Public Housing Authorities Directors Association v. United States
130 Fed. Cl. 522
| Fed. Cl. | 2017Background
- Over 300 public housing authorities (PHAs) and two PHA trade associations sued the United States alleging HUD breached Annual Contributions Contracts (ACCs) by allocating 2012 Operating Fund subsidies using an "excess reserves" offset rather than a uniform pro rata reduction required by HUD regulations (24 C.F.R. § 990.210(c)).
- ACCs expressly incorporate Title 24 regulations "as amended from time to time," and require HUD to provide annual contributions "in accordance with all applicable statutes, executive orders, regulations, and this ACC."
- Congress appropriated $3,961,850,000 for 2012 operating subsidies and included language directing the Secretary to "take into account" PHAs’ excess operating reserves when determining 2012 allocations; the President had proposed a similar approach but with different aggregate limits.
- HUD implemented the 2012 Appropriations Act by first offsetting each PHA’s formula eligibility by that PHA’s excess reserves, then applying a uniform scaling factor (~94.97%) so total payments fit within the appropriation—producing non‑pro rata reductions across PHAs.
- Plaintiffs sought damages (aggregate ≈ $135.8M) for breach of contract, arguing HUD violated the incorporated Title 24 rule that required only pro rata reductions in the event of insufficient funds.
- Court severed and consolidated individual suits, dismissed (for lack of standing) several PHAs that suffered no injury and both association plaintiffs (associational standing failed because individualized damages were required), and resolved Count I on cross-motions for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Title 24 §990.210(c) (pro rata reductions) was incorporated into the ACCs | ACCs explicitly incorporate Title 24 "as amended from time to time," so §990.210(c) is contractually binding | ACCs are subject to "applicable statutes" and availability of funds; statute (2012 Appropriations Act) compelled HUD’s method | Incorporated: Court holds Title 24 (as amended) was incorporated by clear express language, so §990.210(c) governs |
| Whether HUD breached the ACCs by using an excess‑reserve offset (non‑pro rata) before applying a uniform reduction | HUD’s 2012 methodology violated the incorporated pro rata rule; HUD breached ACCs and is liable for damages | HUD had to follow the 2012 Appropriations Act and ACC language making payments "subject to availability of funds"—so no breach | Breach: Court holds HUD breached the ACCs by applying the excess‑reserve offset rather than a pro rata reduction required by Title 24 |
| Whether the 2012 Appropriations Act was incorporated into the ACCs or otherwise supersedes the incorporated regulations | The Act is a later statute but was not incorporated by contract; incorporation requires express language and ACCs do not incorporate future statutes | The Act’s directive to "take into account" reserves and the ACCs’ proviso about availability of funds meant HUD’s actions complied with contract | Act not incorporated: Court rejects that the Act was incorporated or that the ACCs permitted HUD to adopt a non‑pro rata method under the availability proviso |
| Standing of association plaintiffs and certain PHAs without excess reserves | Associations can sue for harms to members; injured PHAs have standing | Associations lack privity; some PHAs suffered no injury from HUD’s methodology | Associations dismissed (no associational standing); PHAs that suffered no injury dismissed; three disputed plaintiffs remain for factual determination |
Key Cases Cited
- United States v. Winstar Corp., 518 U.S. 839 (government may be liable for breach when subsequent legislation frustrates prior contractual commitments)
- Mobil Oil Expl. & Producing Se., Inc. v. United States, 530 U.S. 604 (contracts incorporate existing statutes referenced but do not presumptively incorporate subsequently enacted statutes)
- Precision Pine & Timber, Inc. v. United States, 596 F.3d 817 (Fed. Cir.) (contractual incorporation by reference requires clear, express, unambiguous language)
- Northrop Grumman Info. Tech., Inc. v. United States, 535 F.3d 1339 (Fed. Cir.) (reluctance to find incorporation of statutes/regulations absent explicit contract language)
- Cherokee Nation of Oklahoma v. Leavitt, 543 U.S. 631 ("subject to the availability of appropriations" language normally preserves appropriations constraints but does not authorize violating other contractual/regulatory obligations)