797 F.3d 1049
D.C. Cir.2015Background
- Mantua Gardens East, Inc. (owner) and James Grier (president) operated a 52‑unit HUD‑subsidized project subject to Section 236 regulatory agreement and a Section 8 HAP contract.
- In 2008 Grier moved $325,000 from the project reserve to a Wachovia account; an LLC he formed obtained a loan secured by that deposit and used loan proceeds to pay off the original mortgage.
- In 2011 Mantua Gardens notified Section 8 tenants of new leases and rents and issued vacate notices without giving HUD or tenants one year’s notice.
- HUD sought civil money penalties for Section 8 and Section 236 violations; an ALJ found liability and imposed large penalties but reduced amounts based on ability to pay and an ALJ finding that HUD acted in bad faith.
- The Secretary affirmed liability but vacated the ALJ’s penalty reductions, restoring HUD’s requested penalty amounts; petitioners sought court review challenging jurisdiction, liability findings, and penalty determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction/timeliness of petition under 12 U.S.C. § 1735f‑15(e) | Petition filed within 20 days because “entry” occurred on date of Certificate of Service (May 29, 2013) | HUD: entry = date of Secretary’s order (May 28, 2013); petition late | Court follows Energy Probe: entry = signed and served; petition timely; jurisdiction exists |
| Liability for Section 8 violations (raising rents/no notice) | No HAP contract in force when notices issued, so no statutory/contractual violation | Statutory requirement to give one‑year notice applies regardless; petitioners violated 42 U.S.C. § 1437f(c)(8)(B) | Court upholds Secretary: liability supported and not arbitrary |
| Penalty amount for Section 8 (ability to pay) | ALJ reduced penalty to $450,000 based on asserted inability to pay; Secretary’s reversal arbitrary | Secretary: ability to pay is a presumed factor; party must raise as affirmative defense with documentary evidence; no such evidence here | Court affirms Secretary’s restoration of HUD’s requested penalty ($1,260,000) |
| Liability and penalties for Section 236 violations and ALJ’s bad faith reduction | Transfer/prepayment ended HUD obligations after mortgage transfer; Firstrust tacitly approved reserve transfer; ALJ’s credibility‑based penalty reduction should be upheld | Secretary: no approved prepayment; Regulatory Agreement remained in effect; ALJ misread testimony—no bad faith by HUD | Court affirms Secretary on liability and vacating ALJ’s 25% penalty reductions |
Key Cases Cited
- Bowles v. Russell, 551 U.S. 205 (procedural deadlines for appeals are jurisdictional)
- Henderson v. Shinseki, 562 U.S. 428 (clarifies not all filing deadlines are jurisdictional)
- Energy Probe v. U.S. Nuclear Regulatory Comm’n, 872 F.2d 436 (entry = decision signed and served)
- U.S. Dep’t of Agric. v. Kelly, 38 F.3d 999 (statute‑specific start date may be order date rather than service date)
- Nat’l Treasury Emp. Union v. FLRA, 754 F.3d 1031 (jurisdictional inquiry statement)
- Aylett v. Sec’y of HUD, 54 F.3d 1560 (discusses review when agency overturns ALJ credibility findings)