85 F. 3d 1119 - Louisiana Landmarks Society Inc v. City of New Orleans

The City of New Orleans, the Rivergate Development Corporation, and Harrah's Jazz Company (collectively, "the defendants") appeal an order granting Louisiana Landmarks Society ("Landmarks") a permanent injunction against them. Concluding that Landmarks had no private cause of action to seek the injunction, we reverse, vacate the injunction, and dismiss for failure to state a cause of action.

In October 1971, the city applied for a federal open-space land grant under title IV of the Housing and Urban Development Act of 1970, Pub.L. 91-609, 84 Stat. 1770 (1970) ("HUD Act" or "Act"), reprinted in 1970 U.S.C.C.A.N. 2069, 2083-87.1 These grants were provided for the creation and maintenance of open-space areas inside urban centers. See HUD Act § 701. One of the uses for which grants were available was for "historic and architectural preservation." See id. § 702(b)(4).

The grant application proposed that the city turn a parking lot into the Joan of Arc Plaza, a public area that would showcase a statue of Joan of Arc and a pair of cannons. The statue and cannons were gifts from France. The city ultimately obtained the grant and built the plaza.

Congress terminated the open-space land program in 1975, but it did not explicitly repeal § 705.2 This section required the approval of the Secretary of the Interior--not HUD--prior to the conversion of grant-assisted sites involving "historic or architectural" purposes to uses other than those proposed in the grant application. See id. § 705.

On December 5, 1994, bulldozers, under Harrah's direction, began clearing the Joan of Arc Plaza, but without harming the statue or cannons. Landmarks obtained a temporary restraining order ("TRO") enjoining the defendants from converting the plaza to something other than its allegedly historic purposes.

After a hearing, the district court issued a permanent injunction, along the same lines as the TRO, against the defendants. The defendants moved to amend the judgment so that it would affect a narrow, precisely-defined area, and the court granted this motion. The defendants now appeal the permanent injunction, and Landmarks cross-appeals the amendment.

It is undisputed that Congress did not expressly provide for a private right of action in passing the HUD Act. If any such cause of action exists, it must be one implied by the statute. The defendants argue that the Act implied no such right of action.3

Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2087, 45 L.Ed.2d 26 (1975), established a four-factor test for determining whether a federal statute implies a private right of action:

(1) Is this plaintiff a member of the class for whose "especial" benefit the statute was passed? In other words, does the statute create a federal right for this plaintiff?

(2) Is there any evidence of legislative intent, either explicit or implicit, to create or deny a private remedy?

(3) Is it consistent with the legislative scheme to imply a private remedy?(4) Is the cause of action one traditionally relegated to state law so that implying a federal right of action would be inappropriate?

See also Resident Council of Allen Parkway Village v. HUD, 980 F.2d 1043, 1053 (5th Cir.) (applying Cort test), cert. denied, --- U.S. ----, 114 S.Ct. 75, 126 L.Ed.2d 43 (1993). Furthermore, the Court explained in Touche Ross & Co. v. Redington, 442 U.S. 560, 99 S.Ct. 2479, 61 L.Ed.2d 82 (1979), that the touchstone of the Cort analysis is the second factor, Congressional intent. See id. at 568, 99 S.Ct. at 2485; see also Allen Parkway, 980 F.2d at 1054; Abate v. Southern Pac. Transp. Co., 928 F.2d 167, 169 (5th Cir.1991) (quoting Thompson v. Thompson, 484 U.S. 174, 179, 108 S.Ct. 513, 516, 98 L.Ed.2d 512 (1988)).

When analyzing a federal statute, we begin with the familiar presumption "that Congress did not intend to create a private right of action." Allen Parkway, 980 F.2d at 1053. Generally, a plaintiff asserting an implied right of action under a federal statute " 'bears the relatively heavy burden of demonstrating that Congress affirmatively contemplated private enforcement when it passed the relevant statute.' " Id. (quoting Victorian v. Miller, 813 F.2d 718, 721 (5th Cir.1987) (en banc)). Landmarks has failed to carry this burden.

Under the first Cort factor, we ask whether the plaintiff belongs to an identifiable class of persons upon whom the statute has conferred a substantive right. Abate, 928 F.2d at 169; see Cannon v. University of Chicago, 441 U.S. 677, 690, 99 S.Ct. 1946, 1954, 60 L.Ed.2d 560 (1979). Even if a plaintiff can demonstrate membership in such a class, however, the crucial inquiry remains one of Congressional intent--i.e., whether Congress actually intended to create a private remedy. See Thompson, 484 U.S. at 179, 108 S.Ct. at 516; Touche Ross, 442 U.S. at 568, 99 S.Ct. at 2485; Abate, 928 F.2d at 169 (quoting Thompson ). In answering the question of Congressional intent, "as with any case involving the interpretation of a statute, our analysis must begin with the language of the statute itself." Touche Ross, 442 U.S. at 568, 99 S.Ct. at 2485 (citations omitted).

In this case, Landmarks cannot demonstrate that it is a member of a class for whose special benefit the Act was passed. In the Act's statement of findings and purpose, Congress stated that the grant program established under the Act was intended

to help curb urban sprawl and prevent the spread of urban blight and deterioration, to encourage more economic and desirable urban development, to assist in preserving areas and properties of historic or architectural value, and to help provide necessary recreational, conservation, and scenic areas by assisting State and local public bodies in taking prompt action to [inter alia ] ... acquire, improve, and restore areas, sites, and structures of historic or architectural value....

HUD Act § 701(d). To the extent that there might be an identifiable class of "persons" mentioned in this statute, it would consist of "[s]tate and local public bodies"--not historical preservation societies such as Landmarks.4 This conclusion is supported by the fact that the statute explicitly defines the terms "State" and "local public body." See HUD Act § 709.

It is both true and insufficient that historical preservation societies are "a class that stands to gain some benefit from the regulations and penalties promulgated under these provisions." Abate, 928 F.2d at 169. The statute, however, focuses on Landmarks "only diffusely." id. In other words, it does not focus on historical preservation societies any more than it "focuses" on citizens at large.

Rather, the Act's provisions are framed " 'as a general prohibition or a command to a federal agency.' " Id. (quoting Universities Research Ass'n, Inc. v. Coutu, 450 U.S. 754, 772, 101 S.Ct. 1451, 1462, 67 L.Ed.2d 662 (1981)). The Act directs the Secretary of Housing and Urban Development ("HUD")--with some assistance from the Secretary of the Interior--to execute a regulatory scheme consisting of (1) federal financial assistance to state and local public bodies and (2) restrictions attached to that assistance. This grant program, prior to its termination, sought to benefit urban areas and communities generally. While Landmarks, like any ordinary citizen, may derive an indirect benefit from the enforcement of the regulatory scheme, that attenuated benefit5 does not rise to the level required to support implication of a private right of action. See id.6

Landmarks therefore has failed to establish that it falls within an identifiable class of persons for whose special benefit the Act was passed. Because Touche Ross instructs us that Congressional intent is always the critical inquiry in an implied-right-of-action analysis, see 442 U.S. at 568, 99 S.Ct. at 2485, we consider that Cort factor as well.

The most telling indicator of Congressional intent regarding this grant program is Congress's termination of it as of January 1, 1975. See 42 U.S.C. § 5316(a) (1995) (prohibiting new grants or loans after January 1, 1975, under--inter alia--title VII of the Housing Act of 1961). While Congress did not explicitly repeal § 705--the provision governing conversion of grant-assisted land to other uses--it did decide to pursue a different legislative agenda regarding open-space land and to eliminate the grant program. Given the Supreme Court's general disapproval of implied private rights of action, it would be anomalous to infer one from a defunct federal grant program.

Furthermore, the provisions of the statute are framed " 'as a general prohibition or a command to a federal agency.' " Abate, 928 F.2d at 169 (quoting Coutu, 450 U.S. at 772, 101 S.Ct. at 1462). Like the statute at issue in Abate, this one "creates no rights in favor of individuals"; rather, it "imposes duties on a federal agency and grants the agency the power to fulfill those duties." Id. Stated concisely, the language of the HUD Act is "duty-creating," not "right-creating" like the statute in Cannon. See id. at 169 n. 3 (quoting title IX of the Education Amendments of 1972 ("title IX"), the statute from which the Cannon Court inferred a right of action). And, as the Cannon Court stated, "the right- or duty-creating language of the statute has generally been the most accurate indicator of the propriety of implication of a cause of action." Cannon, 441 U.S. at 690 n. 13, 99 S.Ct. at 1954 n. 13.

Moreover, we must not overlook the fact that this is a federal funding statute. As stated in the Act itself, Congress's purpose in enacting this statute was to "assist" state and local public bodies in creating and maintaining open-space land in urban areas. HUD Act § 701(d). The statute created a grant program composed of federal-state and federal-locality partnerships, each of which properly was characterized as a contract between the federal government and a state or local public body. Cf. Pennhurst State Sch. and Hosp. v. Halderman, 451 U.S. 1, 17, 101 S.Ct. 1531, 1539, 67 L.Ed.2d 694 (1981) (stating that "legislation enacted pursuant to [Congress's] spending power is much in the nature of a contract").

When dealing with a classic federal funding statute like this one, inferring a private right of action is disfavored: "[A]s a general rule, courts have been reluctant to infer a congressional intent to create private rights under appropriations measures." Allen Parkway, 980 F.2d at 1052. Thus, courts generally should decline to entertain claims by private persons that a state or local public body is not complying with a federal-state contract. "In legislation enacted pursuant to the spending power, the typical remedy for state noncompliance with federally imposed conditions is not a private cause of action for noncompliance but rather action by the Federal Government to terminate funds to the State." Pennhurst, 451 U.S. at 28, 101 S.Ct. at 1545.7

In this case, because federal funds were given to the city as a one-time grant, Congress provided other means of enforcing the terms of the federal-state contract. It is apparent from the structure and text of the statute that Congress committed administration of the grant program to the Secretary of HUD, who was to be assisted in some capacities by the Secretary of the Interior. Sections 701 to 709 of the Act repeatedly refer to the Secretary of HUD, carefully describing his duties in administering the grant program. Conspicuously absent is any mention of private, third-party enforcement of this contract between the federal government and the city. Rather, enforcement of the terms of the contract is committed to the executive authority of the Secretary of HUD.

In Former Special Project Employees Ass'n v. City of Norfolk, 909 F.2d 89 (4th Cir.1990), the court held that the Model Cities Act--another HUD grant program--did not imply a private right of action. See id. at 92-93. The court cited approvingly cases from the Ninth and Eleventh Circuits holding that "funding statutes typically are not sufficiently focused on the benefiting class to confer federal rights on the members of the class." Id. at 92. The court also quoted with approval the language from Pennhurst disavowing implied private rights of action for noncompliance with the terms of a federal-state contract. See id. at 93.

The structure and language of § 705 constitute overwhelming evidence that Congress did not contemplate--let alone authorize--private enforcement of the open-space land program. Where analysis of the first two Cort factors leads to the conclusion that Congress did not intend to create a private right of action, we need not address the other two Cort factors. See California v. Sierra Club, 451 U.S. 287, 298, 101 S.Ct. 1775, 1781, 68 L.Ed.2d 101 (1981) (citing Touche Ross, 442 U.S. at 574-76, 99 S.Ct. at 2488-89).

We therefore hold that § 705 does not imply a private right of action. Accordingly, we REVERSE, VACATE the permanent injunction, and render a judgment of dismissal for failure to state a cause of action. Landmarks's cross-appeal regarding the scope of the injunction is DISMISSED as moot.