Marshall v. CuomoMarshall v. Cuomo
Case Information
*1 Before WILKINSON, Chief Judge, and TRAXLER and KING, Circuit Judges.
_________________________________________________________________ Affirmed by published opinion. Judge Traxler wrote the opinion, in which Chief Judge Wilkinson and Judge King joined.
COUNSEL
ARGUED: Kevin Lamar Sink, HOWARD, STALLINGS, STORY, WYCHE, FROM & HUTSON, P.A., Raleigh, North Carolina, for *2 Appellants. Eric David Goulian, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees. ON BRIEF: Ashley H. Story, HOWARD, STALLINGS, STORY, WYCHE, FROM & HUTSON, P.A., Raleigh, North Carolina, for Appellants. Frank W. Hunger, Assistant Attorney General, Janice McKenzie Cole, United States Attorney, Barbara C. Biddle, Civil Division, UNITED STATES DEPARTMENT OF JUSTICE, Wash- ington, D.C., for Appellees. _________________________________________________________________ OPINION
TRAXLER, Circuit Judge:
Appellants George F. Marshall, One Management, Inc., and Fred-
erick Investment Corporation (collectively "Marshall"), brought a
complaint against appellees, the Department of Housing and Urban
Development and its Secretary (collectively "HUD"), challenging
administrative proceedings which resulted in HUD's imposition of a
suspension and three-year debarment of Marshall from future partici-
pation in covered transactions with the federal government. See
Section 8 of the United States Housing Act (the"Act") provides for
financial assistance to "aid[ ] low-income families in obtaining a
decent place to live and [to] promot[e] economically mixed housing."
This case arises from Section 8 agreements which Marshall entered
into with HUD for the provision of subsidized, multifamily housing
at South Lawndale Apartments and Whitney Young Apartments in
Chicago, Illinois. As owner of the properties, Marshall was required
to certify, on a monthly basis, that the subsidized units were in a
decent, safe, and sanitary condition. Following HUD inspections of
South Lawndale and Whitney Young in March 1997, however, the
HUD Assistant Secretary for Housing, acting as the debarring official,
see
plan to HUD proposing $535,715 in repairs. However, Marshall dis-
agreed with the amount of repairs proposed by both HUD and his
property manager, offering instead to use project income (after oper-
ating expenses) plus a personal contribution of $100,000 to fund cer-
tain repairs.
Although Marshall did effect some repairs to the Chicago proper-
ties, HUD ultimately determined that the repairs were insufficient to
bring the properties into compliance. Specifically, HUD referenced
sagging and uneven flooring; cracked and missing bricks and mortar
(evidencing widespread settling and structural damage); seriously
deteriorated porches and exterior stairwells creating safety hazards to
the residents and children; water damage throughout several of the
project buildings from leaking roofs; inoperable doors and door
frames creating a security hazard; numerous broken windows and
windows lacking adequate insulation from outside elements; and
unusable kitchen and bathroom fixtures and appliances (due to age,
deterioration from the sagging floors, or water damage). Convinced
that the condition of the properties violated both Section 8 agree-
ments, HUD abated subsidy payments in May 1997. Shortly thereaf-
ter, Marshall sold the Whitney Young and South Lawndale properties.
By this time, Marshall had responded to the charges set forth in the
notice of suspension and debarment. In May 1997, Marshall requested
and was granted an immediate hearing on the charges, and a hearing
official was appointed to preside. Following a hearing, the debarring
official issued the determination challenged in this action.
3
The debar-
ring official concluded that "Marshall ha[d] willfully failed to main-
tain the [Chicago] projects in decent, safe, and sanitary condition, as
required by the [Section 8 agreements] and therefore may be debarred
under
[Marshall's] failure to comply with his contractual obligations
continued after HUD notified him of the projects' deficiencies
*5
titute[d] a material violation of a program requirement applicable to
public agreements, i.e. the [Section 8 agreements]," which indepen-
dently justified debarment under
In addition to challenging the debarring official's determination that he failed to maintain the Chicago properties in a decent, safe, and sanitary condition, Marshall alleges that HUD was motivated to initi- ate the debarment proceedings not by this alleged failure, but by a desire to retaliate against him for his "hav[ing] been openly critical of HUD" in the context of an earlier dispute concerning subsidized property that he owned in Washington, D.C. Specifically, in the fall of 1995, HUD had declared Clifton Terrace Apartments, owned by an affiliate of Marshall, in default under a deed of trust held by HUD for the alleged failure to maintain the property in a decent, safe, and sani- tary condition and sought to accelerate the entire indebtedness secured by the deed of trust. HUD also abated subsidy payments cal- led for by the Section 8 contract pertaining to Clifton Terrace Apart- ments. In response, Clifton Terrace Apartments filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Ultimately, the
and lasted until he sold the projects. . . . Marshall's willful failure
to comply with the [Section 8 agreements] is evidenced in part
by his express oral and written refusal to perform all of the
repairs identified by HUD and his on-site manager. .. . Mar-
shall's disregard for his contractual obligations is further evi-
denced by the results of HUD's many inspections of the
properties from March 3 to May 14, 1997. Despite frequent cor-
respondence and discussions, Marshall did not make many of the
repairs that were needed to return the projects to decent, safe,
and sanitary condition, nor did he present a plan for making the
repairs.
The period of debarment runs from March 21, 1997, when the notice
of suspension and proposed debarment was issued, to March 20, 2000.
Although the debarring official had originally proposed a five-year
debarment, he noted in the determination that adherence to the general
rule of imposing not more than three years, see
bankruptcy court granted HUD relief from the automatic stay to pur- sue a contractual right to assume possession of the property. HUD then filed an action in federal district court seeking to take possession of Clifton Terrace Apartments. The district court denied HUD's motion for preliminary injunction and later stayed the action to allow the parties to pursue mediation. The parties ultimately reached a set- tlement agreement under which HUD was to receive title to Clifton Terrace Apartments. Of asserted relevance to this action, the settle- ment agreement also contained the following language:
After the Sale Date, HUD shall remove Clifton Terrace's ownership and/or management through One Management, as a basis for any administrative action, including specifi- cally, for denial of Clifton Terrace, One Management, and/or any of the principals of Clifton Terrace, One Man- agement, or their affiliates, should they request 2530 previ- ous participation clearance; they will be considered by HUD in the same manner as 2530 previous participation certifica- tions filed by any other entity pursuant to HUD's regula- tions and standards. In this action, Marshall contends that HUD's actions with respect to the Chicago properties were motivated solely out of what he charac- terizes as the public criticism and embarrassment he inflicted upon HUD during the Clifton Terrace proceedings, and therefore that HUD has violated the Clifton Terrace settlement agreement's prohibition against any reliance upon Clifton Terrace as a basis for future admin- istrative action.
Following receipt of the debarring official's decision to debar Mar-
shall for his willful failure to maintain the Chicago properties in a
decent, safe, and sanitary condition -- and, in the course thereof, to
reject Marshall's claim that HUD was instead motivated by retaliation
for the Clifton Terrace matter -- Marshall brought a ten-count com-
plaint in federal district court, seeking judicial review and reversal of
HUD's decision. Marshall alleged that his debarment violated the
APA and the Clifton Terrace settlement agreement, that the proce-
dures used by HUD to debar him did not comport with the APA and
his due process rights under the Fifth Amendment of the United
States Constitution, and that HUD had failed to adequately respond
*7
to various Freedom of Information Act ("FOIA") requests which he
made under
We review the district court's decision granting HUD's motion for
summary judgment and its motion to dismiss de novo. See Flood v.
New Hanover County,
III.
We begin with Marshall's appeal of the district court's decision to
grant summary judgment for HUD on Counts I and II. Count I alleges
that Marshall submitted substantial evidence contradicting the evi-
dence submitted by HUD in support of the proposed suspension and
debarment, and that the debarring official "should have concluded
that HUD did not carry its burden of proof [under
or debarment proceeding, see
that of the debarring official, see Wilson,
[t]he fact that the projects are old and in a poor neighbor- hood does not excuse the conditions at the projects.[Mar- shall] ha[s] not shown how the project's age or location adversely affect[ed] [his] ability to make needed repairs.
The district court concurred, noting that Marshall remained ultimately responsible for repairing the housing to ensure a decent, safe, and san- itary condition regardless of the cause of the needed repairs. We agree.
We likewise reject Marshall's reliance upon evidence he submitted which purported to show that other subsidized properties he owned had been maintained in a decent, safe, and sanitary condition. The debarment proceeding concerned the condition of the Chicago proper- ties and the conditions pertaining to them. Obviously, Marshall can- not pick and choose which Section 8 agreements he will comply with or ward off appropriate administrative action by pointing to his com- pliance with unrelated agreements for unrelated properties.
Having reviewed the administrative record, it is clear that the
debarring official's determination that the Chicago properties were
not kept in decent, safe and sanitary condition and that Marshall did
not cooperate in attempts to achieve this standard, is fully supported
by the record.
8
Accordingly, we conclude that the debarring official
Marshall also asserts that there was insufficient evidence that the sub-
standard conditions were the result of a "willful" violation justifying
*10
did not act in an arbitrary, capricious, or unlawful manner in imposing
debarment under
IV.
Counts III through X of Marshall's complaint focus not on the issue of whether the condition of the Chicago properties warranted HUD's decision to debar him from further participation, but on his challenge to the manner in which the debarment proceeding was con- ducted and HUD's alleged motivation in seeking debarment. Marshall asserts that if any of these counts survive, the administrative process is tainted, and therefore, we must also reverse the district court's order granting HUD's motion for summary judgment as to Counts I and II. For the reasons that follow, we affirm the district court's dis- missal of these remaining counts.
A.
We begin with Counts V and VI, in which Marshall alleges that
HUD engaged in procedural irregularities in conducting the debar-
ment proceeding. In particular, Marshall asserts that HUD's failure to
conduct the debarment proceeding in accordance with its own regula-
tions renders the decision to debar Marshall "arbitrary, capricious and
not in accordance with law" in violation of
debarment under
Marshall's specific complaint centers on his belief that he was enti-
tled to have the proceeding conducted in accordance with the formal
procedures set forth in
Although acknowledging that the individual conducting the debar- ment hearing in this case was neither an Administrative Law Judge nor a Board of Contract Appeals Judge, Marshall contends that the hearing official was required to conduct the administrative proceeding pursuant to the more formal requirements delineated in 24 C.F.R. Part 26. In essence, Marshall asserts that the proper procedures to be applied were mandated not by the decision of the debarring official, in his discretion, to refer the case to a hearing official rather than a hearing officer, but by Marshall's belief that his response to the notice of debarment raised disputed material facts. Marshall's argument, however, fails to recognize the wide discretion afforded to the debar- ment official in such matters.
Upon receipt of Marshall's response to the notice of debarment and
request for a hearing, the debarring official had the discretion to ren-
der a decision on the basis of the administrative record before him,
or to refer the matter to a hearing official or hearing officer. He chose
not to refer the matter to a hearing officer and, instead, chose to select
a hearing official to conduct the hearing requested by Marshall. This
decision was entirely appropriate pursuant to the discretion afforded
the debarring official by
Accordingly, we conclude that the debarring official did not abuse
his discretion in conducting the proceedings under the informal proce-
dures allowed by the regulation or by concluding that debarment was
appropriate. Once placed on notice of the proposed debarment, Mar-
with
B.
Marshall also contends that the district court erred in dismissing Counts III, IV, and X of the complaint, all of which rely upon the Clifton Terrace matter as a basis for overturning the debarring offi- cial's determination. We disagree.
As noted previously, HUD and Marshall were involved in a dispute over whether Marshall had complied with his obligation to maintain the Clifton Terrace apartments in a decent, safe, and sanitary condi- tion. The dispute was ultimately resolved via a settlement agreement, under which HUD received title to the property. Marshall contends that his public criticism of HUD during the pendency of this dispute, coupled with the alleged embarrassment inflicted upon HUD in the proceedings, motivated the instant debarment proceeding and, conse- quently, violated the settlement agreement's provision that "HUD Immediately prior to the debarment hearing, Marshall requested a continuance, prompted by his receipt of evidence upon which HUD intended to rely, which was denied by the hearing official. As part of his challenge to the manner in which the debarment proceeding was con- ducted, Marshall complains that he was afforded insufficient time to respond to the evidence submitted by HUD. However, although the hear- ing official denied Marshall's request for a continuance of the hearing, he left the record open to allow both parties to submit supplemental information. He also granted Marshall's subsequent request for yet more additional time to submit evidence -- extending the original 15-day post- hearing deadline to August 11, 1997. Marshall also complains because HUD attempted to supplement the record after the August 11, 1997 dead- line. The hearing official, however, ultimately ruled that no materials submitted after the August 11, 1997 deadline would be considered part of the record in the suspension and debarment proceedings. We find no error or prejudice in the manner in which the hearing official addressed these evidentiary submissions.
shall remove Clifton Terrace's ownership and/or management through One Management, as a basis for any administrative action." We, like the district court, are satisfied that Marshall has failed to state a claim for violation of the Clifton Terrace settlement agree- ment. Initially we note that were we to accept Marshall's argument, all administrative action initiated by HUD against Marshall or his affili- ated companies in the future -- regardless of the location of the prop- erty or the stated basis for the action -- would be subject to a claim that HUD was motivated not by the stated basis, but solely by an alleged "vendetta" arising from the Clifton Terrace matter. The refer- enced paragraph in the Clifton Terrace settlement agreement simply cannot be interpreted to allow such a result. Rather, the obvious intent of the language was not to bar HUD from further administrative action against Marshall for violations of Section 8 agreements appli- cable to other properties, but to evidence an agreement that HUD would not rely upon Clifton Terrace as a basis for the denial of "pre- vious participation clearance" and, of course, that HUD would be pro- hibited from pursuing further administrative action against Marshall in the Clifton Terrace matter. It simply cannot, however, be fairly read to prohibit HUD from pursuing future administrative action against Marshall arising out of substandard conditions existing at other subsidized properties owned by Marshall or his affiliated com- panies. Nor are we persuaded by Marshall's contention that HUD violated this portion of the agreement because some of its employees involved with the Chicago properties had participated in the Clifton Terrace matter. The settlement agreement could have, but did not, preclude HUD personnel involved in the Clifton Terrace matter from partici- pating in future matters involving subsidized property owned by Mar- shall or his affiliated companies. And, in any event, the debarring official's decision to debar Marshall was fully supported by Mar- shall's failure to maintain the Chicago properties in a decent, safe, and sanitary condition. Accordingly, we hold that the district court properly concluded that Marshall failed to state a claim that the debar- ment proceeding violated the Clifton Terrace settlement agreement or *16 that the Clifton Terrace matter was relied upon to support the decision to debar Marshall. 12
C.
In Count VII, Marshall contends that HUD improperly combined
prosecutorial and adjudicative functions by permitting improper rela-
tionships to exist between the prosecutors and the hearing official in
violation of
As an initial matter, we note HUD's contention that
The Clifton Terrace matter did involve the same parties and some of the same HUD employees. However, it arose from facts and cir- cumstances completely unrelated to the Chicago matters. The Chi- cago matters, of course, concerned different subsidized housing which, although owned by the same landlord, was required to be kept in a decent, safe, and sanitary condition under separate Section 8 agreements entered into between HUD and Marshall. While related in the sense that, in both cases, HUD took issue with Marshall's mainte- nance of the subsidized housing as required by the applicable Section 8 agreements, we fail to see how they are factually related. In addi- tion, as with Marshall's earlier attempts to insert the Clifton Terrace proceeding into the debarment proceeding, we decline to endorse Marshall's theory that he may forever use the Clifton Terrace matter to both escape his contractual obligations with HUD and defend against HUD's attempts to enforce those obligations on behalf of the tenants whom the agreements are designed to protect. We likewise affirm the district court's dismissal of Count VIII of Marshall's complaint, which alleged that the same facts underlying Count VII violated his due process rights under the Fifth Amendment of the United States Constitution. It is well established that due pro- cess rights are not violated simply by the combination of the investi- gative, prosecutorial, and adjudicative functions in one agency.
Rather, actual bias or a high probability of bias must be present before
due process concerns are raised. See Withrow v. Larkin,
D.
Finally, Marshall contends that the district court erred in granting
HUD's motion to dismiss Count IX, which asserts a claim under the
Freedom of Information Act. See
V.
For the foregoing reasons, we conclude that HUD's decision to debar Marshall was neither arbitrary or capricious, nor an abuse of discretion. The district court properly granted HUD's motion for sum- mary judgment as to Counts I and II and HUD's motion to dismiss Counts III through X of Marshall's complaint, and accordingly, we affirm the judgment below.
AFFIRMED