Real Property Law

Housing Information Vendor Liable for Fair Housing Act Violations

United States v. Space Hunters Inc.

NYLJ 11/16/05, p. 21, col. 1

U.S. Ct. App, Second Circuit

(Opinion by McLaughlin, J.)

In an action by the federal government against a housing information vendor and its principal, the government appealed from federal district court's dismissal of all but one of the government's claims, and from that court's dismissal of the government's punitive damage claims. The vendor cross-appealed from the district court's denial of their motion to dismiss the complaint in its entirety as a matter of law. The Second Circuit affirmed the district court's denial of vendor's dismissal motion, but otherwise vacated the district court's determination, holding that persons other than owners and their agents can be held liable under for publishing discriminatory statements, and that claims to statutory exemptions should not be resolved on jurisdictional motions.

Space Hunters compiles information about rooms for rent and refers prospective tenants according to neighborhood and price range. Space Hunters alleges that it does not advertise apartment or rooms at locations where the owner does not reside or where more than four families live. When a deaf prospective tenant telephoned Space Hunters through a telephone relay service, Space Hunters refused to take the call. When the prospective tenant filed a complaint with the Department of Housing and Urban Development (HUD), a tester followed up, and again was informed that Space Hunters would not take calls from a relay service. In addition, Space Hunters allegedly used racial epithets in conversations with HUD testers. As a result, HUD authorized the Attorney General to bring this action against Space Hunters. The action alleged that Space Hunters had discriminated against prospective tenant, had refused to accommodate prospective tenant's disability, and had made discriminatory statements to prospective tenants. The complaint also alleged similar claims with respect to the testers who had called Space Hunters. District Court dismissed the claims of discrimination and refusal to accommodate on the ground that the statutory exemption, which coves owner-occupied buildings inhabited by four or fewer families, deprived the court of jurisdiction over those claims. The District Court also dismissed the claim based on Space Hunters' discriminatory statements, concluding that such statements are actionable only when made by dwelling owners and their agents. District Court permitted the action to go forward only with respect to the claim that Space Hunters had denied the prospective tenant access to rental services in violation of section 806 of the Fair Housing Act. On that claim, the district judge struck the government's claim for punitive damages, and, after trial, sent the case to a jury, which returned a verdict for the government and awarded prospective tenant $1500 in compensatory damages. Both parties appealed.

The Second Circuit first held that section 804(c) of the Fair Housing Act applies to anyone who makes discriminatory statements with respect to housing, not merely to owners and their agents. The court noted that the statute was designed to protect against psychic injury as well as denial of housing, and also rejected Space Hunters' argument that a broad reading of the prohibition would violate the First Amendment. The court then held that the discrimination claims should not have been dismissed on jurisdictional grounds. The court held that the statutory exemptions should be treated as affirmative defenses that go to the merits of a Fair Housing Act claim, but have no bearing on subject matter jurisdiction. Turning to the punitive damages claim, the court emphasized that the record was awash with evidence of egregious conduct by Space Hunters, which made it appropriate to submit the punitive damages claim to the jury. Hence, the court remanded the case to the district court for further proceedings.

COMMENT

Courts have held advertising agencies liable under section 804(c) of the Fair Housing Act (FHA) for creating advertisements that indicate a discriminatory preference. In Tyus v. Robin Constr. Corp., 1993 U.S. Dist. LEXIS 2791 (D. Ill. 1993), several African-American home-buyers stated a cause of action under the Act against an advertising agency that designed housing ads depicting exclusively white models. The agency designed a series of ads for a property management company and owner who had them published in the Chicago Tribune repeatedly for one year. The agency argued that it could not be held liable since the management company submitted the ads for publication, but the court disagreed based on the plain language of ' 804(c), which imposes liability on those who “make” or “publish” discriminatory ads. Id.

Courts have applied section 804(c) to anyone who “prints” or “publishes” discriminatory advertisements, including newspapers. United States v. Hunter, 459 F.2d 205 (4th Cir. 1972). While newspapers have faced liability under the Act for publishing ads that are discriminatory on their face, courts have been less willing to impose liability for ads which express a discriminatory preference through the use of human models. Thus, in Hunter, a newspaper violated the Act by publishing classified ads seeking to rent an apartment located in a “white home.” The court stated that the publisher had a duty to reject the ads because the ordinary reader's natural interpretation of the ads would be that they indicate a racial preference in accepting tenants. Id. at 213-215. By contrast, in Housing Oppor-tunities Made Equal v. Cincinnati Enquirer, 943 F.2d 644 (6 Cir. 1991), a newspaper escaped liability for publishing housing ads which depicted almost exclusively white models. The court held that the single publication of an advertisement featuring a small number of all-white models does not state a cause of action under section 804(c) as a matter of law. The court suggested in dictum, however, that a newspaper could be held liable for publishing an ad depicting a large group of all-white models, or for repeatedly publishing multiple ads depicting a large number of all-white models, if the ads were created by a particular advertiser as part of a campaign. Id. at 647-649. While section 804(c) makes it unlawful to “make, print, or publish” any discriminatory “notice, statement, or advertisement” in the sale or rental of a dwelling, the federal regulations apply these prohibitions to all written or oral notices and statements. 24 C.F.R. ' 100.75(b) (1989). Courts have endorsed this position and have held owners liable for making oral statements that suggest to an ordinary listener that a particular race is favored or disfavored for certain housing. Gonzalez v. Rakkas, 1995 U.S. Dist. LEXIS 22343 (E.D.N.Y. 1995). Thus, in Gonzalez, an apartment owner was held liable under section 804(c) for making a derogatory statement to a prospective tenant of Hispanic origin. After showing the apartment to plaintiff, the owner improperly indicated that he would prefer a non-Hispanic tenant. Similarly, in United States v. Gilman, 341 F. Supp. 891, 896-897 (S.D.N.Y 1972), a building owner was held liable under section 804(c) for making discriminatory statements to an existing tenant. The owner asked plaintiff whether she knew of anyone who might be interested in renting an apartment, but told her to only send over whites.

Purchaser's Misrepresentations Preclude Return of Down Payment

Estates Design & Construction Corp. v. Jackson Associates

NYLJ 11/22/05, p. 22, col. 1

Supreme Ct., Nassau Cty

(Austin, J.)

In an action by purchaser for return of a down payment, seller sought summary judgment dismissing the complaint. The court granted seller's motion, holding that purchaser had not raised any issues of fact that would support its claim that seller had waived its right to enforce purchaser's compliance with a disputed term.

Purchaser planned to convert the subject property from a hotel into residential condominiums, a change that would make use of the property non-conforming. To deal with this problem, the sale contract made closing contingent upon issuance of a variance from the Long Beach Board of Zoning Appeals (BZA). The contract obligated purchaser to apply for a building permit, and, if the permit were denied, to apply for a variance. If the variance were denied, either party had the right to cancel the contract. The contract also included a representation by purchaser that purchaser had contracted to acquire properties adequate to create off-street parking facilities that would satisfy the city's requirement of note less than 1.5 parking spaces for each dwelling unit. The contract provided that any plan submitted to the building department or the BZA would provide for not less than 1.5 off-street parking spaced for each dwelling unit. The contract also obligated purchaser to pay a $100,000 deposit upon contract, and an additional $50,000 deposit 90 days after execution of the sale contract. If purchaser defaulted, the deposit would be retained by seller as liquidated damages.

The city building department denied purchaser's application for a building permit, at least in part because of inadequate off-street parking. The denial indicated that the zoning ordinance would require 1.75 off-street parking spaces per unit not the 1.5 contemplated by the sale contract. The denial also indicated that the ordinance permitted only 25% of off-street parking to be off-site, while the plan submitted by purchaser would have used far more off-site parking spaces. The BZA then denied purchaser's variance application, citing the plan's failure to comply with off-street parking requirements. Purchaser then sought to cancel the contract and recover its deposit. Seller, however, refused to refund the deposit, relying on purchaser's material misrepresentations with respect to parking — in particular, its representation that it had contracted to acquire properties adequate to create off-street parking facilities adequate to meet the city's supposed requirement of 1.5 spaces per dwelling unit. Seller contended that these misrepresentations constituted a default by purchaser which entitled seller to retain the deposit. Purchaser then brought this action.

In awarding summary judgment to seller, the court rejected purchaser's claim that seller had waived its right to claim default when seller proceeded with the application for a variance after it learned (upon denial of the building permit), that the city's parking requirements were more stringent than those represented in the sale contract. Purchaser had contended that seller elected its remedies by choosing to continue complying with the contract terms rather than immediately declaring a default. In rejecting this claim, the court noted that the contract obligated purchaser to apply for a variance, and that purchaser would have been bound to perform if the variance had been granted. Hence, there was no breach that required action by seller until after the variance was denied. As a result, seller did not waive its right to enforce the contract provision regarding off-site parking requirements.

Housing Information Vendor Liable for Fair Housing Act Violations

United States v. Space Hunters Inc.

NYLJ 11/16/05, p. 21, col. 1

U.S. Ct. App, Second Circuit

(Opinion by McLaughlin, J.)

In an action by the federal government against a housing information vendor and its principal, the government appealed from federal district court's dismissal of all but one of the government's claims, and from that court's dismissal of the government's punitive damage claims. The vendor cross-appealed from the district court's denial of their motion to dismiss the complaint in its entirety as a matter of law. The Second Circuit affirmed the district court's denial of vendor's dismissal motion, but otherwise vacated the district court's determination, holding that persons other than owners and their agents can be held liable under for publishing discriminatory statements, and that claims to statutory exemptions should not be resolved on jurisdictional motions.

Space Hunters compiles information about rooms for rent and refers prospective tenants according to neighborhood and price range. Space Hunters alleges that it does not advertise apartment or rooms at locations where the owner does not reside or where more than four families live. When a deaf prospective tenant telephoned Space Hunters through a telephone relay service, Space Hunters refused to take the call. When the prospective tenant filed a complaint with the Department of Housing and Urban Development (HUD), a tester followed up, and again was informed that Space Hunters would not take calls from a relay service. In addition, Space Hunters allegedly used racial epithets in conversations with HUD testers. As a result, HUD authorized the Attorney General to bring this action against Space Hunters. The action alleged that Space Hunters had discriminated against prospective tenant, had refused to accommodate prospective tenant's disability, and had made discriminatory statements to prospective tenants. The complaint also alleged similar claims with respect to the testers who had called Space Hunters. District Court dismissed the claims of discrimination and refusal to accommodate on the ground that the statutory exemption, which coves owner-occupied buildings inhabited by four or fewer families, deprived the court of jurisdiction over those claims. The District Court also dismissed the claim based on Space Hunters' discriminatory statements, concluding that such statements are actionable only when made by dwelling owners and their agents. District Court permitted the action to go forward only with respect to the claim that Space Hunters had denied the prospective tenant access to rental services in violation of section 806 of the Fair Housing Act. On that claim, the district judge struck the government's claim for punitive damages, and, after trial, sent the case to a jury, which returned a verdict for the government and awarded prospective tenant $1500 in compensatory damages. Both parties appealed.

The Second Circuit first held that section 804(c) of the Fair Housing Act applies to anyone who makes discriminatory statements with respect to housing, not merely to owners and their agents. The court noted that the statute was designed to protect against psychic injury as well as denial of housing, and also rejected Space Hunters' argument that a broad reading of the prohibition would violate the First Amendment. The court then held that the discrimination claims should not have been dismissed on jurisdictional grounds. The court held that the statutory exemptions should be treated as affirmative defenses that go to the merits of a Fair Housing Act claim, but have no bearing on subject matter jurisdiction. Turning to the punitive damages claim, the court emphasized that the record was awash with evidence of egregious conduct by Space Hunters, which made it appropriate to submit the punitive damages claim to the jury. Hence, the court remanded the case to the district court for further proceedings.

COMMENT

Courts have held advertising agencies liable under section 804(c) of the Fair Housing Act (FHA) for creating advertisements that indicate a discriminatory preference. In Tyus v. Robin Constr. Corp., 1993 U.S. Dist. LEXIS 2791 (D. Ill. 1993), several African-American home-buyers stated a cause of action under the Act against an advertising agency that designed housing ads depicting exclusively white models. The agency designed a series of ads for a property management company and owner who had them published in the Chicago Tribune repeatedly for one year. The agency argued that it could not be held liable since the management company submitted the ads for publication, but the court disagreed based on the plain language of ' 804(c), which imposes liability on those who “make” or “publish” discriminatory ads. Id.

Courts have applied section 804(c) to anyone who “prints” or “publishes” discriminatory advertisements, including newspapers. United States v. Hunter, 459 F.2d 205 (4th Cir. 1972). While newspapers have faced liability under the Act for publishing ads that are discriminatory on their face, courts have been less willing to impose liability for ads which express a discriminatory preference through the use of human models. Thus, in Hunter, a newspaper violated the Act by publishing classified ads seeking to rent an apartment located in a “white home.” The court stated that the publisher had a duty to reject the ads because the ordinary reader's natural interpretation of the ads would be that they indicate a racial preference in accepting tenants. Id. at 213-215. By contrast, in Housing Oppor-tunities Made Equal v. Cincinnati Enquirer, 943 F.2d 644 (6 Cir. 1991), a newspaper escaped liability for publishing housing ads which depicted almost exclusively white models. The court held that the single publication of an advertisement featuring a small number of all-white models does not state a cause of action under section 804(c) as a matter of law. The court suggested in dictum, however, that a newspaper could be held liable for publishing an ad depicting a large group of all-white models, or for repeatedly publishing multiple ads depicting a large number of all-white models, if the ads were created by a particular advertiser as part of a campaign. Id. at 647-649. While section 804(c) makes it unlawful to “make, print, or publish” any discriminatory “notice, statement, or advertisement” in the sale or rental of a dwelling, the federal regulations apply these prohibitions to all written or oral notices and statements. 24 C.F.R. ' 100.75(b) (1989). Courts have endorsed this position and have held owners liable for making oral statements that suggest to an ordinary listener that a particular race is favored or disfavored for certain housing. Gonzalez v. Rakkas, 1995 U.S. Dist. LEXIS 22343 (E.D.N.Y. 1995). Thus, in Gonzalez, an apartment owner was held liable under section 804(c) for making a derogatory statement to a prospective tenant of Hispanic origin. After showing the apartment to plaintiff, the owner improperly indicated that he would prefer a non-Hispanic tenant. Similarly, in United States v. Gilman, 341 F. Supp. 891, 896-897 (S.D.N.Y 1972), a building owner was held liable under section 804(c) for making discriminatory statements to an existing tenant. The owner asked plaintiff whether she knew of anyone who might be interested in renting an apartment, but told her to only send over whites.

Purchaser's Misrepresentations Preclude Return of Down Payment

Estates Design & Construction Corp. v. Jackson Associates

NYLJ 11/22/05, p. 22, col. 1

Supreme Ct., Nassau Cty

(Austin, J.)

In an action by purchaser for return of a down payment, seller sought summary judgment dismissing the complaint. The court granted seller's motion, holding that purchaser had not raised any issues of fact that would support its claim that seller had waived its right to enforce purchaser's compliance with a disputed term.

Purchaser planned to convert the subject property from a hotel into residential condominiums, a change that would make use of the property non-conforming. To deal with this problem, the sale contract made closing contingent upon issuance of a variance from the Long Beach Board of Zoning Appeals (BZA). The contract obligated purchaser to apply for a building permit, and, if the permit were denied, to apply for a variance. If the variance were denied, either party had the right to cancel the contract. The contract also included a representation by purchaser that purchaser had contracted to acquire properties adequate to create off-street parking facilities that would satisfy the city's requirement of note less than 1.5 parking spaces for each dwelling unit. The contract provided that any plan submitted to the building department or the BZA would provide for not less than 1.5 off-street parking spaced for each dwelling unit. The contract also obligated purchaser to pay a $100,000 deposit upon contract, and an additional $50,000 deposit 90 days after execution of the sale contract. If purchaser defaulted, the deposit would be retained by seller as liquidated damages.

The city building department denied purchaser's application for a building permit, at least in part because of inadequate off-street parking. The denial indicated that the zoning ordinance would require 1.75 off-street parking spaces per unit not the 1.5 contemplated by the sale contract. The denial also indicated that the ordinance permitted only 25% of off-street parking to be off-site, while the plan submitted by purchaser would have used far more off-site parking spaces. The BZA then denied purchaser's variance application, citing the plan's failure to comply with off-street parking requirements. Purchaser then sought to cancel the contract and recover its deposit. Seller, however, refused to refund the deposit, relying on purchaser's material misrepresentations with respect to parking — in particular, its representation that it had contracted to acquire properties adequate to create off-street parking facilities adequate to meet the city's supposed requirement of 1.5 spaces per dwelling unit. Seller contended that these misrepresentations constituted a default by purchaser which entitled seller to retain the deposit. Purchaser then brought this action.

In awarding summary judgment to seller, the court rejected purchaser's claim that seller had waived its right to claim default when seller proceeded with the application for a variance after it learned (upon denial of the building permit), that the city's parking requirements were more stringent than those represented in the sale contract. Purchaser had contended that seller elected its remedies by choosing to continue complying with the contract terms rather than immediately declaring a default. In rejecting this claim, the court noted that the contract obligated purchaser to apply for a variance, and that purchaser would have been bound to perform if the variance had been granted. Hence, there was no breach that required action by seller until after the variance was denied. As a result, seller did not waive its right to enforce the contract provision regarding off-site parking requirements.