106 Fed. Cl. 623
Fed. Cl.2012Background
- NAHASDA directs HUD to provide annual grants to tribes and uses a FCAS-based formula under 24 C.F.R. §§ 1000.301-1000.340.
- Audit in 2001 revealed HUD misapplied FCAS by excluding eligible units; HUD announced overpayments to plaintiffs.
- HUD identified overpayments since November 26, 2002: $863,236 (Lummi), $249,689 (Fort Berthold), $964,699 (Hopi).
- HUD recaptured most overpayments by offsetting against underpayments and reducing future grants; some funds placed on hold.
- Plaintiffs allege HUD recaptured funds without complying with NAHASDA’s hearing/notice requirements, seeking return of funds.
- Defendant argues recapture was proper under common law offsets or under Section 405, not requiring hearing under 401.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HUD’s offset of grants without a hearing constitutes illegal exaction. | Lummi argues 401/405 require notice/hearing; funds not expended in accordance with NAHASDA were misallocated. | HUD may offset funds under common law due to misallocation outside 401/405; no hearing required. | Denied; section 405 applies and requires hearing before adjustment. |
| Does Section 405 govern adjustments and require hearing before recapturing funds already spent on affordable housing? | Section 405 lacks hearing only if misclassification is not substantial noncompliance; FCAS issues require hearing. | Section 405 provides broad audit/review authority and does not compel hearings; common law offset possible. | Yes, Section 405 applies and requires notice/hearing before grant adjustment; common law offset rejected. |
| Does NAHASDA preclude a federal common law right to recapture funds outside Sections 401/405? | Enumerated remedies are exclusive; common law offset not available. | HUD may recover under common law or offset; statute does not preclude common law. | No; Section 405 governs; common law offset not controlling here. |
Key Cases Cited
- Aerolineas Argentinas v. United States, 77 F.3d 1564 (Fed.Cir.1996) (illicit exaction claim available where money paid to government was improperly taken)
- Eastport S.S. Corp. v. United States, 372 F.2d 1002 (Ct.Cl.1967) (supports illegal exaction framework)
- City of Milwaukee v. Illinois and Michigan, 451 U.S. 304 (U.S.1981) (federal common law only when Congress has not addressed the question)
- American Elec. Power Co. v. Connecticut, 131 S. Ct. 2527 (U.S.2011) (displacement of federal common law when Congress addresses the issue)
- City of Kansas City v. United States Dep’t of Housing and Urban Dev., 861 F.2d 739 (D.C.Cir.1988) (procedural protections in federal grant programs are critical to avoid arbitrary termination)
- Shell Oil Co. v. Manley Oil Corp., 124 F.2d 714 (7th Cir.1941) (interpretation of statutory language like 'subject to' governs scope)
- United States v. Wurts, 303 U.S. 414 (U.S.1938) (common law right to recover funds exists for funds paid illegally)
- United States v. Munsey Trust Co., 332 U.S. 234 (U.S.1947) (government's right to apply unappropriated funds to extinguish debts)