Merritt v. Housing and Urban Development

Background

Ardy Merritt proceeded without a lawyer. Berkeley operated a Shelter Plus Care Program that provided rent subsidies to formerly homeless, disabled individuals and families. The federal Housing and Urban Development Department provided Berkeley grants for rental-assistance programs.

In 2018, Berkeley and SBMann3 LLC entered into a housing-assistance contract under which SBMann3 LLC was to lease Merritt a residential unit in Oakland, California, for $1,540 per month. Berkeley was to pay $1,309, and Merritt was to pay $231. The agreement required SBMann3 LLC to provide decent, safe, and sanitary housing.

Merritt alleged that SBMann3 LLC repeatedly violated that requirement and that he reported the violations to Berkeley. He further alleged that Berkeley warned him, causing him to fear retaliation and stop making additional reports. Berkeley later told Merritt that he could lose the subsidy if he did not pay his share of the rent, and the subsidy was eventually terminated. Merritt said he sent HUD information about nonpayment of rent and alleged illegal entries, but HUD did not conduct a thorough investigation and supported the termination.

Merritt eventually received a three-day notice, and SBMann3 LLC filed an unlawful-detainer case in state court. After hearings, settlement conferences, and a trial, the state court issued a final resolution favoring SBMann3 LLC. Merritt asserted breach-of-contract and fraudulent-enforcement-of-contract claims against HUD, Berkeley, and SBMann3 LLC. He sought damages from all defendants and an injunction against SBMann3 LLC.

Court’s analysis

The court granted Merritt’s application to proceed without paying the filing fee because the application indicated that he lacked funds to pay it. Because Merritt proceeded without paying the fee, the court was required under 28 U.S.C. § 1915(e)(2) to dismiss the complaint if it failed to state a claim on which relief could be granted.

The court construed the complaint as alleging that SBMann3 LLC breached its obligation to provide safe and sanitary housing, that HUD and Berkeley failed to require SBMann3 LLC to meet that obligation, and that all defendants acted fraudulently by enforcing Merritt’s obligation to pay the nonsubsidized portion of the rent.

As to HUD, the court noted that Merritt did not allege a contractual relationship with that department. The court considered whether the allegations could be understood as asserting a claim under the Federal Tort Claims Act, which permits certain claims for losses caused by negligent or wrongful acts of federal employees. The court held that it lacked jurisdiction because Merritt did not allege that he had first presented an administrative claim to HUD and that the claim had been finally denied. The court described that administrative submission and denial as a jurisdictional prerequisite to a Federal Tort Claims Act action for money damages.

The court also dismissed Merritt’s claims against Berkeley and SBMann3 LLC because those claims arose under state law and the court lacked subject-matter jurisdiction. The court cited authority stating that it had no discretion to retain supplemental jurisdiction over those state-law claims after dismissing the federal claims.

The court denied Merritt’s motion for an injunction for lack of subject-matter jurisdiction. It additionally stated that, even if it had jurisdiction over a claim, it could not grant relief that would enjoin the state court’s ruling in the unlawful-detainer action or directly review that state-court decision.

Disposition

The court granted the application to proceed without paying the filing fee, dismissed the complaint for lack of subject-matter jurisdiction, and denied the motion for an injunction. The court stated that Merritt could file an amended complaint no later than August 9, 2024.