The follow ingpap ers hav e be en s ubm itted in conn ection with this m otion: (1) a Mem orand um 1 inS up po rto f D ef

en dant s’ Mo ti on

to D is m is s (“ D ef

s. ’ Me m . ”) and

( 2) th e P la in ti ff

s’ Me m or an dum

in O pp os it io n to D ef

en dant ’s Mo ti on

to D is m is s (“ P ls

. ’ O pp ’n ”)

. UNITED STAT ES DIS TRICT COURT F OR THE D ISTRIC T OF CO LU M BIA
ST. MARK’S PL ACE HOUSI NG : CO MPA NY , I NC .; S T. MA RK ’S PLAC E : ASS OC I AT ES; STE L L AR CP L P; and : CA STL ET ONGP L L C, : : Pla int if fs , :

: v. : Ca se N o. 1: 08 -cv- 00 19 3-R BW : UNI TED STATES DEPARTMENT OF : HOUSI NG AND URBAN : D E V E LO P M E N T an d

R O Y B E R

N A R D I, : AS ACTI NG SECRETARY OF TH E : UNI TED S TAT ES DEP AR TM ENT OF : HOUSI NG AND URBAN : DEVEL OPMENT : : De fe nd ants . :

__________________________________ :
Mem orandum Opini on The plaintiffs br ing this ca se pursua nt to the Administ rative Proc edure Act (“ APA”), 5 U.S.C. §§ 701-06 (2006), see king a decla ratory judgme nt, Compl aint (“Compl.”) ¶ ¶ 48-56, injunctive relief

, id. ¶¶ 57-58, a

nd an orde r of manda

mus, id. ¶¶ 59-64. Curre ntly befor e the Court is the Defe ndants’ Motion to Dismis s pursuant to Fe dera l Rule of Civil Procedur e 12(b)( 6). De fenda

nts’ Motion to Dism iss. For the re asons set for

th below, the Court will gr ant 1 the def endant’ s motion.2 I. Bac kgr ound A. Underlying Fac ts The plaintiffs in this lawsuit are the intended buyer a nd seller on a

contra ct to transfe r
owner ship interest in a multifamily housing pr oject in Staten I sland, NewYork, known a s the Castleton Park Apar

tments (the “Apa

rtments”). Compl. ¶¶ 4, 11. The intended seller s, St. Marks P l a c e H o u s i n g C o . ( “ T h e H o u s i n g C o mp an y” ) an d S t . M ar k s P l a c e A s s o c i a t e s , ar e r e s p e c t i v e l y a limit ed prof

it housing compa

ny org anized under the Private HousingFinanc e L aw of the State of New Y ork, id. ¶ 4, and a

limit ed par

tnership org anized under the laws of the State of New Y ork, id. ¶ 5 . T he Ho us ingCom pa ny is the no min a l owne r o f t he Ap artme nts and

c ur re ntl y ho lds tit le to the Apar

tments for the be nefit of St. Marks Place Associates. I d. ¶ 4. T h e H o u s i n g C o mp an y

p urc h as edth e A p art m en t s i n1 9 7 4 wi tha n o n -i n s ure d m o rt gage loan of $19,715,000 made by the New York State HousingFinanc e Ag ency (“N Y Fina

nce Ag ency”). I d. ¶ 16. On Oc tober 13, 1977, the mortg ag e wa s ref inance d and divided into a “HUD -insured Sec tion 236-assisted” senior mor tga g e of $17,629,100 ( “Mortg ag e Note” ), and a “non-insure d Section 236-assisted” junior mortg ag e of $3,360,900, unde r the a uthority of Section 207 of the National Housing A ct (“NHA” ), 12 U.S.C. 1713 (2006), and pur suant to Section 223(f) of the NH A, 12 U.S.C. 1715n(f) a nd 24 CFR § 207.32(a) (k) ( 1977). I d. ¶¶ 18- 19; Pls .’ Op p’ n, Exhi bit

(“ Ex.” ) B (“ Mo rt g a g e No te ” or “ No te ” ). Th e fi rs t pa g e of the Mo rt g a g e No te contains the followingpara g raph:

Privilege is r eser

ved to pa y the debt in whole or in an a mount equal to o ne or mor e monthl y pa

y me nts on pr inc ipa l ne xt due , o n th e fi rs t day or any month prior to maturity upon at l east thi rty (30) da y s’ prior wr itt e n n oti ce to th e ho lde r. ** I f t his de bt i s p a id i n f

ull pr ior to matur ity and wh ile ins ur e d und er th e Nat ion a l H ou sin g Ac t, a ll parties liable f

or pay ment of this debt here by

ag ree to be jointly

and sever ally bound to pay

to the holder he reof

any adjusted pre miumF o l l o w i n g t h e wo r d “ R e gu l a t i o n s ” , wh i c h a

p p e a r s a tth e e n d

o f th e s e c o n d

s e n t e n c e o f

th e s a me 2 parag raph, is th e follo winglanguag e: “S ee ‘A ttachm ent A ’, P arag raph 2 inc orporate d h erein b y referen ce an d m ad e a parth er eo f. ” C om pl

. ¶ ¶ 1 8- 19 ; P ls

. ’ O pp ’n , E xh ib it( “E x. ”) B ( “M ortg ag e N ot e” ).

3 c ha rg e re qu ir e d b y

the a pp lic a ble Re g ulatio ns . I d. Th e do ub le a ste ri sk

at th e e nd

of the fi rs t se nte nc e re fe re nc e s a fo otn ote that r e a ds : “**Subject to the prior a

pproval of the Secre tary

of Housingand Ur

ban De velopment.” I d. 2 In May 2006, the share holders of the Housing Company and St. Marks Associates (identified c ollectively

in the parties’ filings a s the “St. Marks Plaintiffs”), jointly as the intende d sellers, e ntere d into a contra ct with Stellar CP L P and Stellar Castleton GP L L C (identified

c oll e c tiv e ly

in t he pa rt ie s’ fi lin g s a s th e “ Ste lla r P la int if fs ” ), joi ntl y

a s th e int e nd e d b uy e rs , in which the St. Marks Plaintiffs ag ree d to sell their benef icial intere st in the Apartments and a ll of the outstanding stock in the Housing Company to the Stellar Plaintiffs. Compl . ¶ 11. Th e c on tr a c t w a s d

ra ft e d s o th e Ap artme nts c ou ld b e wi thd ra wn fr om t he “ Mit c he llL ama” Prog ram, a

prog ram a

uthorized under Ar

ticle I Iof the Ne w York State Private Housing F ina nc e L aw ( the “ PHF L aw” ). I d. ¶ 1 2. Th e PHF L aw “ e nc oura g e [s] [pr ivate e nte rp ri se s] to invest in companies re g ulated by law . . . and e ng ag ed in providing. . . housing f acilities . . . for families or pe rsons of low income.” N.Y. Priv. Hous. Fin. L aw § 11 ( McKinney 1987). To withdraw f

rom the Mitchell-L ama pr og ram, a participa nt must ex tinguish any

g overnme nt subsidiz ed or a ssisted mortga g e debts a nd dissolve or rec onstitut e the limited profit housing company that owns the housing development. I d. § 35(2)- (3); Compl. ¶ 15. In four se parate letters dated Dec ember 1, 2006, Marc h 30, 2007, J uly 31, 2007, and November

30, 2007, the plaintiffs attempted to notify the def endants of the ir intention to prepay the Mortg ag e Note. Compl. ¶ 32. At the r equest of the defe ndants, the plaintiffs provide d a written summary

explaining why

they believed the defe ndants’ conse nt to prepay ment was notSection 25 0(a) o f the NH A, cod ified as am ended at 1 2 U .S. C. § 1715 z - 15(a), states in pe rtinent 3 part : Durin g any perio d in whic h an

owne ro f

a m ultifam ily rental hous ing project is required to obtain the appro v al of the Secretary for prepay

m ent of the m ort gage , the Se cretary sha ll not accept an o ffer to prepay the mo r t ga ge o ns u c h p r o

j e c t. . . u n l e s s -- ( 1) th e Se c r e t a ry ha s de t e r min e d t ha tsu c h p r oj e c tis no lo nge r m e e t i ng a need for ren tal ho usingfor lowe r inco m e fam ilies in the are a; (2) the Secretary (A) has determ ined that the ten ants h av e be en n otified b y t h e o w n e r ’ s r e qu e s t f

o r ap p r o v a l o f a p r e p a ym e n t , ( B ) h a s p r o v i d e d the tenants with an o pportunity to com m ent on the owner’s request; and (C) has tak en s uch com

m ents in to co nsideratio n; an d (3) the Se cretary

has ens ured that the re is a plan for prov idingrelocation assistance for adequ ate, com parable hous ingfor any lowe r inco m e tenant who w ill be displace d as a result of the prepay m ent and withd

rawal of the project from

the prog ram . 4 require d. I d. ¶ 33. Ac cordingto the plaintiffs, in J une 2007, HUD ’s Off ice of the Gene ral Couns e l a dv ise d H UD ’s Se c re tary ’s of fi c e that Se c tio n 2 50 (a ) o f t he NH A, wh ic h s ub

je c ts mortg ag e pre pay

ment to restrictions deter

mined by the def endants, did not apply

to the 3 prepa y ment restric tion contained in the Mortg ag e Note. I d. ¶ 34. In September 2007, the plaintiffs’ counse l met with HUD’s Ge nera l Counsel to dis cuss the plaintiffs’ intent to pre pay the Mortg ag e Note a

nd argue why

Section 250(a) did not apply to their Note. I d. ¶ 35. On Oc tober 11, 2007, HUD’ s Offic e of the Gene ral Counsel ag ain alleg edly advised HU D’s Secr etar

y ’s

o ff i ce th ati th adco n cl u d edth atS ec t i o n2 5 0 (a ) w as n o tap p l i cab l e t o th e p l ai n t i ff s ’ M o rt gage N o t e . I d

. ¶

3 6 ; P l s . ’ O p p ’ nat8 & E x. C ( M e m o r an d u mf r o mM i l l i c e n tB

. P o t t s t o B e v e r l y J. Miller). Afte r HUD ’s Off ice of the Gene ral Counsel alleg edly advised the Sec reta

ry ’s offic e for the se c on d ti me a

bo ut t he ina pp lic a bil ity of the pr e pa y me nt r e qu ir e me nt, the Se c re tary me t w ith New Y ork Senator Cha

rles Schumer , who purporte dly conveyed to the Secr etar y his belief that th e S ec re t ary ’s ap p ro v al wa s re qu i re d an d th atS ec t i o n2 5 0 (a ) ap p l i edt o th e p l ai n t i ff s ’ M o rt gage5

Note. Compl. ¶ 37; Pls .’ Opp’n at 8-9 & Ex . D (Press Rele ase f rom the Off

ice of Senator Char les Schumer (D -NY) ) at 1. On De c e mbe r 2 0, 20 07 , th e de fe nd ants no tif ie d th e Ho us ingCom

pa ny that be c a us e prepa y ment of the Mortg ag e Note w as conditioned on the a pproval of the Secre tary , the pla int if fs ’ p re pa y me nt w a s “ su

bje c t to the re str ic tio ns of Se c tio n 2 50 (a ) o f t

he NH A, ” and

the ir prepa y ment reque st had bee n denied be cause the intended pr epay ment had not met the restric tions of this st atutory provision. Compl . ¶ 39; Def s.’ Mem. at 9 & Ex . A (L etter f rom Tere sa M. B ainton to J ean- Pierre V ag anay ). The pla intiffs were advised that the Sec tion 250(a)

re str ic tio ns re qu ir e d: ( 1) that 15 0 d ay s n oti c e mus t be g ive n to the re sid e nts of the Ap artme nts , (2) that the pla intiffs “must provide a minimum of $15,000 per unit in repa irs/reha bilitation or repla ce two or

more major buildingcomponents” w ith funds in escrow a t the time of prepa

y ment approva l, and (3) that the plaintiffs would have to“execute a renta l use ag ree ment that will be

rec orded in fir st lien positi on on the prope rty until what would have be en the matur ity date of the fi rs t mo rt g a g e , N ov e mbe r 1 , 2 01 7. ” De fs .’ Me m. at 9 & Ex. A(L e tte r f ro m T e re sa

M. B a int on

to J ean- Pierre V ag anay

). Not agree ing w ith the defe ndants’ positions, six wee ks later, on F ebrua ry 1, 20 05 , th e pla int if

fs fi le d th is l aws uit

. B. The Mitchell-Lam a P rogram In 1955, the New

York State L eg islature ena cted The L imited-Profit Housing Companies Act, also known a s the Mitchell-L ama Prog ram. See N.Y. Priv. Hous. Fin. L aw § 11. The pr og ra m w a s d e signe d to e nc oura g e the de ve lop me nt o f a ff or da ble ho us ingfo r l owto m idd le inc ome te na

nts . I d. B y

of fe ri ngfi na

nc ia l in c e nti ve s to de ve lop e rs , in c lud ingthe op tio n to prepa y mortg ag es, the Ne w York State L eg islature hoped to e ncoura g e deve lopers to build rental

or c o- op a pa rtme nts in s pit e of

the le ng thy

tim e c on str a int s o n w he n s uc h d e ve lop e rs c ou ld s e ll6

their prope rty . See g ener ally id. §§ 11-37. The Ne w York State L eg islature conte mplated that pr oje c ts d e ve lop e d a

nd op e rate d und e r t

he Mit c he ll- L ama

Pr og ra m mi g ht b e e sta

bli sh e d in conjunction with assistance from the F eder al g overnme nt. I d. § 11-a. H ere , the Fe dera l g overnme nt beca

me associated with the prope rty at issue as a

result of insuringthe re financ ing of the Mo rt g a g e No te un de r t he a uth or ity of the Natio na l H ou sin g Ac t. C. The Na ti ona l Ho usin g A c t a nd t he F unding of t he Hou sing Co m panyLoa n The National Housing A ct was e nacte d by Congr ess in 1934 to addre ss its concern a bout the dec lining national stock of aff ordable housing. Pub. L . No. 73-479, § 1, 48 Stat. 1246 (1934). In 1961, Congr ess amende d the Act to “e nable pr ivate ente rprise to pa rticipate to the max imum

e xtent in me e tin g the ho us ingne e ds of mod e rate -i nc ome fa

mil ie s. ” S. Re p. No . 8 7- 28 1, a t 4 (1 96 1) , a s r e pr int e d in

19 61 U. S.C. C.A .N . 1 92 3, 19 26 . Se c tio n 2 36 of the Natio na l H ou sin g Ac t,

a s ame nd e d in

19 68 , a uth or ize s th e F e de ra l g ov e rnme nt t o s ub sid ize int e re st p ay me nts a s a financ ial incentive to private investors to cre ate a dditional low income housing. Pub. L . No. 90-448, § 201, 82 Stat. 476, 498-501 (1968); se e Cieneg a Ga rdens v. United States, 503 F .3d 1266, 1270 (F ed. Cir. 2007). T h e H o u s i n g C o mp an y was org anized pursuant to the M itchell-L ama law. In 1974, St. Marks obtained a n o n i n s u red mortg ag e loan f rom the NYSHF A for the development of

what bec ame the C as t l eton P ark A partments, an a ff or da ble ho us ingpr oje c t lo c a te d in State n I sla

nd , N e w Y or

k. Th is loan, of a pproxi mately

$20 milli on, was subsidized by HUD unde r Section 236 of the NH A, 12 U.S.C. § 1715z -1. In 1 97 7, the S t. Ma

rk s lo an w a s r e fi na

nc e d, and at th e same time was divi ded int o two parts. The first part c onsisted of a senior mort gage loan, in an orig inal amount of $17,629,100, insured by HU D und e r NHA Se c tio n 2 07 , 1 2 U .S. C. § 17 13 (b ), purs ua nt t o NHA Sec tion 223(f), 12 U.S.C. § 1715n(f) . The sec ond part of the ref inance d loan consists of a noninsured subor dinate mortg ag e loan in the amount of $3,360,900.7

Def s.’ Mem. at 7-8. II. Stand ard of Review On a motion to dismi ss for fa ilure to state a c laim upon which re lief ca n be g rante d pursuant to Fe dera l Rule of Civil Procedur e 12(b) (6), c ourts must construe the a lleg ations and fac ts in the complaint in the light most favora ble to the plaintiff and must g rant the pla intiff the benef it of all infere nces that can be derive d from the f acts a lleg ed in the complaint. Kowa l v. MCICommc’ns Corp., 16 F.3d 1271, 1276 (D .C. Cir. 1994). Howeve r, the Court nee d not

acc ept infer ence s that are unsupported by the fa cts set forth in the c omplaint or “leg al

c on c lus ion [s] c ou c he d a s . . . fa c tua l a lle g a tio n[s]. ” Tr ud e a u v . F TC, 45 6 F .3 d 1 78 , 1 93 (D .C. Cir . 2 00 6) (i nte rn a l qu otatio n ma rk s and c itatio ns omi tte d) . In d e c idi ngwh e the r t o d ism iss a
c la im und e r R

ule 12 (b )( 6) , th e Court

c an o nly c on sid e r t

he fa c ts a lle g e d in

the c omp la int , documents attac hed as e x hibits or incorporate d by ref ere nce in the c omplaint, and matters about which the Court may

take judicial notice . EEOC v. St. Franc is Xavier Par ochial Sch., 117 F .3d 621, 624 (D.C. Cir. 1997). A 12(b) (6) motion should be g rante d and cla ims should be dism issed

un de r t his ru le if the pla int if

f d oe s n ot p ro vid e “ e no ug h f a c ts t o s tate a

c la im t o r e lie f t

hat is plausible on its face .” B ell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). III . A nal ys is Th e de fe nd ants se e k d ism iss a l of the pla int if

fs ’ c omp la int

wi th p re jud ic e fo r f

a ilure to state a c laim upon which re lief ca n be g rante d under the APA. Def s.’ Mem. at 1. Althoug h the d ef en d an t s h av e c o n ce d edth atth ei r r ej ec t i o no f t h e p l ai n t i ff s ’ i n t en tt o p re p ay

th e M o rt gage Note constitutes final a g ency action subjec t to judicial review, the y move to dismiss on the g rounds that the plaintiffs have fa iled to state a c laim under the A PA beca use while the H UD8

regulations in effe ct at the time the Mortg ag e Note w as executed only require d mortg ag ors and mortg ag ees to include a provision in their agree ment that allowed pr epay ment, nothing pr eclude d the def endants fr om making the Secre tary ’s appr oval a pr ere quisite for such pr epay ment. I d. at 2. Whe the r t he pla int if

fs have state d “ c la ims up on wh ic h r e lie f c an b e g ra

nte d d e pe nd s in part on whe ther ther e is a c ause of action [permitting the plaintiffs] to invoke the power of the court to re dress the violations of lawthat [t hey ] claim [ HUD] has committed.” Trude au, 456 F.3d at 188. The answe r to this question “also depends on whether the alleg ations of [the plaintiffs’] complaint are le g ally sufficie nt to state the violations [ they ] claim.” I d. A. The Administrat ive P roce dure Act Wit h respe ct to whether

there is a ca

use of a ction that permits the plaintiffs to invoke the power of this Court, the defe ndants do not deny that the plaintiffs have a ca use of a ction

ava ila ble to t he m, b ut a

rgue that th e pla int if

fs ’ “ thr e e c a

us e s o f a c tio n” c an o nly

be br ou g ht a s one cla im under the APA. De fs.’ Mem. at 11. The Court there fore need not a ddress the de fe nd ants ’ c ha lle ng e to t he pla int if

fs ’ p ur su it o f t

he thr e e se pa

rate c la ims

. Th e APAe nti tle s “ a

pe rs on su ff e ri ngle g a l w ro ng

be c a us e of a g e nc y a c tio n o r a dv e rs e ly aff ecte d or ag g rieve d by

ag ency action within the meaningof a r eleva nt statute” to judicial relief

. 5 U.S.C. § 702. I f no desig nated f orm for se ekingjudicial revie w is provided for by statute, “a

ny applicable form of le g al ac tion including ac tions for dec laratory judgme nts or writs of prohibitory or mandatory

injunction or habea s corpus, in a c ourt of compe tent jurisdiction” are available . § 70 3. Thus , r e g ard le ss o f h owthe re lie f i s c la ssi fi e d, wh e n a pp ro pr iate , a

c ourt may “ ho ld unlawful a

nd set aside a g ency

action . . . found to be arbitra ry , capr icious, an abuse of discre tion,

or oth e rw ise no t in

a c c or da nc e wi th t he law . . . ,” § 7 06 (2 )( A) , w hic h is the re lie f t he pla int if

f i s
s ee k i n g.9

B. P repaym ent P rivilege Both pa rties’ a rguments conce rningthe plaintiffs’ pr epay ment privileg e rig hts rely on the proposition that certa in lang uag e in the seve ral doc uments pertinent to the issue is clea r and unambig uous. The def

endants foc us on the languag e of the Mortg ag e Note f irst and the HUD regulations second. The y contend that the f

ootnote ref

ere nced e arlier

and the “ plain languag e of the Mortg ag e Note c lear ly impose [t he] require ment” that pre pay ment be appr oved by

the Se c re tary . D e fs .’ Me m. a t 13 . T he de fe nd ants a lso argue that no thi ngin t he ve rs ion

of 24 C.F .R. § 207.14(a) applicable to this case expressly mandated that prepa

y ment be allowe d without the Secre tary ’s appr oval, noting that “the re g ulation is sim ply silent on the matter.” I d. at 2, 17. M o re o v er , ac co rd i n g t o th e d ef en d an t s , b ec au s e n o th i n g i nth e p l ai nl an gu age o f t h e M o rt gage Note, Attac hment A, or the H UD re g ulations in effe ct at the time the Mortg ag e Note w as
e xec ute d r e str ic t th e Se c re tary ’s dis c re tio n to a pp ly the re str ic tio ns of

Se c tio n 2 50 (a ) t o prepa y ment of a mortg ag e, the Sec reta ry ’s dec ision to apply

Section 250 was re asonable and should be g iven substantial defe renc e. I d. at 1, 11-13. In opposition, t he plaintiffs a lso focus on the HU D re g ulations in effe ct at the time the Mortg ag e Note w as executed. The y contend “ that there was no statutory , regulatory or
a dmi nis tr a tiv e ba sis ” fo r t he pa rt ie s to the Mo rt g a g e No te or the de fe nd ants to i nc lud e a fo otn ote subjectingprepa

y ment to the approva l of the Secr etar y , and in fa ct the pre pay

ment approva l clause was dire ctly

contra ry to and inconsistent with the expli cit languag e of 24 C.F .R. § 207.14(a) and 24 C.F.R. 207.32(a ), re nderingthe footnote void. Compl. ¶¶ 26, 27; Pls.’ Opp’n at 14. The plaintiffs a

rgue that Section 207.14(a ) is clea r and una mbiguous, a

nd there fore the Secre tary ’s interpre tation is not entit led to any defe renc e. Pls.’ Opp’n at 19. As to the defe ndants’ asse rtion that the plain languag e in the Mortg ag e Note doe s not restrict the10

Secre tary ’s discre tion to apply Section 250(a) , the plaintiffs re spond that the express terms of Attachment A r equire only that the def

endants’ c onsent be obtaine d for spe cified pa rtial pr e pa y me nts ba se d o n r e nt i nc re a se s a c hie ve d b y Ap ri l 13 , 1 97 9, but th a t no su c h c on se nt i s
nece ssary for f ull or substantial partial pre pay ments. Compl. ¶ 46; P ls.’ Opp’n 23-24. Ne ith e r p art

y dis pute s th at th e a

pp lic a ble ve rs ion

of 24 C.F .R. § 2 07 .1 4( a ) r e qu ir e d th a t a p re p ay m en tp ro v i s i o nb e i n cl u d edi nth e M o rt gage No t e, n o r d o th ey d i s p u t e t h atth e M o rt gage Note that is the subject of the ca se included a

footnote re quiring that the Secr etar y ’s appr oval be obtained prior to pr epay

ment. Def

s.’ Mem. at 14-15; Pls.’ Opp’n at 5, 13. I nstead, the pa rties d i s p u t e w h et h er

th e f o o tn o t e i s i nd i re ctco n fl i ctwi thth e r egu l at i o n s i np l ac e w h en th e M o rt gage Note wa s executed. De fs.’ Mem. at 15; Pl s.’ Opp’n at 14. The def endants a rgue that no such

c on fl ic t e xists , w hil e the pla int if fs c on te nd

that th e re is a

c on fl ic t, a

nd the re fo re the fo otn ote mus t be re ndere d void. When an ag ency

is charg ed with administeringa statute, Chevr on, U.S.A., Inc. v. Natural Res. Def . Council, I nc., 467 U.S. 837 (1984) g overns the r eview of the ag ency ’s interpre tation of the statute. B ell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997). The first inquiry to make under

Chevron is ... whether Cong ress ha s directly spoken to the pre cise que s t i o n at issue. I f the intent of Cong ress is c lear , that is the end of the matter; for the c ourt , a s w e ll a s th e a g e nc y , mu st g ive e ff e c t to the un ambi g uo us ly expressed intent of Congr ess. I f, howeve r, the cour t d eter mines Congr ess has not direc tly addre ssed the precise que stion at issue, the court doe s not simpl y

impose its own construction on the st at ute, as would be nece ssary

in the absenc e of a

n administrative interpre tation. Rathe r, if the statut e is sile nt or ambi g uo us wi th re sp e c t to th e sp e c if ic iss ue , th e qu e sti on

fo r t he Court is wh e the r t

he a g e nc y ’s ans we r i s based on a

permissible construc tion of the statute. Chevron, 467 U.S. at 842-43; see also Be ll Atl., 131 F.3d at 1047. In assessingwhether an11

ag ency ’s construc tion of a statute is permissible, the cour t must l ook to traditional tools of statutory construction, includingexamining of “ the statute’s text, it s leg islative history , and structure , as we ll as its purpose” B ell Atl., 131 F.3d at 1047 ( citation omitted). Defe renc e to the ag ency ’s interpre tation is not appropriate if it conf licts with the clear

expressed intention of Congr ess on the question, “but if the statute is silent or ambiguous with re spect to the issue, a permissible ag ency

interpre tation of the statute mer its judi cial def ere nce.” I d. In the ca se at ha

nd, it is a statutory

regulation that is at issue, and in such situations the analy sis for the Court is slightly differ ent. An ag ency ’s interpre tation of its own regulations

“ mus t be a ff

or de d s ub sta

nti a l de fe re nc e and

up he ld u nle ss ‘ pla inl y

e rr on e ou s o r i nc on sis te nt w ith the re g ulation.’” Air T ransp. Ass' n of Am., Inc. v. F AA, 291 F .3d 49, 53 (D.C. Cir. 2002) (quoting Thomas J eff

erson Univ. v. Shalala , 512 U.S. 504, 512 (1994)). H oweve r, if an “alter native re adingis compelled by the re g ulation's pla in lang uag e or by other indications of the [age ncy ' s] i ntent at the time of the r egulation's pr omulgation,” then the re g ulation itself and not the ag ency

interpre tation is controlling. I d. Up o nex am i n at i o no f t h e M o rt gage No t e i t s el f, i ti s cl ea r t h atth e N o t e’ s p l ai nl an gu age
c on dit ion s p re pa

y me nt o n th e a

pp ro va l of

the Se c re tary

of HU D. Th e Court

re a c he s th is conclusion bec ause the footnote in the Note, which contains the la ng uag e re quiring Secre tary approva l, immediately

follows the ver

batim lang uag e of Sec tion 207.14(a)’ s prepa y ment privileg e, and c ontrary

to the plaintiffs’ asse rtions, appea rs to be unre lated to the sente nces that follow it or the languag e in Attachme nt A. Turningto the HUD r egulations in effe ct in 1977, the Court is inclined to ag ree that Section 207.14(a) did not gr ant HUD the authority to alter a prepa y ment privileg e by

requiring the Se c re tary ’s a

pp ro va l. T he 19 77 ve rs ion of Se c tio n 2 07 .1 4( a ) s tate s: “ Th e mor tg a g e sh a ll12

contain a pr ovision permitting the mortg ag or to prepa y the mortg ag e in whole or in part upon any int e re st p ay

me nt d ate a ft e r g ivi ngto t he mor tg a g e e 30 da

y s’ no tic e in wri tin g in a dv anc e of its intention to so prepay .” 24 C.F.R. § 207.14(a ) (1977) . The re g ulation is therefor e unambiguous on its face conce rningthe rig ht to prepay . The Court there fore rea ds the regulation as requir ing mortg ag es, at that time, to include a prepa y ment provision. Howeve r, the de fenda nts are c orre ct in pointing out that the re g ulation is “silent on the matter” of whether the Secr etar

y may condition such prepa

y ment upon his prior approva l. Defs.’ Mem. at 17. Thus, the Court’s inq uir y be c ome s “ wh e the r t

he a g e nc y ’s [de te rm inatio n th a t th e Mo rt g a g e No te ’s fo otn ote is enfor cea ble] is based on a per

missibl e construc tion of the [reg ulation] .” Chevron, 467 U .S. at 84 3. Th e Court

fi nd s th e Sup re me Court ’s re a so nin g in C hr ist e ns e n v . H arr is C ounty , 5 29 U. S. 576, 588 (2000) c ontrols the Court’s resolution of the issue. In Christensen, employ ees of a county ’s sherif

f depa rtment broug ht a lawsuit alleg ing that the c ounty ’s mand ator

y po lic y that e mpl oy e e s sc he du le tim e of f t o r e du c e the c ounty ’s lia bil ity for a ccr ued time violated the F air L abor Standa rds Act of 1938 (“F L SA”), 29 U.S.C. § 207 (2006). Christensen, 529 U .S. at 578. The county argued, and the plaintiffs conc eded, that nothing in the “ FL SA expressly prohibit[ ed] [ the county ’s] practice ....” I d. at 582. Thus, base d on the Supreme Court’s r eadingof the c ontrolling provision of the F L SA and “ne arby provisions of the F L SA t

hat r e fl e c t a

sim ila r c on c e rn fo r e ns ur ingthat e mpl oy e e s r e c e ive so me tim e ly benef it for over time work” a

nd the re g ulation implementing the c ontrolling provision, the Christensen Court found that “[b]ecause the statute [was] s ilent on [ the] iss ue and be cause [t he policy ] [ was] entirely

compatible with [the statute and the re g ulation] , petitioners [could not]

. . . prove that Harr is County

ha[d] violated [the statute or the re g ulation] . I d. at 585. L ike the Supreme Court in Christ ensen, this Court finds that Section 207.14(a) “is more13

proper ly rea d as a minimal guara

ntee that a

[m ortg ag ee] will be able to [prepa y a mortg ag e] . . .,” but no t a g ua ra nte e that su c h r ig ht w ill be wi tho ut c on dit ion s. I d. a t 58 3. “ In o the r w or ds , viewed in the c ontext of the ove rall statutory scheme , [S ection 207.14(a )] is better rea d not as setting f orth the exclusive [unfettered r ight of a mortg ag ee to pr epay

a cove red mortg ag e], but as setting up a

safe g uard to e nsure that a [] ” mortg ag ee w ill have the option to prepa y a mortg ag e, albeit with or without prer equisites. I d. Thus, the Court finds that nothing in Section 207.14(a ) prec luded the par

ties to the Mortg ag e Note f rom conditioning pr epay

ment upon the appr oval of the Secr etar

y . The re g ulations impl ementingSection 236 also provided that a ll mortga g es under the prog ram shall conta in a clause allowingfor pr epay ment, howeve r, Cong ress said nothing about the def

endants be ing pr eclude d from attac hing a dditional requireme nts to such prepa y ments. See 24 C.F.R. § 207.14(a ). F urthermor e, this conclusion is consistent with the

“ br oa d d isc re tio n in

imp le me nti ng[statut e s]” a c c or de d to a g e nc ie s li ke HU D. Che vr on , 4 67 U. S. at 862. Thus, the footnote in the Mor tga g e Note is va lid and not in direct conf lict with the regulations in place whe n the Note wa s executed. T h e d ef en d an t s fu rt h er

ar gu e t h atb ec au s e t h e S ec re t ary d et erm i n edth atth e M o rt gage No t e f o o tn o t e r equ i re s th atp re p ay m en to f t h e N o t e b e ap p ro v edb y th e S ec re t ary , th e M o rt gage Note’s pr epay

ment option falls under the pur view jurisdiction of Section 250 of the N HA, codified at 12 U.S.C. § 1715z -15(a ). The Court must deter mine whether

this action by

the Se c re tary c on sti tut e s a

pe rm iss ibl e int e rp re tatio n o f t he statut e . A c c or din g to t he de fe nd ants , “Section 250 g ener ally

restric ts the Secre tary ’s ability to approve prepa

y ment of mortg ag es wher e the Sec reta

ry ’s appr oval is alrea dy

require d in order f

or pre pay ment to occur .” De fs.’ Me m. at 1. Th e pla int if

fs ’ c on te nti on

that Se c tio n 2 50 do e s n ot a pp ly to t he Mo rt g a g e No te is based upon the ir position that the Mortga g e Note f ootnote was invalid. Howe ver, be cause theThe d ef en dant s al so h av e a Mo ti on to S tr ik e P la in ti ff

s’ R es po ns e to D ef

en dant s’ Mo ti on

to 4 Dism iss an d to Com

pel th e R eturn to D efendants o f Priv ileg ed D ocum ents, and For an E m erg ency Stay Pend ingExpedited

R ev iew of This Motio n currently pen dingbefo re the Court; how ev er, g iv en th e Court’s rulingon

the Defen dants’ Motion to D ism iss, this m otion has becom e m oot and is den ied fo r that rea son. This Mem orand

um O pinion rend ers the O rder g rantingthe Defen dants’ Motion to D ism iss 5 entered on March 2 7, 2009 , an ap pealable O rder. 14 Court has found that the f ootnote is valid, the plaintiffs’ cha lleng e to the applica bility to Section 250 must also fail. And based on the direc tion provided by Chevron, the Court finds that the Se c re tary ’s c on c lus ion

that Se c tio n 2 50 , c od if

ie d a s ame nd e d at 12 U. S.C. § 1 71 5z- 15 (a ), is applicable to the Mortg ag e Note is a permissible interpre tation of the statute. Important to the Court’s conclusion is the history underlying the enac tment of the Mitchell-L ama Prog ram by the Ne w Y or k s tate le g isl atur e , w hic h is c le arl y ide nti fi e d w iththe c on c e rn s th a t mo tiv a te d Co ng re ss to s ub se qu e ntl y

e na c t th e NH A, and

the fo otn ote in t

he Mo rt g a g e No te is f

ull y c on sis te nt w ith those conc erns. See Chevron, 467 U.S. at 863 (similarly stating that the leg islative history identified the policy

conce rns that motivated the ena ctment of the le g islation). So for this reason too, the Secre tary ’s dec ision must be af firmed. IV. Conclusion F or the fo re g oin g re a so ns , th e de fe nd ants ’ m oti on fo r d ism iss a l pu

rs ua nt t o F e de ra l Ru le of Civ il Pr oc e dure 12 (b )( 6) is GR ANTED. 4 SO ORDERED. 5

________________________________ REGGI E B. WAL TON Un i t edS t at es Di s tri ctJ u d ge