PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CARMEN THOMPSON; RHONDA HARRIS;
JOANN BOYD; DORIS TINSLEY;
LORRAINE JOHNSON; ISAAC J. NEAL,
on their behalf and on behalf of all
others similarly situated,
Plaintiffs-Appellants,

v.

U.S. DEPARTMENT OF HOUSING &
URBAN DEVELOPMENT; HENRY G.
CISNEROS, SECRETARY OF HOUSING
AND URBAN DEVELOPMENT, In his
official capacity as Secretary of the
United States Department of
Housing and Urban Development;
                                        No. 99-1402
HOUSING AUTHORITY OF BALTIMORE
CITY, a Municipal corporation;
DANIEL P. HENSON, III, in his
official capacity as Executive
Director of the Housing Authority
of Baltimore City and
Commissioner of the Baltimore City
Department of Housing and
Community Development;
MAYOR AND CITY COUNCIL OF
BALTIMORE,
Defendants-Appellees.

JONESTOWN PLANNING COUNCIL,
INCORPORATED,
Movant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Marvin J. Garbis, District Judge.
(CA-95-309-MJG)

Argued: May 5, 2000

Decided: July 12, 2000

Before WILKINS, MICHAEL, and TRAXLER,
Circuit Judges.

_________________________________________________________________

Reversed by published opinion. Judge Traxler wrote the opinion, in
which Judge Wilkins and Judge Michael joined.

_________________________________________________________________

COUNSEL

ARGUED: Marc Alan Goldman, JENNER & BLOCK, Washington,
D.C., for Appellants. Edward Mark Buxbaum, WHITEFORD, TAY-
LOR & PRESTON, L.L.P., Baltimore, Maryland, for Appellees. ON
BRIEF: Susan R. Podolsky, JENNER & BLOCK, Washington, D.C.;
Barbara A. Samuels, Therese L. Staudenmaier, AMERICAN CIVIL
LIBERTIES UNION, Baltimore, Maryland, for Appellants. Wilbur D.
Preston, Jr., Harry S. Johnson, Dana C. Petersen, Lisa L. Walker, Elva
E. Tillman, WHITEFORD, TAYLOR & PRESTON, L.L.P., Balti-
more, Maryland, for Appellees.

_________________________________________________________________

OPINION

TRAXLER, Circuit Judge:

In 1995, African-American public housing residents (the "Plain-
tiffs") filed a class action against the United States Department of
Housing and Urban Development ("HUD"), HUD's then-Secretary
Henry Cisneros, the Housing Authority of Baltimore City ("HABC"),

                    2
and various Baltimore officials, seeking to eliminate racial segrega-
tion and discrimination in Baltimore's public housing system. In
1996, the parties entered into a Partial Consent Decree (the "Consent
Decree") resolving some of the issues raised in the complaint. In
1998, HABC and the Baltimore officials (together, the "Local Defen-
dants") filed a motion in the district court seeking to modify a portion
of the Consent Decree. The district court granted the motion, and the
Plaintiffs appeal. We reverse.

I.

In their class action complaint, the Plaintiffs alleged that the Balti-
more public housing system, which was established in the 1930s "as
an officially segregated program," J.A. 20, had yet to be desegregated.
The Plaintiffs contended that the defendants assigned white public
housing applicants to "two formerly de jure segregated `white hous-
ing' projects that remain predominantly white," J.A. 21, while black
applicants were assigned to "the formerly de jure segregated `Negro
housing' projects [that] remain single race black projects." J.A. 21.
The complaint also alleged that many of the original"Negro housing"
projects were slated for demolition and that "virtually all the sites
under development for replacement housing are located in minority
areas and/or in areas where there are already large concentrations of
low-income public housing." J.A. 21. The Plaintiffs alleged that
unless the court intervened, the defendants would"rebuild segregation
for generations of public housing families to come" and would
"squander a rare opportunity to right a wrong of historic dimensions."
J.A. 22.

Negotiations between the parties following the lawsuit resulted in
an agreement formalized in the Consent Decree. The stated purposes
of the Consent Decree include "provid[ing] for the redevelopment of
the housing units which have been or will be demolished . . . [and]
provid[ing] enhanced desegregative housing opportunities for resi-
dents of Baltimore City public housing." J.A. 778. To that end, Sec-
tion XII of the Consent Decree provides that, until the defendants'
obligations under the Consent Decree have been satisfied, "the Local
Defendants will not seek public housing funds from HUD for public
housing construction or acquisition with rehabilitation in Impacted
Areas, and will not seek and engage in public housing construction

                    3
or acquisition with rehabilitation with State [Partnership Rental Hous-
ing program] funds in Impacted Areas." J.A. 835.

The Consent Decree defines "Impacted Areas" as those areas other
than "Non-impacted Areas," and defines non-impacted areas by cen-
sus tract numbers. Broadly speaking, impacted areas are areas with
high concentrations of public or low-income housing or with high
minority populations. Thus, the effect of Section XII of the Consent
Decree is to require that new public housing financed with public
funds be located in areas without high concentrations of minority resi-
dents or public housing. At issue in this case are the Local Defen-
dants' current plans for Hollander Ridge and Cherry Hill, public
housing developments located in impacted areas.

Built in the mid 1970s, Hollander Ridge is a 1,000-unit public
housing development located on a 60-acre parcel of land on the east-
ern edge of Baltimore City. The site is cut off from the rest of the city
by Interstate 95, and only one road provides access to the site. Hol-
lander Ridge abuts the predominately white residential neighborhood
of Rosedale. However, the relationship between Hollander Ridge and
Rosedale residents has been so strained that, at the time of the hear-
ing, the city was replacing a chain link fence with a wrought iron
fence to completely surround Hollander Ridge, save for the lone
entrance at the end of Hollander Ridge farthest away from Rosedale.
The balance of the area surrounding Hollander Ridge is devoted to
commercial and light industrial uses.

Hollander Ridge contains 522 family housing units located in 79
low-rise structures and 478 units of housing for the elderly located in
a 19-story high-rise building. By the time the Consent Decree was
entered into, the lack of regular maintenance and repair work had left
Hollander Ridge in a shameful state of disrepair. When tenants moved
out, routine repairs were not made and the units were generally
allowed to remain vacant. The steeply-sloped topography of the site
led to severe erosion problems, causing sanitary sewer lines to buckle
and break, and exposing underground power lines. Many of the low-
rise units were in need of substantial repair, including the replacement
of heating and plumbing systems and upgrades of the electrical sys-
tems. Similar problems existed in the high-rise building, where many
of the major systems needed to be replaced and the individual units

                     4
needed significant updating. The high-rise building also suffered from
structural problems that allowed water to leak into many units.

Shortly after entering into the Consent Decree, the Local Defen-
dants, at the urging of HUD, applied for funds to rehabilitate Hol-
lander Ridge under HUD's HOPE VI program. The Local
Defendants' original plan was to modernize Hollander Ridge by,
among other things, reducing the population density in the develop-
ment through demolition and reconfiguration of existing units, and
upgrading the housing units and amenities. This plan was consistent
with the terms of the Consent Decree.

As part of its review of the HOPE VI application, HUD commis-
sioned a viability assessment of Hollander Ridge conducted by Abt
Associates, Inc. The September 1996 assessment report (the "Abt
report") noted the poor physical condition of the development and
concluded that the costs to rehabilitate it in accordance with the Local
Defendants' plan were prohibitively high. The Abt report also ques-
tioned the viability and marketability of a modernized Hollander
Ridge. The report noted, among other things, that the isolation of the
site and the unavailability of nearby shopping and health-care facili-
ties made the location unattractive to those seeking family housing,
and even more problematic for elderly residents. The Abt report rec-
ommended demolishing Hollander Ridge and acquiring or building
replacement housing in other areas of the city, which would be a per-
missible use of HOPE VI funds.

After the Abt report was issued, HUD awarded the Local Defen-
dants $20,000,000 for Hollander Ridge, one-half of the amount
sought in the HOPE VI application. After an audit of HUD's 1996
grants, however, the Office of the Inspector General recommended
that HUD rescind the Hollander Ridge grant, finding fault with vari-
ous aspects of HUD's selection process. That recommendation appar-
ently delayed the funding of the Hollander Ridge grant.1

The Local Defendants spent the year following the award of the
HOPE VI grant attempting to finalize their plans for Hollander Ridge.
_________________________________________________________________
1 There is no indication in the record of the status of this recommenda-
tion at the time of the hearing before the district court.

                    5
They hired experts to determine how the site should be developed,
and they expressed their disagreement with the findings of the Abt
report. As late as November 1997, the Local Defendants assured
HUD that a revitalized Hollander Ridge would be a viable site for
family public housing.

However, around December 1997, in the wake of continued public
opposition to the Hollander Ridge plan, the Local Defendants devised
a completely new plan for Hollander Ridge. The new plan called for
the demolition of all existing structures to make way for a "senior vil-
lage," which would provide approximately 450 housing units for
senior citizens only, with enhanced security, on site health care, and
transportation services. The senior village was planned as a mixed-
income community providing housing for low and moderate income
seniors, including those who qualify for public housing.

The plans for the senior village at Hollander Ridge clearly violated
Section XII of the Consent Decree. The Local Defendants therefore
sought a modification of the Decree to allow them to seek federal
funds for the plan.

The facts surrounding Cherry Hill are somewhat similar. Cherry
Hill, which was built between 1942 and 1960, is a development of
more than 1,700 family public housing units located on a peninsula
in southern Baltimore City. In the early 1990s, the Local Defendants
developed a strategy for the long-term rehabilitation of Cherry Hill.
The plan originally allocated $25,000,000 in public housing funds to
renovate more than 350 units of family housing in Cherry Hill. As
with Hollander Ridge, the renovation of existing public housing units
was consistent with the terms of the Consent Decree.

However, less than a year after entering into the Consent Decree,
the Local Defendants presented a new plan for Cherry Hill that
included the demolition of some 250 units of family housing, the ren-
ovation of 100 units, and the construction of a new, elderly-only
building. Like the proposed senior village at Hollander Ridge, the
Cherry Hill facility would house mixed-income residents, and would
not be dedicated exclusively to public housing. The announcement of
the plan to construct senior housing at Cherry Hill came at approxi-
mately the same time as the abandonment of a private plan to con-

                    6
struct housing for the elderly in Cherry Hill. Because the revised
Cherry Hill plan also violated Section XII of the Consent Decree, the
Local Defendants sought an additional modification of the Consent
Decree to allow them to seek federal funds for the Cherry Hill project.

After conducting an evidentiary hearing, the district court believed
that substantial changes in circumstances had occurred at Hollander
Ridge and Cherry Hill since the entry of the Consent Decree. As to
Hollander Ridge, the court decided that only after the Consent Decree
did it become apparent that Hollander Ridge could not be modernized
to provide family public housing, but that the site could be used to
provide housing for the elderly. As to Cherry Hill, the district court
concluded that the abandonment of the private plan to build a senior
development occurred after the Consent Decree was entered into and
amounted to a significant change in circumstance. The district court
determined that these changes in circumstance rendered compliance
with the Consent Decree detrimental to the public interest. Conse-
quently, the district court amended the Consent Decree to allow the
Local Defendants to proceed with their plans for Hollander Ridge and
Cherry Hill.2

II.

On appeal, the Plaintiffs contend that the Local Defendants failed
to carry their burden of demonstrating that the Consent Decree should
be modified. We review a district court's decision to modify a consent
_________________________________________________________________
2 The district court noted that the Local Defendants were not seeking
a modification that would, in and of itself, allow them to build the Hol-
lander Ridge and Cherry Hill projects. Instead, the Local Defendants
were seeking permission only to apply for federal funds for the planned
construction. This is a distinction without a difference. As the district
court noted, if federal funds were awarded, then the construction would
proceed. Moreover, while Section XII of the Consent Decree prohibits
the use of public housing funds for the construction or acquisition of
housing in impacted areas, it also prohibits the Local Defendants from
seeking federal funds for the construction or acquisition of housing in
impacted areas. Thus, the Local Defendants' modification request was no
less inconsistent with the terms of the Consent Decree than a request to
allow construction to begin.

                    7
decree for abuse of discretion. See Small v. Hunt, 

, 796
(4th Cir. 1996); Plyler v. Evatt, 

, 1324 (4th Cir. 1991).

Under Rule 60(b)(5) of the Federal Rules of Civil Procedure, "a
district court may modify a judgment if it is no longer equitable that
the judgment should have prospective application. In exercise of that
power, consent decrees . . . may be modified in appropriate cases on
the basis of material changes in operative law or facts." Plyler, 924
F.2d at 1324 (citation and internal quotation marks omitted). In cases
such as this, involving institutional reform litigation, "the unique
nature and demands of [such] litigation necessitate a more flexible
approach to modification than may be appropriate with respect to con-
sent decrees between private parties." Id. (internal quotation marks
omitted); see Rufo v. Inmates of Suffolk County , 

, 383
(1992) ("[A] district court should exercise flexibility in considering
requests for modification of an institutional reform consent decree
. . . ."). However, a consent decree will not be modified simply
because "it is no longer convenient to live with[its] terms." Rufo, 502
U.S. at 383.

To justify the modification of an institutional reform consent
decree, the party seeking the modification "bears the burden of estab-
lishing that a significant change in circumstances warrants revision of
the decree." Id. "If the movant cites significantly changed factual con-
ditions, it must additionally show that the changed conditions make
compliance with the consent decree `more onerous,' `unworkable,' or
`detrimental to the public interest.'" Small, 98 F.3d at 795 (quoting
Rufo, 502 U.S. at 384). A modification, however, should not ordinar-
ily be granted "where a party relies upon events that actually were
anticipated at the time it entered into a decree." Rufo, 502 U.S. at 385.

A. Hollander Ridge

The district court believed that the circumstances surrounding Hol-
lander Ridge had significantly changed because, after the Consent
Decree, the Local Defendants realized that Hollander Ridge could not
viably be rehabilitated to provide family housing, but that it could be
used to provide housing for the elderly. Contrary to the district court's
conclusion, however, the Local Defendants' post-Decree "discovery"
that Hollander Ridge could not be rehabilitated as family housing can-

                     8
not be considered a change of circumstance. The reasons that Hol-
lander Ridge could not be rehabilitated, including the need for
extensive repairs, the cost of those repairs, and the undesirability of
Hollander Ridge because of its isolation, all existed before the entry
of the Consent Decree. The only relevant post-Decree event was the
issuance of the Abt report, which did not itself render Hollander
Ridge unusable as a site for family pubic housing. Instead, the Abt
report merely expressed an opinion that the conditions at Hollander
Ridge made it unlikely that the Local Defendants' original modern-
ization plan would be economically viable, an opinion with which the
Local Defendants at first strongly disagreed. A modification of a con-
sent decree must be based on a change in facts , not a change in opin-
ion about the effect of unchanged facts. See Rufo, 502 U.S. at 384 ("A
party seeking modification of a consent decree may meet its initial
burden by showing . . . a significant change either in factual condi-
tions or in law." (emphasis added)). Thus, the Local Defendants'
changed opinion about the viability of Hollander Ridge as a site for
family public housing simply cannot amount to a change of circum-
stance.

The only remaining justification for the modification as found by
the district court, then, is the Local Defendants' present belief that the
Hollander Ridge site is a viable location for the senior village.
Although there is evidence in the record questioning the viability of
the senior village plan, we will assume for the purposes of this opin-
ion that it is in fact viable. However, the viability of the senior village
is really beside the point.

The Local Defendants knowingly and voluntarily entered into the
Consent Decree and agreed to Section XII, which provides that, until
the other obligations under the Decree have been satisfied, any new
construction of public housing built with public housing funds must
be located in a non-impacted area. The very presence of Section XII
makes it clear that the parties contemplated that new construction
would be required or desired during the life of the Consent Decree.
Given the allegations of the Plaintiffs' complaint--that HUD and the
Local Defendants were continuing the formerly de jure segregated
housing program through their tenant assignment and site selection
policies--Section XII obviously provides an important means of fur-
thering the Consent Decree's stated purpose of "provid[ing] enhanced

                     9
desegregative housing opportunities for residents of Baltimore City
public housing." J.A. 778. By prohibiting the use of public housing
funds for new public housing construction in impacted areas, Section
XII ensures that Baltimore City public housing residents will be inte-
grated throughout the city. Thus, the change of circumstance found by
the district court--the need or desire for new construction--is a cir-
cumstance contemplated and anticipated by the parties at the time
they entered into the Consent Decree. Indeed, the possibility that new
construction would be needed is the very circumstance to which Sec-
tion XII is specifically directed and the only circumstance that trig-
gers its application. That the proposed housing is for the elderly is of
no moment. Section XII prevents the Local Defendants from seeking
public funding for the construction of new public housing in any
impacted area until the other obligations under the Decree are satis-
fied; the provision does not limit its reach to the construction of fam-
ily public housing, nor does it exempt from its reach the construction
of public housing for the elderly.

As noted above, a consent decree ordinarily should not be modified
"where a party relies upon events that actually were anticipated at the
time it entered into a decree." Rufo, 502 U.S. at 385. To warrant a
modification based upon an anticipated change of circumstances, the
party seeking the modification must "satisfy a heavy burden to con-
vince a court that it agreed to the decree in good faith, made a reason-
able effort to comply with the decree, and should be relieved of the
undertaking under Rule 60(b)." Id. The district court rejected the
Plaintiffs' contention that any change in circumstance was anticipated
at the time of the Consent Decree. The court, therefore, did not ana-
lyze the Local Defendants' modification request under the proper
standard, which clearly amounts to an abuse of discretion. See, e.g.,
Brodziak v. Runyon, 

, 196 (4th Cir. 1998) ("[A] court by
definition abuses its discretion when it makes an error of law." (inter-
nal quotation marks omitted)).

Although the district court did not analyze the case under the cor-
rect standard, a remand is not required. The district court held an evi-
dentiary hearing on the modification request, and we have before us
a fully-developed record. A review of the record reveals no evidence
that the Local Defendants made a reasonable effort to comply with
the requirements of Section XII of the Consent Decree, as required by

                    10
Rufo. For example, there is no evidence that the Local Defendants
investigated funding the project through the use of monies not prohib-
ited by Section XII or that they evaluated whether the senior village
could be located in a non-impacted area.

While a flexible approach is required when determining whether a
given set of circumstances warrants modification of an institutional
reform consent decree, that flexibility cannot be used to relieve the
moving party of its burden to establish that modification is warranted.
See Rufo, 502 U.S. at 383 ("Although we hold that a district court
should exercise flexibility in considering requests for modification of
an institutional reform consent decree, it does not follow that a modi-
fication will be warranted in all circumstances."). The changed cir-
cumstances upon which the Local Defendants based their requested
modification were contemplated at the time they entered into the Con-
sent Decree, and the Local Defendants failed to establish that they
made a reasonable effort to comply with Section XII of the Decree.
Under Rufo, therefore, the Local Defendants failed to carry their bur-
den of establishing their entitlement to a modification of the Consent
Decree as to Hollander Ridge.

B. Cherry Hill

For largely the same reasons, the Local Defendants have likewise
failed to establish that the Consent Decree should be modified to
allow the Cherry Hill project to proceed.

The change of circumstance found sufficient by the district court--
abandonment of the planned private senior housing--amounts to no
more than a conclusion that the Local Defendants needed or wanted
to build new housing in Cherry Hill. As previously discussed, the
need in the future for construction of new housing was a circumstance
contemplated at the time of the Consent Decree. And again, as with
Hollander Ridge, the evidence in the record establishes that the Local
Defendants did not make any reasonable efforts to comply with Sec-
tion XII of the Consent Decree before seeking its modification.

The evidence at the hearing established that alternate sources of
funding for the Cherry Hill project are available, sources that could
be used for new construction consistent with the terms of Section XII.

                    11
The Local Defendants did not apply for or apparently even consider
using those alternate funding sources, nor is there any evidence that
the Local Defendants considered locating the proposed project in a
non-impacted area. Because the Local Defendants presented no evi-
dence that they made reasonable efforts to comply with Section XII
with regard to Cherry Hill, they are not entitled to a modification of
the Decree under Rufo.3

III.

In 1996, faced with claims that they were perpetuating the effects
of Baltimore's former official policy of segregation in public housing,
the Local Defendants went before the district court asking for
approval of an agreement that resolved a portion of the claims raised
by the Plaintiffs. The district court approved the agreement, thus giv-
ing the agreement the status of an official court order. Yet only
months after the court's approval of the agreement through the entry
of the Consent Decree, the Local Defendants began considering
development plans that were in conflict with the terms of the Consent
Decree, terms that the Local Defendants presumably believed were in
the public's interest when they agreed to the settlement. And less than
two years after agreeing to those terms, the Local Defendants were
back before the district court asking for relief from the Decree that
they had so recently asked be approved. While Rufo teaches that con-
sent decrees arising from institutional reform litigation are not written
in stone and can be modified upon a proper showing, the fact that
such a consent decree can be modified does not give the parties to the
decree a license to ignore their obligations under the decree. As the
Supreme Court noted in Rufo, a consent decree should not be modi-
fied simply because "it is no longer convenient to live with [its]
terms." Rufo, 502 U.S. at 383.
_________________________________________________________________

3 The Plaintiffs contend that the abandonment of the private project
occurred before the Consent Decree was entered into and that there is no
evidence in the record that the abandonment of the private project actu-
ally motivated the Local Defendants' decision to revise their plans for
Cherry Hill. Because we conclude that Local Defendants failed to estab-
lish that a modification is appropriate, we need not address these factual
disputes.

                    12
We fully recognize that there is public support for the Local Defen-
dants' plans for Hollander Ridge and Cherry Hill, particularly for the
Cherry Hill project. And we also recognize that the planned projects
would serve the needs of some residents of Baltimore's public hous-
ing system. Those facts, however, are insufficient to allow the Local
Defendants to modify the Consent Decree. By prohibiting the use of
public funds for new public housing construction in impacted areas,
Section XII of the Consent Decree reflects a rational, negotiated-for
allocation of scarce public housing funds that serves the needs of
other residents of Baltimore's public housing system. The Local
Defendants sought relief from Section XII based on changes in cir-
cumstances that were contemplated at the time of the Decree and that
were the only circumstances that would trigger its application. There-
fore, under Rufo, the Consent Decree could be modified only if the
Local Defendants satisfied the "heavy burden" of establishing that
they "made a reasonable effort to comply with the decree." Rufo, 502
U.S. at 385. Because the Local Defendants did not establish that they
made reasonable efforts to comply with Section XII before seeking its
modification, they failed to carry their burden. The district court,
therefore, abused its discretion by granting the motion to modify the
Consent Decree. Accordingly, the district court's order modifying the
Consent Decree is hereby reversed.4

REVERSED
_________________________________________________________________
4 Our disposition of the case makes it unnecessary for us to consider the
other arguments raised by the Plaintiffs, including whether the district
court improperly reduced the Local Defendants' burden to establish the
need for the modifications.

                    13