Petition for Writ of Certiorari — Philadelphia Housing Authority Authority v. McDowdell (No. 05-866)

rather than harming the PHA’s residents, had resulted in

excess utility allowance rent reductions and payments for the

residents. (App. 14a 4] 5-7). The district court consequently

held that the residents had suffered no actual injury despite

the fact that PHA had not revised its gas utility allowances.

(App. 14a J 6). It therefore denied the plaintiff class’s re-

quest for retroactive monetary relief. (App. 14a 4 6).

The United States Court of Appeals for the Third Circuit,

however, on September 13, 2005 reversed the district court’s

denial of civil contempt sanctions. McDowell v. Philadelphia

Housing Authority, 423 F.3d 233 (3d Cir. 2005). (App. la-

12a). The Third Circuit held that PHA’s residents “were enti-

tled . . . to have their allowances recalculated based on the

increased rates and the consumption factor in effect at the

time.” (App. lla). The Third Circuit ruled that PHA’s over-

statement of the consumption factor could not be considered

and ordered the district court to calculate and grant residents a

compensatory civil sanction against PHA in the amount of the

difference between the allowances received by tenants and

increased utility allowances based solely on the gas rate in-

creases and the unrevised utility consumption factor that PHA

had used in 2000-02. (App. 1 la-12a).

REASONS FOR GRANTING THE PETITION

The Third Circuit’s opinion conflicts with the decisions of

this Court and other Courts of Appeals both on the limits and

extent of the courts’ civil contempt powers and on the meas-

ure of harm from violation of procedural rights. In addition,

the impact of the Third Circuit’s decision extends far beyond

this Consent Decree and these parties, as the opinion inter-

prets and effectively rewrites HUD’s public housing utility

allowance regulations.

8

A. The Third Circuit’s Opinion Conflicts with the

Decisions of this Court and Other Circuits Lim-

iting the Courts’ Civil Contempt Powers

This Court has made clear that civil contempt sanctions for

past conduct can be permitted only where the complainant

was harmed by the violation of the court order and that such

sanctions must be limited to compensation for the harm the

violation caused. /nternational Union, United Mine Workers

of America v. Bagwell, 512 L.3. 821, 827-34 (1994); United

States v. United Mine Workers of America, 330 U.S. 258,

303-04 (1947).

The Third Circuit’s requirement that the district court

award compensatory retroactive civil contempt sanctions to

the piaintiff class based solely on increased gas rates directly

disregards and conflicts with these limitations on the con-

tempt power. The Consent Decree and HUD’s regulations

required that PHA “revise” its utility allowances, not that

PHA increase the allowances. (App. 4a; App. 22a, 24 C.F.R.

§ 965.507(b)). In contrast, the Consent Decree used the term

“increase” when PHA was required to automatically raise

utility allowances based on rate increases without regard to

other factors. (App. 25a). The Consent Decree’s requirement

that PHA “revise” the allowances therefore could not prop-

erly be read to require an increase based solely on rate

changes and the utility rate component. Instead, it required a

revision of the allowances consistent with HUD regulations,

which not only would address the rate increase but could also

include consideration of other factors bearing on the appropri-

ate utility allowance. The consumption component is such a

factor that HUD regulations require that housing authorities

consider in setting and revising utility aliowances. 24 C.F.R.

§965.505, § 965.507(a).

The Third Circuit’s reasons for excluding the consumption

component were invalid. While paragraph 8 of the Consent

Decree does not list utility consumption as a factor in the

9

utility allowance revisions that it requires, it also does not

exclude or prohibit consideration of the consumption compo-

nent and neither lists nor limits any of the factors that may be

included in the revision. Neither paragraph 8 of the Consent

Decree nor the HUD regulation which it tracks, 24 C.F.R.

§ 965.507(b), states that only adjustments to the rate compo-

nent may be included in a revision. The rate change is thus a

trigger for the need and right to revise utility allowances, and

not a specification or restriction on what may be included in a

revision. Moreover, PHA was clearly and expressly entitled,

under both paragraphs 6 and 7 of the Consent Decree and

HUD regulation 965.507(a), to revise the consumption factor

in the annual reviews that were required in this same time

period. (App. 3a; App. 2la-22a, 24 C.F.R. § 965.507(a)).

Compliance with the Consent Decree therefore would have

permitted revisions in the consumption factor even under the

Third Circuit’s cramped reading of paragraph 8 and Section

965.507(b).

HUD’s 60-day notice requirement, 24 C.F.R. § 965.502(c),

likewise does not preclude a housing agency from including

valid, supported changes in the consumption component in the

required revisions to utility allowances. Section 965.502(c)’s

notice requirement does not apply, as the HUD regulation

concerning revisions triggered by rate increases specifically

exempts such revisions from the notice requirement. 24

C.F.R. § 965.507(b) (App. 22a).

Because the only violation of the Consent Decree was fail-

ure to revise the gas utility allowances and PHA was not

required to automatically or proportionately increase the al-

lowance if no increase was warranted under all appropriate

factors, the Third Circuit’s ruling conflicts with this Court’s

limitations on civil contempt sanctions. Had PHA undertaken

to revise the gas utility allowances at the time of the PGW

rate increases, it would have been entitled to consider the

consumption data available and in existence in the 2000-02

10

period and which demonstrated that the consumption compo-

nent was grossly excessive. Had PHA revised its gas utility

allowances in 2000-02, it would not have been required to

raise the allowances and in fact could have lowered them,

given that the overstatement of the consumption component

far exceeded the increases in gas rates. The residents there-

fore suffered no actual loss from PHA’s failure to conduct

revisions of the allowances and were in fact benefited by the

failure to revise. The civil contempt sanctions ordered by the

Third Circuit are thus inconsistent and incompatible with the

requirement that civil contempt sanctions for past conduct be

limited to plaintiffs’ actual loss.

The Third Circuit’s ruling that residents were entitled to

compensatory civil contempt sanctions based on benefits that

they would not have received under full compliance with the

Consent Decree also conflicts with the decisions of other

_ circuits. The Court of Appeals for the Tenth Circuit has held

that a defendant must be allowed to offset, against the plain-

tiffs’ claimed losses, benefits that plaintiffs received from the

conduct that violated an injunction. Federal Trade Commis-

sion v. Kuykendall, 371 F.3d 745, 766-67 (10th Cir. 2004)

(civil contempt defendants must be allowed to offset, against

total sales from improper telemarketing, amounts paid by

customers where customer was satisfied with the purchase

and would not rescind despite improper solicitations). The

Third Circuit, in contrast, refused to allow PHA to offset

against the gas rate increase the benefit, an unreasonably high

consumption factor, that plaintiffs received from PHA’s fail-

ure to revise the allowances. (App. 7a-1 2a).

The Court of Appeals for the Eighth Circuit has reversed

civil contempt sanctions because defendants’ violation of an

injunction did not cause the harm suffered by plaintiffs,

where compliance with the injunction’s procedural require-

ments would not have changed the loss incurred by plaintiffs.

McBride v. Coleman, 955 F.2d 571, 577-78 (8th Cir. 1992)

1]

(civil contempt damages cannot be awarded for government’s

failure to comply with notice obligations of court’s injunction

where same harm would have occurred even if defendants

had given the notice required by the injunction). The Third

Circuit here, in contrast, required civil contempt sanctions

even though compliance would not have resulted in any

benefit to plaintiffs.

B. The Third Circuit’s Decision Affects the Inter-

pretation of HUD’s Utility Allowance Regulations

and Conflicts with the Fourth Circuit’s Interpreta-

tion of those HUD Regulations

The Third Circuit’s opinion is not limited to construction

and enforcement of a consent decree between these parties.

Not only is the Consent Decree language based on and similar

to HUD’s utility allowance regulations, but the Third Circuit

in its opinion specifically considered, relied on and inter-

preted those HUD regulations. (App. 8a-10a). The impact

of the decision therefore extends far beyond the parties and

affects the application and enforcement of HUD’s public

housing utility allowance regulations throughout the country.

Under the Third Circuit’s ruling, HUD’s utility allowance

revision regulation, 24 C.F.R. § 965.507(b), has been rewrit-

ten to prohibit housing authorities from considering factors

other than utility rates in revising their utility allowances.

(App. 8a-10a). The Third Circuit held that Section 965.507(b)

refers to “adjustments based on rate changes of 10% or more

but does not mention adjustments based on consumption

changes” and therefore does not permit reasonable consump-

tion to be considered in utility allowance revisions triggered

by rate increases. (App. 8a). Effectively, the Third Circuit’s

opinion requires housing authorities to base utility allowances

on invalid, inaccurate and excessive consumption estimates

and to automatically increase utility allowances based solely

on rate increases, even if the resulting allowance would —

violate HUD’s standards for reasonable utility allowances,

12

24 C.F.R. § 965.505. This directly conflicts with the core

and central purpose of the HUD regulations, which provide

that “[t]he objective of a PHA [public housing agency] in

. establishing utility allowances ... shall be to approxi-

mate a reasonable consumption of utilities by an energy-

conservative household of modest circumstances.” 24 C.F.R.

§ 965.505(a) (emphasis added) (App. 19a).

The Third Circuit’s opinion, moreover, conflicts with the

Fourth Circuit’s interpretation of the HUD utility allowance

regulations. In Dorsey v. Housing Authority of Baltimore

City, 984 F.2d 622 (4th Cir. 1993), the Fourth Circuit inter-

preted HUD’s utility allowance regulations and held that non-

compliance with procedural mandates to revise utility allow-

ances does not automatically invalidate existing utility allow-

ances or necessarily require raising of the utility allowances.

984 F.2d at 632. Although it was undisputed in Dorsey that

the defendant housing authority had not revised its utility

allowances as required by HUD’s regulations, the Fourth

Circuit held that this could not support liability unless it was

shown that the resulting utility allowances did not satisfy

HUD’s requirements for reasonable utility allowances. 984

F.2d at 632 (“the regulations as a whole define the contours

of reasonability preclud[ing] us from piecemeal evaluation of

procedural regulations separate from the evaluation of the

reasonableness of the allowances”). The Third Circuit in this

case has taken a position diametrically opposite to the Fourth

Circuit, holding that failure to revise utility allowances re-

quires an automatic raising of allowances regardless of HUD’s

standards of reasonableness.

C. The Third Circuit’s Opinion Conflicts with the

Decisions of this Court and Other Circuits on the

Measure of Harm from Violation of Procedural

Rights

The noncompliance with the Consent Decree in this case

involved a procedural requirement, a requirement that a revi-

13

sion process be conducted when certain utility rate increases

occur. The Consent Decree did not require that utility allow-

ances be increased proportionately to or based solely on util-

ity rate increases. Rather, both it and the regulations that it

enforced and tracked required only that a revision be done to

make sure that the allowances remained in compliance with

HUD’s substantive requirements. (App. 3a-4a; App. 21a-22a,

24 C.F.R. § 965.507).

This Court has made clear that where violation of proce-

dural rights or procedural requirements is at issue, there is no

harm to plaintiff that can support a compensatory award if the

same outcome would have occurred even if the required

procedures had been fully provided and followed. Memphis

Community School District v. Stachura, 477 U.S. 299, 307-11

(1986); Carey v. Piphus, 435 U.S. 247, 260-66 (1978).

The Third Circuit’s judgment is directly contrary to these

decisions. The Third Circuit required the district court to make

a compensatory award based solely on utility rate increases,

notwithstanding the district court’s determination that the

procedure to which plaintiff residents were entitled, revision

of utility allowances, would not have given the residents that

different and more favorable outcome.

In this regard, the Third Circuit’s decision also conflicts

with decisions of other circuits. Other circuits have applied

this Court’s Carey v. Piphus standard to hold that no compen-

satory award for violation of procedural rights can be made

for economic harm from a government decision or act if

adherence to the procedural protections would not have

resulted in a different outcome. See, e.g., Kassim v. City of

Schenectady, 415 F.3d 246, 250 (2d Cir. 2005); Brewer v.

Chauvin, 938 F.2d 860, 864-65 (8th Cir. 1991).

14

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted,

ALAN C. KESSLER

ABBE F. FLETMAN

Counsel of Record

VIRGINIA LYNN HOGBEN

STEPHANIE L. KOSTA

WOLF, BLOCK, SCHORR AND

SOLIS-COHEN LLP

1650 Arch Street, 22nd Floor

Philadelphia, PA 19103-2097

(215) 977-2000

January 5, 2006 Counsel for Petitioner

The Philadelphia Housing Authority

APPENDICES

la

APPENDIX A

UNITED STATES COURT OF APPEALS

THIRD CIRCUIT

No. 04-2609

JACKIE MCDOWELL, et al.

Vv.

PHILADELPHIA HOUSING AUTHO.* TY (PHA);

JOHN WHITE; BARRY MILLER

Jackie McDowell and the certified

class whom she represents,

Appellant

Argued May 27, 2005

Sept. 13, 2005

Rehearing and Rehearing En Banc

Denied Oct. 17, 2005 °

Before SCIRICA, Chief Judge, ALITO and GARTH,

Circuit Judges.

ALITO, Circuit Judge.

This case requires us to construe a consent decree. The

appellants, a class of tenants living in Philadelphia public

housing, moved the District Court to enforce the decree and

to cite the Philadelphia Housing Authority and two of its

employees (together, the “PHA”) for civil contempt. The

tenants alleged that the PHA had violated the decree by

failing to factor rising gas rates into allowances they were

* As to panel rehearing only.

2a

entitled to receive for their gas bills.. The District Court

denied the motion initially and on reconsideration, concluding

that the tenants could not show any actual provable injury as

a result of the PHA’s violations. It reasoned that the PHA

could offset its arrears by retroactively reducing the tenants’

allowances in light of evidence that tenant gas consumption

during the period of the violations had been overstated.

We disagree with this reasoning. The plain text of the

decree and applicable federal regulations do not permit the

PHA to revise the tenants’ allowances retroactively to correct

for historically overstated consumption. The tenants were

entitled to recover in the form of sanctions the difference

between the allowances they received and the allowances

they should have received based on the consumption factor

then in effect. The District Court erred in calculating their

loss based on the PHA’s revised figures, and its order

denying their motion is vacated.

I.

_ This case has its genesis in an April 1997 lawsuit filed

‘against the PHA by Jackie McDowell, a tenant in Philadel-

phia’s public housing system, The suit was brought in federal

court pursuant to 42 U.S.C. § 1983. McDowell’s complaint

alleged that the PHA had deprived her of her federal rights by

failing to factor rising gas rates into the gas allowances she

was entitled to receive under the United States Housing Act

of 1937, 42 U.S.C. § 1437 et seg. McDowell sought relief for

herself and for similarly situated tenants who were allegedly

owed allowances by the PHA. The plaintiff class was

certified in May 1997,

To understand the plaintiffs’ claims, some exposition of the

Housing Act and its accompanying regulations is necessary.

Under section 3(a)(1)(A) of the Act, as amended, a public

housing authority ordinarily may not require a tenant family

to pay more than 30% of its monthly adjusted income as rent.

42 U.S.C. § 1437a(a)(1)(A). Since the Department of Hous-

3a

ing and Urban Development (“HUD”) has interpreted “rent”

to include the reasonable cost of utilities, see, e.g., Tenant

Allowances for Utilities, 49 Fed. Reg. 31,399, 31,400 (Aug.

7, 1984); Wright v. Roanoke Redevelopment & Hous. Auth.,

479 U.S. 418, 420, 107 S.Ct. 766, 93 L.Ed.2d 781 (1987),

housing authorities must issue rebates to.tenants who pur-

chase service directly from a utility company. See West v.

Sullivan, 973 F.2d 179, 182 (3d Cir.1992); West v. Bowen,

879 F.2d 1122, 1129 (3d Cir.1989).

These rebates take the form of monthly allowances credited

toward the tenant’s rent. See 24 C.F.R. § 965.504(b). The

amount of the allowance is calculated “to approximate a

reasonable consumption of utilities by an energy-conservative

household of modest circumstances consistent with the re-

quirements of a safe, sanitary, and healthful living environ-

ment.” /d. § 965.505(a). Separate allowances are calculated

for each utility based on the utility company’s rates and a

consumption factor that takes account of the climate in which

the housing is located, the size of the dwelling units, and

other relevant circumstances. Jd. §§ 965.505(d), 965.507(a).

If a tenant’s utility bill exceeds the allowance, the tenant must

make up the difference; if the allowance exceeds the bill, the

difference may be pocketed. See West v. Bowen, 879 F.2d at

1129 & n. 8.

In January 1998, the parties agreed to settle McDowell’s

lawsuit. The stipulation of settlement read in pertinent part:

6. PHA shall, commencing with 1997, review, at least

annually, the basis on which utility allowances have

been established and, if reasonably required, shall estab-

lish revised allowances.

7. The annual review shall include all changes in cir-

cumstances indicating probability of a significant change

in reasonable consumption requirements and changes in

utility rates.

4a

8. PHA may revise its allowances for resident-

purchased utilities between annual reviews if there is a

rate change except that PHA shall revise its allowances

for resident-purchased utilities between annual [reviews]

if any change in utility rates, by itself or together with

prior rate changes not adjusted for, results in a change of

10 percent or more from the rates on which the

allowances were based.

9. Adjustments to utility allowances shall be retroactive

to the first day of the month following the month in

which the last rate change taken into account in such

revision became effective.

App. at 25. The terms of the settlement were incorporated

into a consent decree, which provided that the District Court

would retain continuing jurisdiction over the administration

and enforcement of the parties’ agreement. /d. at 29.

On December |, 2000, after three years of stability in gas

prices, the Philadelphia Gas Works (“PGW”) raised the

tenants’ rates by approximately 11%. A month later, it raised

them again. The PHA’s own data show that the tenants’ rates

exceeded the baseline rate at the time the decree was entered

by at least 10% during all but two months of the 25—month

period from December 2000 through December 2002. Despite

receiving several letters from the tenants’ counsel urging it to

revise the gas allowances, the PHA took no action on the rate

hikes. The PHA frankly admits that it “fell out of com-

pliance” with the decree during this period. PHA’s Br. at 5.

On October 30, 2002, the tenants filed a motion to enforce

the consent decree and to cite the PHA for civil contempt.

Under a settlement reached in December 2002, the PHA

agreed to increase the tenants’ gas allowances effective

January 1, 2003. The adjustment was not retroactive, how-

ever, and the parties’ agreement expressly left unresolved

whether the tenants were entitled to sanctions for the period

5a

of noncompliance from November 2000 through December

2002. The District Court fixed a briefing schedule to resolve

this issue and heard oral argument on it in July 2003.

The Court denied the tenants’ motion in an unpublished

order dated March 9, 2004. It found that the tenants had “not

suffered any actual provable injury as a result of any failure of

PHA to comply with the Consent Decree prior to January 1,

2003.” App. at 536. This finding was based on “[rjevised gas

consumption calculations for the period July 1, 1999, through

December 31], 2002,” which showed that the overstatement of

gas consumption during this period equaled or exceeded the

shortfalls in the allowances due to the higher rates. /d. The

revised calculations were provided by Sud Associates, P.A.

(“Sud’’), a consulting firm retained by the PHA.

The tenants moved for reconsideration under Federal Rule

of Civil Procedure 59(e). In addition to challenging the Dis-

trict Court’s construction of the consent decree, they argued

that the Court should have afforded them discovery of Sud’s

data and an evidentiary hearing to contest its findings. The

Court denied the motion on May 6, 2004, and the tenants

timely appealed on June 4 of that year, raising the same

claims rejected on their motion for reconsideration.

II.

The denial of a motion for reconsideration is reviewed for

abuse of discretion. See N. River Ins. Co. v. CIGNA Rein-

surance Co., 52 F.3d 1194, 1203 (3d Cir.1995). This standard

of review also applies to the underlying decision to deny the

motion to enforce the consent decree. See Holland v. N.J.

Dep't of Corrs., 246 F.3d 267, 281 (3d Cir.2001); Harris v.

City of Philadelphia, 47 F.3d 1342, 1349 (3d Cir.1995). An

abuse of discretion may occur as a result of an errant

conclusion of law, an improper application of law to fact, or a

clearly erroneous finding of fact. Chiang v. Veneman, 385

F.3d 256, 264 (3d Cir.2004).

6a

The proper construction of the consent decree is a question

of law that receives plenary review. See Holland, 246 F.3d at

270; Sansom Comm. ex rel. Cook v. Lynn, 735 F.2d 1535,

1539 (3d Cir.1984). The decision to deny the tenants

discovery and an evidentiary hearing is reviewed for abuse of

discretion. See United States v. Hedaithy, 392 F.3d 580, 605

(3d Cir.2004); United States v. Albinson, 356 F.3d 278, 281

& n. 5 (3d Cir.2004). Under these standards, vacatur may be

required if the District Court denied the tenants’ motions

based on a misconstruction of the decree or if it abused its

discretion in denying them discovery and an evidentiary hear-

ing. We discuss these claims in turn.

If.

Since a consent decree issued upon the stipulation of the

parties has the characteristics of a contract, contract principles

govern its construction. See Frew ex rel. Frew v. Hawkins,

540 U.S. 431, 437, 124 S.Ct. 899, 157 L.Ed.2d 855 (2004);

United States v. New Jersey, 194 F.3d 426, 430 (3d Cir.1999).

One of these principles is that an unambiguous agreement

should be enforced according to its terms. See United States

v. New Jersey, 194 F.3d at 430 (citing Fox v. U.S. Dep’t of

Hous. & Urban Dev., 680 F.2d 315, 319-20 (3d Cir. 1982)).

Whether the decree is unambiguous is a question of law that

the Court decides by considering whether, “from an objec-

tive standpoint, [the decree] is reasonably susceptible to at

least two different interpretations.” /d. (citing Hullett v.

Towers, Perrin, Forster & Crosby, Inc., 38 F.3d 107, 111 (3d

Cir.1994)).

If the decree is ambiguous, the Court may look to extrinsic

evidence of its meaning, see Thermice Corp. v. Vistron Corp.,

832 F.2d 248, 252 (3d Cir.1987), but ambiguities that persist

must be construed against the party seeking enforcement. See

Harris, 47 F.3d at 1350; accord FTC v. Kuykendall, 37\ F.3d

745, 760-61 (10th Cir.2004). This rule avoids imposing obli-

gations on the parties that they did not bargain for, and it

7a

ensures that a party has fair notice of what the decree requires

before the serious sanction of contempt is invoked. See

United States v. Armour & Co., 402 U.S. 673, 681-82, 91

S.Ct. 1752, 29 L.Ed.2d 256 (1971); Harris, 47 F.3d at 1350.

There can be no doubt that the consent decree obligated the

PHA to revise its gas allowances after the rate changes at

issue here. This duty emerges unambiguously from the plain

text of paragraph 8 of the decree, and the PHA does not deny

that this duty was breached. The interpretive question we

must answer is how the consent decree permitted the PHA to

remedy this breach. The PHA argues that the decree per-

mitted it to offset the shortfall in the allowances the tenants

received by revising estimates of tenant gas consumption

during the period when the violations were occurring. The

tenants argue that the PHA may not offset its sanctions in this

manner because the decree does not permit it to adjust-the

tenants’ allowances retroactively based on revised consump-

tion data.

We agree with the tenants. The only paragraph of the

decree that discusses consumption is paragraph 7, which

permits the PHA, in the course of an annual review, to

consider “all changes in circumstances indicating probability

of a significant change in reasonable consumption require-

ments.” App. at 25. The word “probability” plainly indicates

that the focus of the review is to be prospective. Although

paragraph 9 arguably gives limited retroactive effect to some

revisions based on consumption changes, it does not follow

that the revisions may be retrospective. The unambiguous

language of paragraph 7 indicates that revisions must correct

for “probab[le]” changes in consumption, not for past con-

sumption levels that, in retrospect, were overstated.

Paragraph 8 discusses retrospective adjustments but does

not mention consumption. It permits (and in some cases

requires) an adjustmc. it “if there is a rate change.” /d. In light

of the language of paragraph 7, which mentions both rate and

8a

consumption changes, the omission of consumption in para-

graph 8 is a significant one. A reading of the decree in its

entirety, aided by a straightforward application of the ex-

pressio unius canon, compels the conclusion that the PHA

may not revise the tenants’ allowances retroactively to correct

for historic overestimates of gas consumption.

This view is buttressed by HUD regulations whose

language the consent decree tracks. Under 24 C.F.R.

§ 965.502(c), the PHA must give at least 60 days’ notice to

all tenants before the “proposed effective date” of an

adjustment to their allowances. Section 965.507(b) carves out

an exception to the notice requirement for adjustments based

on rate changes of 10% or more but does not mention

adjustments based on consumption changes. Id. § 965.507(b).

Adjustments based on consumption changes thus remain

subject to § 965.502(c)’s notice requirement. Since such an

adjustment may not take effect until 60 days after the tenants

have received notice, retroactive adjustments are plainly

forbidden under the regulations.

The District Court disregarded the regulations, believing

that the tenants’ motion should be decided solely on the

consent decree, which contains no notice requirement. It is

true that a consent decree should be “construed as it is

written, and not as it might have been written had the plaintiff

established his factual claims and legal theories in litigation.”

Armour & Co., 402 U.S. at 682, 91 S.Ct. 1752. Because the

decree compromises litigation, it will rarely afford the

plaintiffs all the relief they would have obtained had the case

proceeded to a judgment in their favor. See id. at 681, 91

S.Ct. 1752; Harris, 47 F.3d at 1350. Ordinarily, therefore, a

court should confine its interpretation to the four corners of

the decree and not try to divine its meaning from speculation

about the purposes of the parties or the background legal

regime. See United States v. Atl. Ref. Co., 360 U.S. 19, 23, 79

9a

S.Ct. 944, 3 L.Ed.2d 1054 (1959); Hughes v. United States,

342 U.S. 353, 357, 72 S.Ct. 306, 96 L.Ed. 394 (1952).

Notwithstanding these principles, the Supreme Court has

indicated that relevant statutes and regulations may some-

times be used to shed light on the terms of a consent decree.

See United States v. ITT Cont’l Baking Co., 420 U.S. 223,

238, 240-41, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975). The Court

in ITT Continental Baking Co. looked to section 7 of the

Clayton Act, 15 U.S.C. § 18, to help gloss the words

“acquire” and “acquisition” in an antitrust consent decree.

420 U.S. at 240-41, 95 S.Ct. 926. The Court defended its

reliance on this extrinsic evidence on two grounds. First, the

gloss supplied by the statute simply confirmed the meaning

that emerged naturally from the decree’s terms. See id. at 235,

95 S.Ct. 926. Second, the extrinsic evidence was being used

to determine not whether the decree had been violated but

what the appropriate sanction for the violation was. See id. at

237, 95 S.Ct. 926. Since the contemnor had clearly breached

some duty under the decree, there was no danger that he

would be sanctioned for contempt without fair notice of his

obligations. See id.

These rationales apply equally here. As we noted earlier,

the PHA concedes that it was in violation of the Court’s

order. It disputes only the amount of the sanction. In resolv-

ing this dispute, we may construe the decree “basically as

a contract,” and “reliance on certain aids to construction is

proper, as with any other contract.” /d. at 238, 95 S.Ct. 926;

see also United States v. New Jersey, 194 F.3d at 430 (per-

mitting the use of extrinsic evidence to interpret a decree);

Thermice Corp., 832 F.2d at 252 (same). For the reasons set

forth earlier, we believe the plain language of the decree did

not permit the PHA to offset its arrears by revising estimates

of tenant consumption. To the extent that any doubt remains

about the meaning of the decree, the regulations clearly

10a

resolve it in the tenants’ favor. In this respect, the regulations

do not guide our interpretation so much as confirm it.

The PHA submits that it was required to retroactively

revise the allowances because § 1437a(a)(1) does not allow

tenants to pay less than 30% of their monthly adjusted income

in rent. The PHA points to dicta in Wright v. Roanoke

Redevelopment & Housing Authority, in which the Supreme

Court explained that § 1437a permits a housing authority to

charge “no more and no less than 30 percent” of a tenant’s

income as rent. 479 U.S. 418, 430, 107 S.Ct. 766, 93 L.Ed.2d

781 (1987). According to the PHA, many tenants will end

up paying less than 30 percent of their income in rent if

allowances based on inflated consumption estimates are left

uncorrected.

Even if the language on which the PHA relies were

binding, it could not support the PHA’s argument. In 1998, -

over a decade after Wright was decided, Congress rewrote

§ 1437a(a)(2) and added the following language:

The monthly rental amount determined under this clause

for a family shall be an amount, determined by the

public housing agency, that does not exceed the greatest

of the amounts (rounded to the nearest dollar) deter-

mined under subparagraphs (A), (B), and (C) of para-

graph (1). This clause may not be construed to require a

public housing agency to charge a monthly rent in the

maximum amount permitted under this clause.

Quality Housing and Work Responsibility Act of 1998,

Pub.L. No. 105-276, § 523, 112 Stat. 2518, 2566 (codified

at 42 U.S.C. § 1437a(a)(2)(B)(i)(ID) (emphasis added). The

amendment takes pains to ensure that the amounts set forth in

§ 1437a(a)(1) are not construed as minimum rents. Once this

putative rent floor is removed, the PHA’s argument has

nothing left to stand on.

lla

There is consequently no merit to the District Court’s

conclusion that the tenants failed to show “actual provable

injury” resulting from the PHA’s violations. The sanction

imposed on a civil contemnor for his past conduct may not

exceed the actual damages caused by his violation of the

court’s order. See Gregory v. Depte, 896 F.2d 31, 34 (3d

Cir.1990) (citing Quinter v. Volkswagen of Am., 676 F.2d 969

(3d Cir.1982)). It does not follow, however, that the tenants’

actual consumption of gas is the baseline from which their

damages should be measured. As this Court explained years

ago in National Drying Machinery Co. v. Ackoff, the offended

party’s rights under the decree set the baseline for calculating

his loss:

Whether an award in civil contempt be measured in

terms of a plaintiffs loss or a defendant’s profit, such an

award, by very definition, must be an attempt to com-

pensate plaintiff for the amount he is out-of-pocket

or for what defendant by his wrong may be said to

have diverted from the plaintiff or gained at plaintiff's

expense.

245 F.2d 192, 194 (3d Cir.1957); see also Quinter, 676 F.2d

at 975 (“[I]n civil contempt proceedings enforcement of the

rights and remedies of a litigant is the ultimate object.”’); cf.

Leman v. KrentlerArnold Hinge Last Co., 284 U.S. 448, 455-

56, 52 S.Ct. 238, 76 L.Ed. 389 (1932) (permitting the: re-

covery of profits from a patent infringement in violation of a

court order even though the patentee could not show damages

resulting from the infringement).

For the reasons set forth above, the consent decree

permitted the PHA to revise estimates of tenant consumption

prospectively only. When PGW raised its rates, the tenants

were entitled under paragraph 8 of the decree to have their

allowances recalculated based on the increased rates and the

consumption factor in effect at the time. The difference be-

tween the allowances so calculated and the allowances the

12a

tenants received is the loss the tenants suffered and the

benefit the PHA reaped as a result of the latter’s contempt.

This is the tenants’ actual provable injury.

IV.

Because we conclude that the consent decree did not

permit the PHA to offset a shortfall in the tenants’ allowances

with revised estimates of tenant gas consumption, we need

not consider the tenants’ alternative argument that they were

wrongfully denied discovery and an evidentiary hearing to

contest the revisions. The order of the District Court denying

the tenants’ motion for reconsideration is accordingly

vacated. On remand, the tenants’ motion to cite the PHA for

civil contempt shall be granted, and an appropriate sanction

shall be calculated in the manner described above.

13a

APPENDIX B

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

Civil Action No. 97-2302

JACKIE MCDOWELL, et al.

Plaintiffs,

V.

PHILADELPHIA HOUSING AUTHORITY, et al.

Defendants.

ORDER

AND NOW, this 9th of March, 2004, this matter having

come before the Court on plaintiffs Motion to Enforce

Consent Decree, and the Court having considered all papers

filed and proceedings held in connection with the motion, and

having heard arguments on the motion on July 17, 2003, the

Court FINDS and it is hereby ORDERED that:

1. Defendant, The Philadelphia Housing Authority

(“PHA”), has been in full compliance with the Stipulation of

the parties incorporated into this Court’s Order of January 12,

1997 (the “Consent Decree’’) since January 1, 2003.

2. The monthly customer charge of the Philadelphia Gas

Works (“PGW’”’) is not part of the gas “rate” for the purpose of

calculating changes of 10 percent or more, as is necessary for

compliance with paragraphs 8 and 9 of the Consent Decree.

3. PHA shall continue to adjust its gas utility allowance to

account for changes in PGW’s monthly customer charge. Any

such adjustment shall be made beginning on the first day of

the month following the effective date of the change in the

customer charge.

14a

4. Both reductions and increases in PGW’s gas rates are

“changes” for purposes of calculating changes of 10 percent

or more, as is necessary for compliance with paragraphs 8

and 9 of the Consent Decree.

5. The present motion before the Court involves en-

forcement of the Consent Decree. Therefore, 24 C.F.R.

§ 965.502(c) does not control disposition of this matter.

Pursuant to paragraph 6 of the Consent Decree, PHA was

required at least annually to review the basis on which gas

utility allowances had been established and, if reasonably

required, to establish revised allowances. Revised gas

consumption calculations for the period July 1, 1999, through

December 31, 2002, have been provided to the Court and

counsel for plaintiffs in the Final Report prepared by Sud

Associates, Inc. (dated March 2003). Counsel for the plaintiff,

although afforded an opportunity to do so, did not comment

upon or challenge those calculations.

6. Plaintiff and the members of the class have not suffered

any actual provable injury as a result of any failure of PHA to

comply with the Consent Decree prior to January 1, 2003.

Plaintiffs request for retroactive monetary relief is denied.

7. PHA shall not seek to recoup from plaintiff or the class

any part of the gas utility allowance overpayments that

resulted from PHA’s past use of any excessive consumption

calculations to determine gas utility allowances.

8. By consent of PHA, the requirements of paragraph 15

of the Consent Decree concerning provision of written sum-

mary reports of future utility allowance reviews are extended

until December 31, 2005.

9. The Court retains continuing jurisdiction over compli-

ance with the Consent Decree and this Order.

/s/ John P. Fullam

JOHN P. FULLAM

Fullam. S.J.

15a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 04-2609

JACKIE MCDOWELL, et al.

Vv.

PHILADELPHIA HOUSING AUTHORITY (PHA);

JOHN WHITE; BARRY MILLER *

Jackie McDowell and the certified

class whom she represents,

Appellant.

SUR PETITION FOR REHEARING

Present: SCIRICA, Chief Judge, SLOVITER, ALITO,

ROTH, McKEE, RENDELL, BARRY, AMBRO, FUENTES,

SMITH, FISHER, and VAN ANTWERPEN, Circuit Judges,

and GARTH, Senior Circuit Judge.

The petition for rehearing filed by appellee in the above

entitled case having been submitted to the judges who

participated in the decision of this court and to all the other

available circuit judges of the circuit in regular active service,

and no judge who concurred in the decision having asked for

rehearing, and a majority of the circuit judges of the circuit in

regular active service not having voted for rehearing by the

court en banc, the petition for rehearing is denied.

* As to panel rehearing only.

l6a

By the Court,

/s/ Samuel A. Alito, Jr.

Circuit Judge

DATED: October 17, 2005

SLC/ce: Paul A. Brooks, Esq.

George D. Gould, Esq.

Stephanie L. Kosta, Esq.

Abbe F. Fletman, Esq.

17a

APPENDIX D

Subpart E—Resident Allowances For Utilities

SOURCE: 61 FR 7971, Feb. 29, 1996, unless otherwise

noted.

§ 965.501 Applicability.

(a) This subpart E applies to public housing, including the

Turnkey III Homeownership Opportunities program. This

subpart E also applies to units assisted under sections 10(c)

and 23 of the U. S. Housing Act of 1937 (42 U.S.C. 1437 et

seq.) as in effect before amendment by the Housing and

Community Development Act of 1974 (12 U.S.C. 1706e) and

to which 24 CFR part 900 is not applicable. This subpart

E does not apply to Indian housing projects (see 24 CFR

part 950).

(b) In rental units for which utilities are furnished by the

PHA but there are no checkmeters to measure the actual

utilities consumption of the individual units, residents shall be

subject to charges for consumption by resident-owned major

appliances, or for optional functions of PHA-furnished

equipment, in accordance with § 965.502(e) and 965.506(b),

but no utility allowance will be established.

§ 965.502 Establishment of utility allowances by PHAs.

(a) PHAs shall establish allowances for PHA-furnished

utilities for all checkmetered utilities and allowances for

resident-purchased utilities for all utilities purchased directly

by residents from the utilities suppliers.

(b) The PHA shall maintain a record that documents the

basis on which allowances and scheduled surcharges, and

revisions thereof, are established and revised. Such record

shall be available for inspection by residents.

(c) The PHA shall give notice to all residents of proposed

allowances, scheduled surcharges, and revisions thereof. Such

18a

notice shall be given, in the manner provided in the lease or

homebuyer agreement, not less than 60 days before the

proposed effective date of the allowances or scheduled

surcharges or revisions; shall describe with reasonable

particularity the basis for determination of the allowances,

scheduled surcharges, or revisions, including a statement of

the specific items of equipment and function whose utility

consumption requirements were included in determining the

amounts of the allowances or scheduled surcharges; shall

notify residents of the place where the PHA’s record

maintained in accordance with paragraph (b) of this section is

available for inspection; and shall provide all residents an

opportunity to submit written comments during a period

expiring not less than 30 days before the proposed effective

date of the allowances or scheduled surcharges or revisions.

Such written comments shall be retained by the PHA and

shall be available for inspection by residents.

(d) Schedules of allowances and scheduled surcharges

shall not be subject to approval by HUD before becoming

effective, but will be reviewed in the course of audits or

reviews of PHA operations.

(e) The PHA’s determinations of allowances, scheduled

surcharges, and revisions thereof shall be final and valid

unless found to be arbitrary, capricious, an abuse of dis-

cretion, or otherwise not in accordance with the law.

§ 965.503 Categories for establishment of allowances.

Separate allowances shall be established for each utility

and for each category of dwelling units determined by the

PHA to be reasonably comparable as to factors affecting

utility usage.

§ 965.504 Period for which allowances are established.

(a) PHA-furnished utilities. Allowances will normally be

established on a quarterly basis; however, residents may be

19a

surcharged ‘on a monthly basis. The allowances established

may provide for seasonal variations.

(b) Resident-purchased utilities. Monthly. allowances shall

be established. The allowances established may provide for.

seasonal variations.

§ 965.505 Standards for allowances for utilities.

(a) The objective of a PHA in designing methods of

establishing utility allowances for each dwelling unit category

and unit size shall be to approximate a reasonable con-

sumption of utilities by an energy-conservative household of

modest circumstances consistent with the requirements of a

safe, sanitary, and healthful living environment.

(b) Allowances for both PHA-furnished and _ resident-

purchased utilities shall be designed to include such rea-

sonable consumption for major equipment or for utility

functions furnished by the PHA for all residents (e.g., heating

furnace, hot water heater), for essential equipment whether or

not furnished by the PHA (e.g., range and refrigerator), and

for minor items of equipment (such as toasters and radios)

furnished by residents.

(c) The complexity and elaborateness of the methods

chosen by the PHA, in its discretion, to achieve the foregoing

objective will depend upon the nature of the housing stock,

data available to the PHA and the extent of the administrative

resources reasonably available to the PHA to be devoted to

the collection of such data, the formulation of methods of

calculation, and actual calculation and monitoring of the

allowances.

(d) In establishing allowances, the PHA shall take into

account relevant factors affecting consumption requirements,

including:

(1) The equipment and functions intended to be cov-

ered by the allowance for which the utility will be used.

20a

For instance, natural gas may be used for cooking,

heating domestic water, or space heating, or any com-

bination of the three;

(2) The climatic location of the housing projects;

(3) The size of the dwelling units and the number of

occupants per dwelling unit;

(4) Type of construction and design of the housing

project;

(5) The energy efficiency of PHA-supplied appli-

ances and equipment;

(6) The utility consumption requirements of appli-

ances and equipment whose reasonable consumption is

intended to be covered by the total resident payment;

(7) The physical condition, including insulation and

weatherization, of the housing project;

(8) Temperature levels intended to be maintained in

the unit during the day and at night, and in cold and

warm weather; and

(9) Temperature of domestic hot water.

(e) If a PHA installs air conditioning, it shall provide, to

the maximum extent economically feasible, systems that give

residents the option of choosing to use air conditioning in

their units. The design of systems that offer each resident the

option to choose air conditioning shall include retail meters or

checkmeters and residents shall pay for the energy used in its

operation. For systems that offer residents the option to

choose air conditioning, the PHA shall not include air

conditioning in the utility allowances. For systems that offer

residents the option to choose air conditioning but cannot be

checkmetered, residents are to be surcharged in accordance

with § 965.506. If an air conditioning system does not pro-

vide for resident option, residents are not to be charged, and

these systems should be avoided whenever possible.

2la

§ 965.506 Surcharges for excess consumption of PHA-

furnished utilities.

(a) For dwelling units subject to allowances for PHA-

furnished utilities where checkmeters have been installed, the

PHA shall establish surcharges for utility consumption in

excess of the allowances. Surcharges may be computed on a

straight per unit of purchase basis (e.g., cents per kilowatt

hour of electricity) or for stated blocks of excess con-

sumption, and shall be based on the PHA’s average utility

rate. The basis for calculating such surcharges shall be

described in the PHA’s schedule of allowances. Changes in

the dollar amounts of surcharges based directly on changes in

the PHA’s average utility rate shall not be subject to the

advance notice requirements of this section.

(b) For dwelling units served by PHA-furnished utilities

where checkmeters have not been installed, the PHA shall

establish schedules of surcharges indicating additional dollar

amounts residents will be required to pay by reason of

estimated utility consumption attributable to resident-owned

major appliances or to optional functions of PHA-furnished

equipment. Such surcharge schedules shall state the resident-

owned equipment (or functions of PHA-furnished equipment)

for which surcharges shall be made and the amounts of such

charges, which shall be based on the cost to the PHA of the

utility consumption estimated to be attributable to reasonable

usage of such equipment.

§ 965.507 Review and revision of allowances.

(a) Annual review. The PHA shall review at least annually

the basis on which utility allowances have been established

and, if reasonably required in order to continue adherence to

the standards stated in § 965.505, shall establish revised

allowances. The review shall include all changes in circum-

stances (including completion of modernization and/or other

energy conservation measures implemented by the PHA)

22a

indicating probability of a significant change in reasonable

consumption requirements and changes in utility rates.

(b) Revision as a result of rate changes. The PHA may

revise its allowances for resident-purchased utilities between

annual reviews if there is a rate change (including fuel

adjustments) and shall be required to do so if such change, by

itself or together with prior rate changes not adjusted for,

results in a change of 10 percent or more from the rates on

which such allowances were based. Adjustments to resident

payments as a result of such changes shall be retroactive to

the first day of the month following the month in which the

last rate change taken into account in such revision became

effective. Such rate changes shall not be subject to the 60 day

notice requirement of § 965.502(c).

§ 965.508 Individual relief.

Requests for relief from surcharges for excess consumption

of PHA-purchased utilities, or from payment of utility sup-

plier billings in excess of the allowances for resident-

purchased utilities, may be granted by the PHA on reasonable

grounds, such as special needs of elderly, ill or disabled

residents, or special factors affecting utility usage not within

the control of the resident, as the PHA shall deem appro-

priate. The PHA’s criteria for granting such relief, and

procedures for requesting such relief, shall be adopted at the

time the PHA adopts the methods and procedures for

determining utility allowances. Notice of the availability of

such procedures (including identification of the PHA

representative with whom initial contact may be made by

residents), and the PHA’s criteria for granting such relief,

shall be included in each notice to residents given in

accordance with § 965.502(c) and in the information given to

new residents upon admission.

23a

APPENDIX E

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

[Filed Jan. 12, 1998]

C.A. #97-2302

JACKIE MCDOWELL, et al.

Plaintiffs,

VS.

PHILADELPHIA HOUSING AUTHORITY, ef al.

Defendants.

ORDER

AND NOW, This 12th day of January, 1997[8], this matter

having come before the Court for approval of a settlement in

this action, and for award of attorneys fees, and the Court,

having considered all papers filed and proceedings held in

connection, with said motion, having held a hearing and good

cause appearing therefore, it is hereby ORDERED:

1. This Court has jurisdiction over the subject matter of

this action and over all parties to this action; including all

members of the class as that term is defined in the Order of

this Court of May 21, 1997.

2. The Stipulation attached to this Order is incorporated

herein by reference and entered as an Order of this Court.

3. Defendants Philadelphia Housing Authority, John

White and Barry Miller and their successors shall abide by an

implement the terms in the attached Stipulation.

4. This Court hereby finds and concludes that the notice

given to the Class was the best practicable under the cir-

cumstances and fully satisfies the requirements of Rule 23 of

24a

the Federal Rules of Civil Procedure and the requirements of

due process.

5. This Court hereby awards plaintiffs’ counsel for ser-

vices performed in this litigation, attorneys fees in the amount

of $10,324.00.

6. Without affecting the finality of this judgment, the

Court hereby reserves and retains continuing jurisdiction over

all matters relating to the administration and effectuation of

the Stipulation hereby approved.

BY THE COURT:

/s/

U.S. DISTRICT COURT JUDGE

Entered: 1-12-98

Clerk of Court

25a

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

C.A. #97-2302

JACKIE MCDOWELL, et al.

Plaintiffs,

VS.

PHILADELPHIA HOUSING AUTHORITY, et al.

Defendants.

STIPULATION

1. The parties have been advised of and have consented to

the terms and provisions of this stipulation.

2. The class has been certified pursuant to F.R.C.P.

23(b)(2) and the class shall consist of all Philadelphia Hous-

ing Authority (hereinafter “PHA”) tenants for whom PHA

pays or should have paid gas utility allowances since

September 1, 1996.

3. PHA shall increase all gas utility allowance payments

by an amount sufficient to reflect PGW’s current gas rate of

.712 per ccf and GCR of .16517 per ccf, which is an increase

of approximately 17%, effective October 1, 1996.

4. By October 31, 1997, PHA shall issue retroactive gas

utility allowances payments to insure that the gas utility

allowance of all class members are increased by an amount

sufficient to reflect PGW’s current gas rate of .712 per ccf

and GCR of .16517 per ccf, which is an increase of

approximately 17%, for the period of time from October 1,

1996, through March 31, 1997.

5. Where a tenant of record became head of household due

to the death or incapacity of the preceding head(s) of house-

26a

hold, PHA shall provide the relief, pursuant to paragraphs 3-5

of this stipulation, to the current head of household for the

period of time when the tenant of record was head of

household and shall also provide the same relief by paying

the tenant of record for the tenure of the preceding head(s) of

household. Under these circumstances, no payment shall be

made to the preceding head(s) of household.

6. PHA shall, commencing with 1997, review, at least

annually, the basis on which utility allowances have been

established and, if reasonably required, shall establish revised

allowances.

7. The annual review shall include all changes in cir-

cumstances indicating probability of a significant change

in reasonable consumption requirements and changes in util-

ity rates.

8. PHA may revise its allowances for resident-purchased

utilities between annual reviews if there is a rate change

except that PHA shall revise its allowances for resident-

purchased utilities between annual reviews if any change in

utility rates, by itself or together with prior rate changes not

adjusted for, results in a change of 10 percent or more from

the rates on which the allowances were based.

9. Adjustments to utility allowances shall be retroactive to

the first day of the month following the month in which the

last rate change taken into account in such revision became

effective.

10. PHA shall provide notice of this proposed settlement

by mailing the notice attached hereto as Exhibit “II” by first

class mail, postage prepaid to all class members.

11. In the event that the notice to any class member is

returned because the the class member is deceased, then

notice shall be promptly mailed to the succeeding family

member who is head of household of the unit.

27a

12. In the event that the notice to any class member is

returned because the class member has moved and left no

forwarding address, the defendants shall employ a locator

service to determine the class member’s current address and

notice to this class member shall be promptly mailed to the

class member’s current address by first class mail, postage

prepaid.

13. Named plaintiff Jackie’ McDowell shall receive the

same relief as all class members.

14. PHA shall pay Community Legal Services, Inc.

$10,324.00 in attorneys fees for the prosecution of this action.

CLS shall only be entitled to additional attorneys fees in this.

matter if the defendants fail to comply with the terms of this

stipulation and the plaintiffs prevail on a motion to enforce or

a motion for contempt.

15. For the period of time from the date of this settlement

through December 31, 2002, PHA shall provide 2 written

summary report of all future utility allowance reviews to

counsel for plaintiff within 30 days of each annual or interim

review. The report shall contain the following information:

a) The circumstances considered;

b) The relevant changes in the circumstances considered;

c) The amount of any resulting adjustment;

d) The effective date of any resulting adjustment.

16. PHA shall not be required to supply the summaries

required by paragraph 15 after December 31, 2002, unless the

plaintiffs file, prior to October 31, 2002, a motion to have the

monitoring and summaries continue. The court shall grant

such a motion if PHA has not complied with the terms of this

stipulation.

17. The parties expressly understand and agree that the

terms and conditions of this stipulation are in compromise

28a

and full accord and satisfaction of a disputed claim and that

the defendants admit no liability and settle this claim solely

for the purpose of terminating this dispute and litigation

between the parties.

18. Upon the Court’s entry of the final order approving the

settlement in this matter, PHA shall serve the notice attached

as Exhibit “III” upon all class members. Service shall be

made by first class mail, postage prepaid.

19. The court shall retain continuing jurisdiction over

compliance with this stipulation.

/s/ Michael Donahue

Michael Donahue, Esquire

George D. Gould, Esquire

Paul A. Brooks, Esquire

Community Legal Services, Inc.

1424 Chestnut Street

Phila., PA 19102

215-981-3700

Counsel for Plaintiff

/s/ Denise J. Baker

Denise J. Baker, Esquire

Crystal T. Bryant, Esquire

Phila Housing Authority

2012 Chestnut Street

Phiia., PA 10103

215-981-6127

Counsel for Defendants

29a

APPENDIX F

Philadelphia Housing Authority

Determination of Gas Utility Allowances

For Scattered-Sites

March 2003—FINAL REPORT

Submitted to: Joel M. Sweet, Esquire

Wolf, Block, Schorr and Solis-Cohen LLP

1650 Arch Street

22nd Floor

Philadelphia, PA 19103

Submitted by: /s/ Ish Sud Ph.D.

Ish Sud Ph.D., President

/s/ Elizabeth Reid McGowan

Elizabeth Reid McGowan, C.E.M.

Sud Associates, P.A.

1813 Chapel Hill Road

Durham, NC 2707

919/493-5277

30a

‘- Philadelphia Housing Authority

Determination of Gas Utility Allowances

for Scattered-sites

March 2003

I. INTRODUCTION

The objective of this study is to examine the Philadelphia

Housing Authority’s (PHA’s) existing gas utility allowances

for scattered-sites to determine if they comply with the stan-

dards set forth in 24 CFR 965.505, which requires that utility

allowances “approximate a reasonable consumption of utili-

ties by an energy-conservative household of modest circum-

stances consistent with the requirements of a safe, sanitary,

and healthful living environment”.

Further, if the existing allowances do not comply with that

regulation, we shall develop a proposal for gas utility allow-

ances consistent with HUD regulations as outlined in 24 CFR

965.505 and expanded upon in the Utility Allowance Guide-

book, a supplementary reference provided by HUD to assist

housing authorities in interpreting the HUD regulations.

II. EXISTING GAS ALLOWANCES AND ACTUAL GAS

USAGE

PHA’s scattered-site inventory includes several thousand

housing units of a variety of housing types located at various

sites throughout Philadelphia. Although the housing units are

unique, they can be categorized in terms of housing type (de-

tached, semi-detached, or inner row units), by the fuel sources

used for space heating, cooking, and domestic water heating,

and the size, by number of bedrooms. The designations are

coded as DGGG, IGGG, and SGGG, where the first character

refers to the location type (detached, inner-row, and semi-

detached, respectively), while the second through fourth char-

acters refer to the space heating fuel, the cooking fuel, and the

water heating fuels, respectively (where G=Gas, O=Oil, and

3la

E=Electricity.) The numeric suffix refers to the number of

bedrooms in the unit. Thus, a unit coded as DGGG-2 repre-

sents a two bedroom detached home with gas space heating,

water heating and cooking.

As of December 2002, PHA provided a gas utility allow-

ance to residents of 4223 scattered-site units. Table 1 shows

the distribution of these units among the various utility code

designations.

Table

0 egestas ee ag ay ge =

en 1 a ee ee cn

a OHW 12 17 7 U

inner

jooo_|gaingeatier | oe | mo yom) eo an)

8666 __ :' 4 | 9 106 | 127 | 67

inner Row, Od heat:

Heat; Gas Cocking and

SOGG OHW — hae = — bated

* All but one of these homes have received replacement

gas furnaces, and need to have the utility code des-

ignation changed to reflect gas space heating.

** All of these homes have received replacement gas

furnaces, and need to have the utility code designation

changed to reflect gas space heating.

This study is based upon analysis of a complete year of

data for all scattered-site addresses that are currently receiv-

ing a gas utility allowance from PHA and for which a full .

year of gas consumption data was available. Philadelphia Gas

Works (PGW) provided the gas consumption data in the

form of records containing fields for Unit Number, Number

of Bedrooms, Address, Apartment Number, Zip Code, Total

Annual Usage (in ccf), Total Annual Charges (in dollars), and

Average Monthly Charges (in dollars). We correlated these

records with a list of PHA units receiving gas allowances to

include identifiers for the PHA utility codes and occupancy

Status.

32a

Using just the raw PGW gas data sorted by utility code

category and normalized for weather, we compared the exist-

ing utility allowances to the actual gas consumption data

for each allowance category. This was done by multiplying

PHA’s existing monthly gas consumption allowance for each

category by 12 months per year to obtain an annual gas

consumption allowance, and then comparing it to the normal-

ized annual gas consumption for each unit. The normalized

annual consumption for each unit was determined by mul-

tiplying the total usage figure provided by PGW by a weather

normalization factor of 1.14. (The normalization process is

described in greater detail in Step 6 of Section IV of this

report.) We found that the utility allowance exceeded the nor-

malized actual gas consumption in over 96% of the scattered-

site units. |

After determining that over 96% of the scattered-site units

had allowances that exceeded their normalized annual gas

consumption, we examined the magnitude by which PHA’s

existing scattered-site gas allowances exceeded the actual ten-

ant consumption. As an initial check, we compared the dollar

value of the utility allowances paid to tenants to their actual

gas costs for the calendar year 2002. Figure 1 shows a graph

of the amount by which PHA’s scattered-site gas allowance

payments exceeded the actual gas costs. The numbers on the

left hand side show the difference between the gas allowance

payments and actual gas costs; the numbers across the bottom

_ of the chart indicate the number of household included in

each cost differential range.

33a

Figure 1

Gas Allowances Received in Excess of Actus! Gas Costs - 2002

91900-91500 pC,

«-62900 £ ” ? .

C) 2 100 160 200 zs0 co 0 400

Number of Tenants

From Figure |, it is apparent that the existing gas allow-

ance payments exceed the gas costs of the majority of the

scattered-site households. In most cases, the gas allowances

greatly exceed the actual gas costs. On average, the gas al-

lowances exceeded actual gas costs by $900 per year.

As a more exact comparison, we compared the normalized

actual gas consumption figures to the annual gas consumption

allowances provided by PHA. Figure 2 shows a graph of the

percentage of the PHA’s existing gas consumption allowance

which is actually consumed in each household. This percent-

age is based upon the normalized gas consumption, so that

the weather for the year during which data was collected has

been accounted for.

BEST AVAILABLE COPY

34a

Figure 2

Comparteon of Normaitzed Gas Consumption to Annuas Gas Nlowance

wo Oa GER AT

a feng tT

€, . + ? bs

a a

© «00 UL

me 7 sielatme

a —

1. An +! dH z wa _ |

qo ba O, Aidit | {1 7 oar .

PEEUECCECEEEGUEEEREES

CFEREEGES ECS ER EE EE ES

Percentage cf Ons Afiewrance Used

As seen in Figure 2, the vast majority of PHA’s scattered-

site households require far less gas than is provided by the

existing gas allowance. On average, the scattered-site house-

holds actually require only 55% of their gas utility consump-

tion allowance to buy gas.

Due to the large differences between the existing con-

sumption allowances and the average consumption data, we

conclude that the existing allowances do not “approximate a

reasonable consumption of utilities by an energy-conservative

household of modest circumstance” as called for by the gov-

ering standard, 24 CFR 965.505(a). Accordingly, we pro-

pose that new gas utility allowances be calculated using the

methodologies in the Utility Allowance Guidebook (Septem-

ber 1998 Edition) as described below.

Ill. DETERMINATION OF NEW GAS UTILITY ALLOW-

ANCES

HUD’s standards for determining utility allowances are

provided in 24 CFR 965.505. The Utility Allowance Guide-

35a

book is a supplementary document that provides additional

reference for housing authorities in calculating utility allow-

ances. The calculation methodologies used in this analysis

have closely followed the guidelines in the Utility Allowance

Guidebook. While the Guidebook suggests a number of per-

missible methods for meeting the requirements of 24 CFR

965, it also points out that other approaches may also be

acceptable. In a few specific situations where we have devi-

ated from the methods specifically stated in the Guidebook

(such as when there was not a statistically valid sample of

data for a pariicular category) we have used an alternative

method which is intended to be as uncomplicated as possible

while being consistent with the HUD guidelines. We aiso

made sure that any alternative methods would err on the side

of providing a more generous allowance to the residents in

that allowance category. These deviations will be explained

in more detail as they are encountered in this report.

The Utility Allowance Guidebook provides two basic meth-

odologies that may be used to determine utility allowances:

engineering-based methods and consumption-based methods.

Engineering-based methods require inputting specific details

regarding the construction of the house into a software pro-

gram to provide a building energy simulation for the building.

Since a unique building simulation is required for each differ-

ent housing type, this methodology would be prohibitively

costly and impractical to implement for developments which

include a variety of different housing plans. Consumption-

based methods use a statistical sampling of actual historical

utility data to determine appropriate utility allowances. Chap-

ter 4 of this reference includes a decision tree’ to determine

the most appropriate methodology for a Housing Authority’s

particular circumstances. Table 2 shows a summary of the

pertinent questions from the decision tree which were used to

' A copy of the decision tree is included in Appendix A.

36a

determine the most appropriate methodology for determining

the gas utility allowances for PHA’s scattered-sites.

Table 2

Decision Tree for Selecting » Utility Allowance Method

Question Answer Next Step

Do you feel the current

allowances are reasonable

based on your knowledge of The utility allowances

| the regulations? No should be recalculated.

Are the consumption data

relatively easily accessible? Yes Go to the next question

Are the consumption dala of

good quality, or can they be

improved to an acceptable Yes Go to the next question

level? .

Has the HA modernized its No.

development within the last A smal! number have Go to the next question

year? been completely

Has the HA modenazed its modernized; others have

development within the last been partially

three years? modernized. Go to the next question

Does the HA provide an

allowance for heat? Yes Go to the next question

Does the HA have on file valid

heat Joss calculations and is the

heating system efficiency No Go to the next question

known?

Not feasible due to the

Is the HA willing to hire a large number of

consultant to perform heat loss | differing types of units.

calculations and/or to It would be The use of a

determine the efficiency of the | prohibitively costly to | consumption-based

heating system? hire a consultanttodo | methodology is

the large number of recommended.

calculations needed.

Consistent with HUD’s Utility Allowance Guidebook and

in light of the varied nature of PHA’s scattered-site housing

inventory, we recommend that the gas allowances for PHA’s

scattered-sites be determined using a consumption-based

methodology

IV. CONSUMPTION METHOD FOR DETERMINING

GAS UTILITY ALLOWANCES

Chapter 6 of the HUD Utility Allowance Guidebook pro-

vides 8 steps for determining utility allowances using his-

37a

torical consumption data. We have followed these steps in

calculating the gas allowances for this report.

Step 1: Define Allowable and Non-Allowable End Uses

Step 2: Determine the Time Frame of the Historic Con-

sumption Data

Step 3: Develop the Appropriate Allowance Categories

Step 4: Collect the Consumption Data and Group Data by

Allowance Categories

Step 5: Clean Up the Consumption Data and Check the

Statistical Validity of the Sample

Step 6: Determine the Point of Central Tendency for Each

Data Set

Step 7: Establish Standards for the “Energy Conservative”

Household

Step 8: Convert Consumption Allowances to Dollar Allow-

ances

Step 1: Define Allowable and Non-Allowable End Uses

For residential gas usage, the primary end-uses of the fuel

include space heating, domestic water heating, and cooking.

Since all of these are acceptable under HUD guidelines, no

adjustments of the consumption data were required to exclude

data for non-allowable end uses. (The distinction between al-

lowable and non-allowable usages is generally more relevant

to the determination of electric allowances. )

Step 2: Determine the Time Frame of the Historic Con-

sumption Data

There are several acceptable options to define the time

period over which consumption data is studied. Two of the

most common include single-year fixed database and a three-

year rolling base of consumption data.

38a

A single-vear fixed database uses consumption data from a

single year and then normalizes the data to account for the

effects of weather during that base year. This is done by ex-

amining the published weather data for the base year (“degree

days”) and comparing the base year to the average weather

for the same area over a database of thirty years and adjusting

the usage figures accordingly. Normalizing for weather en-

sures that the particular weather patterns during the base year

(such as a particularly warm or cold winter) do not result in

under- or over-calculating the allowances based upon that

particular year’s data. This method has the advantage of not

requiring that consumption data be obtained and analyzed

each year.

The three-year rolling base looks at three years of con-

sumption data for a given number of housing units. Utility

allowances are changed every year under this scheme. Since

it examines data over time, it automatically incorporates any

changes in consumption due to aging of the housing and

equipment as well as installation of weatherization or new

equipment. Since collection of utility data can sometimes be

difficult, and this method requires that new data be collected

and new allowances be recalculated each year, many housing

authorities find this method to be costly and impractical.

The analysis used in this report is based upon a single-year

fixed database normalized for weather using consumption

data from January 2002 to December 2002.

Step 3: Develop the Appropriate Allowance Categories

Most traditional public housing developments consist of

large buildings containing multiple housing units of a similar

design and construction located at a single site, or adjacent

sites. PHA’s scattered-sites (which are the only units relevant

to PHA’s current allowance program) are different from the

traditional public housing developments in that they literally

are scattered throughout the community. Scattered-site hous-

39a

ing provides unique challenges in determining utility allow-

ances because, by their nature, scattered-sites do not have the

uniformity of design and construction types typical of tradi-

tional housing developments.

The Utility Allowance Guidebook discusses the selection of

allowance categories. On page 89, it states that “the process

of defining the allowance categories involves finding a proper

balance between the administrative burden of large numbers

of categories and the inequities which might result from

the failure to recognize appropriate factors accounting for

significantly different consumption requirements among

households.”

Further, 24 CFR 965.505(d) outlines HUD’s requirement

that Housing Authorities take into account the following

factors:

(1) The equipment and functions intended to be covered

by the allowance for which the utility will be used.

For instance, natural gas may be used for cooking,

heating domestic water, or space heating, or any

combination of the three;

(2) The climatic location of the housing projects;

(3) The size of the dwelling units and the number of

occupants per dwelling unit;

(4) Type of construction and design of the housing

project;

(5) The energy efficiency of PHA-supplied appliances

and equipment;

(6) The utility consumption requirements of appliances

and equipment whose reasonable consumption is in-

tended to be covered by the total resident payment;

(7) The physical condition, including insulation and

weatherization, of the housing project;

40a

(8) Temperature levels intended to be maintained in the

unit during the day and at night, and in cold and

warm weather; and

(9) Temperature of domestic hot water.

Below, we consider each of these factors and their rele-

vance to determining the gas utility allowances for PHA’s

scattered-sites.

(1) The equipment and functions intended to be covered by

the allowance for which the utility will be used. For instance,

natural gas may be used for cooking, heating domestic water,

or space heating, or any combination of the three.

In addition to classifying the scattered-site housing stock

by housing type (detached, semi-detached, or inner row units)

and size (number of bedrooms), PHA’s existing allowance

categories classify the housing stock by the fuel sources

used for space heating, cooking, and domestic water heating.

The designations are coded as DGGG, IGGG, and SGGG,

where the first character refers to the location type (detached,

inner-row, and semi-detached, respectively), while the second

through fourth characters refer to the space heating fuel, the

cooking fuel, and the water heating fuels, respectively (where

G=Gas, O=Oil, and E=Electricity). The numeric suffix refers

to the number of bedrooms in the unit. Thus, a unit coded as

DGGG-2 refers to a two bedroom detached home with gas

space heating, water heating and cooking.

(2) The climatic location of the housing projects

All of the PHA’s scattered-sites are located in the same

climatic location. By using normalized gas consumption data,

the climate is automatically accounted for. The degree days

for Philadelphia for the year studied, along with reference

data on standard climate conditions, are used to normalize the

data.

4la

(3) The size of the dwelling units and the number of occu-

pants per dwelling anit

PHA’s existing allowance categories are differentiated by

number of bedrooms in order to account for the size of units

and number of occupants.

(4) Type of construction and design of the housing project

PHA’s allowance categories differentiate units by whether

they are inner-row units, semi-detached units, or detached

housing units. This addresses whether the unit has relatively

little exterior wall exposure to the outdoors in proportion to

its size (inner-row units), a moderate amount (semi-de-

tached), or a large amount (detached units). Since the amount

of exterior wall exposure has a greater impact on how much

heating energy will be required than the exterior finish on a

frame wall (brick vs. stucco vs. wood siding), the distinction

between inner-row, semi-detached and detached units is given

primary importance in describing the building construction

and design.

(5) The energy efficiency of PHA-supplied appliances and

equipment

PHA has replaced existing heating systems with new gas

furnaces in a number of units. In order to determine if the

replacement of furnaces alone resulted in consistently lower

energy usage, we compared the energy consumption from

471 inner-row scattered-site units that had received new fur-

naces within the past 5 years with the usage of 1726 inner-

row units that had not. We found that the installation of new

furnaces was not a consistent indicator of lower energy usage.

Consequently, we feel that it is not worthwhile to differentiate

separate utility allowance categories based on this criterion.

(6) The utility consumption requirements of appliances and

equipment whose reasonable consumption is intended to be

covered by the total resident payment

42a

For residential gas usage, the primary end-uses of the fuel

include space heating, domestic water heating, and cooking.

Since all of these are acceptable under HUD guidelines, no

adjustments of the consumption data were required to exclude

data for non-allowable end uses. (The distinction between al-

lowable and non-allowable usages is generally more relevant

to the determination of electric allowances, where items like

toasters and hair dryers need to be included in engineering-

based simulations, but items such as air-conditioning should

be excluded.)

(7) The physical condition, including insulation and weath-

erization, of the housing project

Due to the non-uniform nature of PHA’s scattered-sites,

the physical condition of the units vary considerably with

respect to insulation and weatherization. PHA has completely

modernized approximately 500-600 units. The effect of mod-

ernization on the energy usage was examined by comparing

the average energy usage of 159 modernized inner-row

houses with 2034 non-modernized inner-row houses. While

modernization generally decreased the gas consumption of

the homes, due to small percentage (<10%) of homes which

have currently undergone modernization, the inclusion of

these homes in the overall utility allowance calculations was

not found to have a significant effect on the overall allowance

recommendations. Because there is currently not a large

enough group of completely modernized homes to provide

statistically valid sample sizes to determine gas allowances

for modernized detached or semi-detached housing, and due

to the extra administrative burden that administering extra

allowance categories would impose, we would not recom-

mend creating separate allowance categories based upon physi-

cal condition of the building at this time. As more houses are

modernized, however, we recommend that PHA consider

establishing separate allowance categories for modernized vs.

non-modernized housing.

43a

(8) Temperature levels intended to be maintained in the unit

during the day and at night, and in cold and warm weather;

and

(9) Temperature of domestic hot water

Specifying temperature levels is generally more relevant to

engineering-based building simulations. In consumption analy-

ses, improperly high temperature settings will show up as

higher than normal usage.

In summary, HUD recommends that Housing Authorities

establish separate categories of utility allowances for different

dwelling sizes (in terms of number of bedrooms). It further

recommends that separate allowance categories be established

for the dwelling unit’s location within a building, to account

for the fact that housing units which have other heated dwell-

ings adjacent to them have lower heating requirements than

detached housing, whose walls are adjacent to unheated out-

door air. PHA’s current allowance categories, which take into

account unit size and location in addition to type of utilities

used, meet HUD’s criteria for an adequate number of allow-

ance categories.

Step 4: Collect the Consumption Data and Group Data by

Allowance Categories

As the initial step in this analysis, we requested utility

consumption for all of the scattered-sites from the gas utility,

Philadelphia Gas Works (PGW.) PGW provided this data in

an electronic format. Each consumption record from PGW

contained fields for Unit Number, Number of Bedrooms’,

Address, Apartment Number, Zip Code, Total Annual Usage

(in ccf), Total Annual Charges (in dollars), and Average

* The fields for unit number and number of bedrooms are not part of

the PGW record-keeping system. This information was “tied to” the ad-

dresses which were sent to PGW when gas consumption information was

requested, and was returned with the consumption information.

44a

Monthly Charges (in dollars). We correlated these records

with a list of PHA units receiving gas allowances to include

identifiers for PHA’s utility codes and occupancy status. The

utility codes are used as the allowance category identifier.

Step 5: Clean Up the Consumption Data and Check the

Statistical Validity of the Sample

As we correlated the gas bills with the list of scattered-site

addresses, we also cleaned up the data. Not all of the gas-

heated scattered-site units were occupied during the base year

during which consumption data was collected. Since PHA

maintains a designation code denoting whether a unit is occu-

pied, vacant, or undergoing renovation, only data from units

which were designated as being occupied were included in

the analysis dataset.

PGW informed us that any records that they sent to us

which showed a consumption of zero denoted an address for

which they had fewer than 10 months of utility data available

during the sample period of January 1, 2002-December 31,

2002. This applied to 282 units. In addition, by comparing the

average monthly gas cost to the annual gas cost, we were able

to determine that a number of the gas records were based

upon either 11, 13, or 14 bills rather than the expected 12 bills

per year. Since the data examined was based upon the calen-

dar year, it was likely that either a missed or additional bill

during the period might involve the normally high gas-usage

months of December or January. Consequently, we chose to

exclude the 155 records which were not based upon 12 gas

bills.

There were 12 gas consumption records which had utility

code designations which identified them as oil heated

homes.’ During the course of this investigation, we learned

>There were an additional 4 homes with oil heating utility code

designations, but they were included among the records for which PGW

bills were not available.

45a

that all but one of the 16 units with oil-heating utility code

designations units had been converted to gas space heating,

and were thus improperly coded. These records were

excluded from the statistical analysis. In addition, there were

73 addresses which we were unable to match with PGW gas

bills by the time this analysis was done.

The cleanup of data resulted in a total of 3,701 records,

distributed as shown in Table 3.

Tae 3

sear of Data Patan ~ AS ora Satan Retanase Calapan

| Colegory _ Description aR __29R_ 82 _4BR s8F _$8h_

DGGG end DHW 2 12) 22 | § §

Lnner-+ow, Gas Neal, cooking, }

GSB OHw ‘8 324_| 1677 | 374 146

Semi-detached: Gas nest. |

$660 __| cooking, eng DHW a | 7} 2 | 160 | 181 |

Although there were a large number of bills available, this

did not result in a large sample size of data in every allow-

ance category. In some cases, the small sample size indicates

that the statistical validity of any results involving the data

would be questionable. In most cases, the small sample size is

primarily the result of an allowance category which had very

few members in it. Table 4 shows a side-by-side comparison

of the number of gas data points available in each category

and the number of occupied homes in the categories.

Table 4

Naander cf Date ee aa = sin

Qyeg pron LBR rae al 2. BR 4 BR

0GGG 2¢3 | 12/32 22 42/17 e/7_ 3 67

inner-row, Gas

hest, cootung,

IGGG | andOHW __|. 19/29 | 324/390 | 1677/1 374/434 j 106 / 157

Semi-detached,

——

SGGG_ | OrHw 4/4 77/90 312/ 150 / 168 | 111/12? | 63/67

The standard for statistical validity suggested by HUD is

that there be a 95% probability that the average of the sample

|

|

|

|

46a

is within 10% of the average for the entire population. The

formula used to determine the resulting valid sample size‘ is:

valid sample size=(3.84* Variance)/(0.1 * Sample Average)”

The numbers which are shown as shaded in Table 4 repre-

sent allowance categories for which there was not a statisti-

cally valid sample size of data available for the category.

Although the number of shaded boxes in the table gives the

impression that this affects a large proportion of the allow-

ance categories, the total number of homes included is only

64, or 1.5% of the scattered-site homes receiving utility al-

lowances.

The reader may wonder why we considered 12 units to be a

valid sample size for the DGGG-2 category, but we consid-

ered 12 units to be inadequate for DGGG-4, and 19 units

inadequate for IGGG-1. This is based upon the variability of

the data within each dataset. There was significantly less

variation among the records in the DGGG-2 category than

there was in either DGGG-4 or IGGG-1.

We made additional checks to ascertain that the data used

was reasonable. The Utility Allowance Guidebook notes that

there may be a variety of causes which may cause excessive

variability in the dataset, and suggests that it is appropriate to

drop the top and bottom 10% of all readings in order to

reduce the variability of the sample to increase its statistical

validity. This can help ensure that unusually high or low data

points are not allowed to skew the results for the entire sam-

ple. Where the existing sample of raw data was high enough

to allow this, the top and bottom 10% of data points were

dropped from the dataset. Where the existing sample size was

already unusually small, this was not done. The resulting

number of data points which were available for analysis is

shown in Table 5.

* Utility Allowance Guidebook, at page 96.

Tatte $

Number of Osis Points Used In Calculations

——— 1OR_ 20R 38 48 __S8R _GOR

Detached, Gas heat, cooking,

| OGGG * and OHW on 19 6 | 12 8 é

PPP |= A PPP

Semi-delached; Ges hest,

LSGGG _| sogking, and DHW = L249 jt 89 | __$!

* Unless noted otherwise, all numbers reflect dropping top

and bottom 10% of values in dataset to improve

variability of data

** Due to small amount of data available, all source data

was used in 4, 5, and 6 bedroom categories.

*** There was inadequate data available to determine one

bedroom usages with statistical validity.

Values shown for one bedroom allowances in following

tables are based upon two bedroom usage.

There was inadequate data available to ensure statistical

validity of the results for any of the one bedroom units re-

gardless of housing type. According to the Utility Allowance

Guidebook, if there is not enough data available to provide a

statistically valid sample size, and additional data is not avail-

able, the housing authority should consider combining similar

allowance categories. For this analysis, we chose to use the

two bedroom values for the one bedroom allowances as well.

This is a slightly more liberal substitution than combining the

two categories. This method was chosen to make sure that the

use of one-bedroom data in a combined-category calculation

would not decrease the value of the allowance that would be

given to two bedroom residents. Instead, it will overestimate

the value of the one-bedroom categories. As an alternative,

PHA could consider using determining the one bedroom al-

lowances by calculating them as a proportionate fraction of

the usage from a different size unit. Based upon the meth-

odologies used in HUD-52667 (the HUD worksheet for deter

48a

mining Section 8 allowances) one bedroom allowances could

be estimated by multiplying the two-bedroom usage by 0.78.

Because there is only one oil-heated home (in category

1OGG-3), there was not a meaningful sample size for analy-

sis. Since this category includes only one home, PHA may

wish to consider paying this gas bill directly to avoid the

administrative burden of determining an allowance level for a

single home. Alternatively, this unit could be given an allow-

ance equal to a similar sized gas heated home.

The sample sizes for most of the detached housing units

(with the exception of the two and three bedroom units) re-

main too small to ensure statistical validity, due primarily

to the small populations in the utility allowance categories.

Lacking additional data for detached housing units, these

numbers were used.

Table 6 shows the average annual consumption levels

which were used as the basis for this analysis.

ES na

weno isa 288 388 468 SOR GBR

cog" |oungensorw | 1100 | soo | s1600 | soos2 | aves | aes |

999 cess od 1M s_ | ov sges.e | reoz2 | zoe, |

jsoag [ore] ony | ons | arene | czar | rere | sons

* Unless noted otherwise, all numbers reflect dropping top

and bottom 10% of values in dataset to improve

variability of data.

** Due to small amount of data available, all source data

was used in 4, 5, and 6 bedroom categories.

*** There was inadequate data available to determine one

bedroom usages with statistical validity.

Values shown for one bedroom allowances in following

tables are based upon two bedroom usage.

49a

Step 6: Determine the Point of Central Tendency for each

Data Set

Once the statistically valid dataset for each allowance cate-

gory has been determined, the next step is to determine the

“typical” consumption for the category. This is referred to as

the point of central tendency. This point can be defined by

either the mean or the median of the daia, at the discretion of

the housing authority. For this analysis, the average (mean)

was used.

When the median is used to determine the point of central

tendency, the value of a single piece of data is used to char-

acterize the entire group. If data is added to or removed from

the dataset, the median will then shift to the value of a dif-

ferent discrete piece of data. Since there can be significant

variation between adjacent points in the dataset, this can

result in a significant shift in the median value based upon the

addition or removal of a single data point. When the average

is used, however, the effect of adding or removing data points

is generally a smoother transition, because the variation in

value is tempered out among all the data points. We prefer to

use the average because it considers the value of every data

point within the dataset rather than relying on one single

value, making it a less volatile indicator than the median.

Since this analysis was based upon consumption data from

a single year, we normalized the data for the effects of weather.

Various organizations, including the National Oceanic and

Atmospheric Administration, keep track of weather statistics

over time. One such statistic is the Heating Degree Days

(HDD), which is a rough indicator of how much heating is

required. By multiplying the consumption data for a particu-

lar year by the ratio of the 30-year average HDD divided by

the HDD for the particular year, the consumption data can be

normalized to a typical year’s energy use.

50a

The 30-year average HDD for Philadelphia from 1941 to

1970, as tabulated in Appendix C of the Utility Allowance

Guidebook, totaled 4865 degree days. The monthly heating

degree days for the period January 2002 to December 2002

were obtained from the archives section of a NOAA website

(at http://www.cpc.ncep.noaa.gov/products/analysis_monitor

ing/cdus/degree_days/) and were found to total 4264 degree

days. This showed that the year during which data was col-

lected was milder than is typical for Philadelphia. To adjust —

for this, the usage data was multiplied by a normalization

factor of 4865/4264, or 1.14.

The average gas consumption values, normalized and con-

verted into monthly figures (by dividing by 12 months per

year) are shown in Table 7.

Table 7

Average Monthly Ges Consumption, ocf, Normafized for Weather

| Category __ Onacrigtion 18h _ _29R__s88 son 8 8R_)

Oeteched; Gas heat,

D0GGG | cou xing, and DH 105.5 | 1058 | 1106 | 161 | 2083 | 2323 |

inner-+ow,

IGGG no. and OHM 77 77.3 '] 116.1 | 182.2 | 1918

Sern-detached, Gas heat,

SGGG and OHW 86.7 ab! 108.4 | 1223 | 1660 | 1816

Step 7: Establish Standards for the “Energy Conservative

Household”

According to CFR 965.505(a), “The objective of a PHA in

designing methods of establishing utility allowances for each

dwelling unit category and unit size shall be to approximate a

reasonable consumption of utilities by an energy-conservative

household of modest circumstances consistent with the re-

quirements of a safe, sanitary, and healthful living environ-

ment.”

The figures shown in Table 7 represent the average gas

consumption by PHA scattered-site tenants for each allow-

ance category. These numbers are strictly averages. Exceed-

ing the average figure does not necessarily imply that the oc-

cupants are being wasteful. Consequently, the housing au-

S5la

thority must decide at what level of consumption the level

changes from energy-conservative to wasteful.

The Utility Allowance Guidebook suggests three methods

that may be used to set the standards for an energy conserva-

tive household:

1. Statistical Method: This method would statistically

ensure that the consumption of most resident house-

holds would fall within the allowance standards by

setting the consumption allowance equal to the mean

plus one standard deviation.

2. Percentile Method: Rather than using the mean which

was determined earlier, this method would divide all

of the consumption data for a given allowance cate-

gory into percentiles. A threshold level (e.g., the 85th

percentile) would be selected, and the allowance would

be set based upon the usage level at that percentile.

3. Multiplier Method: The Housing Authority can set a

fixed percentage above the average which it considers

within the acceptable guidelines for an energy con-

servative household, and apply it to the average. (e.g.,

if the Housing Authority considers usage levels within

10% of average to be acceptable, then the consump-

tion allowance should be set at 1.10 times the average

usage for the allowance category.) In the course of

this analysis, we will refer to this multiplier as the

“Energy Conservative Household Coefficient,” or

ECHC.

We chose to use the multiplier method analysis, as it has

several advantages over the statistical and percentile methods.

These include:

e Simplicity. Applying a multiplier to the point of

central tendency is the simplest method.

52a

e Difficulty in communicating results from the sta-

tistical method: From the analyst’s standpoint, the

statistical method is a simple method to apply.

However, the concept of standard deviation is gen-

erally not well understood among laypeople. Since

communication of results with tenants is important,

this method was considered less desirable.

e Volatility of characterizing a dataset by the value of

a single data point in the percentile method: This

situation is similar to that of the choosing whether

to use the average or the median to characterize

each dataset. Like the median, the percentile method

is based upon using the value of a single reading to

characterize an entire allowance category. We feel

that this places too much importance upon one data

point, particularly when some datasets are relatively

small and there can be sizeable differences between

data point values.

e Flexibility. Because of the ease of application, is it

simple to apply a multiplier across the board to the

average values and compare the resulting allowable

usages to the measured usages. In this way, it is

possible to select a multiplier value which results in

a desired level of residents at or below the allow-

able usage for most allowance categories.

In using the »sultiplier method for this analysis, the accept-

able gas conswenption level is determined by multiplying the

average consumption for a particular household type by the

Energy Conservative Household Coefficient (ECHC). For

example, if usage up to 15% above the average usage is to

be considered allowable, this coefficient should be 1.15. It is

up to the housing authority to select an Energy Conservative

Household Coefficient (ECHC) to determine the level of

energy usage they find acceptable. The Utility Allowance

Guidebook does not prescribe a fixed level that it considers as

53a

an appropriate percentage of homes that would be considered

as using an excessive amount of energy and would conse-

quently receive an allowance level below their actual con-

sumption level. It explicitly states that this decision is strictly

left up to the Housing Authority.

Table 8 shows the acceptable monthly usage levels, nor-

malized for weather, using an ECHC value of 1.15. This

ECHC value means that the allowances would be based upon

115% of the average normalized gas consumption from homes

in each allowance category.

Table 6

Acuaptable Monthty Gas Consumption, acf Normeitred for Weather

Energy Conservative Household Cosfliciet © 115

Category _ Description 10R.__26R 2m 4 SBR _ _@6R

Detached; Gas nest,

OGGG cooking, and OHW 129.3 | 121 127.2 | 1852 | 239.5 | 267.1

Inner: 4

1iGGG mp . 88.9 106.6 1398 | 1760 | 2206

Semi-detached, Ges Nest,

$6G6G cooking, and OHW 09.7 997 124.7 | 1406 | 1909 | 208.8

As a point of reference, we compared the acceptable

monthly gas consumption values (using an ECHC of 1.15) of

Table 8 to PHA’s existing scattered-site gas consumption al-

lowances. PHA’s current scattered-site gas allowances are

shown in Table 9.

The percentage differences between the proposed accept-

able consumption levels (with ECHC = 1.15) and the existing

gas utility allowances are shown in Table 10. A positive per-

centage change indicates that the recommended allowance

exceeds PHA’s existing consumption allowance.

54a

Table 10

Percuntage Crange in Recommended va. Existing Allowances

Energy Conservstive Househoid Coeffictent = 1.15

Dencription 18R_ _20R 3$B8R 48R 68R 68K

Detached, Gas heat,

10666 ___| cooking, and DHW 42% | -23.4% 1% | -33.8% | -19.4% | -21.0% |

inner-row, Gas heat,

1GGG cookang. gr OMW_}_42.8% 44.4% | 37.8% | -40.2% | -36.8% | -30.5% |

Semi-delacned; ’

heat, cooking, end

[$399 _| DKW 308% | 45.2% | 40.9% | -43.8% | 34.1% | 36.7%

Table 10 indicates that the proposed acceptable consump-

tion allowances based upon and ECHC of 1.15 (shown in

Table 8) are lower than PHA’s existing scattered-site gas

consumption allowances.

Is the difference in the proposed allowance levels and .

PHA’s existing gas allowances a cause for concern? Does the

fact that these proposed allowances are lower tlian the exist-

ing allowances imply that they were too restrictive? We

examined these questions by comparing the proposed allow-

ances to other benchmarks.

Since this analysis is based upon a consumption-based

methodology, the results can inherently be expected to be

more generous to the tenants than the results of a similar en-

gineering-based methodology. The Utility Allowance Guide-

book states that “by focusing on actual resident utility con-

sumption rather than on recommended standards for utility

use, the consumption methodology also tends to give less em-

phasis on energy conservation. In other words, if there is a

trade-off between minimizing resident utility surcharges and

maximizing energy conservation by residents, the consump-

tion methodology will tend to favor the former over the

latter.”

Within the framework of the consumption-based methodol-

ogy, we chose to apply a multiplier to the point of central

tendency in order to determine the standards for the energy

conservative household. An alternative method that HUD rec-

ommends is the statistical method, which defines the stan-

dards for the energy conservative household as equal to the

5Sa

mean plus one standard deviation. For comparison purposes,

we calculated those figures as well. Table 11 shows the val-

ues for the mean plus one standard deviation for each allow-

ance category.

‘BR zen 99h =.=

a ~ oa

or 057 | sos? | sree | iz | gare | arse |

00 _| ogni ent OF mo | oso | gos | s270 | 1050 | amps |

|scq | scour eoww | gos | os | sro | vase | vars | 2042 |

The percentage differences are shown in Table 12. A posi-

tive percent difference indicates that the acceptable consump-

tion level from Table 8 (using an ECHC of 1.15) exceeds the

one calculated using the statistical method of using the mean

plus one standard deviation.

ae as, ae Maan Plus Stancard Devaation

| Caegery _Descripton_ 18R 28h 38f 48R 568A 68R

Detached: Gas nest

OGGG 129% | 12.9% | 82%) 6.6% |< 9% | 3.9% |

inner sow, Ges host,

Semi-detached, Gav heat.

LSG6G__| cooking, and OHV 98% | 49% | 3.5% | 50% | 22% |

Table 12 indicates that with the exception of the 6 bedroom

detached units, the proposed acceptable consumption levels

calculated using an ECHC of 1.15 are higher than those cal-

culated by the alternate statistical method suggested by HUD.

This suggests that the use of the ECHC multiplier of 1.15 was

appropriate, «ind generous by HUD standards.

As an additional check to determine whether the acceptable

usage levels shown in Table 8 were reasonable, we compared

the acceptable consumption levels in Table 8 to the actual gas

consumption figures. The acceptable consumption levels in

Table 8 exceeded the actual consumption of 81% of the scat-

tered-site homes during 2002. When the actual consumption

data was normalized to account for weather, we found that

56a

the acceptable consumption levels of Table 8 exceeded the

normalized consumption of 69% of the scattered-site homes.

Step 8: Convert Consumption Allowances to Dollar Allow-

ances

The conversion of the acceptable gas consumption allow-

ances to gas cost allowances is done by applying the current

utility cost rates to the consumption. As of December 2002,

the combined PGW residential gas rate is $1.10701/ccf with

a customer charge of $12.00 per month. Table 13 shows the

dollar utility allowances, rounded to the nearest dollar, based

upon the acceptable usage levels shown in Table 8. Like

Table 8, the allowances shown here are based upon 115% of

the average usage for the category, determined by the applica-

tion of the energy conservative household coefficient of 1.15.

Tatts 13

Acceptable Morth!y Usage Cost, $. Normaitred fry Weather

Energy Corsenative Household Coefficient © 1 15

18R_ _286R 38R 48R S6R_ ESR

| Oetached: Gas heat, cooking,

poss and CHW $146 | $217_ | $277 | $308

inner-row, Gas heat, cooking.

GGG _ and OHW $110 _} $110 u $182 | S208 | $256 |

Semi-detached; Ges heat,

[8660 __| cooking, eno Ob:ws $i22_|_siza_|_srso | $163 | gzz9_ | $249 |

V. RECOMMENDATIONS

Based upon comparisons of PHA’s existing gas allowances

with average consumption data (normalized for weather ef-

fects), we conclude that PHA’s existing scattered-site gas

allowances do not “approximate a reasonable consumption of

utilities by an energy-conservative household of modest cir-

cumstance” as called for by the gove*ning standard, 24 CFR

965.505(a). We recommend that PHA update its gas con-

surnption allowances for scattered sites.

Table 14 shows the recommended monthly gas consump-

tion allowances for scattered-sites in ccf. These values are

based upon the normalized average gas consumption levels

with an Energy Conservative Household Coefficient of 1.15,

57a

as explained above. (This table contains the same information

shown in Table 8. It is repeated here for convenience.)

Tate 14 :

Acceptable Monthty Ges Consumpuon. oct, Normalized for Weether

Energy Conservetre Household Coefficient = 1.15

1BR 2 3 BR a 8R 6

a Pas pO, BARRA SR BG

|DGGG_ __| cooking, end Oriw_ 121.3 | 125.3 1.1272 1962 | 2305 | 267.1

11969 __| cooking, and OW 869 | 669 | 1088 | 1388) 1750

[3069 ___| poking, eng Ort gor | so7_| 1247 | 1496 | 1909 | 2000 |

These allowances were determined by a sound, relatively

simple method based upon HUD standards as outlined in 24

CFR 965.505 with further interpretative guidelines provided

by the September 1998 Utility Allowance Guidebook. Where

our methods deviated from those specifically outlined within

the Guidebook, we selected alternative methods which were

simple, within the spirit of the HUD guidelines, and intended

to err on the side of generosity toward the PHA tenants.

These allowances were calculated using a consumption-

based methodology, which HUD recognizes as a meth-

odology which tends to provide more generous utility allow-

ances. As demonstrated within the report, the multiplier-

based consumption methodology we chose resulted in allow-

ances which were more generous than those from the alterna-

tive statistical method. Although these allowance levels are

lower than PHA’s existing scattered-site gas allowances, we

feel that they are reasonable, but generous.

The corresponding cost allowances, based upon PGW rates

as of December 2002, are shown above in Table 13. HUD

regulations require periodic review of utility allowances to

examine changes in utility rate schedules and requires revi-

sion when a rate change results in a change of 10% or more

from the rates which were previously used to determine util-

ity allowances. When the recommended monthly gas con-

* Utility Allowance Guidebook, at page 83.

58a

sumption allowances have been approved, we will provide a

copy of these allowances in a spreadsheet format to allow for

ease of rate comparison and updating.

59a

APPENDIX A

Decision Tree for Selecting a Utility Allowance Method

Exhibit 4.1

Decision Tree for Selecting a Utility Allowar.» Method

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6la

APPENDIX G

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

C.A. #97-2302

JACKIE MCDOWELL, et al.,

Plaintiffs,

Ve

PHILADELPHIA HOUSING AUTHORITY, et al.,

Defendants.

MEMORANDUM OF THE PHILADELPHIA

HOUSING AUTHORITY TO CORRECT

STATEMENT IN PRIOR BRIEF

On March 7, 2003, The Philadelphia Housing Authority

(“PHA”) filed its sur-reply to Plaintiffs’ Motion to Compel

Compliance and for Sanctions. In its brief, PHA identified

steps it had already taken to comply with the Court’s 1998

Consent Decree. As to gas rate changes of 10 percent or more

and customer charge increases made by the gas company

after the 1998 Consent Decree, PHA also committed to make

the members of the class whole for any provable loss

resulting from not including those changes in its gas utility

allowances.

PHA also demonstrated through the report of its expert,

Sud Associates, Inc., that the consumption calculation PHA

used during the relevant period greatly exceeded the class

members’ actual gas consumption during that time.’ PHA

' In March 2003, PHA providgd notice to residents and their counsel in

this case explaining that PHA woulg prospectively apply Sud Associates’

proposes revised gas consumption allowances, effective June 1, 2003.

The “mz amd comment period required by regulations of the United

62a

therefore proposed that it would recalculate gas utility

allowances for PHA scattered-site residents for the entire

period since the Consent Decree using adjusted gas rates in

accordance with the Consent Decree, accounting for the gas

company’s increased customer charge, and applying PHA’s

proposed revised consumption calculations, which are based

upon a report by Sud Associates. PHA further stated that on

that basis:

If the Court rules that PHA may provide retroactive

utility allowance adjustments based upon Sud Asso-

ciates’s findings, PHA would pay more than $2.8 mil-

lion to class member in retroactive utility allowance

adjustments, even though 96 percent of PHA residents

already receive gas allowances in excess of their actual

gas costs.

PHA’s Sur-reply at p. 20.

On May 22, 2003, Sud Associates informed PHA of an

error in its calculations, and that the amount class members

would be due if PHA used the gas company’s adjusted rates

and customer charges, and the revised consumption allow-

ances determined by Sud Associates, is not $2.8 million. In a

Declaration dated May 30, 2003, which is attached, Dr. Ish

Sud, president of Sud Associates, explained that Sud Asso-

ciates had attempted to calculate the amount actually paid by

PHA for gas utility allowances by establishing the gas

consumption and cost factors that PHA had used since July

1999 and then calculating how much PHA “would have paid

in gas utility allowances had PHA: (a) adjusted gas rates in

accordance with the Consent Decree; (b) accounted for the

gas company’s increased customer charge; and (c) retro

actively applied our proposed revised consumption allow-

ances starting in July 1999 (the first time after the Consent

States Department of Housing and Urban Development has elapsed

without objection or comment from residents or plaintiffs’ counsel.

63a

Decree that gas rates changed by 10 percent or more).”

Declaration of Ish Sud, P.E. (“Sud Decl.”) at ¥ 4. Dr. Sud

explained that:

In calculating the amount PHA actually paid, we mis-

takenly used our proposed revised consumption calcu-

lations raiher than the actual consumption calculations

used by PHA during the relevant time period. As a

result, we understated by $12,301,134 the amount PHA

actually paid to residents in gas utility allowances. After

confirming our error, | immediately contacted PHA’s

counsel to advise them of this fact.

Sud Decl. at 5.

Dr. Sud corrected the error by recalculating the amount

PHA actually paid in gas utility allowances during the

relevant period and determined that the correct amount is

$32,806,662. Sud Decl. at § 6. The amount PHA would have

paid residents in gas utility allowances had it used the as-

sumptions stated above is $23,322,625. Jd. Dr. Sud con-

cluded: “As a result of not using those assumptions, therefore,

PHA overpaid residents for gas utility allowances in the

amount of $9,484,037.” Jd.

In summary, according to Dr. Sud, if PHA were to

recalculate gas utility allowances for the time period July 1,

1999 to December 31, 2002, using gas rates adjusted pursuant

to the Consent Decree, accounting for the gas company’s

increased customer charge, and applying the revised con-

sumption calculations proposed by Sud Associates, PHA

would not owe residents any money for gas utility allow-

ances. On the contrary, PHA overpaid scattered-site residents

by $9,484,037.

Sud Associates’ error emphasizes the fact that PHA resi-

dents have not suffered any provable injury as a result of

PHA’s alleged failure to comply with the Consent Decree.

Just the opposite is true—residents received a huge windfall

64a

over the last five years as a result of PHA’s use of historically

overly generous consumption calculations. Any further pay-

ments to residents are not warranted and would be incon-

sistent with the Brooke Amendment to the Housing Act, in

which Congress legislated that public housing residents “shall

pay as rent . . . 30 per centum of the family’s monthly

adjusted income.” 42 U.S.C. § 1437a(1)(A). As described in

PHA’s surreply brief, the United States Supreme Court has

explained that the Brooke Amendment is a two-way street—

just as rent cannot be more than 30 percent of adjusted

income, it cannot be less:

The Brooke Amendment could not be clearer: as further

amended in 1981, tenants could be charged as rent no

‘more and no less than 30 percent of their income. This

was a mandatory limitation on the individual family and

‘its income.

Wright v. City of Roanoke Redevelopment and Housing

Authority, 479 U.S. 418, 430, 107 S.Ct. 766, 773-74 (1987)

(emphasis added).

Given the fact that, for virtually all PHA residents who

receive gas allowances, the amount they received from PHA

in gas allowances far exceeded the amount they paid for gas,

residents have long been paying rent in an amount less than

30 percent of their adjusted income. For PHA now to pay

residents more money in the guise of gas allowances would

reduce even further below 30 percent the percentage of

adjusted gross income residents have paid PHA for rent,

contrary to the Brooke Amendment as interpreted by the

United States Supreme Court.

65a

By: /s/

Alan C. Kessler

Judah I. Labovitz

Joel M. Sweet

Stephanie L. Kosta

Attorneys for Defendant,

The Philadelphia Housing Authority

OF COUNSEL:

WOLF, BLOCK, SCHORR AND

SOLIS-COHEN LLP

1650 Arch Street

22nd Floor

Philadelphia, PA 19103

Dated: June 9, 2003

‘ 66a

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

C.A. #97-2352

JACKIE MCDOWELL, et al.,

Plaintiffs,

Vv.

PHILADELPHIA HOUSING AUTHORITY, et al.,

Defendants.

DECLARATION OF ISH SUD, PH_D., P.E.

1. I am the President of Sud Associates, P.A. My cur-

riculum vitae is attached hereto as Exhibit A.

2. The Philadelphia Housing Authority, through its coun-

sel, Wolf, Block, Schorr and Solis-Cohen LLP, retained Sud

Associates to serve as a consultant in this litigation. In that

capacity, Sud Associates performed several individual assign-

ments for PHA.

3. The principal assignment was an analysis of gas

consumption by residents of PHA scattered-site housing and,

based upon that analysis, the development of recommen-

dations in accordance with guidelines issued by the United

States Department of Housing and Urban Development

(“HUD”) for revisions to PHA’s gas utility allowances. Our

analysis and recommendations are reflected in our report

dated March 2003, which PHA submitted to the Court as

Exhibit B to its Sur-Reply of Defendant The Philadelphia

Housing Authority in Opposition to Motion to Compel

Compliance And for Sanctions.

4. Another assignment Sud Associates performed for PHA

was a computation of the amount PHA may have underpaid

or overpaid in utility allowances as a result of PHA’s alleged

67a

failure to comply in a timely manner with all aspects of the

Consent Decree. To do this, we established the gas con-

sumption and cost factors that PHA had used since July 1999

to determine its gas utility allowances, in an attempt to

calculate the amount actually paid by PHA foe” gas utility

allowances. We then calculated how much PHA would have

paid in gas utility allowances had PHA: (a) adjusted gas rates

in accordance with the Consent Decree; (b) accounted for the

gas company’s increased customer charge; and (c) retro-

actively applied our proposed revised consumption allow-

ances starting in July 1999 (the first time after the Consent

Decree that gas rates changed by 10 percent or more). We

concluded that, had PHA used the adjusted gas rates, the

increased customer charge, and the revised consumption

calculations, PHA would have paid $2,823,097 more than it

actually had paid in utility allowances during the time period

July 1, 1999 to December 31, 2002.

5. On May 22, 2003, I discovered that what we had

informed PHA was wrong. In calculating the amount PHA

actually paid, we mistakenly used our proposed revised

consumption calculations rather than the actual consumption

calculations used by PHA during the relevant time period. As

a result, we understated by $12,307,134 the amount PHA

actually paid to residents in gas utility allowances. After

confirming our error, I immediately contacted PHA’s counsel

to advise them of this fact.

6. We have now corrected our error by calculating the

amount PHA actually paid in gas utility allowances during

the relevant period. That amount is $32,806,662. The amount

PHA would have paid residents in gas utility allowances had

it used the assumptions stated above is $23,322,625. As a

result of not using those assumptions, therefore, PHA

overpaid residents for gas utility allowances in the amount of

$9,484,037.

68a

7. The revised calculations were prepared by my colleague

Elizabeth McGowan, C.E.M., in a spreadsheet. Both I and

another colleague, Jessica Mandujano, Data Analyst, have

independently reviewed and confirmed the accuracy of the

design of the spreadsheet and the data used in the spread-

sheet. We also have conducted spot checks of the calculations

reflected in the spreadsheet. Additionally, we have compared

the difference between our initial incorrect conclusion about

the amount that PHA would have owed and the corrected

analysis, and verified that the difference would be accounted

for by the difference in the consumption allowances used in

the original calculation and the corrected analysis.

8. The determination of the amount that PHA would have

underpaid or overpaid during the period July 1, 1999 to

December 2002, was performed independently and has no

bearing upon our March 2003 study to determine appropriate

gas consumption calculations pursuant to HUD’s guidelines.

I declare under penalty of perjury that the foregoing is true

and correct.

Date: May 30, 2003

/s/ Ish Sud

Ish Sud, Ph.D., P.E.

69a

ISH SUD

President

Born

October 6, 1949 in Calcutta, India

Education

Ph.D./Mechanical Engineering, Duke University, May 1975

M.S./Mechanical Engineering, Duke University, September

1971

B.Tech./Mechanical Engineering, First Division with

Distinction, Indian Institute of Technology, Kanpur, May

1970

Professional Experience

Graduate Assistant Department of Mechanical Engineering and

Materials Science, Duke University, 1970-1974

Research Associate Department of Mechanical Engineering and

Materials Science, Duke

University, January 1975-July 1975

Design Engineer T.C. Cooke, P.E., Inc., Consulting Engineers,

Durham, NC, October 1974-February 1977

Director Section of Energy Management and Special

Projects, T.C. Cooke, P.E., Inc., Durham, February

1977-December 1978

Senior Project Engineer Center for the Study of Energy Conservation, Duke

and Systems Analyst University, November 1975-1984

Adjunct Associate Professor Department of Mechanical Engineering and

Materials Science, Duke University, July 1978-1984

President Sud Associates, P.A., Consulting Engineers,

Durham, NC, January |979-Present

Professional Society Affiliations

American Society of Heating, Refrigeration, and Air

Conditioning Engineers

American Society of Mechanical Engineers

Association of Demand Side Management Professionals

Sigma Xi

National Society of Professional Engineers/Professional

Engineers of North Carolina

70a

Professional License

Registered Professional Engineer: North Carolina, South

Carolina, Tennessee, Ohio, and Virginia

Professional Activity

Member, ASHRAE PC 100.5, Energy Conservation

Standards for Existing Institutional Buildings (1976-1982).

Chairman, Energy Conservation Committee, ASHRAE,

Triangle Chapter, NC (1978-79).

ASHRAE Technical Committee 4.7 - Energy Calculations

(Member 1978-83, Secretary 1981-83).

Member, TC 4.7 Subcommittees on Handbook and

Simplified Energy Calculations.

ASHRAE Technical Committee 4.6: Building Operations

Dynamics (Member 1985-present).

ASHRAE TC 9.6: Systems Energy Utilization (Chair 1998-

2000; Member 1987-present).

Member, Technical Advisory Committee, ASHRAE SP 56:

Development of a Guide for Analyzing and Reporting

Building Characteristics and Energy Use in Commercial

Buildings.

ASHRAE 669 - RP: Evaluation of Proposed ASHRAE

Energy Audit Forms and Procedures.

Voting Member, ASHRAE GPC-14: Measurement of Energy

and Demand S2vings.

Consulting Experience —

e Founded Sud Associates, P.A. in 1979.

e Conducted a variety of applied research projects on

building and process energy use.

e Primary designer for major multi-disciplinary projects

(architectural, electrical, mechanical, fire protection, and

plumbing).

e Design of building HVAC systems for new and renovated

buildings and central boiler/chiller plants.

Tila

e Performed and supervised energy audits on over 1,800

state, commercial, industrial and institutimal buildings.

e Design and installation supervision of energy

conservation measures, including energy monitoring

control system, envelope, HVAC, and lighting.

e Use of emergency generators and other control of loads to

reduce utility system peaks.

e Sample projects are attached.

Publications

Papers:

Energy Study of Underground Rapid Transit, (with

J.B. Chaddock), High Speed Ground Transportation

Journal, Vol. 6, No. 3, Fall 1972, pp. 391-407.

Drag Calculations for Vehicles in Tubes from

Turbulent Flow Theory, (with J.B. Chaddock),

presented at the Symposium on Aerodynamics of

Transportation, 1979 Conference in Buffalo, New

York, pp. 165-176.

Performing Reliable Energy Audits, HVAC III

Conference, Purdue University, West Lafayette,

Indiana, October 23-25, 1978, pp. 183-187.

Drag Calculations for Vehicles in Very Long Tubes

from Turbulent Flow Theory (with J.B. Chaddock),

Transactions of the ASME, Journal of Fluids

Engineering, Vol. 103, June 1981, pp. 361-366.

Modeling of Building Energy Usage by a

Comprehensive Modified Bin Method.

Proceedings of the 1981 IEEE International

Conference on Cybernetics and Society, Atlanta,

Ga., Oct. 26-28, 1981, pp. 584-591.

72a

The Proposed TC 4.7 Simplified Analysis Procedure,

(with T. Kusuda), Technical Paper presented

at the 1982 Annual Meeting, Toronto, June 1982,

ASHRAE Transactions, 1982, Vol. 88, Part 2.

Development of a Simplified Graphical Procedure for

Estimating the Energy Usage by Non-Residential

Building (with R.W. Wiggins, Jr.), Technical Paper

presented at the 1983 Annual Meeting, Toronto, June

1983, ASHRAE Transactions, 1983, Vol. 90, Part 2.

Development of a Simulation Technique for Evaluating

Control Strategies for Minimum Energy Usage,

Presented at the Workshop on HVAC Controls

Modeling and Simulation, Georgia Institute of

Technology, Atlanta, GA, Feb. 2-3, 1984, paper no. 3.

Control Strategies for Minimum Energy Usage,

Technical Paper presented at the 1984 Annual

Meeting Kansas City, MO, ASHRAE Transaction,

1984, Volume 90, Part 2.

Comparative Performance of Desiccant and

Conventional Cooling Systems in Supermarkets,

Electric Dehumidification: State of the Art

Humidity Control for Supermarkets (interim

report), Electric Power Research Institute, October 10,

1990, New Orleans, LA.

Comparative Performance of Desiccant and

Conventional Cooling Systems in Supermarkets,

accepted for presentation at ASHRAE Winter

Meeting, January 1993, Chicago, IL.

Evaluation of Proposed ASHRAE Energy Audit Form

and Procedures, (with J. Hay), Technical Paper

presented at 1997 Annual Meeting June 1997, Boston,

ASHRAE Transactions, 1997, Vol. 103, Part 2.

73a

Seminars:

The Proposed Duke Model for Simplified Building

Energy Calculations, Paper presented at the Seminar

on Small Computer Energy Calculation Program,

ASHRAE Semiannual Meeting, Philadelphia, PA,

Jan. 28-Feb. 1, 1979.

Experiences on the Use of Proposed Procedures for

Simplified Energy Analysis, Paper presented at the

Seminar on Proposed Procedure for Simplified Energy

Analysis, ASHRAE Annual Meeting, Detroit, MI,

June 1979.

Overview of Retrofit Isolation Approach, Seminar on

GPC 14P: Measurement of Energy and Demand

Savings, ASHRAE Annual Meeting, Seattle, WA,

June 20, 1999.

Major Research Reports:

Development of the Duke University Building Energy

Analysis Method(DUBEAM) and Generation of

Plots for North Carolina, (with Wiggins, Chaddock,

and Butler), Report submitted to North Carolina

Energy Institute, November 1979, NTIS-NCEI 0009.

Development of the Prudent 90-75R Retrofit and

Evaluation of Standard Designs of Selected

Commercial Buildings for the Development of

Energy Performance Standards for New Buildings,

(with J.B. Chaddock), Report submitted to the

American Institute of Architects Research

Corporation and U.S. Department of Energy,

March 1980.

74a

Comparison of Proposed ASHRAE TC 4.7 and DOE-2

Results to Examine the Feasibility of Utilizing TC

4.7 for Implementation of BEPS for Residential

Buildings, August 1980, Report submitted to Center

for Building Technology, National Bureau of

Standards.

A Simplified Procedure for Sizing and Analyzing

Thermal Energy Storage in Commercial and

Institutional Buildings, and Generation of Plots for

North Carolina, (with W.F. Milburn and R.L.

Aicher), Reports submitted to North Carolina Energy

Institute, June 1981, NTIS-NCEI0040.

Development and Validation of a Computer Model for

Electric Water Heaters, (with R.L. Aicher), Report

Submitted to Carolina Light and Power Company,

September 1982.

Control Strategies for Minimum Energy Usage, Report

submitted to ASHRAE at Conclusion of RP-253,

May 1984.

Humidity Control Strategies in a Library. Report

submitted to Electric Power Research Institute,

December 1997, EPRI TR-106601.

Evaluation of Proposed ASHRAE Energy Audit Form

and Procedures. Submitted to ASHRAE at

Conclusion of Research Project 669, February 1996.

Lectures, Short Courses, Symposia Organization,

Miscellaneous:

Energy Management—tThe Total Picture, (with T.H.

Phillips), North Carolina Independent Telephone

Association, Inc., Twenty First Annual Spring

Conference, Greensboro, NC, May 25, 1978.

75a

Short Course on Energy Conservation in Buildings,

Duke University Continuing Education, May 1977,

1978, and 1979 (with other lecturers).

Simplified Energy Calculation, lecture delivered at the

USNC/CWC 67 Energy Conservation Workshop,

National Bureau of Standards, Gaithersburg, October

20-21, 1980.

Simplified Building Energy Analysis Calculation

Techniques, ACEC 1981 Institute on Energy and

Engineering Education, Pennsylvania State

University, February 26-March 1, 1981.

Use of Computerized Energy Analysis for New and

Existing Buildings, North Carolina State University,

Division of Continuing Education, April 28-29, 1982.

Symposium Chairman, Simulation Predictions

Compared with Measured Data, ASHRAE Annual

Meeting, Kansas City, MO, June 1984.

Member, Select Panel on Research Goals and Priorities

in Thermal Systems, Organized by ASME for the

National Science Foundation, Fort Lauderdale, FL,

April 25-27, 1984.

Seminar Lecturer, Simplified Energy Calculations,

Professional Development Seminar taught by

ASHRAE, Halifax, Nova Scotia, April 17-18, 1985.

Associate Editor, Workshop to Determine Research

Needs in Building Controls, Organized by

Drexel University for the National Science

Foundation, ® « delphia, PA, March 3-4, 1986.

Comparison of F ‘<-2 Generated Residential Energy

Budgets with Those Calculated by Degree Day and

Bin Methods (with Kusuda and Alereza), ASHRAE

Transactions, Vol. 87, Part 1, pp. 491-499.

76a

Waste Heat Recovery and Energy Cost Management

for Food Processing Plants, NC Energy Division,

One-Day workshops were held in Raleigh and

Statesville, NC, June 1989.

Heating, Ventilating, and Air Conditioning

SystemEfficiency: A Guide to Controlling Costs,

NC Alternative Energy Corporation, a series of four

one-day workshops presented to Nonprofit Groups,

November 1988 to June 1989.

Symposium Chairman, Use of Building Dynamics to

Optimize HVAC System Sizing and Operation,

ASHRAE Winter Meeting January 1990.

State of the Art Audits, Energy 2000 Conference,

Pittsburgh, PA, August 2000.

Relevant Research Activities

e Thermal Energy Storage for Commercial and

Institutional Buildings in North Carolina, Co-

sponsored by NC Energy Institute,-Duke Power

Company, and Carolina Power and Light Company,

1979-1980, (Co-principal Investigator).

e Comparison of DOE-2 and ASHRAE TC 4.7

Procedure for Residential Buildings, Sponsor—

National Bureau of Standards, 1980.

e Development and Validation of Computer Models of

Electric Water Heaters, Sponsor—Carolina Power and

Light Company, 1981-1982.

e Control Strategies for Minimum Energy Usage,

Sponsor—ASHRAE, 1980-1983, Assessment of

Commercial Load Management Opportunities Using

Energy Management Systems, NC Alternative Energy

Corporation, 1986-1987.

ae

e.

T7Ta

Development of a Guide for Analyzing and Reporting

Building Characteristics and Energy Use in Buildings:

ASHRAE SP 56, 1990.

Cooperative Agreements with City-Owned Electric

Utilities to Reduce their PeakLoads by Using

Emergency Generators Owned by Carolina Telephone &

Telegraph Company, 1988-ongoing.

Economic and Engineering Feasibility of Installing

Utility Funded Emergency Generators at

Davidson Water, Inc. to Reduce Peak Billing Loads

Experienced by EMC Serving the Plant.

Waste Heat Recovery in Restaurants: Design

Optimization and Field Verification. Research

sponsored by DOE, October 1990 - March 1992.

Comparative Performance of Desiccant Cooling:

Supermarkets. Research sponsored by NC Energy

Division, completion June 1991.

Variable Airflow Devices For Lumber Dry Kiln Fans:

An Engineering Validation Research sponsored by NC

Alternative Energy Corporation, completion September

1992.

Humidity Control in Library: Evaluation of Heat Pipe

Sytems, System Optimization, and Other Techniques

for Humidity Control. Research sponsored by Electric

Power Research Institute, completion September 1994.

Evaluation of Proposed ASHRAE Energy Audit Form

and Procedures. ASHRAE Research Project 669,

completion February 1996.

Community Service

Outstanding and Significant Service, Volunteer Services,

State of North Carolina, Department of Human Resources

78a

Biographical Listings

Who’s Who in the South and Southwest

American Men and Women of Science

Who’s Who in the Frontiers of Science and Technology

Who’s Who in the World

Who’s Who of Emerging Leaders in America

(z) | MAR 27 2006 |

oat Q }

& FICE OF THE CLERK |

No. 05-866 Lo 3

In the

Supreme Court of the United States

PHILADELPHIA HOUSING AUTHORITY, ET AL.,

Petitioners,

¥s

JACKIE MCDOWELL, ET AL.,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Third Circuit

BRIEF IN OPPOSITION

GeorGE DP. GouLp

Counsel of Record

PauL A. Brooks

ComMMUNITY LEGAL Services, INC.

1424 Cuestnur STREET

PHILADELPHIA, PA 19102-2505

(215) 981-3700

Counsel for Respondents

Jackie McDowell, et al.

March 27, 2006

Becker Gallagher Legal Publishing, Inc. 800.890.5001

2

Question Presented for Review

Did the Court of Appeals correctly construe the Consent

Decree to require that PHA compensate the tenants for its

admitted violation of the Decree, with the compensation

calculated upon the increased gas rates and the consumption

factor that were in effect at that time, without permitting PHA

to offset for revised estimates of tenant gas consumption?

-ji-

List of Parties

Respondents incorporate by reference petitioner’s List of

Parties, except that pursuant to Fed.R.Civ.P. 25(d) the

individual defendants John White and Barry Miller have been

replaced by the individuals who presently hold the public

offices they once held.

-iii-

Table of Contents

Cecsioms reescmted for Review... 0. oh ie ee. i

SE is ea Niche es a NR ee il

ee ee PI oo eb oe es ie ee iv

SEINE seh 9 ick a ow SPS ing ae hy as eck ew ee l

ok a eee eer ar ee ree a l

Reasons for Denying the Petition ............... i

A. The Third Circuit’s decision does not conflict with

any decision of the Supreme Court, nor of any

Sr Ra NE a ie ee i ra 5

B. The Third Circuit’s decision does not conflict with

HUD’s utility allowance regulations, nor does it

conflict with the Fourth Circuit’s interpretation of

SE eee Se ee Ew ES eee 9

C. The Third Circuit’s decision does not conflict with

- indeed, it has no bearing upon - decisions of the

Supreme Court and other circuits on the measure

of harm from violations of procedural due process

ESP Sane re cee oe ye Ay eee TY eee 11

Oh a a pa coma 13

-iV-

Table of Authorities

Cases

Brewer v. Chauvin, 938 F.2d 860 (8" Cir. 1991) ..... 12

Carey v. Piphus, 435 U.S. 247,

PE eh APE CIPI ae tee ER OSes 11, 12

Dorsey v. Housing Authority of Baltimore City,

ee Fae Gee Oe Cs i ee NN Ges 10

Federal Trade Commission v. Kuykendall,

SFE F609 CT Gh. Be) oS eas 6, 7, 8

International Union, United Mine Workers of America v.

Bagwell,

Sie U.S. Gels LIS6 SAA. Zoom CIRO) ogo oe ces 5

Kassim v. City of Schenectady,

CLS Fe A eh BD. 6 eich ere een 11

McBride v. Coleman, 955 F.2d 571 (8" Cir. 1992) .... 8

Memphis Community School District v. Stachura,

477 U.S. 299, 106 S$. Ct. 2537 (1986) 6. ww ee. 11

United States v. United Mine Workers of America,

SO Ach, ees OF A. OFF LIED ike ib Ve oes 5

Statutes

Federal Trade Commission Act, 15 U.S.C. §45 ...... 6

U.S. Housing Act, 42 U.S.C. §§1437 et seq. ..... 44 42

a

Opinions Below

Respondents incorporate by reference petitioner’s

“Opinions and Orders of the Courts Below”, with the

following addition. The District Court order from which

respondents timely appealed was dated May 6, 2004. This

order denied respondents’ timely motion under Fed.R.Civ.P.

59(e) to alter or amend the judgment.’

Statement of the Case

The Court of Appeals clearly ad accurately stated the

case in section (I) of its opinion (see: PHA appendix, pp. 2a-

5a), which respondents (“Tenants”) incorporate by reference

herein. Tenants add that the Third Circuit, on October 17,

2005, denied PHA’s petition for rehearing.

The Statement of the Case presented by petitioner

(“PHA”) is marred by several misleading or inaccurate

assertions. First, PHA mis-characterizes its violation of the

Consent Decree as being nothing more than a “procedural”

misstep. PHA brief, p. 3. The Court of Appeals correctly

noted that for 23 of the 25 months preceding January 1, 2003,

PHA unlawfully failed to adjust the utility allowances it

provided to the Tenants to reflect gas-rate increases of more

' The May 6, 2004 order stated further: “42. This Court has

made no ruling on the issue of counsel fees. Plaintiffs may submit

an application for such fees, within 20 days, and defendants may

respond, following which the Court will rule on that issue.”

i.

than 11%. See: PHA appendix, p. 4a. PHA’s violation of

the Decree was substantive, not merely procedural.

Second, PHA misleads this Court when it suggests that the

District Court found certain “facts” about the Tenants’ gas

consumption which the Court did not find. Contrary to

PHA’s assertions, the District Court never found that the

Tenants “benefited from” PHA’s violation of the decree

(PHA brief, p. 3, p. 7)’. At most, the District Court held that

the Tenants failed to prove that they suffered any actual injury

as a result of PHA’s violation of the Consent Decree. See:

Order dated March 9, 2004, at 46; PHA’s appendix p. 14a.

However, the District Court based that holding upon its legal

conclusion that the Tenants failed to challenge certain

calculations of PHA’s expert. The Tenants vigorously

disputed the District Court’s legal conclusion (and PHA’s

factual assertions) because the District Court’s procedures

failed to afford them a fair opportunity to challenge PHA’s

factual assertions, and improperly placed upon the Tenants the

burden of disproving PHA’s assertions. The Tenants

challenged the District Court’s legal conclusion and

? For much of the period from December 2000 through

December 2002, the gas rate faced by the Tenants was greater by

much more than 11%. The “McDowell baseline rate”, reflected in

the Consent Decree, was $0.87717 per ccf; in December 2000, the

gas rate was $0.96575; then from January 1, 2001 until October 1,

2001 the gas rate was $1.28115, which is 46% higher than the

McDowell baseline rate. PHA did not dispute these 1 jures. See:

PHA brief filed in District Court on Feb. 3, 2003, at p. 6.

* PHA’s assertion that its own past consumption estimates

“grossly exceeded reasonable consumption” (PHA brief, p. 6) have

no factual support in the record whatsoever. Not even PHA’s own

expert applied that characterization.

Rs

procedures in the Court of Appeals, which found it

unnecessary to reach the issue. See: Court of Appeals

opinion, PHA appendix, p. 12a.

Third, PHA’s assertion that it “was in full compliance

with the Consent Decree as of January 1, 2003" is, at best,

half-true. PHA brief, p. 6. PHA correctly raised the utility

allowances prospectively effective January 1, 2003.

However, as the Court of Appeals noted, PHA remained in

violation of the Decree after that da‘» because it failed to raise

the allowances retroactively for the period Dec. 1, 2000

through Dec. 31, 2002. Court of Appeals opinion, PHA

appendix p. 4a-Sa.

PHA asserts without justification that the Court of

Appeals’ decision “interferes with HUD’s regulations and

imposes duties on public housing agencies different than those

HUD chose to impose in its regulations.” PHA brief, p. 3.

For the reasons explained below, infra pp. 9-10, the Court of

Appeals’ decision does nothing of the sort. The Court of

Appeals correctly construed the Consent Decree to be

consistent with HUD’s regulations. The Court of Appeals’

decision requires no more and no less of PHA than that it

compensate the Tenants fully for PHA’s willful failure to

follow the Decree and HUD’s regulations.

i.

Reasons for Denying the Petition

As the Court of Appeals aptly put it “[t}his case requires

us to construe a consent decree.” PHA’s petition should be

denied, first and foremost, because the Court of Appeals

construed the Decree correctly. Second, the petition should

be denied because the Consent Decree is unique and

therefore, even if the Court of Appeals had misconstrued the

Decree, that would have no significant effect on other housing

authorities, much less on other litigants who have entered into

other consent decrees.

Because the Consent Decree in this case is unique, it

comes as no surprise that the Court of Appeals’ decision

creates no bona fide circuit split. Each and every case cited

by PHA is either consistent with the decision of the Court of

Appeals, or is readily distinguishable. Far from interfering

with HUD’s regulations, as PHA suggests it does, the Court

of Appeals’ decision construes the Consent Decree in

harmony with HUD’s regulations. Accordingly, the authority

of the federal government is not undermined by the decision.

Finally, one can safely expect that the facts here are

extremely unusual. It was PHA’s failure to follow HUD

regulations (by raising utility allowances to reflect higher

rates) that prompted the Tenants’ lawsuit which resulted in the

1998 Consent Decree. Less than three years after entering

into the Decree, PHA again violated HUD’s regulations in the

same way, now also violating the Decree. After PHA ignored

repeated warning letters from their counsel, the Tenants

moved to enforce the Decree. PHA admitted it had again

violated the Decree; its only defense was to dispute the

Tenants’ entitlement to compensation. PHA’s theory was that

it had violated the Decree in not one but two ways which, by

happenstance, supposedly canceled each other out. Even if

i.

that were true (which the Tenants disputed), it would be most

extraordinary and unlikely to reoccur. Therefore, this case

almost certainly will have no significant effect beyond PHA

and the Tenants.

A. The Third Circuit’s decision does not conflict with

any decision of the Supreme Court, nor of any

other circuit court:

The Court of Appeals correctly held that on account of

PHA’s violation of the Decree, the Tenants are entitled to

compensation for the actual harm they suffered by reason of

PHA’s violation - no more and no less. The Court of

Appeals construed the Decree (and HUD’s regulations) to

provide that:

[T]he consent decree permitted the PHA to revise

estimates of tenant consumption prospectively only.

When PGW [the local gas supplier] raised its rates,

the tenants were entitled under paragraph 8 of the

decree to have their allowances recalculated based on

the increased rates and the consumption factor in

effect at that time. The difference between the

allowances so calculated and the allowances the

tenants received is the loss the tenants suffered... .

This is the tenants’ actual provable injury.

See: PHA’s appendix pp. I la-12a.

The Court of Appeals’ decision is entirely consistent with

this Court’s precedents, including inter alia: International

Union, United Mine Workers of America v. Bagwell, 512 U.S.

821, 114 S.Ct. 2552 (1994) and United States v. United Mine

Workers of America, 330 U.S. 258, 67 S.Ct. 677 (1947). The

Court of Appeals limited the sanction for PHA’s contempt to

ba

Pane)

ee

»

cS

U.S. Housing Act, 42 U.S.C. §§1437 et seq., as well as

HUD’s regulations thereunder, which protect the Tenants

from housing-cost burdens that Congress has found excessive.

Regarding the calculation of damages for a systemic

violation of the consent decree in Kuykendall, the Tenth

Circuit concluded that the consumers were entitled to actual

damages based, initially, on the seller’s gross receipts -

probably the broadest possible measure. /d. at p. 765-766.

The only adjustments the Tenth Circuit allowed were two: if

the sellers proved that they had provided any consumer with

a full refund, or that any consumer was wholly satisfied with

her purchase, then the District Court should reduce the gross

receipts accordingly for each such consumer. The Tenth

Circuit rejected the sellers’ argument that they be allowed to

offset the value of the product each consumer was sold. /d.

at p. 766-767. PHA’s analogy to the Kuykendall decision is

at best tenuous, it is arguably counter-productive (from

PHA’s standpoint), and in any event the decision of the Third

Circuit hardly creates a split between it and the Tenth

Circuit’.

* The issue in Kuykendall decision is more analogous to the

question which arose in this case of whether PHA, in calculating

retroactive utility allowances, may retroactively lower utility rates

(as distinguished from consumption estimates). From July 1999

through Nov. 2000, the gas rates were lower by slightly more than

10% than the McDowell baseline rates, and during that time PHA

did not lower the allowances to reflect the lower rates. The District

Court indicated that PHA, in calculating any retroactive allowance

adjustments, could offset the excess from that period of lower

rates, against the shortfall from the subsequent period of much

higher rates. See: Order dated March 9, 2004, 44, PHA’s

appendix p. 14a. The Tenants did not challenge this offset,

because retroactive adjustments for rate changes are permitted by