Savannah Heights Limited Partnership v. District of Columbia Housing Authority

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 21-7004 September Term, 2021
FILED ON: FEBRUARY 23, 2022

SAVANNAH HEIGHTS LIMITED PARTNERSHIP AND BOWLING GREEN APARTMENTS LIMITED
PARTNERSHIP,
APPELLANTS

v.

DISTRICT OF COLUMBIA HOUSING AUTHORITY,
APPELLEE

Appeal from the United States District Court
for the District of Columbia
(No. 1:20-cv-00155)

Before: HENDERSON, TATEL and MILLETT, Circuit Judges

JUDGMENT

This appeal was considered on the record from the United States District Court for the
District of Columbia and on the briefs of counsel. See FED. R. APP. P. 34(a)(2); D.C. CIR. R. 34(j).
The Court has afforded the issues full consideration and has determined that they do not warrant a
published opinion. See D.C. CIR. R. 36(d). For the reasons stated below, it is

ORDERED AND ADJUDGED that the judgment of the district court be AFFIRMED.

Savannah Heights Limited Partnership and Bowling Green Apartments Limited
Partnership (Owners) own separate apartment buildings in Washington, D.C. The Owners brought
a breach-of-contract action against the District of Columbia Housing Authority (DCHA), a public
housing authority that provides housing assistance to low-income households in Washington,
D.C., and administers a federal voucher program providing rent subsidies for low-income tenants
in the Owners’ apartment buildings. See D.C. CODE §§ 6-201–6-232. They alleged that the DCHA
breached its contractual duty to comply with various federal statutory and regulatory requirements
for determining reasonable rents and the corresponding rent subsidies owed to the Owners. The
district court dismissed the action because the DCHA participates in a congressionally approved
program run by the Department of Housing and Urban Development (HUD) that gives local public
1
housing authorities the flexibility to craft their own procedures for the administration of the
voucher program. Pursuant to its agreement with the DCHA under this program, HUD waived the
federal requirements for determining rent reasonableness. Savannah Heights Ltd. P’ship v. D.C.
Hous. Auth., Civ. Action No. 20-155 (RJL), 2021 WL 39607, at *2 (D.D.C. Jan. 4, 2021). Because
the federal rent reasonableness requirements on which the Owners based their breach-of-contract
action against the DCHA are inapplicable, the district court concluded that they did not state a
claim upon which relief can be granted. See FED. R. CIV. P. 12(b)(6). For the reasons set forth
below, we affirm.

I.

The Owners’ apartment buildings in Washington, D.C., include dozens of units occupied
by low-income families, a portion of whose rent is paid through the Housing Choice Voucher
Program (HCVP), a HUD-administered program authorized by the Congress in the Housing Act
of 1937 to help low-income families “obtain[] a decent place to live.” 42 U.S.C. § 1437f(a), (b)(1).
HUD coordinates with local public housing authorities like the DCHA to make rent subsidy
payments to owners of low-income housing through the HCVP. See id. § 1437f(o); Section 8
Tenant-Based Assistance: Housing Choice Voucher Program, 24 C.F.R. pt. 982. The statute and
its implementing regulations set forth specific procedures for determining the reasonable rent owed
by the DCHA to participating housing owners. 42 U.S.C. § 1437f(o)(10)(A); 24 C.F.R. § 982.507
(Rent to owner: Reasonable rent). As required for the HCVP payments, the DCHA entered into
standard Housing Assistance Payment (HAP) contracts with the Owners and the HAP contracts
obligated the DCHA to comply “with all statutory requirements, and with all HUD requirements,
including the HUD program regulations at” 24 C.F.R. pt. 982. Appendix (App.) 132–40.

Since 2000, the DCHA has participated in HUD’s Moving to Work (MTW) Demonstration
Program, which the Congress created in 1996. It allows public housing authorities like the DCHA
to seek exemptions from existing public housing and voucher rules. 1 The DCHA’s current MTW
Agreement with HUD, in effect since 2010, expressly waives the federal statutory and regulatory
requirements for determining rent reasonableness and authorizes the DCHA “to develop a local
process to determine rent reasonableness that differs from the currently mandated requirements in
the” statute and its implementing regulations. 2 App. 38 (DCHA’s Memorandum in Support of
Motion to Dismiss quoting the DCHA’s 2010 MTW Agreement, Section D, 2(c), waiving rent-
reasonableness provisions). The DCHA has accordingly designed its own local process for

1
General information about the MTW program is publicly available on HUD’s website. See generally DEP’T OF HOUS.
& URBAN DEV., MOVING TO WORK (MTW) DEMONSTRATION PROGRAM, available at
https://www.hud.gov/program_offices/public_indian_housing/programs/ph/mtw/history (last visited Feb. 15, 2022)
(noting that the Congress created the MTW program through the Omnibus Consolidated Recissions and
Appropriations Act of 1996, Pub. L. No. 104-134, 110 Stat. 1321 (1996), and that the DCHA became a participant in
2000); DEP’T OF HOUS. & URBAN DEV., MTW FAQ, available at
https://www.hud.gov/program_offices/public_indian_housing/programs/ph/mtw/faq (last visited Feb. 15, 2022).
2
The DCHA’s 2010 MTW Agreement is available in full on HUD’s MTW website. Amended and Restated Moving
to Work Agreement, Attachment C, Section D, 2(c), https://www.hud.gov/sites/documents/DOC_10184.PDF (last
visited Feb. 15, 2022).
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determining rent reasonableness, which it has implemented through its housing regulations. See
D.C. Mun. Regs. Tit. 14, § 8301.3.

The Owners sued the DCHA for breach of contract in the Superior Court for the District
of Columbia, alleging that it failed to comply with the federal statutory and regulatory
requirements for determining rent reasonableness, an obligation purportedly imposed through the
HAP contracts. As a result, the Owners sought approximately $275,000 in damages for lost rent.

After the DCHA removed the suit to federal court, the district court granted the DCHA’s
motion to dismiss because the federal provisions governing rent reasonableness were waived for
the DCHA and therefore do not apply to its HAP contracts with the Owners. Savannah Heights,
2021 WL 39607, at *2. The district court concluded that the Owners failed to account for the effect
of the DCHA’s 2010 MTW Agreement with HUD, which rendered the federal requirements for
determining rent reasonableness inapplicable. Id.

The district court had jurisdiction pursuant to 28 U.S.C. § 1331, as the DCHA properly
removed the suit to federal court under 28 U.S.C. § 1441(a). This court has appellate jurisdiction
under 28 U.S.C. § 1291, as the Owners filed a timely notice of appeal from a final order of the
district court. A district court’s order granting a motion to dismiss is reviewed de novo. Carter v.
WMATA, 503 F.3d 143, 145 (D.C. Cir. 2007) (citation omitted).

II.

The Owners argue that nothing exempts the DCHA from complying with the federal
statutory and regulatory requirements for determining rent reasonableness and that their respective
HAP contracts with the DCHA specifically obligate the DCHA to adhere to the process set forth
in these provisions. Not so. The DCHA’s 2010 MTW Agreement with HUD waives the federal
requirements for rent reasonableness and the HAP contracts incorporate the DCHA’s
obligations—and thus the waivers—under the MTW Agreement.

As explained, the DCHA’s 2010 MTW Agreement with HUD does precisely what the
DCHA insists it does. 3 It expressly “waives” the federal statutory and regulatory requirements for
determining rent reasonableness and authorizes the DCHA “to develop a local process to determine
rent reasonableness that differs from the currently mandated requirements in the” statute and its
implementing regulations. App. 38 (quoting the DCHA’s 2010 MTW Agreement, Section D, 2(c)
and specifically waiving the rent-reasonableness provisions found at 42 U.S.C. § 1437f(o)(10) and
24 C.F.R. § 982.507). Each year, the DCHA submits its annual HCVP plan, which includes its
local process for determining rent reasonableness, to HUD for approval and the record indicates
that HUD has without exception approved the DCHA’s plans as compliant with its MTW

3
The Federal Rules of Evidence provide that the “court may judicially notice a fact that is not subject to reasonable
dispute because it . . . can be accurately and readily determined from sources whose accuracy cannot be reasonably
questioned.” FED. R. EVID. 201(b), (b)(2). Rule 201(b)(2) applies to HUD’s public description of the HCVP and the
MTW program, its publicly available 2010 MTW Agreement with the DCHA and its annual MTW approval letters—
the authenticity and accuracy of which the apartment owners do not contest.
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Agreement obligations. See, e.g., id. at 52 (2020 approval letter noting waivers), 203 (2018
approval letter noting waivers), 205 (2019 approval letter noting waivers); see also D.C. Mun.
Regs. Tit. 14, § 8301.3 (local process for determining rent reasonableness). Notwithstanding the
Owners’ protestations to the contrary, this practice is consistent with the DCHA’s HAP contract
obligation to comply “with all HUD requirements,” including its duties under the MTW
Agreement. App. 136. The DCHA owes no duty to the Owners to follow the federal requirements
because they have been waived and nothing in the HAP contracts abrogates the waiver. 4

On appeal, the Owners also contend that the DCHA’s interpretation of its obligations under
federal law and the HAP contracts is preempted by the Low-Income Housing Tax Credits Program,
the objective of which is to incentivize the private development of affordable, low-income rental
housing. They posit that the DCHA’s failure to pay reasonable rent as defined by the statute and
its implementing regulations conflicts with this objective. The Owners have forfeited this argument
because they did not make it in district court. See Chichakli v. Tillerson, 882 F.3d 229, 234 (D.C.
Cir. 2018) (an argument not raised in district court is forfeited).

The district court correctly concluded that the federal requirements for rent reasonableness
on which the Owners based their breach-of-contract action do not apply to the DCHA pursuant to
its longstanding MTW Agreement with HUD waiving such requirements. Accordingly, the
judgment of the district court is affirmed. 5

Pursuant to D.C. Circuit Rule 36, this disposition will not be published. The Clerk is
directed to withhold issuance of the mandate herein until seven days after resolution of any timely
petition for rehearing or petition for rehearing en banc. See FED. R. APP. P. 41(b); D.C. CIR. R. 41.

Per Curiam

FOR THE COURT:
Mark J. Langer, Clerk

BY: /s/
Daniel J. Reidy
Deputy Clerk

4
Neither does the Housing and Economic Recovery Act of 2008, Pub. L. No. 110-289, 122 Stat. 2654 (2008), which
amended the Housing Act of 1937 to provide a new standard for determining rent reasonableness—the standard
codified in the statutory and regulatory provisions on which the Owners’ complaint is based and that were waived by
the DCHA’s 2010 MTW Agreement.
5
The Owners also contend that the district court abused its discretion by denying them an opportunity to conduct
discovery. This argument is meritless. No discovery is required because the Owners failed to state an actionable claim.
The very purpose of Rule 12(b)(6) is to dispose of cases that do not warrant reaching the costly discovery phase
because, under the facts as alleged by the Owners, they could never win. See 5B CHARLES ALAN WRIGHT & ARTHUR
R. MILLER, FED. PRAC. & PROC. CIV. § 1356 (3d ed. Apr. 2021 Update) (12(b)(6) motion “is not a procedure for
resolving a contest between the parties about the facts”).
4