# Appendix — Burroughs v. Pierce

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1985
- **Citation:** 471 U.S. 1099

## Text

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

E-2

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 inso

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_2000%3A2. Public record. Not legal advice.