PHILADELPHIA — A federal appeals court recently reversed a lower court’s decision to dismiss a lawsuit filed against the city of Pittsburgh and its former mayor, Luke Ravenstahl, according to a decision filed on March 31.
U.S. Court of Appeals for the Third Circuit judges Felipe Restrepo, Morton I. Greenberg and Michael Fisher comprised the court, and Greenberg penned the decision.
The appellate panel ruled in favor of appellants Freedom Unlimited Inc., Northside Coalition for Fair Housing Inc., the Hill District Consensus Group Inc. and the Fair Housing Partnership of Greater Pittsburgh.
In March 2016, the appellants filed a lawsuit in the U.S. District Court for the Western District of Pennsylvania against Ravenstahl and the city of Pittsburgh, alleging that the city had been regularly misusing and lying about compliance with various government-sponsored community development programs since 2006, according to the appellate court’s decision.
Specifically, the former mayor allegedly lied to the U.S. Department of Housing and Urban Development in order to receive funds for the Community Development Block Grant and HOME Investment Partnerships programs.
The appellate court’s decision further states that the appellants claim that the city allegedly did not specify where or how the funds secured from the programs were spent and that many development issues remained unaddressed. When the city did make development proposals open to the public, it allegedly did not acknowledge any of the issues brought to its attention.
“In particular, [the] appellants assert that the city failed to take appropriate actions to analyze and address impediments to fair housing,” Greenberg wrote in the appellate court’s decision. “...[E]ven when the city did identify impediments to fair housing, such as the centralization of government-assisted housing in low-income and minority-concentrated neighborhoods, it failed to take or even propose actions to redress those impediments.”
The plaintiffs claim that the defendants violated the Fair Claims Act, which “makes it unlawful knowingly to submit a fraudulent claim to the government,” according to the appellate court’s decision.
The appellants cited specific examples in Pittsburgh’s action plan that allegedly show that the funds were not used for their intended purpose.
Though the CDBG program allows the city to determine where and how the funds should be used, it specifies that the spending must fall within acceptable guidelines for community and housing development needs, according to the appellate court’s decision.
The CDBG guidelines specifically forbid the city from using the funds for non-community development needs, such as general government expenses. However, the appellants claim that the programming funds were used to cover things like general spending.
The lower court originally dismissed the case, finding that the city did disclose how the funds were spent, and that even if it did violate the terms of the program, it did not violate the Fair Claims Act.
According to the appellate court’s decision, the lower court drew a distinction between the city not complying with the rules of the program and not telling the public about it. In other words, the court differentiated between “non-compliance with conditions of participation and non-compliance with conditions of payment.”
The appellate panel, however, reversed course.
The appellate judges based their decision on a U.S. Supreme Court decision handed down in June 2016, only a couple of months after the district court’s initial ruling.
In Universal Health Services Inc. v. United States ex rel. Escobar, the court did not distinguish “between conditions of payment of funds and conditions of participation in a federal program” to decide whether a government violated the FCA.
In that ruling, the high court decided that whether a government appropriately used the funds it was given could have affected whether it should have received the funds and whether it would receive more funding in the future.
In March 2017, the appellants in the Pennsylvania case appealed the district court’s decision based on the Escobar ruling.
The Third CIrcuit sent the case back to the district court so it could be reheard based on the Escobar decision.