required to be signed upon pain of risking violation of 42 USC § 1437f(t)(A). Where signature of an agreement is compulsory or refusal to sign has adverse consequences, its execution cannot constitute a waiver of a right to contest the imposition of its compulsory terms; if an order is issued as a result of this litigation requiring Summit to sign the current HUD § 8 agreement, it will explicitly provide that there will be no such waiver, express or implied.
If such a valid objection exists, administrative remedies should be pursued in the first instance. While tenant beneficiaries of subsidies have not been permitted to sue to require HUD to impose additional constraints on landlords because such impositions are discretionary with the agency,
this does not indicate that those subjected to sovereign compulsion cannot obtain judicial review under the Administrative Procedure Act or 28 USC § 1331; to so hold would raise substantial constitutional questions.
Summit argues that Riddick has no standing to challenge Summit's refusal to sign agreements with governmental authorities necessary for her to continue as a § 8 tenant. Summit confuses tenant standing to compel HUD to impose or interpret regulations in their favor under the governing statutes, which the courts have not permitted, with standing to challenge refusals of building owners participating in the § 8 program to grant or extend leases, which has been upheld.
Glover v. Crestwood Lake Section 1 Holding Corps., 746 F. Supp. 301 (S.D.N.Y. 1990) held that discrimination against § 8 certificate holders can support a private action. This is logical: either loss of one's ability to retain a place to live, or loss of substantial payments toward one's rent contrary to law, is a deprivation which courts should not assume must be remediless. See Sniadach v. Family Finance Corp., 395 U.S. 337, 23 L. Ed. 2d 349, 89 S. Ct. 1820 (1969) (improper prejudgment garnishment). If governmental action were involved, it might implicate a property right that could not be invaded without due process.
By contrast, tenants do not have standing as third party beneficiaries to enforce the provisions of agreements between landlords and governmental authorities. Reiner v. West Village Associates, 768 F.2d 31, 33 (2d Cir. 1985).
Reiner, like other cases denying standing falls into a category of suits by tenants seeking to compel governmental authorities to impose additional requirements upon landlords, to deny relief to landlords, or to provide additional detailed benefits such as electricity cost allowances to tenants. See Ellis v. United States Dept. of HUD, 551 F.2d 13 (3d Cir. 1977); Hale v. Chicago Housing Authority, 642 F. Supp. 1107 (N.D. Ill. 1986).
The present case involves not the administration of the housing statutes by government agencies or enforcement of their agreements with landlords, but the ability of the plaintiff to restore her status as a tenant under § 8. Summit agrees that it has no quarrel with Riddick as a tenant and only objects to the text of the agreement demanded by HUD. Riddick's suit does not seek intrusion into the current ongoing operations of government agencies or, indeed, of Summit. Summit has already signed similar agreements to that it is now asked to sign, and its rights to challenge the agreement or its interpretation before or against HUD will be preserved.
Denying standing in the Reiner line of cases leaves enforcement of rights created by HUD against landlords in the hands of governmental agencies as intended by Congress. Permitting standing to a tenant such as Riddick directly injured by discrimination in violation of a provision intended for her protection, is not dependent on agreements with HUD and, by contrast, in accord with the intent Congress must have had to make the antidiscrimination provision effective. See Cort v. Ash, 422 U.S. 66, 76-78, 45 L. Ed. 2d 26, 95 S. Ct. 2080 (1975), reaffirmed in Thompson v. Thompson, 484 U.S. 174
, 98 L. Ed. 2d 512, 108 S. Ct. 513 (1988).
Summit's real quarrel is not with Riddick, who holds a Section 8 certificate and has long been a tenant in the building, but with the terms of the contract insisted upon by the HUD, which defendants claim goes beyond permissible restrictions upon defendants' management of the building. Riddick should not be held hostage because of a broader disagreement between Summit and HUD.
It would run contrary to the objectives of housing legislation and those set forth in Fed.R.Civ.P. 1
for Riddick to be dragged into a regulatory controversy which she did not originate, and thus become an involuntary pawn in that dispute. Riddick is not seeking any additional rights. For her to lose her § 8 subsidy and perhaps be put onto the street because of disagreements between Summit, an institutional entity, and HUD, an even larger such entity, would constitute a failure of the legal system and a miscarriage of justice.
Summit's remedy is not to refuse to sign documents and thus to terminate Riddick's tenancy, but to raise with HUD the propriety of its current § 8 contract and its implementation; if necessary Summit may seek judicial review of HUD's position. As indicated above such review appears to be available; Summit will not be estopped from raising such issues with or against HUD by reason of a settlement or order in the current case, and I have the power to retain jurisdiction to reopen the current issues if such review is properly sought but refused.
I direct the parties to consider an agreement, more fully described below, reinstating Riddick's § 8 status while preserving Summit's rights to contest HUD's current § 8 contract through all available avenues including addition of HUD as a third party defendant in this litigation. The advantage of such an agreement is that it will permit the present Riddick - Summit dispute (incidental to Summit but crucial to Riddick) to be resolved, while preserving Summit's ability to contest HUD requirements or their implementation without having waived any of its objections to them.
The agreement the parties are directed to consider may include provisions, to be incorporated into an order of this court, authorizing Summit to execute documents required to permit Riddick to occupy Summit housing as a Section 8 tenant under current HUD requirements without prejudice to Summit's right to challenge the propriety or implementation of such requirements, and without Summit's signature constituting a waiver of any such challenge.
Such an agreement may provide for dismissal of the current litigation in this court upon reinstatement of Riddick's tenancy under § 8, without prejudice to revival of this suit by either party if necessary. Such revival might be authorized should Summit wish to seek to join HUD as a party to this action while retaining Riddick as a Section 8 tenant, in the event that after proper efforts are made, no other remedy is available to Summit to pursue its contentions regarding the HUD Section 8 contract.
In the event no agreement along the above or other lines between the parties can be negotiated, I will consider granting relief directing defendants to execute any documents required to reinstate and continue plaintiff's status as a subsidized tenant under § 8 without prejudice to defendants' rights to challenge the applicable requirements in submissions to or litigation with the relevant governmental agencies. Such relief if ordered will provide that neither such order nor defendants' involuntary signature of documents would constitute a waiver of or estoppel against defendants' claims that the documents are improperly required on their face or as applied or are otherwise contrary to law.
Summit's position appears to be that it is Riddick's responsibility under Fed.R.Civ.P. 19(a) to have added HUD or local housing authorities as parties if necessary to complete adjudication. Presence of HUD or other governmental agencies as parties appears necessary to granting the relief sought by Summit, not that sought by Riddick. Summit as a defendant cannot insist that a plaintiff sue every party who might be necessary to adjudication of the defendant's contentions. See Humphrey v. Stanolind Oil & Gas Co., 232 F.2d 925 (5th Cir. 1956).
I grant permission for Summit to add appropriate governmental bodies as third party defendants if they can properly be joined, should it wish to do so rather than pursue through other avenues its claims that current § 8 requirements as adopted or implemented are improper. I do not prejudge what exhaustion of administrative remedies or other prerequisites may be necessary for Summit to pursue such claims.
Joinder of governmental agencies will not necessarily require delay of my consideration of relief to Riddick. As set forth previously, Summit can be required to sign the necessary documents to reinstate Riddick's § 8 subsidy without prejudice to Summit's position with respect to the validity of the requirements set forth in those documents.
Riddick has sought punitive damages. Summit has the right to contest What it considers unauthorized governmental encroachment upon its managerial functions and corporate independence. I find no basis for inferring intentional wrongdoing which would support plaintiff's application for punitive damages.
Plaintiff has also sought an award of attorney's fees; such application may be renewed upon disposition of the case if supported by authority for such an award. See Holbrook v. Pitt, 748 F.2d 1168 (7th Cir. 1984).
The individual defendants in this case like others with notice (Fed.R.Civ.P. 65) will be bound by any injunctive decree directing Summit to take steps requiring action on their part. There is no basis for holding them liable individually for damages or attorney's fees.
Suit against individual defendants with respect to monetary claims where a solvent organization is the actor, and where as here complete relief can be obtained without pursuing natural persons as defendants, serves no purpose and is contrary to the objectives of Fed.R.Civ.P. 1 and the Judicial Improvements Act of 1990, Public Law 101-650, 104 Stat. 5089, enacting 28 USC § 473. See Archer v. Globe Motorists Supply Co., 833 F. Supp. 211, 1993 WL 187913, 1993 U.S. Dist. LEXIS 7162 (S.D.N.Y. 1993).
No reason for piercing the corporate veil has been presented. See 1 Fletcher, Cyclopedia of Corporations § 44, 44.1 (rev. perm. ed 1983); Gelb, "Piercing the Corporate Veil - the Undercapitalization Factor," 59 Chi.-Kent L. Rev. 1 (1982).
Summit asserts that Riddick's legal aid counsel violated DR 7-104 by communicating with Summit personnel prior to initiation of the lawsuit when they should have known that Summit had counsel. This case, however, is before me on agreed facts, concededly genuine documents and legal arguments submitted by the parties. Hence such ethical infractions, if they occurred, would have no bearing on the litigation before me and cannot be considered in connection with it. Moreover, legal ethics are pragmatic and to be applied where real, not speculative harm is involved. See United States v. Thompson, 803 F. Supp. 905 (S.D.N.Y. 1992); United States v. Bryser, 803 F. Supp. 908 (S.D.N.Y. 1992).
Moreover, if counsel for Summit had not been involved in the matter when the communications occurred, there could also be no ethical violation, especially if no litigation was pending. See In re FMC Corp., 430 F. Supp. 1108 (D. W. Va. 1977).
Where an organization rather than a natural person is the recipient of questions or communications by opposing counsel, in connection with ongoing relationships, and questions asked could equally well be put by the client in the course of that activity, no overreaching appears likely, and the objectives of the Rule would not apply.
Riddick's request for sanctions under Fed.R.Civ.P. 11 is likewise out of place. Summit's counsel made no factual misstatements: it appears conceded that Riddick's counsel did indeed talk with Summit personnel prior to the bringing of the lawsuit. Paradoxically, perhaps, Riddick's counsel have defended this as necessary or proper inquiry to avoid Fed.R.Civ.P. 11 sanctions.
Summit and its counsel might, even if erroneously, have been concerned that legal ethics had been violated.
They raised the issue without making groundless factual assertions.
Under such circumstances, Fed.R.Civ.P. 11 sanctions are inappropriate. See Stern v. Leucadia National Corp., 844 F.2d 997, 1005-06 (2d Cir.), cert. denied 488 U.S. 852, 102 L. Ed. 2d 109, 109 S. Ct. 137 (1988).
To penalize Summit for raising the issue would have a chilling effect on the constitutionally protected access to the courts. See Bates v. Arizona, 433 U.S. 350, 376 n 32, 53 L. Ed. 2d 810, 97 S. Ct. 2691 (1977); United Transportation Union v. State Bar of Michigan, 401 U.S. 576, 28 L. Ed. 2d 339, 91 S. Ct. 1076 (1971); Brotherhood of Railway Trainmen v. Virginia, 377 U.S. 1, 12 L. Ed. 2d 89, 84 S. Ct. 1113 (1964); Bounds v. Smith, 430 U.S. 817, 821, 52 L. Ed. 2d 72, 97 S. Ct. 1491 (1977).
Were it sanctionable to make difficult uphill arguments contrary to existing authority, many landmark decisions would have been reached only at the peril of those arguing for them.
Indeed, counsel for less well-funded parties such as Riddick might be the most likely to suffer if sanctions were imposed or expensive, time-consuming side litigation over sanctions were generated in this type of situation. See Taft, "The Delays of the Law," 18 Yale L.J. 28, 35 (1908).
Important questions involving the administration of the § 8 subsidy program and its interaction with § 221 are raised by contentions of the parties in this case and discussed in this memorandum order; I direct plaintiff's counsel to send copies of this memorandum order to the relevant local housing agencies, the Regional Director and Secretary of the Department of Housing and Urban Development, and the chairs of the relevant House and Senate Committees.
Dated: White Plains, New York
October 18, 1993
VINCENT L. BRODERICK, U.S.D.J.