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United States ex rel Anti-Discrimination Center of Metro New York, Inc. v. Westchester County

July 13, 2007

UNITED STATES OF AMERICAN EX REL. ANTI-DISCRIMINATION CENTER OF METRO NEW YORK, INC., PLAINTIFF,
v.
WESTCHESTER COUNTY, NEW YORK, DEFENDANT.



The opinion of the court was delivered by: Denise Cote, District Judge

OPINION & ORDER

This Opinion holds that a local government entity that certifies to the federal government that it will affirmatively further fair housing as a condition to its receipt of federal funds must consider the existence and impact of race discrimination on housing opportunities and choice in its jurisdiction. Plaintiff Anti-Discrimination Center of Metro New York, Inc. (the "Center") brings this qui tam action on behalf of the United States against Westchester County, New York ("Westchester") pursuant to the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"). The Center claims that Westchester falsely certified that it was in compliance with its obligation to conduct an analysis of impediments to fair housing choice and affirmatively to further fair housing, which it was required to do by statute to receive Community Development Block Grant ("CDBG") and other federal funds. Westchester has filed a motion to dismiss for failure to state a claim under Rule 12(b)(6), Fed. R. Civ. P.; for lack of subject matter jurisdiction under Rule 12(b)(1); and for failure to plead fraud with particularity under Rule 9(b). For the following reasons, the motion to dismiss is denied.

Background

The following facts are undisputed or taken from the complaint, unless otherwise noted. The United States provides housing-related funding to a variety of state and local governmental entities. Recipients of the grants are required to make certifications to the Secretary of Housing and Urban Development ("HUD"), including certifications that "the grant will be conducted and administered in conformity with the Civil Rights Act of 1964 [42 U.S.C.A. § 2000a et seq.] and the Fair Housing Act [42 U.S.C.A. § 3601 et seq.], and the grantee will affirmatively further fair housing," and that "the projected use of funds has been developed so as to give maximum feasible priority to activities which will benefit low- and moderate-income families or aid in the prevention or elimination of slums or blight." 42 U.S.C. § 5304(b)(2), (3).

Westchester includes forty-five municipal entities. With the exception of Mount Pleasant, Mount Vernon, New Rochelle, White Plains, and Yonkers, the entities are part of the Westchester Urban County Consortium ("Consortium"). During the period from April 1, 2000 to the present (the "false claims period"), Westchester applied each year for federal funds, including the CDBG, on behalf of itself and participating municipalities.*fn1 As a requirement of eligibility for those funds, Westchester made multiple certifications under the relevant statutes and regulations. Specifically, it certified that "it will affirmatively further fair housing, which means that it will conduct an analysis to identify impediments to fair housing choice within the area, take appropriate actions to overcome the effects of any impediments identified through that analysis, and maintain records reflecting the analysis and actions in this regard." 24 C.F.R. § 91.425(a)(1)(i); see also id. § 570.601(a)(2).

The Center claims that the certifications Westchester made were knowingly false. According to the complaint, Westchester, through its employees, acknowledged to the Center that its demographic analysis for the purpose of identifying impediments to fair housing did not encompass race, but only examined housing needs based on income.*fn2 Westchester explained that it sees discrimination as a problem of income discrimination, not racial discrimination, and does not treat as an impediment anything that is not brought to its attention by a Consortium member or other local government entity. According to the complaint, Westchester "did not engage in any independent analysis or exploration of impediments," and "refused to identify or analyze [community resistance to integration on the basis of race and national origin] as an impediment." Instead, it evaluated the needs of categories such as handicapped persons and extended families. Westchester admitted to the Center that the reason its analysis of impediments did not study housing discrimination based on race was because the Consortium did not include Yonkers.*fn3

Not only did Westchester fail to conduct an appropriate analysis of impediments, as a matter of policy it also refused to monitor the efforts of participating municipalities to further fair housing and did not inform them that Westchester might withhold federal funds if the municipality did not take steps to further fair housing. Westchester admitted to the Center that it permits participating municipalities to look only to the housing needs of existing residents, and not the housing needs of persons living outside the municipality. Throughout the false claims period, Westchester never required a participating municipality to take any steps to increase the availability of affordable housing or otherwise affirmatively further fair housing.

In sum, the Center claims that Westchester acted with knowledge that the certifications and the basis for receipt of the federal funds it submitted were false, and has improperly received more than $45 million in federal funds. On April 12, 2006, the Center filed the complaint in this qui tam action under seal, as required by 31 U.S.C. § 3730(b)(2). The Government had the option, under 31 U.S.C. § 3730(b)(4)(A), of conducting the action. After several extensions, the United States notified the Court on December 14, 2006, that it was declining to intervene pursuant to 31 U.S.C. § 3730(b)(4)(B). The Center then served the complaint on Westchester on January 8, 2007, and Westchester filed its motion to dismiss on April 17. That motion was fully submitted on June 15.*fn4

Discussion

Westchester's argument that the complaint should be dismissed for lack of subject matter jurisdiction is considered first:

Where, as here, the defendant moves for dismissal under Rule 12(b)(1), Fed. R. Civ. P., as well as on other grounds, the court should consider the Rule 12(b)(1) challenge first since if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot and do not need to be determined.

United States ex rel. Kreindler & Kreindler v. United Techs. Corp., 985 F.2d 1148, 1155-56 (2d Cir. 1993) (citation omitted).

I. Subject Matter Jurisdiction

On a motion to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1), Fed. R. Civ. P., "[t]he plaintiff bears the burden of proving subject matter jurisdiction by a preponderance of the evidence." Aurecchione v. Schoolman Transp. System, Inc., 426 F.3d 635, 638 (2d Cir. 2005). A court must "accept as true all material factual allegations in the complaint," Shipping Fin. Serv. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)), but refrain from "drawing from the pleadings inferences favorable to the party asserting [jurisdiction]," APWU v. Potter, 343 F.3d 619, 623 (2d Cir. 2003) (citation omitted). In resolving factual challenges to subject matter jurisdiction, the court may consider evidence outside of the pleadings. United States v. Space Hunters, Inc., 429 F.3d 416, 425-26 (2d Cir. 2005). "[A] district court may properly dismiss a case for lack of subject matter jurisdiction under Rule 12(b)(1) if it lacks the statutory or constitutional power to adjudicate it." Aurecchione, 426 F.3d at 638 (citation omitted). The inquiry is distinct from whether the plaintiff can state a claim for relief. Carlson v. Principal Fin. Group, 320 F.3d 301, 305-06 (2d Cir. 2003).

"Congress enacted the [FCA] in 1863 'with the principal goal of stopping the massive frauds perpetrated by large private contractors during the Civil War.'" United States ex rel. Lissack v. Sakura Global Capital Mkts., Inc., 377 F.3d 145, 151 (2d Cir. 2004) (citing Vt. Agency of Natural Res. V. United States ex rel. Stevens, 529 U.S. 765, 781 (2000)). The FCA imposes liability on any person who "knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval." 31 U.S.C. § 3729(a)(1). The terms "knowing" or "knowingly" mean that a person "(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required." Id. § 3729(b)(1).

Under the qui tam provision of the FCA, "[a] person may bring a civil action for a violation of [the FCA] for the person and for the United States Government. The action shall be brought in the name of the Government." Id. § 3730(b)(1). "[T]he government may either intervene and prosecute the action, § 3730(b)(2), or allow the original plaintiff -- the qui tam relator -- to proceed with the suit under § 3730(b)(4)(B)." Kreindler & Kreindler, 985 F.2d at 1153. Either way, "the relator is entitled to a portion of the proceeds if the prosecution is successful." Id.; see also 31 U.S.C. § 3730(d).

Subject matter jurisdiction for qui tam actions under the FCA is limited by statute:

(e) Certain actions barred. . . . .

(4)(A) No court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions in a criminal, civil, or administrative hearing, in a congressional, administrative, or Government [sic] Accounting Office report, hearing, audit, or investigation, or from the news media, unless the action is brought by the Attorney General or the person bringing the action is an original source of the information.

(B) For purposes of this paragraph, "original source" means an individual who has direct and independent knowledge of the information on which the allegations are based and has voluntarily provided the information to the Government before filing ...


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