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MEDGAR EVERS HOUSES TENANTS ASS'N v. MEDGAR EVERS

October 23, 1998

MEDGAR EVERS HOUSES TENANTS ASSOCIATION, et al., Plaintiffs, against MEDGAR EVERS HOUSES ASSOCIATES, L.P., THE UNITED STATES DEPARTMENT OF HOUSING and URBAN DEVELOPMENT, et al., Defendants.


The opinion of the court was delivered by: GLEESON

MEMORANDUM AND ORDER

 JOHN GLEESON, United States District Judge:

 The Medgar Evers Houses Tenants Association and 181 tenants bring this action against the Medgar Evers Houses Associates, Limited Partnership ("MEHALP"), BPC Management Corporation ("BPC"), the New England Management Company, Inc. ("New England Management"), and others, claiming violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961 et seq., and New York State Real Property Actions and Proceedings Law (RPAPL) Article 7A, §§ 769-78. The defendants against whom relief is sought *fn1" have moved to dismiss the RICO claim on the ground that it fails to state a claim upon which relief could be granted. For the reasons set forth below, defendants' motion is granted.

 FACTS

 Medgar Evers Houses Tenants Association is an unincorporated association of tenants of the Medgar Evers Houses, a federally subsidized, low-income housing project consisting of nine buildings in the Bedford-Stuyvesant section of Brooklyn, New York. The individual plaintiffs are the tenants in 181 of the 315 apartment units located in the project. All of them participate in the federal program known as "Section 8" rental assistance.

 Defendant MEHALP has owned the Medgar Evers Houses since 1985. Defendant BPC operated and managed the project for MEHALP from approximately 1985 to 1990. Defendant New England Management has operated and managed the project for MEHALP since 1990. The individual defendants are employees of BPC or New England Management.

 A. The Statutory and Regulatory Framework

 The Section 8 program helps low-income families obtain a wholesome place to live, see 42 U.S.C. § 1437f, furthering the National Housing Act's "goal of a decent home and a suitable living environment for every American family." 42 U.S.C. § 1441. To achieve this goal, HUD provides, among other benefits, mortgage insurance or direct mortgage to the private sector at below-market rates for development or purchase and maintenance of low-income housing for the duration of the mortgage. Section 8 rental assistance consists of monthly rent subsidy payments to the owners of qualifying housing projects, such as Medgar Evers Houses. The government subsidizes that portion of each tenant's total contract rent that exceeds 30% of the tenant's adjusted gross income.

 HUD regulates Section 8 properties pursuant to various laws and regulations as well as through a Housing Assistance Payment ("HAP") Contract and a Regulatory Agreement between HUD and the property owner, in this case, MEHALP. Through the HAP Contract and Regulatory Agreement, HUD imposes on owners of Section 8 projects the duty to provide services and maintain the premises in compliance with HUD regulations and in conformity with state and local laws.

 The government pays Section 8 rent subsidies on the tenants' behalf directly to the owner upon its (or its agent's) submission of a HUD form known as a "Housing Owner's Certification and Application for Housing Assistance Payments" ("Owner's Certification"). The Owner's Certification requires the owner to sign a statement that provides, in relevant part, that "all required inspections have been completed . . . [and] the units for which assistance is billed are safe, decent and sanitary and occupied or available for occupancy." Complaint P 47.

 HUD retains the power and authority to replace non-performing management, to withhold subsidy payments and, if necessary, declare a default under the mortgage and regulatory agreement, and to become a "mortgagee in possession" or commence mortgage foreclosure proceedings.

 B. The Conditions at the Medgar Evers Houses

 HPD serves as the New York City agency responsible for inspecting residential apartment units for violations of various housing and building safety codes. HPD generally conducts such inspections in response to tenant complaints or housing court disputes in which tenants allege conditions impairing building safety or habitability. Violations issued by HPD inspectors fall into three categories of severity. The most severe are designated "C" violations, issued for conditions that present immediate hazards to the health and/or safety of the tenants. These must be corrected within twenty-four hours. Next in severity are "B" violations, issued for hazardous conditions, which must be corrected within thirty days. The least severe are "A" violations, which cover non-hazardous conditions that must be corrected within six months. Plaintiffs allege that, as of the filing of their complaint in May 1997, a total of 1,595 housing code violations existed at Medgar Evers Houses, of which 1,188 were either "C" or "B" violations.

 Between 1990 and the present, HUD has conducted at least six on-site inspections. These inspections found various types of repairs and maintenance needed in many areas, including elevators, exterior walls and foundations, water and sewage systems, insulation, electrical fixtures and systems, and heating systems. The inspectors also found a need for rodent and vermin extermination and a pervasive condition of mold and mildew throughout the project.

 C. The Plaintiffs' Claims

 Although HUD is named as a "co-defendant" in the complaint, plaintiffs have conceded that it is only a nominal defendant, from which no relief is sought unless the Court orders the dissolution of the RICO "enterprise" and places the project in receivership. See Complaint P 3; Transcript of Oral Argument, Jan. 9, 1998 ("Tr."), at 18-19. *fn2" Plaintiffs thus do not assert that federal jurisdiction arises because HUD is a party to this action. Rather, federal jurisdiction rests on their RICO claim and on supplemental jurisdiction under 28 U.S.C. § 1367. The complaint alleges that MEHALP, BPC, New England Management, and the individual defendants constituted an "associated in fact" "enterprise" within the meaning of 18 U.S.C. § 1961(4). Plaintiffs charge those defendants with violating 18 U.S.C. § 1962 (c) and (d) by participating and conspiring to participate in ...


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