DENVER (CN) — A divided 10th Circuit panel ruled this week that it remains to be seen whether the Department of Housing and Urban Development must repay $140,000 in grant money it seized without hearings from a Native American housing authority.
The Modoc Lassen Indian Housing Authority is the tribal housing entity for the Wintun-Wailaki Indians at the Grindstone Indian Rancheria in Glenn County, California.
The 120-acre Grindstone Rancheria, 5 miles north of Elk Creek in Northern California, has about 165 members, of whom about 100 live on the reservation.
In the early 2000s, HUD notified the Modoc Lassen that its housing authority had received $140,000 in funding to which it was not entitled. HUD said it would reduce its Indian Housing Block Grants to recapture the money. In 2004, HUD notified Modoc Lassen that it had fully repaid the debt.
The tribe sued HUD in 2008, claiming it had unlawfully reduced its federal housing assistance. It claimed HUD had improperly removed 13 affordable housing units in the Grindstone Rancheria to calculate the funding.
A federal judge ruled for the tribe in June 2014, finding that HUD had violated the Native American Housing Assistance and Self-Determination Act by taking the money from without a hearing.
But in a convoluted ruling on Tuesday, the 10th Circuit unanimously agreed on only one of three points at issue, and split on two other issues.
Writing for the majority, First Circuit Judge Nancy Moritz said that HUD did not recapture the money under a law or regulation that imposes a hearing requirement. So the trial judge erred in ruling that the tribe was entitled to a hearing before the money could be recaptured.
“But that’s where our unanimous agreement ends; the remaining questions divide the panel,” Moritz wrote.
Two members of the panel agree that HUD lacked authority to recapture the money via administrative offset. “Accordingly, we affirm the portion of the district court’s order that characterizes the recaptures as illegal.”
However, “two other members of the panel agree that if the agency no longer has the recaptured funds in its possession, then the district court lacked authority to order the agency to repay the recipients. Thus, we reverse that portion of the district court’s order and remand for further factual findings.”
Moritz clarified: “To the extent that HUD has already distributed the funds from those yearly appropriations to other tribes, HUD can’t possibly return those funds to the tribes. Thus, the district court instead ordered HUD to pay the Tribes by ‘substitut[ing]’ other funds for the funds to which the tribes are actually entitled — i.e., funds from past- or future-year NAHASDA [Native American Housing Assistance and Self Determination Act] appropriations.
“This distinction may seem pedantic. After all, money is money. And surely the tribes don’t care whether HUD repays them using funds that remain from 2003’s NAHASDA appropriation, or if it instead repays them from some other source. But ‘the fungibility [of] money’ can easily ‘obscure’ the difference between (1) ‘relief that seeks to compensate a plaintiff for a harm by providing a substitute for the loss, and (2) ‘relief that requires a defendant to transfer a specific res to the plaintiff.’
“To understand how that distinction operates to preclude relief here, assume for a moment that instead of withholding funds for affordable housing from a particular tribe, HUD instead wrongfully withheld from that tribe an actual house — a house that HUD then gave to another eligible tribe.
“Because that specific house is no longer in HUD’s possession, the district court can’t order HUD to turn it over to the tribe that should have originally received it.” (Citations omitted.)
First Circuit Judges Scott Matheson and Robert Bacharach wrote separate dissents in part, for different reasons.
Matheson disagreed with Moritz’s determination that “to the extent HUD no longer has the tribes’ particular funds, sovereign immunity bars the Tribes from recovering.”
He continued: “The Supreme Court has explained that the nature of the relief sought, not the source of the funds, determines whether sovereign immunity applies. The tribes are seeking specific relief — enforcement of NAHASDA’s mandate. They are not seeking damages, and therefore the waiver of sovereign immunity in the Administrative Procedure Act (‘APA’), 5 U.S.C. § 702, applies.”
Bacharach disagreed with Moritz’s determination that HUD lacked authority to recoup the overpayments.
“HUD argues that it obtained authority to recoup the overpayments through NAHASDA, which implicitly incorporated the longstanding common-law principle that governmental entities can recoup erroneous payments,” Bacharach wrote.
“I agree with HUD. Through NAHASDA, Congress incorporated common-law principles that allowed HUD to recoup the overpayments by adjusting the tribes’ annual allocations.”
What’s clear is Moritz’s conclusion: “Thus, with one exception, we reverse the portion of the district court’s order that directs HUD to repay the tribes and remand for factual findings regarding whether any of the recaptured funds remain in HUD’s possession.”