Tribal NAHASDA Hearing Rights: Mapping the Chaos. Jon Tillinghast Dave Heisterkamp December 11, 2018
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1 Tribal NAHASDA Hearing Rights: Mapping the Chaos Jon Tillinghast Dave Heisterkamp December 11, 2018
2 Today s Focus is On. HUD Enforcement Proceedings Specifically, when and how HUD can make recaptures of NAHASDA grant funds 2
3 What Do We Mean by a Hearing? 24 C.F.R provides that hearings are governed by 24 CFR Part CFR Part 26 provides for evidentiary hearings before an unbiased Administrative Law Judge Parties can call witnesses Testimony is taken under oath Discovery is allowed, including pre-hearing depositions Parties may agree to less formal proceedings 3
4 Pre-Award Tribal/HUD Disputes Are governed by 24 C.F.R Census & Other formula data challenges Formula Areas Setting of Total Development Costs Fair Market Rents Only allows for a written appeal. No right to an actual hearing. 4
5 The CDBG Act - Predecessor to NAHASDA 401 If the Secretary finds after reasonable notice and opportunity for hearing that a recipient of assistance under this chapter has failed to comply substantially with any provision of this chapter, the Secretary, until he is satisfied that there is no longer any such failure to comply, shall (1) terminate payments to the recipient under this chapter, or (2) reduce payments to the recipient under this chapter by an amount equal to the amount of such payments which were not expended in accordance with this chapter, or (3) limit the availability of payments under this chapter to programs, projects, or activities not affected by such failure to comply Section 111, Community Development Block Grant Act of 1974, 42 U.S.C (1982) 5
6 The CDBG Act - Predecessor to NAHASDA 401 According to HUD, NAHASDA 401 "is patterned after the community development block grant (CDBG) legislation at Title I of the Housing and Community Development Act of 1974 [the "CDBG Act"]" 62 Fed. Reg (July 2, 1997) Initial NAHASDA Statutory procedural protections play a critical role [in administering public housing laws] because they insure that a [recipient] legally entitled to an annual [housing law] grant will not be 'precipitously deprived of funding pursuant to arbitrary action by HUD. Kansas City v. H.U.D., 861 P.2 nd 739, 744 (D.C. Cir. 1988) Opportunity for full adjudicatory hearing must be provided under Section 111 when HUD orders a public housing agency to refund moneys allegedly collected unlawfully That HUD's different reading [of Section 111] is hyper-technical in this context is further shown by the obvious purpose of the notice and hearing provision. It was plainly intended to give a recipient a fair chance to respond to the serious charge of noncompliance, and so have the grant maintained if the Secretary's action was ill-conceived. City of Boston v. H.U.D., 898 F.2d 828, 832 (1 st Cir. 1990) 6
7 NAHASDA 401(a) prior to and after 2000 amendment (a) Actions by Secretary affecting grant amounts Except as provided in subsection (b) of this section, if the Secretary finds after reasonable notice and opportunity for hearing that a recipient of assistance under this Act has failed to comply substantially with any provision of this Act, the Secretary shall (1) terminate payments under this Act to the recipient; (2) reduce payments under this Act to the recipient by an amount of such payments; that were not expended in accordance with this chapter (3) limit the availability of payments under this Act to programs, projects, or activities not affected by such failure to comply; or (4) in the case of noncompliance described in section 402(b), provide a replacement tribally designated housing entity for the recipient, under section 402. If the Secretary takes an action under paragraph (1), (2), or (3), the Secretary shall continue such action until the Secretary determines that the failure to comply has ceased. [this portion removed by 2000 amendment] 25 U.S.C. 4161(a) prior to amendments under P.L (2000) 7
8 NAHASDA 405(c) prior to 2000 amendment (c) EFFECT OF REVIEWS. The Secretary may make appropriate adjustments in the amount of the annual grants under this Act in accordance with the findings of the Secretary pursuant to reviews and audits under this section. The Secretary may adjust, reduce, or withdraw grant amounts, or take other action as appropriate in accordance with the reviews and audits of the Secretary under this section, except that grant amounts already expended on affordable housing activities may not be recaptured or deducted from future assistance provided on behalf of an Indian tribe. 25 U.S.C. 4165(c) prior to 2000 amendment 8
9 NAHASDA 405(d) (formerly (c)) as amended in 2000 (d) Effect of reviews Subject to section 4161(a) [ 401(a)] of this title, after reviewing the reports and audits relating to a recipient that are submitted to the Secretary under this section, the Secretary may adjust the amount of a grant made to a recipient under this chapter in accordance with the findings of the Secretary with respect to those reports and audits. 25 U.S.C (c) as amended by P.L U.S. Code annotation for 2000 amendments: Prior to amendment, section required the Secretary to make reviews and audits of recipients' activities and performance, to prepare reports, and to make adjustments in amounts of annual grants under this chapter based on the reviews and audits. 9
10 NAHASDA Regulations As originally proposed in 1997, regulation 24 C.F.R implementing Sec. 405 made no provision for a hearing. 62 Fed. Reg (July 2, 1997) Tribes objected. They wanted a hearing. The The tribal position in the proposed rule was that prior to the Department taking action under section 405(c) to adjust, reduce or withdraw future grant awards, the Department must provide notice and an opportunity for a hearing Extensive comments were received which unanimously supported the tribal position The final rule states that HUD will provide the recipient with a hearing identical to that provided under Section 401(a) of NAHASDA. 63 Fed. Reg (March 12, 1998) 10
11 NAHASDA Regulations 24 C.F.R final version in 1998 (b) Before undertaking any action in accordance with paragraphs (a) and (c) of this section, HUD will notify the recipient in writing of the actions it intends to take and provide the recipient an opportunity for an informal meeting to resolve the deficiency. In the event the deficiency is not resolved, HUD may take any of the actions available under paragraphs (a) and (c) of this section. However, the recipient may request, within 30-days of notice of the action, a hearing in accordance with The amount in question shall not be reallocated under the provisions of , until 15 days after the hearing has been held and HUD has rendered a final decision. 11
12 Many Judges Have Reviewed the 401 & 405 Provisions 2001 HUD s Office of Inspector General reviews ONAP s unit inventory practices and recommends audit of all TDHEs Ft. Peck I is first case filed protesting HUD s recapture after FCAS audit NAHASDA amended to head-off further litigation, but leaves door open to tribes already involved in challenges under original statutory language P.L , 301(b)(1)(E). Eventually, 45 tribal plaintiffs filed 17 different lawsuits against HUD in 4 different federal jurisdictions, including the Court of Federal Claims. 12
13 10 th Circuit ruled that: o HUD could only recapture grant funds under two specific provisions of NAHASDA o It then interpreted both those provisions narrowly; and o It ruled that, if the circumstances didn t fit within either confined set of circumstances, then HUD couldn t recapture 13
14 We Weren t the Only Rodeo in Town 9 th Circuit Court of Appeals: Crow Tribal Housing Authority v. HUD, 781 P (2015) Fort Belknap Housing Authority v. HUD, 726 F.3d 1099 (2013)» Housing Auth. Of the Te-Moak Tribe of Western Shoshone Indians v. HUD, 85 F.Supp.3d 1213 (D. Nev. 2015)» Walker River Paiute Tribe v. HUD, 68 F.Supp.3d 1202 (D. Nev. 2014) U.S. Court of Claims: Lummi Tribe of the Lummi Reservation v. United States, 870 F.3d 1313 (Fed. Cir. 2017) ( Lummi Appeal ) Rev g Lummi Tribe of the Lummi Reservation v. United States, 106 Fed. Cl. 623 (2012) ( Lummi Trial ) 14
15 All of Which Has Created this Hash ISSUE Does NAHASDA 401 apply to HUD s actions, requiring a hearing? No court has ruled that 401 applies. BUT: rulings based in part on 2008 FCAS amendment Does NAHASDA 405 apply to HUD s actions, requiring a hearing? RESULT YES: Crow, Lummi Trial BUT: Both cases turned on version of NAHASDA regulation that has changed NO: Modoc Lassen Does HUD have the inherent power to recapture grant funds without a hearing? YES: Fort Belknap NO: Modoc Lassen, Crow, Lummi Trial* *Dismissed for lack of subject matter jurisdiction 15
16 NAHASDA 401(a) as amended in 2000 (a) ACTIONS BY SECRETARY AFFECTING GRANT AMOUNTS. Except as provided in subsection (b), if the Secretary finds after reasonable notice and opportunity for hearing that a recipient of assistance under this Act has failed to comply substantially with any provision of this Act, the Secretary shall (1) terminate payments under this Act to the recipient; (2) reduce payments under this Act to the recipient by an amount equal to the amount of such payments that were not expended in accordance with this Act; (3) limit the availability of payments under this Act to programs, projects, or activities not affected by such failure to comply; or (4) in the case of noncompliance described in section 402(b), provide a replacement tribally designated housing entity for the recipient under section U.S.C. 4161(a) as amended by P.L
17 THE ISSUES: NAHASDA 401: What Were the Key Issues? What is substantial noncompliance? If the compliance is insubstantial, does this mean: (i) no hearing is required, and HUD can recapture (Fort Belknap); or (ii) there is no authority (Modoc Lassen) Is there a difference between funds unlawfully expended, and unlawfully granted? CBDG cases say no Fort Belknap and Modoc Lassen say yes 17
18 Why the Substantial Noncompliance Decisions May Not Apply to You: SUBSTANTIAL NONCOMPLIANCE. The failure of a recipient to comply with the requirements of section 302(b)(1) regarding the reporting of low-income dwelling units shall not, in itself, be considered to be substantial noncompliance for the purposes of this title. NAHASDA 401(a)(2); added by P.L (2008) 18
19 Why the Substantial Noncompliance Decisions May Not Apply to You: No Court Has Interpreted the Generally-Applicable Definition of Substantial Noncompliance! 24 C.F.R What constitutes substantial noncompliance? A noncompliance is substantial if: (a) The noncompliance has a material effect on the recipient meeting its planned activities as described in its Indian Housing Plan; (b) The noncompliance represents a material pattern or practice of activities constituting willful noncompliance with a particular provision of NAHASDA or the regulations, even if a single instance of noncompliance would not be substantial; (c) The noncompliance involves the obligation or expenditure of a material amount of the NAHASDA funds budgeted by the recipient for a material activity; or (d) The noncompliance places the housing program at substantial risk of fraud, waste or abuse. 19
20 THE ISSUES: NAHASDA 405: The Current Text of 405(a) & (d): (a)..the Secretary may conduct an audit or review of a recipient in order to (A) determine whether the recipient (i) has carried out (I) eligible activities in a timely manner; and (II) eligible activities and certification in accordance with this Act and other applicable law; (ii) has a continuing capacity to carry out eligible activities in a timely manner; and (iii) is in compliance with the Indian housing plan of the recipient; and (B) verify the accuracy of information contained in any performance report submitted by the recipient under section 404. (d) EFFECT OF REVIEWS- Subject to section 401(a), after reviewing the reports and audits relating to a recipient that are submitted to the Secretary under this section, the Secretary may adjust the amount of a grant made to a recipient under this Act in accordance with the findings of the Secretary with respect to those reports and audits. 25 U.S.C (a)&(c) 20
21 Section 405: Key Issue: What Kind of Audit or Review Will Bring HUD Action within scope of 405? Modoc Lassen: Eligible activities are defined in 202 of NAHASDA, and term [doesn t] include the tribe s report on its eligible housing activities. in other words, applicability is defined with reference to the tribal document that is being challenged, and not the underlying activity Certifications includes only the specific certifications of compliance listed in the IHP ( 102(b)(2)(D)(i.e. Civil Rights Act compliance), certification of Davis Bacon compliance ( 104(b)(1); and environmental review certification 105(b); and subparagraph (a)(a)(iii) applies only to items that are actually in Indian Housing Plan. ***Compare to CBDG ruling in City of Boston that statute must be given broad interpretation based on its impact on the housing authority, and not HUD s hypertechnical interpretation. 21
22 Section 405: Key Issue: What Kind of Audit or Review Will Bring HUD Action within scope of 405? Crow and Lummi Trial: Section 405 itself is ambiguous because it does not define eligible activities, and it should given an interpretation that favors tribal hearing rights (Crow) Certifications can include other reports within the broad framework of tribal reporting required by NAHASDA (Lummi Trial) 22
23 ISSUE: Does 405 Require a Hearing? On its face, 405 does not require a hearing; The preface to 401(d), that grant adjustment is [s]ubject to section 401(a) does not incorporate 401(a) s hearing requirement into 405. Crow; rather The proviso simply excepts matters covered by 401(a) ( substantial noncompliance matter) from the scope of 405; However, as enacted in 1998, 24 C.F.R provided that no action would be taken under 405 without an opportunity for a formal hearing. 63 Fed. Reg Crow and Lummi Trial based the hearing requirement on that regulation. 23
24 How Does 24 C.F.R Read Today: 532 as it existed until 2012: What are the adjustments HUD makes to a recipient s future year s grant amount under section 405 of NAHASDA? (a) HUD may, subject to the procedures in paragraph (b) below, make appropriate adjustments in the amount of the annual grants... (b) the recipient may request, within 30 days of notice of the action, a hearing in accordance with
25 How Does 24 C.F.R Read Today: In 2012, was amended to delete any reference to 405. New rule refers only to actions under 401; At the same time, 530(b) of the regulations was amended to state that HUD would use 401 s substantial noncompliance procedures for violations found in the course of 405(b) audits and reviews; To muddy things further, the 2012 preamble states that the amendments to 532 subsume pre-existing 532(c) (which, in turn, references old 532 s hearing guarantee). The effect of the 2012 amendment: who knows? 76 Fed Reg (Nov. 18, 2011) (draft rule and preamble); 77 Fed Reg (Dec. 3, 2012) (final rule). 25
26 Does Any of this Matter? Can HUD Recapture a Grant Under Common Law Authority Independent of 401 and 405? NO HUD has no common law right where Congress has established statutory remedies: Modoc Lassen, Crow and Lummi Trial Modoc Lassen: If neither 401 nor 405 applies, HUD cannot recapture grant funds YES: Fort Belknap (ruling was made in connection w/ dismissal for lack of subject matter jurisdiction) 26
27 Does Any of this Matter? HUD s theory: In recovering the overpayments at issue here, HUD exercised the government s longstanding, commonlaw right to recover funds which its agents have wrongfully, erroneously, or illegally paid..hud Brief, Modoc Lassen at 44. How far does this theory extend?: The theory has no apparent rules or limitations. Crow, quoting Lummi Tribal. HUD can always argue that, as things turned out, the grant was originally paid erroneously. 27
28 SO WHERE DO THINGS STAND: 401 expressly requires a hearing But, both 9 th and 10 th Circuits have interpreted statute narrowly In the 10 th Circuit, HUD has no choice but to utilize 405 and argue that the 2012 amendment to removed any hearing right under that section In the 9 th Circuit, citing Fort Belknap, HUD may argue that it is invoking its common law right to recoup wrongfully paid funds In the: 8 th Circuit (the Dakotas, Minnesota, Iowa, Nebraska, Missouri and Arkansas); and 7 th Circuit (Wisconsin Illinois and Indiana) nothing has been decided. In the Court of Claims, no remedy is available 28
29 What if HUD Recaptures a Grant? Do you Have a Remedy? The Court of Claims 28 U.S.C. 1491(a) (Tucker Act) and 1505 (Indian Tucker Act). Allows some monetary claims against U.S. BUT: if claim is based on statute, the statute must be money mandating only money mandating if it mandates compensation for damages sustained Thus, one key is whether the claimant is seeking damages Lummi, 870 F.3d at1318 U.S. District Court 5 U.S.C. 702 Authorizes judicial review of agency action except an action for damages Bowen v. Mass., 487 U.S. 879 (1988): Damages means money sought as substitute compensation for an injury Thus, it does not include actions for the very thing the plaintiff was deprived of (i.e. grant funding) 29
30 Whoops Lummi NAHASDA is not money mandating The term applies only to statutes that compel an unconditional award of money. Grants that have: (i) limitations (like the limitation to affordable activities and Native resident/income limits); and (ii) continuing oversight, do not meet that definition. Modoc Lassen NAHASDA grantees are seeking damages They are not seeking the very thing that they were deprived to the extent that: They would be reimbursed with funds from fiscal years other than the fiscal year in which the recapture occurred. 30
31 All Dressed Up, and Nowhere to Go: Lummi Go to that other Court Modoc Lassen Go to that other Court 31
32 Lummi: [W]e have severe misgivings about the incongruency of [HUD s] stances in this and related litigation. In particular, it appears that the government has taken, essentially, the opposite position in at least one of our sister circuits in parallel litigation. See Modoc Lassen.Of the government's two faces, we find the one presented to the Claims Court the one arguing that this "is not a suit for Tucker Act damages" to be the correct one. U.S. Supreme Court: This is fine with us : 202 L.Ed.2d 196 (Modoc Lassen [Fort Peck], cert. denied) 202 L.Ed.2d (Lummi, cert. denied) 202 L.Ed.2d 21 (Fort Peck, cert. denied) 32
33 THANK YOU QUESTIONS? Jon Tillinghast Dave Heisterkamp 33
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