Walker v. Department of Housing & Community Development

HARRELL, J., dissenting, in which MURPHY, J., joins. I think it a much closer question than the Majority opinion appears willing to admit whether there is sufficient indicia in the relevant regulatory scheme here that negates, expressly or by implication, the notion that a contested case administrative hearing process is required in Maryland in termination of Section 8 housing benefits situations. Because I am inclined to the view that there is sufficient indicia of negation here, I dissent. As the Majority opinion notes, 24 C.F.R. § 982.555 (a)(1) provides that a state public housing agency (“PHA”) “must give a participant family an opportunity for an informal hearing to consider whether the ...

PHA decision ... [is] in accordance with the law, HUD regulations and PHA policies ____” Majority op. at 85, 29 A.3d at 296 (emphasis added). The Majority opinion proceeds to describe the procedures for conducting such “informal hearings,” Majority op. at 85, 29 A.3d at 296, which the Maryland PHA Administrative Plan and hearing officer Chestnut earried-out apparently in this case. Majority op. at 87, 29 A.3d at 297. 1 Moreover, the procedures of 24 C.F.R. § 982.555 (e) and Maryland PHA’s Administrative Plan comply with federal due process requirements (see Majority op. at 92-95, 29 A.3d at 300-02, discussing Goldberg v. Kelly, 397 U.S. 254 , 90 S.Ct. 1011 , 25 L.Ed.2d 287 (1970)). I can find nothing in the relevant statutory or regulatory context that indicates other than that a more formal, trial type contested case hearing (under the Maryland Administrative Procedure Act) is not intended in these situations.

Stated another way, the need or desire for a contested case hearing process was negated. See Majority op. at 102-03, 29 A.3d at 306-07 and n. 13. Thus, even though a statutory entitlement was at issue in the present case, § 10-202(d)(1) of the State Gov’t Art. of the Md.Code does not trump the clear indication from the relevant statutory and regulatory scheme ¹⁰⁹ for the administrative resolution of Section 8 housing assistance disputes that only an “informal hearing” is required, such as was given in the present case, Sugarloaf Citizens Ass’n v. Northeast Maryland Waste Disposal Auth., 323 Md. 641, 662-668 , 594 A.2d 1115, 1125-1128 (1991), notwithstanding. I would affirm the judgment of the Circuit Court for Wicomico County.

Judge MURPHY authorizes me to state that he joins the views expressed here. . The Majority opinion does not contend that the informal hearing accorded Walker in the present case falls shy of the requirements of 24 C.F.R. § 982.555 (e) or the State PHA Administrative Plan. BARBERA, J. In this case we are asked to consider whether, prior to the termination of housing assistance benefits administered pursuant to the “Section 8 Housing Program,” 1 the Department of Housing and Community Development (“Department”) must, upon request, provide a “contested ease” hearing in accordance with Maryland’s Administrative Procedure Act, Md. Code (1984, 2009 RepLVoL), §§ 10-101 through 10-305 of the State Government Article (“S.G.”). This question is of much interest to Appellant Tonya Walker, whose housing benefits were terminated by the Department for her alleged violations of certain “family obligations” 2 required to be satisfied for continued participation in the Section 8 program.

Appellant challenged that decision at an informal administrative hearing at which, pursuant to Departmental and federal regulation, a hearing officer appointed by the Department presided. The hearing officer affirmed the Department’s decision. Appellant sought judicial review of the Department’s decision, asserting that the informal hearing was intended to be a “contested case” under Maryland’s APA, see SG § 10-202(d), to which certain rights and procedures apply, but were not followed in her case. The Circuit Court rejected Appellant’s contention and affirmed the Department’s decision.

Appellant noted a timely appeal to the Court of Special Appeals. Before argument in that court, we, on our initiative, issued a writ of certiorari. ⁸³ I. The Federal Housing Choice Voucher Program The Section 8 Housing Program, otherwise known as the Housing Choice Voucher Program (hereinafter “HCVP”), was enacted for the purpose of “aiding low-income families in obtaining a decent place to live....” 42 U.S.C. 1437f(a). The HCVP is administered by the Department of Housing and Urban Development (“HUD”), the regulations for which are found in 24 C.F.R Part 982. Under the HCVP, HUD enters into contracts with, and provides funding to, state public housing agencies (“PHAs”) for the purpose of providing rental subsidies to eligible program participants.

Each PHA must adopt an Administrative Plan that conforms with the statutory requirements and HUD regulations. Individuals seeking to participate in the HCVP program must apply to the designated PHA. The PHA, in conformance with criteria set forth by 42 U.S.C. § 1437f(o )(4), HUD regulations, and the procedure established by its Administrative Plan, is responsible for processing and qualifying the low income applicants. See 42 U.S.C. § 1437f(o )(6).

Once an applicant is approved by the PHA, he or she is provided a HUD voucher and approval form. The participant is then responsible for locating housing. Once a participant identifies rental housing and reaches an agreement with the landlord, the participant must obtain tenancy approval from the PHA. To be approved, the apartment must meet housing quality standards established by HUD, see 42 U.S.C. § 1437f(o )(8)(B); 24 C.F.R § 982.305(a); the rent must be reasonable, see 42 U.S.C. § 1437f(o )(10)(A); and the lease must conform to HUD requirements, including as an attachment a memorandum prepared by HUD explaining the rights and responsibilities of the landlord and tenant, see 42 U.S.C. § 1437f(o )(7)(F).

Once the PHA approves the lease, the PHA then enters into a housing assistance payment agreement with the landlord, whereby the PHA arranges to pay the difference between the participant’s base rental payment and the actual rent for the housing unit. ⁸⁴ When a family is selected to participate in the HCVP program, the PHA is required to “give the family an oral briefing” to explain family and owner responsibilities. 24 C.F.R. § 982.301 (a). The PHA must also provide the family with an information packet setting forth, inter alia, “[f]amily obligations under the program,” and explaining the right of a participant to request an informal hearing before the PHA to challenge certain PHA actions and how and when that right may be exercised. 24 C.F.R. § 982.301 (b). Pursuant to the statute and HUD regulation, participants in the HCVP must meet, at the outset and on an ongoing basis, specified family obligations. See 24 C.F.R. § 982.551 .

Two of those obligations are relevant to the present case: Pursuant to 24 C.F.R. § 982.551 (d) participants are required to allow the PHA to inspect the unit on an annual basis to ensure that the unit meets housing quality standards, see also 42 U.S.C. § 1437f(o )(8)(D) (requiring PHAs to conduct annual inspections); and pursuant to 24 C.F.R. § 982.551 (b), participants are obligated to provide “true and complete” information as required by the PHA and HUD, including “family income and composition.” Part 24 C.F.R. § 982.552 (c)(1) lists the grounds upon which a PHA may terminate program assistance. That regulation provides: The PHA may at any time deny program assistance for an applicant, or terminate program assistance for a participant, for any of the following grounds: (i) If the family violates any family obligations under the program (see § 982.551). See § 982.553 concerning denial or termination of assistance for crime by family members. (v) If the family currently owes rent or other amounts to the PHA or to another PHA in connection with Section 8 or public housing assistance under the 1937 Act. ⁸⁵ (vii) If the family breaches an agreement with the PHA to pay amounts owed to a PHA, or amounts paid to an owner by a PHA.

(The PHA, at its discretion, may offer a family the opportunity to enter an agreement to pay amounts owed to a PHA or amounts paid to an owner by a PHA. The PHA may prescribe the terms of the agreement.) 24 C.F.R. § 982.552 (c)(1). The requirement of a pre-termination hearing 24 C.F.R. § 982.555 (a)(1) provides that, prior to making a determination to terminate assistance, “a PHA must give a participant family an opportunity for an informal hearing to consider whether the [ ] PHA decision[ ] ... [is] in accordance with the law, HUD regulations and PHA policies.... ” Part 24 C.F.R. § 982.555 (e) directs the PHA to establish procedures for conducting informal hearings and provides a general framework for conducting the proceeding. The regulation provides the following: Prior to the hearing, the participant must be given the opportunity to examine all relevant PHA documents.

Id. At the hearing, the participant, at his or her own expense, is entitled to legal representation. Id. The PHA may appoint “any person” to serve as the hearing officer for the hearing, so long as that person is not the person “who made or approved the decision under review or a subordinate of this person.” Id.

Although there are no formal evidentiary rules at the hearing, both the PHA and the participant have the opportunity to “present evidence, and may question any witnesses.” Id. The regulation requires all factual determinations to be made by a preponderance of the evidence standard, and it directs the hearing officer to “issue a written decision, stating briefly the reasons for the decision.” Id. Maryland’s PHA The Maryland Department of Housing and Community Development is the PHA responsible for administering the HCVP program in Wicomico County, Maryland. 3 As required ⁸⁶ by the federal statute and HUD regulations, the Department has adopted an Administrative Plan governing the administration of the HCVP program. 4 Consistent with the various HUD regulations discussed above, the Administrative Plan provides for, inter alia, the possible termination of a participant’s assistance payments for failing to comply with family obligations, failing to provide an accurate report of family income, and failing to repay the Department for any overpayments. Also consistent in all material aspects with HUD regulations, the Administrative Plan provides that, prior to the termination of a participant’s housing assistance benefits, the participant must be given an opportunity for an informal hearing.

In accordance with 24 C.F.R. 982.555(e), the Administrative Plan specifies the rights afforded to a participant at the informal hearing and how that informal hearing is to be conducted. ⁸⁷ II. This litigation arises out of Appellant’s alleged failure to comply with her family obligations, as required by the Administrative Plan and HUD regulations. In 2009, Appellant resided with her four children in a house she rented in Salisbury, Maryland. Because Appellant was at the time an HCVP participant, her rental payments were supplemented by payments made directly from the Department to Mary Anne Johnson, the property manager of Appellant’s rental unit.

The Department, alleging that Appellant was in violation of her family obligations, notified Appellant that her rental assistance payments were being terminated. As a result of the termination, Appellant requested and was given an informal hearing to appeal the termination decision, as required by the Administrative Plan and HUD regulations. On August 27, 2009, that hearing was held at the office of Joy Chestnutt, a local property manager appointed by the Department to serve as the hearing officer. The Hearing Ms. Chestnutt (hereinafter, “the hearing officer”) took testimony from Ms. Barbara Bialk, a housing subsidy officer representing the Department, and from Appellant and her father, Avery Walker.

The hearing officer also received certain documentary evidence from the Department and Appellant. Given the purely legal question we decide, it is unnecessary to discuss all that occurred at the hearing. It is sufficient to note the following. The Department’s theory for terminating Appellant’s participation in the program was that she had violated her HCVP family obligations in two ways: she failed on multiple occasions to make her home available for inspection, as required by 24 C.F.R. § 982.551 (d), and she failed to enter into a repayment agreement to compensate the Department for alleged overpayments, as she was required to do by the Administrative Plan and 24 C.F.R. § 982.552 (c)(1)(vii).

According to the Department, the overpayment resulted from Appellant’s failure to report to the Department that she was receiving Social Security benefits on behalf of her children. ⁸⁸ The Department further alleged that Appellant failed to take any corrective actions to satisfy her family obligations, despite the Department’s numerous letters to Appellant warning her of the need to do so in order to avoid termination of her HCVP benefits. Those letters included a June 8, 2009 “Termination of Assistance Notification” letter indicating that Appellant’s HCVP participation was being terminated effective July 31, 2009. The letter stated that the grounds for termination were Appellant’s failure to enter into a repayment agreement and to allow inspection of the assisted unit. The letter also notified Appellant that “[y]ou have a right to appeal this decision.

To appeal, you must file a written request for an informal hearing sent to [the Department] no later than fourteen (14) days from the postmark on this notice.” Appellant presented to the hearing officer a different version of events that led to the Department’s terminating her from the program. With regard to her alleged failure to make her home available for inspection, Appellant argued that she had notified the Department that the inspector failed to show up for one of the scheduled re-inspections and that a family medical emergency necessitated her missing the second of the scheduled re-inspections. As for the failure to report the change in income, Appellant denied receiving notice from the Department directing her to arrange for a repayment plan and, when she noticed an increase in her rental payments, she believed that she had begun repayment of the overpayment. Appellant also denied receiving the June 8 “Termination of Assistance Notification,” and alleged that she only learned from her father of the termination of her benefits on or about August 11, 2009, after her father had been informed by the property manager, Ms. Johnson, of the termination.

Appellant presented to the hearing officer a letter from Ms. Johnson. Ms. Johnson wrote that the property management company did not receive the June 8 letter, and, according to Ms. Johnson, she learned of the termination only after she noticed that the rental assistance payments from the Department had ceased. ⁸⁹ On September 3, 2009, the hearing officer issued a written decision, summarizing the aforementioned evidence, but making no findings of fact. The decision includes the hearing officer’s conclusion, without elaboration, that “[t]he testimony and evidence in this matter indicates that the decision of the [Department] should be upheld.” Petition for Judicial Review On September 28, 2009, Appellant filed in the Circuit Court for Wicomico County a petition for judicial review pursuant to SG § 10-222. The Department moved to dismiss the petition. 5 The Department relied on Maryland Rule 7-201(a), which provides: “The rules in this Chapter govern actions for judicial review of (1) an order or action of an administrative agency, where judicial review is authorized by statute.... ” The Department argued that its decision to terminate Appellant from the program would be subject to judicial review only if authorized by statute, and there is no such authority.

The Department further relied on SG § 10-202(d), which describes what is, and what is not, a “contested case.” The Department argued that the informal hearing conducted pursuant to 24 C.F.R. § 982.555 does not come within the definition of a “contested case” as set forth in Maryland’s Administrative Procedure Act (hereinafter, the “APA”), for which judicial review is available. See SG § 10-222(a)(1) (providing that, “[e]xeept as provided in subsection (b) of this section, a party who is aggrieved by the final decision in a contested case is entitled to judicial review of the decision as provided in this section”). 6 SG § 10-202(d) sets forth the following definition for “contested case”: ⁹⁰ (d) Contested Case.—(1) “Contested case” means a proceeding before an agency to determine: (1) a right, duty, statutory entitlement, or privilege of a person that is required by statute or constitution to be determined only after an opportunity for an agency hearing; or (ii) the grant, denial, renewal, revocation, suspension, or amendment of a license that is required by statute or constitution to be determined only after an opportunity for an agency hearing. (2) “Contested case” does not include a proceeding before an agency involving an agency hearing required only by regulation unless the regulation expressly, or by clear implication, requires the hearing to be held in accordance with this subtitle. In the Department’s view, there is no statute or provision of the Constitution that requires a contested case hearing prior to the termination of HCVP participation, making SG § 10-202(d)(1) inapplicable; instead, the sole right to a hearing comes from HUD regulations, specifically the right to the informal hearing set forth in 24 C.F.R. § 982.555 .

According to the Department, SG § 10-202(d)(2) is therefore applicable, ⁹¹ and, because 24 C.F.R. § 982.555 does not indicate either expressly or by clear implication that the informal hearing is to be treated as a contested case, it is not one. Appellant disagreed. Appellant argued in her Reply Memorandum, and later during oral argument before the Circuit Court, that 24 C.F.R. § 982.555 is not the only source of a right to a hearing prior to an HCVP termination decision. Appellant asserted that the pre-termination hearing, in addition to being required by the federal regulation, is also dictated by the Due Process Clause of the federal Constitution, thereby satisfying the definition of a “contested case” set forth in SG § 10—202(d)(1)(i).

Appellant continued that, as a contested case, the hearing was required to be held according to the procedures set forth in Subtitle 2 of SG § 10 and, because it was not, a remand to the Department for a proper hearing was required. The Circuit Court, after hearing from the parties in open court, issued a written Opinion and Order agreeing with the Department. The court, unpersuaded by Appellant’s argument, found that “the hearing held by the [Department] was ... required only be regulation, 24 C.F.R. § 982.555 (a)(v)” and therefore the “matter is not a ‘contested case’ under Maryland’s statutory definition and [ ] the APA requirements do not apply.” The court nonetheless went on to find that there was substantial evidence in the record to support the Department’s termination decision. The Appeal On May 12, 2010, Appellant noted an appeal to the Court of Special Appeals.

Prior to argument before the Court of Special Appeals, we, on our initiative, issued a writ of certiorari to consider the following questions: 1. Does the Maryland Administrative Procedure Act govern hearings concerning terminations of rental assistance to participants in the Housing Choice Voucher Program administered by the Department? 2. Did the Department comply with Maryland’s Administrative Procedure Act? ⁹² For the reasons that follow, we hold that the Department, upon receipt of Appellant’s challenge to the pending termination decision, was required to provide her a contested case hearing before terminating her housing benefits. We further hold that the informal hearing was not held in accordance with the contested case procedures set forth in the APA.

III

A. We decide first whether the Department is required to hold a' “contested case” hearing, as defined by the APA, before terminating the benefits of an HCYP participant who challenges the termination. SG § 10-202(d)(1), as we have explained, defines “contested case” as including “a proceeding before an agency to determine[ ] (i) a right, duty, statutory entitlement, or privilege of a person that is required by statute or constitution to be determined only after an opportunity for an agency hearing[.]” When a “proceeding” meets the definition of a contested case, the agency is required to provide certain trial-type procedures during the hearing. See Sugarloaf Citizens Ass’n v. Northeast Maryland Waste Disposal Auth., 323 Md. 641, 651 , 594 A.2d 1115, 1120 (1991). 7 The parties are in agreement that the Department is a State agency to which the APA applies. See SG § § 10-202, ⁹³ 10-203.

Termination of HCVP benefits, moreover, constitutes a “right, duty, statutory entitlement, or privilege” as set forth in the definition of “contested case.” SG § 10-202(d)(1). The parties dispute, however, whether a statute or constitutional principle requires that a decision regarding termination of HCVP benefits be made only after “an opportunity for an agency hearing.” It is a well-established principle of Maryland administrative law that the APA itself does not grant a right to an administrative hearing. Rather, the right must come from another source, such as a statute, due process principles, or a regulation. See Carven v. State Retirement & Pension System of Maryland, 416 Md. 389, 410 , 7 A.3d 38, 51 (2010); Sugarloaf 323 Md. at 652 , 594 A.2d at 1120 .

Appellant makes no claim that a statute grants her the right to an administrative hearing. Appellant contends, instead, that federal due process principles entitle her to a pretermination hearing. Appellant relies on Goldberg v. Kelly, 397 U.S. 254 , 90 S.Ct. 1011 , 25 L.Ed.2d 287 (1970). In Goldberg , the Supreme Court held that termination of welfare benefits without first affording the recipient an opportunity for an evidentiary hearing violates the Due Process Clause of the Fourteenth Amendment.

The Goldberg Court held that Due Process requires that, prior to termination of public assistance benefits, the welfare recipient must be given “timely and adequate notice detailing the reasons for a proposed termination,” and, at the hearing, the recipient must be given “an effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally.” Goldberg, 397 U.S. at 267-68 , 90 S.Ct. 1011 . The Supreme Court reasoned that the interests of the participant in the “uninterrupted receipt of public assistance, coupled with the State’s interest that his payments not be erroneously ⁹⁴ terminated, clearly outweighs the State’s competing concern to prevent any increase in its fiscal and administrative burdens.” Id. at 266 , 90 S.Ct. 1011 . That same reasoning applies with equal force to HCVP benefits, because participants rely on the rental assistance payments to meet “their basic need for housing.” Basco v. Machin, 514 F.3d 1177 , 1182 n. 7 (11 th Cir.2008). See also Davis v. Mansfield Metro.

Hous. Auth., 751 F.2d 180, 185 (6th Cir.1984) (same). The Department implicitly concedes, by not arguing the contrary, that the Due Process Clause requires an evidentiary hearing prior to the termination of HCVP benefits. And indeed, the informal hearing framework set forth in 24 C.F.R. § 982.555 meets Goldberg’s due process requirements.

Compare 24 C.F.R. § 982.555 (c)(1) (providing that the recipient may request a hearing to challenge termination if he or she “does not agree with the [initial] determination”) with Goldberg, 397 U.S. at 267 , 90 S.Ct. 1011 (requiring that the recipient be given the opportunity of a pre-termination hearing “to protect a recipient against an erroneous termination of his benefits”); compare 24 C.F.R. § 982.555 (c)(2) (providing that the PHA is required to give “prompt written notice” of the proposed termination containing “a brief statement of reasons”) with Goldberg, 397 U.S. at 267-68 , 90 S.Ct. 1011 (stating that recipient must receive “timely and adequate notice detailing the reasons for a proposed termination”); compare 24 C.F.R. § 982.555 (e)(5) (specifying that the recipient “must be given the opportunity to present evidence, and may question any witnesses”) with Goldberg, 397 U.S. at 268 , 90 S.Ct. 1011 (explaining that the recipient must be given an “effective opportunity to defend by confronting any adverse witnesses and by presenting his own arguments and evidence orally”). 8 As the Department acknowledges in its brief, courts throughout the country have rejected due process challenges ⁹⁵ to the informal hearing procedures set forth in 24 C.F.R. § 982.555 precisely because the procedures meet the requirements of Goldberg and its progeny. See generally Hunter v. Underwood, 362 F.3d 468 (8th Cir.2004); Ritter v. Cecil County Office of Hous. & Cmty. Dev., 33 F.3d 323 (4th Cir.1994). It is clear, then, that the Due Process Clause—and not the relevant federal regulations alone—requires, upon request, a hearing prior to the termination of HCVP benefits.

We thus must decide whether the due process requirement of a hearing prior to termination of HCVP benefits renders those hearings “contested cases” for purposes of the Maryland APA. 9 B. Right to a pre-termination hearing is not required “only by regulation” The Department first relies on SG § 10-202(d)(2) in arguing why the pre-termination hearing is not a contested case. ⁹⁶ Once again, SG § 10-202(d)(2) provides: “ ‘Contested case’ does not include a proceeding before an agency involving an agency hearing required only by regulation unless the regulation expressly, or by clear implication, requires the hearing to be held in accordance with this subtitle.” (Emphasis added.) The Department argues that a pre-termination proceeding is not a contested case because the “informal hearing” is required by regulation (i.e., 24 C.F.R. § 982.555 ). Appellant responds, as she did before the Circuit Court, that the right to a pre-termination hearing emanates not “only” from the federal regulation, but also from the Due Process Clause, thereby making SG § 10-202(d)(2) inapplicable. The plain language of SG § 10-202(d)(2) demonstrates why the Department’s argument fails. 10 That provision exempts from contested case treatment a hearing that is “required only by regulation” (absent language in the regulation indicating that it is to be treated as a contested case). In other words, subsection (d)(2) is applicable only when neither a statute nor a constitutional principle—e.g., due process— requires a hearing prior to certain agency action.

Put another way, the only way for the Department to prevail on this point is if we read out the word “only” from SG § 10-202(d)(2), such ⁹⁷ that it would read in relevant part: “ ‘Contested case’ does not include a proceeding before an agency involving an agency hearing required by regulation....” That, of course, is untenable. We are obliged to enforce the plain language of a statutory provision and must “neither add nor delete language so as to reflect an intent not evidenced in the plain language of the statute.... ” Headen v. Motor Vehicle Admin., 418 Md. 559, 569 , 16 A.3d 196, 202 (2011) (internal quotation marks and citation omitted). The legislative history of SG § 10-202(d)(2) does not convince us to the contrary. To understand the history of that subsection, we must first review Sugarloaf, 323 Md. 641 , 594 A.2d 1115 , the issuance of which precipitated the enactment of subsection (d)(2).

In that case, we construed a statute that employed the term “public hearing” as contemplating a contested case hearing. In response to Sugarloaf , the Governor formed a Commission to Revise the Administrative Procedure Act and charged the Commission with “assessing] and respondting] to complaints that the Sugarloaf decision had resulted in an unexpected and unwarranted expansion of the situations to which contested case hearings were applicable.” The Commission recommended the addition of § 10-202(d)(2) to “clarify which activities of State government do not fall under the provisions of the [APA].” The General Assembly adopted the recommended provision in 1993. The Bill Analysis of HB 877 (which became subsection (d)(2)) states that the amendment “makes clear that a public hearing that is required by regulation or statute before an agency takes a particular action need not take the form of a ‘contested case’ proceeding, with its accompanying evidentiary, discovery, and other elaborate