Opposition Brief — Price v. Pierce

(\ T bee

: v } Upremea Court, U.S.

No. 87-967 FILED

JAN

IN THE ee

: JOSEPH F. SPANIOL, JR

Supreme Court of the United —

OCTOBER TERM, 1987

AUDREY PRICE, NAILA KURDI, SHARON ATRA, EUGENE STERN,

and PATRICIA MARQUARDT, individually and on behalf of all others

similarly situated, and HOPE FAIR HOUSING CENTER,

Petitioners,

v.

SAMUEL PIERCE, in his official capacity as Secretary of the United

States Department of Housing and Urban Development; A.D. VAN

METER, in his official capacity as Chairman of the Illinois Housing

Development Authority; JAMES KILEY, in his official capacity as Direc-

tor of the Illinois Housing Development Authority; HAWTHORN RIDGE

ASSOCIATES; VERNON HILLS ASSOCIATES II; TRAILS VENTURE;

GRANDWOOD GARDENS ASSOCIATES; PRAIRIEBROOK VENTURE;

and ARROWHEAD APARTMENT ASSOCIATES,

Respondents.

On Petition For A Writ Of Certiorari To The United

States Court Of Appeals For The Seventh Circuit

RESPONDENTS A.D. VAN METER’S

AND JAMES KILEY’S BRIEF IN OPPOSITION

DONALD R. HARRIS

RICHARD T. FRANCH*

DARRYL M. BRADFORD

JENNER & BLOCK

One IBM Plaza

Chicago, Illinois 60611

(312) 222-9350

Attorneys for A.D. Van Meter

* Counsel of Record and James Kiley

Midwest Law Printing Co., Chicago 60611, (312) 321-0220 y,

yA \

TABLE OF CONTENTS

PAGE

TAM OP AUTHORITIES 6c ces cece eden

STATEMENT OF THE CASE ...............

REASONS FOR DENYING THE WRIT ..... 6

ES ik 6 SN aS S INE RES ieee 11

TABLE OF AUTHORITIES

CASES: PAGE

Cedar-Riverside Associates, Inc. v. City of Minne-

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

Edison v. Pierce, 745 F.2d 453 (7th Cir. 1984) .... 2

Ferguson v. Skrupa, 372 U.S. 726 (1963) ...... 8

Holbrook v. Pitt, 643 F.2d 1261 (7th Cir. 1981)... 4,9

Price v. Pierce, 821 F.2d 1114 (7th Cir. 1987) .. passim

Ressler v. Pierce, 692 F.2d 1212 (9th Cir. 1982) .. : ae

STATUTES:

ee Ne I ois 8050 ood We bo ee eek eee 10

Se a i xo dak sah eae dba anes 10

Pee err Seer Tree Teer er ee 8

Te Tih SR he RO hc a ee

Oe Bi Oe hks x ss Kee wre a hae eeenkakiaas

Omnibus Reconciliation Act of 1981, Pub. L. No.

97-35, §§ 325, 371, 95 Stat. 357, 406, 431 (1981) .

Supplemental Appropriations Act of 1984, Pub. L.

No. 98-181, Title II, § 209(aX(2), 97 Stat. 1153,

FANE REE 63 dn KS cde Raw A OK ae

Tax Reform Act of 1986, Pub. L. No. 99-514,

§ 1311(a), 100 Stat. 2659 (1986) ............

ge ee ea ee rere

Ill. Rev. Stat. Ch. 67%, 9301 et seg. .........

LEGISLATIVE HISTORY:

H.R. Rep. No. 1114, 98rd Cong., 2d Sess. 1, 22-24

ER re ear em te ee me eae

S. Rep. No. 693, 98rd Cong., 2d Sess. 1, 44 (1974) .

TREATISES:

Restatement (Second) of Contract, § 302 (1979) ....

3, 7

10

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

AUDREY PRICE, NAILA KURDI, SHARON ATRA,

EUGENE STERN, and PATRICIA MARQUARDT, in-

dividually and on behalf of all others similarly situated,

and HOPE FAIR HOUSING CENTER,

Petitioners,

va

SAMUEL PIERCE, in his official capacity as Secretary of

the United States Department of Housing and Urban Devel-

opment; A.D. VAN METER, in his official capacity as

Chairman of the Illinois Housing Development Authority;

JAMES KILEY, in his official capacity as Director of the

Illinois Housing Development Authority; HAWTHORN

RIDGE ASSOCIATES; VERNON HILLS ASSOCIATES II;

TRAILS VENTURE; GRANDWOOD GARDENS ASSOCI-

ATES; PRAIRIEBROOK VENTURE; and ARROWHEAD

APARTMENT ASSOCIATES,

Respondents.

On Petition For A Writ Of Certiorari To The United

States Court Of Appeals For The Seventh Circuit

RESPONDENTS A.D. VAN METER’S

AND JAMES KILEY’S BRIEF IN OPPOSITION

Respondents A.D. Van Meter and James Kiley respect-

fully request that this Court deny plaintiffs’ petition for

a writ of certiorari seeking review of the decision of the

United States Court of Appeals for the Seventh Circuit

in this case.

= om

STATEMENT OF THE CASE

The Illinois Housing Development Authority (“IHDA’’)

was created for the purpose of increasing the production

of housing for persons of low and moderate income in IIli-

nois. Ill. Rev. Stat. ch. 6742, 4301 et seg. Respondents

A.D. Van Meter and James Kiley are the Chairman and

Director of IHDA. IHDA, through tax-exempt bonds, pro-

vides loans to riot-for-profit and limited-profit entities for

the construction or rehabilitation of housing developments.

Id.

Section 8 provides that the Secretary of Housing and

Urban Development (“HUD”’) is authorized to enter into

annual contributions contracts with a public housing agen-

cy, like IHDA. 42 U.S.C. § 1437f. Pursuant to the annual

contribution contracts, IHDA enters into contracts to

make housing assistance payments to owners of apartment

complexes to assist eligible low income tenants in renting

units. 42 U.S.C. § 1487f(bX1). (These contracts are collec-

tively referred to herein as ‘Section 8 contracts.’’) One

of the goals of the Section 8 program is to enable, to the

extent feasible, low income tenants to live in economically

mixed multifamily housing. The federal government, through

IHDA, provides a rental subsidy by paying the owner the

difference between a fair market rent and the amount the

low income tenants can afford. Edison v. Pierce, 745 F.2d

453, 454 (7th Cir. 1984).

Until 1981, Congress refused to impose a requirement

that all available Section 8 subsidies be utilized. In 1981,

well after all the Section 8 contracts involved in this case

were executed, Section 8 was amended to require new

Section 8 contracts to provide for full utilization of avail-

—

able Section 8 subsidies. Omnibus Budget Reconciliation

Act of 1981, Pub. L. No. 97-35, §§ 325, 371, 95 Stat. 357,

406, 431 (1981). Because this amendment only applies to

Section 8 contracts entered into after October 1, 1981, it

does not apply to the Section 8 contracts at issue in this

case.

On November 30, 1983, Congress abolished the portion

of the Section 8 program at issue here by repealing 42

U.S.C. § 1437f(bX2). Supplemental Appropriations Act of

1984, Pub. L. No. 98-181, Title II, § 209(a)(2), 97 Stat.

1153, 1183 (1984). Consequently, no new Section 8 projects

of the type at issue in this case have been funded since

then.

Pursuant to the Section 8 program, between 1975 and

1978, IHDA, HUD, and several developers entered into

Section 8 contracts to provide funds for low income

tenants at six housing developments. These Section 8 con-

tracts set forth the maximum number of subsidized units

for which Section 8 funds can be obtained for each de-

velopment. (See App. 161-162, 170-171.) The owners of

these developments only receive payments from the gov-

ernment for the Section 8 units that are actually utilized.

(App. at 2); 42 U.S.C. § 1437f(c)4).

When the Section 8 contracts at issue here were ex-

ecuted, Section 8 was a new federal program. While one

of the goals of the Section 8 program was, to the extent

possible, to construct multifamily housing with a mix of

low income and market rate tenants, ‘“‘no one knew what

the optimum mixture was.” (App. at 12.) Determining the

proper mix of low income and market rate tenants was

key because “‘ilf the percentage of poor people in a project

rises too far, the other tenants may leave, and the pur-

pose of the program would be defeated.” (Jd. at 13-14.)

enllie:

In addition, without enough market rate tenants renting

units, the project could be without sufficient income to

meet expenses, resulting in a collapse of the housing de-

velopment. (/d. at 14.)

The Section 8 subsidies originally set aside for each of

the six developments was for a maximum of 40% of the

units in each development. (Jd. at 2.) Until approximate-

ly August of 1983, defendants utilized approximately half

of the maximum available Section 8 subsidies. (/d.) Thus,

each development had approximately 80% market rate

tenants and 20% lower income tenants. (/d.) The section

8 statute recognized the prudence of this 80/20 balance

by expressly permitting HUD to “give preference to ap-

plications for assistance involving not more than 20 per

centum of the dwelling units in a project.” 42 U.S.C.

§ 1437f(cX5); Holbrook v. Pitt, 643 F.2d 1261, 1272 n.20

(7th Cir. 1981).

While approximately half of the subsidies were not uti-

lized at these six complexes, the total number of unused

Section 8 units in IHDA’s entire portfolio was much

smalier, approximately 3.3% of the available Section 8

units. Moreover, the ability to utilize 40% of the Section

8 units gave the defendants the flexibility to meet poten-

tially changing market, housing and economic conditions

and ensure the economic success of the program. Indeed,

in approximately August of 1983, IHDA and the owners,

now equipped with several years of experience in this

area, took advantage of this flexibility and increased the

total utilization of available Section 8 subsidies.’ Each of

1 It is incorrect to assert, as plaintiffs do, that the defendants

are only utilizing half of the available subsidies. (See, e.g., Plain-

tiffs’ Petition at 2.) In August of 1983, the owners and I

(Footnote continued on following page)

DA at-

~$—-

these developments has remained financially sound and

has allowed many low income families to live in economi-

cally mixed housing developments.

Plaintiffs are five individuals who inquired about the

availability of low income housing at three of the six

developments and Hope Fair Housing Center, an organiza-

tion that assists lower income families in finding housing.

They seek to require the defendants to use all of the

available Section 8 subsidies. Only two of the plaintiffs

actually filled out applications to rent apartments, both

at the same development. None of the plaintiffs filled out

applications at the other five developments and none of

the plaintiffs inquired about housing at three of the de-

velopments. (App. at 3.)

On July 8, 1987, the Seventh Circuit affirmed the dis-

trict court’s entry of summary judgment on behalf of the

defendants. (App. 1.) The court found that the defendants

had not violated the Section 8 statute or regulations; that

plaintiffs were not third-party beneficiaries under the Sec-

tion 8 contracts and even if they were, the parties had

modified their contractual obligations thereunder; and that

the plaintiffs had no property interest in Section 8 benefits

entitling them to due process. (/d.)

1 continued

es to transfer 90 Section 8 units that were authorized but

not being utilized from five of the —— complexes (18 from

each complex) to the sixth complex. five complexes would have

then utilized 80% of the new maximum number of available Sec-

tion 8 subsidies and the sixth complex would have become 100%

Section 8 subsidized with full utilization. The net result of this

would have been that 416 of 482 Section 8 subsidies would

utilized. Although_HUD ultimately disapproved the transfer,

IHDA and the developers still retained the new increased utiliza-

tion levels at each of the five complexes.

~~

REASONS FOR DENYING THE WRIT

This case does not merit this Court’s review. The

Seventh Circuit’s decision does not conflict with the deci-

sion of any other court and the court did not depart from

the accepted and usual course of judicial proceedings. Su-

preme Court Rule 17.1. As is demonstrated below, none

of the four issues for which plaintiffs seek review are suf-

ficiently important to warrant this Court’s review. Jd.

Rather, this case presents the relatively simple issue of

whether defendants should have the discretion, in appro-

priate situations, to decide not to rent approximately 186

apartments to low income families to ensure that the de-

velopments in this case remain economically mixed and

viable.

There are six specific reasons why the issues in this

case are not sufficiently important to warrant this Court’s

review.

First, Congress has already addressed plaintiffs’ griev-

ance that all available Section 8 subsidies should be uti-

lized. In 1981, Congress amended the Section 8 statute.

to require full utilization for future projects. However,

Congress expressly stated that this requirement was not

to be applied retroactively, as plaintiffs in effect request.

See Omnibus Budget Reconciliation Act of 1981, Pub. L.

No. 97-35 §§ 325, 371(b), 95 Stat. 357, 406, 431 (1981).

Thus, Congress concluded that it was inappropriate to re-

quire the defendants to utilize all Section 8 subsidies when

the defendants had not been required to do so in the past

and had relied on that discretion in applying for funding.

While plaintiffs suggest that Congress always intended

to require full utilization and merely clarified its original

difnn

j intent in 1981, Congress’ express denial of retroactive ap-

) plication of the statute demonstrates to the contrary.

Moreover, as the Seventh Circuit observed, the “legisla-

tive history contains no suggestion that the purpose of

the 1981 amendment was merely to clarify the original

statute.” (App. at 13.) Because Congress has already de-

termined when full utilization is or is not required, this

Court should not re-evaluate the balance Congress struck.

Second, Congress has abolished all funding for this pro-

gram. Supplemental Appropriations Act of 1984, Pub. L.

No. 98-181, Title II, § 209(aX2), 97 Stat. 1153, 1183 (1984).

Therefore this Court would be reviewing a statute and

a program that Congress has repealed.

Third, while plaintiffs ask this Court to hear the merits

of their entire claim, there is a significant standing hurdle

which prohibits complete resolution of the dispute. Be-

cause none of the plaintiffs filled out applications at five

of the developments, plaintiffs’ standing to pursue claims

against the owners of these developments “‘is doubtful.”

(App. at 3.) Little purpose would be served by this Court

resolving in a piecemeal fashion a dispute over plaintiffs’

alleged entitlement to no more than 30 apartments at one

of six developments.

Fourth, plaintiffs assert that the Seventh Circuit’s

holding that plaintiffs have no due process claim conflicts

with the Ninth Circuit’s decision in Ressler v. Pierce, 692

F.2d 1212 (9th Cir. 1982). This assertion is incorrect. As

even plaintiffs acknowledge, in Ressler, plaintiffs were

seeking a hearing before the owners could refuse to select

a particular applicant as a tenant. (See Plaintiffs’ Peti-

tion at 12.) There was no dispute regarding the number

of subsidies that had to be utilized. Here, by contrast,

plaintiffs seek to compel utilization of the actual bene-

nein nisin tant

om

fits, rather than a hearing to determine whether they are

qualified for an apartment. Thus, plaintiffs claim a right

to substantive relief, not procedural due process. Due

process only provides procedural protection for property

interests, not a right to substantive relief. See generally

Ferguson v. Skrupa, 372 U.S. 726, 728-32 (1963). The

Seventh Circuit’s decision therefore does not conflict with

Ressler.

Fifth, plaintiffs ask this Court to make the policy deci-

sions on how to achieve the National Housing Act’s goal

of a “decent home . . . for every American family.” 42

U.S.C. § 1441. But Congress has vested IHDA and HUD

with the power and discretion to make these policy deci-

sions for developments funded before the 1981 amend-

ment. As the Eighth Circuit has observed:

(Sluch lawsuits . . . require courts to determine both

the objectives of national housing policy and the

means uppropriate for their realization. Housing policy

is continuously evolving; its contours are better de-

fined by those intimately involved in its development

and implementation . . . [Jjudicial supervision is not

rs 7 with the purposes underlying the Housing

ct.

Cedar-Riverside Associates, Inc. v. City of Minneapolis,

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

The language of the Section 8 statute and the legislative

history demonstrate that Congress intended to vest discre-

tion in IHDA over the degree of utilization of Section 8

units in projects funded prior to the 1981 amendment.

Congress chose ‘“‘to vest in local public housing agencies

the maximum amount of responsibility in the administra-

tion of their housing programs.” 42 U.S.C. § 1437 (1976).

See H.R. Rep. No. 1114, 98rd Cong., 2d Sess. 1, 22-24

(1974). As the Senate Report states: ‘Throughout Section

onilliess

8, discretion in making important decisions . . . is given

to the public housing agency .. .” S. Rep. No. 693, 93rd

Cong., 2d Sess. 1, 44 (1974). There is no indication that

Congress sought to exclude from this discretion the im-

portant administrative decision of setting utilization levels

to provide, when appropriate, for economically mixed

housing to assure the continued economic viability of Sec-

tion 8 developments.

Sixth, the Seventh Circuit’s decision denying plaintiffs’

statutory, contractual and constitutional claims was cor-

rect. The 1981 amendment is fatal to plaintiffs’ statutory

claim. Plaintiffs’ contractual claim fares no better. The

plaintiffs are not parties to the Section 8 contracts and

are not third-party beneficiaries thereunder. A third-party

acquires enforceable rights under a contract only if the

parties to the contract intended to confer a direct benefit

upon that person. See, e.g., Holbrook v. Pitt, 643 F.2d

1261, 1270 (7th Cir. 1981); Restatement (Second) of Con-

tracts, § 302 (1979). The contracts at issue here were in-

tended to benefit tenants, not applicants for housing. Hol-

brook, 643 F.2d at 1271-1272. As the Seventh Circuit

stated:

[T]o give each applicant . . . the status of a party

to the contract would make almost every lower-

income person in the United States a potential plain-

tiff. . . It is implausible that the developers, IHDA,

or HUD, ever intended to impose so novel and ill-

defined a burden on themselves. . .

(App. at 10.) Under plaintiffs’ theory, the parties to the

Section 8 contracts could not modify the contract terms,

regardless of the circumstances, unless they first obtained

a release from each of the hundreds of low income persons

who had inquired about housing. (See App. at 11.) The

law does not support this absurd conclusion.

~10—

Moreover, even if plaintiffs were third-party beneficiaries,

the Section 8 contracts do not require full utilization. If

they did, there would have been no need for Congress

to have amended the statute in 1981 to provide that

future contracts shall require full utilization. While plain-

tiffs argue that this means that defendants would not have

to use any of the subsidies, the tax code requires that

defendants rent at least 20% of all units to lower income

families to retain the tax exempt status of the bonds that

fund the developments. 26 U.S.C. § 103(bX4XAXii).? Thus,

plaintiffs’ fears of zero utilization have no basis in fact

or in law. In any event, the Seventh Circuit found that

the parties had modified any obligation to fully utilize the

Section 8 subsidies that they may have had under the Sec-

tion 8 contracts. (App. at 11 and cases cited therein.)

Because defendants did not violate the statute and plain-

tiffs have no contract rights, plaintiffs were not deprived

of any property or entitlement without due process of law.

(App. at 14.) Thus, plaintiffs’ constitutional claim was prop-

erly denied.

2 This provision applies to the bonds at issue here. The Tax Re-

form Act of 1986 modified this provision without any substantive

changes relevant here. See 26 U.S.C. § 142(dX1XA). The Tax Re-

form Act of 1986 P gy Dg: to tax-exempt bonds issued

after August 15, 1986. See Pub. L. No. 99-514, § 1311(a), 100 Stat.

2659 (1986).

~, e

CONCLUSION

es

For all the foregoing reasons, respondents A.D. Van

Meter and James Kiley respectfully request that this

Court deny plaintiffs’ petition for certiorari.

Respectfully submitted,

DONALD R. HARRIS

RICHARD T. FRANCH*

DARRYL M. BRADFORD

JENNER & BLOCK

One IBM Plaza

Chicago, Illinois 60611

(812) 222-9350

Attorneys for A.D. Van Meter

and James Kiley

* Counsel of Record