Oti Kaga, Inc. v. South Dakota Housing Development Authority

Oti Kaga appeals the district court's2 grant of summary judgment dismissing
its eleven-count complaint against the South Dakota Housing Development Authority
(SDHDA) and its seven-member board. The complaint alleges SDHDA
discriminated against Oti Kaga by rejecting its applications for tax credits under
Internal Revenue Code (IRC) § 42, and for funding under the HOME Investment
Partnership Act (HOME Program), 42 U.S.C. §§ 12741-12756. We affirm.

I.

Oti Kaga is a non-profit corporation established by the Cheyenne River Sioux
Tribal government pursuant to the United States Housing Act of 1937, 42 U.S.C. §§
1437-1437x. Oti Kaga's purpose is to acquire, construct, and operate rental housing
and related facilities on the Cheyenne River Sioux Indian Reservation.

SDHDA is an independent public instrumentality exercising essential public
functions under S.D. Codified Laws § 11-11-10. SDHDA is responsible for, among
other things, adopting and implementing a tax credit allocation plan pursuant to IRC
§ 42, as well as administering the state HOME Program in South Dakota. Appellees
William Earley, John Rothstein, Kevin Culhane, Lynn Hager, Thomas Schramm and
Leland Kleinsasser are members of SDHDA's Board of Commissioners, and appellee
Darlys Baum is SDHDA's Executive Director. Baum and the board members were
sued individually and in their official capacities.

Oti Kaga's claims arise out of SDHDA's administration of two federal housing
programs. The first, the tax credit allocation program, is authorized by IRC § 42, and
encourages investment in low-income housing projects. Under the tax credit
allocation program, state housing agencies are responsible for allocating tax credits
for the construction of low-income housing. IRC § 42(h)(3) limits the total number
of housing credits a state may allocate annually, and IRC § 42(m) requires the credits
to be allocated in accordance with a "qualified allocation plan." The annual plan
must be prepared by the state's housing agency and approved by the governmental
unit of which the agency is a part. IRC § 42(m)(1)(A)(i). SDHDA is the authorized
housing agency for South Dakota. S.D. Codified Laws § 11-11-47.

The second program at issue is the HOME Program. The HOME Program
provides federal housing funds directly to participating jurisdictions. The
jurisdictions disburse those funds in the form of loans and grants "to provide
incentives to develop and support affordable rental housing and home ownership
affordability." 42 U.S.C. § 12742(a)(1). Prior to 1998, states, certain municipalities,
and Indian tribes were participating jurisdictions in the HOME Program. 42 U.S.C.
§ 12747(a)(2). Accordingly, each Indian tribe in South Dakota could apply directly
to the Department of Housing and Urban Development (HUD) for an Indian HOME
Program allocation. Indian tribes could also apply to the state housing development
authority for state HOME Program funds. According to HUD regulation 24 C.F.R.
Part 92, "[a] State may fund projects on Indian reservations located within the State
provided that the State includes Indian reservations in its consolidated plan."
Because of the separate allocation existing prior to 1998, SDHDA adopted annual
HOME Program Plans which included reservation demographics but precluded the
use of state HOME Program funds for tribal projects.

In 1996, Congress enacted the Native American Housing and Self-
Determination Act (NAHASDA), 25 U.S.C. §§ 4101-4243. In conjunction with
NAHASDA, Congress terminated several programs which had provided Indian housing assistance, including the Indian HOME Program. Thereafter, Indian housing
assistance was funded directly through Indian Housing Block Grants (IHBG), 25
U.S.C. § 4111, and disbursed to recipients on the basis of Indian Housing Plans (IHP)
prepared by the tribes and submitted to HUD. 25 U.S.C. § 4112. Unlike HOME
Program funding, which is based on a competitive process, IHBGs are entitlement
funds which tribes use to meet locally identified needs. 25 U.S.C. § 4116(b)(1).

Notwithstanding consolidation of Indian-funding programs under NAHASDA,
HUD regulations implementing the HOME Program continue to allow states the
discretion to fund projects on Indian reservations provided the state includes the
reservations in its annual HOME Program Plan. 24 C.F.R. § 92.201. Prior to passage
of NAHASDA, SDHDA chose to include reservations in its annual plan but did not
award state HOME Program funds to Indian reservations or other jurisdictions
receiving separate allocations of funds.3 After NAHASDA became effective SDHDA
continued this practice.

In March 1996, Oti Kaga, with the assistance of David Bland,4 submitted an
application for tax credits to SDHDA in connection with a proposed housing
development (Elk View I) located on the Cheyenne River Sioux Indian Reservation.
Of the twenty-three applications for tax credits received by SDHDA in 1996, four
came from Indian tribes. SDHDA considered the applications and ranked them from
one to twenty-three according to its tax credit allocation plan, with one being the
highest rated and twenty-three the lowest rated application. Oti Kaga's application
was ranked six out of twenty-three but, as with other higher ranked applications, it
did not receive an award of tax credits. Only one of the tax credit awards went to an Indian sponsor. In addition to ranking criteria set out in IRC § 42(m)(1)(C)(i-viii),
SDHDA considered the extent to which the sponsor of the application was ready to
proceed. One member of SDHDA testified this factor weighed heavily against Oti
Kaga. Another board member stated the board decided it should award one tax credit
to an Indian tribe, and a lower ranked Indian-sponsored application was selected. In
October 1996, Oti Kaga was subsequently awarded the tax credits after a successful
applicant declined its award. Oti Kaga contends it was discriminated against because
the decision to initially deny tax credits was based on race.

Oti Kaga intended to build Elk View I using tax credits and Indian Home
Program funding obtained in 1996. It intended to build the second phase of the Elk
View project (Elk View II) using tax credits and Indian Home Program funding
awarded in 1997. Oti Kaga contends it suffered "distinct and palpable" injuries in
connection with those planned projects caused by the delay in awarding tax credits
in 1996. Oti Kaga alleges it was told Indian Home Program funding would not be
awarded in 1996 unless tax credits were also awarded. Because it was initially denied
tax credits, Oti Kaga ignored the 1996 Indian HOME Program application deadline.
As a result, Elk View I was delayed until 1997 and ran into cost overruns. Oti Kaga
alleges it was further harmed because it was forced to use Indian Home Program
funds obtained in 1997, which had been earmarked for Elk View II, to construct the
delayed Elk View I project, thereby in turn delaying Elk View II. Oti Kaga also
alleges a price quote it obtained for an environmental assessment for Elk View I
increased significantly from 1996 to 1997.

Oti Kaga also claims discrimination resulting from SDHDA's decision not to
award state HOME Program funds in 1997. As previously noted, Oti Kaga alleges
it was forced to use 1997 Indian HOME Program funds to build Elk View I. As a
result, it had to seek alternative funding for Elk View II. Thus, in 1997 Oti Kaga
applied to SDHDA for state HOME funding to finance Elk View II. Its application
for state HOME Program funding was denied. Among the reasons given for denying the application were SDHDA's belief that 1) housing projects on Indian reservations
were provided for under NAHASDA, and 2) state HOME Program funds were no
longer available for Indian projects. As with the denial of tax credits, Oti Kaga
argues the decision to deny its application for state HOME Program funding was
based on race. Oti Kaga contends it was harmed by the discriminatory refusal to
award state HOME Program funds because the lack of funding delayed construction
of Elk View II.

Oti Kaga brought suit against SDHDA and its board members claiming 1)
disparate treatment under the Fair Housing Act of 1968 (FHA), 42 U.S.C. §§ 3604
& 3605; 2) disparate impact under the Fair Housing Act of 1968, 42 U.S.C. §§ 3604
& 3605; 3) violation of the right to contract, 42 U.S.C. § 1981; 4) violation of the
property rights of citizens, 42 U.S.C. § 1982; 5) disparate treatment/impact under the
Civil Rights Act of 1866, 42 U.S.C. §§ 1981 and 1982; 6) negligent performance of
statutory obligations; 7) discrimination in the allocation of HOME Program funds, 42
U.S.C. § 12832; 8) discrimination in Title VI programs (disparate treatment), 42
U.S.C. § 2000d; 9) improper allocation of tax credits, IRC § 42(m); 10) state Fair
Housing Act violation, S.D. Codified Laws Ch. 20-13; and 11) deprivation of rights
under color of law, 42 U.S.C. § 1983. Appellees moved for summary judgment on
the basis of standing, political question doctrine, mootness, qualified immunity, the
inability of a corporation to recover damages for personal injury, statute of
limitations, the inability to prove intentional discrimination, a failure to exhaust state
administrative remedies, and failure to join indispensable parties. The district court
granted summary judgment finding Oti Kaga lacked standing to bring any claims
arising from the denial of its application for tax credits because it sustained no injury
and, alternatively, the claims were barred by expiration of the statute of limitations.
The district court also dismissed Oti Kaga's claims arising out of the denial of its
application for state HOME Program funding, finding Oti Kaga could not make out
a prima facie showing of intentional discrimination or disparate impact. Oti Kaga, Inc. v. S.D. Housing Dev. Auth., 188 F.Supp.2d 1148, 1160-68 (D.S.D. 2002).

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A. Standing to assert denial of tax credits

The district court granted summary judgment and dismissed Oti Kaga's claims
arising from denial of tax credits finding it failed to allege any injury in fact. We
review the district court's grant of summary judgment based on standing de novo.
National Fed'n of the Blind of Mo. v. Cross, 18 F.3d 973, 979 (8th Cir. 1999).

"The question of standing ‘involves . . . constitutional limitations on federalcourt
jurisdiction.'" Bennett v. Spear, 520 U.S. 154, 162 (1997) (quoting Warth v.
Seldin, 422 U.S. 490, 498 (1975)).

To satisfy the case or controversy requirement of Article III, which is the
irreducible constitutional minimum of standing, a plaintiff must,
generally speaking, demonstrate that he has suffered injury in fact, that
the injury is fairly traceable to the actions of the defendant, and that the
injury will likely be redressed by a favorable decision.

Id. (internal quotations omitted).

Injury in fact is "an invasion of a legally protected interest which is (a) concrete
and particularized, and (b) actual or imminent, not conjectural or hypothetical."
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Traceability requires proof
of causation, showing the injury resulted from the actions of the defendant "and not
. . . [from] the independent action of some third party not before the court." Id.
(internal citations and quotations omitted). "As the non-moving party facing a
summary judgment motion, it was [Oti Kaga's] burden to present some evidence to
establish a genuine question of fact on the standing issues of injury and causation."
Eddings v. City of Hot Springs, 323 F.3d 596, 602 (8th Cir. 2003) (citing Fed. R. Civ.
P. 56(e)). Our inquiry into standing, however, is not a review of the merits of Oti
Kaga's claims. Campbell v. Minneapolis Pub. Housing Auth., 168 F.3d 1069, 1073
(8th Cir. 1999). Instead, at the summary judgment stage we accept as true all material
facts alleged as "long as they are not incapable of proof at trial." National Fed'n of
the Blind of Mo., 184 F.3d at 979 (citation omitted).

Oti Kaga claims the delay in awarding tax credits caused it to forego applying
for Indian HOME Program funding in 1996, thereby delaying Elk View I and
resulting in cost overruns. Oti Kaga further claims it was harmed by having to use
1997 Indian HOME Program funds to construct the 1996 Elk View I project, leaving
it without a funding source for the 1997 Elk View II project. Finally, it contends the
delay in construction caused the cost of an environmental assessment to increase.

We conclude Oti Kaga has alleged sufficient injury in fact, traceable to
appellees, to satisfy the requirements of standing. We question Oti Kaga's ability to
prove its damages claims given its decision to ignore the application deadline, but we
find the allegations are not incapable of proof. Oti Kaga alleges it was improperly
denied tax credits. It further alleges the receipt of Indian HOME Program funding
was dependent upon an award of tax credits, and even if it had applied for funding it
would have been denied. The fact it was awarded Indian HOME Program funding
for Elk View I in 1997, after receiving the award of tax credits, provides support for
its allegations. Accordingly, we find Oti Kaga has alleged sufficient facts showing it was injured by the wrongful denial of tax credits to meet the injury in fact and
causation requirements of standing.5

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