Nozzi v. Housing Authority of the City of Los Angeles

ORDER The memorandum disposition and concurrence filed on March 21, 2011, are hereby withdrawn. The clerk shall file the attached memorandum disposition and concurrence in their place. The parties shall have fourteen days from entry of the superseding memorandum disposition to file petitions for rehear [541] ing or petitions for rehearing en banc in the above-captioned matter. IT IS SO ORDERED. MEMORANDUM ** Plaintiffs Michael Nozzi and Nidia Pe-laez, putative class representatives of recipients of federal housing assistance payments under the Section 8 Housing Voucher Program, 42 U.S.C. § 1437f(o), and the Los Angeles Coalition to End Hunger and Homelessness (collectively “plaintiffs”) appeal the district court’s dismissal of two claims and grant of summary judgment in favor of defendants Housing Authority of the City of Los An-geles (“HACLA”), which administers the Section 8 Program, and its Executive Director, Rudolph Montiel, on other claims arising from defendants’ failure to provide adequate notice of its planned reduction of the voucher payment standard (‘VPS”), which is used to calculate plaintiffs’ monthly housing assistance payments. Because the district court incorrectly applied well-established law to conclude that plaintiffs asserted no property interest to which due process attached, and because genuine issues of material fact exist as to whether the notice HACLA provided satisfied the requirements of due process, we affirm in part and reverse in part. 1. Perhaps misconstruing plaintiffs’ § 1983 due process claim, the district court improperly concluded that plaintiffs’ property interest in Section 8 benefits did not require adequate notice that their benefits were subject to the planned reduction. Although the district court based this conclusion on its determination that plaintiffs could not claim a property interest in the § 982.505 notice requirement, plaintiffs’ claim does not depend on finding a “right to notice.” Rather, plaintiffs claim that they are statutorily entitled to benefits under Section 8, and that the statute in tandem with the regulatory requirements “restricting] the discretion” of HACLA, Griffeth v. Detrich, 603 F.2d 118, 121 (9th Cir.1979), creates a property interest in Section 8 benefits to which constitutional due process attaches. See Perry v. Sin-dermann, 408 U.S. 593, 599-603, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972) (citing Bd. of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)) (a legitimate claim of entitlement derived from a statute, rule, regulation, or de facto protocol gives rise to a federally protected property interest). Moreover, because it is beyond dispute that “property interests ... extend well beyond actual ownership,” Roth, 408 U.S. at 571-72, 92 S.Ct. 2701, the district court erred in concluding that plaintiffs “can only [have] a property interest in property.” See, e.g., Ressler v. Pierce, 692 F.2d 1212, 1215 (9th Cir.1982) (finding that applicants have a federally protected property interest in receiving benefits); Griffeth, 603 F.2d at 121 (same). The controlling authority establishes that Section 8 participants have a property interest in housing benefits by virtue of their “membership in a class of individuals whom the Section 8 program was designed to benefit.” Ressler, 692 F.2d at 1215. Because the Section 8 regulations “closely circumscribe” HACLA’s discretion — by prohibiting HACLA from immediately implementing a reduced VPS, and requiring HACLA to inform participants that a reduced VPS will be implemented — plaintiffs’ property interest is protected against an abrupt and unexpected change in benefits. Id.; see also Gene [542] va Towers Tenants Org. v. Romney, 504 F.2d 483, 490 (9th Cir.1974) (finding that plaintiffs’ protected property interest in low-income housing included an expectation “that rents will be kept as low as economically feasible” where an entity’s discretion to increase rent was limited and plaintiffs clearly fell within the category of intended beneficiaries of the federal assistance program). What process is due to protect plaintiffs’ well-settled property interest in their Section 8 benefits is controlled by the factors set forth in Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976). Upon remand, the district court shall apply the Mathews factors to the circumstances presented here. See, e.g., Ressler, 692 F.2d at 1216-22 (evaluating the sufficiency of procedural safeguards); Geneva Towers, 504 F.2d at 491-93 (same). We note that the district court’s conclusion that there is “no reason to look beyond the regulatory language” to determine if HAC-LA’s notice was sufficient is at odds with Mathews. Technical compliance with regulatory procedures does not automatically satisfy due process requirements. See Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 541, 105 S.Ct. 1487, 84 L.Ed.2d 494 (1985) (“ ‘Property1 cannot be defined by the procedures provided for its deprivation.”). Moreover, given that the district court recognized that “the consequences of a sudden reduction in benefits to a Section 8 participant could be potentially devastating,” there exists a genuine issue of material fact as to whether HACLA’s notice sufficiently protected plaintiffs’ property interest.1 2. For similar reasons, the district court improperly granted summary judgment on plaintiffs’ state due process claim. California courts have held that the due process provision of the California Constitution, Cal. Const, art I, § 7, is “identical in scope and purpose” to the Due Process Clause of the federal Constitution. Gray v. Whitmore, 17 Cal.App.3d 1, 20, 94 Cal. Rptr. 904 (1971) (citing Gray v. Hall, 203 Cal. 306, 318, 265 P. 246 (1928)). 3. The district court incorrectly concluded that the notice provided by defendants satisfied the mandatory duty in § 982.505 to provide one-year notice before implementing the reduced VPS. California Government Code § 815.6 permits private individuals to sue public entities where: (1) an enactment imposes a mandatory duty; (2) it is intended to protect the individual from the type of injury suffered; and (3) the breach of the mandatory duty was the proximate cause of the injury suffered. Cal. Gov’t Code § 815.6. At a minimum, the notice must be sufficiently effective to protect housing benefits recipients from an abrupt and unexpected reduction of benefits. It is a question of fact whether the “literal compliance” that occurred here was sufficient to meet § 815.6’s requirements. 4. The district court’s dismissal of plaintiffs’ state law negligence claim was erroneous because, while public entities cannot be held liable for their own negligence, they may be held vicariously liable for the negligent acts of their individual employees. See Cal. Gov’t Code § 815.2; Eastbum v. Reg’l Fire Prot. Authority, 31 Cal.4th 1175, 1179, 7 Cal.Rptr.3d 552, 80 P.3d 656 (2003). [543] 5. The district court did not err in dismissing plaintiffs’ § 1983 claim to enforce the notice requirement in the regulation. Under Save Our Valley v. Sound Transit, 335 F.3d 932 (9th Cir.2003), agency regulations cannot create a federal right enforceable under § 1983. AFFIRMED in part, REVERSED in part, and REMANDED for proceedings consistent with this disposition. Each party shall bear its own costs. Footnotes [**] This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3. [1] The district court's reliance on Atkins v. Parker, 472 U.S. 115, 105 S.Ct. 2520, 86 L.Ed.2d 81 (1985), is misplaced. There, the plaintiffs had no property interest in advance notice of congressional action under the Food Stamp Act, and thus minimal, after-the-fact notice of a legislative change satisfied due process. Id. at 125-26, 129-30, 105 S.Ct. 2520.