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JACKSON SQUARE ASSOCS. v. UNITED STATES HUD

August 10, 1992

JACKSON SQUARE ASSOCIATES, a New York Limited Partnership, Plaintiff, -vs- UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Buffalo Office - Region II, Defendant.


The opinion of the court was delivered by: JOHN T. CURTIN

 This case stems from a dispute over the amount of payments due under a Housing Assistance Payments ("HAP") contract between plaintiff, Jackson Square Associates ("Jackson Square"), and defendant, the United States Department of Housing and Urban Development ("HUD"). Several motions are pending. First, plaintiff has moved to strike several affirmative defenses offered by defendant. Item 12. Second, plaintiff has moved to amend its complaint. Item 17. Third, defendant has moved to dismiss the complaint or have the case transferred to the Claims Court, pursuant to 28 U.S.C. § 1631, for lack of subject matter jurisdiction in this court. After a brief review of the facts, the court will address each motion in turn.

 FACTS

 Jackson Square owns a 160-unit low-income housing development in the Town of Amherst, New York. Effective March 13, 1979, Jackson Square entered into a HAP contract with HUD, pursuant to 42 U.S.C. § 1437f, under which HUD agreed to make rental assistance payments to Jackson Square for the development's eligible tenants. See Item 17, Exh. 1 (HAP contract). Included within the contract was an allowance for the expected utility expenses of Jackson Square. Id. Shortly after commencement of the contract, however, it was determined that a mistake had been made which caused Jackson Square's utility expenses to be greatly underestimated. On July 17, 1979, the Buffalo area office of HUD recommended to the national HUD office than Jackson Square's utility allowance should be adjusted upward by $ 24 per month, per unit. Item 17, Exh. 2. By letter of August 29, 1979, this requested increase was apparently approved by Lawrence B. Simons, Assistant Secretary for HUD in Washington, D.C. Item 17, Exh. 3. Plaintiff alleges that this adjustment was never made. It seeks damages of several hundred thousand dollars to cover past and future alleged shortfalls. See Item 17 (proposed amended complaint).

 DISCUSSION

 Plaintiff has moved to strike four of the six affirmative defenses contained in defendant's answer. Item 12. Defendant does not object to having its sixth defense--failure to exhaust administrative remedies--stricken, but opposes the motion for the other three defenses. Item 21, P 6. Plaintiff's motion is denied. See National Union Fire Ins. Co. of Pittsburgh v. Alexander, 728 F. Supp. 192, 203 (S.D.N.Y. 1989).

 Plaintiff has also moved to file an amended complaint. Item 17. "Leave [to amend a complaint] shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). See Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962); Ryder Energy Distribution v. Merrill Lynch Commodities, 748 F.2d 774, 783 (2d Cir. 1984). In order to adequately test the merits of plaintiff's complaint, this motion is hereby granted.

 That brings the court to the main issue currently before it, viz., whether this court has jurisdiction over plaintiff's amended complaint or whether, under the Tucker Act, 28 U.S.C. § 1346(a)(2), the case must be transferred to the Claims Court. Before proceeding, however, the court cautions that the case law in this area appears to lead toward contradictory conclusions.

 Many, if not most, courts have concluded that jurisdiction under the Tucker Act is exclusive in the United States Claims Court, pursuant to 28 U.S.C. § 1346(a)(2), if three conditions are met:

 (1) the action is against the United States; (2) the action is founded upon the Constitution, federal statute, executive regulation, or government contract; and (3) the action seeks monetary relief in excess of $ 10,000.

 Amoco Prod. Co. v. Hodel, 815 F.2d 352, 359 (5th Cir. 1987), cert. denied, 487 U.S. 1234, 108 S. Ct. 2898, 101 L. Ed. 2d 932 (1988). See United States v. Hohri, 482 U.S. 64, 66, 96 L. Ed. 2d 51, 107 S. Ct. 2246 n.1 (1987); Alan Guttmacher Inst. v. McPherson, 805 F.2d 1088, 1096 (2d Cir. 1986); A.E. Finley & Assoc., Inc. v. United States, 898 F.2d 1165, 1167 (6th Cir. 1990); Weeks Constr., Inc. v. Oglala Sioux Hous. Auth., 797 F.2d 668, 675 (8th Cir. 1986); Hahn v. United States, 757 F.2d 581, 586 (3d Cir. 1985); Portsmouth Redevelopment & Hous. Auth. v. Pierce, 706 F.2d 471, 473 (4th Cir.), cert. denied, 464 U.S. 960, 78 L. Ed. 2d 336, 104 S. Ct. 392 (1983); Homewood Corp. v. Kemp, 786 F. Supp. 1315, 1318-19 (S.D. Ohio 1992); Carlyle Gardens Co. v. Delaware State Hous. Auth., 659 F. Supp. 1300, 1307 (D. Del. 1987). Cf. Tennessee ex rel. Leech v. Dole, 749 F.2d 331, 335 (6th Cir. 1984), cert. denied, 472 U.S. 1018, 87 L. Ed. 2d 615, 105 S. Ct. 3480 (1985) (concluding that Claims Court jurisdiction was exclusive only for suits "founded on contract" involving more than $ 10,000). More importantly, for the most part these cases also hold that to satisfy the first condition,

 it is not necessary that the United States be denominated as a party. An action against a federal agency or official will be treated as an action against the sovereign if "the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration, or if the effect of the judgment would be to restrain the Government from acting, or compel it to act."

 Portsmouth Redevelopment & Hous. Auth., 706 F.2d at 473 (quoting Dugan v. Rank, 372 U.S. 609, 620, 10 L. Ed. 2d 15, 83 S. Ct. 999 (1963)). See also Amoco Prod. Co., 815 F.2d at 359; B.K. Instrument, Inc. v. United States, 715 F.2d 713, 723-24 (2d Cir. 1983). Thus, under this line of analysis, the first inquiry for a district court is to determine the source of funds sought to be recovered by plaintiff in its action. If the judgment sought could be paid out of separate funds in the control of the federal agency sued, the suit would not be against the sovereign. Weeks Constr., Inc., 797 F.2d at 675 & n.9; Industrial Indem. Inc. v. Landrieu, 615 F.2d 644, 646 (5th Sir. 1980); Marcus Garvey Square, Inc. v. Winston Burnett Constr. Co. of Cal., 595 F.2d 1126, 1131 (9th Sir. 1979); Carlyle Gardens Co., 659 F. Supp. at 1304. But if the judgment sought could only come from the public treasury, then the suit must be considered to be against the United States. E.g., Dugan v. Rank, 372 U.S. at 620; Amoco Prod. Co., 815 F.2d at 359; Portsmouth Redevelopment & Hous. Auth., 706 F.2d at 473. If the suit is determined to be against the United States and the other two conditions are also satisfied, the suit must be dismissed by the district court, or transferred to the Claims Court. Amoco Prod. Co., 815 F.2d at 368; Portsmouth Redevelopment & Hous. Auth., 706 F.2d at 475.

 The Second Circuit, in the recent case of C.H. Sanders Company v. BHAP Housing Development Fund Company, 903 F.2d 114, 119 (2d Cir. 1990), has undertaken an analysis somewhat different from the cases cited above. Under Sanders, jurisdiction may be found in a district court if two conditions are satisfied: First, there must be a grant of subject matter jurisdiction; and second, there must be a valid waiver of sovereign immunity. Id. at 117. See also Falls Riverway Realty v. City of Niagara Falls, 754 F.2d 49, 54 (2d Cir. 1985); S.S. Silberblatt, Inc. v. East Harlem Pilot Block--Bldg. 1 Hous. Dev. Fund Co., 608 F.2d 28, 35 (2d Cir. 1979); FHM Constructors, Inc. v. Village of Canton Hous. Auth., ...


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