HRA joining class action lawsuit


At the August Pipestone Housing and Redevelopment Authority (HRA) meeting the board unanimously voted to join a class action lawsuit against Housing and Urban Development (HUD) for withholding operating subsidies in 2012.

This is the second class action lawsuit to be filed against HUD. The United States Federal Claims Court ruled in favor in January of this year of the housing authorities in the first class action lawsuit. The award was over $135 million. The second lawsuit is for $230 million, if all housing authorities that did not participate in the first lawsuit join. Of that, the Pipestone HRA’s share would be the $150,922 allegedly withheld in 2012.

The Public Housing Authorities Directors Association (PHADA) and the National Association of Housing and Redevelopment Officials (NAHRO) administered the first lawsuit and will do the same for the second. The law firm Coan and Lions out of Washington D.C., will provide legal services, as they did on the first lawsuit.

PHADA has offered the Pipestone HRA and other housing authorities that did not opt into the initial lawsuit against HUD to participate in a second class action lawsuit. The lawsuit must be filed by Nov. 18, 2017, the end of the six-year statute of limitations for filing a breach of contract lawsuit against the U.S.

According to Executive Director Tammy Manderscheid, Pipestone did not join the first lawsuit for a couple of reasons.

“We did not get involved with it due to the fact that the money that you had to pay to be involved had to be non-federal funds,” she said. “At the time we said we don’t really have any non-federal funds that don’t already belong to the building.”

When the first lawsuit started Manderscheid also raised concern about, “biting the hand that feeds us.”

To participate in the lawsuit as a small housing authority with less than 250 units, the Pipestone HRA has to pay $1,000, which again cannot be federal funding. The HRA board unanimously approved borrowing this money from the tenant’s laundry and vending fund, pending confirmation from their auditor that they are not using the money inappropriately.

The money from the fund is gained from tenant use of the washers, dryers, candy and pop machines. The machines are owned by the tenants. Thirty percent of the revenue generated by the machines is paid to the HRA for electric and water bills. The remainder is used on things  like a tenant Christmas dinner. Currently, the tenants have around $5,000 in a CD and about $3,500 in their checking account.

Manderscheid said they could repay the tenant fund double if the lawsuit was won. If lost, it would be repaid by suspending a portion of the electric and water bills until the $1,000 was paid back.

“I personally feel that with $150,000 sitting on the table, we should take a stab in the dark and go after it,” Manderscheid said.

Board member Jamie Norling, who is a resident of the building, said she had “no problem with it at all” to use the tenant fund. “If we win, it’s a win-win.”