No. 96-1937

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1996

JACKSON SQUARE ASSOCIATES, PETITIONER

v.

UNITED STATES DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF FOR THE RESPONDENTS IN OPPOSITION

WALTER DELLINGER
Acting Solicitor General

FRANK W. HUNGER
Assistant Attorney General

MICHAEL JAY SINGER
JOAN C. GOODRICH

Attorneys

Department of Justice
Washington, D.C. 20530-0001
(202)514-2217

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QUESTION PRESENTED

    Whether the Department of Housing and Urban
Development correctly determined that petitioner
was ineligible for a special rent adjustment of six
percent over the automatic annual adjustment factor
contained in its "housing assistance payments" con-
tract.

(1)

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TABLE OF CONTENTS

Opinions below . . . . 1 
Jurisdiction . . . .  1
Statement . . . . 2 
Argument . . . . 6
Conclusion . . . . 9

TABLE OF AUTHORITIES

Cases:

Camp v. Pitts, 411 US. 138(1973)  . . . . 7
Cisneros v. Alpine Ridge Group, 508 U.S.10
(1993) . . . . 3, 8
Lehman v. Nakshian, 453 U.S. 156(1981)  . . . . 7
Youakim v. Miller, 425 U. S. 231 (1976) . . . . 7
Constitution, statutes, and regulations:
U. S. Const. Amend. VII . . . . 6
Administrative Procedure Act, 5 U.S.C. 701
et seq . . . . 5
  5 U.S.C. 702 . . . . 7
Supplemental Appropriations Act, 1984, Pub. L.
No.98-181,  209,97 Stat. 1183 . . . . 2
42 U.S.C. 1404a . . . . 7
42 U.S.C. 1437f  . . . . 2
42 U.S.C. 1437f(c) . . . . 2
24 C.F.R .880. 609(b) (1980)  . . . . 7
24 C.F.R. (1979):
  Section 88O.110(C)  . . . . 7
  Section 880.201 et seq . . . . 2

(III)

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QUESTION PRESENTED

    Whether the Department of Housing and Urban
Development correctly determined that petitioner
was ineligible for a special rent adjustment of six
percent over the automatic annual adjustment factor
contained in its "housing assistance payments" con-
tract.

(1)

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In the Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-1937

JACKSON SQUARE ASSOCIATES, PETITIONER

v.

UNITED STATES DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

    The opinion of the court of appeals (Pet. App. A1-
A4) is unpublished, but the decision is noted at 108
F.3d 329 (Table). The opinions of the district court
(Pet. App. A8-A51) are reported at 927 F. Supp. 75,869
F. Supp. 133, and 797 l?. Supp. 242.

JURISDICTION

    The judgment of the court of appeals was entered
on March 6, 1997. The petition for a writ of certiorari
was filed on June 4, 1997. The jurisdiction of this
Court is invoked under 28 U.S.C. 1254(1).

(1)

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2

STATEMENT

    1. Pursuant to 42 U.S.C. 1437f, the United States
Department of Housing and Urban Development
(HUD) helps low-income families obtain adequate
housing. Under the federal program at issue in this
case, owners of newly constructed housing could
obtain mortgages insured by HUD and receive rent
assistance payments from the government in return
for renting to low-income tenants; each tenant would
make rent payments based upon his or her income,
and HUD would pay the owner the difference between
the tenant's payment and the actual rent. 1 A land-
lord wishing to participate in the program would
enter into a "housing assistance payments" (HAP)
contract with HUD. See 42 U.S.C. 1437f(c). Under
HUD regulations, each HAP contract was to set
forth, among other matters, the amount of rent
assistance payments that HUD would make to the
landlord, the actual rent for each unit, and the method
by which the rent would be adjusted over time. See 24
C.F.R. 880.201 et seq. (1979).
    2. In 1979, HUD entered into a HAP contract with
petitioner Jackson Square Associates, which owned a
160-unit low-income housing development in Amherst,
New York. Pet. App. A9-A10. The contract set forth
the following rents:
  40 one-bedroom units,  $307 per month
  60 two-bedroom units, $341 per month

___________________(footnotes)

    1 In 1983, Congress repealed the new-housing construction
program.  See Supplemental Appropriations Act, 1984, Pub. L.
No. 98-181,  209, 97 Stat. 1183. That repeal, however, did not
affect HUD's obligation to pay rent allowances under existing
contracts.

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3

50 three-bedroom units, $390 per month
10 four-bedroom units, $427 per month

Id. at  Al0.  The contract specified two ways in which
the prescribed rent could be adjusted. One method
provided for increases based on an "Automatic Annual
Adjustment Factor" (AAAF) developed by HUD to
reflect general economic conditions. See id. at Al 1;
see generally Cisneros v. Alpine Ridge Group, 508
U.S. 10 (1993). On each anniversary date of the HAP
contract, the rents specified in the contract were to
be automatically adjusted using the AAAF most
recently published in the Federal Register. Pet. App.
All. The other method allowed for a special addi-
tional adjustment to reflect increases in actual and
necessary expenses incurred by the owner in operat-
ing and maintaining the housing units. Id. at A14.
The owner had the burden of proving that substantial
general increases in real property taxes, utility
rates, and the like caused "increases in the owner's
operating costs which are not adequately compen-
sated for by automatic annual adjustments," Ibid.
(emphasis omitted in part).
    In June 1980, petitioner told HUD that it had
substantially underestimated the utility expenses for
the common areas of the housing units. Pet. App.
A10. It submitted the actual utility costs for the
previous 12 months-$64,297.74-and requested a rent
increase.2  Ibid.  On July 17, 1980, the Buffalo Office

___________________(footnotes)

    2  Previously, HUD had estimated that the utility costs for
the common areas of the housing units would be about $69,000
per year. Pet. App. A10. Petitioner had disagreed with that
estimate and had certified that the costs would be only $19,200
per year. Ibid. HUD had adopted petitioner's low estimate
because petitioner had represented that it was based on an
engineering study. Ibid.

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4

prepared an internal proposal addressing petitioner's
utility costs. Id. at All. It proposed both a rent
increase of $24 per apartment and a higher tenants'
utility allowance. Ibid. In making those calculations,
however, the Buffalo Office did not take into account
the fact that, under the AAAF, petitioner had already
received an automatic 4.8% rent increase for 1980. Id.
at A12 n.2.
In an internal memorandum dated August 29, 1980,
HUD's Assistant Secretary for Housing adopted the
Buffalo Office's proposal and approved the following
new rents:
  40 one-bedroom units, $331 per month
  60 two-bedroom units, $365 per month
  50 three-bedroom units, $414 per month
  10 four-bedroom units, $451 per month
Pet. App. A12. That $24 per unit increase entitled
petitioner to a six percent overall increase in rents.
    3. In October 1980, the Buffalo Office informed
petitioner of the new schedule approved by the Assis-
tant Secretary. Pet. App. A13. The final figures were
the same as in the Assistant Secretary's memoran-
dum (which petitioner did not see until December
1980), but the Buffalo Office specified that the rent
increase incorporated  the  4.8% increase based on the
AAAF. Id. at A13, A32. Petitioner claimed that it
was entitled to an additional six percent increase on
top of the AAAF, for a total increase of 10.8%. Id. at
A16, A32. In July 1983, the Buffalo Office denied
that claim on the ground that, despite petitioner's
argument to the contrary, the six percent increase
approved in October 1980 was *'consistent with [the
Assistant Secretary's] memo of August 29, 1980." Id.
at A32.

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5

In 1988, petitioner again filed a claim with the
Buffalo Office for the difference in past and future
payments between what it received under the October
1980 increases and what it would have received if
it had been granted a 10.8% increase. Pet. App. A32-
A33. The Buffalo Office denied the claim, and the
Secretary of HUD denied petitioner's administrative
appeal. Id. at A33.
    4. Petitioner next filed suit in district court,
claiming breach of contract and violations of the
Administrative Procedure Act, 5 U.S.C. 701 et seq.
(APA). See Pet. App. A30-A31. In 1994, the court
granted summary judgment in favor of HUD on the
breach-of-contract claim. Id. at A33-A37. In 1995,
however, the court remanded the case to HUD for
further development of the portions of the record
relevant to petitioner's  APA  claim. See id. at A18.
    In May 1996, the district court granted summary
judgment to HUD on that claim as well. The court
first rejected petitioner's argument that the Buffalo
Office was without authority to treat the 4.8% AAAF
for 1980 as incorporated within the $24 per unit
rent increase approved by the Secretary. The court
observed that the final agency action in this case was
the Buffalo Office's July 1983 rent determination, not
(as petitioner had argued) the Assistant Secretary's
internal memorandum of August 29, 1980.  Pet. App.
A18-A22. Nothing in the governing statute or regu-
lations, the court added, requires the Assistant
Secretary himself to make final rent determinations;
although the Assistant Secretary must approve de-
cisions to set rents above 110% (up to a maximum of
120%) of the "fair market" rent, HUD's regional
offices retain "authority to depart from the [Secre-
tary's] approved maximum levels." Id. at A22. More-

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6

over, the court noted, "the language of the Assistant
Secretary himself [in the internal memorandum]
seems to contemplate that his approval was just one
interim part of the HUD decisionmaking process."
Ibid.  The court also determined that it was not arbitrary
or capricious for HUD to approve a rent adjustment
of only 1.2% over the AAAF.  Pet. App. A22-A23.
Because the plain language of the contract "states
that the AAAF must be calculated into any requested
special additional adjustments," the court concluded
that HUD's decision was reasonable. Id. at A23. The
court also rejected petitioner's additional allegation
that bias against petitioner's president had affected
the agency's decision; that decision, the court rea-
soned, "was not only proper, but was required by
* * * the HAP contract," and therefore cannot be
said to have resulted from any alleged bias. Id. at A24.
5. In a summary order, the court of appeals affirm-
ed the district court's judgment "for substantially the
reasons stated by the district court." Pet. App. A3.

ARGUMENT

    The unpublished summary decision of the court of
appeals was correct, and it does not conflict with any
decision of this Court or of another court of appeals.
Further review is therefore not warranted.
    1. Petitioner first argues (Pet. 7-9) that the
district court violated its right to a jury trial under
the Seventh Amendment. Petitioner did not raise
that claim either in the district court or in the court
of appeals, and those courts did not address it; the
claim is therefore not properly presented for this
Court's review. See, e.g., Youakim v. Miller, 425
U.S. 231, 234 (1976) (per curiam). In any event, the

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7

claim would be without merit even if it were properly
presented. Under principles of sovereign immunity,
"[i]t has long been settled that the Seventh Amend-
ment right to trial by jury does not apply in
actions against the Federal Government," Lehman v.
Nakshian, 453 U.S. 156, 160 (1981), unless "Congress
[has] clearly and unequivocally departed from its
usual practice * * * and granted a right to trial by
jury," id. at 162. Congress granted no such right
here. See 5 U.S.C. 702  42 U.S.C. 1404a.
    2. Petitioner next contends that the Buffalo Office
improperly "overruled" the Assistant Secretary's
August 1980 internal memorandum approving a rent
adjustment of $24 per unit. Pet. 10-14. That claim
is also without merit. The Buffalo Office in fact
implemented the exact rent levels approved by the
Assistant Secretary, and that Office's decision to
treat those rent levels as incorporating the
1980 AAAF was a proper means of reconciling the
Assistant Secretary's internal memorandum with the
terms of the HAP contract, see p. 3, supra, and
with HUD regulations, see 24 C.F.R. 880.110(C) (1979)
(special rent adjustments may be granted only to
extent that owner's operating costs are not ade-
quately covered by automatic annual adjustments); 24
C.F.R. 880.609(b) (1980) (same)?

___________________(footnotes)

    3 Despite petitioner's contrary suggestion (see Pet. 10),
Camp v. Pitts, 411 U.S. 138 (1973), has no relevance here. In
Pitts, this Court held that, in reviewing agency action, a court
may take into account an agency's "contemporaneous
explanation" of its decision.  See id. at 139, 143.  The
"explanation" that petitioner cites here, however, was not
"contemporaneous" with the agency's decision, but appears in-
stead in a deposition (of the Assistant Secretary) taken many
years after that decision. See Pet. App. A71 (noting that "I

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8

    3. Relying on Cisneros v. Alpine Ridge Group,
508 U.S. 10 (1993), petitioner also argues that, to
justify a "cancellation" of an AAAF benefit, HUD
must first conduct a "comparability study" measur-
ing HUD-assisted rents against unassisted rents in
the private market. Pet. 15. That contention is also
unavailing. HUD did not "cancel" an AAAF benefit.
Instead, it granted an AAAF increase and took that
increase into account in determining how much of
an additional rent increase petitioner needed to cover
its operating costs.  Nothing in Alpine Ridge
suggests that, before taking that action, HUD was
required to conduct a "comparability study."
    4. Finally, there is no merit to petitioner's con-
tention (Pet; 16-17) that bias tainted HUD's decision.
As the district court determined (see Pet. App. A24),
the agency's decision was in fact "required by * * *
the HAP contract," and therefore "any alleged bias on
the part of [HUD] is irrelevant to this action." Apart
from its erroneous claim that HUD's "decision was
substantively incorrect, petitioner offers no basis for
contesting that determination.

___________________(footnotes)

have no other independent knowledge and no area of
recollection except these documents"),  Moreover, although
the Assistant Secretary testified in that deposition that he had
considered his internal memorandum the final action of his
office and had anticipated that HUD's staff would follow it, see
id. at A70-A72, that does not mean that he intended his memo-
randum to preclude the staff from- taking into account either
the terms of the contract at issue here or the regulations
governing HAP contracts generally.

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9

CONCLUSION

    The petition for a writ of certiorari should be
denied.

Respectfully submitted.

WALTER DELLINGER
Acting Solicitor General

FRANK W. HUNGER
Assistant Attorney General

MICHAEL JAY SINGER
JOAN C. GOODRICH
Attorneys

AUGUST 1997