UNITED STATES DISTRICT COURT - NHLP



UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

_________________________________________

SHARON RUTLEDGE, NACHELLE JOHNSON,

LULA HAMPTON, TAURA CHEATHAM, and

the PARKVIEW TENANTS’ ASSOCIATION,

File No. CV-

Plaintiffs,

v. Hon.

ALFONSO JACKSON, Secretary of the U.S. U.S. Mag. Judge

DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT (HUD), and HUD,

Defendants.

_________________________________________/

MOTION FOR PRELIMINARY INJUNCTION and BRIEF IN SUPPORT

Pursuant to Rule 65 of the Federal Rules of Civil Procedure, the plaintiffs ask this Court to preliminarily enjoin the defendants from finalizing the sale of Parkview Apartments to Emmanuel Ku/Dakko Management until such time as this action is heard and judgment is entered. If the defendants are allowed to proceed with the proposed sale, the plaintiffs may be without recourse to challenge the lawfulness of the sale. An injunction is warranted and necessary in this case in order to preserve the status quo until the plaintiffs have had an opportunity to vindicate their rights.[1]

Introduction

The plaintiffs are residents of the Parkview housing complex (Parkview) and are seeking to prevent the HUD from selling Parkview to Emanuel Ku/Dakko Management (Ku). Ku is a New York developer with a record of mismanagement of low-income properties in New York City. During Mr. Ku’s ownership of his NYC properties, the Department of Housing Preservation and Development of the City of New York has charged him with nearly 3,000 building code violations, including 600+ that were immediately hazardous, and 1,750+ that were hazardous violations. Ku’s violation rate is eight times greater than the previous owners’ rates. In addition, Ku’s 13 properties have been the subject of 35 separate litigations. See Affidavit of Harold M. Shultz, attached as Exhibit A to the complaint.

Section 219 of the Consolidated Appropriations Act of 2004, Pub. L. No. 108-199, 118 Stat. 397 (Jan. 23, 2004), requires that a potential buyer of a HUD-held property be “in substantial compliance with applicable State or local government housing statutes, regulations, ordinances and codes with regard to other properties owned by the purchaser.” The plaintiffs allege that the sale to Ku would violate Section 219 and is therefore illegal.

Argument

I. THE COURT SHOULD ENTER A PRELIMINARY INJUNCTION TO MAINTAIN THE STATUS QUO AND TO PREVENT THE UNLAWFUL SALE OF PARKVIEW TO KU.

The Court must assess four factors in deciding whether to issue a preliminary injunction: (1) whether the plaintiffs have established a substantial likelihood or probability of success on the merits; (2) whether there is a threat of irreparable harm to them; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by the injunction. Hamad v. Woodcrest Condominium Ass’n, 328 F.3d 224, 230 (6th Cir. 2003). “The four considerations applicable to preliminary injunction decisions are factors to be balanced, not prerequisites to be met.” Mich. Bell Tel. Co. v. Engler, 257 F.3d 587, 592 (6th Cir. 2001). The plaintiffs here make a strong showing on all four factors, thus making a preliminary injunction appropriate.

A. The Plaintiffs Are Substantially Likely To Succeed On The Merits

The Senate Committee Report (S. Rep. 108-148, at 62 (2004)) of Section 219 makes clear that the intent behind the bill was “to prevent the sale of HUD properties, from HUD, or from State and local governments, to people with demonstrated patterns of severe housing code violations.” As the Senate report suggests, the focus of the new law is on the individual purchaser. The assumption underlying the bill is that property owners who demonstrate a pattern of code non-compliance are likely to continue that pattern after purchasing additional properties. These are the purchasers whom Congress meant to bar from buying HUD low-income projects.

Congress clearly expressed its desire to ensure that buyers – who may get the properties at a steeply discounted rate – are not slumlords or predatory investors who will extract income from the properties without maintaining them to the level required by state and local health and safety and building codes.

Given the detail and strength of the affidavit of the special counsel to the NYC Housing Commissioner, HUD cannot argue in good faith that it reviewed Ku’s record of housing code violations before approving him as the high bidder at the foreclosure sale. Alternatively, if it did approve him, then it acted unlawfully or its approval was an abuse of discretion. Ku’s record could hardly be worse; indeed, Ku is the paradigm of the sort of purchaser whom Congress meant to block from buying HUD properties. Accordingly, the plaintiffs have shown a substantial likelihood of success on the merits.

B. The Plaintiffs Will Be Irreparably Harmed If The Sale Is Finalized

The plaintiffs are seeking to prohibit the closing of the sale of Parkview. Once the sale is finalized, it will be more difficult to have it set aside or to divest Ku of ownership. At that point, Ku will hold full title, and the plaintiffs may have lost their only realistic chance of preventing Ku from assuming control of Parkview. Given Ku’s record of under-investment, code violations, tardiness, and litigation in his NYC properties, the plaintiffs are almost certain to suffer the same fate as Ku’s NYC tenants if he is allowed to gain control of Parkview.

Accordingly, absent a preliminary injunction, the plaintiffs right to challenge the sale, as well as their right to decent housing under the law, will be irreparably harmed. Only with a preliminary injunction can the plaintiffs hope to vindicate their rights through the courts.

C. The Harm To The Defendants And Other Interested Parties Will Be Slight

At present the plaintiffs seek only to maintain the status quo through an injunction. Ku has not yet purchased the property, nor has he acquired the right to collect any money from the plaintiffs. An injunction will put him in no worse a position than he was in before the sale of Parkview (at the HUD foreclosure auction), and it will put him in no worse position than he is in now, awaiting closing. Moreover, the further the process proceeds, the stronger will be Ku’s reliance interest. Therefore, the harm to Ku would be minimal, and an injunction should be entered as soon as practicable.

As for HUD, its burden will be limited to having the sale of the property delayed. Congress has clearly struck a balance in favor of careful scrutiny of potential buyers, and against hasty sales to unqualified buyers. HUD cannot then complain that it is being harmed by delay caused by its failure to fulfill Congress’s clear intentions.

Therefore, the harm to the defendants and others is minimal, and the harm to the plaintiffs if the injunction is denied far outweighs the harm to the defendants and other interested parties if it is granted.

D. The Public Interest Will Be Served By A Preliminary Injunction

Congress has been clear in articulating the importance of safe, affordable housing and has passed numerous laws to that end. The very statute at issue in this case was specifically designed to further those ends. An interpretation of Section 219 that thwarts Congressional efforts to improve the nation’s housing stock, especially for low and moderate income residents, cannot be said to serve the public interest. Conversely, a preliminary injunction will serve the public interest by ensuring that the defendants’ actions are in accord with Congressional directives designed specifically to promote those interests.

If the plaintiffs are successful in this action, it will be because the Court determines that HUD failed to approve Ku as required by federal law, or that HUD flouted the law in approving Ku, given his egregious record of code violations in NYC. In a case like this one, HUD serves as a stand-in for the public. If HUD failed to carry out Congress’s goal of ensuring that the housing sold by HUD went only to a buyer with a strong record of code compliance, then it is the public that suffers harm. A preliminary injunction will serve the public interest both by vindicating the right of Congress to pass meaningful legislation in this area, and by preserving the quality of the nation’s housing stock (specifically in Ypsilanti, Michigan). The plaintiffs must be afforded an opportunity to fairly and fully present their case to the Court in order to protect these important public interests. An injunction is necessary if the plaintiffs are to have that opportunity.

Conclusion

For the reasons set forth, the plaintiffs ask the Court to enjoin the sale of the Parkview property by HUD to Mr. Ku/Dakko Management until such time as it rules on the merits of the plaintiffs’ case.

Respectfully submitted,

MICHIGAN POVERTY LAW PROGRAM

____________________________

By: James E. Schaafsma (P-42899)

611 Church Street, Suite 4A

Ann Arbor, MI 48104-3000

(734) 998-6100

MICHIGAN CLINICAL LAW

PROGRAM

_________________________

By: Paul D. Reingold (P-27594)

363 Legal Research Building

801 Monroe Street

Ann Arbor, MI 48109-1215

(734) 763-4319

LEGAL SERVICES OF SOUTH-CENTRAL MICHIGAN

_________________________

By: Robert F. Gillett (P-29119)

Min Kim (P-57707)

420 North Fourth Avenue

Ann Arbor, MI 41804

(734) 665-6181

Jake Ouslander and Matt Vasconcellos

Student Attorneys for the Plaintiffs

Dated: November 28, 2005

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[1] The plaintiffs’ complaint also asks that the sale be voided if it has proceeded to closure before this action can be heard, so that an injunction would continue to be appropriate even if the sale is finalized.

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