ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA District Court No. 97-cv-02302 District Judge: The Honorable John P. Fullam.
The opinion of the court was delivered by: Alito, Circuit Judge
Before: SCIRICA, Chief Judge, ALITO and GARTH, Circuit Judges
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 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.
This case has its genesis in an April 1997 lawsuit filed against the PHA by Jackie McDowell, a tenant in Philadelphia'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 seq. 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 Housing 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 (1987), housing authorities must issue rebates to tenants who purchase 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 requirements of a safe, sanitary, and healthful living environment." Id. § 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. Id. §§ 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 establish revised allowances.
7. The annual review shall include all changes in circumstances indicating probability of a significant change in reasonable consumption ...