APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Civil No. 77-3102)
Before Rosenn, Garth and Sloviter, Circuit Judges.
Society Hill is a fashionable neighborhood in Philadelphia. The Society Hill Civic Association (the Association) is a group of property owners residing in that neighborhood. The United States Department of Housing and Urban Development (HUD) and the Philadelphia Redevelopment Authority (RDA) are cooperating to build a small number of units of low-income housing in Society Hill. HUD and RDA are bound to fund this housing under the terms of a consent decree entered in an earlier litigation, Dodson v. Salvitti, 77 F.R.D. 674, 25 Fed. R. Serv. 2d (Callaghan) 172, No. 74-1854 (E.D.Pa.1977), aff'd mem., 571 F.2d 571 (3d Cir.), cert. denied, 439 U.S. 883, 99 S. Ct. 222, 58 L. Ed. 2d 195 (1978).
In the instant suit, the Association and several individual homeowners seek to attack the prior consent decree. Judgment on the pleadings was granted by the district court in favor of the defendants, HUD, RDA and various officials of those agencies. The Association and the individual plaintiffs now appeal this determination.*fn1
Because we conclude that, on the present record, the Association's action cannot be deemed to be barred by the prior consent decree, and because we find that the Association's complaint sets forth a number of claims inappropriate for disposition by judgment on the pleadings, we reverse the district court's judgment and remand for further proceedings.
This case illustrates the unfortunate hostility and distrust that is often generated by urban renewal. The Association, plaintiff below and appellant here, represents the interests of property owners who seek to preserve property values and a perceived quality of life in Society Hill. The defendants, HUD and RDA, are two government agencies responsible for funding the urban renewal project that the Association claims will infringe its members' rights. The intervenors, Mable Dodson and others, are the tenants who are to be allocated urban renewal housing under the prior consent decree entered into by HUD, RDA, and themselves.
This case is the third in a series of related cases carrying forward the dispute over urban renewal in Society Hill. Initially, the tenants' landlord, a nonprofit housing corporation called the Octavia Hill Association, sought to evict them, the tenants, from their homes to allow rehabilitation of the property. Octavia Hill brought six actions in ejectment in the state courts of Pennsylvania. After removal to federal district court, a consent decree was entered into which provided that the tenants would surrender possession of their tenancies in return for, among other things, temporary housing as well as RDA's promise to attempt to rehabilitate certain property on Pine Street in Society Hill as a permanent relocation resource. Octavia Hill Association, Inc. v. Hayes (Dodson), Nos. 73-1594 to -1599 (E.D.Pa. Oct. 16, 1973). Eventually, a further court order was entered on June 28, 1974 to enforce the Octavia Hill consent decree.
Subsequently the tenants filed a class action*fn2 in federal district court against HUD and RDA complaining of their failure to carry out their obligations under various federal constitutional and statutory provisions to provide the tenants with permanent relocation housing.*fn3 This litigation was captioned Dodson v. Salvitti. Class certification in this tenants' action was denied. A motion for intervention by local property owners (neighbors of those represented by the Association in the present case) was denied on grounds of untimeliness and lack of a legal interest sufficient to support intervention. Dodson v. Salvitti, 77 F.R.D. 674 (E.D.Pa.1977). Ultimately a second consent decree was approved in Salvitti providing for permanent housing for the tenants in new units to be constructed through the joint efforts of HUD and RDA. Dodson v. Salvitti, No. 74-1854 (E.D.Pa. Sept. 16, 1977), aff'd mem., 571 F.2d 571 (3d Cir.), cert. denied, 439 U.S. 883, 99 S. Ct. 222, 58 L. Ed. 2d 195 (1978). No such relief had been provided in the earlier Octavia Hill consent decree.
The present action challenges the Salvitti consent decree. The Association brought suit against HUD and several of its officers, and against RDA and its executive director, Augustine Salvitti. Several of the tenants intervened as defendants. The Association claimed, first, that the Dodson consent decree was illegal because it was collaterally barred by the Octavia Hill consent decree, and second, that the Dodson consent decree was independently violative of various federal constitutional provisions and various state and federal statutes and regulations. The district court dismissed the entire action on the pleadings, under Fed.R.Civ.P. 12(c), on two independent grounds. The district court held that the Association's action constituted an impermissible collateral attack on a valid consent decree, since it concluded that the Association should have intervened in Dodson v. Salvitti to protect its interests. Alternatively, the district court held that the Association's complaint failed to state any claims upon which relief could be granted. This appeal followed.
Initially, we must determine as a matter of law whether the Association's action is barred by the collateral estoppel effect of the consent decree entered by the court in Dodson v. Salvitti. We begin with the familiar principle set forth by Chief Justice Stone for the Supreme Court in Hansberry v. Lee, 311 U.S. 32, 61 S. Ct. 115, 85 L. Ed. 22 (1940):
It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process. A judgment rendered in such circumstances is not entitled to the full faith and credit which the Constitution and statute of the United States prescribe, and judicial action enforcing it against the person or property of the absent party is not that due process which the Fifth and Fourteenth Amendments require.
311 U.S. at 40-41, 61 S. Ct. at 117 (citations omitted).
The Association and the individual plaintiffs here claim the benefit of this principle: they were not parties to the Salvitti suit, and they allege that the judgment there entered constitutes an adverse determination of various constitutional, statutory and regulatory rights that they possess. If not allowed to attack the legality of the Salvitti consent decree, they argue, they will have been denied due process of law.*fn4 See Consumers Union v. Consumer Product Safety Commission, 192 U.S. App. D.C. 93, 590 F.2d 1209, 1217-18, 1221 (D.C.Cir.1978) (requester of information under Freedom of Information Act not bound by judgment in reverse-FOIA suit to which it was not a party), rev'd on other grounds sub nom. GTE Sylvania, Inc. v. Consumers Union, 445 U.S. 375, 100 S. Ct. 1194, 63 L. Ed. 2d 467 (1980).
The defendants invoke the strong interest in the finality of judgments to bar the collateral attack. They properly point out that if there were an unqualified right on behalf of persons not parties to a suit to relitigate the merits of the judgment by means of a second suit, the interest in finality would be seriously undermined. Thus, they rely on the district court decision in Oburn v. Shapp, 70 F.R.D. 549 (E.D.Pa.), affirmed without opinion by this court, 546 F.2d 418 (3d Cir. 1976), cert. denied, 430 U.S. 968, 97 S. Ct. 1650, 52 L. Ed. 2d 359 (1977), for the proposition that a collateral challenge may not be raised in these circumstances.
We agree with the defendants that a concern for the finality of judgments demands some limitations on the availability of collateral attack. We also accept the balance struck in Oburn between the competing interests in finality and an individual's right not to be bound by the judgment in a case to which he was not a party. But, even applying the Oburn approach here, we find that due process demands that the Association be allowed its challenge, and that the district court erred in precluding it.
Oburn presented an attack on a consent decree entered in an earlier litigation in which Pennsylvania agreed to increase minority hiring and promotion in the state police. The plaintiffs in Oburn were unsuccessful white applicants to the state police, who alleged that the earlier consent decree infringed their federal and state constitutional rights. The district court held that the plaintiffs would not be allowed to collaterally attack the earlier decree.
In support of their position that a separate action is maintainable, plaintiffs have cited the Court to the case of Hansberry v. Lee, 311 U.S. 32, 61 S. Ct. 115, 85 L. Ed. 22 (1940). However, we find Hansberry to be inapposite to the cases before us. Hansberry stands for the proposition that a stranger to a prior suit, who lacks any opportunity to timely contest the validity of the final judgment rendered in that prior suit, may not be bound by the prior judgment, depending on the particular facts, if he would be deprived of the due process of law guaranteed by the Fifth and Fourteenth Amendments.
We cannot accept plaintiffs' proposition that Hansberry allows any third person an unqualified right to collaterally relitigate the merits of a judgment in a prior suit. Under such circumstances, courts could never enter a judgment in a lawsuit with the assurance that the judgment was a final and conclusive determination of the underlying dispute.
If the instant cases presented a situation wherein the plaintiffs had no alternative but to institute an independent lawsuit in order to challenge the Bolden consent decree, then their reliance on Hansberry might be appropriate. The instant cases do not present such a situation, because this Court continues to maintain jurisdiction over the Bolden consent decree. This factor of continuing jurisdiction is quite significant in view of plaintiffs' allegation that the Bolden consent decree was procured by a fraud on the court.
70 F.R.D. at 552 (footnote omitted), aff'd mem., 546 F.2d 418 (3d Cir. 1976), cert. denied, 430 U.S. 968, 97 S. Ct. 1650, 52 L. Ed. 2d 359 (1977).
The distinction between the Oburn proceeding and the instant one is immediately apparent. In Oburn, the district court had retained jurisdiction over the earlier consent decree; thus, the Oburn plaintiffs could have had their day in court by moving to intervene in the very litigation in which the decree had been entered. This retention of jurisdiction is also present in the other decisions that have found collateral attacks impermissible in similar circumstances. See, e. g., Black and White Children of the Pontiac School System v. School District of the City of Pontiac, 464 F.2d 1030-31 (6th Cir. 1972); McAleer v. American Telephone & Telegraph Co., 416 F. Supp. 435, 438 (D.D.C. 1976). But here, this route is closed; the Salvitti court did not retain jurisdiction over the decree, and thus direct intervention is no longer available. The Association may only challenge the consent decree by instituting a separate lawsuit. Thus, if it is to receive the day in court that due process demands, its collateral attack must be allowed.
The defendants contend, however, that collateral attack is not the only way the Association can have its challenge entertained. They point out that under the terms of the consent decree, the parties retained their right to return to court to enforce the decree.*fn5 Thus, they claim that the Association can intervene if the parties should ever return to court to resolve disputes over enforcement.
This argument need not detain us long, for the defendants' suggestion does not guarantee the Association an opportunity to present its claims. If the parties to the Salvitti decree can carry out its terms amicably, they never will return to court for enforcement, and there will be no further litigation in which the Association could intervene. This speculative possibility of an opportunity for the Association to intervene at the enforcement stage falls far short of the opportunity to be heard on the substantive claims and the opportunity to be afforded "that due process which the Fifth and Fourteenth Amendments require." Hansberry v. Lee, 311 U.S. at 41, 61 S. Ct. at 118.
The district court here generally recognized the Association's right to be heard under Hansberry v. Lee. The court concluded, however, that the Association's failure to seek intervention in Dodson v. Salvitti precluded its later collateral attack. We agree with the district court that intervention is a far better course than subsequent collateral attack, if intervention is feasible. We further agree that an unjustified or unreasonable failure to intervene can serve to bar a later collateral attack. Unjustified failure to intervene would, for instance, bar a collateral attack by the group of property owners who had earlier sought to intervene in Salvitti. Those property owners were denied intervention in part on the grounds that they had delayed for two and a half years before bringing their motion to intervene. As the dissent points out, these property owners should not be allowed to escape the consequences of their own tardiness by recasting their motion for intervention as a complaint in a suit collaterally attacking the prior judgment. However, it is not these property owners who are before the court now.
The district court here precluded the Association's collateral attack for the same reason that it denied intervention to the other property owners in Dodson v. Salvitti. The court held that the Association had "been no less dilatory in asserting (its) claims (than) . . . the Dodson intervenors, (and) should have acted, if at all, as soon as it became apparent (that its) interests needed representing." But this conclusion was not one that the court could draw at this stage of the litigation. The Association made an allegation in its complaint, which must be accepted as true for purposes of a judgment on the pleadings, that would excuse its failure to file suit until the present time. The Association alleged that, despite its continuing negotiation with the tenants during the course of Dodson v. Salvitti, it did not know of the Dodson action until late 1976, and was never served with process. If this allegation is true, and we must accept it as such at this stage, the Association, on the present record with all inferences given in its favor, cannot be precluded from its present collateral attack on the ground that it unreasonably delayed in protecting its interests.*fn6 The Association's conduct following its discovery of the Dodson v. Salvitti litigation in late 1976, according it all reasonable inferences from the record, cannot be characterized as unreasonable delay in protecting its interests.
The Association acted promptly after the final denial of this motion to intervene, filing its own complaint in the instant suit in September, 1977.*fn7 Thus, giving the Association the benefit of all reasonable inferences from the facts, as we must at this stage in the litigation, it cannot be said that the Association delayed unreasonably in acting to protect its interests. Of course, on remand the district court is not bound to give the Association all reasonable inferences from the facts. Rather, the facts of the reasonableness of the Association's conduct can be developed more fully. Ultimately, the Association's right to maintain this suit will depend on the district court's findings, upon remand, as to when the Association became apprised of the Dodson v. Salvitti suit, and whether the issues raised in this case are similar to those raised by the proposed intervenors in Dodson and if, under all the circumstances, the Association delayed unreasonably in acting to protect its interests.
Assuming that the district court finds that the Association did not delay unreasonably in acting to protect its interests, and that its challenge must therefore be allowed, it remains to consider the legal sufficiency of the claims that the Association raises. In doing so, we suffer the disadvantage of having little discussion of these issues by the parties or the district court. The parties in their briefs concentrated on the question of the collateral estoppel effect of the Dodson v. Salvitti consent decree. They have provided us with virtually no illumination on subjects we find critical to the resolution of this case-the Association's standing, its entitlement to seek judicial review of HUD's action in committing itself to the consent decree, or the actual substantive merits of its claims. The district court, apparently faced with a similar situation, understandably did not dwell on these aspects of the suit. The district court's primary ruling was that the Association's complaint, since it sought impermissibly to attack a valid judgment, could not be entertained. Thus, on this ground the district court dismissed the suit. It was only after it had done so that the district court alternatively stated that "(i)n view of this ruling, it is unnecessary for me to examine the sufficiency of each and every averment in the complaint. However, I would point out that I think the averments of the complaint are untenable and do not state a cause of action." (98a). With relatively little additional discussion of the merits, the district court then entered its order dismissing the complaint pursuant to Fed. R. Civ. P. 12(c).
Under Rule 12(c), like Rule 12(b)(6) (dismissal for failure to state a claim upon which relief can be granted), judgment will not be granted
unless the movant clearly establishes that no material issue of fact remains to be resolved and that he is entitled to judgment as a matter of law. In considering a motion for judgment on the pleadings, the trial court is required to view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. In this fashion the courts hope to insure that the rights of the nonmoving party are decided as fully and fairly on a rule 12(c) motion, as if there had been a trial.
5 C. Wright & A. Miller, Federal Practice and Procedure, § 1368, at 690 (1969) (footnotes omitted). Thus, our task is to determine whether any of the allegations made by the Association can survive a Rule 12(c) motion, under the standard set forth above. In discharging this task, we have the benefit of the pleadings alone, with little additional analysis by the parties or the district court. Nevertheless, we believe that at least some of the Association's ...