In recent weeks, advocates for affordable housing have to be concerned over the events unfolding in Westchester County, NY, and in the State of New Jersey.

On April 5th, 2013, the United States Court of Appeals, 2nd Circuit, in the case of USA v. Westchester County, 712 F.3d 761, affirmed a decision of the United States District Court for the Southern District of New York (Denise Cote, J.) finding the County in violation of the duty to comply with the terms of a Consent Decree which resolved a qui tam action brought by the Anti-Discrimination Center of Metro New York, Inc. (ADC) under the False Claims Act.


In April 2006, ADC alleged that the County submitted false claims to the United States Department of Housing and Urban Development (HUD) in order to obtain millions of dollars in federal grant monies for fair housing. HUD requires local governments receive HUD funds to affirmatively further fair housing and to consider the existence and impact of racial discrimination in analyzing barriers to housing opportunities. The County certified to HUD that it complied with the grant requirements. The District Court disagreed, ruling that the County was obligated, as a condition of the HUD grant, to consider race in connection with its certification that it affirmatively furthered fair housing. Th Court determined that since the County failed to demonstrate that it considered rule-based impediments to fair housing and also failed to maintain records of any analysis of whether race created an impediment to fair housing, the County certifications to HUD were false as a matter of law. United States ex rel Anti-Discrimination Center of Metro New York, Inc. v. Westchester County 668 F Sup 2d 548 (SDNY 2009). The HUD funds that were received by the County totaled $52M. Under the Federal False Claim Act, anyone convicted of filing a false claim with the government to receive funding is subject to a penalty requiring a payback to the government of three times the amount of funds fraudulently obtained. Therefore, the County’s exposure under this action could have been $156M.

In August 2009, after the initial District Court determination, the United States Government intervened in the action. The Government offered and the parties agreed to sign a Consent Decree settling the action which obligated the County to pay $30M to the United States, $21.6M of which would be credited to the County’s HUD account to fund fair housing in the County, and $2.5M would be paid to ADC as the realtor/whistle-blower. Under the False Claim Act, the party initiating a successful act (the Realtor) is eligible to receive up to 30% of the amount recovered. This provision encourages people who are aware of false claims against the government to alert the government, and provides the government the opportunity to reclaim taxpayer money obtained in a fraudulent manner.

The Consent Decree required the County to take affirmative steps to further fair housing and to eliminate discrimination in housing opportunities. One such step requires the County to “promote”, through the County Executive, legislation currently before the Board of Legislators to ban ‘source of income’ discrimination in housing.”

Source of income legislation would prohibit housing discrimination based upon an individual’s source of income, such as, for example, social security benefits, State and Federal public assistance, Section 8 vouchers.

In 2009, then County Executive Andrew Spano sent five brief letters to advocacy organizations expressing his hope that they would continue to advocate for the County Board of Legislators to adopt the source of income legislation that had already been introduced. Mr. Spano also sent a letter to the leadership of the Board of Legislators, encouraging enactment of that legislation. However, the legislation was not approved by the end of the 2009 legislative session.

The legislation was re-introduced in 2010, and eventually passed by the Board of Legislators in June 2010 with some alterations.

However, by that time, there was a newly elected County Executive, Robert Astorino, who not only failed to take any steps to promote the legislation, but subsequently vetoed the amended version of the legislation on June 25, 2010.

On July 11, 2011, the County submitted a revised analysis of impediments to affordable housing plan (AI Plan) to HUD. HUD by letter dated July 13, 2011, notified the County that the AI Plan did not meet requirements of the Consent Decree because it did not incorporate corrective actions, including promotion of source of income legislation, or plans to overcome exclusionary zoning practices.

Once the fiscal year 2011 AI plan was rejected, HUD removed the County as grantee-eligible for HUD funds and federal funding was discontinued. In response to this, the County and the United States sought review by the Monitor appointed by the District Court to monitor the County’s compliance with the Consent Decree and resolve disputes between the parties. The Monitor issued a report that found, among other things, the County was in breach of its obligations to promote the source of income legislation.

The County objected to the Monitor’s determination and sought review from the Federal Magistrate Judge. The Magistrate Judge sustained the County’s objection on the dispute over the source of income legislation. The United States filed an appeal of the Magistrate Judge’s decision with the District Court.

The District Court reversed the Magistrate Judge’s decision and held the County did violate the Consent Decree. The County appealed the District Court decision to the Court of Appeals, Second Circuit.

Second Circuit Decision

In its appeal, the County first argued that the District Court did not have the authority to review the Magistrate Judge’s decision, claiming that by terms of the Consent Decree, only the Magistrate Judge could review the Monitor’s decision.

The Circuit Court rejected this argument and held that the District Court did have authority to review the Magistrate Judge’s decision because:

1) The Consent Decree specifically reserved jurisdiction in the District Court; and

2) The Consent Decree stated that any additional review by the Magistrate Judge would comply with the relevant provisions of the Federal Rules of Civil Procedure which require that a District Judge review any part of the Magistrate Judge’s decision to which a proper objection is made.

The County then argued that:

1) The Consent Decree only required that the County Executive “promote” the legislation and that the term “promote” was ambiguous;

2) The Consent Decree only applied to the County Executive in office at that time and the promotion of the source of income legislation as it existed in the 2009 legislative session;

3) The 2009 legislature, in authorizing the Consent Decree, could not bind future legislatures and County Executives; and

4) The Court could not interpret the Consent Decree in a manner that would require the County Executive to surrender his sovereign power to veto legislation.

The Circuit Court rejected all those arguments.

The Court held that the word “promote” had a clear and plain meaning which included “to bring or help bring into being, to contribute to the growth, enlargement or prosperity of, or to encourage or further”. Therefore the promotion of the legislation required affirmative action by the obligated party to help bring the legislation to function.

The Court determined the effort of the former County Executive in writing six short letters did not really rise to the goal of promotion, and coupled with the fact that the current County Executive vetoed the legislation once adopted, clearly demonstrated that the County Executive violated the terms of the Consent Decree.

The Court held that a local government is not relieved of its obligations under a Consent Decree taken on by a previous administration merely because new local officials take office.

The duty of the County Executive to promote the legislation extended beyond the 2009 legislative session because if it were to determine that the County was only required to take affirmative steps for the last five months of the 2009 legislative session, it would in effect render the Consent Decree meaningless.

The Court also reasoned that the County could not now claim that it was without power to do what it expressly represented was within its power as it sought to avoid hundreds of millions of dollars in liability. In entering the Consent Decree, the County chose to bind itself to the terms rather than have the District Court adjudicate the matter. The strong policy encouraging settlement of cases requires that the terms of the Consent Decree once approved by federal court, be respected as fully as a judgment entered after trial. Such an agreement constitutes a fully enforceable federal judgment that overrides any conflicting state law or state court order.

The Court held that the County Executive did retain his right to veto the legislation. But the Court determined that that veto constituted a breach of the Consent Decree, and, therefore, the County would be required to defend the False Claims Act suit under the original claim and subject itself to liability for up to $156M in damages if the veto were to continue.

In affirming the District Court’s decision, the Second Circuit, acknowledged legitimate concerns that Federal Courts carefully consider the validity and scope of a Consent Decree, but concluded that: “The County would have this Court rely upon the legitimate concerns that motivate modification of long-standing Consent Decrees to allow the County to shirk its voluntarily agreed to obligations, made less than four years ago, with no showing that the objects of the Consent Decree have been obtained and strong evidence indicating that they have not been. This we will not do.”

Around the time this case was decided, HUD issued an ultimatum to the County threatening to permanently cut $7.4M in funding unless the County produced a zoning study and affirmatively promoted the source of income legislation to the County Board of Legislators. The County Executive announced his plans to file an additional lawsuit in Federal District Court to prevent this funding cut. At the same time, it was reported that the source of income legislature was filed and a zoning study was submitted. The County is now seeking to stay any forfeit of funds until HUD reviews the zoning study.

Westchester County has long been the flash point in New York State on the issue of affordable housing.

Most of the landmark cases on exclusionary zoning in NYS involve Westchester communities. See Berenson v. Town of New Castle, 38 NY2d 102(1975) and Continental Building Co. v. Town of North Salem211 AD2d 88 (3rd Dept 1995). It is sobering and in fact depressing that after all these years and all the efforts of so many good people, that Westchester County has not solved its housing problems.

All municipal officials should take notice of the events in Westchester. When accepting federal grant money, know what you are certifying and the obligations that your municipality is assuming.

New Jersey

In New Jersey, a controversy has arisen regarding efforts of Governor Christie to take anywhere from $140M to $200M (depending on what report you’ve read) from the New Jersey Council on Affordable Housing (COAH) earmarked to provide for affordable housing in the State. This money apparently was transferred to the general fund to help balance the budget.

The COAH was formed after the landmark New Jersey Mount Laurel decisions requiring municipal boards to provide for affordable housing for low income families in their community. The COAH was formed in 1985 in response to the decisions to help New Jersey townships fund affordable housing. The trust fund was funded by fees charged to developers.

Unfortunately, by all reports, the COAH, which has not met in more than two years, has not been forthcoming in providing guidelines and approvals for municipalities to allow them to obtain money from the trust fund.

Governor Christie is now trying to dismantle COAH, stating that it is too dysfunctional to do its job. The issues have been brought before a New Jersey State Appeals Court that will hear arguments by both housing advocates and Governor Christie in June. In the meantime, the $140M meant for the affordable housing units has been frozen.

Westchester County and New Jersey, along with much of the Northeast, have been dealing with an affordable housing crisis for over forty years. It is imperative that all interests work together to resolve differences and find solutions that do not involve long, protracted court battles. It is in everybody’s interest that we provide decent housing not only the needy, but for our current and future work force.

The author is of this article is John Cappello