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Baldwin v. Housing Authority of the City of Camden

August 21, 2003; as amended September 26, 2003.


The opinion of the court was delivered by: Wolfson, District Judge



Presently before the Court is defendants' motion to dismiss plaintiff's Complaint pursuant to Fed. R. Civ. P. 12(b)(6). In this civil rights case, plaintiff, Sara Baldwin, argues that creditworthiness is not a criterion which the Housing Authority of the City of Camden ("HACC") may properly consider in determining a lower income individual's eligibility for Section 8 assisted rental housing vouchers. In that connection, plaintiff alleges that HACC and the individually named defendants *fn1 deprived her of due process by denying her application for Section 8 vouchers on the basis of creditworthiness. Defendants assert that the use of creditworthiness as a criterion to evaluate applications for Section 8 vouchers is authorized by law and applicable regulations, and that their consideration of plaintiff's creditworthiness during their review of her application was appropriate. Alternatively, the individual defendants argue that they are protected from liability for any constitutional violation by the doctrine of qualified immunity and seek summary judgment on that basis. For the following reasons, defendants' motion to dismiss is denied and the individual defendants' motion for summary judgment is denied in part and granted in part.

In addition, in her Opposition to Defendants' Motion to Dismiss, plaintiff informally requests leave of the Court to amend her Complaint. The Court grants plaintiff's informal request for leave to amend her Complaint in order to proceed under 42 U.S.C. § 1983. Further, plaintiff is ordered to file such Amended Complaint within thirty days, in accordance with Section VI of this opinion.


I. Statutory and Regulatory Framework

The Section 8 voucher program is part of a larger Congressionally enacted housing assistance program designed to aid lower-income individuals in securing affordable housing. *fn2 The program was established under federal law and is implemented pursuant to numerous federal regulations and interpretation of those regulations by local public housing authorities. In order to better understand plaintiff's argument in this case, a brief review of the Section 8 Program's statutory and regulatory framework is in order.

A. Section 8 Program

Before the Court is the question of whether creditworthiness was a proper basis for HACC's denial of plaintiff's application for rental assistance vouchers under the Section 8 Tenant-Based Housing Choice Voucher Program ("Section 8"), one of several rent subsidy programs *fn3 established pursuant to Section 8 of the United States Housing Act of 1937, as amended by the Housing and Community Development Act of 1974, 42 U.S.C. § 1437f ("Housing Act"). These housing assistance programs, referred to collectively as "Section 8," were created by Congress in order to help low-income families obtain "a decent place to live" and to promote economically mixed housing. *fn4 Under the program, the Secretary of Housing and Urban Development ("HUD") is empowered to enter into contracts with state and local public housing agencies ("PHAs") and fund such agencies through annual contribution contracts. *fn5 PHAs are authorized to receive applications from eligible persons seeking housing assistance, approve or deny the applications, and then provide vouchers to approved applicants. *fn6 Defendant HACC is such a PHA.

A. Quality Housing and Work Responsibility Act of 1998

In 1998, the Quality Housing and Work Responsibility Act ("QHWRA") became law. *fn7 Section 511 of the QHWRA requires PHAs, beginning in October 1999, to file each year, an Annual and Five Year Plan (referred to in the regulation separately and collectively as "Agency Plan[s]"). *fn8 The same provision of the QHWRA also sets forth a list of eighteen topics a PHA must address in its Annual and Five Year Plan. *fn9 Among the topics on that list are eligibility, selection, and admissions policies for a PHA's Section 8 voucher program. *fn10 QHWRA requires PHAs to conduct a public hearing and invite public comment regarding the Agency Plans *fn11 and also requires PHAs to establish resident advisory boards to help with the general development of the Agency Plans. *fn12 The Agency Plans provide a framework for local accountability. *fn13

The QHWRA requires review of PHA Agency Plans by HUD. *fn14 If HUD does not provide written notice of disapproval within seventy-five days after a PHA submits an Agency Plan for review, the plan is presumed to be approved. *fn15 This presumption, however, does not preclude judicial review of HUD's approval or disapproval of a PHA Agency Plan under the Administrative Procedure Act, 5 U.S.C. § 710 et seq., or in an action under 42 U.S.C. § 1983. *fn16 Additionally, QHWRA does not preclude a PHA from modifying or amending any policy, rule, regulation or plan after the PHA submits the agency plan to HUD. A significant modification or amendment, however, may not be adopted or implemented until there is consultation with the resident advisory board, public notice, a public hearing or public meeting of the board of directors, and review by HUD. *fn17 QHWRA and HUD do not provide a definition of "significant amendment," rather, determination of the definition of "significant amendment" is left to PHAs in order to facilitate local public participation in the PHA planning process. *fn18 Further, federal regulations implementing the Section 8 program require PHAs to identify the basic criteria for determining a substantial deviation or amendment within the Agency Plan. *fn19

C. Section 8 Administrative Plan

HUD requires PHAs to include a separate Section 8 Administrative Plan as a supporting document to the Annual Plan. *fn20 The Administrative Plan delineates PHA policies on matters for which the PHA has discretion to establish local policies. *fn21 The purpose of this requirement is to ensure public access to detailed information related to all of the housing authority's discretionary policies. *fn22 Section 8 implementing regulations list twenty-three policies that PHAs must address in their Section 8 Administrative Plans. *fn23 Among those policies is the PHA's policy for screening applicants for family behavior or suitability for tenancy. Although HUD empowers PHAs to screen applicants for Section 8 vouchers for suitability of tenancy, PHAs must conduct any such screening in accordance with the stated policies in their administrative plan. *fn24

When a PHA denies or terminates assistance, it may consider all relevant circumstances, such as the seriousness of the case, the extent of participation or culpability of individual family members, mitigating circumstances related to the disability of a family member, and the effects of denial or termination of assistance on the other family members who were not involved in the action or failure. *fn25 When HUD recently revised this language, *fn26 it noted that PHAs were not required under the law, nor did HUD encourage them, to terminate or deny assistance in every circumstance when a basis for such termination or denial existed. *fn27 When a PHA denies assistance, an applicant is entitled to written notice and an informal review conducted by any person assigned by the PHA other than the person who made or approved the initial decision, or a subordinate of that person. *fn28

II. Facts

Plaintiff, Sarah Baldwin, is a thirty-three year old single mother whose sole source of income is $322 per month in public assistance payments. On Saturday, July 27, 2002, plaintiff was among more than one thousand low-income individuals who received an application for one of only three hundred new Section 8 rental assistance vouchers. Following completion of her voucher application on July 28, 2002, plaintiff submitted it to defendant HACC for consideration. On or about August 7, 2002, defendant Barnett mailed plaintiff a letter denying her application based on her credit history. Complaint ("Compl.") at ¶ 19; Ex. 3. Plaintiff requested an administrative hearing to review the denial of her application on August 12, 2002. That hearing took place on September 19, 2002, with plaintiff represented by counsel. Defendant Herrick served as the hearing officer, and defendant Barnett was present. Compl. at ¶ 21.

During the hearing, relying on a March 20, 2002 copy of the Section 8 Administrative Plan, plaintiff's counsel challenged HACC's use of creditworthiness as a proper criterion upon which to deny plaintiff's voucher application. Compl. at ¶ 23; Ex. 6. Plaintiff alleges that defendant Barnett then produced an August 21, 2002 copy of the HACC Section 8 Administrative Plan which provided for screening and denial of applications on the basis of credit history. Id. In response, plaintiff argued that an Administrative Plan dated August 21, 2002, could not justify HACC's August 7, 2002 denial of her voucher application because the Administrative Plan was not effective at the time HACC denied plaintiff's application, some two weeks earlier. Compl. at ¶ 24. Plaintiff alleges that defendant Barnett "stormed out of the room" and returned shortly thereafter with a copy of a resolution of the Board of Commissioners passed in July 2002, and claimed that applicable federal regulations permitted the Board to change the Administrative Plan. Id. at ¶ 25. Plaintiff testified that she would not have stood in line overnight if she had known defendants would use credit history as a screening criterion. Compl. at ¶ 26. Later in the hearing, plaintiff offered into evidence a letter dated August 9, 2002, from her landlord, which she alleged showed seven years of satisfactory rental history. Id. at ¶ 27. Plaintiff asserts that defendant Barnett instructed defendant Herrick not to admit the letter into evidence, on the basis that it was irrelevant. Compl. at ¶ 27.

On September 19, 2002, before plaintiff's receipt of written notice from HACC regarding the outcome of her administrative hearing, Barnett wrote to plaintiff's counsel to further address the topic of the propriety of HACC's use of creditworthiness as a criterion in evaluating voucher applications. Compl. at ¶ 30. Four days later, on September 23, 2002, Herrick issued a written decision upholding Barnett's denial of plaintiff's application. On September 24, 2002, plaintiff's counsel sent a letter to Barnett responding to Barnett's letter of September 19. The next day, Barnett replied in writing that the Administrative Plan had always included creditworthiness as a screening criterion and basis for denial of an application. Plaintiff alleges that this position contrasted with Barnett's earlier representations that the Board could change the Administrative Plan if it so desired. Compl. at ¶ 33. On September 26, 2002, plaintiff's counsel responded to Barnett in writing, restating counsel's argument against HACC's denial of plaintiff's application and resubmitting plaintiff's letter from her landlord regarding her satisfactory rent payment history.

On November 7, 2002, plaintiff timely filed a Verified Complaint In Lieu of Prerogative Writ pursuant to New Jersey Rules of Court 4:69 in New Jersey Superior Court and served defendants on November 15, 2002. On December 13, 2002, defendants filed a Notice of Removal and this case was removed to federal court. On January 6, 2003, defendants filed this motion to dismiss for failure to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b)(6) under L.Civ.R. 7.1(b) and Appendix N. The individual defendants also filed an alternative motion for summary judgment on the basis of qualified immunity.

Plaintiff's Complaint alleges in Count One that defendants' rejection of her Section 8 voucher application denied her due process under the 14th Amendment of the United States Constitution, as well as the Due Process Clause of the New Jersey Constitution. In Count Two plaintiff claims that the denial of her application was arbitrary, capricious and unreasonable, and constituted an abuse of discretion in violation of a clear legal duty owed to her by a governmental entity, and therefore provides grounds for an action in lieu of prerogative writ. In Count Three, plaintiff claims a violation of her rights under the Housing Act, and regulations promulgated thereunder. Specifically, she claims that PHAs may only change tenant screening for Section 8 eligibility during each year's public review and comment period on the Annual Plan. In Count Four, plaintiff claims an abuse of discretion under the Housing Act, and its implementing regulations, for failing to consider all relevant circumstances.

Plaintiff's Complaint requests a preliminary injunction and permanent injunction ordering defendant HACC, its agents, successors, and employees to provide her a Section 8 voucher, as well as compensatory damages, court costs, and any such further relief as this Court may deem appropriate. Defendants dispute plaintiff's allegations and assert that they did not violate any legal standard in applying creditworthiness as a criteria in determining plaintiff's suitability for Section 8 benefits. In the alternative, the individual defendants assert that they are entitled to qualified immunity for any constitutional violations arising out of their actions in this case.


I. 12(b)(6) Standard

Dismissal under Fed. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief may be granted, is appropriate only in those instances in which it appears beyond doubt that a plaintiff can prove no set of facts in support of her claim which would entitle her to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1988). In resolving a Rule 12(b)(6) motion, a court must focus its inquiry on the allegations in the Complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the Complaint may also be taken into account. See Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.2 (3d Cir. 1994) (citing Chester County Intermediate Unit v. Penn. Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990)). The reviewing court must accept as true all well pleaded allegations in the Complaint and view them in the light most favorable to the plaintiff. Scheuer v. Rhoads, 416 U.S. 232, 236 (1974). "Since the long-established federal policy of civil litigation is to decide cases on the proofs, district courts generally disfavor Rule 12(b)(6) motions." Port Authority of New York and New Jersey v. Arcadian Corp., 991 F. Supp. 390, 398 (D. N.J. 1997) (citing Melo-Sonics Corp. v. Cropp, 342 F.2d 856 (3d Cir. 1965)).

II. Scope of Review of HACC Actions

The parties in this case disagree over the proper scope of this Court's review of HACC's actions. Defendants assert that the Administrative Procedure Act, 5 U.S.C. § 701 et seq., applies and that this Court's review of HACC's actions is thus circumscribed by the statute's narrow scope. *fn29 By contrast, plaintiff asserts that this Court's review of the issues in this case is not limited by the narrow scope of the Administrative Procedure Act. Rather, plaintiff argues that because HACC's actions are inconsistent with federal regulations, this Court may review those actions de novo. Further, plaintiff asserts that even under the scope of review established by Section 706 of the Administrative Procedure Act, because HACC's actions are not in accordance with law, this Court owes HACC no deference upon review of such actions. *fn30 I find that additional considerations compel a de novo standard of review here.

In Ritter v. Cecil County, 33 F.3d 323, 327 (4th Cir. 1994), the Court of Appeals for the Fourth Circuit held that a local PHA is not an "agency" as defined by the Administrative Procedure Act. *fn31 At issue in Ritter were the interpretations of federal regulations by the Cecil County Housing Agency, a PHA established under the Housing Act, and not any HUD action. Id. The Fourth Circuit determined that because the Cecil County Housing Agency was "neither created nor maintained or controlled by the United States," it was a state agency and consequently, the Administrative Procedure Act did not provide the appropriate standard for review of its actions. Id.

Here, as in Ritter, plaintiff complains only of a PHA's interpretation of federal regulations and not the actions of HUD. In addition, like the Cecil County Housing Agency, HACC was not created, nor is it maintained or controlled, by the United States. Rather, HACC is a federally funded public housing authority organized under state law. See N.J.S.A. 52:27C-22. *fn32 Consequently, because HACC is a state agency, the Administrative Procedure Act does not establish the scope of this Court's review of its actions. See Ritter, 33 F.3d at 327; see also, Clark v. Alexander, 85 F.3d 146, 152 (4th Cir. 1996) (discussing level of deference due state agencies interpreting agency regulations under a federally created program); Hill v. Richardson,7 F.3d 656, 658 (7th Cir. 1993) (stating in dicta that Administrative Procedure Act does not apply to state governments). Instead, to the extent that HACC's actions are inconsistent with federal housing regulations or their authorizing legislation, this Court exercises de novo review. Ritter, at 327-28. If no such inconsistency exists, "the court should afford the state agency's action reasonable deference, meaning that the action should be upheld unless it is found to be arbitrary or capricious." Clark, 85 F.3d at 152.

III. Creditworthiness

As an initial matter, this Court must determine whether federal regulations permit a PHA to use creditworthiness as a criterion in its determination of an applicant's eligibility for Section 8 vouchers. "An interpretation of a regulation presents a legal question of law to the court." Shaw v. Philadelphia Housing Auth., 1991 WL 97681, *3 (E.D. Pa. 1991) (interpreting former Section 8 regulation 24 C.F.R. § 882.209(d)) (citing International Society for Krishna Consciousness, Inc. v. Rochford, 425 F. Supp. 734 (N.D. Ill. 1977), aff'd in part, rev'd in part, 584 F.2d 263 (7th Cir. 1978)). Statutory rules of construction should also be applied in interpreting regulations. Rucker v. Wabash Railroad Co., 418 F.2d 146 (7th Cir. 1969). The plain language of a regulation and the ordinary meanings of the ...

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