[00:00:01] Speaker 00:
Case number 22-5334, Sandpiper Residents Association et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al, et al,

[00:00:16] Speaker 02:
Good morning.

[00:00:17] Speaker 02:
May it please the court.

[00:00:18] Speaker 02:
My name is Kimberly Brown-Miles for the appellant.

[00:00:21] Speaker 02:
This case is not moved for the following reason.

[00:00:24] Speaker 02:
The sole grounds for mootness that was presented by HUD in the district court was that because Sandpiper's owners had changed, the terms of the 2022 appropriations statute no longer provided funds for tenant protection vouchers and the funds were no longer available.

[00:00:38] Speaker 02:
That was the only grounds for mootness that was presented by HUD in the district

[00:00:41] Speaker 02:
HUD has the burden of showing that this argument is correct on both the facts and the law.

[00:00:47] Speaker 02:
This court reiterated in Zuckerman versus USPS that the party urging mootness has the heavy burden of establishing that a case is moot.

[00:00:56] Speaker 02:
HUD fails to meet this heavy burden.

[00:00:58] Speaker 02:
Plaintiff's concrete interest in this matter is to acquire decent, safe, and sanitary housing.

[00:01:03] Speaker 02:
This case is not moot.

[00:01:05] Speaker 02:
or lack of appropriation funds.

[00:01:07] Speaker 02:
Funds for tenant protection vouchers are available under the appropriations accounting statute for fiscal years 2019 through 2021.

[00:01:15] Speaker 02:
Plans to meet the elements for vouchers for their claims that accrued during these years that would allow them to access decent, safe, and sanitary housing.

[00:01:22] Speaker 02:
but ignores the appropriations accounting statutes 31 USC 1552, 31 USC 1553, and 31 USC 1502B, and the equitable appropriations doctrine providing for availability of these funds.

[00:01:37] Speaker 05:
For example, in Westchester- Let me ask you this question.

[00:01:41] Speaker 05:
I mean, suppose you are right and that the case is not moved in the sense that the relief that you are seeking

[00:01:53] Speaker 05:
um, could theoretically still be ordered and it would grant, um, some redress ability to the injuries of your client, the relief being vouchers.

[00:02:11] Speaker 05:
But turning to the merits in you still have the problem that

[00:02:20] Speaker 05:
um there's been no notice of deficiency that has been issued to the current owners of the property and that seems to be a requirement of the statute before voucher eligibility and that's our argument your honor that there does not need to be a notice of deficiency

[00:02:45] Speaker 02:
for our clients to meet the elements for voucher relief for fiscal years 2019 through 2021 because the uncontested evidence in the record shows that the previous owner received a notice of default and that's still within the ambit of the

[00:03:01] Speaker 02:
CAA provision and assets because we meet the elements for those fiscal years.

[00:03:06] Speaker 02:
That's the reason why our clients are entitled to voucher relief.

[00:03:10] Speaker 05:
Also want to know for the record and you're saying that they would get vouchers from funds from those appropriations as opposed to a later appropriation.

[00:03:21] Speaker 02:
Your honor.

[00:03:22] Speaker 02:
Even for the record has not been developed related to the current status of the project.

[00:03:28] Speaker 02:
And that is in question in terms of whether the current owner is whether there will be further another notice of deficiency issued to the current owner.

[00:03:38] Speaker 02:
And the record at this point, the last inspection that occurred at the complex in February of 2022, and that was the last documented status of the physical conditions of the property, the owner was still, the new owner was deficient.

[00:03:52] Speaker 02:
HUD had not issued a notice of default per se, but they received an unsatisfactory HUD inspection.

[00:03:58] Speaker 04:
But I guess when you filed a lawsuit, though, I mean, you can't wait until the facts kind of turned out in your favor.

[00:04:15] Speaker 05:
Um, and then hope you can get relief then.

[00:04:18] Speaker 05:
I mean, the the facts or the evidence, so to speak, is whether you're entitled to the relief.

[00:04:25] Speaker 05:
The district court is entitled to assess the evidence and the facts as of the time that one side or the other asked for judgment, right?

[00:04:35] Speaker 02:
Yes, sir.

[00:04:35] Speaker 05:
So what difference does it make that in the future, the notice of the link deficiency might be issued?

[00:04:45] Speaker 02:
The facts in the record indicate that the complex has not met these are safe and sanitary standards under HUD regulations.

[00:04:53] Speaker 02:
Moreover, your honor, the district court moving to our other claim under the Fifth Amendment and third housing.

[00:05:00] Speaker 02:
We set forth facts, establishing a prima facie case of intentional discrimination that the district court also dismissed on mootness grounds.

[00:05:09] Speaker 02:
And we pled effective relief for that, for those claims, even though again, the burden is not on the plaintiffs to establish that a case is moot.

[00:05:19] Speaker 02:
I want to know for the record that even though district court did not or indicated in the decision that we did not meaningfully identify other relief, we point the court to rule 54C, which provides that every other final judgment should grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.

[00:05:40] Speaker 02:
And we don't concede that we did not

[00:05:42] Speaker 02:
meaningfully identify other relief available in our operative complaint because we did not go through that in a few moments.

[00:05:49] Speaker 02:
However, under Rule 54, we need not have specifically pledged that relief for a relief to be granted for our intentional discrimination claim.

[00:05:58] Speaker 02:
If I can go into the merits of our intentional discrimination claims for a moment.

[00:06:02] Speaker 02:
HUD is funding and administering a dual segregated PBRH system in Galveston, Texas.

[00:06:07] Speaker 02:
All the white PBRH projects and white census tracts have passing HUD inspection scores, while 67% of the units in majority minority census tracts have failing HUD inspection scores.

[00:06:21] Speaker 02:
I paid for PBR housing in white areas that me has Sanders but does not do so in most of its black area PBR projects.

[00:06:30] Speaker 02:
I refused to provide the assistance to our plaintiffs that would allow them to access decent safe and sanitary housing.

[00:06:36] Speaker 02:
So we played in terms of injunctive relief, not just for.

[00:06:40] Speaker 02:
tenant protection vouchers under the CAA, which we still maintain that our tenants are or our clients are entitled to.

[00:06:48] Speaker 02:
We also ask general, we also play for injunctive relief for HUD to provide decent, safe and sanitary units in neighborhoods without substandard conditions so that our clients could access decent, safe and sanitary housing, which they are entitled to under the housing assistance payment contract and under HUD regulations.

[00:07:09] Speaker 03:
Don't you have to believe that the reason that HUD denied the vouchers was discriminatory purpose or intent?

[00:07:21] Speaker 01:
What we have pledged is that HUD is providing different standards.

[00:07:25] Speaker 02:
of PBRH housing to tenants based on race.

[00:07:30] Speaker 02:
And so it's not so much just limited to access to vouchers per se.

[00:07:35] Speaker 02:
HUD is not providing black tenants, decent safe and sanitary housing.

[00:07:39] Speaker 02:
And a similarly situated comparator is tenancy in a PBRH projects.

[00:07:44] Speaker 02:
White tenants, your honor, do not need access to vouchers, which would allow them to access decent safe and sanitary housing because they already have it.

[00:07:54] Speaker 02:
So there is not going to be a similar situation compared to where HUD is going to give white PBRA tenants vouchers and not black tenants because they are not in that situation.

[00:08:03] Speaker 03:
And that's- And what facts do you plead support or allege discriminatory purpose or intent in the way things- I understand you're saying that this is the way things are.

[00:08:16] Speaker 03:
But where's the agency's intent?

[00:08:19] Speaker 02:
So we plead that on pages, it's on 231 and 234 in the record.

[00:08:25] Speaker 02:
And the standard for the unequal conditions that I referenced is based on HUD's REAC inspection score.

[00:08:31] Speaker 02:
So we set it out by project, by race of the occupants in those projects, and by location.

[00:08:37] Speaker 02:
And in the office in Brazoria County locations,

[00:08:41] Speaker 02:
We set out that there are five white projects.

[00:08:44] Speaker 02:
None of those white projects have failing real estate assessments or inspection scores.

[00:08:49] Speaker 02:
That's HUD's inspection evaluation for PBR projects.

[00:08:53] Speaker 03:
67%- Are they in control of that though?

[00:08:56] Speaker 03:
They just, they aren't, I guess, inspect the properties.

[00:09:03] Speaker 02:
Very quickly to go over how PBRs work.

[00:09:05] Speaker 02:
They are privately owned projects.

[00:09:07] Speaker 02:
However, they sign a contract with HUD

[00:09:10] Speaker 02:
agreeing that they will provide the tenants in that project decent safety sanitary housing.

[00:09:15] Speaker 02:
And it is HUD's responsibility to ensure that those private landlords are providing that housing under HUD standards to those tenants.

[00:09:25] Speaker 02:
And HUD pays those owners a subsidy in exchange for them providing that housing.

[00:09:32] Speaker 02:
HUD is continuing to pay landlords such as the owner of Sandpiper Cove

[00:09:39] Speaker 02:
a subsidy while they're not providing decent, safe, and sanitary housing to the tenants in which they're housing.

[00:09:46] Speaker 02:
So the tenants signed a contract with the private landlord, that is true, but the landlord is responsible for providing a decent, safe, and sanitary housing under its contract with HUD.

[00:09:58] Speaker 03:
And so the remedies that you're pleading for this discrimination, it's not just the vouchers?

[00:10:03] Speaker 02:
We're, we are asking for voucher relief because we also cite Hills versus Putro, which indicates in that case, Supreme court case where that case stands for that a district court has the equitable authority when they, when a constitutional violation is filed.

[00:10:22] Speaker 02:
In this case, we're pleading that HUD violated the fifth amendment in terms of intentional discrimination.

[00:10:29] Speaker 02:
who are not providing decent sanitary housing to black tenants compared to white tenants.

[00:10:35] Speaker 02:
And in that finding, a district court has the authority to issue equitable relief to remedy that constitutional violation.

[00:10:45] Speaker 02:
So in this case, vouchers would provide those tenants with decent sanitary housing and they could use that mobile voucher

[00:10:52] Speaker 02:
to locate to whatever unit would take that voucher to access housing and integrated areas that are decent, safe, and sanitary.

[00:11:02] Speaker 01:
That answers your question.

[00:11:07] Speaker 04:
All right.

[00:11:08] Speaker 04:
If there's no other questions, we'll give you some time on rebuttal.

[00:11:12] Speaker 04:
Thank you.

[00:11:28] Speaker 04:
May it please the court, Simon Brewer for the Department of Housing and Urban Development.

[00:11:32] Speaker 07:
This case is moved for exactly the reason the district court held.

[00:11:36] Speaker 07:
Events have outrun the controversy such that no effective relief is available for plaintiffs' claims here.

[00:11:42] Speaker 07:
Following the sale of the Sandpiper Cove... There's a legal dispute about whether vouchers are an available remedy.

[00:11:51] Speaker 06:
How does that show mootness?

[00:11:53] Speaker 06:
If you're wrong about the availability of the remedy, we can address the alleged injury.

[00:12:01] Speaker 07:
If we're wrong about the availability of the remedy, then the dispute would not be moved for that reason.

[00:12:05] Speaker 07:
But the court has treated.

[00:12:06] Speaker 06:
But there's just a remedial, a substantive law question about whether this remedy is available in light of the appropriation.

[00:12:14] Speaker 07:
This court has treated the availability of appropriations as a mootness question.

[00:12:18] Speaker 07:
And that's because if there are no funds available to provide a remedy, then the appropriations clause forbids the court from providing effective relief.

[00:12:27] Speaker 07:
And so in cases like Shawnee Tribe, whether or not there are available funds has been treated as a question of mootness.

[00:12:34] Speaker 07:
And so for that reason, the district court treated it as a question of mootness here.

[00:12:38] Speaker 07:
It looked to the meaning of the appropriation statute, and it determined that the funds would not be available in the circumstances.

[00:12:44] Speaker 07:
But that follows from the mootness framework, not necessarily exclusively from America's framework.

[00:12:50] Speaker 06:
I'm not sure it matters, but it just strikes me as more of a merit than a question.

[00:12:54] Speaker 07:
We agree.

[00:12:56] Speaker 07:
At the end of the day, if the court determines this is a merits question, it can certainly affirm on merits grounds and the department would read that similarly.

[00:13:04] Speaker 07:
But we think the district court got it right because of the appropriations context here.

[00:13:10] Speaker 05:
Well, why did the district court get it right?

[00:13:13] Speaker 05:
I mean, why can't the statute be read when it says that

[00:13:21] Speaker 05:
the secretary can pursue transfer project to an owner approved by the secretary under established procedures who will be obligated to properly make all required repairs and to accept renewal of the assistance contract if such renewal is offered.

[00:13:40] Speaker 05:
Why doesn't that language obligate a successive owner to repair the property in

[00:13:52] Speaker 04:
essentially cure any notice of deficiency.

[00:14:00] Speaker 07:
The new owner is required to make the repairs to the property and the new owner here has agreed to do that.

[00:14:06] Speaker 05:
Is the new owner required to cure the notice of deficiency?

[00:14:10] Speaker 05:
Is that what that means when you say that

[00:14:15] Speaker 05:
They're required to make repairs.

[00:14:17] Speaker 07:
No, the notice of default terminated upon sale, and that's because the notice of default is an owner specific remedy.

[00:14:24] Speaker 07:
And it serves as the predicate for other owner's specific remedies in the statute.

[00:14:28] Speaker 07:
But upon the sale of the property and the transfer of the housing assistance payment contract, the new owner incurred its own obligations to HUD to provide decent, safe and sanitary housing and to make sure that the property is in a condition that satisfies its regulatory and contractual obligations.

[00:14:43] Speaker 07:
And if the owner, the new owner becomes in default to those obligations, HUD can certainly issue new owner a notice of default, but that has not happened in this case.

[00:14:51] Speaker 05:
Why is that consistent with

[00:14:53] Speaker 05:
congressional intent.

[00:14:55] Speaker 05:
I mean, it just seems like it's a way to kick the can down the road without anything getting fixed.

[00:15:01] Speaker 07:
I think Congress recognized that there may be times when pursuing transfer to a new owner who will undertake repairs is the best option for preserving one of these properties.

[00:15:09] Speaker 07:
And Congress has directed the department to take all steps reasonable to preserve these kinds of properties.

[00:15:18] Speaker 07:
But having the notice of default transfer over to the new owner or something like that would, in fact, undermine Congress's specification that transferring of the property is a remedy because new owners would be extremely reluctant to take on these projects that had already had a notice of default issued if they could immediately face civil money penalties or debarment from federal programs that are other remedies also predicated on those of default.

[00:15:42] Speaker 07:
So it makes sense that the new owner itself has to be in default of its obligations or those other remedies become available as to the new owner.

[00:15:51] Speaker 05:
I mean, it seems that all of those sorts of things can be dealt with in a negotiation.

[00:15:57] Speaker 05:
You know, you can stipulate that, okay, we're not going to subject you to all of these other penalties right away.

[00:16:05] Speaker 05:
will give you this much time.

[00:16:07] Speaker 05:
But, um, notice has been issued.

[00:16:10] Speaker 05:
And in the meantime, if these tenants want to move and not wait for the repairs and we'll give them vouchers.

[00:16:20] Speaker 07:
I think Congress recognized that vouchers was one option, and it afforded HUD the ability to issue those vouchers without a requirement to issue those vouchers.

[00:16:28] Speaker 07:
But it recognized that there's a menu of enforcement choices here, of which vouchers is one, pursuing the transfer of the project to a new owner is another, and that circumstances will differ.

[00:16:37] Speaker 07:
And in this case, HUD pursued transfer of the project to a new owner after trying other remedies, such as requiring the previous owner to replace the management company.

[00:16:48] Speaker 05:
That response is why it might be reasonable for HUD to not exercise its jurisdiction to impose these other remedies on a new owner immediately, but that doesn't really answer the question as to why legally it couldn't be permissible for HUD to allow tenants to

[00:17:16] Speaker 05:
have vouchers right away while the new owner is trying to fix the property.

[00:17:24] Speaker 07:
It's certainly true that HUD would have enforcement discretion in those circumstances, but I think the congressional scheme recognizes that the obligations imposed on owners are specific to those owners, and it didn't want to open the door to even the risk that HUD would immediately impose these kinds of entity-specific sanctions on a new owner.

[00:17:43] Speaker 07:
and thereby undermine its rules.

[00:17:44] Speaker 07:
I mean, even if HUD could agree to forego those with respect to a new owner, new owners might be wary of purchasing properties.

[00:17:51] Speaker 05:
How long has this voucher scheme at issue been in place?

[00:17:56] Speaker 05:
Just since 2018 or is it before that?

[00:17:58] Speaker 05:
I believe 2016 is when it was first implemented, but it may be off by a year or so.

[00:18:04] Speaker 05:
So the authority that was cited for why

[00:18:09] Speaker 05:
the notice of default doesn't transfer was, I think, a single declaration from a HUD employee.

[00:18:16] Speaker 05:
Is that all the authority you have?

[00:18:18] Speaker 05:
There's no regulation, there's no policy statement, there's no nothing else?

[00:18:24] Speaker 05:
That's correct.

[00:18:25] Speaker 07:
The HUD declaration sets forward HUD's understanding of the notice of default and the enforcement scheme rates.

[00:18:32] Speaker 07:
Do we owe that any deference?

[00:18:34] Speaker 07:
We have not asked for any deference, but we think that's consistent with the language of the appropriations statute and certainly reflects HUD's experience administering the scheme and enforcing notices of default issued to owners and these types of properties across the country.

[00:18:49] Speaker 04:
I mean, if the conditions of these properties hasn't improved and it's still,

[00:19:04] Speaker 05:
basically have deficiencies that endanger the health and safety of the tenants.

[00:19:14] Speaker 05:
Why would it make sense to interpret the statute to deny these tenants a voucher just for the sole reason that

[00:19:31] Speaker 05:
The property's been sold.

[00:19:33] Speaker 07:
The property being sold as part of HUD's enforcement scheme of the statute.

[00:19:37] Speaker 07:
Selling the property and transferring the associated contract to a new owner that commits to making repairs on the property that secured financing to make repairs on the property was, in HUD's view, a reasonable and economical way to conclude this enforcement action and bring the property into compliance.

[00:19:53] Speaker 07:
In certain circumstances, it could choose to issue vouchers, but it would typically do that as a last resort when other possible remedies have failed.

[00:20:00] Speaker 07:
And HUD, in its judgment, again, taking into account the conditions of the property here, had not yet been convinced that that was an appropriate step.

[00:20:06] Speaker 05:
How long did they have to make the repairs?

[00:20:11] Speaker 05:
The new owner?

[00:20:12] Speaker ?:
Yeah.

[00:20:12] Speaker 07:
I don't know that there's a specific timeline set forth in the record, but I can tell you that as of July, the repairs on the property were 85% complete and currently the repairs are expected to be completed by November of this year.

[00:20:26] Speaker 05:
And is that in the record somewhere?

[00:20:27] Speaker 07:
That is not in the record, but certainly that would bear on if this case were remanded to the district court, the propriety of issuing a preliminary injunction.

[00:20:34] Speaker 03:
Isn't the textual basis for your argument that

[00:20:40] Speaker 03:
The statute says it's when the owner has received a notice of default.

[00:20:45] Speaker 03:
That's correct.

[00:20:45] Speaker 03:
Yeah.

[00:20:46] Speaker 03:
Cause Judge Wilkins was just asking you, what is the basis for this position that you're taking?

[00:20:51] Speaker 07:
That's exactly right, Judge Pan.

[00:20:53] Speaker 07:
It is the owner that must have received a notice of default.

[00:20:56] Speaker 07:
And at the current time, the owner has not received a notice of default, even if some prior owner has.

[00:21:02] Speaker 03:
And this case comes to us in the posture of having been dismissed as moot.

[00:21:08] Speaker 03:
And I'm wondering if that's the proper way to look at this, because I think the intervening event is that there was a change of owner, but wasn't there an amended complaint that named the new owner as a defendant?

[00:21:22] Speaker 03:
And doesn't that, I guess, defeat the mootness argument, but perhaps

[00:21:27] Speaker 03:
This should be dismissed under Rule 12b6 for failure to state a claim instead.

[00:21:31] Speaker 07:
No, Your Honor.

[00:21:32] Speaker 07:
So the same posture happened in the Del Monte case that we cite in our brief, where an amended complaint was filed after the putative mooting event.

[00:21:40] Speaker 07:
And this court decided that case on mootness grounds about whether the intervening events, the filing of the initial complaint had mooted the case.

[00:21:47] Speaker 07:
And that's exactly the same here.

[00:21:48] Speaker 07:
The intervening event occurred between the initial filing case and the filing of the second amendment.

[00:21:53] Speaker 04:
And so the district court appropriately treated that as a mooting event.

[00:22:02] Speaker 04:
any other issues.

[00:22:06] Speaker 05:
Thank you.

[00:22:07] Speaker 05:
Thank you.

[00:22:07] Speaker 05:
Thank you.

[00:22:09] Speaker 05:
Ms.

[00:22:10] Speaker 05:
Brown-Miles, I think you're out of time.

[00:22:12] Speaker 05:
We'll give you two minutes.

[00:22:14] Speaker 02:
Thank you, your honor.

[00:22:15] Speaker 02:
I wanted to respond to my colleague, Mr. Brewer's, some statements regarding the statutory framework of the CAA.

[00:22:24] Speaker 02:
HUD is sort of complaining the menu of options that they have against the PBRA owner upon a failing re-export and the tenant protection policies.

[00:22:32] Speaker 02:
And we go into that extensively in our briefing, but I want to reiterate it here that it is clear that under the statutory framework, HUD has about nine options

[00:22:41] Speaker 02:
in terms of enforcement options against the owner.

[00:22:44] Speaker 02:
And one of those options is to transfer the project and sell it.

[00:22:50] Speaker 02:
And I want to highlight that that new owner is under section 219 C2D, that's under the 2021 Appropriations Act, but each each act reiterates sort of similar language, that that new owner is obligated to promptly make all repairs and to accept renewal of the assistance contract if such renewal is offered.

[00:23:10] Speaker 02:
In addition, HUD's own guidance emphasizes that tenant protection vouchers and its enforcement options against the owner are completely separate.

[00:23:21] Speaker 02:
So they're separate in the statutory framework, tenant protection vouchers are in paragraph two of the 2023 CAA.

[00:23:29] Speaker 02:
And again, that allows them to have the option to give tenant protection vouchers while they're working out

[00:23:37] Speaker 02:
whatever enforcement process that is going through with the owner.

[00:23:40] Speaker 02:
So again, one of their enforcement options is to abate the section eight contract.

[00:23:44] Speaker 02:
And typically when that happens is they cancel the contract and then the folks in order to continue to receive decent, safe and sanitary housing under their subsidy, they get voucher.

[00:23:55] Speaker 02:
Well, the funding for voucher relief is separate.

[00:23:59] Speaker 02:
And that's why Senator Rubio, which we go into extensively in our brief,

[00:24:04] Speaker 02:
wanted this funding because it allows HUD to pursue its enforcement options and do whatever it deems to be appropriate in terms of the agency's discretion, but it allows folks to be out of those dangerous situations more quickly without having to be forced into the decision-making of whether to preserve affordable housing

[00:24:28] Speaker 02:
or to maintain folks in those dangerous conditions or if they can leave out.

[00:24:34] Speaker 02:
So HUD 2018, HUD notice 2018-09 is on 208 to 213 of the record.

[00:24:41] Speaker 02:
And the HUD notice regarding enforcement is on 28, is HUD notice 2018, and that's docket 40 within the record.

[00:24:48] Speaker 02:
So it's very clear that HUD can pursue both.

[00:24:52] Speaker 02:
That's why they got that additional funding.

[00:24:55] Speaker 05:
All right, thank you.

[00:24:56] Speaker 05:
We have your argument.

[00:24:58] Speaker 05:
Thank you.