Plaintiffs, PRELIMINARY STATEMENT. Plaintiffs submits this reply memorandum in further support of their application for a

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1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK x DIANA ESTEVEZ, ARCELIANO GONZALEZ, GERMANIA GONZALEZ, ALBANIA NUNEZ, ANA REYES, MARIA PAULINO, MARIA TORRES, MARIA MORONTA, NANCY GARCIA, ZOILA PINZON, EMMA ROMAN, BERNARDINA INIRIO, MARY ALBERICCI, GILMA BERMUDEZ, EVELYN TAVARES, GUADALUPE GODINEZ, GLADYS ABREU and RAMONA CALDERON, 05 Civ (JG)(MJL) -against- Plaintiffs, COSMOPOLITAN ASSOCIATES LLC Defendant x PRELIMINARY STATEMENT Plaintiffs submits this reply memorandum in further support of their application for a preliminary injunction enjoining defendant, Cosmopolitan Associates LLC (hereinafter the landlord or defendant ), to accept their Section 8 voucher pending the outcome of this litigation. Plaintiffs, low income tenants who rely on their subsidy to pay their rent, face eviction and homelessness because their landlord, a former United States Department of Housing & Urban Development ("HUD") subsidized landlord, claims it need not accept their Section 8 enhanced vouchers. Federal law, legislative history, and HUD s own interpretation of the law clearly give plaintiffs the right to stay in their homes using their Section 8 voucher. 1

2 ARGUMENT I. PLAINTIFFS HAVE MET THE REQUIREMENTS FOR ISSUANCE OF A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTIVE RELIEF A. Plaintiff Will Suffer Irreparable Injury Without Injunctive Relief. The very real prospect of eviction and homelessness faced by plaintiffs clearly constitute the threat of irreparable injury to plaintiffs. See McNeill v. New York City Housing Authority, 719 F.Supp. 233, 254 (S.D.N.Y. 1989). In McNeill, Section 8 tenants sued the Housing Authority and their landlords, because their Section 8 benefits were terminated by the Housing Authority because of their landlords failure to make repairs. Finding irreparable harm and likelihood of success on the merits, the Southern District granted a preliminary injunction, enjoining the landlords from collecting more than the tenants Section 8 share of the rent. McNeill, 719 F.Supp. at 254. Indeed, the landlord concedes that eviction proceedings would inevitably be brought if plaintiffs are unable to pay the full contract rent. See Defendant s Memorandum of Law (hereinafter Def. Mem.). The landlord has already brought nonpayment proceedings for the full contract rent against some of the plaintiffs, and plaintiffs declarations make clear that without the subsidy they cannot afford the full rent which in many cases exceeds their income. The landlord implausibly asserts that plaintiffs ought to defend themselves one by one in the Housing Part of the Civil Court of the City of New York (hereinafter housing court ). See Def. Mem. at 3. However, housing court cannot order the landlord to accept Section 8 and, thus cannot grant the relief that plaintiffs request in their complaint. See Jones v. Gianferante, 305 2

3 nd N.Y. 135, 111 N.E.2d 419 (1953); Lorch v. Lorch, 7 A.D.2d 641, 179 N.Y.S.2d 638 (2 Dep t, 1958)(no affirmative equitable relief can be granted in a summary proceeding to recover real property); Ford v. Tower West Assoc., 120 Misc.2d 240, 241, 467 N.Y.S.2d 476 (App. Term, 1 st Dep t)(the Civil Court s power to issue injunctions is limited to landlord s compliance with housing codes). See also, McNeill 719 F.Supp. at (finding housing court to be an inadequate forum for resolving plaintiff Section 8 tenants claims). Moreover, federal court is the appropriate venue for resolving issues of the interpretation of federal law except in certain very limited exceptions. As the Supreme Court held in England v. Louisiana State Bd. of Medical Examiners, 375 U.S. 411, 415 (1964): There are fundamental objections to any conclusion that a litigant who has properly invoked the jurisdiction of a Federal District Court to consider federal constitutional claims can be compelled, without his consent and through no fault of his own, to accept instead a state court's determination of those claims. n5 Such a result would be at war with the unqualified terms in which Congress, pursuant to constitutional authorization, has conferred specific categories of jurisdiction upon the federal courts, and with the principle that "When a Federal court is properly appealed to in a case over which it has by law jurisdiction, it is its duty to take such jurisdiction.... The right of a party plaintiff to choose a Federal court where there is a choice cannot be properly denied." Willcox v. Consolidated Gas Co., 212 U.S. 19, 40 [1909]." The landlord does not make an abstention claim, but if the landlord had, it should be properly rejected for the reasons that the Court in McNeill rejected the claim. McNeill, 719 F. Supp. at 255. In the absence of injunctive relief, plaintiffs will suffer irreparable harm as they face eviction from their homes of many years and the potential of becoming homeless. B. Plaintiffs Are Likely to Succeed on the Merits 3

4 Federal law protects the right of current tenants who receive enhanced vouchers to continue to reside in their apartments, utilizing enhanced Section 8 vouchers to remain in place. 42 U.S.C. 1437f(t). The landlord appears to concede that 1437f(t) requires acceptance of enhanced vouchers but then asserts that 1437f(t) and Congress 1998 repeal of the so-called endless lease provision relieves the landlord of its obligation to enter into a contract with the Department of Housing Preservation and Development ( HPD ), the local public housing authority (PHA). The landlord s claim is disingenuous because it ignores that federal law and regulation require landlords to enter into a Housing Assistance Payment ( HAP ) contract with a local Public Housing Authority (PHA) in order to receive payments for all Section 8 subsidies, including enhanced vouchers. Moreover, the landlord chooses to completely disregard the fact that Congress enacted 1437f(t) in 1999 after its repeal of the endless lease provision with the express intent to protect a specific sub-class of Section 8 in place tenants with enhanced vouchers who as a result of owner opt-outs of project-based Section 8 programs were facing massive displacement. A further amendment in 2000 to 1437f(t) made clear that enhanced voucher holders are entitled to remain in their homes. Thus, the plain meaning of the statute, the purpose of the statute and its legislative history require the landlord to accept plaintiffs enhanced voucher. See Point B(1) and (2) infra. 1. Owners of Former Project Based Section 8 Housing Must Accept Enhanced Vouchers From Tenants Who Elect To Remain in Their Units It is well settled that statutory construction must begin with the plain text, and where the statutory language provides a clear answer, it ends there as well. Raila v. United States, 355 F.3d 4

5 118, 120 (2d Cir. 2004)(citations omitted). The plain language of 42 U.S.C. 1437f(t) clearly entitles plaintiffs who hold enhanced vouchers to remain in their homes and use their enhanced vouchers to pay their rent. Jeanty v. Shore Terrace Realty Ass n, No. 03 Civ (BSJ), 2004 U.S. Dist. LEXIS 15773, 2004 WL (S.D.N.Y. August. 10, 2004). Jeanty is directly on point with the case before this Court. In Jeanty, the landlord of a residential complex who, as here, opted out of its project-based Section 8 contract, argued that 1437f(t) merely ensured the tenant s right to remain in their apartment but did not obligate the landlord to accept her enhanced voucher. The Jeanty court squarely rejected the landlord s argument as illogical, stating that [i]f a landlord s obligation to accept enhanced vouchers upon opt-out was merely voluntary, then 1437f s grant to the tenant of the right to remain would be illusory. Jeanty, 2004 U.S.Dist. LEXIS at *10. The landlord asserts that Jeanty somehow does not apply because unlike the landlord in Shore Terrace defendant Cosmopolitan is ready willing and able to accept Section 8 monies from the Plaintiffs as long as it is not in any way contractually obligated to HPD. See Def. Mem. at 6. This reading of the statutory requirements is just as illogical as that advanced by the Shore Terrace landlord and rejected by the Jeanty court. Federal law and regulations governing the Section 8 program require landlords to enter into a HAP contract with the local PHA, in the instant case HPD, in order to be paid Section 8 subsidies on behalf of tenants. 42 U.S.C.A. 1437f et seq., 24 C.F.R (2). Thus, the refusal to sign the HAP contract is nothing but a refusal to accept the enhanced voucher, in clear violation of the mandate of 1437f(t). Giving the words of the statute their ordinary meaning, the plain language of 1437f(t) expresses Congress intent to afford tenants of formerly project-based buildings the right to 5

6 remain in their homes if they so choose. As Jeanty made clear, this right is meaningful only if a corresponding obligation applies to project owners. It makes little sense... to interpret the statute to mean that landlords must allow a tenant to remain exclusive of any obligation to accept the tenant s enhanced voucher U.S.Dist. LEXIS at *11. Thus, a sensible reading of the statute s plain language that a family may elect to remain in the same project cannot mean that the family s choice turns on the consent of the landlord. Rather, a landlord who opted out of its project-based HAP contract is bound to accept enhanced vouchers from tenants in place with all the attendant requirements as set forth by the provisions of 1437f, including the execution of HAP contracts for holders of enhanced vouchers. Opting-out of a project-based subsidy contract only relieves the landlord of the obligation to rent to new in-coming Section 8 tenants. 2. The Legislative History Of 1437f(t) Confirms Congress Intent to Protect Enhanced Voucher Holders Right to Remain Legislative history should only be used in determining the meaning of a statute when there is ambiguity. Reve v. Ernst & Young, 507 U.S. 170, , 113 S.Ct. 1163, 122 L.Ed.2d 525 (1993); United States v. Dauray, 215 F.3d 257, 264 (2d Cir. 2000). Thus, the Jeanty court held the statute s plain language made it unnecessary to search for congressional intent. Jeanty, 2004 U.S.Dist. LEXIS at *11 n.7 (citing American Tobacco Co. v. Patterson, 456 U.S.63, 74, 71 L.Ed.2d 748, 102 S.Ct (1982)). Nonetheless, the legislative history is instructive in light of defendant s mistaken assertion that plaintiffs insistence on their right to remain is nothing but an end run around the statutory repeal of the so-called endless lease provision. Apparently, defendant wants to convince this Court that Congress by enacting the Quality Housing and Work Responsibility Act of 1998, H.R. 4194, is precluded from subsequently enacting provisions to 6

7 protect certain classes of tenants. However, as noted by the Jeanty court, [c]ongress may allow landlords to sever their relationships with HUD in prior legislation but may nonetheless enact legislation to protect tenants living in these same housing developments from the consequences of opt-outs at later dates. Jeanty, at *11(citing Russello v. United States, 464 U.S.16, 23, 78 Ed. 2d 17, 104 S.Ct. 296(1983). As more fully set forth in plaintiffs Memorandum of Law, submitted in support of its application for injunctive relief (hereinafter Plaintiffs Mem. ), the legislative history makes clear that by enacting 1437f(t) in 1999, Congress expressly sought to protect tenants in formerly HUD subsidized housing developments from displacement after owner opt-outs of federal Section 8 contracts. See Plaintiffs Mem. at This is evident from testimony at subcommittee and committee hearings prior to the enactment of the enhanced voucher statute. Id. Defendant s claim that landlords are not obligated to enter into a HAP contract in order to accept enhanced vouchers from tenants who elect to remain in their home despite the explicit language of 42 U.S.C. 1437f(t) is nonsensical and must be rejected. If this were Congress s intention, then there would have been no need to enact the enhanced voucher provision to protect tenants in place from displacement after a landlord s opt-out. Under the landlord s interpretation, however, Congress enactment of 1437f(t) accomplished nothing at all. That plainly cannot be correct and was specifically rejected by the court in Jeanty. Notably, the landlord utterly ignores the distinction that Congress made between enhanced vouchers given to tenants in formerly project-based units in order to protect tenants in place, and regular vouchers given to applicants who were not in project- based units. Defendant persists that the enhanced voucher provision designed to protect only tenants in place must be interpreted as 7

8 voluntary citing Salute v. Stratford Green Garden Apartments, 136 F.3rd 293 (2d Cir. 1998). Defendant s reliance on Salute is misplaced. Salute addressed the former 42 U.S.C. 1437f(t), the so-called take one, take all provision which Congress repealed in The Second Circuit affirmed this Court s engrafting an exception on to the former 42 U.S.C. 1437f(t), agreeing that a literal reading of the take one, take all provision would have provided an incentive to evict tenants whose Section 8 subsidy the landlord had accepted out of compassion after they moved in so not to have to rent to outside applicants with Section 8. Thus, Salute was primarily concerned with the effect the interpretation of the statute would have had on low income tenants with Section 8 who were already residing in the Stratford Green Apartments. These are exactly the tenants who Congress wished to protect by enacting 42 U.S.C. 1437f(t): in place, indigent tenants who would be displaced by the HUD subsidized landlord leaving the Section 8 project based program. Moreover, Salute did not involve a landlord who had benefitted from project-based subsidies and predated the current version of 42 U.S.C. 1437f(t). See Jeanty v. Shore Terrace, at fn 6. In summary, if Congress intended landlords who received the benefits of the Section 8 program to refuse enhanced vouchers after they opted out, it would have made provisions for doing so. However, Congress intended the statute to do just what it purports to do: give tenants in place the right to elect to remain after the landlord opts-out of the Section 8 contract. Thus, the plain language of the statute, the legislative history and the policy behind the statute all mandate that a formerly HUD subsidized landlord be required to accept an in-place tenant s enhanced Section 8 voucher. 3. HUD As The Agency Entrusted To Administer The Section 8 Program Requires 8

9 Owners Who Opt Out Of Project Based Contracts To Accept Enhanced Vouchers From Current Tenants Even if 42 U.S.C. 1427f(t) could be subject to a different interpretation than that set forth above, the Supreme Court requires deference to HUD s interpretation. Chevron U.S.A. Inc. v. National Resources Defense Council Inc., 467 U.S. 837 (1984). The Supreme Court has recognized that agencies interpretations of their statutory mandates should be given deference due to their presumed substantive expertise with respect to the subject matter over which the agencies govern. See Jeanty, at * 13. As more fully set forth in plaintiffs initial memorandum of law, HUD through its numerous directives and policy guidelines adheres to the plain language of 42 U.S.C. 1427f(t). Plaintiffs Mem., at Just as the landlord chooses to ignore the plain language of 42 U.S.C. 1427f(t)and the congressional intent in enacting this provision, the landlord chooses to misapprehend HUD s interpretation of the statute. The landlord erroneously argues that HUD guidelines merely prevent a landlord from issuing a Notice of Termination to a tenant receiving an enhanced voucher but that nothing in HUD s policies mandates the landlord s participation in the enhanced voucher program. Def. Mem. at 13. However, as stated above, federal law and regulations require the execution of a HAP contract before payments for enhanced vouchers can be made to a landlord. 24 CFR (2). Without payments pursuant to a HAP contact enhanced vouchers would be completely meaningless. The landlord argues that this interpretation is irrational because it would render an owner s right to opt out meaningless and forces an owner to enter into a new contract with the government. 9

10 Def. Memo, at 6. As Jeanty held, this is simply wrong: Once an owner opts out of project-based assistance, it is entitled to receive market-rate rents, in the form of enhanced vouchers, from the tenants who resided in the building at the time of the opt out.. Landlords are also entitled to rent vacant apartments to whomever they wish. Furthermore, even if [the landlord s] argument where correct, it would not lead inexorably to the invalidation of HUD s interpretation. Instead, Congress could have intentionally chosen not to alter an owner s rights upon opt-out because of its prior receipt of government assistance and because it viewed as more important avoiding the displacement of low-income tenants upon opt-out. Jeanty, at *4-5. The landlord s own papers support this interpretation. The landlord s General Manager, Steven Seltzer asserts that only 10% of the units in the 1500 unit development currently receive Section 8 assistance. See Seltzer Aff. 6. The cases relied upon by the landlord for the proposition that landlord acceptance of enhanced vouchers is voluntary are inapposite, because they do not involve either the current statute, tenants with enhanced Section 8 vouchers or landlords who previously obtained the benefits of project-based Section 8 through HUD. See 30 Eastchester LLC v. Healy, 2002 N.Y. Slip Op U, 2002 WL (City Ct. New Rochelle), Cosmopolitan Associates, LLC v. Ortiz, N.Y.L.J. November 12, 2004 (Civ. Ct. Queens Co.); Licht v. Moses, 5 Misc.3d 1023A (Civ. Ct. Kings Co. 2004), appeal pending; Kulick and Rheingold Realty v. Montero, 8 Misc.3d 1007(A)(Civ. Ct. N.Y. Co. 2005); In the matter of the Administrative Appeal of Hyland Management Corp., Adm. Rev. Dkt No. QB910041RO, Dro Dkt No. PK910001RD. In contrast to the case before this Court, these cases involve the intersection between the New York State Rent Stabilization Law and federal law. Significantly, the landlord fails to cite and distinguish the numerous cases which hold that the Rent Stabilization Law requires that a landlord renew a Section 8 voucher including one where this same landlord was a plaintiff. See 10

11 Rosario v Diagonal Realty, LLC, Misc 3d, N.Y.S.2d, 2005 NY Slip Op 25267, NYLJ, Jul. 13, 2005 at 18, col 3 (Sup Ct, NY Co. 2005); Cosmopolitan Associates v. New York City Department of Housing Preservation and Development, Index No. 4816/05, May 31, 2005 (Sup. Ct. Queens Co.)(n.o.r.)(annexed)( [t]his court cannot find that plaintiff Cosmopolitan has a likelihood of ultimate success on the merits because of those cases which hold that payment pursuant to a HAP contract is a material term and condition of a rent stabilized lease which must be included in a renewal lease ); Ellwood Realty LLC v. De La Cruz, Index No /05, n.o.r. (Civ. Ct. N.Y. County); Ellwood Realty LLC v. Polanco, Index No (N.Y. Co. 2004) (n.o.r.)(annexed); Tiebout Estates v. Coleman, N.Y.L.J. October 19, 2004 (Civ. Ct. Bx Co.); M 1849 LLC v. Inniss, Index No /04 (August 8, 2004) (Civ. Ct. Bx Co)(n.o.r.)(annexed); Bran-Trav Development. LLC v. Matus, N.Y.L.J. August 11, 2004, p.17, c.1 (Civ. Ct. Kings Co.); Kouznetski v. Verga Assoc., N.Y.L.J. July 10, 2002, p.29 c.2 (Sup. Ct. Kings Co.); Tann Realty Co. v. Thompson, 112 Misc.2d 392, 446 N.Y.S.2d 959 (Civ. Ct. N.Y. Co. 1981); Fishel v. CAB, 123 Misc.2d 841, 474 N.Y.S.2d 908, 909 (Sup. Ct. Co. 1984). However, as noted above, this significant body of state case law is inapposite to the federal statute at issue here, which distinguishes enhanced Section 8 vouchers from other Section 8 vouchers. As the agency entrusted with administering the Section 8 program, HUD has reasonably read 42 U.S.C. 1437(f)(t) as requiring owners who opt out of project-based contracts to accept enhanced Section 8 voucher payments. Jeanty, at * Under Chevron, this court should defer to HUD s well reasoned interpretation of the statute. C. Plaintiffs Have Raised Serious Questions Going To The Merits And The Balance Of Hardships Tips Clearly In Their Favor. 11

12 Plaintiffs have demonstrated that they face almost certain irreparable harm and are likely to prevail on the merits. However, even if plaintiffs have not shown probable success on the merits, they have presented sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of the hardships tips decidedly toward them. See, Jackson Diary, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (per curiam). Here, the tenants face eviction and homelessness because they cannot afford to pay the full rent without Section 8's assistance. The landlord will be fully whole by accepting the tenants share of the rent and cashing the checks that HPD continues to send to the landlord for Section 8's share of the rent pending the outcome of this litigation. There cannot be serious question that a balancing of the equities tips decidedly in plaintiffs favor. CONCLUSION For the foregoing reasons, plaintiffs respectfully request that their motion for a preliminary injunction be granted. Dated: New York, New York September 27, 2005 By: ODA FRIEDHEIM (OF 9836) April A. Newbauer, Esq. The Legal Aid Society Oda Friedheim, of Counsel Josephine Flores, of Counsel Queens Boulevard Kew Gardens, New York Tel. (718) Scott Rosenberg, Esq. Director of Litigation Civil Appeals and Law Reform Unit 12

13 Judith Goldiner, of Counsel 199 Water Street New York, New York (212) Attorneys for Plaintiffs 13