United States ex rel. Anti-Discrimination Ctr. of Metro N.Y., Inc. v. Westchester Cnty.

UNITED STATES OF AMERICA ex rel. ANTI-DISCRIMINATION CENTEROF METRO NEW YORK, INC., Plaintiff, v. WESTCHESTER COUNTY, NEW YORK, Defendant.

06 Civ. 2860 (DLC)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

May 24, 2016

OPINION AND ORDER

APPEARANCES:

For the U.S. Government:

David J. Kennedy

United States Attorney's Office

86 Chambers Street

New York, NY 10007

For Westchester County, New York:

Robert F. Meehan

Westchester County Attorney's Office

138 Martine Avenue, 6th Floor

White Plains, NY 10601

DENISE COTE, District Judge:

On August 10, 2009, the County entered into a Consent Decree that required it, among other things, to ensure the development of at least 750 new affordable housing units by 2016. In February 2012, the County sought approval from the Monitor to include among that number 28 units to be built at Chappaqua Station in the Town of New Castle. That approval was granted in September 2012, but the New Castle units remain unbuilt. The land for the development was not purchased by the County until January 29, 2016, and as of today, New Castle has only granted a site remediation permit for that land. This Opinion addresses the debate between the parties about whether the County has breached ¶¶ 7(i)-(j) and 23 of the Consent Decree by failing to act more diligently in connection with the New Castle development.

The current litigation arises out of the Report of Monitor James E. Johnson dated May 8, 2015 ("Report"). The United States ("Government") has objected to the Opinion of November 19, 2015 ("Magistrate Opinion") issued by the Honorable Gabriel Gorenstein insofar as it sustained the objections of Westchester County ("County") to portions of that Report. The County also objected to the Magistrate Opinion on more limited grounds. As explained below, the County timely satisfied the financing in place interim benchmark imposed by ¶ 23 of the Consent Decree for the period ending December 31, 2014, but breached the obligations imposed on the County under the Decree's ¶ 7(i)-(j). Decision is reserved on the question of whether sanctions should be imposed for that breach.

Background

The procedural history giving rise to this dispute has been described in previous opinions issued by this Court and the Second Circuit Court of Appeals. See, e.g., United States exrel. Anti-Discrimination Ctr. of Metro N.Y., Inc. v. Westchester Cnty., 495 F. Supp. 2d 375 (S.D.N.Y. 2007) (denying motion to dismiss False Claims Act lawsuit against the County); United States ex rel. Anti-Discrimination Ctr. of Metro N.Y., Inc. v. Westchester Cnty., 668 F. Supp. 2d 548 (S.D.N.Y. 2009) ("2009 Opinion") (finding that County's Certifications to obtain CPD Funds were false but reserving on County's scienter); U.S. ex rel. Anti-Discrimination Ctr. of Metro New York, Inc. v. Westchester Cnty., N.Y., No. 06cv2860 (DLC), 2012 WL 1574819 (S.D.N.Y. May 3, 2012) (adopting Monitor's conclusions in part and Magistrate Judge's opinions in part); United States ex rel. Anti-Discrimination Ctr. of Metro N.Y., Inc. v. Westchester Cnty., 712 F.3d 761 (2d Cir. 2013) ("2013 Appeal Opinion") (affirming holding that the County had breached promotion requirement); Cnty. of Westchester v. U.S. Dep't of Hous. & Urban Dev., No. 13cv2741 (DLC), 2013 WL 4400843 (S.D.N.Y. Aug. 14, 2013) (dismissing APA claims for lack of jurisdiction and statutory claim for pleading deficiency); Westchester v. U.S. Dep't of Hous. & Urban Dev., 778 F.3d 412 (2d Cir. 2015) (vacating in part 2013 Opinion and remanding on issue of jurisdiction); Cty. of Westchester v. U.S. Dep't of Hous. & Urban Dev., 116 F. Supp. 3d 251 (S.D.N.Y. 2015) ("2015 Opinion") (holding that HUD's administration of grant programs at issue was lawful); Cty. of Westchester v. U.S. Dep't of Hous. & UrbanDev., 802 F.3d 413, 418 (2d Cir. 2015) ("2015 Appeal Opinion") (affirming this Court's finding that HUD did not violate federal administrative law). The Court assumes familiarity with those Opinions. Only the facts necessary to resolve the present dispute are described below.

A. False Claims Act Litigation and the 2009 Consent Decree

This litigation began in 2006 when the Anti-Discrimination Center of Metro New York, Inc. ("ADC") sued the County as a qui tam relator under the False Claims Act ("FCA"), 31 U.S.C. § 3729 et seq. ADC claimed that the County received more than $52 million from the federal government for housing and community development after falsely certifying that it affirmatively furthered fair housing ("AFFH"). In the 2009 Opinion, the Court ruled that the County's certifications to HUD were false as a matter of law. 668 F. Supp. 2d at 571. The Court scheduled a trial on the issue of the County's knowledge in making the false statements. Id. If a verdict was entered against it, the County faced an adverse judgment of as much as $156 million. 2013 Appeal Opinion, 712 F.3d at 775. The Government intervened after the 2009 Opinion was issued but before the remaining issues in the case were tried, and the County entered into a Consent Decree with the United States Department of Housing and Urban Development ("HUD") on August 10, 2009 ("Settlement").

The Consent Decree consists of thirty-eight pages and imposes many obligations on the County. The County was required to spend $51,600,000 as a remedy for violating the False Claims Act. Of this sum, $21,600,000 was paid into the County's account with HUD, which would make the funds available to the County to meet the requirements of the Community Development Block Grant program and other terms and conditions. See Settlement ¶¶ 2, 3, 5.

The Settlement also has as a central goal the construction of new affordable housing units. Paragraph 7 of the Consent Decree requires that the County "ensure the development of at least 750 new affordable housing units" by 2016. The County was required to secure funding of $30,000,000 for land acquisition and other necessary costs of development of the new units. Settlement ¶ 5. The new units must meet a series of demographic and affordability requirements in order to ensure that they AFFH. For example, 630 of the units must be built in municipalities that, according to 2000 Census data, have a "single race African-American only" population of less than 3% and a Hispanic population of less than 7%. Settlement ¶ 7(a)(i). Paragraph 7(d) further requires that at least half of the 750 new units must be rental units, of which at least 20% shall be "affordable to and occupied by households with incomes at or below [50%] of Area Median Income." The remaining unitsmust be "affordable to and occupied by households with incomes at or below [65%] of the [Area Median Income]." Id. Paragraph 7(e) describes additional affordability requirements that are tied to the County's median income. Moreover, no more than 25% of the units "shall be units intended for occupancy by senior citizens that are controlled by age restrictions." Settlement ¶ 7(f). The Settlement also gives priority to "sites within qualifying municipalities and census tracts that are located in close proximity to public transportation." Settlement ¶ 7(g). These requirements, read holistically along with the other provisions of the Consent Decree, confirm that the overall goal of ¶ 7 is to develop 750 new affordable housing units whose occupancy will AFFH.

Paragraph 7(i) of the Consent Decree further provides that the County must "use all available means as appropriate" to ensure the development of the 750 new units. These include, but are not limited to, "developing financial or other incentives for other entities to take steps to promote" the development of the new affordable housing units. These incentives may involve "conditioning or withholding the provision of County funds on actions that promote the objectives" of ¶ 7. This affirmative obligation in ¶ 7(i) is a requirement that the County must meet throughout the duration of the Consent Decree's implementation. It is not contingent on municipal action (or inaction) andensures that the County diligently pursues the ultimate 750-unit goal using "all available means as appropriate."

Paragraph 7(j) is in some ways similar to ¶ 7(i) but it operates differently. Paragraph 7(j) requires that, "[i]n the event that a municipality does not take actions needed to promote" development of the 750 housing units or "undertakes actions that hinder" such development, the County must "use all available means as appropriate to address such action or inaction, including, but not limited to, taking legal action." Moreover, the "County shall initiate such legal action as appropriate to accomplish the purpose of this [Consent Decree]." In other words, the Settlement contemplates a distinct set of County obligations that are triggered by municipal opposition to new affordable housing developments. If a municipality "hinder[s]" the objectives of ¶ 7 or "does not take actions needed to promote" the goal of developing 750 units, the County must address that opposition using "all available means as appropriate." This specific obligation is in addition to the consistent obligation to "use all available means as appropriate" to ensure the development of 750 affordable housing units that is found in ¶ 7(i).

Paragraph 23 of the Consent Decree provides for interim benchmarks to ensure the County's progress towards the 750-unit construction goal. By the end of 2014, the County was requiredto have financing in place for 450 units and building permits for 350 units. By the end of 2015, the County needed financing in place for 600 units and building permits for 525 units. By the end of 2016, the County must have financing in place and building permits for all 750 new affordable housing units.

The Settlement also provides for the appointment of the Monitor until the County satisfies these and other obligations. The Settlement requires that the Monitor conduct compliance assessments every two years "to determine whether the County has taken all...