A Denham Springs couple whose home flooded in August 2016 sued the Trump administration on Monday, seeking to have a federal judge declare that a new law would allow the Livingston Parish residents to pay off part of their SBA loan using state recovery dollars.
The plaintiffs, Jeffry and Amanda Meyer, are among thousands of households caught in what's become widely known as the "duplication of benefits trap" after the historic floods of 2016.
People who received, or even just applied for, U.S. Small Business Administration loans had their loan amount counted against them when they sought state recovery grant dollars later through the Restore Louisiana program.
Under U.S. Department of Housing and Urban Development guidance, the value of the SBA loan, even if it was never actually taken, was subtracted from the value of any state grant through Restore. Often the loan value was so large, it wiped out the value of any potential state grant offer, leaving homeowners with nothing to gain from the state recovery program.
Hundreds of residents and state and local officials fought HUD's interpretation of the existing law and pushed for a change.
In October, President Donald Trump signed changes to the federal Stafford Act that proponents said would eliminate the old duplication of benefits interpretation.
Quoting Congressmen Garret Graves and Cedric Richmond, Gov. John Bel Edwards and others and detailing the legislative history of the new changes to the Stafford Act, the Meyers' lawsuit claims the new law is clear.
The suit asserts that HUD is now acting unreasonably and unlawfully in delaying its implementation of the change and is arbitrarily holding to an outdated interpretation in contravention of current law.
"The law is clear and certainly Congress and the president thought the law was clear after it was passed and so we can't let bureaucrats decide whether or not they want to implement a law passed by Congress and signed into law by the president," said J.R. Whaley, one of the plaintiffs' attorneys.
HUD, which funds the state recovery program, has viewed an SBA loan, which residents must pay back, plus a reduced interest rate, as a federal benefit on par with a free grant, so, the agency says, one can't duplicate the other.
The suit was filed in U.S. District Court in Baton Rouge and names Trump and Dr. Ben Carson, HUD's secretary, as defendants.
The lawsuit does not seek damages or class action status, but Whaley said a favorable ruling could benefit thousands of Louisiana homeowners caught in the same problem.
The court is in the Middle District of Louisiana, which encompasses the Baton Rouge region and includes the three-worst hit parishes in the '16 floods: Ascension, East Baton Rouge and Livingston.
The state Restore Louisiana program has set aside about $225 million for homeowners affected by the duplication of benefits issue.
The federal lawsuit is only the latest pressure tactic trying to force HUD to issue its guidance on the duplication of benefits changes to the Stafford Act.
In late February, U.S. Sens. Bill Cassidy and John Kennedy, both Louisiana Republicans, put holds on Trump administration nominees to HUD in an attempt to prompt the agency to act. Cassidy also said Monday he planned to meet with Carson this week to "turn up the heat" on the issue.
In a statement, Graves, who with Richmond, was a co-author of the legislation changing the Stafford Act, said his office has been working with the plaintiffs and their attorneys while his office continued separately to push HUD and other administration officials.
"The bureaucrats at HUD are going to be held accountable for not doing their job," Graves said in a statement.
Pat Forbes, executive director of the state Office of Community Development, declined to comment directly on the lawsuit but he said his office, Gov. John Bel Edwards and others in state government share the frustration of homeowners waiting for an answer five months after the Stafford Act changes became law.
"We and the governor and the congressional delegation have been working for a long time to try to get this fixed, and we thought it was fixed last October, and we're eager to have an answer," said Forbes, whose agency manages the Restore program.
Brian Sullivan, spokesman for HUD, who was provided a copy of the lawsuit Monday, said he could not comment on pending litigation.
He said the agency, which was caught in the 35-day federal government shutdown, plans to have its guidance out on duplication of benefits by May, along with new rules for $1.2 billion in flood mitigation dollars also coming to the state through HUD.
The Meyers were among the 6,000 Louisiana households that applied for or took out SBA loans after the 2016 floods. Their lawsuit recounts a not so unfamiliar tale with the recovery bureaucracy.
Their Carol Ann Drive home received more than 5.5 feet of flood water Aug. 12, 2016, according to the lawsuit.
Though the Meyers had flood insurance, their $120,000 home was deemed substantially damaged and they were required under Federal Emergency Management Agency rules to demolish, elevate and rebuild, the suit says.
With that determination, their mortgage company also required the Meyers to pay off the remainder of their home loan, nearly $108,500, with their flood insurance payout.
With the loss of the insurance money, the Meyers sought aid from FEMA to get in a new home. FEMA officials instructed them to apply for an SBA loan and, ultimately, the Meyers received $280,500 to demolish their old home, elevate and rebuild their new home, and furnish it, the suit alleges.
The Restore Louisiana program deemed the Meyers eligible for the grant program but HUD's duplication of benefits policy wiped out any award from Restore, the suit alleges.
Like many other SBA loan recipients, the Meyers wanted the grant dollars to help pay off their loan, which totaled $271,800 in principal in December, the suit alleges.
"As a result of Defendants’ failures, Plaintiffs are left in a position of paying down the significant SBA loan without grant funds that they would otherwise be entitled to," the lawsuit alleges.