Legal Update 2008: Recent Court Decisions on Fair Housing Law

In this special issue of Fair Housing Coach, we look at some recent cases decided by federal and state courts on fair housing law. Keeping abreast of what's happening in the courts can help you learn from the experiences of other communities to better prevent—or respond to—fair housing complaints.

In this lesson, we'll explain the underlying facts of each case, the ruling, and the reasoning behind the court's decision. And, in our Editor's Notes, we'll highlight how the decision can help bolster your fair housing efforts. Finally, you can take the Coach's Quiz to see how much you have learned.

WHAT DOES THE LAW SAY?

The Fair Housing Act (FHA) prohibits discrimination in housing because of race, color, national origin, sex, familial status, disability, or religion.

Anyone who claims housing discrimination has several avenues to formally proceed against your community. For an alleged violation of the FHA, you could face an administrative complaint filed with HUD, a federal lawsuit brought by the U.S. Department of Justice (USDOJ), or a private lawsuit filed in federal and state courts by an individual. In addition, many state and local fair housing agencies may bring enforcement actions for alleged violations of federal, state, or local fair housing laws.

For the most part, the cases included in this issue originated in private lawsuits filed by individuals. Depending on the forum, the procedural rules may vary, but the underlying lessons of how owners may prevent—or defend against—fair housing complaints remain the same.

FAMILIAL STATUS

Manager Steered Families with Children Away from Community

The owners of a multi-unit community may be liable under the FHA for the conduct of a property manager who discouraged families with children from residing in the community.

FACTS: The owners of a 28-unit community in California hired an on-site property manager to handle the rental process. During the next 21 months, the property manager rented out 17 units, none of which were rented to families with children. By that time, all the residents were adults, with the exception of two teenagers who had moved in before the manager was hired.

During this period, a single mother with two young children filed a complaint with the local fair housing agency, alleging that the property manager discouraged her from moving into the community by saying that it had no play area.

The agency initiated an investigation that included five phone tests, three on-site tests, and one on-site survey. During the testing, the property manager allegedly made the following comments to various testers who inquired about units for themselves and their young children: children could not play at the building; there were no children living at the building; there was no area for the children to play at the building; the building was not insured for children; the units were too small for children; and the building was “super quiet” because there were no kids. The manager also allegedly suggested that the testers inquire about vacancies in the owner's community next door, which she said was the “family building.”

After completing the investigation, the fair housing agency contacted the owners, detailing the allegations of its investigation and offering to resolve the matter without litigation. After unsuccessful negotiations, the fair housing agency eventually filed a housing discrimination complaint.

During the trial in federal court, the owners had seven families with children testify. Two had moved in before the property manager was hired; the other five moved in after the owners learned about the fair housing investigation. One of the owners said he was aware that the 17 vacancies during the 21-month period were all filled by families without children.

DECISION: The trial court ruled against the owners, finding them liable for discrimination on the basis of familial status.

REASONING: The court ruled that the owners violated the FHA by 1) discouraging the prospective resident and the testers with small children from renting a unit in the community; 2) steering families with children away from the community; and 3) making statements that indicated a preference not to rent to families with children.

The owners were liable for the property manager's discriminatory acts because the manager was acting in her role as their agent when she showed available units at the property.

In addition to awarding $35,000 in damages, the court ordered the community to be monitored for compliance with the FHA for three years. At the community's expense, the fair housing agency was ordered to conduct: 1) quarterly on-site tests; 2) annual on-site surveys; 3) mailings to residents about familial discrimination; 4) annual resident fair housing workshops; 5) fair housing training for the owners and employees; and 6) monthly fair housing advertising in the newspaper to educate the public on fair housing.

The court declined to award punitive damages. Despite previous fair housing complaints against one of the owners, the court did not find a pattern or practice of discriminatory behavior to justify a punitive damage award.

• Southern California Housing Rights Center v. Krug, October 2007

EDITOR'S NOTE: Not knowing that your staff is acting in a discriminatory manner will not protect you from liability under fair housing laws. Owners generally are liable for discriminatory actions or statements by their leasing staff and other agents made in the course of their duties. Fair housing training and effective oversight will help you prevent fair housing claims based upon discriminatory actions by your staff.

SEXUAL HARASSMENT

Property Manager Accused of Sexually Harassing Resident

Both the property owner and the property manager may be liable under the FHA for the property manager's sexual harassment of a resident.

FACTS: The owner of a rental community in New York allegedly employed her husband as the property manager, and in that role, he handled all direct dealings with residents. Though the owner admitted that he was her agent, there was no written employment contract between them, nor were there any types of personnel policies.

The property manager rented a unit to a single woman, who alleged that he made unwelcome sexual advances toward her. According to the resident, he repeatedly propositioned her and asked her to accompany him on out-of-town trips. She said he stopped by—uninvited—several times, pressed his body against hers, touched her breast, and kissed her twice. According to the resident, the last unwanted physical contact occurred in 2003, after which they had no contact of any kind for nearly a year.

In the summer of 2004, the resident allegedly was late in paying her rent. According to the resident, after a conversation in which the resident refused to go away with the property manager, he informed her of a rent increase. Allegedly, it was to take effect in November.

The resident didn't pay rent in November, and the owner and property manager then filed for eviction. The case was settled, and the resident moved out. A few months later, the resident sued the owner and the property manager for violating the FHA and the New York Human Rights Law (NYHRL) based on sexual harassment.

The owner and the property manager asked the court to rule in their favor without a trial, arguing that the resident's allegations of misconduct were not sufficiently severe to hold them liable for sexual harassment. They also argued that her case was filed too late under the statute of limitations.

DECISION: The court denied the property manager's request to dismiss the claims. The court denied the owner's request to dismiss the claim under the FHA, but it dismissed the NYHRL claim against her.

REASONING: Further proceedings were necessary to determine whether the owner and the property manager were liable for sexual harassment. While isolated or sporadic sexually inappropriate acts were not pervasive or severe enough to amount to sexual harassment under the FHA, the resident alleged that the property manager had repeatedly verbalized his desire to have physical relations with her, and had fondled her against her will. If true, the resident's allegations of misconduct by the property manager were sufficiently severe to amount to a hostile environment.

The resident's claim was not filed too late. In hostile environment claims, the statute of limitations required only that one sexually harassing act has occurred within 300 days of filing. The property manager's alleged actions in 2002, 2003, and 2004 could amount to a single hostile working environment, which would mean that all of the alleged harassment was timely under the statute of limitations.

Although the owner could be liable for the property manager's alleged sexual harassment of the resident under the FHA, she could not be liable for his actions under the NYHRL. There was no evidence that the owner acquiesced in the property manager's alleged misconduct or later condoned it, which was required to be liable under state law.

• Glover v. Jones, September 2007

EDITOR'S NOTE: This case demonstrates the importance of having fair housing policies and a mechanism for ensuring that your staff follows them. The court ruled that the owner could be liable under the FHA for punitive damages if the resident proved that the property manager had sexually harassed her. The law recognizes a defense to such claims when the employer establishes an antidiscrimination policy and makes a good-faith effort to enforce it. This owner was not entitled to that defense, however, because she allegedly admitted that she had no personnel policies or any written employment guidelines.

DISABILITY

Resident Belatedly Claims Large Dog Is Service Animal

A resident who violated the rules by keeping a large dog in her unit may be entitled to keep it as a reasonable accommodation for her alleged disability.

FACTS: A resident lived with her daughter in a two-bedroom unit in a public housing community in Iowa. Residents were allowed to have pets if they first applied for a pet permit from the housing agency. Only one pet per unit was allowed, and the pet's weight could not exceed 20 pounds. The restrictions did not apply to service animals.

Without applying for pet permits, the resident and her daughter both got dogs, each of which weighed more than 90 pounds. Two years later, a housing inspector discovered the dogs. The resident and her daughter said they got the dogs after two attempted break-ins.

In addition to applying for pet permits, the resident requested that the dogs be considered service animals. The housing agency denied the request because its rules allowed only one pet per unit and the dogs exceeded the weight restriction. The agency said the pets did not meet the qualifications for service animals.

The resident presented a letter from her doctor, who requested that the resident be allowed to keep her dog for safety reasons, secondary to post-traumatic stress disorder (PTSD). Another doctor said that the resident had been diagnosed with PTSD and that the resident had trained her dog to be a service companion; he said that the dog played an important part of the resident's psychological well-being and its removal would impede her recovery.

Meanwhile, the daughter's dog was removed from the home. The daughter moved out, and her name was removed from the lease.

The resident filed a housing discrimination complaint with the state civil rights commission, which found probable cause to support her claim. On her behalf, the state sued the housing agency, alleging a violation of state fair housing law.

The housing agency asked the court to rule in its favor without a trial, arguing that, at the time the resident filed her request for an accommodation, she was otherwise unqualified for her unit because of her violation of the pet policy. The court agreed and dismissed the case. The state appealed.

DECISION: The appeals court ruled against the housing agency and sent the case back for further proceedings.

REASONING: The agency could be liable for a fair housing violation by failing to waive the pet policy requirements to accommodate the resident's disability.

The lower court improperly ruled that the resident's violation of the pet policy meant that she was not qualified for her unit. Under state and federal fair housing law, the owner of a rental community must reasonably accommodate a qualified individual with a disability by making changes in its rules, policies, practices, or services when needed.

Although the rules prohibited pets unless the resident first obtained a permit and the pet's weight met with weight restrictions, the lease allowed residents to make requests for reasonable accommodations at any time during the tenancy. Because she requested the accommodation and presented evidence of a disability while she was living there, her request was timely.

Further proceedings were needed to resolve the dispute of whether the resident's requested accommodation was reasonable given her mental health diagnosis and alleged need for the dog as a service animal. The resident said that as a result of past domestic violence, she suffered from PTSD, which left her in a “persistent state of fear.” She said the dog helped alleviate that fear, because she had trained it to precede her into rooms, turn on the lights, and bring her cell phone to her.

• State ex rel. Henderson v. Des Moines Municipal Housing Authority, December 2007

EDITOR'S NOTE: Even if your community has a no-pets policy, you must carefully consider requests to keep a service animal as a reasonable accommodation for residents with disabilities. To determine the reasonableness of the requested service animal accommodation, you should consider the individual's need for the service animal and the effectiveness of the animal in resolving disability-based problems.

SOURCE OF INCOME

Owner May Be Liable for Withdrawal from Section 8 Program

The owner of a rental community may be liable for housing discrimination under the FHA for withdrawal from participation in the Section 8 housing assistance program because of its effects on a protected class.

FACTS: The owner of a multi-unit rental community in Louisville, Ky., had participated in the Section 8 voucher program for some time. As of 2003, 18 families residing in the community—17 of which were black—received Section 8 assistance.

In 2003, the owner decided to withdraw from the Section 8 program because of disputes with the housing authority regarding rental payments made on behalf of Section 8 residents. The owner notified the county housing authority, which administered the program locally, that it would honor existing leases with Section 8 residents, but it would not renew those leases or sign any new Section 8 leases.

The local fair housing council and three affected residents filed a complaint with the local human relations commission, which ruled that the owner's withdrawal from the Section 8 program amounted to unlawful racial discrimination under the FHA because it had a disparate impact on blacks.

The owner sued the commission, asking the court to declare that it did not violate the FHA by withdrawing from the Section 8 program. The court sided with the owner, ruling that an owner cannot be liable under the FHA by withdrawing from the Section 8 program solely because it had a disparate impact on members of a protected class. The commission appealed.

DECISION: The U.S. Court of Appeals ruled in favor of the owner, but for different reasons than did the trial court.

REASONING: The appeals court ruled that an owner could be liable under the FHA if its withdrawal from the Section 8 program had a disparate impact on members of a protected class, but there was not enough evidence to show that the impact had occurred in this case. In cases alleging disparate impact, the issue was whether a racially neutral policy or practice had the effect of discriminating against a protected class.

The court disagreed with two other federal appeals courts, which have exempted owners from liability under the FHA for a complete withdrawal from the Section 8 voucher program. The court also rejected the owner's emphasis on the voluntary nature of the Section 8 voucher program. Even though an owner often could withdraw from Section 8 without violating the terms of Section 8 or the FHA, the court said this did not mean that withdrawal from Section 8 could never constitute a violation of the FHA.

For example, an unexplained withdrawal from Section 8, combined with strong evidence of disparate impact, might show that an owner entered Section 8 expecting to draw residents of one race, then withdrew based on discriminatory motives when he attracted residents of a different race.

In this case, however, the commission did not present enough evidence to show that the owner's withdrawal from the Section 8 program had a disparate impact on black residents of the community. To determine whether there was a greater adverse effect on black residents than on white residents, the court needed to compare the percentage of blacks among the Section 8 residents whose leases were not renewed (about 94 percent) to the percentage of the total pool of residents at the community.

The only indication of the racial makeup of the community, however, was an attorney's statement that 90 percent of the residents of the community were black. That meant that the racial makeup of the community's Section 8 and non-Section 8 residents was essentially the same: overwhelmingly non-white. The commission could not show that the owner's withdrawal from the program would harm a disproportionate percentage of black residents at the community.

• Graoch Associates #33, L.P. v. Louisville/Jefferson County Metro Human Relations Commission, November 2007

EDITOR'S NOTE: Depending on where your community is located, you could face liability under the FHA if your community decides to withdraw from the Section 8 voucher program. In this decision, which is binding upon communities in Kentucky, Michigan, Ohio, and Tennessee, the Sixth Circuit ruled that an owner may be liable if the decision has a disparate impact on members of a protected class. Contrary rulings have been issued by the Second Circuit—which applies to communities in Connecticut, New York, and Vermont—and the Seventh Circuit—which applies to communities in Illinois, Indiana, and Wisconsin.

DEFENDING AGAINST QUESTIONABLE CLAIMS

Consistent Compliance in Screening Helps Owners in Discrimination Claim

The owners, agents, and employees of a residential rental community in Florida successfully defended themselves against a resident's fair housing complaint by demonstrating their consistent application of the community's rental procedures.

FACTS: Acting without an attorney, a white male resident of a residential high-rise community in Florida sued the owners, managers, employees, and real estate agents, alleging various claims under state and federal law relating to his rental of a unit in the building. After a series of proceedings, the court dismissed most of his claims, except his allegations that the owners and the others violated the FHA by discriminating against black people and families with children, thereby depriving him of racial and familial diversity. He also asserted that they harbored racial hostility and malice toward “progressive white [persons] who objected” to this conduct.

The court granted the request of the owners and the others for a ruling in their favor without a trial. The resident appealed.

DECISION: The U.S. Court of Appeals sided with the owners and their agents and employees, ruling that the resident did not present enough evidence to back his claim.

REASONING: Despite “sweeping allegations” of discrimination, the resident failed to identify any evidence that would justify allowing the case to continue. Most of the documents he submitted were inadmissible as evidence, and the documents generated in connection with a state agency investigation showed that the owners did not discriminate based on race or familial status.

In contrast, the undisputed evidence showed that if any person, regardless of race or familial status, inquired about renting a unit at the community, he was asked whether he owned any pets or owned more than one vehicle, and about the size and price range of the desired unit. If units were available, he was shown the units and given a tour of the building and property.

In addition, the owners presented evidence that each interested applicant was required to complete the same steps for residency approval. An applicant had to fill out an application, which did not call for any information regarding his familial status, and submit it together with an application fee and a check in the amount of the first month's rent. Upon receipt, an employee conducted a credit and criminal check of the applicant, and verified employment and prior rental history.

• Merget v. Moss, September 2007

EDITOR'S NOTE: While there may be no way to prevent someone from filing an unfounded discrimination case against your community, you can best defend yourself with proof that you have established fair housing policies and procedures, and that you follow them consistently.

• Fair Housing Act: 42 U.S.C. §3601 et seq.