Cisneros v. Alpine Ridge Group Page 2

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Media for Cisneros v. Alpine Ridge Group

Audio Transcription for Oral Argument - March 30, 1993 in Cisneros v. Alpine Ridge Group

Michael R. Dreeben:

The contract simply does not say that HUD must use this overall limitation as a methodology for composing the factors.

Sandra Day O'Connor:

Well, read in light of the statute, could it be thought to be ambiguous to some extent as to whether they're going to make these comparability studies in the published formula or whether they're going to do it separately in a case-by-case basis?

Michael R. Dreeben:

The statute itself, in our view, is not ambiguous on the question of whether comparability studies are authorized.

Sandra Day O'Connor:

No, I said was the contract ambiguous, read in light of the statute, which contemplated, apparently, that the Government could agree in these contracts to a formula approach to the adjustments?

Michael R. Dreeben:

No, I do not think that the contract is at all ambiguous read in light of the statute.

The contract is, if anything, far clearer on this point than the statute.

The contract explicitly uses the words,

"notwithstanding any other provisions of this contract. "

as a way of indicating that when there is a collision or a conflict between the provision dealing with published adjustment factors and the substantive standard that was animating this program... namely, that rents shall not exceed market-level rents... that the overall limitation provision takes precedence, and the words that are used there are crystal-clear on that point, I think.

If there is any doubt about what the statute actually meant about it... and I will concede that the statute is not as precise as the contracts... the statute is entrusted to HUD to administer, and HUD, exercising the authority that any administrative agency has in this situation, has promulgated a regulation that is entitled, "Overall Limitation", and that sets forth that the comparability rule that is parallel to the statute and is parallel to the contracts is an overall limitation, and the agency has interpreted its authority under that rule as authorizing comparability studies.

Now, the owners in this case have made much of the fact that HUD did not in the very earliest years of the program conduct comparability studies, but I think that claim really pales against the historical background here.

The program was enacted in 1974.

The first published adjustment factor wasn't published until 1976, and when that factor was published, HUD recognized that there could be some problems with the factors, and those problems arose because they cover extremely wide areas.

Exact, precise, reliable market data is not available for every market locality in the country.

HUD had to rely on information that they got from the Bureau of the Census and the Bureau of Labor Statistics, and it used that information as a means of devising what it believed would be generally accurate factors, but it recognized that the factors might need to be improved.

Two years later, in 1978, an internal HUD task force report noted that it is HUD's policy that field offices may adjust rents up or down based on the results of an individualized comparability study, and by 1981, HUD had found out that there were sufficient problems in certain areas that required the use of comparability studies in order to ensure that what Congress intended came to pass, namely, that the owners got annual rent adjustments that enabled them to keep pace with the movement of the market.

But in no situation were those adjustments designed to produce rents that were materially in excess of what comparable projects were experiencing in the area, with the one proviso that to the extent that there was any such initial difference when the contract rents were set, it would be preserved.

Sandra Day O'Connor:

Well now, why did the Government concede in the Ninth Circuit that section 801 substantially impaired the contract?

Michael R. Dreeben:

Well, Justice O'Connor, I don't believe that the Government did concede that in any meaningful sense.

We did not specifically raise a substantial impairment argument.

We argued that the owners have no contract right to formula-based adjustments without the use of a comparability cap.

We're arguing that here today.

In the alternative, we argued in the Ninth Circuit that even if there was an impairment of that contract right... in other words, if the Ninth Circuit had been correct in its Rainier VIew decision... that still didn't constitute a due process violation, and we gave many reasons for that.

We also, in the lower courts, addressed an alternative takings analysis that had been proffered by the respondents, and many of the elements involved in that analysis run parallel to the claim we make today, which is that even if the Court were to disagree with us on the contract and find, contrary to our view, in the clear language of the contract that there was a contract right, as the Ninth Circuit saw it, even, still, the Federal statute at issue here doesn't constitute a substantial impairment of that contract right because the statute also preserves the same financial standard that was always in this program... namely, comparable market rents.

It is respondents' burden, who are attacking the constitutionality of a Federal statute, to satisfy this Court that they have met every element of the test that the Due Process Clause requires, and in our view they have not met the burden of showing substantial impairment.

Now, the Ninth Circuit gave one other reason on the contract that I want to address.

The Ninth Circuit concluded that if HUD's reading of the contract were accepted, the election by HUD of the use of a formula would be nullified.

That holding does not follow from either the language of the contract or the language of the statute.

HUD continued throughout this program to use the formula as the primary mechanism for adjusting rents.

It published the formulas every year, it applied them to the projects, but what it did do was to apply the overall limitation as written.