Legal Update 2009: What's Happening in the Courts

In this special issue of Fair Housing Coach, we'll update you on some recent court developments involving the Fair Housing Act (FHA).

In some recent decisions, courts have weighed in on both sides of the simmering dispute over whether and to what extent the FHA applies to conduct that occurs after the sale or rental of a dwelling. HUD's position is that the FHA bans discrimination and retaliation that occurs both before and after a person buys or rents a dwelling.

Many courts across the country agree, holding communities liable under the FHA for discriminatory treatment of their residents under various circumstances. However, some courts—most notably the federal appeals court based in Chicago—have ruled that the FHA was intended to address access to housing, not conduct that occurred after a resident bought or rented a dwelling.

In this lesson, we'll explain the rulings and the reasoning behind the court decisions. In Lessons Learned, we'll highlight how the rulings may affect your fair housing efforts. Then, you can take the Coach's Quiz to see how much you have learned.

COACH'S TIP: A brief explanation of the federal court system may be helpful to understand the significance of federal court rulings on the FHA. Independent of state courts, the federal court system is comprised of three levels:

U.S. District Courts: One or more courts in each state that conduct trials in disputes involving the FHA and other federal laws;

U.S. Courts of Appeal: Courts that hear appeals of decisions by several district courts within a particular region, which are referred to as “Circuits.” There are 11 Circuits (plus a Federal Circuit), which are designated by number; for example, the 1st U.S. Circuit Court of Appeals has authority over the federal district courts in Maine, Massachusetts, New Hampshire, Puerto Rico, and Rhode Island.

U.S. Supreme Court: The highest court in the land. In general, the Supreme Court has discretion whether to review federal appeal court decisions involving federal fair housing law.

The bottom line: Decisions of the district courts on the FHA generally are binding only on communities located within that state. However, appeals court decisions on the FHA carry more weight and are binding on all states within their circuit. And of course, Supreme Court decisions carry the most weight and are binding on all communities across the country.

WHAT DOES THE LAW SAY?

The FHA prohibits discrimination in the sale or rental of housing based on disability, race, color, religion, national origin, sex, and familial status.

The issue is whether a community may be liable for a violation of the FHA based on housing discrimination that occurred after a resident moved into the unit—known as “post-acquisition” discrimination. Courts have come to different conclusions based on how broadly they interpret “the sale or rental of a dwelling.” Specifically, most of the cases involve interpretations of three sections of the FHA:

• Section 3604(a), which makes it unlawful to refuse to sell or rent, or otherwise make unavailable or deny, a dwelling;

• Section 3604(b), which makes it unlawful to discriminate in the terms, conditions, or privileges of the sale or rental of a dwelling or the provision of services or facilities connected therewith; and

• Section 3617, which makes it unlawful to coerce, intimidate, threaten, or interfere in the exercise or enjoyment of any right guaranteed by Section 3604 (and other specified sections of the FHA).

According to HUD regulations, these provisions apply to not only discriminatory practices during the sale or rental of a dwelling unit, but also discriminatory treatment of residents after they have bought or rented a dwelling [24 C.F.R. §100.400(c)(2)].

Although many courts have ruled—or assumed that—the law covers both pre- and post-acquisition discrimination, a federal appeals court—the 7th Circuit Court of Appeals, which has authority over Illinois, Indiana, and Wisconsin—came to the opposite conclusion in 2004. The case was filed under the FHA by a Jewish homeowner who accused the homeowner's association of failure to stop alleged harassment by a neighbor (who was also the association president).

In the ruling, the appeals court said the language used in the FHA's antidiscrimination provisions [Section 3604] indicated a concern with activities, such as redlining, that prevent people from acquiring property (though it might be broad enough to cover post-acquisition conduct when it was so bad that it effectively deprived a resident of housing). The court concluded that the FHA contained no hint in its language or legislative history of a concern with anything but access to housing—and there was nothing to suggest that Congress was trying to solve the future problem of how minority groups were treated when they were included.

The appeals court also questioned—but did not rule on—the validity of a HUD regulation related to the FHA's anti-retaliation provision [Section 3617], which forbids threatening, intimidating, or interfering with persons in their enjoyment of a dwelling because of a protected characteristic. The court said that interference with enjoyment of a dwelling can take place only after the dwelling has been acquired, “and we know that section 3604 is not addressed to post-acquisition discrimination.” However, the homeowner's association did not challenge the validity of the regulation, so the court declined to rule on it [Halprin v. The Prairie Single Family Homes of Dearborn Park Assn., November 2004].

Recent developments reflect that the issue is far from settled in the courts. Currently pending before the same court is an appeal involving the same issue. And in the past few months, federal courts in different states have reached opposite conclusions on whether a community may be liable for discriminatory treatment of residents.

Is Condo Board Liable for Removing Resident's Mezuzah from Doorway?

Currently pending before the 7th Circuit—the same court that issued the 2004 decision—is a case involving a Chicago condominium owner who accused the condo association of religious discrimination and harassment by repeatedly removing a religious object from her doorway.

The district court dismissed the case, and a three-judge panel of the appeals court upheld the decision. However, the appeals court ordered the case to be reheard en banc—that is, before all of the judges of the appeals court. The matter is currently pending a decision by the court.

THE ALLEGATIONS

According to the complaint, the condo owner was Jewish and required by her religious beliefs to affix a mezuzah to the hallway side of the doorpost of her unit. (A mezuzah is a small piece of parchment containing religious texts, which is rolled up and placed in a casing.)

Allegedly, the mezuzah was in place in 2001, when the condo owner served on the condo board and chaired the committee that adopted rules to prohibit owners from placing signs or objects of any sort outside their doors. According to the condo owner, she did not imagine that the rule would affect the mezuzah on her doorpost, and it did not—until 2004, when the building's hallways were repainted and all mezuzot and other religious signs and symbols were removed.

When the painting was finished, the condo owner said she put up another mezuzah but the condo board had it removed. Allegedly, this process repeated several times—with the condo owner putting up another and the maintenance staff taking it down.

The condo owner sued the condo association for violating the FHA. (Later, according to the court, the condo board adopted a religious exemption to hallway rules and ordered its staff to leave mezuzot, crucifixes, and other religious items alone. Meanwhile, the state of Illinois and the city of Chicago each adopted laws barring condo associations from interfering with religious practices.)

The condo owner alleged that the board intentionally discriminated against her because of her religion in violation of Sections 3604(a), 3604(b), and 3617 of the FHA.

Relying on the 2004 appeals court decision, the condo association argued that the FHA did not apply to alleged discrimination after the condo owner acquired possession of the unit. The district court sided with the condo board, ruling that the condo owner could not pursue claims under the FHA. The condo owner appealed.

PANEL DECISION: AFFIRMED

Building on its 2004 ruling that religiously motivated harassment of owners or residents does not violate the FHA or its regulations, the three-judge panel of the appeals court ruled that the condo board was not liable for violating the FHA by enforcing its hallway rule by removing the mezuzah.

The condo owner unsuccessfully argued that her case fell within the exception for post-acquisition discrimination that was so severe that it effectively made the dwelling unavailable on religious grounds. She argued that because an observant Jew must have a mezuzah at every entrance, to forbid all mezuzot was to forbid all adherents to Judaism from living there.

The court rejected that argument because the hallway rule was neutral with respect to religion—it applied equally to all religious—and secular—items in hallways. Rather, the court said that what the condo owner wanted was an accommodation—a religious exception to a neutral rule—and that the FHA required accommodations of handicaps—but not religious beliefs and practices [Bloch v. Frischholz, July 2008].

COURT RECONSIDERS RULING

At present, the case is back before the same court, this time by all members of the court.

In support of the condo owner, the Justice Department argued that the FHA applies to post-acquisition discrimination. In its brief, the department argued that the language used in the law supported the conclusion that the FHA applies to discrimination that occurs after sale or rental. For example, the FHA includes a bar on discrimination in the provision of “services or facilities” in connection with the sale or rental of residential property, which “is fairly read to encompass activities and benefits that are ongoing in nature, such as use of common areas, maintenance, and rules enforcement.”

The department urged the court to address whether the condo board applied its rules to bar the mezuzah for discriminatory reasons. The department argued that discriminating against condo owners in rules enforcement because of their religion would constitute religious discrimination in violation of the FHA, so the court should send the case back for further proceedings.

COACH'S TIP: Look for an update on this case in the December 2009 issue of Fair Housing Coach on Holiday Celebrations and Religious Discrimination Claims.

Owner Not Liable for Alleged Failure to Stop Neighbor's Racially Motivated Harassment

Meanwhile, in June, the federal district court in Indiana (which is within the 7th Circuit) dismissed a lawsuit in which a resident blamed a community owner for doing nothing to stop another resident's racially motivated harassment—and allegedly retaliating against her by threatening to evict her.

THE ALLEGATIONS

The case was filed by Jones, a black woman, who signed a lease for a home with the South Bend (Indiana) Housing Authority. From the time she moved in with her children, according to Jones, she experienced racial harassment by her next door neighbor, who was white and also a tenant of the housing authority. Allegedly, the neighbor's harassment included threats of bodily injury and use of racial epithets against Jones and her family, as well as other residents in the neighborhood.

Two years later, Jones said she notified the housing authority of the harassment and that she did not feel safe. About six months later, Jones allegedly complained again to the housing authority about the neighbor's racial harassment and intimidation, which including damaging her car and harassing her children. Allegedly, other residents in the neighborhood confirmed her complaints about the neighbor. According to Jones, she asked for a transfer to another unit, but the housing authority not only refused her request, but later that month, notified Jones that she could be evicted due to her conflict with the neighbor.

Jones sued the housing authority for violating the FHA, alleging that the housing authority's failure to adequately address the neighbor's racial harassment violated Section 3604(b) by discriminating against her “in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith,” because of her race. Furthermore, she alleged that the housing authority's notice that she could be evicted due to the conflict violated the FHA's anti-retaliation provision [Section 3617], which makes it “unlawful to coerce, intimidate, threaten or interfere with any person in the exercise or enjoyment of…any right granted or protected by section…3604.”

The housing authority asked the judge to dismiss the case.

DECISION: CASE DISMISSED

The judge dismissed the case, ruling that the FHA did not cover housing discrimination that occurred after a resident moved into the unit—unless it was so bad that it effectively deprived a resident of housing.

Relying on the 2004 appeals court ruling, the judge said that Jones could not pursue her discrimination claim under the FHA because all of her allegations related to conduct that occurred after she moved into the neighborhood. For the same reason, Jones' retaliation claim also failed.

Jones unsuccessfully argued that her case fell within the exception for post-acquisition discrimination that effectively deprives a resident of housing. She argued that the housing authority's alleged act of notifying her that she could be evicted due to the conflict with the neighbor effectively deprived her of her right to the property. The judge disagreed, ruling that what was required under the exception was conduct that effectively drove a person from her home—and that one alleged notice of possible future eviction was not enough to satisfy this test.

Furthermore, the judge ruled that a HUD regulation, which forbids “threatening, intimidating or interfering with persons in their enjoyment of a dwelling” because of a protected characteristic, conflicted with the FHA, so it was invalid. Since the FHA prohibited discriminatory acts only in connection with the acquisition of or access to property, it did not deal with post-acquisition discrimination claims based only in interference with enjoyment. The judge said that HUD's regulation created a claim for post-acquisition discrimination when one did not exist under the FHA. Because the regulation ran against the express language of the statute, it was invalid [Jones v. South Bend Housing Authority, June 2009].

Residents Accuse Owner of Racial Harassment Throughout Six-Year Tenancy

In May, a federal judge in Virginia issued a ruling in an FHA case filed by a black family who claimed that they were subjected to racial harassment throughout their six-year tenancy by the owner of a house they rented as well as by neighbors who were his relatives. The judge dismissed some FHA claims against the owner, but the judge refused to dismiss claims that the family was subjected to different terms and conditions and retaliation under the FHA.

THE ALLEGATIONS

According to the complaint, the couple rented a trailer for two years when their real estate agent passed along an offer from the trailer's owner to rent a house he owned. The couple alleged that the owner had been unaware of their race until the day they moved into the house.

After that, according to the couple, the owner and his relatives subjected them to a campaign of racial discrimination and harassment. They alleged that the owner imposed onerous requirements on their tenancy, such as telling them that they couldn't have friends, family, or guests visit the house or keep any articles outside. Allegedly, he warned that he could come over to verify their compliance and said that the house was being watched by neighbors.

In addition, the couple claimed that their neighbors repeatedly directed derogatory language and racial epithets at them, trespassed on their property, and discharged weapons near the house. Allegedly, they never complained to police, and couldn't identify the alleged perpetrators of the harassment. Nevertheless, the couple asserted that they complained to the owner, but he refused to do anything to stop it. The owner denied the allegations.

Allegedly, the couple agreed to move out at the end of June 2005 after the owner notified them of plans to renovate the home and raise the rent. In early June, the couple claimed that they left for a weekend to attend an out-of-state funeral. While they were gone, according to the couple, the owner and his relatives entered the house, removed all their possessions, took what they wanted, dumped the rest in the yard, and set fire to it.

In their complaint, the couple accused the owner of violating various provisions of the FHA. After a series of proceedings, the owner asked the judge to dismiss all the couple's claims.

DECISION: REQUEST GRANTED IN PART

The judge dismissed some of the couple's claims, ruling that the owner was not liable for making housing unavailable under Section 3604(a) or for making discriminatory statements under Section 3604(c). However, the judge refused to dismiss the couple's claims for discriminatory terms and conditions under Section 3604(b) or retaliation under Section 3617.

Section 3604(a): The judge dismissed the claim that the owner violated Section 3604(a) by making housing unavailable when he allegedly removed and burned their possessions. Though it was not binding on the courts in Virginia, the judge relied on the 2004 7th Circuit decision to rule that Section 3604(a) forbids pre-rental or pre-sale “housing refusal—which meant that it applied only to conduct leading up to the purchase or rental of a dwelling—not to anything that happened afterward. The couple's claim under Section 3604(a) failed because they were not rejected as residents—and it did not cover anything that happened after they became residents.

Section 3604(c): The judge ruled that the owner was not liable for making discriminatory statements under Section 3604(c). Although the couple said that they were subjected to racial epithets by the owner and his relatives, the judge said that there was no evidence that the owner ever used harsh or racially offensive terms. Even if he knew that unidentified relatives had verbally harassed the couple, it would not be enough to find that he made a discriminatory statement against the couple based on their race.

Section 3604(b): In contrast, the judge ruled that the owner could be liable for discrimination in the terms or conditions of housing. Based on allegations that the owner imposed a series of onerous conditions on their tenancy, the judge said that a reasonable jury could find his actions were discriminatory under Section 3604(b). And although there was a dispute about whether the couple ever reported the racial harassment to the owner, the judge said that the owner's alleged omissions may have been serious enough to create a hostile living environment in violation of Section 3504(b).

Section 3617: The judge also refused to dismiss the claim that the owner violated Section 3617 by interfering with the couple's rights based on allegations that he entered and took possession of the home, and then discarded and burned their property [Johns v. Stillwell, May 2009].

LESSONS LEARNED

Despite conflicting court rulings on whether the FHA applies to post-acquisition discrimination, communities would be wise to take steps to prevent discrimination both before and after a resident signs a lease and moves in.

Many courts have found communities liable under the FHA for discrimination and retaliation against current residents. Even in states that have found no liability for post-acquisition discrimination under the FHA, communities still may face liability under for violations of state or local civil rights laws.

HUD's position is that an owner may be liable under the FHA for discriminatory policies and practices throughout the rental process. Current HUD regulations reflect that policy, so it's likely that HUD will continue to pursue claims of housing discrimination, particularly for discriminatory terms and conditions of tenancy based on Section 3604(b).

In fact, according to HUD's most recent annual report, discrimination in the terms, conditions, privileges, services, and facilities in the rental or sale of property was the most common issue raised in complaints filed with HUD and fair housing enforcement agencies in the past four fiscal years. HUD reported that the issue was alleged in 56 percent of complaints—more than the next two categories (refusal to rent, 26 percent; and failure to make reasonable accommodations, 23 percent) combined.

Finally, even if a court ultimately sides with a community in a lawsuit alleging post-acquisition discrimination under the FHA, the community would have likely incurred significant legal expenses—as well as a drain on time and energy—to defend itself.

COACH'S TIP: To help you stay out of fair housing trouble, it's important to keep up on what's happening across the nation in fair housing law, so Fair Housing Coach offers FREE monthly e-Alerts with news on developments in federal, state, and local governments and in the courts. Sign up today by visiting www.vendomegrp.com.

Fair Housing Act: 42 USC §3601 et seq.