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July 10, 1990


The opinion of the court was delivered by: William C. Conner, District Judge:


Plaintiffs, an organization and residents of the Lower East Side of Manhattan,*fn1 move for a preliminary injunction to enjoin the funding of clearance and construction on a site located at 9th Street and Avenue C in the Lower East Side of Manhattan. Plaintiffs seek review of the decision of the Department of Housing and Urban Development ("HUD") to fund a project under Section 202 of the Housing Act of 1959, 12 U.S.C. Section 1701q, which would result in the construction of an eighty-unit low-income senior citizens residence on a site presently occupied by what plaintiffs describe as a "people's park" and cultural facility known to them as La Plaza Cultural. Plaintiffs claim that HUD's approval of the site violated various HUD regulations, including HUD regulation 24 C.F.R. section 880.206(d) which precludes HUD's support of projects which would result in an undue concentration of assisted persons in areas containing a high proportion of low-income persons. Plaintiffs name various HUD officials, the project's sponsor and the Mayor of the City of New York (the "City") as defendants. This Court conducted an evidentiary hearing limited to HUD's application of section 880.206(d) on May 17, 1990. This opinion constitutes the Court's findings of fact and conclusions of law pursuant to Rules 52(a) and 65(d), Fed.R.Civ.P.


On or about July 14, 1988 the Board of Estimate of the City of New York approved the sale of the site to the sponsor of the housing project, defendant Lower East Side Coalition Housing, Inc. (the "Sponsor"), a non-profit organization, for construction of Casa Victoria, an eighty-unit senior citizens' residence (the "Project"). The Project is slated to contain twenty efficiency apartments and fifty-nine one-bedroom apartments, ten percent of which will be designed to accommodate handicapped tenants. One apartment is set aside for a superintendent. The site is located at the southwest corner of 9th Street and Avenue C, on the Lower East Side of Manhattan. The Sponsor received partial mortgage financing from HUD pursuant to Section 202.

Plaintiffs filed this action and moved for a preliminary injunction in December 1989, alleging that HUD's approval of the Project violated applicable HUD regulations, including one which required HUD to avoid an undue concentration of assisted persons in areas containing a high proportion of low-income persons. This action was stayed while HUD, on its own initiative, reviewed the site selection de novo as to the undue concentration factor and determined on or about April 19, 1990, that the Project would not result in an undue concentration of assisted persons in the area. HUD therefore issued a renewed firm commitment and extended its reservation of funds for the Project. On May 1, 1990, plaintiffs served an amended complaint and again moved for a preliminary injunction to halt the Project.


I. Preliminary Injunction Standard

To obtain a preliminary injunction, the movant must show "both irreparable harm and a likelihood of success on the merits or a sufficiently serious question regarding the merits to make it a fair ground for litigation with the balance of hardship tipping decidingly in its favor." Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 972 (2d Cir. 1989); Fireman's Fund Ins. Co. v. Leslie & Elliott Co., Inc., 867 F.2d 150 (2d Cir. 1989); Le Sportsac, Inc. v. K Mart Corp., 754 F.2d 71, 74 (2d Cir. 1985).

When a plaintiff seeks to enjoin governmental action taken in the public interest pursuant to a statutory or regulatory scheme, an injunction should issue only if the plaintiff proves irreparable injury and a likelihood of success on the merits. See Plaza Health Laboratories, Inc. v. Perales, 878 F.2d 577, 580 (2d Cir. 1989); Union Carbide Agricultural Prod. Co. v. Costle, 632 F.2d 1014, 1018 (2d Cir. 1980), cert. denied, 450 U.S. 996, 101 S.Ct. 1698, 68 L.Ed.2d 196 (1981). Defendants argue that this stricter standard should be applied in the instant case because HUD acted pursuant to a regulatory scheme furthering the public interest in low-income senior citizen housing. Because of the dire need for low-income housing for senior citizens and the handicapped, the Court will apply this heightened standard, although the result would be the same if the less-rigorous alternative standard were applied.

A. Irreparable Injury

In order to satisfy the requirement of irreparable injury, plaintiffs must demonstrate "an injury that is neither remote nor speculative, but actual and imminent." Tucker, 888 F.2d at 975 (quoting Consolidated Brands, Inc. v. Mondi, 638 F. Supp. 152, 155 (E.D.N.Y. 1986)). The injury must be one requiring a remedy of more than money damages. Id.

Plaintiffs contend that they will suffer irreparable injury in the form of the destruction of La Plaza Cultural and the construction of a housing project which, because it does not meet HUD regulations, will increase the undue concentration of assisted persons in the area. Plaintiffs assert standing under the Administrative Procedure Act, 5 U.S.C. § 702, which allows persons "affected or aggrieved" by federal agency action to seek judicial review, including injunctive relief, against those agencies, and there has been no contention that the interest plaintiffs seek to protect in this case are not "arguably within the zone of interests to be protected or regulated by the statute . . . in question." Association of Data Processing Serv. Org., Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970). Therefore, plaintiffs have met the standing requirement provided for in the Administrative Procedure Act.

HUD argues, however, that plaintiffs lack constitutional standing to assert injury from the destruction of La Plaza Cultural. A plaintiff must meet the constitutional requirements of standing, derived from Article III of the Constitution, which allows the federal courts to adjudicate only actual "cases" or "controversies." Allen v. Wright, 468 U.S. 737, 750, 104 S.Ct. 3315, 3324, 82 L.Ed.2d 556 (1984). In order to have such standing, a plaintiff must allege a 1) distinct and palpable injury in fact 2) fairly traceable to defendant's allegedly unlawful conduct 3) which is likely to be redressed by a favorable decision. See Allen, 468 U.S. 737, 751, 104 S.Ct. 3315, 3324; Fulani v. League of Women Voters Educ. Fund, 882 F.2d 621, 624 (2d Cir. 1989). To the extent that there is a difference between the "traceability" and "redressability" components, the former "examines the causal connection between the assertedly unlawful conduct and the alleged injury, whereas the latter examines the causal connection between the alleged injury and the judicial relief requested." Allen, 468 U.S. at 753 n. 19, 104 S.Ct. at 3325 n. 19. Defendants contend that plaintiffs cannot meet the redressability component of standing. In other words, they assert that plaintiffs cannot show that they "would benefit in a tangible way from the court's intervention," Warth v. Seldin, 422 U.S. 490, 508, 95 S.Ct. 2197, 2210, 45 L.Ed.2d 343 (1975), because this Court cannot provide for the maintenance of La Plaza Cultural.

In an Article 78 proceeding filed by plaintiffs in state court, the state court found that the various interim leases granted to community residents for gardens and open spaces at the site expired in 1985 and that the Site had never been dedicated for use as a public park. See Bober v. City Board of Estimate, No. 19141/88 (Sup.Ct.N.Y.Co. April 14, 1989). Plaintiffs' appeal of the state court's decision was dismissed for failure to prosecute on April 24, 1990, and their motion to reinstate their appeal was denied by the state appellate court on May 29, 1990. The City is also going forward with a summary proceeding commenced on October 13, 1989, to evict all individuals and groups, including the plaintiffs in this action, in state court, with which it apparently intends to proceed regardless of whether the Casa Victoria project goes forward. Tr. 211. HUD argues that the City's right to evict plaintiffs from the site and dispose of the property as it sees fit is independent of the resolution of this action.*fn2 Since an injunction against the project will not provide for the maintenance of La Plaza Cultural, any injury suffered by plaintiffs from the destruction of La Plaza Cultural may well occur if the Project does not go forward. This Court agrees that since it cannot decree the maintenance of La Plaza Cultural, plaintiffs have no standing to challenge HUD's decision on the basis of this injury. While the Court recognizes the value that plaintiffs attribute to the site, which currently contains a garden, numerous trees, an amphitheater and several murals painted by community members, the current use of the site is not relevant to the undue concentration inquiry.

As plaintiffs argue, the issue of irreparable harm does not ultimately turn on whether plaintiffs have a legal right to continue to use the site as a park. While plaintiffs' primary aim appears to be to prevent the destruction of La Plaza Cultural, plaintiffs also assert that they will be irreparably harmed because the Project will result in an undue concentration of assisted persons in the area, in violation of HUD regulations.

HUD argues that since the number of additional assisted persons in the area from the Project will increase the total assisted housing in the neighborhood by only 0.4 percent, plaintiffs cannot be harmed from this small increase. However, this argument is unpersuasive. Under the regulation at issue, the critical factor is not the total number of housing units in the area but the resulting percentage of assisted units, as compared to the concentration of such units in other areas.

HUD further argues that plaintiffs failed to show that an addition of seventy-nine units occupied by senior citizens would harm the community in any way, and contends that it would instead improve the neighborhood. Plaintiffs assert in their amended complaint that "numerous alternate sites exist on the Lower East Side and elsewhere which are more suitable and whose development will not be destructive to the surrounding neighborhood." Amended Complaint ¶ 26. Defendants argue that this allegation shows that plaintiffs do not really object to the increase in assisted persons in their area as long as the Project is not built on the site occupied by La Plaza Cultural. However, plaintiffs' pleading does not mean that plaintiffs are not alleging harm from an undue concentration. In their amended complaint, plaintiffs do not define what area they include in their reference to the Lower East Side and some areas of the Lower East Side may have a lower concentration of assisted persons than the area involved in the instant action. While it is clear that plaintiffs would like their park to be preserved, they have also asserted a claim of injury based on the independent ground of undue concentration.

Contrary to HUD's characterization, plaintiffs are asserting more than a right to have the government act in accordance with the law, an insufficient basis, standing alone, for jurisdiction. See Allen, 468 U.S. at 754, 104 S.Ct. at 3326. As residents of the area, plaintiffs' interests will be directly and adversely affected if the HUD regulation is violated. See King v. Harris, 464 F. Supp. 827 (E.D.N.Y. 1979), aff'd mem., sub nom. King v. Faymor Devp't Co., 614 F.2d 1288 (2d Cir. 1979), vacated, 446 U.S. 905, 100 S.Ct. 1828, 64 L.Ed.2d 256 (1980), aff'd mem. on remand, 636 F.2d 1202 (2d Cir. 1980) (court found that plaintiffs, individuals living near the proposed housing project and associations representing their interests, had shown irreparable harm because the proposed low-income housing project would further the creation of a low-income and minority area); see also Shannon v. Dept. of Housing & Urban Dev., 436 F.2d 809, 818 (3d Cir. 1970) (plaintiffs, residents in an area where a project was built, were found to have standing to challenge HUD's decision because they claimed that the concentration of lower income black residents in a project in their neighborhood would adversely affect their quality of life and their investments in their homes and businesses).

In the case at bar, area resident Tillyard testified that shopping opportunities in the neighborhood for food and clothing are very limited. Tr. 99-100. She also testified that Avenue C and 9th Street is a heavy drug trading corner and that heavy drug trading occurs at crack houses and at certain stores and bars in the area. Tr. 96-97. It is logical to infer that such conditions may be exacerbated by an increase in low-income persons in the area. Plaintiffs therefore have satisfied the requirement of irreparable injury.*fn3

B. Likelihood of Success on the Merits and Balance of Hardships

1. Standard of Review

Because this challenge arises under the Administrative Procedure Act, it is the Court's role to determine whether, based on the administrative record developed by the agency, the agency decision was arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law.*fn4 See 5 U.S.C. § 706(2)(A); Camp v. Pitts, 411 U.S. 138, 142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973); Sierra Club v. United States Army Corps of Engineers, 772 F.2d 1043, 1051-52 (2d Cir. 1985). "Normally, an agency rule would be arbitrary and capricious if the agency had relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ...

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