Arizona Oddfellow-Rebekah Housing Inc. v. United States Department of Housing & Urban Development

This case presents an important question regarding the interpretation of language routinely used in regulatory agreements between defendant-appellee United States Department of Housing and Urban Development (“HUD”) and owners of low income housing projects. HUD insures plaintiff-appellant Arizona Oddfellow-Rebekah Housing’s (“Arizona Oddfellow”) mortgage on a low-income housing project. As a condition of such mortgage insurance, Arizona Oddfellow must abide by a Regulatory Agreement which prohibits it from spending project revenues for anything other than “reasonable operating expenses.” We must determine whether attorneys’ fees incurred in defending against housing and employment discrimination suits constitute reasonable operating expenses. We conclude that they do.

I. BACKGROUND

Arizona Oddfellow owns and operates a low income housing project for the elderly. The mortgage for the housing project is insured by HUD under § 236 of the National Housing Act, 12 U.S.C. § 1715z-l. As a condition of its participation in the § 236 program, Arizona Oddfellow entered into a Regulatory Agreement and Addendum with HUD. That agreement requires Arizona Oddfellow to place all revenues in a…