Darby v. Cisneros

509 U.S. 137 (1993)


P is a real estate developer who specializes in the development and management of multifamily rental projects. P worked with Garvin, Jr., a mortgage banker, who had developed a plan to enable multifamily developers to obtain single-family mortgage insurance from Cisneros (D). Garvin's plan avoided HUD's 'Rule of Seven.' Gavin would use straw purchasers as mortgage-insurance applicants. Once the loans were closed, the straw purchasers would transfer title back to the development company. Because no single purchaser at the time of purchase would own more than seven rental properties within the same project, the Rule of Seven appeared not to be violated. In 1986, HUD initiated an audit but concluded that neither P nor Garvin had done anything wrong or misled HUD personnel. In June 1989, HUD issued a limited denial of participation for one year. Two months later, D notified Ps it was also proposing to debar them from further participation in all HUD procurement contracts and any nonprocurement transaction with any federal agency. Ps appealed, and the ALJ found that the financing method used by Ps was 'a sham which improperly circumvented the Rule of Seven.' It also found that because it was disclosed to local HUD employees, that Ps lacked criminal intent, and that P himself 'genuinely cooperated with HUD to try [to] work out his financial dilemma and avoid foreclosure.' The ALJ concluded that an indefinite debarment would be punitive and that it would serve no legitimate purpose; but good cause existed, to debar Ps for a period of 18 months. Under D regulations a determination of an ALJ would be final unless, pursuant to 24 CFR part 26, the Secretary or the Secretary's designee, within 30 days of receipt of a request decides as a matter of discretion to review the finding of the hearing officer. The 30-day period for deciding whether to review a determination may be extended upon written notice of such extension by the Secretary or his designee. Any party may request such a review in writing within 15 days of receipt of the hearing officer's determination.' Ps did not seek further administrative review. Ps files this lawsuit. Ds moved to dismiss the complaint on the ground that Ps, by forgoing the option to seek review by the Secretary, had failed to exhaust administrative remedies. The District Court eventually granted P's motion for summary judgment, concluding that the 'imposition of debarment, in this case, encroached too heavily on the punitive side of the line, and for those reasons was an abuse of discretion and not in accordance with the law.' The Court of Appeals for the Fourth Circuit reversed. The Supreme Court granted certiorari.