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To determine whether statutes or regulations create a protected property interest in a government benefit, courts must ask whether they place substantive limitations on official discretion. Absent such limitations on the agency's discretion, the statute and the regulations cannot create a property interest, as a benefit is not a protected entitlement if government officials may grant or deny it in their discretion.
In the aftermath of Hurricanes Katrina and Rita, the Federal Emergency Management Agency ("FEMA") provided awards of "rental assistance" to individuals displaced from their homes on account of either storm. These awards consist of payments that recipients are to use to rent alternate housing. FEMA's practice has been to award rental assistance in a single payment designed to cover rent for three months. If a recipient is in need of assistance beyond this three month period, he may apply for additional awards, known as "continued rent assistance," which are also made in three month allotments. This appeal concerns alleged due process violations in the process by which FEMA makes eligibility determinations for these additional awards. The four named plaintiffs received awards of rental assistance from FEMA after they were displaced from their homes by Katrina, but were later found ineligible for continued rent assistance. On behalf of themselves and a class of similarly situated individuals, they filed this suit in the Eastern District of Louisiana, alleging that FEMA administers the rental assistance program in an arbitrary and inconsistent manner in violation of the due process clause, the Administrative Procedure Act, and the Stafford Act. Their complaint specifically charged that FEMA: (1) denies applications for continued rent assistance by issuing notices containing only confusing codes, instead of understandable explanations; (2) operates an unresponsive system that precludes effective challenges to FEMA decision making before the loss of assistance; and (3) fails to publish eligibility standards. Plaintiffs requested a declaratory judgment and permanent injunction. Before FEMA could answer the complaint, plaintiffs moved for class certification and for a preliminary injunction. The district court entertained oral argument on these motions, but did not conduct an evidentiary hearing. Plaintiffs submitted a variety of materials to the court in support of their motions, including declarations from the named plaintiffs and other individuals describing their experiences with FEMA, as well as records of correspondence with FEMA. FEMA submitted a declaration explaining its administration of the rental assistance program. Additionally, as part of its motion to alter or stay the preliminary injunction, FEMA submitted a second declaration and a number of sample letters, notices, and other documents relating to the rental assistance program. On the whole, it is not an exaggeration to say that the materials submitted by the parties, together with the pleadings, paint two very different pictures of FEMA's administration of the rental assistance program. On July 13, 2007, the district court granted class certification and issued a preliminary injunction as requested.
Were the statute and regulations governing the rental assistance program sufficient to create a property interest?
The court found that alone, 42 U.S.C.S. § 5174 and regulations governing the rental assistance program were insufficient to create a property interest. Absent substantive limitations on FEMA's discretion, they could not create a property interest, as a benefit was not a protected entitlement if government officials could grant or deny it in their discretion. Explicitly mandatory language was wholly absent. Section 5174(c)(1)(A)(i) was a permissive grant of authority to provide such assistance. Prior receipt of assistance created no property interest in continuing benefits because the program was not one in which, upon an initial showing of eligibility, a recipient became entitled to a stream of payments. Section 5174 and the regulations did not mandate the payment of a single award of continued rent assistance to eligible individuals, much less a continuing stream of payments. The $25,000 statutory cap, the 18-month regulatory time limit, and 42 U.S.C.S. § 5121 did not compel continuing payments. It was possible a property interest could be establish based on FEMA's policies and practices in implementing the program to provide assistance. But, facts as to these matters were not sufficiently developed.