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INDEPENDENT HOUS. SERVS. OF SAN FRANCISCO v. FILLM

December 27, 1993

INDEPENDENT HOUSING SERVICES OF SAN FRANCISCO; CALIFORNIA ASSOCIATION OF PERSONS WITH HANDICAPS; INDEPENDENT LIVING CENTER OF SAN FRANCISCO, Plaintiffs,
v.
FILLMORE CENTER ASSOCIATES; DMJM; SAN FRANCISCO REDEVELOPMENT AGENCY; FILLMORE CENTER PROJECT CORPORATION, Defendants.



The opinion of the court was delivered by: CAULFIELD

 BACKGROUND

 This lawsuit arises out of the construction of Fillmore Center ("the project") in San Francisco. The project consists of 1,113 mixed-rent housing units *fn1" and was started in 1984 as a redevelopment project. San Francisco Redevelopment Agency ("Agency") assembled and cleared the land for redevelopment. The Agency contracted to sell the land to Fillmore Center Associates ("FCA") on December 16, 1985 and the land was finally conveyed to FCA, the owners/developers, on July 16, 1987, after the Agency approved the schematic drawings and preliminary construction documents for the site. Construction began in 1987. The last residential unit in the project was completed in September 1991, after this suit commenced.

 FCA was in bankruptcy at the time these motions were originally heard (September 10, 1992). FCA has since received a discharge in bankruptcy and Fillmore Center is now owned by Fillmore Center Project Corporation ("FCPC"). FCA did not participate in the original briefing of these motions or at the September hearing, but it and FCPC have since submitted memoranda in response to plaintiffs' motion.

 Plaintiffs sued the owners of the project (FCA, now FCPC), the architects of the project, defendants Daniel, Mann, Johnson & Mendenhall ("DMJM"), and the Agency for violation of federal, state, and local handicap access laws.

 INTRODUCTION

 The following motions are before the court: *fn2" (1) motion for summary adjudication on behalf of Plaintiffs Independent Housing Services of San Francisco ("IHS"), California Association for the Physically Handicapped ("CAPH"), and Independent Living Center of San Francisco ("ILRC") (collectively "Plaintiffs"); (2) motions for summary judgment on behalf of the Agency, in which FCPC and FCA have joined, in part; (3) motion to dismiss the First Amended and Supplemental Complaint (or, alternatively, to dismiss the first cause of action) by DMJM (in which the Agency joins); (4) motion for summary judgment by the Agency on the new Americans with Disabilities Act ("ADA") claim.

 In their motion for summary adjudication, plaintiffs seek a determination that Fillmore Center is subject to Title 24 of the California Building Standards Code ("Title 24") and Section 504 of the Rehabilitation Act, 29 U.S.C. § 794.

 Defendant DMJM seeks summary judgment on the grounds that all plaintiffs lack standing, that there is no private right of action for damages under California Business and Professions Code § 17200 for Damages, and that DMJM did not violate plaintiffs' civil rights under section 1983. DMJM also seeks to dismiss the first cause of action on the basis that it fails to state a claim upon which relief can be granted.

 FCA and FCPC join in the Agency's motions concerning laches and the statute of limitations and DMJM's motion concerning standing, and the California Business and Professions Code, and FCA joins in the motion for summary judgment on the section 1983 conspiracy claim (FCPC is not named as a defendant on that claim).

 Prior Orders of This Court

 Order of October 16, 1991

 In the order of October 16, 1991, in response to DMJM's motion to dismiss, this court dismissed (1) the Rehabilitation Act and Architectural Barriers Act claims against DMJM, (2) the California Government Code § 11135 claim against DMJM, and (3) the damages claims under California Government Code § 4450 and the Unruh Civil Rights Act against DMJM. The court denied (1) the motion to dismiss the section 1983 claim against DMJM, (2) the motion to dismiss the California Government Code § 4450 and the Unruh Civil Rights Act claims for injunctive relief against DMJM, and (3) the motion to dismiss the Unfair Business Practices Act claim against DMJM.

 Order of October 22, 1992

 In its order of October 22, 1992, this court ordered further briefing, inter alia, on certain HUD regulations under the Rehabilitation Act, including whether the regulations allegedly at issue were in effect during the relevant period. The court also ordered further briefing on whether a section 1983 claim can be based on a violation of the Rehabilitation Act, and to what relief plaintiffs may be entitled were they to prevail on any of their claims.

 Order of January 22, 1993

 In the order of January 22, 1993, in response to plaintiffs' motion to amend and supplement their complaint, this court granted (1) the motion to add FCPC (the successor to the bankrupt FCA) as a party, (2) the motion to add a cause of action under the Americans With Disabilities Act against the Agency, (3) the motion to add a cause of action under Health and Safety Code section 17910 et seq., and (5) the motion to add a prayer for punitive damages. The court denied the motion to add a cause of action under Health and Safety Code § 19955 against DMJM and the Agency and held that whether this cause of action should be permitted against FCPC may be addressed by a motion once FCPC is a party.

 DISCUSSION

 A. The Standard for Summary Judgment

 Federal Rule of Civil Procedure 56(c) provides for summary judgment where no genuine issue exists as to any material fact and where the moving party is entitled to judgment as a matter of law. The moving party bears the responsibility of identifying for the court the portions of the record that demonstrate the absence of a genuine issue of material fact, but need not support its motion with evidence "negating the opponent's claim." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Rather, summary judgment will be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id., 477 U.S. at 322.

 If the moving party will bear the burden of proof at trial, the moving party must present evidence which, if uncontradicted, would entitle it to a directed verdict at trial. Once it has done so, the burden shifts to the non-moving party to present specific facts showing that contradiction is possible. British Airways Board v. Boeing Co., 585 F.2d 946, 950-952 (9th Cir. 1978), cert. denied, 440 U.S. 981, 60 L. Ed. 2d 241, 99 S. Ct. 1790 (1979). A mere "scintilla" of evidence will not suffice; the non-moving party must show that the fact-finder could reasonably find for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202 (1986). The court must accept the non-moving party's evidence as true; all inferences are to be drawn in the light most favorable to the non-moving party. Eisenberg v. Insurance Co. of North America, 815 F.2d 1285, 1289 (9th Cir. 1987).

 B. Standing

 All defendants claim that summary judgment should be granted in their favor because all plaintiffs lack standing. *fn3" The court finds that IHS does have standing to pursue its claims against all defendants in its own capacity. The court finds that CAPH and ILRC do not have standing to sue any of the defendants.

 In Lujan v. Defenders of Wildlife, U.S. , 112 S. Ct. 2130, 2136-38, 119 L. Ed. 2d 351 (1992) (citations omitted), the Supreme Court stated:

 
The irreducible constitutional minimum of standing contains three elements: First, the plaintiff must have suffered an "injury in fact" -- an invasion of a legally-protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not 'conjectural' or 'hypothetical[.]'" Second, there must be a causal connection between the injury and the conduct complained of - the injury has to be "fairly . . . traceable to the challenged action of the defendant, and not . . . the result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."
 
The party invoking federal jurisdiction bears the burden of establishing these elements.
 
* * * *
 
"The 'injury in fact' test requires more than an injury to a cognizable interest. It requires the party seeking review be himself among the injured." To survive the Secretary's summary judgment motion, respondents had to submit affidavits or other evidence showing, through specific facts, not only that listed [endangered] species were in fact being threatened by funded activities abroad, but also that one or more of respondents' members would thereby be "directly" affected apart from their "'special interest' in the subject."

 Similarly, in Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 344, 97 S. Ct. 2434, 2441, 53 L. Ed. 2d 383 (1977), the Supreme Court stated:

 An association has standing to bring suit on behalf of its numbers when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.

 1. California Association of Persons with Handicaps ("CAPH")

 DMJM claims CAPH lacks standing because it does not advise its members on how to obtain handicapped accessible housing or provide placement services; rather, it is an advocacy group for legislation of concern to people with disabilities. DMJM claims, therefore, that CAPH has not suffered any "distinct and palpable injury" or one that is "fairly traceable" to the conduct of any of the defendants or that there is any "substantial likelihood" that any claimed injury could be prevented or redressed by the relief sought.

  CAPH alleges that it has 4,000 members who are either themselves physically handicapped or who actively pursue the rights of the physically handicapped, that its membership includes disabled people living in San Francisco, and that as a result of the defendants' actions, disabled people in San Francisco have been harmed. Plaintiff cites Warth v. Seldin, 422 U.S. 490, 511, 45 L. Ed. 2d 343, 95 S. Ct. 2197 (1975) for the proposition that an organization may have standing solely as a representative of its members. Warth, however, went on to say what is stated in Lujan and Hunt, supra, that the association "must allege that its members, or any one of them, are suffering immediate or threatened injury as a result of the challenged action of the sort that would make out a justiciable case had the members themselves brought suit." Id. at 422 U.S. at 511, 45 L. Ed. 2d at 362.

 As in Warth, the plaintiffs here have failed to make such an allegation or showing. Warth concerned a challenge to the exclusionary zoning practices of the town of Penfield. Among the other associations found to lack standing in Warth was the Housing Council. It alleged that its membership included groups involved in developing low and moderate income housing. The Housing Council was found to lack standing because "neither the complaint nor any materials of record indicate that any members of Housing Council had taken any step toward building housing in Penfield." 422 U.S. at 517, 45 L. Ed. 2d at 365. *fn4"

 Plaintiffs in this case have failed to provide proof, or even allege, that any of CAPH's members have attempted to live in Fillmore Center but have not been able to because it is inaccessible. In their pretrial statement, plaintiffs state that they will call a number of individuals who "will testify to the severe shortage of accessible housing in San Francisco and to [their] desire to live in Fillmore Center if it provided the accessibility and adaptability required by law." These allegations fall short for two reasons. First, at the summary judgment stage, plaintiffs must provide evidence (in affidavits or other admissible form) of specific facts that support a finding of standing; allegations are not enough. There is no evidence from any of these prospective witnesses. Furthermore, even if allegations would suffice at this stage, the allegations fall short because there is no allegation that any of these prospective witnesses attempted to find suitable housing at Fillmore Center (or otherwise ascertained that they could not live there) or that they could afford to live there. Plaintiffs' analogy between the alleged inaccessibility at Fillmore Center and a "white's only" sign is insufficient. A person of color may not need to attempt to enter a building that bears a "whites only" sign to have standing to sue regarding the exclusion of people of color. That is because the exclusionary policy is clear; it is therefore sufficient to allege that the excluded person would otherwise go into the building. But there is no allegation that any of the members of CAPH were able to determine, without actually going to Fillmore Center to find suitable housing, that suitable housing was not available at Fillmore Center.

 Plaintiffs' cite Greater Los Angeles Council on Deafness, Inc. v. Zolin, 812 F.2d 1103, 1115, 1115 n.18 (9th Cir. 1987) for the proposition that organizational plaintiffs have standing under section 504 of the Rehabilitation Act. In Zolin, however, the plaintiffs were attacking the refusal of the jury commissioner to provide interpreters for hearing-impaired individuals. Not only is that a determination that necessarily affects all hearing-impaired citizens (unlike the Fillmore Center's alleged inaccessibility, which does not necessarily affect all disabled individuals), but the organizational plaintiff, GLAD, had actually paid for one individual's courtroom interpreter, id. at 1106, thereby incurring a specific injury from the failure of the government to provide the interpreter.

 DMJM's motion for summary judgment against CAPH is GRANTED because CAPH lacks standing. Summary judgment against CAPH is GRANTED in favor of the Agency and FCA/FCPC as well because the same reasoning applies to CAPH's claims against them.

 2. Independent Housing Services ("IHS")

 DMJM argues that IHS lacks standing because, although IHS does advise people with handicaps about available housing, none of its clients has ultimately been prevented from living at Fillmore Center. One 85-year old client of IHS's was initially turned down at Fillmore Center, but IHS intervened and she was given housing. The reason why she was initially turned down has not been provided to the court.

 Plaintiffs claim that IHS has been harmed by being forced to "expend valuable resources because its primary objective of protecting the rights of physically handicapped and disabled persons to accessible housing has been frustrated." Organizations can have standing to sue if the challenged activity impairs their ability to provide counseling and referral services. Havens Realty Corp. v. Coleman. 455 U.S. 363, 71 L. Ed. 2d 214, 102 S. Ct. 1114 (1982).

 
If . . . petitioners' steering practices have perceptibly impaired HOME's ability to provide counseling and referral services for low- and moderate-income homeseekers, there can be no question that the organization has suffered injury in fact. Such concrete and demonstrable injury to the organization's activities -- with the consequent drain on the organization's resources -- constitutes far more than simply a setback to the organization's abstract social interests.

 Havens, 455 U.S. at 379, 71 L. Ed. 2d at 229 (citation omitted).

 Walter park, executive director of IHS, declared that (1) the purpose of IHS is to increase access to housing for the disabled and elderly; (2) IHS renovates housing and provides referral services, (3) IHS spent over $ 120,000 in 1991 locating housing for disabled and elderly clients; (4) IHS often must place its clients in housing that is not fully accessible because of the shortage of accessible housing in San Francisco; (5) IHS has referred clients to Fillmore Center; (6) Fillmore Center's units are not fully accessible; (7) IHS is harmed when inaccessible housing is constructed in the city, particularly on flat land such as the land on which Fillmore Center is built, because of San Francisco's limited space for growth. DMJM responds that IHS has not shown injury to itself because it did not show exactly how much it spent on finding housing for the disabled alone and because it did not show that it would have spent any less had Fillmore Center been fully accessible. DMJM's response lacks merit.

 DMJM cites Anderson v. City of Alpharetta, 770 F.2d 1575 (11th Cir. 1985), a case involving a housing referral organization seeking to sue for housing discrimination, to support its claim that IHS has not shown sufficient injury. That case is clearly distinguishable. In finding that the plaintiff lacked standing, the court stated:

 
The revised allegations of standing provide no factual support for the existence of a referral service, for the allocation of funds to that service, for instances of individuals seeking housing referrals to the [area in dispute] . . . and consequently no support for the bare allegation that the service was rendered ineffective.

 Anderson, 770 F.2d at 1582.

 Here, in contrast, there is factual support for the existence of the service, the allocation of funds to the service, and for instances of referrals to Fillmore Center. Analogy to Havens is more appropriate than to Anderson. DMJM objects that IHS has not specified exactly how much money is spent on finding housing for the disabled as opposed to the elderly. Clearly, however, some money was spent on referring disabled individuals to housing. Even defendants state that IHS refers disabled individuals to Fillmore Center. It is therefore established that IHS spends money referring disabled individuals to housing; the exact amount IHS spends on it is relevant to damages issues but not to standing. IHS is injured not only because it must spend more money in seeking accessible housing elsewhere because of Fillmore Center's alleged inaccessibility, but because it must refer its clients to partially inaccessible housing at Fillmore Center.

 DMJM also argues that IHS's alleged injuries will not be redressed by a favorable ruling. IHS seeks damages and to enjoin DMJM from further work on Fillmore Center in violation of the access codes.

 A damage award would help IHS find (or create) accessible housing and therefore would redress the injury, at least in part. The only potential source of damages remaining against DMJM, however, is section 1983, and, as discussed below, the court GRANTS summary judgment to DMJM on § 1983 (as well as on Title 24). Damages are therefore not available against DMJM.

 DMJM also argues that IHS is not entitled to a declaration or injunction against DMJM (assuming DMJM is found to have violated any law) because it has long since completed its work on Fillmore Center and there is no contemplated future relationship between DMJM and plaintiffs. The court agrees.

 While addressed under the heading of standing, the problem is actually one of mootness. *fn5" Plaintiffs concede that DMJM is no longer involved with Fillmore Center and is unlikely to be involved with it in the future. Plaintiff's Supplemental Reply Brief at 22. Plaintiffs argue, however, that they are entitled to a declaration and an injunction ordering DMJM to design its future projects in accordance with applicable handicap access laws and/or an order requiring DMJM to educate itself about such laws.

 "The interest required of a litigant to attain standing is essentially the same as the interest required to maintain a claim under the mootness doctrine." Nelsen v. King County, 895 F.2d 1248, 1250 (9th Cir. 1990). Plaintiffs must show "the likelihood of substantial and immediate irreparable injury" (as well as the inadequacy of legal remedies) to obtain equitable relief. City of Los Angeles v. Lyons, 461 U.S. 95, 103, 103 S. Ct. 1660, 1666, 75 L. Ed. 2d 675 (1983). The plaintiff in Lyons claimed to have been illegally strangled by a police officer. His claim for damages was permitted to proceed, but his claim for an injunction was not. The Court noted:

 
Absent a sufficient likelihood that he will again be wronged in a similar way, Lyons is no more entitled to an injunction than any other citizen of Los Angeles; and a federal court may not entertain a claim by any or all citizens who no more than assert that certain practices of law enforcement officers are unconstitutional.

 Id., 461 U.S. at 111, 103 S. Ct. 1660, 1670. In discussing the mootness doctrine, the Supreme Court stated:

 
That the dispute between the parties was very much alive when suit was filed . . . cannot substitute for the actual case or controversy that an exercise of this Court's jurisdiction requires. . . . We have jurisdiction if there is a reasonable likelihood that the respondents will again suffer the deprivation of . . . rights that gave rise to this suit."

 Honig v. Doe, 484 U.S. 305, 317-18, 108 S. Ct. 592, 601, 98 L. Ed. 2d 686 (1988).

 In its October 1991 order, this court denied DMJM's motion to dismiss the claims for injunctive relief under the Unruh Civil Rights Act and Government Code § 4450 because of the possibility that DMJM could do future work on Fillmore Center, making DMJM's alleged violations capable of repetition yet evading review. Given the passage of time, however, it is now clear that the DMJM will not do future work on Fillmore Center. In addition, the exception to the mootness doctrine for wrongs that are capable of repetition yet evading review is not applicable now that there is no threat that DMJM will do future work on Fillmore Center. "This exception is limited to cases where: '(1) The challenged action [is] in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there [is] a reasonable expectation that the same complaining party would be subjected to the same action again.'" Lee v. Schmidt-Wenzel, 766 F.2d 1387, 1390 (9th Cir. 1985) (quoting Trustees for Alaska v. EPA, 749 F.2d 549, 555 (9th Cir. 1984) (emphasis added), quoting Weinstein v. Bradford, 423 U.S. 147, 149, 46 L. Ed. 2d 350, 96 S. Ct. 347 (1975)). First, the duration of the challenged action would not be too short to be fully litigated. IHS could obtain an injunction in future cases if it acts sooner in the course of construction. *fn6" For instance, Civil Code § 55 permits a litigant who is only "potential aggrieved" by a violation of the Unruh Civil Rights Act, Government Code § 4450, et seq., or Health and Safety Code § 19555, et seq. to obtain injunctive relief. Second, as noted above, it is unlikely that this dispute will arise again between these parties. IHS's remaining claims against DMJM are moot. IHS's claims against the Agency and FCA/FCPC, however, are not moot.

 3. Independent Living Resource Center ("ILRC")

 Kathy Uhl, executive director of ILRC, declares that ILRC provides homemakers and personal care attendants to people with disabilities to help them function in their homes and advises them on how to adapt their homes to their needs. She declares that ILRC often must provide services that would not be required if ILRC's clients' homes were built according to code requirements. Ms. Uhl states:

 
[1] It is likely that physically disabled residents at the Fillmore Center will request that [ILRC] perform the services described. . . . [2] In addition, some of the physically disabled clients of [ILRC] who are presently receiving these services would not have needed them or would need less services if [Fillmore Center] had provided them with the accessibility required by law. . . . [3] It is also reasonable to assume that several individuals who were not able to move into [Fillmore Center] because of its limited accessibility had to remain in the hospital longer until they could find accessible housing. . . . [Emphasis added.]

 The first and third statement are too speculative to establish standing. The second statement is also insufficient. Ms. Uhl does not state that she has (or had) any clients who live in Fillmore Center who need extra care because Fillmore Center is inaccessible. She does not state that she has any clients living elsewhere who could have and would have lived at Fillmore Center had it been more accessible. ILRC has not shown sufficient injury and therefore does not have standing.

 The court finds that CAPH and ILRC do not have standing both with regard to DMJM and the other defendants. IHS has standing to pursue its claims against the Agency and FCA/FCPC but its claims against DMJM are moot.

 C. Section 504 of the Rehabilitation Act

 Section 504 of the Rehabilitation Act prohibits discrimination against physically handicapped and disabled persons by recipients of federal financial assistance. Plaintiffs contend that Fillmore Center is subject to section 504 because the project received substantial federal financial assistance.

 Section 504 of the Rehabilitation Act, 29 U.S.C. § 794, provides:

 
No otherwise qualified handicapped individual in the United States, as defined in section 706(8) of this title, shall, solely by reason of his handicap, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. . . .

 "Federal financial assistance" has been broadly construed to encompass assistance of any kind, direct or indirect.

 The Agency received financial assistance from the Department of Housing and Urban Development ("HUD") in the form of Community Development Block Grants ("CDBG"), Categorical Block Grants ("CBG"), and Urban Development Action Grants ("UDAG"). Such funding is within the definition of federal financial assistance to which the Rehabilitation Act applies. 24 C.F.R. Pt. 8, App. A. This funding was used, in part, to assemble the land on which Fillmore Center is built. *fn7" The Land Disposition Agreement between the Agency and Fillmore Center Developers acknowledges that federal aid has been used to make Fillmore Center possible.

 In United States Dept. of Transportation v. Paralyzed Veterans of America, 477 U.S. 597, 91 L. Ed. 2d 494, 106 S. Ct. 2705 (1986), the Supreme Court addressed the question of whether airlines were recipients of federal financial assistance for purposes of Section 504 of the Rehabilitation Act in light of the extensive federal financial assistance provided to airports. The Court held that airlines were beneficiaries but not recipients of the financial assistance and therefore section 504 did not apply to them. The Court stated:

 
By its terms section 504 limits its coverage to the "program or activity" that "receives" federal financial assistance. At the outset, therefore, section 504 requires us to identify the recipient of the federal assistance. We look to the terms of the underlying grant statute.
 
The grant statutes relied on by the Court of Appeals are the Airport and Airway Improvement Act of 1982. . . . The 1970 Act established the Airport and Airway Trust Fund, appropriations from which are used to fund airport development. The purpose of disbursements from the Trust Fund is to establish "a nation-wide system of public airports adequate to meet the present and future needs of civil aeronautics." 84 Stat 224. . . . Under [the Airport Improvement Program] airport operators submit project grant applications for "airport development and airport planning." 49 USC App. § 2201(a). . . .
 
* * * *
 
It is not difficult to identify the recipient of federal financial assistance under these Acts: Congress has made it explicitly clear that these funds are to go to airport operators. Not a single penny of the money is given to the airlines. Thus, the recipient for purposes of section 504 is the operator of the airport and not its users.
 
Congress limited the scope of section 504 to those who actually "receive" federal financial assistance because it sought to impose section 504 coverage as a form of contractual cost of the recipient's agreement to accept the federal funds.
 
* * * *
 
By limiting coverage to recipients, Congress imposes the obligations of section 504 upon those who are in a position to accept or reject those obligations as part of the decision whether or not to "receive" federal funds. In this case, the only parties in that position are the airport operators.
 
Respondents attempt to avoid the straight-forward conclusion that airlines are not recipients within the meaning of section 504 by arguing that airlines are "indirect recipients" of the aid to airports. They contend that the money given to airports is simply converted by the airport into nonmoney grants to airlines. Under this reasoning, federal assistance is disbursed to airport operators in the form of cash. The airport operators convert the cash into runways and give the federal assistance -- now in the form of a runway -- to the airlines.
 
This argument confuses intended beneficiaries with intended recipients.. . . . While Grove City stands for the proposition that Title IX coverage extends to Congress' intended recipient, whether receiving the aid directly or indirectly, it does not stand for the proposition that federal coverage follows the aid past the recipient to those who merely benefit from the aid. In this case, it is clear that the airlines do not actually receive the aid; they only benefit from the airports' use of the aid. . . . Respondents assert that the economic benefit to airlines from the aid to airports is a form of federal financial assistance. This position ignores the very distinction made by Congress in section 504, and recognized in Grove City: The statute covers those who receive the aid, but does not extend as far as those who benefit from it. . . . The key is to identify the recipient of that assistance. In this case, it is clear that the recipients of the financial assistance extended by Congress under the trust fund are the airport operators.

 Paralyzed Veterans, 477 U.S. at 604-07, 91 L. Ed. 2d at 502-04 (emphasis in original).

 There are crucial parallels between Paralyzed Veterans and this case that compel a finding that Fillmore Center is not covered by the Rehabilitation Act. The Supreme Court directs that the court identify the recipient of the federal financial assistance by looking to the terms of the underlying grant statute. The grants at issue are made pursuant to the Housing and Community Development Act of 1974, 42 U.S.C. § 5301 et seq.8 "The primary objective of this chapter is the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income." 42 U.S.C. § 5301(c). The recipient of the federal funds under the Act is the state or local government. *fn9" Section 5302(c) provides: "One or more public agencies, including existing local public agencies, may be designated by the chief executive officer of a State or a unit of general local government to undertake activities assisted under this chapter." Section 5303 provides: "The Secretary is authorized to make grants to States, units of general local government, and Indian tribes to carry out activities in accordance with the provisions of this chapter."

 Because the grants are given to governmental entities for use by those entities, Paralyzed Veterans compels a finding that it is the governmental entities that are the recipients. Thus, the Agency is a recipient and FCA/FCPC is merely a beneficiary, just as airports are recipients but airlines are merely beneficiaries despite the tremendous benefit airlines receive from government assistance to airports.

 Moreover, Paralyzed Veterans indicates that the contract theory is simply the rationale for the limitation of coverage to recipients of federal financial assistance, not the rule which determines the application of section 504. Rather, Paralyzed Veterans holds that the court must look to the underlying grant statute to determine who the recipient is. Thus, even though the contract theory could comfortably be applied to FCA/FCPC, under the statute at issue here, the Agency is the recipient and FCA/FCPC is merely a beneficiary.

 The dissent in Paralyzed Veterans isolated what is justifiably seen as the error and fundamental limitation in the majority's reading of the Rehabilitation Act:

 
The appropriate question is thus not whether commercial airlines "receive" federal financial assistance. Rather, it is whether commercial airlines are in a position to "[exclude handicapped persons] from the participation in, . . . [deny them] the benefits of, or . . . [subject them] to discrimination under" a program or activity receiving federal financial assistance. . . . I believe that they are, and I therefore dissent.

 Paralyzed Veterans, 477 U.S. at 614, 91 L. Ed. 2d at 508 (Marshall, J. dissenting). Fillmore Center clearly would be covered by the Rehabilitation Act were the dissent's interpretation the law. The purpose of Block Grants is to eradicate urban blight by, inter alia, providing suitable housing. Handicapped people are denied the benefits of, or subject to discrimination under, a program or activity that receives federal financial assistance to the extent that housing built on land assembled with Block Grants is inaccessible to them. The majority in Paralyzed Veterans instructs that the court must focus its inquiry on who the recipient is in the underlying statute, and that is the Agency.

 Were the current HUD regulations applicable, FCA/FCPC would be a recipient and Fillmore Center would have to comply with the requirements of the Rehabilitation Act. According to 24 C.F.R. § 8.50(a), an applicant for Federal financial assistance must assure that the program or activity to which the regulations apply will be operated in compliance with the regulations. Section 8.50(b)(1) establishes that the transferee of ...


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