NATIONAL FAIR HOUSING ALLIANCE, INC. et al v. S.C. BODNER COMPANY, INC. et al

Filing 154

ENTRY denying Defendants' 103 Motions 107 , 110 to Dismiss (see Entry). Signed by Judge Richard L. Young on 2/17/2012. (PG)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

NATIONAL FAIR HOUSING ALLIANCE, )
)
INC., et al.,
)
Plaintiffs,
)
)
vs.
)
S.C. BODNER COMPANY, INC., et al., )
)
Defendants.

1:10-cv-993-RLY-DML

ENTRY ON DEFENDANTS’ MOTIONS TO DISMISS

The Fair Housing Act as amended in 1988 (“FHA”) prohibits housing
discrimination on the basis of race, national origin, color, religion, sex, familial status or
disability and applies to both private and government assisted housing. 42 U.S.C. §§
3601- 3619. Since 1991, in order to comply with the FHA it is a requirement that
multifamily housing of four or more units be designed and built in a manner which allows
for ready use and access by persons with disabilities. 42 U.S.C. § 3604(f)(3)(C). In
addition, the FHA prohibits discrimination against persons with disabilities in the sale,
rental, occupancy or provision of services with regard to such housing, regardless of
when it was designed or built. 42 U.S.C. § 3604(f)(1), (2). Owners of multifamily
housing which was not built in compliance with current standards must allow tenants to
make reasonable modifications to the housing or common areas, at the tenants own
expense, to accommodate a disability. Owners themselves must make reasonable
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accommodations in rules or policies in order to afford the disabled an equal opportunity
to use and enjoy the premises. 42 U.S.C. § 3604(f)(3)(A), (B). The Plaintiffs in this
lawsuit allege that the Defendants have failed to live up to these and other obligations
imposed by the FHA.

The Plaintiffs in this lawsuit are the National Fair Housing Alliance (“NFHA”), a
national non-profit public service organization of allied local private and non-profit fair
housing groups which are dedicated to assuring accessible housing and promoting
residential integration, and two of its member organizations, Savannah-Chatham County
Fair Housing Council, Inc. and Metro Fair Housing Services, Inc. Their Amended
Complaint alleges violations of the FHA against over forty Defendants. Plaintiffs
categorize the Defendants as either: (1) designer/builders of multi-family housing
(“design/build Defendants”), (2) owners of multi-family housing properties designed and
built by the design/build Defendants which, through direct “testing,” have been
determined to be out of compliance with the FHA (“owner Defendants”), and (3) owners
of properties built by the design/builder Defendants whose properties have not been
directly tested but are believed to be out of compliance with the FHA as well (“remedial
Defendants”).

The five design/build Defendants include an individual, Steven Bodner, two
Indiana construction companies which he operates or did operate, and two other housing
related companies in which Bodner holds an ownership interest. The owner Defendants
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and remedial Defendants have multi-family housing properties located in nine different
states which were designed or built by one of Bodner’s companies. It is alleged that
Bodner owns an interest in several of these Defendants as well.

Plaintiffs contend that the design/build Defendants engaged in a “pervasive pattern
and practice of designing and constructing apartments in violation of the FHA’s
accessibility requirements.” More specifically, Plaintiffs contend these Defendants
designed and built apartment communities post-1990 that did not comply with the United
States Department of Housing and Urban Development’s published Fair Housing
Accessibility Guidelines. According to Plaintiffs, the owner Defendants are aware of the
fact that these apartment communities were designed and built in a manner which does
not allow disabled individuals to readily use or enjoy the units or the common areas, have
done nothing about such noncompliance and have willingly engaged in discrimination by
continuing to rent the apartments without rectifying the lack of FHA compliance. The
Amended Complaint asks the court to declare the Defendants in violation of the FHA,
enjoin further discriminatory conduct, require the design/build Defendants to survey and
bring into compliance the affected properties and award damages and attorney fees.

Ten of the Defendants, including all of the design/build Defendants, have entered
into stipulated judgments with the Plaintiffs to settle the claims with respect to certain of
the owned properties. The stipulated judgments require Bodner and his related
construction companies to retrofit certain design and construction elements in order to
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make the properties more accessible to the disabled. Other property owners have not
agreed to such stipulated judgments. Three groups of owner Defendants and remedial
Defendants have brought separate, but nearly identical motions seeking to be dismissed
from the lawsuit pursuant to rule 12(b)(6) of the Federal Rules of Civil Procedure. Those
motions are the subject of this entry.

I.

STANDARD OF REVIEW

To survive a Rule 12(b)(6) motion to dismiss, a complaint must first comply with
Rule 8(a) by providing “a short and plain statement of the claim showing that the pleader
is entitled to relief,” such that the defendant is given fair notice of the nature of the claim
and the grounds upon which it rests. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555,
127 S.Ct. 1955, (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99 (1957)).
Second, the factual allegations in the complaint must be sufficient to raise the possibility
of relief above the “speculative level,” assuming that all of the allegations in the
complaint are true. E.E.O. C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th
Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Detailed factual allegations” are not
required, but the plaintiff must allege facts that, “state a claim to relief that is plausible on
its face.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, (2009) (quoting
Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949. “[O]nce a claim has been
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stated adequately, it may be supported by showing any set of facts consistent with the
allegations in the complaint.” Twombly, 550 U.S. at 563.

II.

42 U.S.C. § 3604(f)

The particular provision of the Fair Housing Act Amendments at issue in this case
is set forth below:
42 U.S.C. § 3604 - As made applicable by section 3603 of this title and
except as exempted by sections 3603(b) and 3607 of this title, it shall be
unlawful–
...
(f)(1) To discriminate in the sale or rental, or to otherwise make unavailable
or deny, a dwelling to any buyer or renter because of a handicap of-(A) that buyer or renter,
(B) a person residing in or intending to reside in that dwelling after it
is so sold, rented, or made available; or
(C) any person associated with that buyer or renter.
(2) To discriminate against any person in the terms, conditions, or
privileges of sale or rental of a dwelling, or in the provision of services or
facilities in connection with such dwelling, because of a handicap of-(A) that person; or
(B) a person residing in or intending to reside in that dwelling after it
is so sold, rented, or made available; or
(C) any person associated with that person.
(3) For purposes of this subsection, discrimination includes-(A) a refusal to permit, at the expense of the handicapped person,
reasonable modifications of existing premises occupied or to be
occupied by such person if such modifications may be necessary to
afford such person full enjoyment of the premises except that, in the
case of a rental, the landlord may where it is reasonable to do so
condition permission for a modification on the renter agreeing to
restore the interior of the premises to the condition that existed
before the modification, reasonable wear and tear excepted.
(B) a refusal to make reasonable accommodations in rules, policies,
practices, or services, when such accommodations may be necessary
to afford such person equal opportunity to use and enjoy a dwelling;
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or
(C) in connection with the design and construction of covered
multifamily dwellings for first occupancy after the date that is 30
months after September 13, 1988, a failure to design and construct
those dwellings in such a manner that–
(i) the public use and common use portions of such dwellings
are readily accessible to and usable by handicapped persons;
(ii) all the doors designed to allow passage into and within all
premises within such dwellings are sufficiently wide to allow
passage by handicapped persons in wheelchairs; and
(iii) all premises within such dwellings contain the following
features of adaptive design:
(I) an accessible route into and through the dwelling;
(II) light switches, electrical outlets, thermostats, and
other environmental controls in accessible locations;
(III) reinforcements in bathroom walls to allow later
installation of grab bars; and
(IV) usable kitchens and bathrooms such that an
individual in a wheelchair can maneuver about the
space.

III.

DISCUSSION

At the heart of the Defendants’ argument is the issue of whether an owner of
apartments can be found liable under 42 U.S.C. § 3604(f)(1) or (f)(2) for merely offering
to rent apartments that were designed and built out of compliance with the disability
access standards that multi-family units have been required to meet if constructed after
1990. Defendants assert that there needs to be an instance of discrimination involving a
particular individual or family in order for them to be held liable and that a claim based
upon mere “observation” of alleged discriminatory conditions on an owner’s property has
only been recognized by the Ninth Circuit and would not be consistent with the rulings in

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cases coming from the Seventh Circuit Court of Appeals.

In response to the Defendants’ argument that Plaintiffs have failed to point to a
single instance where they refused to rent, made unavailable or denied a unit to a disabled
individual, the Plaintiffs refer the court to both organizational standing cases, e.g., Village
of Bellwood v. Dwivedi, 895 F.2d 1521, 1526 (7th Cir. 1990), and the history of “testing”
or “tester1” cases brought to enforce the FHA, e.g., Havens Realty Corp. v. Coleman, 455
U.S. 363, 102 S.Ct. 1114 (1982), where an individual may have no intention of renting or
buying a unit but still sustain an injury in the form of discrimination. In reply, the
Defendants were quick to state that they were not challenging the standing of the
Plaintiffs, but were contending that there has to be “an affirmative act of discrimination”
and not simply an observation of a condition which demonstrates a lack of design/build
compliance. In short, Defendants argue that if Plaintiffs’ testing at their properties did not
yield an affirmative act of discrimination it should not be allowed to form the basis for a
claim under subsections 3604(f)(1) or (f)(2).

As Defendants admit, at least two jurisdictions have found that a claim under
subsections 3604(f)(1) or (f)(2) can be supported by “testing.” Most recently, in a case
where the issues were nearly identical to those in the case at bar, the Middle District of

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“Testers” in this context are individuals who have no intention of renting an apartment,
but act in the same manner as a potential renter in order to gather evidence of unlawful
practices.
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Florida denied a motion to dismiss which was based upon the same arguments raised by
Defendants in this case. In doing so it stated:
... given the absence of any caselaw discussing the viability of this claim
and legislative history suggesting that Plaintiff’s allegations plausibly state
a claim for relief under 42 U.S.C. § 3604(f)(1)-(2), the Court finds that
Plaintiff's claim against BHDR is well-pled.
Harding v. Orlando Apartments, LLC, 2011 WL 1457164, at * ( M.D.Fla. April 15,
2011). The legislative history referred to by the court in Harding includes comments
from the House and Senate Committee debates to the effect that it was understood that
discrimination against handicapped individuals was not limited to blatant intentional acts,
but can be as simple as benign neglect with respect to architectural barriers which result
in physical exclusion of those with certain disabilities. Id. at *6.

The Ninth Circuit has also accepted what Defendants describe as a claim based on
“observational discrimination.” In Smith v. Pacific Properties and Development Corp.,
358 F.3d 1097 (9th Cir. 2004), cert. denied, 543 U.S. 869, 125 S.Ct. 106 (2004), the
Court noted that as a matter of first impression it was deciding that a person seeking to
enforce rights created by § 3604(f)(2) need not have an interest in actually purchasing or
renting a particular property. Id. at 1099. Reversing the district court’s determination
that without an interest in renting or purchasing a unit, neither the tester nor the coplaintiff housing organization could bring a claim, the court stated:
To read an additional standing requirement into the statute beyond mere
observation, however, ignores that many overtly discriminatory conditions,
for example, lack of a ramped entryway, prohibit a disabled individual from
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forming the requisite intent or actual interest in renting or buying for the
very reason that architectural barriers prevent them from viewing the whole
property in the first instance.
Id at 1104.

Defendants argue that these cases are outliers and would be inconsistent with the
Seventh Circuit’s construction of the FHA. Yet they have not been able to point to a
decision from the Seventh Circuit, or any other circuit for that matter, where “testing” has
been specifically rejected as a basis for a discrimination claim brought against an owner.
Moreover, certiorari was sought with regard to the Smith decision and the same was
denied. Smith v. Pacific Properties and Development Corp., 358 F.3d 1097 (9th Cir.
2004), cert. denied, 543 U.S. 869, 125 S.Ct. 106 (2004).

The question at hand is whether an owner who knows or should know the building
he owns was constructed in violation of subsection (f)(3)(C) is required to address those
violations, or can he offer the apartments for rent without making an effort to correct the
violations. And, the court sees the answer to that question as being tied to the extent of
the owner’s knowledge of those violations, which might reflect on intent. Affording the
Plaintiffs all factual inferences, as the court must at the motion to dismiss stage, it is
certainly plausible that an owner could have purchased a post-1990 constructed apartment
community knowing that its price reflected a lesser cost of construction due to noncompliance with subsection (f)(3)(C). Further, that owner could intend that the costs of
compliance be passed on to those renters who may need certain modifications that
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otherwise would have been in place if subsection (f)(3)(C) had been complied with. It is
not implausible to think that an owner might use subsection (f)(3)(A), which requires an
owner to allow a renter to make reasonable modifications at their cost, as a shield and a
means to shift the costs of subsection (f)(3)(C) compliance.

This court understands the Fair Housing Act to be a broad and inclusive antidiscrimination mandate from Congress, and the Supreme Court has stated on several
occasions that it must be given a generous construction. City of Edmunds v. Oxford
House, Inc., 514 U.S. 725, 731, 115 S.Ct. 1776, 1780 (1995); Havens Realty Corp v.
Coleman, 455 U.S. 363, 380, 102 S.Ct. 1114, 1125 (1982); Trafficante v. Metropolitan
Life Ins. Co., 409 U.S. 205, 212, 93 S.Ct. 364, 368 (1972). Accordingly, the court will
not read into the Act a requirement of an “affirmative act,” when the same is unnecessary
for the owners to have a discriminatory intent. The court finds that the allegations
contained in Plaintiffs’ Amended Complaint are sufficient at this point to lay out a
plausible claim of discrimination.

As for the remedial Defendants, the court agrees with the Plaintiffs, that the
presence of those Defendants in the lawsuit is required if complete relief is to be
provided. Should the claims against the design/build Defendants be successful with
regard to the properties owned by the remedial Defendants and a retrofit of the various
premises is ordered as part of any relief granted there would be a need to address the
interests of the owners of those properties. Even if there are no specific discrimination
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claims made against the remedial defendants and no “testing” was done at their
properties, it is plausible that the same defects being addressed by the design-build
Defendants would exist and need to be corrected at the properties owned by the remedial
Defendants, if it is shown that those apartment communities were designed and built in a
manner inconsistent with FHA requirements. Since they own the properties, the remedial
Defendants have a vital interest in the order that makes them a required party under Rule
19(a) of the Federal Rules of Civil Procedure.

IV.

CONCLUSION

For the reasons explicated in this entry, the Motion To Dismiss filed by
Defendants Brooklyn Place TIC I, LLC Through Brooklyn Place TIC XXIX, LLC
(Docket # 103), Defendant Cross Lake Apartments, LLC’s Motion To Dismiss Plaintiffs’
Amended Complaint (Docket # 107) and Defendants Morgan Overlook Apartments LLC,
Morgan Crescent At Wolfchase, LLC and Huntsville Main Street Apartments LLC’s
Motion To Dismiss Plaintiffs’ Amended Complaint (Docket # 110) are each DENIED.

SO ORDERED this 17th day of February 2012.

__________________________________
RICHARD L. YOUNG, CHIEF JUDGE
United States District Court JUDGE
RICHARD L. YOUNG, CHIEF
United States District Court
Southern District of Indiana
Southern District of Indiana

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Electronic Copies to:
Michael Allen
RELMAN DANE & COLFAX, PLLC
[e-mail]
Stephanie Lynn Cassman
LEWIS WAGNER LLP
[e-mail]
Stephen M. Dane
RELMAN DANE & COLFAX, PLLC
[e-mail]
John William Emry Jr
[e-mail]
Andrew W. Gruber
BINGHAM GREENEBAUM DOLL LLP
[e-mail]
David K. Herzog
FAEGRE BAKER DANIELS LLP - Indianapolis
[e-mail]
John J. Jewell
TRIMBLE & JEWELL PC
[e-mail]
Thomas J. Keary
RELMAN DANE & COLFAX, PLLC
[e-mail]
Lori R. Koch
GOFFSTEIN RASKAS POMERANTZ KRAUS & SHERMAN, LLC
[e-mail]
Harmony A. Mappes
FAEGRE BAKER DANIELS LLP - Indianapolis
[e-mail]

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Christopher D. Oakes
COX, OAKES & ASSOCIATES, LTD.
[e-mail]
Theresa Renee Parish
LEWIS WAGNER LLP
[e-mail]
Charles F.G. Parkinson
HARRIS WELSH & LUKMANN
[e-mail]
John Carl Trimble
LEWIS WAGNER LLP
[e-mail]
Paul A. Wolfla
BAKER & DANIELS - Indianapolis
[e-mail]

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