bors of HUD-owned property for failure

to maintain that property and that the

statute contains no other express en-

forcement mechanism. Plaintiffs must

C-14

therefore rely on the theory of an

implied private right of action in order

to state a claim.

The court notes at the outset

that both sides have engaged in a wide-

ranging analysis of the legal principles

governing private rights of action,

standing, and even subject matter juris-

diction. Defendants have argued that

plaintiffs do not satisfy the criteria

for implication of a private right of

action established in Cort v. Ash,

422 U.S. 66, 78 (1978), do not even meet

the standing requirements of Warth v.

Seldin, 422 U.S. 490 (1975), Data

Processing Services v. Camp, 397 U.S.

150 (1970), and Barlow v. Collins,

397 U.S. 159 (1970), and do not fall

within the limited waiver of sovereign

immunity provided in the NHA, 12 U.S.C.

C-15

§1702. Plaintiffs, on the other hand,

argue that the NHA and HUD regulations,

which are couched in mandatory language,

as well as the United States Housing

Act, 42 U.S.C. §1441 et seg., impose

enforceable duties on the HUD defendants

and therefore require implication of a

private right of action in their favor.

The passage of time has reduced

this lawsuit to one for damages only.

The issue at this stage of the proceed-

ings is thus a much narrower one than

the parties advocate: does the NHA

create a cause of action in favor of

neighbors of HUD-owned buildings to

recover damages for the failure of HUD

personnel to maintain such property?

Although the Supreme Court has

Said that "the question whether a liti-

gant has a 'cause of action' [under a

C-16

statute} is analytically distinct and

prior to the question of what relief, if

any, a litigant may be entitled to

receive," Davis v. Passman, 442 U.S.

228, 239 (1978), most decisions have

treated the two questions as interre-

lated and have not articulated the

different considerations that might

apply in deciding the availability of

equitable as opposed to monetary relief

under a given statute. Examination of

the two "separate" questions has, for

the most part, merged under a general

analysis of the criteria for implying a

private cause of action established in

Cort v. Ash, supra: (1) whether plain-

tiff is a member of the class for whose

special benefit the statute was enacted; 4/

(2) whether the history or language of

the statute suggests an intent to create

C-17

a private cause of action; (3) whether

implication of a cause of action is

consistent with the purposes and scheme

of the statute; and (4) whether the

cause of action is one traditionally

relegated to state law.

The case law on implied pri-

vate rights of action does, however,

suggest that courts discriminate between

the question of existence of a cause of

action and existence of a particular

remedy in two respects. First, the

focus where damage actions are concerned

tends to be on the third Cort factor.

Second, there appears to be generally

greater hesitancy to imply a cause of

action for damages than one for equi-

table relief.

The Court of Appeals for the

Seventh Circuit recently drew an explicit

C-18

distinction between the questions of

available remedies and the existence of

a cause of action. In Lieberman v.

University of Chicago, 660 F.2d 1185

(7th Cir. 1981), cert. denied,

U.S. , 302 S$. CE... 3008 (2082),

the court examined the availability of a

damage remedy for persons subjected to

sex discrimination in violation of Title

IX of the Education Amendments of 1972,

20 U.S.C. §1681(a). Although the Supreme

Court in Cannon v. University of Chicago,

441 U.S. 677 (1979), had previously

implied a private right of action under

Title IX, the Seventh Circuit did not

consider that decision controlling on

the question of available relief.

Instead, relying on the above-quoted

language in Davis v. Passman, supra, it

concluded that the question of remedies

must be considered separate and apart

C-19

from the issue of a private cause of

action. Focusing on the purpose of the

statute in question, it concluded that a

damage remedy was not consistent with

its purposes and would not further its

goals .2/

Other courts have been reluc-

tant to extend an implied private right

of action to include monetary relief.

In Ruth Anne M. v. Alvin Independent

School Dist., 532 F.Supp. 460 (S.D. Tex.

1982), the court considered the exis-

tence of an implied private right of

action for damages under the Rehabili-

tation Act of 1973, 29 U.S.C. §794.

Based on the legislative history of the

Act and the fact that it creates substan-

tive rights in favor of the handicapped,

the court concluded that such persons

have a private right of action to enforce

C-20

the Act. However, after considering the

statute, its legislative history, and

the statutory objectives, the court

found that "Congress, although intending

a judicial remedy to enforce rights

conferred by [the Act], intended gener-

ally to provide for enforcement of those

rights only through injunctive and

declaratory relief." 532 F.Supp. at

471. It rested its ¢*cision in part on

the adequacy of equitable relief to

protect the rights of the handicapped

and the fact that a damage remedy, in

potentially imposing massive financial

liability upon recipients of federal

funds, might deter acceptance of such

funds and thus impede the legislative

goal of expanding opportunities for the

handicapped. In reaching this conclu-

sion, the court expressly rejected the

C-21

approach taken in Bell v. Hood, 327 U.S.

678 (1946), that where a statute creates

substantive rights courts should presume

the full panoply of traditional remedies.

It said, "“{t]hat principle seems unavoid-

ably suspect in view of recent Supreme

Court decisions considering the implica-

tion of private remedies and the element

of congressional intent." Id. (citing

Transamerica Mortgage Advisors, Inc. v.

Lewis, 444 U.S. 11 (1979) and Touche

Ross & Co. v. Redington, 442 U.S. 560

(1979).

In Boxall v. Sequoia U. High

Sch. Dist., 464 F.Supp. 1104 (N.D. Cal.

1979), the court, although finding an

implied private right of action to en-

force the provisions of the Rehabilita-

tion Act, also declined to give benefi-

Claries of the Act a damage remedy. It

C-22

concluded that such actions should be

limited to equitable relief, finding

that, because the statute did i aaa

port "to give individuals a whole

panoply of new rights and remedies," it

"should probably be seen as creating a

private supplement to governmental

enforcement, not as providing a new

entitlement to damages." Id. at 1112.

In Loughran v. Flanders,

470 S.Supp. 110 (D. Conn. 1979), the

court, though it did not explicitly

distinguish between the remedy and cause

of action issues, counseled special

hesitation in implying a damage remedy,

focusing on the purpose of the statute

at issue. Although the plaintiff in

Loughran was a special beneficiary of

the Education for All Handicapped

Children Act, 20 U.S.C. §1401 et seq.,

C-23

and indeed, had an express private right

of action under the statute, tne court

declined to imply a damages remedy

because the statutory purposes of pro-

viding federal assistance for education

or the handicapped and serving as a

catalyst for educational innovation

would not be furthered by such a remedy.

Id. at 115.9/

Keeping in mind the generally

greater hesitancy of the courts, and

particularly the Court of Appeals for

the Seventh Circuit to imply a damage

remedy in a statute that does not ex-

pressly provide for one, the court turns

now to the statute in question.

In insuring and eventually

sconixine the property in question, HUD

was acting pursuant to the NHA, more

specifically, the mortgage insurance

provisions of the NHA, 12 U.S.C. §1707

C-24

et seq. The policies and goals of the

subchapter on mortgage insurance as well

as other federal housing legislation are

enunciated in 42 U.S.C. §§1441 and 144la

and reaffirmed in 12 U.S.C. §1701t.

Section 1441 states: |

The Congress declares

that the general welfare

and security of the

Nation and the health and

living standards of its

people require housing

production and related

community development

sufficient to remedy the

serious housing shortage,

the elimination of sub-

standard and other inade-

quate housing through the

clearance of slums and

other blighted areas, and

the realization as soon

as feasible of the goal

of a decent home and a

suitable living environ-

ment for every American

family

Section 144la states in relevant

part:

(b) The Congress fur-

ther finds that policies

designed to contribute to

the achievement of the

C-25

National housing goal

have not directed suf-

ficient attention and

resources to the preser-

Vation of existing hous-

ing and neighborhoods,

that the deterioration

and abandonment of hous-

ing for the Nation's

lower income families has

accelerated over the last

decade, and that this ac-

Celeration has contributed

to neighborhood disintegra-

tion and has partially

negated the progress

toward achieving the

National housing goal

which has been made

primarily through new

housing construction.

(c) The Congress

declares that if the

national housing goal is

to be achieved, a greater

effort must be made to

encourage the preserva-

tion of existing housing

and neighborhoods through

such measures as housing

preservation, moderate

rehabilitation, and im-

provements in housing

management and mainte-

nance, in conjunction

with the provision of

adequate municipal ser-

vices. Such an effort

should concentrate, to a

C-26

greater extent than it

has in the past, on

housing and neighborhoods

where deterioration is

evident but has not yet

become acute (emphasis

supplied).

Section 170l1t reiterates the

goal of "a decent home and a suitable

living environment for every American

family" and further states:

The Congress declares

that in the administra-

tion of those housing

programs authorized by

this Act which are de-

Signed to assist families

with incomes so low that

they could not otherwise

decently house them-

selves, and of other

Government programs de-

Signed to assist in the

provision of housing for

such families, the high-

est priority and emphasis

should be given to meet-

ing the housing needs of

those families for which

the national goal has not

become a reality

The above-quoted statement of

purposes makes it clear that Congress,

C-27

in passing the NHA, intended primarily

to benefit low income persons in need of

adequate housing. However, they are not

the sole beneficiaries of the statute.

Federal housing legislation also evi-

dences a concern for the development and

maintenance of "stable, desirable urban

communities." Alschuler v. Dept. of

Housing & Urban Development, 686 F.2d

472, 278 (7th Cir. 1981).

The goal of aiding in the

preservation of existing housing and

urban communities and the resulting

benefit to residents of neighborhoods

where the federal government invests its

funds are even more apparent in the

particular statutory provisions and

administrative guidelines under which

HUD acquired and handled the property in

question. HUD acquired the building

C-28

pursuant to 12 U.S.C. §1710, which

provides for conveyance to HUD upon

foreclosure, of mortgaged properties

which are federally insured under

12 U.S.C. §1709. Section 1710(g) grants

the Secretary of HUD the power to "deal

with, complete, rent, renovate, modern-

ize, insure, or sell for cash or credit,

in his discretion, any properties con-

veyed to him...."

HUD promulgated guidelines for

the maintenance and disposition of

properties acquired through mortgage

foreclosure.’ Those guidelines indi-

cate that the NHA was intended at ieast

in part to ensure the preservation of

existing housing and the protection of

residents of neighborhoods receiving

federal housing monies. Paragraph 23 of

the Handbook requires that all proper-

ties "shall be fully repaired promptly"

C-29

(emphasis supplied), and notes that

"[t]he timely provision of repair or

substantial rehabilitation may be

critical to the preservation of block

[sic] and even neighborhoods in older

areas of our cities and suburbs."

Paragraph 23g imposes on HUD the duty to

give immediate attention "to those re-

pairs required to prevent undue deteri-

Oration and eliminate hazardous condi-

tions that may be dangerous to the

public." Paragraph 70 of the Handbook

states that "[e]very possible precaution

shall be taken to eliminate conditions

which may contribute to injury or damage

to the person or property of others,

particularly those conditions which may

be attributed to negligence." Para-

graph 104 reiterates this concern,

stating, "Immediate action must be taken

to eliminate any conditions hazardous to

the public....*

C-30

The court concludes that the

statement of purposes in the NHA and the

above-quoted language in the HUD regula-

tions place plaintiffs within those

classes of persons which the NHA seeks

to benefit. The court further concludes

that the NHA and the HUD Handbook impose

upon HUD the duty to maintain properties

it acquires through foreclosure.

First, this circuit has read

the NHA as imposing a duty upon HUD to

act consistently with national housing

policies. United States v. Winthrop

Towers, 628 F.2d 1028, 1034-35 (7th Cir.

1980). (HUD decision to foreclose mort-

gage subject to review under the Adminis-

trative Procedure Act for conformity to

national housing objectives). See Also

Commonwealth of Pennsylvania v. Lynn,

501 F.2d 848, 855 (D.C. Cir. 1974). One

C-31

of those policies or goals is the preser-

vation of existing housing and neighbor-

hoods. Second, HUD's own internal

guidelines make mandatory HUD's main-

tenance and repair of buildings it

acquires through mortgage foreclosure.

The HUD defendants' argument that the

Handbook is not binding on them because

it was not published in accordance with

statutory rule-making procedures is not

well taken. Brown v. Lynn, 392 F. Supp.

559 (N.D. Ill. 1975), on which they

rely, involve an attempt to impose upon

third parties the duties set forth in an

unpublished HUD handbook. Here, plain-

tiffs seek to hold HUD itself to the

standards it has established. See

Estrada v. Hills, 401 F. Supp. 429,

437-38 (N.D. Ill. 1975).

The question in this case,

however, is not whether plaintiffs have

C-32

standing to bring an action for judicial

review of HUD's conduct under the Admin-

istrative Procedure Act, 5 U.S.C. §701

et seg., or even whether they can en-

force HUD's duties by obtaining an

injunction against the responsible

officials directly under the NHA.

Rather, the issue here is whether the

foregoing evidence of congressional

intent to confer a benefit upon the

class of individuals to which plaintiffs

belong and the mandatory nature of HUD's

duties support implication of a private

right of action for damages by these

plaintiffs. The court concludes that

they do not for essentially two reasons.

First, plaintiffs are not the

sole or even primary beneficiaries of

the NHA in general or the specific

statutory provisions. at issue here.

C-33

There can be no questions, and plain-

tiffs do not dispute, that potential

inhabitants of federally-funded or

supported housing are the primary bene-

ficiaries of federal housing legisla-

tion. In addition, there are other

classes of potential plaintiffs who

share secondarily in the benefits of the

statutes in question. For example, the

NHA contains numerous incentives for the

involvement of private developers in

housing construction, and Congress has

expressed an interest in such partici-

pation as one of the goals of the hous-

ing statutes. 42 U.S.C. §1441. See

Shivers v. Landrieu, 674 F.2d 906, 911

(D.C. Cir. 1981) (tenants of federally-

insured housing have no private right of

action for damages under mortgage insur-

ance provisions of the NHA for deficient

building maintenance because "[t]hey are

C-34

not, however, the Act's only benefi-

ciaries -- obviously the benefit of

mortgage insurance operates directly in

favor of the bankers, builders, and

developers." )

The government itself is an

intended beneficiary of various provi-

sions of the NHA. For example, HUD's

authority to set rents on federally-

insured buildings under §221(d)(3) of

the NHA, 12 U.S.C. §1715L(d)(3), while

clearly aiding low income tenants, also

"attempts to assure adequate return

sufficient to prevent foreclosure,"

thereby benefitting the government,

which "will bear the brunt should there

be a default." Falzarano v. United

States, 607 F.2d 506, 510 (lst Cir.

1979) (tenants of federally-insured

housing have no private right of action

for violations of §221(d)(3)). And HUD's

C-35

duty under §221(d)(2), 12 U.S.C.

§1715L(d)(2), to insure mortgages only

on property that conforms to local

ordinances redounds to the benefit of

the government because it "assure[s] the

United States of adequate security for

the mortgages FHA insure[s]." Davis v.

Romney, 490 F.2d 1360, 1372 (3d Cir.

1974) (purchasers of homes with

federally-insured mortgages may maintain

an action under the Administrative

Procedure Act for declaratory and in-

junctive relief but have no private

right of action for damages when HUD

violates §221(d)(2)).

In the present case, HUD's

authority, under §204(g) of the NHA,

12 U.S.C. §1710(g), to deal with prop-

erty acquired through foreclosure pro-

tects the government's financial in-

terests as well as the interests of

C-36

potential purchasers. The Forward to

the HUD Handbook notes that it is "de-

signed to assist in the disposal of

properties as promptly as possible. The

prompt and orderly disposition of prop-

erties is absolutely essential to the

continuous cash flow to the treasury

resulting from sales proceeds." Para-

graph 23e of the Handbook states that

the policy of complete and adequate

repair "protects HUD and it also pro-

tects the purchasers." In the chapter

titled "Repairs and Maintenance," the

Handbook provides at 4185,

a. [The overall objec-

tive] is to (a) place

properties in first class

condition to create

maximum sales appeal at

the highest obtainable

sales price in order to

contribute to maintenance

of a firm real estate

market; (b) eliminate

potential default hazard

attributable to physical

C-37

deficiencies and (c) eli-

minate all structural,

(including termite in-

festation) mechanical and

surface deficiencies

which, if not eliminated,

would result in major

repair or replacement

expenditures by the

purchaser, or demand upon

HUD under the terms of

the warranty on the Sales

Contract, Form 2384.

Thus, any maintenance and repair respon-

sibilities imposed upon HUD by the NHA

and the HUD Handbook benefit not only

neighbors of HUD-owned properties, but

also purchasers of such properties and

the government itself. The fact that

damages, if available, would ultimately

come from the pocket of a beneficiary of

the very statute and regulations under

which plaintiffs sue militates against

implying a damage remedy.

The second and more signifi-

cant reason for declining to infer from

C-38

the NHA a damage remedy on behalf of

plaintiffs is that such relief would be

at cross purposes with the fundamental

objectives of the statute and other

housing legislation. "The primary

purpose of the legislative scheme is to

upgrade the nation's housing." Cedar-

Riverside Assoc. v. City of Minneapolis,

606 F.2d 254, 258 (8th Cir. 1979). This

is to be accomplished through a variety

of mechanisms, including rental subsi-

dies for new or rehabilitated housing,

mortgage insurance, and federal funding

for urban redevelopment. To grant

neighborhood residents a damage remedy

for injuries resulting from their prox-

imity to hazardous conditions on HUD-

owned property would just divert funds

from the provision of adequate housing.

The payment of money to nearby residents

C-39

does not paint a porch or glaze a win-

dow; it does not in any respect preserve

a neighborhood. At most it provides

some balm to some undefined and virtu-

ally undefinable class of people for

continuing co-existence with substandard

housing. Furthermore, an award of

compensation for plaintiffs' alleged

injuries, aS Opposed to enforcement

through injunctive relief or judicial

review under the Administrative Procedure

Act, would not even necessarily deter

future derelictions of duty by HUD

officials. See Jones v. Reagan, No. 81-

2918, slip op. at 4-5 (7th Cir., January 4,

1983) (discussing "make whole" and

deterrent functions of compensatory and

punitive damage awards). Under these

circumstances, implication of a private

right of action for damages under the

C-40

NHA is ill-advised. See Shivers v.

Landrieu, 674 F.2d at 912 (granting

tenants of federally-insured housing a

damages remedy might “impede," rather

than promote the construction of housing

units (emphasis in original)).

Upon reviewing the statute in

question, the court concludes that while

plaintiffs are within one of several

classes of potential litigants protected

and benefitted by the NHA and thus may

enforce the duties imposed by the stat-

ute, a damages remedy is not contem-

plated by or consistent with the pur-

poses of the NHA. Summary judgment must

therefore be granted in defendants'

favor with respect to the federal

claims .2/

om The State Law Claims

Normally a party's state law

claims, brought pursuant to the court's

C-41

pendent jurisdiction, should be dis-

missed if his federal claims are re-

jected prior to trial. United Mine-

workers of America v. Gibbs, 383 U.S.

715, 726, (1966); Abiodun v. Martin

Oil Service, Inc., 475 F.2d 142, 145,

(7th Cir.), cert. denied, 414 U.S. 866

(1973). However, under certain circum-

stances "judicial economy, convenience,

and fairness to the litigants' favor the

retention of jurisdiction over state law

issues...." Forest Laboratories, Inc. v.

Pillsbury Company, 452 F.2d 621, 629,

(7th Cir. 1971) (quoting United Mine-

workers, supra). Upon weighing these

factors the court concludes that plain-

tiffs' state claims should be resolved

here.

First, the parties have filed

cross-motions for summary judgment. The

C-42

case is therefore in the same procedural

posture as one in which the parties have

gone to trial; discovery is complete and

ali the evidence has been presented.

Second, this case has been pending in

federal court since 1976; if the state

claims were dismissed for lack of jur-

isdiction and plaintiffs forced to

re-file their suit in state court, they

might well be confronted with statute of

limitations problems. Third, assuming

plaintiffs were able to bring an action

in state court, the federal defendants

would be entitled to remove the action

to federal court pursuant to 28 U.S.C.

§1442(a)(1), and in all likelihood would

do so. For these reasons the court

will, in its discretion, exercise jur-

isdiction over plaintiffs' state law

claims.

C-43

In Counts II and III of their

complaint, plaintiffs have alleged that

defendants violated state and municipal

law in failing to have a night watchman

on the premises, in maintaining the

building in a manner constituting a

nuisance, in failing to erect an eight-

foot fence around the building, and in

permitting the building to be boarded

up. Defendants concede these facts, but

argue, nonetheless, that they are not

liable for these violations of local

law. The HUD defendants contend that

they are free from state regulation

under the supremacy clause of the United

States Constitution, that they are

absolutely immune from liability for

what are in essence common law torts,

and, alternatively, that they are en-

titled to a good faith defense under the

C-44

stipulated facts. Defendant Rist con-

tends that, because state law permits

only injunctive relief for violations of

municipal ordinances, plaintiffs have no

cause of action for damages.

The court rejects the general

proposition that the supremacy clause

completely relieves federal officials of

susceptibility to suit for violations of

state law. Rather, when an agency of

the federal government insinuates itself

into the local business world, as HUD

does here under the mortgage insurance

and foreclosure provisions of the NHA,

it should, as a general rule, be held to

the same legal obligations as a private

property owner. Cf. . F.H.A. v. Burr,

309 U.S. 242, 245 (1940) (construing NHA

waiver of sovereign immunity provisions

and holding that "when Congress launched

C-45

a governmental agency into the commer-

Cial world and endowed it with authority

to 'sue or be sued,' that agency is not

less amenable to judicial process than a

private enterprise under like circun-

stances would be...."); City of

Philadelphia v. Page, 363 F. Supp. 148,

153 (E.D. Pa. 1973) (holding HUD liable

over to purchaser cf HUD property which

violated local ordinances: "When the

government goes into the marketplace it

must go as everyone else" (citation

omitted)). This court agrees with the

view taken in City-Wide Coalition,

Etc. v. Philadelphia Hous. Auth., 356

F. Supp. 123, 129 (E.D. Pa. 1973), where

the court held that Congress had not

granted HUD the right to preempt or

disregard reasonable local health regu-

lations concerning properties which it

C-46

acquires. See also Knox Hill Tenant

Council v. Washington, 448 F.2d 1045,

1055 (D.C. Cir. 1971) (no evidence of

congressional intent to exempt

government-owned housing from local

housing codes) .2/

The court's view that HUD's

owned property is subject to local

housing codes is buttressed by HUD's own

regulations with regard to the property

in question. The HUD Handbook states at

1185(d), "“[I]n areas where local housing

codes are in effect and are being actively

enforced, the repair program is to be

designed to meet local code requirements."

Thus, neither the NHA nor HUD's own

guidelines support the HUD defendants'

preemption argument. Cf. City of

Boston v. Harris, 619 F.2d 87, 95 n.21

(lst Cir. 1980) (administrative preemp-

tion of local law in absence of explicit

C-47

congressional declaration of preemption

valid where Congress delegates to agency

broad administrative powers).

‘The court recognizes that even

where there is no express preemption

provision in a federal statute, federal

preemption may be warranted when there

is a clear conflict between federal and

local law. See Chicago-Midwest Meat

Ass'n v. City of Evanston, 589 F.2d

278, 282 (7th Cir. 1978), cert. denied,

442 U.S. 946 (1979), and cases cited

therein. However, the state and local

law in question here does not conflict

with the purposes of the NHA. As dis-

cussed above, the NHA, along with other

federal housing legislation, was enacted

to aid in the provision of safe and

decent housing to the nation's lower

income families through the construction

C-48

of new housing and the rehabilitation of

existing structures. Municipal code

provisions which require a night watch-

man on the premises of vacant buildings

to protect against vandalism and which

prohibit operation of a building as a

nuisance compliment rather than hinder

these federal goals. +2/ Similarly, the

Illinois statutory; pivvision which

permits a municipality to demolish or

repair "dangerous and unsafe buildings

or uncompleted and abandoned buildings,"

Ill. Rev. Stat., ch. 24, §11031-1 (1979),

has a purpose which parallels the goals

of federal housing legislation. It was

intended to provide municipalities with

"an effective tool for protecting its

citizens from the unfortunate and de-

grading results of substandard and

C-49

dangerous housing." City of Chicago v.

Nielsen, 38 Ill. App. 3d 941, 349 N.E.2d

532, 537 (lst Dist. 1976).

Defendants argue that requir-

ing compliance with these ordinances

would be exceedingly burdensome finan-

cially and would frustrate national

housing goals because it would, in

effect, encourage demolition of build-

ings acquired by HUD through mortgage

foreclosure. Such an argument is un-

persuasive. It is highly unlikely that

HUD would choose to incur the expense of

demolishing its buildings and, in adedi-

tion, lose the value of such buildings

as a result of demolition in order to

avoid complying with local law. More-

over, this argument could be used to

avoid liability under any state or local

law that requires some expenditure of

C50

federal monies. The court does not

believe that the "clear conflict" doc-

trine of the supremacy clause was in-

tended to reach so far. ;

The federal defendants' re-

maining arguments that they have abso-

lute immunity or at least a good faith

defense with respect to the state law

Claims involve complicated factual

questions concerning the scope of their

official functions and their specific

duties as HUD employees, and are in the

nature of affirmative defenses. In

light of the court's determination that,

under Illinois law, plaintiffs have not

stated a claim entitling them to mone-

tary relief against the federal or

private defendants, these questions need

not be decided.

Plaintiffs brought their state

law claims pursuant to Ill. Rev. Stat.

Sep i pete Gh ) teetefe

C-51

ch. 24, §11-13-15, which provided in

relevant part:

any owner or tenant of

real property within 500

feet in any direction

of the property on which

the building or structure

in question is located

who shows that his prop-

erty or person will be

substantially affected by

the alleged violation [of

ordinances enacted pur-

suant to certain divi-

sions of the Illinois

Municipal Code], in

addition to other reme-

dies, may institute any

appropriate action or

proceeding ... (3) to

prevent any illegal act,

conduct, business, or use

in or about the premises,

or (4) to restrain,

correct or abate the

violation.11/

The statute by its terms creates a

limited right of action on behalf of

certain private parties to enforce

municipal ordinances by way of an in-

junction.22/ Contrary to plaintiffs'

contention, the statutory language

C-52

referring to other available remedies

does not create statutory remedies in

addition to injunctive relief. Rather,

it simply makes clear that the §11-13-15

does not preclude other remedies or

rights of action available under other

statutues or the common law. +3/ Plain-

tiffs' suit for injunctive relief has

been mooted by the sale of the building

and §11-13-15 provides no other remedy

to private parties in connection with

violations of city ordinances. Plain-

tiffs, obviously because of the restric-

tions upon private actions challenging

public nuisances, in their briefs ex-

pressly disavow that their state law

Claims for damages are in the nature of

a common law nuisance action, stating,

"No part of plaintiffs' complaint even

purports to allege. the elements of such

C-53

a tort." (Plaintiffs' Reply Memorandum,

p. 14). Accordingly, defendants' motion

for summary judgment respecting the

state law claims must also be granted.

JAMES B. MORAN

Judge, United States

District Court

C-54

rO OTe COT FF

This court rejects plaintiffs'

contention that Judge Leighton's

earlier ruling that the complaint

states a claim represents the law

of the case, and the question of a

private right of action thus may

not be relitigated. In the first

place, Judge Leighton did not

expressly rule that plaintiffs had

a private right of action. Secondly,

even if he had, the district court

is always free to reconsider prior

rulings if it is convinced that its

law of the case is substantially

erroneous. Diaz v. Indian Head,

Inc., 686 F.2d 558 (7th Cir.

1982).

C-55

The parties disagree as to the

correct characterization of HUD's

Property Disposition Handbook for

One to Four Family Properties,

No. 4310.5 (the "Handbook" ).

Plaintiffs characterize it as

containing binding regulations

placing mandatory duties on HUD

personnel. Defendants, on the

other hand, describe it as setting

out internal policies and guide-

lines rather than enforceable

duties. For the sake of conven-

ience, the court will occasionally

refer to the Handbook and its

contents as the "HUD regulations".

The motion of defendant Rist, the

area management broker, has a

somewhat different focus. Rist

C-56

argues that summary judgment must

be granted in his favor because his

duties are defined solely by his

contract with HUD, not by federal

law of HUD regulations, and any

liability on his part runs only to

the other contracting party, i.e.,

HUD.

-he Court elaborated on this first

factor saying that the question is

whether "the statute create[s] a

federal right in favor of the

plaintiff." 422 U.S. at 76. In

Universities Research Assn. v.

Coutu, 450 U.S. 754, 772 (1981),

the Court analyzed this factor in

terms of whether the language of

the statute in question has "'an

unmistakable focus on the benefitted

C-57

class' ... [on is] framed ...

Simply as a general prohibition or

a command to a federal agency."

(quoting Cannon v. University of

Chicago, 441 U.S. 677, 690-91). At

least one court has viewed the

language of the [Coutu] decision as

a "refinement" of the first [Cort]

factor. Miener v. State otf Mo.,

673 F.2d 969, 974, n.4 (8th Cir.),

cert. denied, 103°S.Ct. 215, 230

(1982).

In Guardians Ass'n of New York

Clee v. Civ) gery., 633 7.24 232

(2d Cir. 1980), cert. granted, 454

U.S. 1140 (1982), a majority of the

court reached a different result

concerning the availability of

damages under Title VI of the Civil

Rights Act of 1964, 42 U.S.C.

C-58

§2000d, the statute after which

Title IX was modeled. The court

felt that Cannon, which it charac-

terized as implying a "private

right of action unlimited as to

remedy," 633 F.2d at 273, compelled

this result. Judge Meskill, who

disagreed with the majority view,

examined the question of a damage

remedy in light of the four cort

factors and concluded, primarily in

light of the purposes of Title VI,

that such a remedy was not avail-

able. Id. at 255.

In Anderson v. Thompson, 658 F.2d

1205, 1210 n.7 (7th Cir. 1981), the

court concluded that the Cort v. Ash

four-step analysis was inappropriate

when the question is availability

of remedies rather than existence

C-59

of a cause of action, especially

where the statute involved ex-

pressly provides for a right of

action but is silent as to relief.

It nonetheless examined the avail-

ability of a damages remedy under

the statute in question there in

light of the statute's language,

legislative history and purposes.

These are the first three factors

outlined in Cort.

As noted [supra] at fn. 2, the

parties disagree as to the en-

forceability of the duties set

forth in the Handbook. The HUD

defendants, citing Brown v. Lynn,

392 Ff. Supp. 559 (8.D. Til. i97S),

argue that the "guidelines" con-

tained therein do not constitute

binding regulations because there

C-60

was no compliance with the require-

ments of the Administrative Procedure

Act, 5 U.S.C. §553(b). Plaintiffs,

relying on Estrada v. Hills, 401

F. Supp. 429 (N.D. Ill. 1975),

contend that the Handbook imposes

mandatory duties on HUD officials.

At this point the court examines

the contents of the Handbook solely

for the purpose of gleaning evi-

dence of legislative intent to

benefit a particular class of

potential litigants. While state-

ments of policy contained in agency

regulations or guidelines would

alone be insufficient to infer a

private cause of action, they are

relevant to the extent that they

support congressional intent as

C-61

expressed in the language or his-

tory of the statute.

Although Rist, the only non-

government defendant in this case,

does not challenge plaintiffs'

federal claims on implied private

right-of-action grounds, the fore-

going analysis applies as well with

respect to the federal claims

against him.

The only case in this circuit

dealing with HUD's liability under

local law is Merrill Tenant Council

v. U.S. Dept. of Housing, 638 F.2d

1086 (7th Cir. 1981), where the

court held that HUD was obligated

to pay interest on security deposits

received from tenants of HUD-owned

or operated property, as required

C-62

by Illinois law. Id. at 1089. The

Merrill court did not expressly

decide the preemption question,

rather simply assuming that

Illinois law applied to the federal

defendants.

The purpose of §99-4.1 of the

municipal code, which requires that

property used "for the purpose of

storing used lumber, metal, or

other second-hand building material"

be surrounded by an eight-foot

fence and its applicability to the

building in question is less clear.

Most likely, it was intended to

protect the public from the dangers

attendant upon the storage of such

materials. However, in light of

the resolution of plaintiffs' state

law claims, the court need not

C-63

determine the purpose of this

ordinance. The court also wonders,

in passing, whether strict enforce-

ment of the night watchman ordi-

nance against HUD might give it

some species of equal protection or

selective prosecution argument. On

the other hand, strict enforcement

of the ordinance generally would go

far toward fulfillment, in Chicago

at least, of the dictates of the

Humphrey-Hawkins Act.

The statute was amended in 1977 to

permit tenants or owners within

1200 feet to bring suit.

Section 11-13-15 provides for

enforcement of municipal ordi-

nances. Count III of plaintiffs'

complaint alleges a violation of a

13/

C-64

state statute not a municipal

ordinance. Moreover, the statute

in question, Ill. Rev. Stat.

ch. 24, §11-31-1 (1981) grants to

the corporate authorities of each

municipality the right to demolish

Or repair certain buildings.

Although the parties do not arque

the point, it does not appear that

§11-13-15 grants plaintiffs the

right to enforce state statutes.

This view is supported by the fact

that the statute specifically

refers only to the court's power to

issue restraining orders and pre-

liminary and permanent injunctions,

and mentions no other remedies.

D-1

APPENDIX D

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LEO BURROUGHS, JR., et al.

Plaintiffs,

vs. 76 C 1640

CARLA HILLS, etc., et al.,

me ee ee ee ee ee See See See”

Defendants.

ORDER

While the designation of

“landmark case" would overstate the

scope of this lawsuit, this case did

present novel questions of considerable

public interest and importance, was

brought by plaintiffs of limited means to

seek answers to those questions rather

than for commercial advantage or private

gain, and was litigated in that context.

This court considers such a case to be

D-2

within the narrow discretion allowable

under Delta Air Lines, Inc. v. Colbert,

692 F.2d 489 (7th Cir. 1982), and its

exercises that discretion to deny costs.

ENTER:

s/James B. Moran

United States District Judge

Date: May 10, 1983

E-1

APPENDIX E

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

LEO BURROUGHS, JR. et al.

United States

District Judge

)

fn )

Plaintiffs, )

)

vs. ) 76 C 1640

) Before the

CARLA HILLS, etc., et al. ) Honorable

) George N.

Defendants. ) Leighton

)

)

Memorandum Order

Eight Chicago residents and a

Civic organization have joined in this

suit against the United States Department

of Housing and Urban Development, (HUD),

and several named defendants for injuries

they allegedly sustained as a result of

what they say is defendants' misfeasant

maintenance of a vacant and abandoned

building located at 7228 South Coles

Avenue, Chicago, Illinois. Plaintiffs

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assert that defendants' poor maintenance

of the building violated express regula-

tions promulgated by HUD; was a violation

of an affirmative duty to provide a

Suitable living environment for every

American family as imposed on HUD by

Congress in 42 U.S.C. § 1404; and was a

violation of certain Illinois housing

Stucutes and Chicago building codes.

Jurisdiction for this action is invoked

pursuant to 28 U.S.C. § 1331. The cause

is before the court on defendants’

motion to dismiss and cross-motions for

summary judgment.

Defendants’ Motion to Dismiss

In their motion defendants

claim that plaintiffs fail to state a

claim for relief insofar as the complaint

rests on violations .of the mandate of

Congress expressed in its declaration of

E-3

national housing policy in 42 U.S.C.

§ 1441.

The Congress declares

that the general welfare and

security of the Nation and the

health and living standards of

its people require housing

production and related community

development sufficient to

remedy the serious housing

shortgage, the elimination of

substandard and other inadequate

housing through the clearance

of slums and blighted areas,

and the realization as soon as

feasible of the goal of a

decent home and a suitable

living environment for every

American family, thus contribut-

ing to the development and

redevelopment of communities

and to the advancement of the

growth, wealth, and security

of the Nation.

The law is clear that HUD has

broad discretion in its implementation

of the National Housing Policy, however,

"[w]hen an administrative decision is

made without consideration of relevant

[policy] factors it must be set aside."

Shannon v. U.S. Dept. of Housing and Urban

E-4

Development, 436 F. 2d 809, 819 (3d Cir.

1970). Thus, HUD must act “in an appro-

priate manner and for a rational reason

reiated to the achievement of the statu-

tory objectives." Cole v.Lynn, 389

F. Supp. 99, 102 (D.C.Cir. i975).

Section 1441 “is not precatory; HUD is

obliged to follow these policies.

Action taken without consideration of

them, er in conflict with them, will not

stand." Commonwealth of Pennsylvania v.

Lynn, 501 F. 2d 848, 855 (D.C.Cir.

1974). On examination of the complaint,

this court concludes that plaintiffs

have stated a claim on which relief can

be granted insofar as it is premised on

defendants' violations of the policy

mandates under 42 U.S.C. § 1441. Accord-

ingly, defendants' motion to dismiss on

this ground is denied.

E-5

Defendants also contend that

plaintiffs fail to state a claim insofar

as the complaint is premised on violations

of HUD regulations, because these "regula-

tions" are in fact only handbook provi-

sions which are not binding on HUD since

they do not have the force of law. In

support of this contention, defendants

note that these provisions are not

published and in fact are merely state-

ments of HUD policy, not intended to

create a private right of action.

The general rule is that in

order for an agency regulation to be

binding and have the force of law, the

agency promulgating the regulation must

follow the formal rules set out in

5 U.S.C. § 553 and in most cases must

publish the regulation in the Federal

Register. The purpose of the require-

ments set ic. th in 5 U.S.C. § 553 is to

U

E-6

put all interested parties on notice of

the regulation's existence. However, it

has been held that even unpublished

regulations can be binding and have the

force of law with respect to parties who

have actual knowledge of the regulation.

See Arlington Oil Mills, Inc. v. Knebel,

543 F. 2d 1092 (5th Cir. 1976); du Pont

de Nemours & Co. v. Train, 541 F. 2d

1018 (4th Cir. 1976); United States v.

Aarons, 310 F. 2d 341 (2d Cir. 1962).

See also, K. Davis, Administrative Law

Treatise, 6.10 (1975).

Although there is no definitive

legal authority in this circuit setting

forth the legal effect of handbook

provisions, this court is cognizant of

the fact that whether handbook provisions

have the force of law is a question of

fact turning on the intent of the agency

promulgating the handbook. See Estrada v.

E-7

Hill, 401 F. Supp. 429 (N.D. Ill. 1975).

Due to the inconclusive nature of the

record before the court and the court's

conclusion that this cause should proceed

for presentation on the merits, this

court declines to grant defendant's

motion to dismiss on this ground.

Accordingly, it is denied.

Defendants have raised at

least two other contentions which this

court has considered. First, defendants

assert that plaintiffs lack standing to

prosecute this suit. However, after

examination of the complaint, this court

holds that the individually named plain-

tiffs and the Five Block Club have

alleged a sufficient stake in the outcome

of this controversy to confer standing

on themselves to bring this suit. See

Sierra Club v. Morton, 405 U.S. 727, 739

(1971). Second, defendants suggest that

E-8

plaintiffs cannot state a claim insofar

as the complaint is premised on violations

of Illinois statutes and Chicago ordinances.

However, since plaintiffs state a claim

for relief under 42 U.S.C. § 1441 over

which this court has jurisdiction under

28 U.S.C. § 1331, this court need not

now reach the delicate issue of whether

Hancock v. Train, 426 U.S. 167 (1976),

bars application of local housing laws

to HUD-owned buildings on the ground

that all federally owned land is exempt

from state regulation unless there is an

affirmative waiver of immunity by Congress.

Finally, defendants contend that plaintiffs'

claim has been mooted since HUD has not

held title to the subject matter building

Since July, 1976. While it appears that

plaintiffs' claim for declaratory relief

has been mooted, their claim for damages,

however speculative, has not. Therefore,

E-9

the motion to dismiss on this ground is

denied.

Cross-Motions for Summary Judgment

In August 1975, HUD obtained

legal title to the building, and held

title until July 9, 1976 when HUD sold

the building to the City of Chicago. In

their motion for summary judgment supported

by affidavit and depositions, plaintiffs

claim that during the 19 months that

defendants held title to the building,

it was vacant, abandoned, and in a state

of disrepair. They claim that glass was

broken throughout; rats and mice were

prevalent; foundations were badly cracked;

floors were in dangerous and hazardous

condition; exterior doors were insecure;

roaches and other insects infested the

building; and debris was scattered

throughout the building. Plaintiffs

E-10

claim that since they live near the

building, its condition during this

period of 19 months posed a serious

danger to their health and safety and,

in addition, greatly lowered the quality

of their living environment.

Defendants in their motion for

summary judgment supported by affidavits

and depositions materially controvert

plaintiffs' claim with regard to the

condition of the building. Defendants

claim that the building was well-maintained

and, as such, did not pose any danger to

plaintiffs' health and safety, or the

quality Of their environment.

Summary judgment is proper

only where there are no issues of material

fact and the movant is entitled to

judgment as a matter of law. See Butler v.

Bensinger, 377 F. Supp. 870 (N.D. Ill.

1974). On review of the record in this

E-11

case, there appear to be issues of

material fact concerning the condition

of the subject matter property during

the time defendants held title. Accord-

ingly, the cross-motions for summary

judgment are denied.

So ordered

s/ George N. Leighton

United States District

Judge

Dated: October 11, 1978

F-1

APPENDIX F

Relevant Statutory Provisions

The Housing Act of 1949, 42 U.S.C.

§ 1441, provides in pertinent part:

The Congress hereby

declares that the general

welfare and security of

the Nation and the health

and living standards of

its people require housing

| production and related

community development

sufficient to remedy the

serious housing shortage,

the elimination of sub-

standard and other inade-

quate housing through the

clearance of slums and

blighted areas, and the

realization as soon as

feasible of the goal of a

decent home and a suitable

living environment for

every American family,

thus contributing to the

development and redevelop-

ment of communities and

to the advancement of the

growth, wealth, and

‘ security of the Nation .

The Department of Housing

and Urban Development,

and any other departments

or agencies of the Federal

Government having powers,

functions, or duties with

respect to housing, shall

F-2

exercise their powers,

functions, and duties

under this or any other

law, consistently with

the national housing

policy declared by this

Act and in such manner as

will facilitate sustained

progress in attaining the

national housing objective

hereby established .

The Department of Housing and Urban

Development Act, as amended, 42 U.S.C.

§ 144la, provides:

(a) The Congress finds

that the supply of the

Nation's housing is not

increasing rapidly enough

to meet the national

housing goal, established

in the Housing Act of

1949, of the "realization

as soon as feasible of

the goal of a decent home

and a suitable living

environment for every

American family". The

Congress reaffirms this

national housing goal and

determines that it can be

substantially achieved

within the next decade by

the construction or

rehabilitation of twenty-

six million housing

units, six million of

these for low and moderate

income families.

F-3

(b) The Congress further

finds that policies

designed to contribute to

the achievement of the

national housing goal

have not directed sufficient

attention and resources

to the preservation of

existing housing and

neighborhoods, that the

deterioration and aban-

donment of housing for

the Nation's lower income

families has accelerated

over the last decade, and

that this acceleration

has contributed to neighbor-

hood disintegration and

has partially negated the

progress toward achieving

the national housing goal

which has been made

primarily through new

housing construction.

(c) The Congress declares

that if the national

housing goal is to be

achieved, a greater

effort must be made to

encourage the preservation

of existing housing and

neighborhoods through

such measures as housing

preservation, moderate

rehabilitation, and

improvements in housing

management and maintenance,

in conjunction with the

provision of adequate

municipal services. Such

an effort should concentrate,

to a greater extent than

F-4

it has in the past, on

housing and neighborhoods

where deterioration is

evident but has not yet

become acute.

The National Housing Act, 12 U.S.C.

§ 1713, provides in pertinent part:

(k) Acquisition of property

by conveyance or foreclosure.

The Secretary is hereby

authorized either to

(1) acquire possession of

and title to any property,

covered by a mortgage

insured under this section

and assigned to him, by

voluntary conveyance in

extinguishment of the

mortgage indebtedness, or

(2) institute proceedings

for foreclosure on the

property covered by any

such insured mortgage and

prosvcute such proceedings

to conclusion . :

(g) Handling and disposal

of property; settlement of

Claims. Notwithstanding

any other provisions of

law relating to the

acquisition, handling, or

disposal of real property

by the United States, the

Secretary shall have

power to’ deal with,

complete, rent, renovate,

modernize, insure, or

sell for cash or credit,

in his discretion, any

F-5

properties conveyed to

him in exchange for

debentures and certifi-

cates of claim as provided

in this section

The National Housing Act, as amended,

12 U.S.C. § 1702, provides, in pertinent

part:

The powers conferred by

this Act shall be exer-

cised by the Secretary of

Housing and Urban Development

(hereinafter referred to

as the "Secretary"). In

order to carry out the

provisions of this title

ond Cations £2, Lit, V,

Vig Veese SEeks tee 2, and

XI, the Secretary may

establish such agencies,

accept and utilize such

voluntary and uncompensated

services, utilize such

Federal officers and

employees, and, with the

consent of the State,

such. State and local

officers and employees,

{and appoint such other

officers and employees as

he may find necessary ... .]

The Secretary shall, in

Carrying out the provisions

of this title and titles II,

ELZ¢ Ve Fas VEes Weake

IX, X, and XI be authorized,

in his official capacity,

to sue and be sued in any

court of competent juris-

diction, State or Federal.

F-6

Relevant Portions of the HUD Property

Disposition Handbook Paragraph 23,

Chapter 2, of the HUD Handbook provides,

in pertinent part:

a.

The repair program

shall include all

repairs necessary to

create maximum sales

appeal and eliminate

existing or potential

structural, mechanical

and other deficiencies.

In addition, the

repair program

should include such

upgrading which,

because of type and

location of the

properties, the

Director determines

necessary to generate

sales, or to stabilize

or improve neighbor-

hoods. In establishing

the repair program,

particularly where

inner-city, core-area

properties are

involved, it is

important to be

aware of the salutary

effect that will

probably result.

The timely provision

of repair or substan-

tial rehabilitation

may be critical to

the preservation of

blocks and even

F-7

neighborhoods in

Older areas of our

cities and suburbs.

Typically, in older

but still sound

neighborhoods, the

rehabilitation of

one house on the

block can lead to

investment in upgrading

other houses on the

block. The result

of the repair program

with respect to

deteriorating or

substandard housing

should be to create

a structure in

like-new condition,

with all components

operable, and with

no major expense in

the offing for

several years. All

major repair work

shall be accomplished

in accordance with

established formal

contracting and

purchase order

procedures.

* * *

Immediate Protective

Repairs. Irre-

spective of whether

full repairs are

delayed, immediate

attention shall be

given to those

repairs required to

F-8

|

prevent undue deterio-

ration and eliminate

hazardous conditions

that may be dangerous

to the public.

Initial Cleanup and

Maintenance. It is

essential that

unsightly conditions

be corrected promptly.

Immediately upon

taking possession

the Area Management

Broker (AMB) or the

local office if an

AMB is not available,

shall make arrangements

to have all rubbish

removed and the

premises given a

thorough cleaning,

including cutting of

grass, weeding, and

trimming of shrubbery

if needed.

Continued Maintenance.

In addition to the

initial cleaning,

arrangements shall

also be made for

continued "housekeeping"

maintenance, such as

care of shrubbery

and lawns, snow

removal and broom

cleaning. Unoccu-

pied properties must

be maintained in

clean and presentable

condition.

Paragraph

F-9

185, Chapter 7 of the HUD

Handbook provides, in pertinent part:

Paragraph

Handbook,

80.

Repair and Maintenance

Objectives.

The overall objective is

to (a) place properties

in first-class condition

to create maximum sales

appeal at the highest

obtainable sales price in

order to contribute to

maintenance of a firm

real estate market;

(b) eliminate potential

default hazard attributable

to physical deficiencies;

and (c) eliminate all

structural, (including

termite infestation)

mechanical and surface

deficiencies which, if

not eliminated, would

result in major repair or

replacement expenditures

by the purchaser, or

demands upon HUD under

the terms of the warranty

on the Sales Contract,

Form 2384.

80, Chapter 3, of the HUD

provides in pertinent part:

Supervision of Area

Management Brokers. In

order to obtain quality

performance on a timely

basis, the CPO shall be

responsible for assuring

F-10

that each area management

broker (AMB) understands

what is expected of him,

and that he is familiar

with the standards of

acceptable performance

established by the local

office for all activities

under his supervision.

The CPO shall supervise

the activities of each

AMB to the extent necessary

to develop and maintain

top quality management

services. Where an AMB

is new to the program,

the CPO shall expend a

sufficient amount of

time, either personally

or by a qualified staff

member, in training and

supervising the AMB and

his employees who are

engaged in performing the

services required under

the broker contract.