How MHPI Developers Can Defend Against Class Actions For Environmental Contamination

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The Military Housing Privatization Initiative was intended to address the availability and adequacy of housing for military service members and their families. As a result of the MHPI, approximately 99 percent of military family housing in the United States is now operated and maintained by private developers. MHPI developers have recently been the target of litigation seeking to hold them responsible for mold and other environmental contamination. Plaintiffs are not only seeking damages for personal injury. They are seeking class certification. In one case they are seeking injunctive relief that would require changes to how the MHPI project is managed.

In this post, we provide some background on the MHPI program, the environmental contamination litigation filed so far, and some perspective on the legal issues presented in these cases. We explain why MHPI developers have a basis to assert derivative sovereign immunity and why the federal enclave doctrine presents an obstacle to some state law claims. We also point out why plaintiffs may face insurmountable hurdles in achieving certification to proceed in a class action.

Mold, pesticides, and lead-based paint

The Military Housing Privatization Initiative was part of the National Defense Authorization Act for Fiscal Year 1996. Public Law 104-106, 110 Stat. 186 (Feb. 10, 1996); 10 U.S.C. §§ 2871–85. Under the MHPI, the Office of the Secretary of Defense has authorized the military branches to enter into partnerships with private developers selected through a competitive process. By all accounts, the MHPI program has been successful in improving the availability and condition of housing for service members and their families. It has also resulted in transitioning the management of military family to the private development and management companies. As of December 2019, GAO estimates that 99 percent of military family housing in the United States is under private-sector management.

Over the last ten years, a few tenants have filed lawsuits asserting claims involving the housing conditions at MHPI projects. The lawsuits frequently allege failure to repair or abate mold or water damage and use of lead-based paint. At least one such suit has gone to trial. It resulted in a $350,000 award to the family of a Marine.

The lawsuits have included class actions. In April 2014, military families who rented housing at Marine Corps Base Hawaii filed a putative class action alleging failure to disclose the use of pesticides. The court denied class certification, resulting in ten individual cases. The first of the ten cases settled. The second case, seen as a bellwether for the others, was dismissed on summary judgment because the plaintiffs were unable to show that they were exposed to pesticides or that they had suffered damages as a result of the exposure.

Media and congressional attention

As lawsuits have percolated, so has news coverage. Reuters has been reporting and investigating this issue in depth since August 2018. The issue has also been the subject of reports in other national outlets, such as the New York Times, Washington Post, Newsweek, and CBS.

Not far behind the news coverage came congressional attention. Since early 2019, the Senate Armed Services Committee has been holding hearings on the issue of environmental contamination in military housing. The hearings included testimony from military families, advocacy groups, and MHPI developers and executives. The House Armed Services Committee has been holding similar hearings.

Senator Elizabeth Warren (D-Ma) and Representative Debra Haaland (D-NM) introduced the “Military Housing Oversight and Service Member Protection Act,” which seeks to address some of the issues raised in the hearings. The FY 2020 National Defense Authorization Act requires the Secretary of Defense to develop a “Tenant Bill of Rights” that would be included in each lease for an MHPI housing unit. Among the rights to be included is “[t]he right to reside in a housing unit and community that meets applicable health and environmental standards.” S. 1790 § 3011 (Dec. 20, 2019) (adding 10 U.S.C. § 2890(b)(1)).

In tandem with the attention from the media and Congress, larger and broader lawsuits alleging environmental contamination in military family housing are being filed. Plaintiffs are seeking to represent military families across entire bases. Military families sued for contamination at Randolph Air Force Base in Bexar County, Texas, and Laughlin Air Force Base in Val Verde County, Texas. Similar lawsuits allege contamination in military family housing at Fort Meade, Maryland, and MacDill AFB in Florida. The lawsuits allege mold contamination in service members’ homes. Although most complaints seek money damages, at least one complaint seeks an injunction that would require residential properties to be certified as safe from mold contamination before they are leased.

Legal obstacles to actions against MHPI developers

A claim asserting environmental contamination on a privatized military family housing project faces significant legal obstacles. In addition to statutes of limitations and other common defenses, claims against MHPI developers may be limited by derivative sovereign immunity, the federal enclave doctrine, and by the specific terms and conditions of the applicable contract documents.

Derivative sovereign immunity provides a defense if a private entity can show that its acts were in compliance with federal directions and pursuant to federal authority. The Supreme Court has recognized that federal government contractors share the immunity of the United States when they act pursuant to authority that was “validly conferred.” See Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (2016) (citing Yearsley v. WA Ross Constr. Co., 60 S. Ct. 413 (1940)). Successfully asserting Yearsley immunity will depend on the nature of the allegations and the language in relevant MHPI documents, such as the ground lease and project company operating agreement.

The federal enclave doctrine may also be a significant limit on the viability of tenant claims asserting environmental contamination on MHPI projects. Under the federal enclave doctrine, a plaintiff’s claims would be governed by the state law that existed when the federal government acquired the land where the project is located. See Paul v. United States, 371 U.S. 245 (1963). Laws adopted after the land was transferred to the federal government—including consumer protection laws, landlord-tenant laws, permit requirements, environmental standards, and building codes—would not be applicable. For this reason, some plaintiffs’ claims may be governed by earlier state law.

Tenants asserting claims based on the terms and conditions of their individual lease agreements will face additional obstacles. For example, tenant leases may require tenants to provide notification to the MHPI developer before filing suit or to attempt mediation or negotiation. Tenant lease agreements may require all disputes to be resolved in binding arbitration.

Finally, plaintiffs seeking to represent a class of other tenants or families may face a significant uphill battle on class certification. If any of the individual named plaintiffs’ claims are barred or the lease agreements are not the same, class certification may be unavailable altogether.

We will provide updates as these cases move through the courts.

Further reading—

Title XXX of the FY 2020 National Defense Authorization Act, Military Housing Privatization Reform, S. 1790 §§ 3001-3064 (Dec. 20, 2019)

Testimony of Elizabeth A. Field, Government Accountability Office, Military Housing Privatization: Preliminary Observations on DOD’s Oversight of the Condition of Privatized Military Housing, GAO-20-280T (Dec. 3, 2019)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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