Cisneros v. Alpine Ridge Group Page 3

Cisneros v. Alpine Ridge Group general information

Media for Cisneros v. Alpine Ridge Group

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

Michael R. Dreeben:

Namely, if there was a conflict between the comparability determinations and the formula, then the comparability determination took precedence to the extent of the conflict, and that is not a nullification of the formula, it simply is a qualification on any adjustment that's available to an owner.

William H. Rehnquist:

It used the proviso only after it had gone through the formulaic calculations.

Michael R. Dreeben:

That's exactly right, Chief Justice Rehnquist.

The comparability survey is the last step of the process, and I think what makes it most clear that this is an independent requirement of the contract is that the contract itself provides two different mechanisms for adjusting rents each year.

First, it provides the factor method which we've been discussing.

Second, the contract provides for special adjustments that any owner can seek when he can show that operating costs at his project and similar projects, or at his project alone, have increased more rapidly than is taken into account by the general factor, and when that happens, he can apply for a specialized increase based on his project alone.

If HUD agrees, he gets that increase, subject again to this cap.

The cap applies overall.

It comes at the end of the section dealing with the rent adjustments, and it governs both of the prior mechanisms for adjusting rent that the contract and the statute set forth.

Antonin Scalia:

Of course, if you have your formulas set unrealistically enough... that is, high enough... you would always have this case-by-case adjustment applicable, which would defeat the whole purpose of requiring the formula.

Michael R. Dreeben:

I think you're right, Justice Scalia, that if HUD really manipulated the adjustment factor in such a way so that it was never applicable, then this would be a very different case.

Antonin Scalia:

And Congress has required in the statute that there be the adjustment formula, right?

Michael R. Dreeben:

Yes, that's... it required that there be either the use of comparisons of fair market rentals or a reasonable formula, and HUD elected the reasonable formula approach, but the point here is that the factors in general operation are not inaccurate.

The problem arises because the best information that HUD could get during this period covered broad areas.

For example, there was one factor that governs the entire Washington, D.C. Metropolitan Area, which includes Montgomery County, Fairfax County, it includes a variety of areas in which economic conditions are quite different from each other, and the factor may as an overall matter be working just fine for most of the projects that are located in that region.

But for particular projects, it might be quite out of line, and it was to deal with that particularized problem that HUD adopted the comparability survey technique, it was not as a method of circumventing or abandoning the factors as a whole.

The Ninth Circuit seemed to read it that way, but the record really doesn't support any such claim, and there really has never been a claim in this case that HUD on a wholesale basis disavowed factors.

It continues to publish them, and it's attempting to perfect them all the time.

Antonin Scalia:

Do we have any idea what percentage of the projects were reevaluated in this fashion?

Michael R. Dreeben:

The record does not show that, and I don't think that there have been reliable statistics that would be publicly available that would show that kind of information.

But again, I don't think that the respondents have ever claimed that at any point HUD ceased to publish the factors.

The Federal Register reveals that they did, and they haven't attempted to claim that most or any substantial component of the projects that are governed by the factors didn't get the factor increase.

Now, in the alternative, and only if this Court concludes, contrary to the language of the contract, that the Ninth Circuit is somehow correct and what HUD was required to do was not apply the comparability survey directly but to work it into the factors, or to revise the factors in response to a comparability survey, then our alternative submission is that section 801 of the HUD Reform Act does not substantially impair the rights that the respondents had under their contracts.

Anthony M. Kennedy:

May I just ask on 801, at the time Congress passed 801, was the Ninth Circuit the only one to have ruled on whether HUD could use comparability studies, or had there been other courts, district courts in other circuits, that had ruled on the point?

Michael R. Dreeben:

Justice Kennedy, to my knowledge the Ninth Circuit was the only Federal court, the only court to rule on this issue.

There have since the passage of section 801 been three other courts... the Court of Federal Claims and two district courts... that have analyzed the constitutionality of section 801, and all three of those courts found that, as we submit, the owners never had a contract-based right to adjustment-formula increases free from comparability caps, and they therefore terminated the constitutional analysis at that point.

When Congress confronted the situation, Rainier View was the only Federal court to have ever held that comparability caps could not be used.

The district court in that very case had agreed with HUD that comparability caps could be used, but had held that HUD hadn't implemented them properly, there hadn't been national standards... all of those were administrative law claims which the district court conceptualized under the guise of the Due Process Clause, but the basic thrust was, HUD hadn't done it right.

The Ninth Circuit, on the basis of its reading of the contract language against the background of the statute, announced for the first time that no, HUD, you may not use comparability studies.

Where that left HUD was in an anomalous position.