USA v. Nolen et al

Filing 99

ORDER signed by Senior District Judge John A. Mendez on 03/11/25 GRANTING IN PART 85 Motion for Partial Summary Judgment as to Shirlee Nolen's vicarious liability and DENYING IN PART Shirlee Nolen's prospective punitive damages and Joel and Shirlee Nolen's personal liability for purported misconduct related to Nolen Properties, LLC under alter ego theory. (Deputy Clerk KML)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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UNITED STATES OF AMERICA,

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No.

2:23-cv-00320-JAM-CKD

Plaintiff,
v.
JOEL LYNN NOLEN; SHIRLEE
NOLEN; NOLEN PROPERTIES, LLC;
NANCY CANALE, as trustee of
the Bernard Canale and Nancy
Canale 1998 Revocable Trust;
and BERNARD CANALE, by and
through his successor in
interest NANCY CANALE,

ORDER GRANTING IN PART AND
DENYING IN PART PLAINTIFF UNITED
STATES OF AMERICA’S MOTION FOR
PARTIAL SUMMARY JUDGMENT

Defendants.
Before the Court is the United States’ (“the Government”)

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motion for partial summary judgment.

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Defendants Joel and Shirlee Nolen and Defendant Nolen Properties,

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LLC (collectively, the “Defendants”) filed oppositions to the

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Government’s motion and the Government subsequently replied.

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Nolen Opp’n, ECF No. 93; Nolen Properties Opp’n, ECF No. 95;

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Gov’t Reply, ECF No. 96.

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GRANTS in part and DENIES in part the Government’s motion for

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partial summary judgment.

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I.

See Gov’t Mot., ECF No. 85.

See

For the following reasons, the Court

FACTUAL BACKGROUND

This case arises from alleged civil rights violations under
the Fair Housing Act, 42 U.S.C. Section 3601 et seq. (“FHA”).
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The Government asserts in its Amended Complaint that Defendant

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Joel Nolen engaged in a pattern or practice of discrimination on

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the basis of sex committed through various acts of retaliation

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and sexual harassment of tenants in violation of the FHA.

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Amended Compl., ECF No. 14.

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alleges that Defendant Shirlee Nolen, Joel Nolen’s wife and a co-

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owner of the rental properties is vicariously liable.

See

The Amended Complaint further

Id.

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The Government also maintains that in 2009, the Nolens

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established Nolen Properties, LLC (“the LLC”) as a holding

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company for their properties.

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Nolen Properties held title to 38 of the Nolens’ rental

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properties from 2009 to 2013.

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transferred their properties back into their own names and in

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2015, Nolen Properties, LLC was dissolved.

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the Government has moved for partial summary judgment seeking to

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establish that Shirlee Nolen is vicariously liable for Joel

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Nolen’s not yet proven violations of the FHA, that Shirlee Nolen

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is liable for punitive damages, and that the Court should pierce

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the corporate veil of Nolen Properties, LLC to hold Joel and

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Shirlee Nolen personally liable for the alleged misconduct.

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II.

See Gov’t Mot. at 1, ECF No. 85.

Id.

In 2013, the Nolens

Id.

On these facts,

OPINION

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A.

Legal Standard

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The purpose of summary judgment is to identify and dispose

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of factually unsupported claims and defenses.

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v. Catrett, 477 U.S. 317, 323 (1986).

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therefore appropriate when the “pleadings, depositions, answers

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to interrogatories, and admissions on file, together with the

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affidavits, if any, show that there is no genuine issue of
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See Celotex Corp.

Summary judgment is

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material fact and that the moving party is entitled to judgment

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as a matter of law.”

Fed. R. Civ. P. 56(c).

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“[C]ourts are required to view the facts and draw reasonable

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inferences ‘in the light most favorable to the party opposing the

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[summary judgment] motion.’”

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(2007) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655

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(1962) (per curiam)).

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evidence is such that a reasonable jury could return a verdict

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for the nonmoving party.”

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U.S. 242, 248 (1986)).

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B.

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Scott v. Harris, 550 U.S. 372, 378

An issue of fact is genuine if “the

Anderson v. Liberty Lobby, Inc., 477

Analysis
1.

Shirlee Nolen’s Vicarious Liability

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The Government seeks partial summary judgment as to Shirlee

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Nolen’s vicarious liability, arguing that Joel Nolen operated as

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her agent at all relevant times of the purported unlawful

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conduct.

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that there are insufficient facts to support a finding on

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Shirlee Nolen’s vicarious liability because Shirlee Nolen did

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not have notice of Mr. Nolen’s misconduct.

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5.

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See Gov’t Mot. at 3-5, ECF No. 85.

Defendants argue

See Nolen Opp’n at

The Court agrees with the Government.
While the Government has not moved for summary judgment on

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its substantive underlying civil rights claims pertaining to

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Joel Nolen’s own liability, the Court finds that there are

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sufficient undisputed facts to support a finding of vicarious

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liability against Mrs. Nolen under current law.

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whether a principal-agent relationship exists, courts consider:

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1) “the manifestation of consent” by the principal that the

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agent shall act on her behalf, 2) “consent by the [agent] so to
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To determine

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act,” and 3) whether the principal had “control (or the right to

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direct or control).”

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Meyer v. Holley, 537 U.S. 280, 286 (2003).

The undisputed facts show that Shirlee Nolen gave actual or

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implied consent for Joel Nolen to act on her behalf in the

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operations of their rental properties by allowing Mr. Nolen to

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oversee and manage the properties.

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Material Facts (“SUMF”) ¶¶ 30, 40–54.

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aware that he sets prices for the rentals, makes the final

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decision in who becomes a tenant, communicates with maintenance

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workers, communicates with tenants, and takes actions to evict

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tenants.

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demonstrate that Mrs. Nolen had legal control of the properties

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by virtue of being a co-owner.

SUMF ¶¶ 9-13, 42, 51, 52.

See Statement of Undisputed
Specifically, she is

The undisputed facts also

See Gov’t Mot. at 4.

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While Defendants argue that Mrs. Nolen had a minimal role

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in the operations of the rental properties and that she was not

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on notice of Mr. Nolen’s alleged misconduct, SUMF ¶¶ 31-39;

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Nolen Opp’n at 5, this minimal role is sufficient to establish

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her vicarious liability as a co-owner because the FHA does not

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require notice of misconduct to be liable under a principal-

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agent theory.

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Under the FHA, a person may be held vicariously liable for

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a discriminatory housing practice by the person’s agent

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“regardless of whether the person knew or should have known” of

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the of the misconduct.

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codifies Meyer v. Holley, 537 U.S. 280 (2003), where the Supreme

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Court held that the FHA “provides for vicarious liability” and

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that “traditional vicarious liability rules ordinarily make

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principals . . . vicariously liable for the acts of their agents

24 C.F.R. § 100.7(b).

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This regulation

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. . . in the scope of their authority,” regardless of whether

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the principal authorized or knew of the acts at issue.

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285–86.

Id. at

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As the Government points out, property owners, including

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spouses who co-own property, have been held vicariously liable

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for the discriminatory actions of their rental agents.

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e.g., Bischoff v. Brittain, 183 F. Supp. 3d 1080, 1092 (E.D.

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Cal. 2016).

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to Mrs. Nolen’s vicarious liability should there be a finding

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against Mr. Nolen.

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that viewing the facts in the light most favorable to the

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Defendants, the Government has met its burden and grants partial

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summary judgment as to Shirlee Nolen’s vicarious liability for

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Joel Nolen’s purported misconduct.

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2.

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See,

Moreover, the Defendants have offered to stipulate

See Nolen Opp’n at 5.

Thus, the Court finds

Shirlee Nolen’s Liability for Potential Punitive
Damages

While there are sufficient undisputed facts to support a

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determination of Shirlee Nolen’s vicarious liability, the Court

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does not find that there are enough undisputed facts to

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demonstrate Mrs. Nolen’s potential liability for punitive

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damages.

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driven determination and Joel Nolen’s own liability for punitive

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damages remains unproven at this stage of the litigation.

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Nolen Opp’n at 7.

As Defendants point out, punitive damages are a fact-

See

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To obtain punitive damages under the FHA, a plaintiff must

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show that a defendant’s conduct was motivated by evil motive or

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intent, or that the conduct involved reckless or callous

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indifference to the federally protected rights of others.
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See

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Fair Housing of Matin v. Combs, 285 F.3d 899, 906 (9th Cir.

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2002).

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principal-agent and vicarious liability contexts have not been

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fully explicated in this circuit.

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to any authority within the Ninth Circuit where a defendant has

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been held vicariously liable for punitive damages in the FHA

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context.

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Circuit has yet to address vicarious liability for punitive

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damages under the FHA.

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(citing United States v. Salazar, No. 1:23-cv-01282-JLT-CDB,

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2024 WL 3858714, at *12 (E.D. Cal. 2024)).

However, punitive damages determinations in the

The Government does not cite

Instead, both parties acknowledge that the Ninth

See Gov’t Mot. at 7; Nolen Opp’n at 6

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Here, the undisputed facts show that Mrs. Nolen had a

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minimal role in the rental business and Defendants contend that

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Mrs. Nolen had no reason to be aware of any alleged misconduct

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by Mr. Nolen.

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rise to a determination as a matter of law that Mrs. Nolen was

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recklessly indifferent, and a reasonable jury could find that

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punitive damages are not sufficiently proven.

See Nolen Opp’n at 7.

These facts do not give

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Given the lack of controlling authority in the Ninth

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Circuit and the fact that Mr. Nolen’s liability is not yet

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determined, the Court declines to grant summary judgment on the

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issue of Shirlee Nolen’s liability for punitive damages and

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leaves this determination for the jury or until the substantive

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merits of the underlying FHA violations by Mr. Nolen are

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adjudicated.

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///

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///

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3.

Joel and Shirlee Nolen’s Potential Personal

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Liability for Misconduct Related to Nolen

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Properties, LLC Under Alter Ego Theory

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The Government further moves for partial summary judgment

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on its claim that Nolen Properties, LLC is the alter ego of Joel

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and Shirlee Nolen and requests that the Court pierce the

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corporate veil to hold the Nolens personally liable for Joel

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Nolen’s purported misconduct related to the LLC.

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10-15.

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and dispute the Government’s contentions that Nolen Properties,

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LLC was an illegitimate company.

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Specifically, Defendants maintain that the LLC’s liability has

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not yet been decided, that the LLC was adequately capitalized,

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that LLC funds were not co-mingled, and that substantial

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injustice and fraud have not yet been shown.

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Properties Opp’n 7-22.

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See Mot. at

Defendants argue that this determination is premature

See Nolen Opp’n at 8.

Id.; Nolen

The Court agrees with Defendants that the request to pierce

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the corporate veil is premature at this juncture.

In its reply

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brief, the Government cites four cases for its contention that a

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corporate veil piercing analysis is appropriate.

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Reply at 5-6 (citing Harwood v. Int’l Est. Planners, 33 App’x

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903 (9th Cir. 2002); Trinidad v. Pangelinan, 32 F. App’x 357

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(9th Cir. 2002); In re Brugnara Properties VI, 606 B.R. 371

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(Bankr. N.D. Cal. 2019); Laborers’ Pension Fund v. Lay-com,

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Inc., 580 F.3d 602 (7th Cir. 2009)).

See Gov’t

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However, these cases are neither procedurally nor

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substantively analogous to the case before this court.

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Harwood, the district court below ruled against the named
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In

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individuals on the underlying substantive contract breach and

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civil RICO claims in conjunction with its veil-piercing

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analysis.

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the district court below ruled on the underlying fraud and civil

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RICO charges against the named individuals before reaching the

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veil-piercing analysis.

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In re Brugnara dealt with a bankruptcy proceeding where the

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underlying tax debts and nominee liens had already been attached

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to property owned by debtors before the corporate veil was

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pierced.

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in Laborers’ Pension Fund v. Lay-Com, plaintiffs had already won

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a default judgment establishing defendant’s liability before the

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corporate veil was pierced.

33 Fed. App’x 903, 904 (9th Cir. 2002).

In Trinidad,

32 Fed. Appx. 357, 358 (9th Cir 2002).

606 B.R. 371, 375 (Bankr. N.D. Cal. 2019).

Finally,

580 F.3d 602, 606 (7th Cir. 2009).

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Unlike this case, in each of the cases cited by the

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Government, the substantive misconduct forming the basis of the

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complaint had already been adjudicated prior to or concomitantly

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with a veil-piercing analysis.

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persuasive or controlling authority in a similar procedural

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posture, the Court declines to pre-emptively pierce the

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corporate veil prior to determination of liability for the LLC

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or before the adjudication of the underlying civil rights

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violations.

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reach the merits of the corporate veil piercing analysis and

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reserves this issue for determination at trial.

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the Court declines to grant partial summary judgment on the

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Nolens’ personal liability based on an alter ego theory.

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III.

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Thus, given the lack of

Given this procedural barrier, the Court need not

Accordingly,

ORDER

For the reasons set forth above, the Court GRANTS the
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Government’s motion for partial summary judgment on Shirlee

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Nolen’s vicarious liability and DENIES the Government’s motion

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for partial summary judgment on Shirlee Nolen’s prospective

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punitive damages and Joel and Shirlee Nolen’s personal liability

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for purported misconduct related to Nolen Properties, LLC under

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alter ego theory.

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IT IS SO ORDERED.
Dated:

March 11, 2025

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