ORDER DENYING DEFENDANTS' MOTION FOR RESTITUTION
RICHARD P. MATSCH, Senior District Judge.
In Defendants' Motion for Restitution filed May 14, 2018,1 the defendants ("HUD") ask this Court to amend the judgments entered in favor of the Tribes to those amounts that can be considered specific relief from the 2008 grant in compliance with the mandate from the United States Court of Appeals for the Tenth Circuit to the extent that the appellate court reversed this Court's rulings that were the bases for those judgments. See Modoc Lassen Indian Housing Authority v. HUD, 881 F.3d 1181 (10th Cir. 2017).
The Tenth Circuit panel issued three opinions. All three judges agreed that the agency did not recapture funds pursuant to a statute or regulation that imposed a hearing requirement, reversing this Court's holding to the contrary. They disagreed about the agency's authority to recapture the funds by administrative offset. Judge Moritz and Judge Matheson agreed that neither the statute nor the regulations authorized HUD to recoup the overpayments by offset. They also agreed than no common law precedent gave HUD such authority.
There was disagreement in characterizing this Court's authority to enter the judgments for recovery of funds. Judge Moritz and Judge Bacharach ruled that these awards were money damages which this Court had no jurisdiction to order because the APA, 5 U.S.C. § 702, does not expressly waive sovereign immunity from such relief. Judge Matheson disagreed, opining that the Tribes were seeking specific relief by enforcing NAHASDA's mandate, making the waiver of sovereign immunity in the APA applicable. He added that payment of the funds may be barred by the Appropriations Clause because HUD can disburse funds only according to the terms of the appropriations it receives from Congress. Since this Court did not determine whether HUD has appropriations available to satisfy the Tribes he suggested remand to address the appropriations issue. Judge Moritz, writing for the majority, said remand was required for "factual findings regarding whether, at the time of the district court's order [to pay the judgments], HUD had the relevant funds at its disposal." 881 F.3d at 1198-99.
In a footnote Judge Moritz informed that in post-opinion briefing the parties said that HUD had already complied with the repayment orders. 881 F.3d at 1186-87, n.3. That was accepted but the only comment was that the Tribes never suggested that this compliance implicates HUD's right to appeal. In another footnote Judge Moritz wrote that HUD's argument that it didn't act arbitrarily and capriciously in concluding that the Tribes misreported the number of eligible housing units in their possession was not addressed because HUD lacked authority to recapture the alleged overpayments. 881 F.3d at 1187, n. 4.
This Court did in fact find that HUD's actions were arbitrary and capricious within the meaning of the APA and that ruling has not been reversed.
There is no basis for inferring or implying any view from these appellate judges on the question now before this Court — whether equity favors either the Tribes or HUD on the question of restoration of HUD's payments of the judgments during the appeal. There is agreement that this question of restitution is to be decided under the principles of equitable jurisprudence.
To apply those principles it is necessary to review this litigation from inception.
The dispute giving rise to this protracted litigation began in 2001 when HUD's Office of Inspector General (OIG) did a nationwide audit of the NAHASDA program implementation.2 That statute enacted in 1996, effective October 1, 1997, changed the manner in which HUD had been providing funds to Indian housing authorities through programs under the Housing Act of 1937 through Annual Contributions Contracts. In sum the United States Congress provided annual appropriations to be allocated to Tribes under a formula which relied on the Tribes' submission of information regarding (1) Formula Current Assisted Stock ("FCAS") and (2) need.
The audit report contained a conclusion that HUD had not properly allocated funds because grant awards had been based on FCAS counts that included units that ought not qualify for assistance. Particularly, the OIG faulted HUD for failing to enforce compliance with 24 C.F.R. § 1000.318 by accepting inclusion of units that should no longer be considered owned or operated by the Tribes. Emphasis was on units that were under rent-to-buy contracts whereby the occupant could obtain conveyance of title after paying for 25 years.
In September 2001, HUD notified Fort Peck Housing Authority ("Fort Peck" or "FPHA") that it may have received grant overpayments because 238 homeownership units had been included in its FCAS for years 1998, 1999, 2000, and 2001. Letters were exchanged resulting in HUD's claim that Fort Peck had received overfunding for fiscal years 1998 through 2002 for a total of $1,767,276.00. Fort Peck paid $513,354.00 in 2002.
On October 3, 2002, counsel for Fort Peck challenged the claim of overpayment and requested a hearing. By letter of January 3, 2003 the Deputy Assistant Secretary for Native American Programs advised counsel that the procedures being followed by regulation do not provide for a hearing. After a site visit, HUD reduced the amount claimed to be owed to $786,996.00. The position taken by HUD was that after 25 years, the rent-to-own units should be conveyed and refused to allow Fort Peck to retain units on its inventory without showing good cause.
After written protests from Fort Peck's counsel, the Assistant Secretary for Public and Indian Housing issued a letter denying counsel's arguments. That letter was taken to be a final agency decision for which Fort Peck sought judicial review under the APA by filing Civil Action No. 05-cv-00018-RPM.
By Memorandum Opinion and Order on May 25, 2006, this Court held that the regulation 1000.318 under which HUD acted conflicted with the statute, 25 U.S. § 4152(b)(1), and was therefore invalid. HUD's calculation of the Tribe's FACS was criticized in the following language:
Even if the statute and the regulation could be reconciled, HUD's interpretation of § 1000.318 results in paternalistic oversight by that agency, contrary to the principles of Indian self-determination and self-governance that are key components of NAHASDA. See 25 U.S.C. § 4101(7). As set forth above, HUD interprets § 1000.318 (a)(1) and (2) to mean that a tribe is allowed to count homeownership units in its FCAS if the tribe still owns and operates the units, and so long as the tribe (1) is conveying units as soon as practicable after they become eligible for conveyance, and (2) is strictly enforcing its agreements with homebuyers. As discussed above, the plaintiff's A & O Policy sets forth collection procedures and procedures applicable to conveyance of homeownership units. HUD should defer to the FPHA's judgment, within the parameters of that Policy, as to when eviction or conveyance is appropriate. Instead, HUD itself determines whether the tribe has conveyed such units "as soon as practicable," and whether the tribe is strictly enforcing its MHOAs. HUD's exercise of authority over this determination interferes with tribal management of tribal affairs. Notably, in response to the OIG audit report, the Deputy Assistant Secretary for Native American Programs protested the OIG's recommendation that HUD take a more active oversight role, explaining that the administration of the Indian Block Grant program should be accomplished "in a manner that recognizes the right of Indian self-determination and tribal self-governance."
(Mem. Op. & Order, May 25, 2006, Doc. 28, Civil Action No. 05-cv-00018-RPM).
This Court's May 25, 2006 opinion and order did not address the additional claims of failure to observe procedural due process and requirements for a hearing and lack of authority to recapture funds already spent on affordable housing activities.
HUD appealed and almost four years later the Tenth Circuit Court of Appeals by an Order and Judgment entered on February 19, 2010, reversed the statutory interpretation that the number of units owned in 1997 was a floor for future funding and held that 24 C.F.R. § 1000.318 was valid. Fort Peck Housing Authority v. HUD, 367 Fed. App'x 884 (10th Cir. 2010) (unpublished). The appellate court did not address HUD's elimination of units which in HUD's view should have been conveyed and failed to consider that issue as requested by Fort Peck's Petition for Rehearing, denied without comment.
In 2008 — while the Fort Peck appeal was pending — Congress amended NAHASDA, making changes to the statutory provisions at issue in the Fort Peck litigation. See Native American Housing Assistance and Self-Determination Reauthorization Act of 2008, Pub.L. No. 110-411, 122 Stat. 4319 (2008). The amendments stated that they did not apply to "any claim arising from a formula current assisted stock calculation or count involving an Indian housing block grant allocation for any fiscal year through fiscal year 2008, if a civil action relating to the claim is filed by not later than 45 days after October 14, 2008." 25 U.S.C. § 4152(b)(1)(E). Before that deadline, other tribes filed civil actions, challenging HUD's recapture of grant funds that HUD had previously awarded to them.
After the Tenth Circuit's 2010 order and judgment, which found 24 C.F.R. § 1000.318 to be valid, the plaintiff Tribes continued to claim that HUD had misinterpreted the regulation and applied it improperly, had illegally recaptured grant funds already awarded, and had violated the statutory and regulatory scheme for resolution of such disputes.
After remand in the Fort Peck action, this court ordered coordinated briefing in the related cases to address common legal issues. A first round of briefs addressed, among other issues, the propriety of HUD's practice of categorically eliminating from a Tribe's FCAS count any rent-to-own unit for which the term of the rent-to-own period had expired.
In a Memorandum Opinion and Order dated August 31, 2012, this Court held that HUD had acted arbitrarily and capriciously when it determined that the plaintiff Tribes should not have included in their FCAS units that they still owned and operated after expiration of the term provided for payment in the rent-to-own contracts without regard for the tribes' reasons for not conveying the units. This Court also held that HUD violated NAHASDA's regulatory scheme by failing to provide the Tribes with an opportunity for a hearing before HUD recaptured the purported grant overpayments by administrative offset.3
A second round of consolidated briefing addressed issues regarding Plaintiffs' requested remedies for HUD's illegal actions. In a Memorandum Opinion dated March 7, 2014, the Court held that HUD lacked inherent authority to recoup grant overpayments from Plaintiffs through administrative action. This Court rejected HUD's argument that this Court lacked authority under the APA to order HUD to restore to Plaintiffs the grant funds that HUD had recaptured illegally. The Court ordered HUD to restore to the plaintiff Tribes all funds that were illegally recaptured for fiscal years through and including FY 2008 (subject to the 6-year limitations period provided by 28 U.S.C. § 2401(a)); enjoined HUD from threatening recapture or acting upon any threatened recapture; and ordered Plaintiffs to provide proposed judgments.4
In 2014 and 2015, judgments were entered in each of the related cases.
HUD paid the judgments and appealed without requesting a stay pending appeal. The holdings of the Tenth Circuit's 2017 opinion, drawn from the separate opinions of the panel members, have been described above.5
After remand, HUD now seeks orders requiring the plaintiff Tribes to restore to HUD the amounts that they received on account of the judgments. HUD, however, does not seek restitution of the $6,165,842 it paid to the Navajo Tribe. HUD acknowledges that its payment of that judgment was "specific relief" authorized under the APA and not a "money judgment" because Navajo's judgment correlates to a 2008 recapture, and HUD had 2008 grant funds available when it paid the judgment in favor of the Navajo Tribe. (See HUD Mot. for Restitution and Report and Decl. of Andrea L. Sparks-Ibanga, attached as exhibits to HUD's motion.) Similarly, HUD's requests for restitution do not include certain amounts attributable to recaptures of 2008 grant funds from three of the seven plaintiffs in Case No. 08-cv-2584 (Spirit Lake; SWA Corporation; and the Winnebago Tribe). HUD says that for all other relevant fiscal years, it had no funds available from those years' appropriations when the judgments were paid.6 Plaintiffs (with the exception of the Navajo Tribe) question HUD's characterizations of the funds and its representations about the availability of funds and moved for an order compelling HUD to produce additional information. Because the Court finds that equity does not require Plaintiffs to restore to HUD any of the judgment amounts, the Court does not need to address Plaintiff's motion for additional information. The equitable issue of restitution can be determined without regard to whether particular funds that HUD elected to use to pay the judgments correlated to the fiscal years of the disputed recaptures. That is so because HUD comes to this Court with unclean hands.
As stated in this Court's earlier opinions the Tribes had no opportunity to challenge HUD's determinations by presenting evidence that there were good and sufficient reasons for keeping title to the rent-to-own units after 25 years. HUD ignored the reality that the occupants of those units had enforceable contract rights. HUD also ignored the public policy in NAHASDA that the Tribes should be free to determine how the grant funds are expended in the field. The public policy of the United States is to recognize tribal authority in tribal matters and that surely includes providing for the welfare of their people on tribal lands.
HUD never accused the plaintiff Tribes of fraudulently or intentionally making false reports of their FCAS inventories. There is no suggestion that the plaintiff Tribes ever misused grant funds that HUD awarded to them. Rather, HUD rationalized the illegal recaptures as actions taken to correct the agency's own errors.
From what sources would the plaintiff Tribes find the funds for repayment? There is no suggestion that the funds received from payment of the judgments have not been used for purposes relating to the needs for housing assistance to their members. Are the Tribes to use future grants for housing made by the formula to make repayment, thereby shorting the use of funds for meeting the housing needs of their people? That is the understanding apparent in the request that if repayment is ordered the Tribes should be given the opportunity to set a repayment period of 6 to 12 years depending on the date of original seizure.
It is recognized that when the judgments were paid HUD explicitly reserved the right to recover if the results of the appeal invalidated the judgments. Should the Tribes have then failed to use those funds for purposes of the housing needs and perhaps this litigation? HUD expects to use repayments to pay Tribes not involved in this litigation for their needs. That would be a windfall to them because the established law in these cases is that the withholdings of funds from these Tribes in the years that it was done was arbitrary, capricious and contrary to law depriving people from help with their housing needs. After HUD effected the illegal recaptures, it redistributed the recaptured funds, and equity does not favor allowing HUD to recover the judgment amounts for the purpose of making another redistribution.
When asked at the hearing why the payments of the judgments were made during the appeal process, counsel for HUD said, "I think they thought it was, you know, the equitable thing to do." He was right. The equitable thing for the Court to do now is to deny the motion for restitution.
Accordingly, factual questions about whether HUD had relevant funds at its disposal when it was ordered to pay the judgments are moot.
Based on the foregoing, it is
ORDERED that the Defendants' motions for restitution in the above-captioned actions are DENIED.
