Causes of Action



UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

Kenneth Tinney, Joe Crosswell, *

Nancy Champion, and *

Carol Cleveland, *

* AMENDED COMPLAINT

Plaintiffs, *

v. * Case No. _______ CV-02-C-2062-M

*

Anne Venneman, in her official capacity as *

Secretary of the United *

States Department of *A

Agriculture, RIVERSIDE COVES *

APARTMENTS, *

a partnership, Charles A Martin, general partner, *

Lawrence Olshan, general partner, David Bunkin, *

general partner, Robert W. Grimes, general partner *

and John Doe 1-100;, and *

The Guardian *

Company, L.L.C., an Alabama limited liability *

company *

*

Defendants. *

INTRODUCTION

1. Plaintiffs bring this action to challenge Defendant’s’ Riverside Coves Apartments, Ltd., its partners - Charles A. Martin, Lawrence Olshan, David Bunkin, Robert W. Grimes, and John Doe 1-100, and The Guardian Company, LLC (“OWNERS”) efforts to circumvent the rental rate provisions, Section 515 of the Housing Act of 1949 (established by of the Senior Citizen’s Housing Act of 1962, Pub. L. No. 87-723, 4(b), 76 Stat. 670). Plaintiffs Kenneth Tinney, Joe Crosswell, Nancy Champion and Carol Cleveland (“TINNEY, et al.”)s are all low-income individuals with disabilities who reside in River Bend Apartments (“River Bend”) in Riverside, Alabama. In 1978 and 1979, Defendant OWNERSs THE GUARDIAN COMPANY, LLC Riverside Coves Apartments, Ltd., its partners, Charles A Martin, Lawrence Olshan, David Bunkin, Robert W. Grimes, and John Doe 1-100, its partners, and The Guardian Company, LLC (“GUARDIAN COMPANYOWNERS”) exploited utilized two federally subsidized loan programs to fund construction of River Bend, receiving over $2.4 million in low-interest loans in exchange for assuring tenants affordable housing for 50 years.

2. Defendant VENNEMAN approved Defendant OWNERS original request to prepay their mortgages on River Bend with restrictions which would maintain the property as affordable housing. Defendant OWNERS appealed this decision. On appeal Defendant OWNERS request to prepay without restrictions was approved. After a remanded appeal hearing Defendant OWNERS were again granted the right to prepay without restrictions and Defendant VENNEMAN approved this determination. If Defendant GUARDIAN COMPANYOWNERS prepayss its mortgages this affordable rent program with terminate in violation of Section 515 of the Housing Act of 1949. Plaintiffs bring this action to enforce federal law and to assure affordable housing to River Bend’s low-income tenants.

PARTIES

3. Plaintiff Kenneth Tinney has resided in a two bedroom apartment at River Bend since 1995. Plaintiff TINNEY is an individual with quadriplegia. Due to Defendant VENNEMAN’s RURAL HOUSING SERVICEVENNEMAN’s determination to allow Defendant GUARDIANOWNERS to prepay its mortgages on River Bend and withdraw from the 515 program Plaintiff TINNEY’s Rental Assistance will terminate when Defendant OWNERS prepay its mortgages and he now facess a rent increase from $42.00 to $412.00 per month, a 1005 % increase.

4. Plaintiff Joe Crosswell has resided in a twoone-bedroom apartment at the projectRiver Bend since 1982. Due to Defendant VENNEMAN’sRURAL HOUSING SERVICEVENNEMAN’Ss determination to allow Defendant GUARDIAN OWNERS to prepay its mortgages on River Bend and withdraw from the 515 program Plaintiff CROSSWELL’s Rental Assistance will terminate when Defendant OWNERS prepay its mortgages, and d so he now faces a rent increase from $86.00 to $412.00 per month, a 479% increase.

5. Plaintiff Nancy Champion has resided in a two bedroom apartment at River Bend since February 2001.. Due to Defendant VENNEMAN’sRURAL HOUSING SERVICEVENNEMAN’s determination to allow Defendant GUARDIANOWNERS to prepay its mortgages on River Bend and withdraw from the 515 program Plaintiff CHAMPION’s Rental Assistance will terminate when Defendant OWNERS prepay its mortgages, and so she now faces a rent increase from $184.00 to $412.00 per month, a 224% increase.

6. Plaintiff Carol Cleveland has resided in a two bedroom apartment at River Bend since July 2001. Due to Defendant VENNEMAN’sRURAL HOUSING SERVICE’S VENNEMAN’s determination to allow Defendant GUARDIANOWNERS to prepay its mortgages on River Bend and withdraw from the 515 program Plaintiff CLEVELAND’s Rental Assistance will terminate when Defendant OWNERS prepay its mortgages, and so she now faces a rent increase from $127.00 to $412.00 per month, a 324% increase.

7. Defendant Anne aNNE Venneman is Secretary of the United States Department of Agriculture (USDA) and is sued in her official capacity. Defendant VENNEMAN is responsible for ensuring USDA's compliance with the laws of the United States, including the Rural Housing Service (RHS) administration of the Section 515 program preservations statute.

8. Defendant X is the Administrator of the FmHA, and in such capacity administers all programs and operations for FmHA, including its rural rental housing programs.

9. Defendant X is the FmHA State Director for Alabama, and as part of his duties, administers the FmHA financed rental housing programs, including requested prepayments of FmHA mortgages.

10. Defendant X is a Director of one of the Alabama District offices for FmHA. He administers the FmHA rural rental housing projects in his district, which includes River Bend Apartments, and is the official who initially recommended permitting the Owners to prepay its mortgage on River Bend Apartments.

11. Defendant RIVERSIDE COVES APARTMENTS, Ltd., is a partnership in the State of Alabama and the current owner of River Bend Apartments.

12. Defendant Charles A. Martin, is a partner in the general partnership {of or in} RIVERSIDE COVES APARTMENTS, LTDtd.

13. Defendant Lawrence Olshan is a partner in the general partnership {of or in} RIVERSIDE COVES APTSAPARTMENTS, LTDtd.

14. Defendant David Bunkin is a partner in the general partnership {of or in} RIVERSIDE COVES APTSAPARTMENTS, LTDtd.

15. Defendant Robert W. Grimes is a partner in the general partnership in RIVERSIDE COVES APARTMENTS, Ltd.{of or in} RIVERSIDE COVES APTS, LTD.

16. Defendant John Doe 1-2001100 is a partner in the general partnership in RIVERSIDE COVES APARTMENTS, Ltd.

17. {of or in} RIVERSIDE COVES APTS, LTD.Defendant THE GUARDIAN COMPANY, L.L.C., the Guardian CompanyOWNERS iis a limited liability company in the State of Alabama and the current owner of River Bend.

FEDERAL JURISDICTON

18. This court has jurisdiction over plaintiffs' claims pursuant to 28 USC §§ 1331 and 1346. This action is authorized against the federal defendants by 5 USC § 702. To the extent sovereign immunity is applicable to defendant USDA, it has been waived by virtue of 5 USC § 702. Declaratory relief is authorized by 28 USC §§ 2201 and 2202. To the extent sovereign immunity is applicable to defendant USDA, it has been waived by virtue of 5 USC § 702.

VENUE

19. Venue is proper in the Northern District of Alabama pursuant to 28 USC 1391(b)(2), because a substantial part of the events or omissions giving rise to the claim occurred, and a substantial part ofthe property River Bend Apartments that is the subject of the action is situated in Riverside, AlabamaL.

STATUTORY FRAMEWORK

Section 515 of the Housing Act of 1949, 42 U.S.C.A. § 1485

20. Section 515 of the Housing Act of 1949, 42 U.S.C.A. § 1485, was established by a 1962 aAct of Congress (Senior Citizens Housing Act of 1962, Pub.L. No. 87-723, 4(b), 76 Stat. 670 (1962)) which authorizes the Farmers Home Administration ("FmHA") to make loans for the Rural Rental Housing Program.

21. The Rural Housing Service (RHS), formerly known as the Farmer's Home Administration (FmHA), is a division of the Department of Agriculture (USDA), and is presently responsible for the administration of the Section 515 Multifamily Housing Program (Section 515). 42 USC § 1485.

22. RHS is obligated to administer programs such as the Section 515 program “consistent with program goals and objectives, so that the involuntary displacement of families and businesses is avoided.” 42 USC § 1471 (g).

23. Pursuant to the Section 515 program, RHS provides mortgage loans for terms up to 50 years to facilitate and encourage the development of rental housing for low and moderate income households. 42 USC § 1485. Projects financed with a Section 515 loan "should expand the supply of decent, safe, and sanitary housing for very low-, low- and moderate-income elderly persons, persons with disabilities, and families in a nondiscriminatory way . . . [and] should promote a greater choice of housing opportunities in the housing market area." 7 C.F.R. 1944.215(r).

24. Borrowers are responsible for "meeting the objectives for which the loan and/or grant was made.".” 7 C.F.R. 1930, Subpt. C, Exhibit B, III A2.

25. Owners of Section 515 projects are able to take advantage of other subsidies which benefit their project. Two such programs are the Interest Credit Plan II Program and the Rental Assistance Program. {CITE}42 USC § 1490(a)(1)B.

26. Under the Interest Credit Plan II Program, the private owners of the Section 515 projects receive subsidies that reduce the effective interest rate on their mortgagemortgages to 1%. 42 USC § 1490(a)(1)B. In return, the owner must maintain rents at levels no higher than necessary to cover the cost of debt service, a limited return, and the monthly operations of the project. 7 CFR 1944.215. Also, Tthe owner must limit occupancy to low and moderate income households. 7 CFR 1930, Subpt. C, ¶ IV (2)(a).

27. Borrowers are responsible for "meeting the objectives for which the loan and/or grant was made". 7 C.F.R. 1930, Subpt. C, Exhibit B, III A2.

28. Although the rents produced by the Interest Credit Program typically run substantially below market, these rents are often still too high to be affordable for the lowest income households in rural communities. Therefore, many Section 515 developments also receive project-based rent subsidies through the RHS Rental Assistance Program. {CITE}

29. Under the Rental Assistance Program, low-income households are not to pay more than 30% of their income in rent. Rental Assistance ceases upon prepayment of RHS loans. Rental Assistance ceases when the mortgagemortgages is are terminated.

{CITE}

Emergency Low Income Housing Preservation Act, 42 U.S.C. § 1472(c)

30. Congress enacted detailed legislation to preserve Section 515 projects as affordable housing. 42 USC § 1472(c).

31. Congress passed the Emergency Low Income Housing Preservation Act of 1987 ("ELIHPA"), 42 U.S.C. § 1472(c), out of concern that a large portion of the housing stock constructed under the Section 515 program was vulnerable to mortgage prepayment and removal from the stock of low-income housing in rural areas, thus thwarting the basic purpose of the program.

32. Subsequent to the enactment of ELIHPA, an owner of a project funded by a Section 515 loan who wishes to prepay its outstanding indebtedness must submit a request to prepay a RHS loan. 7 CFR 1965.205.

33. Within 30 days of a submitted request, RHS must notify each tenant of the housing development as well as interested nonprofit organizations and appropriate state and local agencies that the owner has submitted a request to prepay the Section 515 loan. 42 U.S.C. § 1472(c)(3).

34. RHS must not grant a prepayment request until the requirements specified in ELIHPA are met. 42 U.S.C. § 1472 (c)(1)(A). To that end, RHS must attempt to enter into an agreement under which the owner of the project commits to extend the low-income use of the project for 20 years from the date of the agreement. 42 U.S.C. § 1472(c)(4)(A).

35. Before an owner may prepay the mortgage and exit the Section 515 program, RHS must determine if the project is still needed as low income housing, and if prepayment would materially affect housing opportunities for minorities. 7 CFR 1965.215. Depending on its findings, RHS must then advise the owner of the restrictions it will place on the owner's prepayment of the mortgage. 7 CFR 1965.213.

36. If RHS determines low-income housing is still needed, but minority housing opportunities will not be affected by prepayment, the owner may prepay but must agree to use restrictions. 7 CFR 1965, Subpt. E, Exh. A-4. These restrictions require the owner to protect all current tenants from displacement. 7 CFR 1965, Subpt. E, Exh. A-4. This protection is accomplished by retaining the same rent limitations and other tenants' rights that exist under the Section 515 program until the tenants choose to leave their current residence. 7 CFR 1965.215(c)(1)(ii), RD AN No. 3633 (4-10-01).

37. If RHS determines low-income housing is needed and minority-housing opportunities will be affected by prepayment, more elaborate protections are required. 7 CFR 1965.215(c)(1)(i), RD AN No. 3633 (4-10-01). The owner has the option to either: (1) continue to protect current and future tenants according to the law under the Section 515 program; or (2) offer the project for sale to a non-profit or public agency, which would protect current and future tenants according to the law under the Section 515 program. 7 CFR 1965.204.

38. In order to implement these restrictions, owners must agree to the filing of restrictive use covenants against the property and the execution of a restrictive-use agreement. See exhibits to Subpart E following § 1965.250. Rents, other charges, and conditions of occupying will be set so that the effects will not differ from what they would have been had the project remained in the Section 515 program. See Exhibit A-4 to Subpt. E.

39. Other Section 515 program requirements are to remain in effect to protect tenants as well, such as monetary limits set for security deposits, 7 CFR Pt. 1930, Subpt. C, Exh. B, VIII., H, and the substantial noncompliance and good cause requirements necessary for a termination and eviction. 7 CFR Pt. 1930, Subpt. C, Exh. B, XIV, A.

40. Before an owner may prepay the mortgage and exit the Section 515 program, RHS must determine if the project is still needed as low income housing, and if prepayment would materially affect housing opportunities for minorities. 7 CFR 1965.215. Depending on its findings, RHS must then advise the owner of the restrictions it will place on the owner's prepayment of the mortgage. 7 CFR 1965.213.

41. If RHS determines low-income housing is still needed, but minority housing opportunities will not be affected by prepayment, the owner may prepay but must agree to use restrictions. 7 CFR 1965, Subpt. E, Exh. A-4. These restrictions require the owner to protect all current tenants from displacement. 7 CFR 1965, Subpt. E, Exh. A-4. This protection is accomplished by retaining the same rent limitations and other tenants' rights that exist in under the Section 515 program until the tenants choose to leave their current residence. 7 CFR 1965.215(c)(1)(ii), RD AN No. 3633 (4-10-01).

42. If RHS determines low-income housing is needed and minority-housing opportunities will be affected by prepayment, more elaborate protections are required. 7 CFR 1965.215(c)(1)(i), RD AN No. 3633 (4-10-01). The owner has the option to either: (1) continue to protect current and future tenants according to the law under the Section 515 program;; or (2) offer the project for sale to a non-profit or public agency, which would protect current and future tenants according to the law under the Section 515 program. 7 CFR 1965.204.

43. In order to implement these restrictions, owners must agree to the filing of restrictive use covenants against the property and the execution

44.

RHS is obligated to administer programs such as the Section 515 program “consistent with program goals and objectives, so that the involuntary displacement of families and businesses is avoided.” 42 USC § 1471 (g).

Emergency Low Income Housing Preservation Act, 42 U.S.C. § 1472(c)

45. In 1987, Congress passed the Emergency Low Income Housing Preservation Act of 1987 ("ELIHPA"), 42 U.S.C. § 1472(c), out of concern that a large portion of the housing stock constructed under the Section 515 program was vulnerable to mortgage prepayment and removal from the stock of low-income housing in rural areas, thus thwarting the basic purpose of the program.

46. Subsequent to the enactment of ELIHPA, an owner of a project funded by a Section 515 loan who wishes to prepay its outstanding indebtedness must submit a request to prepay a RHS loan. 7 CFR 1965.205.

47. Within 30 days of a submitted request, RHS must notify each tenant of the housing development as well as interested nonprofit organizations and appropriate state and local agencies that the owner has submitted a request to prepay the Section 515 loan. 42 U.S.C. § 1472(c)(3).

48. RHS must not grant a prepayment request until the requirements specified in ELIHPA are met. 42 U.S.C. § 1472 (c)(1)(A). To that end, RHS must attempt to enter into an agreement under which the owner of the project commits to extend the low-income use of the project for 20 years from the date of the agreement. 42 U.S.C. § 1472(c)(4)(A).

49. With Congress’ intent to preserve and extend the use of Section 515 developments as low-income housing as its guiding principle, RHS must offer financial incentives to an owner requesting to pre-pay its Section 515 loan. 42 U.S.C. § 1472(c)(4)(B). If, despite these incentives, the owner refuses to enter into an agreement to extend the low-income use of the project, then the owner must offer to sell the project to a qualified nonprofit organization or public agency at fair market value. 42 U.S.C. § 1472 (c)(5)(A).

50. During the pendeency of the prepayment request, the owner must continue to operate the Section 515 development as low-income rental housing and offer vacant units to eligible households subject to a lease addendum notifying new tenants of the pendency of the prepayment request. 7 C.F.R. § 1965.206(b)(5).

51. If no bona fide purchase offer is made and RHS accepts the prepayment, tenants have the right to remain in their units and pay the higher rents, with or without federal, state, or other subsidy, unless evicted for cause unrelated to payment. 7 C.F.R. § 1965.206(b)(2)(x).

Statement of the Facts

Defendant Owner's Attempt to Prepay the Mortgages and

Defendant VENNEMAN’s Violation of Regulations in Approving Prepayment

DDefendant GUARDIAN COMPANYOWNERS’s attempt to prepay mortgages

52. Defendant GUARDIAN COMPANYRiverside Coves Apartments, Ltd. owns River Bend Apartments (“River Bend”), formerly named the Riverside Coves Apartments Phase I and II, a 144 unit apartment complex in Riverside, AL Alabama.

53. Defendant Riverside Coves Apartments, Ltd. by and through its partners GUARDIAN COMPANY executed a 50 year loan agreement with Farmers Home Administration (FmHA) for $1,139,000 on August 23, 1978. This loan enabled Defendant GUARDIAN COMPANYOWNERS to build the 68-unit apartment complex known as Riverside Coves Apartments Phase I.

54. Defendant GUARDIAN COMPANY Riverside Coves Apartments, Ltd. by and through its partners executed a 50-year loan agreement with FmHA for $1,333,000 on June 28, 1979. This loan enabled Defendant GUARDIAN COMPANYOWNERS to build the 76-unit apartment complex known as Riverside Coves Apartments Phase II.

55. Defendant GUARDIAN COMPANYOWNERS entered the RHS Interest Credit Plan II program with respect to both FmHA mortgages on the River Bend Apartment Complex. As a consequence, Defendant GUARDIAN COMPANYOWNERS received a subsidy that made its mortgagemortgages interest equal to an effective rate of 1% despite the prevalence of market interest rates of approximately in the area of 10% at that time.

56. Defendant GUARDIAN COMPANYOWNERS agreed to maintain affordable rents for very-low, and low-income individuals and families for the full 50-year term of the mortgagemortgages as a condition of participation in this government subsidized program.

57. With more than 27 years left on Defendant GUARDIAN COMPANYOWNERS’s mortgage agreements with RHS, Defendant GUARDIAN COMPANYOWNERS asked RHS for permission to prepay the Section 515 mortgages on River Bend and remove River Bend from the 515 program.

58. Plaintiffs learned about Defendant OWNERS’ intention to prepay its Section 515 loan on or about December 14, 2000, when they received a letter from the management at River Bend.

59. Plaintiffs were informed by said letter that if Defendant VENNEMAN approved prepayment by Defendant OWNERS they could still receive their rental assistance at other subsidized housing.

60. On February 6, 2001, Defendant VENNEMAN VENNEMAN, as RHARURAL HOUSING ,SERVICE notified Plaintiffs, River Bend tenants, that Defendant GUARDIAN COMPANYOWNERS had requested permission to prepay its loans under the Section 515 and circumvent its responsibilities under the program.

61. On March 19, 2001, Defendant VENNEMAN VENNEMAN as USDARURAL HOUSING SERVICE informed Defendant GUARDIAN COMPANYOWNERS their request to prepay was approved conditioned on acceptance of a "Restrictive Use Agreement.". Defendant GUARDIAN COMPANYOWNERS refused to accept a "Restrictive Use Agreement.".

62. As of April 2001, there were 73 tenants at River Bend receiving Rental Assistance under the Section 515 program who faced displacementwould have been displaced if RHS approved Defendant GUARDIAN COMPANYOWNERS’s request to prepay without restrictions.

63. On July 20, 2001, Defendant VENNEMAN VENNEMAN, as RHSRURAL HOUSING SERVICE, denied Defendant GUARDIAN COMPANYOWNERS’s prepayment request because there was inadequate housing for low-income tenants within “a reasonable commuting area.”.

64. On October 31, 2001, Plaintiffs were notified by Defendant VENNEMANVENNEMAN, as RHSRURAL HOUSING SERVICE, that Defendant GUARDIAN COMPANYOWNERS filed an appeal of the agency’s decision to allow prepayment with restrictions. This letter further states that, “[t]hese appeals hearings are generally only open to the two parties and their witnesses. This is not an open forum.”

65. The appeal hearing was held by the National Appeals Division (NAD) of the USDA on December 3, 2001. The hearing officer was Mr. Pat Skaggs.

66. Defendant OWNERS asserted on December 3, 2001 in the NAD evidentiary hearing that the market area for River Bend Apartments included regions that tenants had left-some more than a decade earlier, regions that tenants mention in a survey they might like to move to, and the entire circulation area of the Birmingham News and the Anniston Star, in which River Bend advertised. Thus in Defendant OWNERS’ view, the Riverside, Alabama market area included, inter alia, Birmingham, Sylacauga, Prattville, Bessemer, and portions of Florida, and Georgia.

67. This expansive definition of market area does not comply with the definition 58 CFR 38913-01 and 7 CFR § 1965.202 ("The market area is the community in which the project is located and those outlying rural areas which are impacted by the project (excluding all other established communities)").

68. On December 7, 2001, the hearing officer released his opinion in this case. He determined that Defendant GUARDIAN COMPANYOWNERS established by a preponderance of the evidence that RHS erred in its decision to require Defendant GUARDIAN COMPANYOWNERS to prepay with restrictions instead of prepaying without restrictions.

69. On December 7, 2001, Defendant VENNEMAN, by and through the NAD hearing officer’s decision, eschewed the definition set out in the federal rules, and adopted the expansive definition of market area asserted by Defendant OWNERS. This decision allowed Defendant OWNERS to avoid the requirement that it must execute a restrictive use agreement to protect current tenants. Defendant OWNERS were also able to diminish the number of tenants in the project by relocating tenants to housing far from Riverside, Alabama during the appeal process.

70. On January 4, 2002, Rural Development requested a Director's Review of NAD’s December 7, 2001, decision.

71. On January 7, 2002, Ms. Nancy Smith, the Acting Director of USDA, vacated and remanded the NAD decision due to the inadequate notification tenants received regarding the hearing as well as their inability to attend or participate in the hearing process. The remand stipulated that the hearing officer must allow tenant participation in the appeal.

72. The original hearing officer was set to preside over the remanded appeal. In a letter dated, January 25, 2002, from Hearing Officer Mr. Pat Skaggs to Assistant Director of NAD Southern Region, Duane Sinclair, Mr. Skaggs asked “to be excused from re-hearing the appeal because I do not feel that I can render an unbiased adjudication.”

73. By notation on January 30, 2002, Mr. Skaggs states, “[m]y request to recuse is not approved, no provision to cover recusal on a remand decision. Instructed to schedule a remand pre-hearing and remand hearing to comply with Director’s review determination.”

74. During the pendency of the remanded appeal review, Plaintiff CHAMPION, along with another River Bend tenants, attempted to inform other residents about the situation in a letter dated February 7, 2002. This letter assured fellow tenants no final determination had been made with regard to Defendant OWNERS’ request to prepay its mortgages under Section 515.

75. On February 12, 2002, Defendant MARTIN, a partner in Defendant OWNERS, sent a memo to all tenants stating that the letter from Plaintiff CHAMPION contained false information. Although, Defendant OWNERS’ request to prepay was still under review, Defendant MARTIN stated, “I would urge each and everyone that would like to stay at River Bend Apartments to apply for a Section 8 Voucher.”

76. Further, Defendant OWNERS provided transportation for River Bend tenants to the HUD office to apply for Section 8 vouchers.

77. The pre-hearing meeting for the remand hearing were the agenda for the hearing was set was held without a tenant representative despite the fact that the purpose for the rehearing was to allow for tenant participation.Add in prehearing meeting where agenda was set was held without tenant representative present.

78. On April 25, 2002, despite his own admitted bias, MrMr. Skaggs held the remanded appeals hearing of Defendant GUARDIAN COMPANYOWNERS's request for prepayment via teleconference.

79. On May 2, 2002, the hearing officer released his opinion in this case. He determined that Defendant GUARDIAN COMPANYOWNERS established, by a preponderance of the evidence, that RHS erred in its decision to require Defendant GUARDIAN COMPANYOWNERS to prepay with restrictions instead of without restrictions.

80. On May 21, 2002, Mr. Arthur Garcia, Administrator for RHS, requested a Director's Review of the NAD decision on May 2, 2002. In his request, Mr. Garcia identifies several areas where the hearing officer’s determination is in conflict with the agencies’ own regulations. He further states that, “the intent of the Agency regulations is to protect the remaining tenants in the prepaying facility, not to help them move.”

81. On June 6, 2002, the USDA Acting Director, Mr. Duane Sinclair, who previously denied Hearing Officer Skaggs request for recusal, upheld the USDA National Appeals' decision approving Defendant OWNERS Defendant GUARDIAN COMPANYOWNERS’s their prepayment of their Section 515 mortgages without restrictions.

82. The only action taken by Defendant VENNEMAN to protect the tenants of River Bend since approving Defendant OWNERS’ request to prepay its loans with RHS and remove River Bend from the 515 program, was the issuance of Letters of Priority Entitlement (LOPE) for admission to other RHS projects.

Defendants' Failure to Prevent Plaintiffs' Displacement

83. Plaintiffs learned about Defendant GUARDIAN COMPANYOWNERS’s intention to prepay its Section 515 loan on or about December 14, 2000, when they received a letter from the management at River Bend.

84. Plaintiff’s were informed by said letter that if Defendant VENNEMAN VENNEMAN by RHS RURAL HOUSING SERVICE approved prepayment by Defendant GUARDIAN COMPANYOWNERS they could still receive their rental assistance at other subsidized housing., most of which is outside the market area.

85. On February 6, 2001, Defendant VENNEMAN by RHS confirmed Defendant GUARDIAN COMPANYOWNERS’s intention to prepay the Section 515 loan in a letter to Plaintiff.

86. Defendant Guardian CompanyOWNERS asserted on December 3, 2001 in an RHS evidentiary hearing that the market area for River Bend Apartments included, regions that tenants had left-some more than a decade earlier, regions that tenants mention in a survey they might like to move to, and the entire circulation area of the Birmingham News and the Anniston Star, in which River Bend advertised. Thus in Defendant GUARDIAN COMPANYOWNERS’ s view, the Riverside, Alabama market area included, inter alia, Birmingham, Sylacauga, Prattville, Bessemer, and portions of Florida, and Georgia.

87. This expansive definition of market area does not comply with the definition located in 58 CFR 38913-01 and 7 CFR § 1965.202 ("The market area is the community in which the project is located and those outlying rural areas which are impacted by the project (excluding all other established communities)").

88. On December 7, 2001, Defendant VENNEMAN VENNEMAN, as RHSRURAL HOUSING SERVICE, eschewed the definition set out in the federal rules, and adopted the expansive definition of market area asserted by Defendant Guardian CompanyOWNERS. This decision allowed Defendant GUARDIAN COMPANYOWNERS to fulfill the requirements of prepayment by offering displaced tenants housing far from Riverside, Alabama.

89. On January 7, 2002, the December 7, 2001, the Appeal Determination was vacated and remanded back to the USDA Appeals Division by the Director of the USDA.

90. During the pendaency of the remanded appeal review, Plaintiff ChampionCHAMPION, along with another River Bend tenant, attempted to inform other residents about to the situation in a letter dated February 7, 2002. This letter assured fellow tenants no final determination had been made with regard to Defendant GUARDIAN COMPANYOWNERS’s request to prepay its mortgages under Section 515.

91. On February 12, 2002, Defendant Charles MartinMARTIN, a partner in Defendant GUARDIAN COMPANYOWNERS, sent a memo to all tenants stating that the letter from Plaintiff Champion CHAMPION contained false information. Although, Defendant GUARDIAN COMPANYOWNERS’s request to prepay was still under review, Mr. Defendant MartinARTIN stated, “I would urge each and everyone that would like to stay at River Bend Apartments to apply for a Section 8 Voucher.”

92. Further, Defendant the GUARDIAN COMPANYOWNERS provided transportation for River Bend tenants to the HUD office to apply for Section 8 vouchers. While at the HUD office, River Bend management provided food and beverages to their tenants while they waited.

SECTION 8 v RA

In the Remanded Appeal Determination rendered by the USDA Appeals Division on May 2, 2002, for the April 25, 2002, Evidentiary Hearing, Defendant VENNEMAN, as RHSRURAL HOUSING SERVICE,VENNEMAN again adopted the unofficial, expansive definition of market area proposed by Defendant GUARDIAN COMPANYOWNERS.

93. On June 6, 2002, Mr. Duane Sinclair, the Acting Director of the USDA certified the National Appeals decision.

The only action taken by Defendant VENNEMAN RURAL HOUSING SERVICE to protect the tenants of River Bend since it approved Defendant OWNERS’s request to prepay its loans with RHS and remove River Bend from the 515 program was the issuance of Letters of Priority Entitlement (LOPE) for admission to other RHS projects.The only action taken by RHS to protect the tenants was the issuance of Letters of Priority Entitlement (LOPE) for admission to other RHS projects.

Defendant VENNEMAN’s Failure to Address Needs of Minority Groups

Defendants' Failure to Address Needs of Minority Group Plaintiffs

94. In neither the Remanded Appeal Determination, nor the Director's Review of the Remanded Appeal Determination, was the impact upon minorities addressed by either Defendant GUARDIAN COMPANYOWNERS or Defendant VENNEMAN by RHSRURAL HOUSING SERVICEVENNEMAN. Only the tenant representative addressed the issue of impact upon minority tenants in the Remanded Appeal Determination.

95. In a letter dated, May 21, 2002, Mr. Arthur Garcia, an Administrator for RHS identifies that the Civil Rights Impact Analysis (CRIA) produced by RHS indicated that the area housing market around River Bend is a “very tight market with very few vacant units.”

96. Mr. Garcia further states that, “[by} removing the subject property from the stock of affordable rental housing, minorities would clearly be affected by a loss of housing opportunity in a tight market.”

97. Had RHS Defendant VENNEMAN complied with the law, RHSshe would also have had to make a determination about whether the Defendant owners’OWNERS’ prepayment in this instance would have had a material effect on minority housing opportunities. If Defendant VENNEMAN RHS had made the determination that minority housing opportunities would be affected by prepayment, Defendant owners OWNERS would be required to offer the project for sale to a nonprofit or public agency interested in retaining the project as affordable housing for the long term.

98.

99. 76. Defendant VENNEMAN by RHS not only failed to make statutory findings with respect to minority housing opportunities, and but the agency failed to consider in any way the implications of iher ts actions or inactions in addressing this prepayment with respect to impact upon minorities in the market area of River Bend.

100.

CAUSES OF ACTION

FIRST CAUSE OF ACTION – VIOLATION OF APA

101. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive, of this complaintrestate ¶¶ 1-61.

102. Defendant VENNEMAN, as RHSRURAL HOUSING SERVICE,VENNEMAN violated the Section 515 prepayment preservation statute, 42 USC 1472(c), by permitting owners, Defendant RIVERSIDE COVES and GUARDIAN COMPANYOWNERS to prepay the Section 515 mortgage and not requiring maintenance of the restrictive covenants protecting the tenants, and entitling Plaintiffs to relief under the Administrative Procedures Act, 5 USC § 706.

SECOND CAUSE OF ACTIONSECOND CAUSE OF ACTIO- VIOLATION OF APA

N

103. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive, of this complaint

Plaintiffs restate ¶¶ 1-61.

104. Defendant VENNEMAN, as RHSRURAL HOUSING SERVICEVENNEMAN, violated her statutory obligation to administer the Section 515 program to avoid displacement of families, pursuant to 42 USC §1471(g), by permitting Defendant GUARDIAN COMPANYOWNERS to prepay its Section 515 mortgages without requiring the maintenance of the restrictive covenants protecting the tenants, and entitling Plaintiffs to relief under the Administrative Procedures Act, 5 USC § 706.

105.

THIRD CAUSE OF ACTION- VIOLATION OF THE APA

THIRD CAUSE OF ACTION

106. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive, of this Complaintstate ¶¶ 1-61.

107.

108. Defendant RURAL HOUSING SERVICEVENNEMAN, violated itsher duty to administer the Section 515 program to affirmatively further fair housing pursuant to 42 USC § 3608(d), by not considering the effect of its actions or inactions on minorities in the town of Riverside, Alabama L and its market area, when it permitted Defendant OWNERS to prepay its mortgages and circumvent the Section 515 program. Such a violation entitles Plaintiffs to relief under the Administrative Procedures Act, 5 USC § 706.

109. Defendant VENNEMAN, as RHS, violated its duty to administer the Section 515 program to affirmatively further fair housing pursuant to 42 USC § 3608(d), by not considering the effect of its actions or inactions on minorities in the town of Riverside, AL and its market area, when it permitted Defendant GUARDIAN COMPANY to prepay its mortgages and circumvent the Section 515 program. Such a violation entitles kept Plaintiffs from entitled to relief under the Administrative Procedures Act, 5 USC § 706.

FOURTH CAUSE OF ACTION- VIOLATION OF DUE PROCESS

110. FOURTH CAUSE OF ACTION

111. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive, of this Complaint.

112. Defendant RURAL HOUSING SERVICE VENNEMAN, violated Plaintiffs’ Due Process rights under the 5th and 14th Amendments to the United States Constitution and the Preservation Act regulation by not adhering to its own administrative policies, located in 58 CFR 38913-01 and 7 CFR 1965.202.

FIFTH CAUSE OF ACTION- VIOLATION OF ELIPHA

113. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive, of this Complaintstate ¶¶ 1-61.

114.

115. Defendant OWNERS violated Plaintiffs’ rights under the Emergency Low Income Housing Preservation Act, 42 USC § 1472(c), and its implementing regulations, by not offering to sell River Bend Apartments to qualified nonprofit organizations and public agencies which would maintain the complex as low-income housing.

SIXTH CAUSE OF ACTION- VIOLATION OF ELIPHA

116. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive of this Complaint.

117. Defendant OWNERS violated Plaintiff’s’ rights under the Emergency Low Income Housing Preservation Act, 42 USC § 1472(c), and it implementing regulation by not executing restrictive use agreements to protect current tenants.

SEVENTH CAUSE OF ACTION- VIOLATION OF SECTION 515

118. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX73, inclusive of this Complaint.

119. Defendant OWNERS violated its duties under Section 515 of the Housing Act of 1949 and its implementing regulations by relocating tenants and not renting vacant units as Section 515 units prior to prepaying its mortgages on River Bend.

120. By seeking to benefit from both a mortgage prepayment which did not comply with federal law, and from the actions of federal Defendants in permitting such prepayment, defendant owners violated 42 USC § 1472 (c).

121.

122. FIFTH CAUSE OF ACTION

123. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX, inclusive, of this Complaint.state ¶¶ 1-61.

124.

SIXTH CAUSE OF ACTION

Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX, inclusive, of this Complaint.state ¶¶ 1-61.

Defendant VENNEMAN, as RHS, violated Plaintiffs’ Due Process rights under the 5th and 14th Amendments and the Preservation Act regulation by not adhering to its own administrative policies, located in 58 FR 38913-01 and 7 CFR 1965.202.

SEVENTH CAUSE OF ACTION

87. Plaintiffs reallege and incorporate by reference the allegations in Paragraphs 1 through XX, inclusive of this Complaint.state ¶¶ 1-61

RELIEF

WHEREFORE, the Plaintiffs pray this Court:

Enter a declaratory judgment that the actions and omissions of Guardian Company set forth above violate Section 515 of the Housing Act of 1949, 42 U.S.C. § 1485; the Emergency Low Income Housing Preservation Act of 1987, 42 U.S.C. § 1472(c); the Loan Resolution, Deed of Trust, and Promissory Note regarding River Bend Apartments; the Uniform Relocation Act, 42 U.S.C. §§ 4601 et seq.; 42 U.S.C. § 1437f, note; the Due Process Clause of the Fourteenth Amendment to the United States Constitution; and 42 U.S.C. § 1983.

By seeking to benefit from both a mortgage prepayment which did not comply with federal law, and from the actions of federal Defedants in permitting such prepayment, defendant owners violated 42 USC § 1472 (c).

RELIEF

125. Therefore, plaintiffs seek the following relief:

A. A declaratory judgment, issuesd pursuant to 28 USC § 2201, that :

1. By permitting Ddefendant ownersOWNERS to prepay the section 515 mortgages without the imposition of restrictive covenants protecting the tenants, Ddefendants VENNEMANenneman and RHS have violated the Section 515 prepayment preservation statute, 42 USC §1472(c), entitling plaintiffs to relief under the Administrative Procedures Act (APA), 5 USC § 706;

2.

3. By choosing to permit Ddefendant ownersOWNERS to prepay the section 515 mortgages without the imposition of restrictive covenants protecting the tenants, dDefendant VENNEMANenneman and RHS havse violated their her statutory obligation to administer the section 515 program so as to avoid displacement of families, pursuant to 42 USC § 1471(g), entitling plaintiffs to relief under the APA, 5 USC § 706;

4.

5. 3. By failing to consider the implications of its actions or inactions in permitting this prepayment with respect to minorities in the market area of Riverside, Alabama, Ddefendant VennemanENNEMAN and RHS violated therefore violated her duty to administer theirher programs so as to affirmatively further fair housing pursuant to 42 USC § 3608 (d), entitling plaintiffs to relief under the APA, 5 USC § 706.

6.

;

7. By seeking to benefit from both a mortgage prepayment which did not comply with federal law, and from the actions of federal defendants in permitting such prepayment, defendant owners violated 42 USC § 1472 (c);;

B. For Ppreliminary and permanent injunctive relief:

1. Eenjoining Defendant RHS VENNEMAN from allowing prepayment of the mortgages on River Bend Apartments, until the agency makes the proper findings and determines what restrictions to impose as a result of those findings.

2. eEnjoining Defendant OWNERSs’ RIVERSIDE COVES and GUARDIAN COMPANYOWNERS from inducing or encouraging any residents to move out of River Bend Apartments;

C. Award Plaintiffs their costs.

D.

E. An aAward of costs, and disbursements, and attorney’s fees pursuant to 28 USC § 2412;

F.

G. For sSuch relief as the court may deem just and equitable, including any relief available pursuant to 28 USC § 2201 and 2202.

126.

127. Enter a preliminary and permanent injunction:

enjoining RHS from allowing prepayment of the mortgage on River Bend Apartments, until the agency makes the proper findings and determines what restrictions to impose as a result of those findings.

a. enjoining Defendant Guardian Company from inducing or encouraging any residents to move out of River Bend Apartments;

128. Award Plaintiffs their costs.

129. An award of costs and disbursements and attorney’s fees pursuant to 28 USC § 2412;

130. Grant Plaintiffs such other and further relief as the court deems just and proper.

Respectfully submitted,

Dated: ________________________ Signed: Respectfully Submitted,

Alabama Disabilities Advocacy Program

_________________________________________

REUBEN W. COOK, ESQ.

Alabama Disabilities Advocacy Program

P. O. Box 870395

Tuscaloosa, Alabama 35487

(205)348-4928 telephone

(205) 348-3909 facsimile

Attorney for Plaintiffs LAURA E. McNALLY

JAMES A. TUCKER

Alabama Disabilities Advocacy Program

526 Martha Parham West

Box 870395

Tuscaloosa, Alabama 35487

(205) 348-4928 telephone

(205) 348-3909 facsimile

Attorneys for Plaintiffs

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download