Cnty. of Westchester v. U.S. Dep't of Hous. & Urban Dev.

802 F.3d 413

COUNTY OF WESTCHESTER, Plaintiff–Appellant

v.UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, and Julian Castro, as Secretary of Housing and Urban Development, Defendants–Appellees.

No. 15–2294–cv.

United States Court of Appeals, Second Circuit.

Argued: Sept. 22, 2015.

Decided: Sept. 25, 2015.

Robert F. Meehan, Westchester County Attorney (Linda M. Trentacoste, Adam Rodriguez, and Justin R. Adin, on the brief), Westchester County Attorney's Office, White Plains, N.Y., for County of Westchester, Plaintiff–Appellant.

David J. Kennedy (Benjamin H. Torrance, on the brief), Assistant United States Attorneys, for Preet Bharara, United States Attorney for the Southern District of New York, New York, N.Y., for U.S. Department of Housing and Urban Development and Julian Castro, Secretary of Housing and Urban Development, Defendants–Appellees.

Before: CABRANES, RAGGI, and WESLEY, Circuit Judges.

Opinion

PER CURIAM:

For nearly a decade, plaintiff-appellant the County of Westchester (the “County” or “Westchester”) has been engaged in litigation with the United States Department of Housing and Urban Development (“HUD” or “the Government”) over whether the County has adequately analyzed—in its applications for HUD funds—impediments to fair housing within the County's jurisdictions.¹

To receive grants from HUD, an applying jurisdiction, like the County, must submit an annual “Action Plan” detailing how the jurisdiction will use the grants.² Along with the Action Plan, the County must certify that it will “affirmatively further fair housing” (“AFFH”).³ Under HUD regulations, this means that the County must “conduct an analysis to identify impediments to fair housing choice within the jurisdiction” (an “analysis of impediments,” or “AI”) and promise to “take appropriate actions to overcome the effects of any impediments identified through that analysis.”⁴

In this appeal, the County challenges final administrative determinations by HUD to withhold funds allocated to the County under the Community Planning and Development Formula Grant Programs (“CPD funds”)⁵ for fiscal years (“FY”) 2011, 2013 and 2014.⁶ The County's principal argument is that the conditions that HUD placed on the allocation of these CPD funds violated the Administrative Procedure Act, 5 U.S.C. §§ 701 –706 (“APA”), and two other statutory provisions—42 U.S.C. §§ 12705 and 12711 —that generally prohibit HUD's intrusion into local public policy.⁷ In short, the County asserts that HUD's repeated rejection of the County's AIs turned on a factor—the substance of local zoning policies —that HUD was not permitted to consider.

On July 17, 2015, the United States District Court for the Southern District of New York (Denise L. Cote, Judge ) granted defendants-appellees' motion for summary judgment, holding that HUD's decision was not arbitrary or capricious and that § 12705 and § 12711 did “not relieve the County of its obligation to make accurate Certifications and to produce adequate AIs in order to obtain CPD Funds.”⁸ As to these “Certifications,” the District Court concluded that HUD acted within its authority in determining that the County's AIs had failed to assess the impediments to fair housing choice caused by local zoning ordinances or to identify actions the County would take to overcome these impediments. Accordingly, the District Court held that HUD was justified in its conclusion that the County's plan would not “affirmatively further fair housing,” as required by HUD regulations and the Fair Housing Act (“FHA”).⁹

Because we agree that HUD's withholding of CPD funds did not violate federal law, we AFFIRM the District Court's judgment of July 21, 2015.¹⁰ We also VACATE IN PART the temporary injunction issued pendente lite by a motions panel of this Court on May 1, 2015. HUD is authorized to reallocate the County's FY 2013 funds forthwith. As to the County's FY 2014 funds, however, HUD is directed to delay reallocating those funds until after the County exhausts its right to seek further review of this decision.

BACKGROUND

In order to understand the current dispute between the County and HUD, it is necessary to review the last decade of litigation against the County.¹¹

I. The 2006 Litigation and Consent Decree

In April 2006, the Anti–Discrimination Center of Metro New York (“the relator”) filed a qui tam lawsuit alleging that the County violated the False Claims Act¹² by submitting “false” certifications to HUD from 2000 to 2006 in order to obtain approximately $52 million in housing grants. Under the relevant statutes and regulations, the County, as a recipient of HUD funds, was required to certify to HUD that it would “affirmatively further fair housing.”¹³ The relator alleged that the County's certifications were “false” within the meaning of the False Claims Act because the County failed to analyze impediments to fair housing or to develop strategies to overcome these impediments, despite certifying to HUD that it had done so.

During pretrial proceedings, the district court entered several rulings in favor of the relator. On July 13, 2007, it denied the County's motion to dismiss, holding that the relator had stated a claim that the County violated the False Claims Act by falsely certifying that it considered race when evaluating fair housing impediments and corrective actions.¹⁴ On February 24, 2009, the district court held that the County's certifications to HUD were false within the meaning of the False Claims Act, but it denied the relator's motion for summary judgment on the grounds that the County's knowledge that the certifications were “false” was a disputed issue of fact for trial.¹⁵

On August 10, 2009, the Government intervened in the action in place of the relator and, on the same day, presented the district court with a consent decree that all parties—including the County—agreed to enter.¹⁶

By settling the case and agreeing to the consent decree, the County avoided the risk of paying treble damages of more than $150 million. Instead, the decree obligated the County to pay $30 million to the United States—of which $21.6 million would be credited to the County's account with HUD—and to take numerous steps to further “fair housing.”¹⁷ Most relevant here, the County agreed to spend $30 million of its own funds—in addition to the $21.6 million in its HUD account—to build 750 units of affordable housing over the following seven years.¹⁸ The County was required to

use all available means as appropriate to achieve the [building of the 750 units], including, but not limited to, developing financial or other incentives for other entities to take steps to promote [those] objectives ..., and conditioning or withholding the provision of County funds on actions that promote [those] objectives....¹⁹

The consent decree “anticipated that the County [would build these 750 units] by leveraging the funds that it is expending pursuant to [the consent decree] with supplemental funds.”²⁰ Moreover,

[i]n the event that a municipality does not take actions needed to promote the [building of the 750 units], or undertakes actions that hinder [those] objectives ..., the County shall use all available means as appropriate to address such action or inaction, including, but not limited to, pursuing legal action.²¹

Additionally, the consent decree required the County to complete, within 120 days, an analysis of impediments to fair housing choice (“AI”) “deemed acceptable by HUD.”²² The decree specifically required that the AI

(b) identify and analyze, inter alia:

(i) the impediments to fair housing within its jurisdiction, including impediments based on race or municipal resistance to the development of affordable housing; [and]

(ii) the appropriate actions the County will take to address and overcome the effects of those impediments....²³

The County also agreed to “promote, through the County Executive, legislation ... to ban ‘source-of-income’ discrimination in housing.”²⁴ Such legislation prohibits landlords from refusing to rent to a tenant because that tenant's income comes from Social Security benefits or from state or federal public assistance programs, such as “Section 8.”²⁵

Finally, the consent decree provided for the appointment of a monitor to oversee compliance, to recommended additional actions needed to ensure compliance, and to assess “whether the County has taken all possible actions to meet its obligations ... including ... promoting inclusionary and other appropriate zoning by municipalities by offering incentives, and, if necessary, taking legal action.”²⁶ The appointment of the monitor was to last “for so long as the County's obligations” under the consent decree “remain unsatisfied.”²⁷ The consent decree also created a dispute resolution process whereby the parties could submit grievances for the monitor to resolve.²⁸

II. 2011 Litigation

The August 2009 consent decree settled all False Claims Act charges stemming from the County's applications for HUD funding from 2000 to 2009. Since 2009, however, the County has continued to apply for CPD funds. The present dispute concerns HUD's rejection of the County's post-consent decree applications for funding. Specifically, this litigation concerns HUD's decision to withhold the County's CPD funds for FY 2011, 2013, and 2014.²⁹

The County first challenged HUD's withholding of its CPD funds for FY 2011. As noted above, the consent decree required the County to make efforts to ban “source-of-income discrimination.” In 2009, the County's Board of Legislators debated a bill to meet this obligation. The County Executive at the time, Andrew Spano, sent letters to advocacy organizations expressing support for the pending bill, and to the leadership of the County Board of Legislators encouraging them to pass the bill. Although the Board failed to pass the legislation in 2009, an identical bill was reintroduced in 2010. On June 14, 2010, the Board passed a slightly modified version of the bill, but, on June 25, 2010...