Ellis et al v. United States Department of Housing and Urban Development et al
Filing
37
ORDER granting in part and granting without prejudice 23 Motion for Judgment on the Pleadings. See Order for details. (Written Opinion) Signed by Judge Susan Richard Nelson on 8/24/2015. (SMD)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Andrew Ellis and Harriet A. Ellis,
Case No. 14-cv-3045 (SRN/JJK)
Plaintiffs,
MEMORANDUM OPINION
AND ORDER
v.
The City of Minneapolis, a municipal
corporation; Betsy Hodges, individually
and as Mayor of the City of Minneapolis;
Nuria Rivera-Vandermyde, individually
and as Director of City of Minneapolis’
Department of Regulatory Services; JoAnn
Velde, individually and as Deputy Director
of City of Minneapolis’ Department of
Regulatory Services; John Doe and Jane
Doe, individually,
Defendants.
SUSAN RICHARD NELSON, United States District Judge
I.
INTRODUCTION
This matter is before the Court on Defendants City of Minneapolis, Betsy Hodges,
Nuria Rivera-Vandermyde, and JoAnn Velde’s Motion for Judgment on the Pleadings
[Doc. No. 23]. For the reasons set forth below, the Motion is granted with prejudice in part
and granted without prejudice in part.
II.
BACKGROUND
This lawsuit arises out of Defendant City of Minneapolis’ (the “City”) alleged
implementation of unlawful housing policies and heightened enforcement of those policies
against inner-city landlords in a discriminatory manner. (See First Am. Compl. [Doc. No.
7] ¶ 1.) However, this is not the first time that landlords Andrew and Harriet Ellis have sued
the City. Because their previous lawsuits are relevant to the present matter, the Court will
briefly summarize those cases and their disposition.
A.
Plaintiffs’ Prior Lawsuits Against the City
Plaintiffs first sued the City in 2011. In that action, “Ellis I,” Plaintiffs alleged that
the City represented to the U.S. Department of Housing and Urban Development (“HUD”)
that the City was taking steps to affirmatively further fair housing when, in fact, it was not.
Ellis v. City of Mpls., No. 11-CV-0416 (PJS/TNL), 2014 WL 3928525, at *1 (D. Minn.
Aug. 12, 2014) (“Ellis I”). Plaintiffs further alleged that, as a result of those false claims,
the City received millions of dollars in HUD funding that it was not entitled to receive. Id.
Accordingly, Plaintiffs brought a qui tam action under the False Claims Act to recover those
funds on behalf of the United States. Id. In granting the City’s motion to dismiss, the court
determined that it lacked jurisdiction over claims based on certain of the alleged false
statements for which Plaintiffs had not been the original source and, as to the remainder of
the claims, that Plaintiffs failed to allege with particularity how the statements at issue were
false or fraudulent. Id. at *1–3.
Plaintiffs next sued the City in 2012. In this second lawsuit, “Ellis II,” Plaintiffs
alleged that the City improperly declared one of their rental properties a nuisance and
ordered its demolition after that property had been damaged in a fire in 2006. Ellis v. City
of Mpls., Civ. No. 12-57 (ADM/SER), 2012 WL 3431126, at *1 (D. Minn. Aug. 15, 2012)
(“Ellis II”). Plaintiffs asserted three claims under the Fair Housing Act (“FHA”), including
2
disparate impact caused by a violation of the City’s ministerial duty not to cause disparate
impact, and retaliation for associating with protected class members. Id. at *3–4. Plaintiffs
also asserted claims for negligence based on the City’s response to the fire, violation of the
state building code by declaring the property a nuisance, and violations of due process. Id.
at *5. The City moved to dismiss, and the court determined that each of Plaintiffs’ FHA
claims and the negligence claim were time-barred. Id. at *3, *5. The court went on to hold
that, even if the disparate impact and retaliation claims had not been untimely, they would
have been subject to dismissal for failure to state a claim. Id. at *3–4. The Eighth Circuit
affirmed the district court’s ruling. Ellis v. City of Mpls., 518 F. App’x 502, 505 (8th Cir.
2013).
B.
The Present Lawsuit
In the present matter, which relates to events occurring since July 31, 2012, Plaintiffs
claim that the City “has denied housing for ‘protected class’ members” and “violated the
City’s duty to Affirmatively Further Fair Housing (‘AFFH’) through facially neutral
housing policies and actions including its illegally elevated housing standards above
minimum standards and targeted and heightened enforcement, and through other punitive
housing policies directed at privately owned low-income rental dwellings located in high
poverty minority neighborhoods.” (Id. ¶ 2.) According to Plaintiffs, Defendant Hodges is
responsible for executing and enforcing the City’s ordinances and housing policies, (id.
¶ 21), and is the final policymaker on issues related to the City’s receipt of federal grants,
funding certifications for the federal grant programs, the City’s federal fair housing
3
obligations, and the City’s housing standards and code enforcement and appeals, (id. ¶ 22).
Defendant Rivera-Vandermyde is allegedly responsible for managing rental licensing and
enforcing the City’s housing maintenance code, for the Housing Board of Appeals, and—
along with Defendant Velde—for policymaking related to the City’s housing standards,
code enforcement, and appeal procedures. (Id. ¶¶ 23–24.)
Plaintiffs allege that, during the relevant time period, they have owned fourteen
rental dwellings in inner-city Minneapolis, which provide a total of approximately thirtyfive rental units. (See id. ¶¶ 27, 36–37.) According to Plaintiffs, their rental units are
located in areas where there is a high concentration of poverty and protected class members,
(see id. ¶¶ 48–49, 51–53), and over sixty percent of their tenants have been AfricanAmerican, nine percent Hispanic, and thirty percent White, (id. ¶ 29). Plaintiffs assert that
“Whites make up 65% of the Minneapolis population and Blacks 18%,” and “48.5% of
Blacks in the City are very low income compared to 15.5% of Whites occupying the City.”
(Id. ¶¶ 38, 40; see id. ¶ 41.)
Plaintiffs contend that Minneapolis has a shortage of affordable housing, especially
for protected class members, (see id. ¶¶ 54–63), and that the City has been the recipient of
federal funds for the purpose of providing housing for low- and moderate-income
individuals, (see id. ¶¶ 65–66). Plaintiffs claim that, as a condition of receiving these funds,
the City has certified that it will comply with anti-discrimination laws, including the FHA,
and that it will affirmatively further fair housing. (E.g., id. ¶¶ 68, 73, 90.) Plaintiffs allege
that Minneapolis’ Regulatory Services Department (“Regulatory Services”), which is
4
responsible for enforcing the City’s housing standards through the housing maintenance
code and rental licensing requirements, has received some of this federal funding. (See id.
¶¶ 95–98.)
As a result of receiving these funds, Plaintiffs claim that the City has a duty to
conduct an analysis of impediments to fair housing choice (“AI”) and to act to overcome the
effects of such impediments. (E.g., id. ¶ 74.) Plaintiffs state that the City participated in a
regional AI in 2001 and, in 2002, contributed to the preparation of an AI Action Guide, but
that the City did not conduct another AI until 2009. (See id. ¶¶ 101, 107, 114.) Plaintiffs
contend that Defendants have ignored the findings of the 2001 AI and 2002 AI Action
Guide, (id. ¶¶ 115–16), and that the 2009 AI does not include an analysis of how specific
housing code policies or actions impact low-income or protected class housing and does not
provide a clear link between the impediments identified and fair housing choice and
protected class status, (see id. ¶¶ 119–26). Plaintiffs also assert that Defendants have failed
to conduct an AI directed to public sector housing policies and actions since 2009, despite
HUD’s recommendation that the AI be updated annually and despite Regulatory Services’
heightening of housing standards and code enforcement on inner-city rental dwellings
occupied by protected class members and owned by low-income housing providers. (See
id. ¶¶ 128–31.) Plaintiffs claim that the City’s failure to follow federal requirements results
from a bias against rental dwellings in the inner-city. (See id. ¶ 142.) Nevertheless,
Plaintiffs allege, the City has certified from 2012 to 2014 that it has conducted AIs and
complies with its duty to affirmatively further fair housing. (Id. ¶ 91).
5
Plaintiffs also challenge the City’s rental dwelling license scheme, alleging that the
City has revoked numerous licenses since 1991, (id. ¶ 147), and, “[o]n information and
belief, . . . [has] displaced hundreds of ‘protected class’ families from their rental homes
since July 31, 2012,” (id. ¶ 149). Plaintiffs also state that the City “has repeatedly
threatened Plaintiffs with revocation of multiple rental licenses without a lawful basis” since
July 31, 2012. (Id. ¶ 160.) According to Plaintiffs, Regulatory Services has conducted
unlawful inspections of Plaintiffs’ rental dwellings, issued invalid orders and citations to
Plaintiffs, issued “vague and inconsistent orders,” and allowed code inspectors to use their
discretion in dictating minimum housing standards. (See, e.g., id. ¶¶ 161–62, 164, 166–68,
170–73.) Plaintiffs state that they have responded to each of these orders by making
necessary repairs, seeking clarification of the deficiency at issue, or filing appeals, (see id.
¶¶ 174, 177–78), but that Regulatory Services generally has failed to communicate with
Plaintiffs in return, (see id. ¶¶ 179–83). In some instances, however, Regulatory Services
has cancelled “invalid” orders. (See id. ¶ 184.)
According to Plaintiffs, Regulatory Services has “appl[ied] heightened housing
standards beyond minimum standards and targeted and [sic] unlawful code enforcement to
low-income protected class housing in the inner-city including to Plaintiffs’ rental dwellings
since July 30, 2012.” (Id. ¶ 100.) For example, Plaintiffs describe written notices of code
violations that were issued in September 2012 for Plaintiffs’ properties located at 16th
Avenue South. (See id. ¶ 214.) Plaintiffs claim that those notices unnecessarily required
Plaintiffs to repair the roofs on those buildings, did not describe the deficiencies in sufficient
6
detail, and required repair of a “near-perfect” exterior wall and chimney. (See id. ¶¶ 214–
16, 218–21, 225–27, 229, 231.) Plaintiffs allege that they were denied their appeal request
related to the roof orders, and that the City’s facially neutral policy of requiring “perfect”
conditions is above minimum standards and increases costs such that it affects the cost of
housing for all tenants. (See, e.g., id. ¶¶ 222, 228, 232.) In addition, Plaintiffs allege, a
March 2014 written notice regarding Plaintiffs’ East 26th Street property listed code
deficiencies that were non-existent or not sufficiently specific. (Id. ¶ 239.) For example,
Plaintiffs assert that the claimed mice infestation was not “widespread and severe” as
required for extermination under the housing code, the smoke detector was operational, and
a lead abatement specialist was unnecessary when there were only three small areas that
needed touch-up paint. (See, e.g., id. ¶¶ 240–44.) Plaintiffs allege that their appeal requests
regarding this notice were ignored, and that Regulatory Services’ policies raised the
minimum standards and impacted affordable housing by raising costs. (See id. ¶¶ 245–52.)
Plaintiffs make similar allegations regarding “heavy code enforcement,” lack of specificity,
inaccuracy, and denial of appeal rights relating to June 2014 notices of claimed deficiencies
at Plaintiffs’ 1st Avenue property. (See id. ¶¶ 258–82.) Finally, Plaintiffs allege that
Regulatory Services has failed to obtain consent to inspect certain properties, has
“demanded that Plaintiff coerce consent from protected class tenants,” has failed to disclose
the City’s “ulterior motive[]” to remove rental units from available affordable housing
stock, and failed to cite Plaintiffs’ tenants for violations that are the tenants’ responsibility.
(See id. ¶¶ 283–93.)
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According to the First Amended Complaint, the City does not apply these heightened
housing standards and policies to its “sister government agency,” the Minneapolis Public
Housing Agency (“MPHA”)—which also provides affordable housing to low-income
individuals and protected class tenants—even though the MPHA is under-funded and has a
significant volume of code violations in its housing units. (See id. ¶¶ 310–11, 313, 319–24.)
Rather, Plaintiffs allege, the City applies a preferential standard to the MPHA in order to
enhance MPHA’s competitive position, and those standards are the City’s actual “minimum
housing standards.” (See id. ¶¶ 316–18, 327.) Plaintiffs state that a viable alternative to the
City’s application of heightened standards as discussed above would have been to follow
these minimum standards or to conduct “legitimate” AIs to identify barriers to affordable
housing created by the City’s policies related to the for-profit low-income rental market and
then take action to eliminate those barriers. (See id. ¶¶ 328–30.)
As a result of application of the heightened standards, Plaintiffs claim to have
suffered interference with their business operations, loss of opportunities to rent, loss of
profits, attorney’s fees, loss of opportunities to add rental units to their portfolio,
harassment, humiliation, and embarrassment. (See id. ¶¶ 301–03.) Plaintiffs assert that the
increase in operating costs had to be spread out over all of their units, thereby affecting the
cost of housing for all tenants, (see, e.g., id. ¶ 299), and that Defendants’ actions and
heightened policies are “a significant disincentive” to continue providing low-income rental
housing in Minneapolis or to expand their portfolio in response to the high demand for such
housing, (see id. ¶¶ 304–05). Moreover, Plaintiffs claim that after they filed this lawsuit on
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July 30, 2014, Regulatory Services “commenced an increased course of intimidation and
retaliation against Plaintiffs” by issuing demands for licensing inspections of seven of their
rental dwellings, issuing an inspection notice for their homestead, issuing citations and
fines, threatening to revoke their rental license, and denying their right to appeal certain
orders. (See id. ¶¶ 354–61, 363–68, 373–76.)
In their First Amended Complaint, Plaintiffs assert six claims against Defendants.1
Four of these claims relate to Defendants’ enforcement of allegedly “heightened” housing
code standards in violation of the FHA and Defendants’ duty to affirmatively further fair
housing. In Count I, Plaintiffs seek a declaratory judgment that “Minneapolis is legally
bound by HUD’s Disparate Impact Rule,” that “Minneapolis is prohibited by its contract
with HUD from challenging disparate impact unless it forgoes . . . federal funding,” and that
the City’s obligation to affirmatively further fair housing requires it to conduct AIs pursuant
to the FHA and HUD and to eliminate barriers to fair and affordable housing. (Id. ¶¶ 384–
86.) Count II seeks injunctive relief under the FHA, prohibiting “the City’s unlawfully
heightened inspections and standards, heavy code enforcement, rental licensing and threats
of license revocations, denial of appeal rights and other challenged housing policies and
actions.” (Id. ¶ 395.) In Count III, Plaintiffs assert disparate treatment and disparate impact
claims under the FHA. (See id. ¶¶ 401–20.) More specifically, they allege that the City’s
facially-neutral housing policies and actions have blocked, denied, or impeded the provision
of housing on the basis of protected status and have had a disparate impact on protected
1
Plaintiffs also initially asserted one claim against HUD and its Secretary, but those
parties have been dismissed from this case [Doc. Nos. 34, 36].
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classes, and that Defendants intended that the policies would have such an impact. (See id.
¶¶ 403–05, 413.)
The remaining claims are brought specifically under 42 U.S.C. § 1983. In Count
VII,2 Plaintiffs assert that Defendants unlawfully retaliated against them for exercising their
First Amendment rights in filing this lawsuit. (See id. ¶¶ 461–69.) Count VIII asserts that
Defendants violated Plaintiffs’ due process rights under the Fourteenth Amendment by
infringing upon Plaintiffs’ right to pursue an occupation, right to notice, and hearing and
appeal rights. (See id. ¶¶ 470–83.) Finally, in Count IX, Plaintiffs allege that Defendants
failed to affirmatively further fair housing and engaged in discriminatory housing practices
in violation of the FHA. (Id. ¶ 485.)
Defendants answered the First Amended Complaint and subsequently filed their
Motion for Judgment on the Pleadings. The Motion was fully briefed, and the matter was
heard on April 10, 2015.
III.
DISCUSSION
Defendants have moved for judgment on the pleadings pursuant to Rule 12(c) of the
Federal Rules of Civil Procedure. “Judgment on the pleadings is appropriate if there is no
material issue of fact to be resolved and the moving party is entitled to judgment as a matter
of law.” Buddy Bean Lumber Co. v. Axis Surplus Ins. Co., 715 F.3d 695, 697 (8th Cir.
2013). Rule 12(c) motions are governed by the same standards that apply to motions to
dismiss brought under Rule 12(b)(6) for failure to state a claim. Gallagher v. City of
2
Plaintiffs have dropped their claims in Counts IV, V, and VI. (See Pls.’ Mem. of
Law in Opp. to City Defs.’ Mot. for J. on the Pleadings [Doc. No. 29] at 2.)
10
Clayton, 699 F.3d 1013, 1016 (8th Cir. 2012). The Court assumes the facts in the
Complaint to be true and construes all reasonable inferences from those facts in the light
most favorable to the plaintiff. Morton v. Becker, 793 F.2d 185, 187 (8th Cir. 1986).
However, the Court need not accept as true wholly conclusory allegations, see Hanten v.
Sch. Dist. of Riverview Gardens, 183 F.3d 799, 805 (8th Cir. 1999), or legal conclusions the
plaintiff draws from the facts pled, Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th
Cir. 1990). In addition, the Court ordinarily does not consider matters outside the pleadings.
See Fed. R. Civ. P. 12(d). The Court may, however, consider exhibits attached to the
complaint and documents that are necessarily embraced by the pleadings, Mattes v. ABC
Plastics, Inc., 323 F.3d 695, 697 n.4 (8th Cir. 2003), and may also consider public records,
Levy v. Ohl, 477 F.3d 988, 991 (8th Cir. 2007).
Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a complaint “must
contain . . . a short and plain statement of the claim showing that the pleader is entitled to
relief.” The U.S. Supreme Court, in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), clarified that this Rule does not require
that a complaint contain “detailed factual allegations,” but it does require that it contain facts
with enough specificity “to raise a right to relief above the speculative level.” Twombly,
550 U.S. at 555. In other words, this standard “calls for enough fact[s] to raise a reasonable
expectation that discovery will reveal evidence of [the claim].” Id. at 556. “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do
not suffice.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555). Thus, to survive a
11
motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is
plausible on its face.” Twombly, 550 U.S. at 570.
In their Motion, Defendants argue that each of Plaintiffs’ claims must be dismissed
for one or more of the following reasons: res judicata, qualified immunity, or failure to
plead a sufficient factual basis. (See Defs.’ Reply Mem. in Supp. of J. on the Pleadings
[Doc. No. 32] (“Defs.’ Reply”) at 2.) Because Plaintiffs’ other causes of action are
premised upon their FHA disparate impact claim, the Court will address that claim first.
A.
Violation of the FHA (Count III)
“The Fair Housing Act . . . prohibits property owners and municipalities from
blocking or impeding the provision of housing on the basis of race, color, religion, sex,
familial status, or national origin.” Gallagher v. Magner, 619 F.3d 823, 831 (8th Cir. 2010)
(citing 42 U.S.C. § 3604(a)–(b)). In Count III, Plaintiffs assert claims for both disparate
treatment and disparate impact under the FHA. Regarding the disparate treatment claim,
Defendants argue that they are entitled to judgment on the pleadings because “[t]he
Amended Complaint is complete[ly] devoid of any factual support for the conclusory
statements that the City intended for its facially neutral policies to have a discriminatory
effect.” (Defs.’ Mem. of Law in Supp. of Their Mot. for J. on the Pleadings [Doc. No. 26]
(“Defs.’ Mem.”) at 15.) Plaintiffs do not respond to this argument or make any argument in
support of their disparate treatment claim. (See Pls.’ Mem. of Law in Opp. to City Defs.’
Mot. for J. on the Pleadings [Doc. No. 29] (“Pls.’ Opp.”) at 18–30.) Accordingly, Count III
is dismissed to the extent that it alleges disparate treatment under the FHA.
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Regarding the disparate impact claim, Defendants argue that they are entitled to
judgment on the pleadings on grounds of res judicata, qualified immunity, and
implausibility.
1.
Res judicata
Defendants first challenge Plaintiffs’ disparate impact claim under the doctrine of res
judicata. The general rule of res judicata is:
[W]hen a court of competent jurisdiction has entered a final judgment on the
merits of a cause of action, the parties to the suit and their privies are
thereafter bound “not only to every matter which was offered and received to
sustain or defeat the claim or demand, but as to any other admissible matter
which might have been offered for that purpose.”
Comm’r of Internal Revenue v. Sunnen, 333 U.S. 591, 597 (1948) (quoting Cromwell v.
Cnty. of Sac, 94 U.S. 351, 352 (1876)). Thus, a court evaluating whether res judicata
applies must consider whether: (1) there has been a final judgment on the merits of a cause
of action; (2) the court that issued the judgment was of competent jurisdiction; (3) the
person seeking to preclude the claim was a party or a privy to a party in the first litigation;
and (4) the claim sought to be precluded either was actually litigated or is a claim that might
have been offered in the first litigation. See Lundquist v. Rice Mem’l Hosp., 238 F.3d 975,
977 (8th Cir. 2001). In order to be barred by res judicata, a claim must “arise[] out of the
same nucleus of operative fact” as the prior claim or be “based upon the same factual
predicate.” Hufsmith v. Weaver, 817 F.2d 455, 461 (8th Cir. 1987) (citation and internal
quotation marks omitted). Moreover, the doctrine does not apply to claims that did not exist
when the prior litigation was filed. Lundquist, 238 F.3d at 977.
13
Defendants argue that Plaintiffs’ claims relating to a “heightened enforcement
scheme,” the City’s failure to affirmatively further fair housing, and the City’s failure to
conduct proper AIs were litigated, or could have been litigated, in Plaintiffs’ previous
lawsuits against Defendants—Ellis I and Ellis II. (Defs.’ Mem. at 28.) Plaintiffs, on the
other hand, argue that res judicata does not apply because the Government was the real
party in interest in Ellis I, and because the present lawsuit does not arise out of the same
nucleus of operative facts that was at issue in Ellis I or Ellis II. (Pls.’ Opp. at 14–15.)
The Court finds that res judicata does not apply because Plaintiffs’ claims in the
present lawsuit do not arise out of the same nucleus of operative fact as the prior lawsuits.
As discussed above, the present lawsuit alleges that the City’s heightened enforcement of its
housing policies has blocked, denied, or impeded the provision of housing on the basis of
protected status and has had a disparate impact on protected classes. Ellis I and Ellis II were
each based on a different factual predicate. In Ellis I, the essence of the claim was that the
City had committed fraud on the Government by improperly certifying that it was taking
steps to affirmatively further fair housing—that lawsuit did not concern the heightened
enforcement of the City’s housing code in a discriminatory manner. The factual predicate
of Ellis II was the City’s violation of the building code, and corresponding violation of its
ministerial duty not to cause disparate impact, in demolishing one of Plaintiffs’ rental
properties after it was destroyed by fire. Again, that lawsuit did not concern the general
heightened enforcement of the City’s housing code in a discriminatory manner. Even if the
factual basis of Ellis II could be considered sufficiently similar, that case concerned events
14
that took place in 2006, and the order dismissing that case was issued on August 15, 2012.
Thus, while some of the background facts may overlap, the alleged facts that form the basis
of Plaintiffs’ present lawsuit occurred after July 30, 2012 and, therefore, could not have
been litigated in Ellis II. Accordingly, Plaintiffs’ disparate impact claim is not barred by res
judicata.3
2.
Qualified immunity
Defendants also argue that the City officials are entitled to qualified immunity.
“Qualified immunity shields government officials from liability and the burdens of litigation
. . . unless the official’s conduct violates a clearly established constitutional or statutory right
of which a reasonable person would have known.” Saterdalen v. Spencer, 725 F.3d 838,
841 (8th Cir. 2013). Thus, determining whether qualified immunity applies involves
consideration of two questions: (1) whether the facts alleged constitute a violation of a
constitutional or statutory right; and (2) whether that right was “clearly established” at the
time of the alleged violation. LaCross v. City of Duluth, 713 F.3d 1155, 1157–58 (8th Cir.
2013) (citing Saucier v. Katz, 533 U.S. 194, 201 (2001)). “Unless the answer to both of
these questions is yes, the defendants are entitled to qualified immunity.” Krout v.
Goemmer, 583 F.3d 557, 564 (8th Cir. 2009).
3
In their reply brief, Defendants argue that the administrative exhaustion doctrine
also bars all claims that were previously litigated or that could have been litigated.
(Defs.’ Reply at 3, 7–8.) The Court declines to address this argument for two reasons.
First, it was raised for the first time in the reply brief. Second, Defendants only argue
that Plaintiffs’ failure to appeal the validity of certain citations has rendered those
citations valid. (Id. at 7–8.) However, Defendants do not specify the particular citations
to which they are referring and, at any rate, Plaintiffs’ claim is based on more than the
issuance of citations.
15
Defendants assert that the City officials are entitled to qualified immunity because
the enforcement of the City’s housing code, including the issuance of citations, is a
discretionary government function. (Defs.’ Mem. at 49–50.) According to Defendants,
Plaintiffs have no right to be free from receiving incorrect citations. (Id. at 50.) Plaintiffs,
on the other hand, argue that the Eighth Circuit’s decision in Gallagher v. Magner, 619 F.3d
823 (8th Cir. 2010), clearly established that implementation of housing code standards and
enforcement actions similar to those at issue constitute violations of the FHA and, at the
very least, Plaintiffs should be permitted to conduct discovery on the issue of immunity.
(Pls.’ Opp. at 63.)
The Court declines to rule on the availability of qualified immunity at this stage of
the proceedings. As discussed in more detail below, the facts alleged are not sufficient to
state a claim for violation of the FHA. That being said, the Court is permitting Plaintiffs
one last opportunity to re-plead their claim. Therefore, it is not clear whether the answer to
the first question in the qualified immunity test will be “yes.” If Plaintiffs choose to replead their claim, Defendants may again raise their qualified immunity defense. If Plaintiffs
do not re-plead their claim, it will be dismissed with prejudice and the issue of immunity
will be rendered moot.
3.
Plausibility
Finally, Defendants contend that Plaintiffs have failed to plead sufficient facts to
support their disparate impact claim. While Defendants’ Motion was pending, the U.S.
Supreme Court in Texas Department of Housing & Community Affairs v. Inclusive
16
Communities Project, Inc., 135 S. Ct. 2507, 2525 (2015), confirmed that disparate impact
claims are cognizable under the FHA. In that case, the plaintiffs alleged that the defendant
had caused segregated housing patterns by granting too many tax credits for housing in
predominantly black inner-city neighborhoods and too few in predominantly white
suburban neighborhoods. Id. at 2514. Relying on two pieces of statistical evidence, the
district court found that the plaintiffs had established a prima facie case of disparate impact.
Id. The district court then concluded that, although the defendant’s proffered interests in
allocating tax credits in its chosen manner were legitimate and sufficient to rebut the
plaintiffs’ prima facie case, the defendant had not met its burden of proving that there were
no less discriminatory alternatives. Id.
While the defendant’s appeal was pending, HUD issued a regulation interpreting the
FHA to protect against disparate impact and establishing a three-part burden-shifting
framework for adjudicating such claims. Id. As summarized by the Supreme Court:
Under the regulation, a plaintiff first must make a prima facie showing of
disparate impact. That is, the plaintiff “has the burden of proving that a
challenged practice caused or predictably will cause a discriminatory effect.”
24 CFR § 100.500(c)(1) (2014). If a statistical discrepancy is caused by
factors other than the defendant’s policy, a plaintiff cannot establish a prima
facie case, and there is no liability. After a plaintiff does establish a prima
facie showing of disparate impact, the burden shifts to the defendant to
“prov[e] that the challenged practice is necessary to achieve one or more
substantial, legitimate, nondiscriminatory interests.” § 100.500(c)(2). . . .
Once a defendant has satisfied its burden at step two, a plaintiff may “prevail
upon proving that the substantial, legitimate, nondiscriminatory interests
supporting the challenged practice could be served by another practice that
has a less discriminatory effect.” § 100.500(c)(3).
17
Id. at 2514–15. The Fifth Circuit Court of Appeals subsequently held that disparate impact
claims are recognized under the FHA and, applying the HUD regulation, determined that
the district court erred in placing the burden on the defendant to prove that there were no
less discriminatory alternatives for allocating the tax credits. Id. at 2515.
The Supreme Court granted certiorari on the question of whether disparate impact
claims are cognizable under the FHA. Id. In holding that they are recognized, the Court
announced several “cautionary standards.” Id. at 2524. First, the Court noted that liability
under the FHA cannot be imposed solely on a showing of statistical disparity. See id. at
2522. Thus, “[c]ourts must . . . examine with care whether a plaintiff has made out a prima
facie case of disparate impact . . . . A plaintiff who fails to allege facts at the pleading stage
or produce statistical evidence demonstrating a causal connection cannot make out a prima
facie case of disparate impact.” Id. at 2523. “[This] robust causality requirement ensures
that ‘[r]acial imbalance . . . does not, without more, establish a prima facie case of disparate
impact’ and thus protects defendants from being held liable for racial disparities they did not
create.” Id. (quoting Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 653 (1989)).
Second, governmental entities “must not be prevented from achieving legitimate
objectives, such as ensuring compliance with health and safety codes.” Id. at 2524. Thus,
“[g]overnmental . . . policies are not contrary to the disparate-impact requirement unless
they are ‘artificial, arbitrary, and unnecessary barriers,’” id. (quoting Griggs v. Duke Power
Co., 401 U.S. 424, 431 (1971)), and “housing authorities and private developers [must be
given] leeway to state and explain the valid interest served by their policies,” id. at 2522.
18
Finally, “before rejecting a business justification—or, in the case of a governmental
entity, an analogous public interest—a court must determine that a plaintiff has shown that
there is ‘an available alternative . . . practice that has less disparate impact and serves the
[entity’s] legitimate needs.’” Id. at 2518 (quoting Ricci v. DeStefano, 557 U.S. 577, 578
(2009)). As the Supreme Court stated, “[w]ere standards for proceeding with disparateimpact suits not to incorporate at least [these] safeguards . . . , then disparate-impact liability
might displace valid governmental and private priorities . . . .” Id. at 2524. Defendants
argue that Plaintiffs’ claim fails at each step of the analysis. (Defs.’ Mem. at 16.)
a.
Prima facie case
First, according to Defendants, Plaintiffs have failed to plead a prima facie case of
disparate impact because they do not allege facts to show that: any tenant was displaced,
any policy had a significant adverse impact upon a protected class member, they lost the
ability to rent to tenants, the City has a high volume of false assertions of code violations, no
other landlord will purchase the properties that Plaintiffs choose not to purchase, or how the
housing code was elevated or in what ways the City’s orders were vague. (See id. at 16–
21.) Defendants also argue that Plaintiffs have not alleged statistics demonstrating an
inference of disparate impact because the First Amended Complaint only contains statistics
regarding Plaintiffs’ own tenants and not the impact upon protected classes compared to the
relevant population. (Id. at 20–22.)
In opposition, Plaintiffs assert that they have identified a facially-neutral policy or
practice that had a significant adverse impact on protected class members, and they point to
19
their allegations that: (1) the City and Regulatory Services required Plaintiffs to meet
elevated standards above minimum housing standards; (2) Regulatory Services fails to
specify claimed code deficiencies and the required remedial action; (3) Regulatory Services
targets privately-owned, low-income rental dwellings; (4) Regulatory Services fails to
provide due process; (5) Regulatory Services fails to adequately train its inspectors; (6) the
City has failed to conduct an analysis of impediments to fair housing choice since 2001 or to
take action to eliminate impediments; (7) Regulatory Services holds housing providers,
rather than tenants, responsible for all deficiencies; (8) Regulatory Services threatens civil
and criminal penalties based on admitted or unlawful orders and citations; (9) Regulatory
Services refuses to communicate with housing providers; and (10) the City requires all
housing to be in a perfect state of repair. (See, e.g., First Am. Compl. ¶¶ 403; Pls.’ Opp. at
20.) According to Plaintiffs, they have sufficiently alleged resulting injuries, including that
housing units remain vacant, Plaintiffs have suffered lost profits, and Plaintiffs have a lesser
ability and incentive to provide low-income housing. (Pls.’ Opp. at 21–24.) Finally,
Plaintiffs contend that they have “pled sufficient plausible facts that in Minneapolis,
protected class members have been and continue to be disproportionately impacted by the
City’s affordable housing crisis, and protected class members are vulnerable to such policies
which disproportionately impact their fair housing choice.” (Id. at 25.)
The Court finds that Plaintiffs have failed to adequately plead a prima facie case of
disparate impact. Even assuming, without ruling, that the statistics alleged in the First
Amended Complaint demonstrate that protected class members are disproportionately
20
impacted by policies that reduce the availability of low-income housing in the City,
allegations of a statistical disparity alone are insufficient to make out a prima facie case.
Rather, Plaintiffs also must allege facts that plausibly demonstrate a causal link between the
challenged policy and that disparity. Tex. Dep’t of Hous., 135 S. Ct. at 2523; see Gallagher,
619 F.3d at 836 n.4 (“[M]erely showing that there is a shortage of housing accessible to a
protected group is insufficient to establish a prima facie case for a disparate impact claim.
Plaintiffs must also show that such a shortage is causally linked to a neutral policy, resulting
in a disproportionate adverse effect on the protected population.”).
Plaintiffs have failed to do so. Although Plaintiffs allege generally that, as a result of
the City’s application of heightened standards, they have incurred increased operating costs
that must be passed on to their tenants and that they no longer have an incentive to continue
providing low-income housing or to expand their portfolio, Plaintiffs have not alleged, with
sufficient factual support, that they have been prevented from renting any of their units or
that any tenants have been displaced. Accordingly, the First Amended Complaint contains
no plausible allegations that the City’s alleged heightened enforcement of the housing code
has caused any adverse impact on a protected class and thus, fails to make out a prima facie
case of disparate impact.
b.
Legitimate interests
Second, Defendants argue that “[t]he City’s housing policies have a ‘manifest
relationship’ to legitimate, non-discriminatory policy objectives and are necessary to the
attainment of such objectives,” which include providing minimum property maintenance
21
standards to ensure a basic standard of living, keeping the City clean and safe, and keeping
housing habitable. (Defs.’ Mem. at 23–24.) However, Plaintiffs argue that Defendants will
fail to meet their burden at this second stage of the disparate impact analysis because they
cannot demonstrate that the challenged housing policies and actions are necessary to
promote a “compelling government interest.” (Pls.’ Opp. at 27.) They also argue that the
City’s failure to conduct an AI should defeat the City’s claim in light of its duty to
affirmatively further fair housing and its knowledge of the protected class’s need for
housing. (Id. at 28.)
Contrary to Plaintiffs’ argument, it is clear in light of Texas Department of Housing
that Defendants need only demonstrate the existence of a “legitimate” government
interest—not a “compelling” government interest—and that “ensuring compliance with
health and safety codes” qualifies as such. 135 S. Ct. at 2524; see Gallagher, 619 F.3d at
837 (finding that “the objectives of providing minimum property maintenance standards,
keeping the City clean and housing habitable, and making the City’s neighborhoods safe
and livable” were “legitimate, non-discriminatory objectives”). In addition, Plaintiffs’
argument that the City’s failure to conduct an AI in light of its duty to affirmatively further
fair housing simply re-hashes their arguments from stage one of the burden-shifting analysis
and is irrelevant as to whether the interests that the City is pursuing are legitimate. Thus,
although Plaintiffs do not concede that Defendants can meet their burden, (see Pls.’ Opp. at
27), neither have they alleged any facts plausibly showing that Defendants cannot.
22
Accordingly, Defendants have demonstrated that they will be able to satisfy their burden
under this prong of the analysis.
c.
Alternative practice
Finally, Defendants assert that Plaintiffs cannot, and do not, assert any viable
alternative means for the City to accomplish its policy objectives because MPHA’s
properties are HUD-owned and so are immune from the City’s nuisance ordinances, there is
no significant difference between the City’s current and past housing policies that would
render the old policies preferable, and it would be unfair and infeasible for the City to cite
the tenants rather than the landlords for housing violations. (See Defs.’ Mem. at 25–28.) In
response, Plaintiffs argue that they have sufficiently pled a viable and less discriminatory
alternative that meets the City’s needs—i.e., “actually complying with the City’s own Codes
and the State Building Code.” (Pls.’ Opp. at 28.) Plaintiffs also point to their allegations
that the City would have discovered other viable alternatives if it had conducted AIs and
kept records while taking actions to eliminate impediments to housing. (Id. at 28–29.)
The Court agrees that the First Amended Complaint does not sufficiently allege the
existence of any viable alternatives that would have less disparate impact. First, the only
actual suggested alternative is compliance with the City’s current codes—mere speculation
that other alternatives “would have” been discovered not only fails to identify with any
specificity what those alternatives might be, but also fails to identify how those alternatives
would cause less disparate impact. Second, Plaintiffs’ allegation that the City could follow
its current codes is too vague to support a plausible claim. The only purported definition of
23
these “minimum” housing standards is based on a comparison to the MPHA units’ “normal
state of repair and disrepair and needed maintenance and improvements that are typical for a
low-income housing provider with older housing stock.” (Id. ¶ 326; see id. ¶ 327
(“MPHA’s ‘high performer’ status with HUD in light of the actual physical deterioration of
its physical inventory, demonstrates that those actual conditions are the ‘minimum housing
standards’ applied to MPHA and acceptable to Minneapolis for its own public rental
portfolio.”).) Such an ambiguous standard can hardly be considered viable. Plaintiffs also
have not alleged any facts to support the notion that the alleged discriminatory impact
would be lessened by application of these “minimum” housing standards. For example,
Plaintiffs have alleged no plausible facts to support the conclusion that they would not incur
costs in complying with or defending against enforcement of the minimum standards. Thus,
Plaintiffs have failed to allege any plausible or viable alternative means for the City to
accomplish its legitimate policy objectives.
In light of the cautionary standards enunciated in Texas Department of Housing, this
Court finds that the facts alleged in the First Amended Complaint are wholly insufficient to
raise a reasonable expectation that discovery would reveal evidence of disparate impact
under the FHA. However, because that opinion was issued after this Motion was taken
under advisement, the Court will permit Plaintiffs thirty days to file an amended complaint
that attempts to cure the deficiencies noted herein. Accordingly, Count III is dismissed
without prejudice. If Plaintiffs fail to file a Second Amended Complaint within 30 days of
the date of this Order, Count III will be dismissed with prejudice.
24
B.
Declaratory Judgment (Count I)
As discussed above, Count I seeks a declaratory judgment that: (1) the City is bound
by HUD’s disparate impact rule; (2) the City is prohibited by its contract with HUD from
challenging disparate impact unless it forgoes federal funding; and (3) the City’s obligation
to affirmatively further fair housing requires it to conduct AIs pursuant to the FHA and
HUD and to eliminate barriers to fair and affordable housing. (First Am. Compl. ¶¶ 384–
86.) Under the Declaratory Judgment Act, federal courts have the power to “declare the
rights and other legal relations of any interested party seeking such declaration, whether or
not further relief is or could be sought.” 28 U.S.C. § 2201(a). Federal courts, however,
“only have jurisdiction to hear actual cases and controversies.” Cnty. of Mille Lacs v.
Benjamin, 361 F.3d 460, 463 (8th Cir. 2004) (citing U.S. Const. art. III, § 2, cl. 1). In order
to qualify as an actual case or controversy, “the dispute [must] be ‘definite and concrete,
touching the legal relations of parties having adverse legal interests’; and [it must] be ‘real
and substantial’ and ‘admi[t] of specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be upon a hypothetical state of
facts.’” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007) (citation omitted).
In their Motion, Defendants argue that Count I fails because Plaintiffs have
improperly conflated a legal argument about whether a disparate impact claim is cognizable
under the FHA (made by Defendants in a previous case) with whether Defendants in fact
have followed the disparate impact rule. (Defs.’ Mem. at 32–33.) Defendants also argue
that Plaintiffs’ request related to AIs is barred by res judicata and is inappropriate for
25
declaratory relief because an AI may not lead to any viable alternatives with which
Plaintiffs would be satisfied and so the requested declaration would not end the controversy.
(Defs.’ Reply at 14–15.) In opposition, Plaintiffs merely repeat the relief they are seeking,
summarizing it as “a declaration by this Court of the City’s federal and Fair Housing
obligations.” (Pls.’ Opp. at 41.)
The Court finds that Plaintiffs have not stated a proper claim for declaratory relief
because they are not seeking resolution of an actual case or controversy. A declaration from
this Court that Defendants are “bound by” HUD’s regulations or that delineates the City’s
obligations under the FHA to affirmatively further fair housing would constitute an
impermissible advisory opinion on the authoritative value of a particular regulation, or an
explanation of what the law is, rather than an application of law to a particular set of facts.
Moreover, the notion that the City is prohibited by its contract from challenging disparate
impact is not only incorrect, but also moot. The contract simply states that “‘[t]he grant will
be conducted and administered in conformity with . . . the Fair Housing Act (42 U.S.C.
3601-3619), and implementing regulations.’” (First Am. Compl. ¶ 68 (quoting id., Ex. A
(Local Grantee Certifications) at 3).) The contract does not prohibit any party from making
legal arguments as to the meaning of the FHA or its implementing regulations. Moreover,
in light of the Supreme Court’s holding in Texas Department of Housing, it is now clear that
a claim for disparate impact is cognizable under the FHA. Accordingly, there is no actual
case or controversy presented in Plaintiffs’ claim for declaratory relief, and Count I is
dismissed.
26
C.
Injunctive Relief (Count II)
In Count II, Plaintiffs seek injunctive relief pursuant to 42 U.S.C. § 3613 prohibiting
the City and its employees from continuing the alleged wrongful conduct. (See First Am.
Compl. ¶ 396.) Section 3613, however, merely lists the types of remedies that are available
to a prevailing plaintiff in a civil action brought under the FHA:
In a civil action under subsection (a) of this section, if the court finds that a
discriminatory housing practice has occurred or is about to occur, the court
may award to the plaintiff actual and punitive damages, and subject to
subsection (d) of this section, may grant as relief, as the court deems
appropriate, any permanent or temporary injunction, temporary restraining
order, or other order (including an order enjoining the defendant from
engaging in such practice or ordering such affirmative action as may be
appropriate).
42 U.S.C. § 3613(c)(1). Accordingly, as Plaintiffs acknowledge, to “prevail” on Count II
would require a finding of a discriminatory housing practice under Count III. (See Pls.’
Opp. at 38.) Because Count II is concededly not an independent cause of action and is
dependent upon the outcome of Count III, it too will be dismissed without prejudice at this
juncture. Likewise, if Plaintiffs fail to file a Second Amended Complaint addressing the
deficiencies in Count III within 30 days of the date of this Order, Count II will be dismissed
with prejudice.
D.
First Amendment Retaliation (Count VII)
Defendants also seek dismissal of Plaintiffs’ First Amendment retaliation claim. “It
is well-settled that ‘as a general matter the First Amendment prohibits government officials
from subjecting an individual to retaliatory actions . . . on the basis of his constitutionally
protected speech.’” Osborne v. Grussing, 477 F.3d 1002, 1005 (8th Cir. 2007) (quoting
27
Hartman v. Moore, 547 U.S. 250, 256 (2006)). “To successfully plead a First Amendment
retaliation claim, a plaintiff must plausibly plead that he/she ‘engaged in protected activity
and that defendants, to retaliate for the protected activity, took adverse action against
[him/her] that would chill a person of ordinary firmness from engaging in that activity.’”
Zutz v. Nelson, 601 F.3d 842, 848–49 (8th Cir. 2010) (quoting Lewis v. Jacks, 486 F.3d
1025, 1028 (8th Cir. 2007)). In addition, “[t]he defendant’s retaliatory motive must be a
but-for cause of the retaliation; a plaintiff cannot recover if the defendant would have taken
the same adverse action even in the absence of the improper motive.” Gearin v. City of
Maplewood, 780 F. Supp. 2d 843, 856 (D. Minn. 2011) (citing Osborne, 477 F.3d at 1006).
As stated by the Eighth Circuit in Osborne v. Grussing:
[A] plaintiff who seeks relief from valid adverse regulatory action on the
ground that it was unconstitutional retaliation for First Amendment-protected
speech must make the same showing that is required to establish a claim of
selective prosecution—“that he has been singled out for prosecution while
others similarly situated have not been prosecuted for conduct similar to that
for which he was prosecuted [and] that the government’s discriminatory
selection of him for prosecution was based upon . . . his exercise of his first
amendment right to free speech.”
477 F.3d at 1006 (quoting United States v. Catlett, 584 F.2d 864, 866 (8th Cir. 1978)).
Defendants challenge the sufficiency of Plaintiffs’ pleadings regarding causation,
arguing that, although Plaintiffs have alleged that the City commenced an increased course
of retaliation against them by issuing demands for licensing inspections on their properties,
Plaintiffs have failed to allege that those inspections were unique to Plaintiffs. (Defs.’
Mem. at 45.) On the contrary, Defendants assert, the inspections at issue were planned
since 2011. (Id.) Defendants also argue that, despite Plaintiffs’ allegations that Defendants
28
denied their right to appeal, Plaintiffs were not denied due process. (Id.; Defs.’ Reply at
17.)
Plaintiffs, on the other hand, appear to argue that the standard in Osborne applies
only if the regulatory action at issue is admitted to be “valid” and that this Court should
instead apply the causation standard articulated by the Eighth Circuit in Revels v. Vincenz,
382 F.3d 870, 876 (8th Cir. 2004)—i.e., that “the adverse action was motivated at least in
part by the exercise of the protected activity.” (Pls.’ Opp. at 44.) According to Plaintiffs,
the following allegations are sufficient: Defendants commenced an increased course of
retaliation against Plaintiffs “shortly after” they filed this lawsuit by subjecting several of
Plaintiffs’ properties to inspection and denying Plaintiffs their appeal rights, the Housing
Board of Appeals members insulted Plaintiffs’ attorney, Defendants issued Plaintiffs
citations and fines for failure to comply with the City’s orders, and Defendants’ actions
were taken with an intent to retaliate. (See id. at 45–48.)
The Court finds that Plaintiffs’ claim must be dismissed for failure to plead facts
sufficient to demonstrate that they will be able to establish causation. First, the causation
standard as articulated by the Eighth Circuit in Osborne, rather than in Revels, applies in
this lawsuit challenging Defendants’ regulatory enforcement actions. Although the Osborne
court stated the causation rule in terms of plaintiffs who seek relief from “valid” regulatory
action, the court explicitly stated that it was crafting a standard specific to the type of case
before it—which involved plaintiffs who admitted that they had violated the regulations at
issue. 477 F.3d at 1006. Plaintiffs have not explained why the same type of standard would
29
not apply in regulatory enforcement actions where the plaintiff is also challenging the
validity of the regulatory enforcement itself.
Second, even under Revels, “[a] plaintiff must show he was ‘singled out because of
[his] exercise of constitutional rights.’” Peterson v. Kopp, 754 F.3d 594, 602 (8th Cir.
2014) (citation and internal quotation marks omitted) (describing the causation prong of the
test articulated in Revels). Plaintiffs’ allegations demonstrate the contrary. In particular,
Plaintiffs allege that: Defendants announced prior to the filing of Plaintiffs’ Complaint that
they were increasing their enforcement efforts and that the increase would affect hundreds
of property owners, (see First Am. Compl. ¶¶ 152–53, 235–36); other low-income housing
providers have been faced with license revocation proceedings, (see id.¶¶ 154–57);
Defendants have, from July 31, 2012 through present, issued vague orders not in
compliance with the City’s code to other low-income housing providers, (see id. ¶¶ 165–
66); and Defendants have refused to communicate “with many property owners and rental
housing providers in the City,” (id. ¶ 181; see id. ¶ 186). These allegations refer to a
continuous stream of demands for licensing inspections, denials of appeal rights, and
issuance of fines and citations beginning on July 30, 2012—long before Plaintiffs filed their
Complaint—and, therefore, are contrary to the notion that Defendants took the alleged
retaliatory actions because Plaintiffs filed this lawsuit. In addition, these allegations
demonstrate that the same actions were taken against numerous property owners, not just
Plaintiffs. Because Plaintiffs have failed to allege facts that, if true, could support a finding
of but-for causation, their First Amendment retaliation claim must be dismissed.
30
E.
Due Process (Count VIII)
Defendants next seek dismissal of Plaintiffs’ Fourteenth Amendment due process
claim. In Count VIII, Plaintiffs assert that they were deprived of their liberty interest in “the
freedom . . . to choose and pursue a career [and] to engage in any of the common
occupations of life.” (First Am. Compl. ¶ 471.) They allege that Defendants interfered with
those constitutional rights and, by denying their appeal and hearing requests, did “not
afford[] Plaintiffs adequate procedural rights prior to depriving them of their protected
interest.” (Id. ¶ 481.) While it is not clear from the face of the First Amended Complaint
whether Plaintiffs are asserting a substantive or procedural due process claim, Plaintiffs
argue in their briefing on this Motion only that they were denied procedural due process.
(See Pls.’ Opp. at 48–62.)
In that regard, Defendants argue that Count VIII fails because Plaintiffs have not
cited to any binding authority for the proposition that they have a protectable liberty interest
in private sector careers, and because they have not adequately alleged that they were
actually deprived of their occupation as landlords. (Defs.’ Reply at 17.) In addition,
Defendants argue that no pre-deprivation hearing was required in light of the City’s
important government interest in ensuring that housing is safe. (Defs.’ Mem. at 47–48.)
Plaintiffs, on the other hand, argue that the freedom to choose and pursue a career is a
liberty interest that may not be arbitrarily denied by the government, and that the City
unlawfully deprived them of their due process rights by denying their appeal and hearing
requests on four separate occasions. (See Pls.’ Opp. at 49–61.)
31
The Fourteenth Amendment prohibits state action that “deprive[s] any person of life,
liberty, or property, without due process of law.” U.S. Const. amend. XIV, § 1. Courts
analyzing a procedural due process claim consider two questions: (1) whether state action
has deprived the plaintiff of a protected interest; and if so, (2) whether sufficient procedural
safeguards for challenging the deprivation were available. Keating v. Neb. Pub. Power
Dist., 660 F.3d 1014, 1017 (8th Cir. 2011). In other words, “[t]he possession of a protected
life, liberty, or property interest is . . . a condition precedent to the government’s obligation
to provide due process of law.” Movers Warehouse, Inc. v. City of Little Can., 71 F.3d 716,
718 (8th Cir. 1995). Thus, “[u]nless there has been a deprivation [of a protected liberty or
property interest] by state action, the question of what process is required . . . is irrelevant,
for the constitutional right to due process is simply not implicated.” Iota Xi Chapter of
Sigma Chi Fraternity v. Patterson, 566 F.3d 138, 146 (4th Cir. 2009) (citation and internal
quotation marks omitted; ellipsis and alterations in original).
In regard to the particular liberty interest at issue in this case—i.e., in choosing and
pursuing an occupation—the Eighth Circuit has stated:
“The Constitution only protects [the] liberty [to follow a chosen profession
free from unreasonable governmental interference] from state actions that
threaten to deprive persons of the right to pursue their chosen occupation.
State actions that exclude a person from one particular job are not actionable
in suits . . . . It is the liberty to pursue a particular calling or occupation, and
not the right to a specific job, that is secured by the Fourteenth Amendment.”
Habhab v. Hon, 536 F.3d 963, 968 (8th Cir. 2008) (quoting Piecknick v. Pennsylvania, 36
F.3d 1250, 1259–60 (3d Cir. 1994)). Applying these principles in Habhab v. Hon, the court
found that the owner of a towing company had not been deprived of his right to pursue his
32
chosen occupation even where the defendants “encouraged potential customers to hire other
tow truck companies, ordered [the plaintiff] to leave a towing site despite having been
retained, and threatened [the plaintiff] with criminal charges if he continued to follow his
business practices.” Id. at 966. Likewise, in Khan v. Bland, the Seventh Circuit found that
a landlord who was barred from participating in a Section 8 program was not precluded
from pursuing his occupation because he could continue renting units to non-Section 8
tenants and had not been put out of business. 630 F.3d 519, 534–35 (7th Cir. 2010).
Plaintiffs have failed to sufficiently plead a violation of their due process rights.
Although Plaintiffs assert that they have received fines, citations, and threats of adverse
action from Defendants, and that some of their units have remained vacant, they do not
allege that their rental license was ever revoked or that they have otherwise been prevented
from continuing in their occupation as landlords. (See Pls.’ Opp. at 48–62.) Accordingly,
the facts pled do not support a plausible claim that Plaintiffs were deprived of any alleged
liberty interest in pursuing their chosen occupation, and Plaintiffs’ claim for relief under the
Fourteenth Amendment fails. Count VIII is dismissed.
F.
Duty to Affirmatively Further Fair Housing (Count IX)
Aside from incorporating by reference the previous paragraphs of the First Amended
Complaint, and stating the nature of the alleged damages, the entirety of Count IX reads:
Defendant City has failed affirmatively to further fair housing, in violation of
42 U.S.C. Section 3608 and 24 C.F.R. § 1, et seq., by engaging in racially
discriminatory housing practices, including by causing and increasing
segregation.
33
(First Am. Compl. ¶ 485.) In their brief in opposition to this Motion, Plaintiffs argue that
the “duty to affirmatively further fair housing” consists of a duty to “‘administer the
programs and activities relating to housing and urban development in a manner
affirmatively to further the policies of [42 U.S.C. §§ 3601–3619].’” (Pls.’ Opp. at 30
(quoting 42 U.S.C. § 3608(e)(5)).) They further assert that numerous courts have applied
this duty to state and local agencies, and that Defendants have violated their duty by failing
to conduct AIs, applying housing policies in a manner that is detrimental to Plaintiffs’
ability to provide affordable housing to protected class members, violating Plaintiffs’ First
and Fourteenth Amendment rights, and trying to prohibit private investors from purchasing
vacant homes for rental dwellings. (See id. at 30–38.) Defendants, on the other hand, argue
that Count IX should be dismissed because the allegations relating to the production of AIs
are barred by res judicata, and because the allegations pertaining to segregation are
unsupported or at least duplicative of Plaintiffs’ disparate impact claim. (Defs.’ Mem. at
48–49.)
The Court agrees with Defendants that this claim is duplicative and must be
dismissed. In Gallagher, owners of low-income rental housing located in St. Paul,
Minnesota brought a lawsuit against the City of St. Paul based on its allegedly “aggressive
enforcement” of its housing code. 619 F.3d at 833. The landlords asserted several claims
against the City of St. Paul, including claims for disparate impact under the FHA and for
failure to affirmatively further fair housing by neglecting to analyze impediments to fair
housing. See id. at 831–40. Although the Eighth Circuit ultimately concluded that the
34
landlords’ disparate impact claim should have survived summary judgment, it affirmed the
district court’s dismissal of the failure to affirmatively further fair housing claim because
that claim “ha[d] no independent significance.” Id. at 839 (citing Charleston Hous. Auth. v.
U.S. Dep’t of Agric., 419 F.3d 729, 740 (8th Cir. 2005); Langlois v. Abington Hous. Auth.,
234 F. Supp. 2d 33, 72–73 (D. Mass. 2002)).
Similarly, here, Plaintiffs’ claim for failure to affirmatively further fair housing has
no independent significance from their disparate impact claim. Their allegations that
Defendants failed to conduct AIs, applied housing policies in a manner that is detrimental to
Plaintiffs’ ability to provide affordable housing to protected class members, and tried to
prohibit private investors from purchasing vacant homes for rental dwellings are the same
allegations that support their disparate impact claim. In addition, the Court has already
determined that Plaintiffs have not adequately stated claims for violation of their First and
Fourteenth Amendment rights. Accordingly, those claims cannot form the basis of their
claim for failure to affirmatively further fair housing. For these reasons, Count IX is
dismissed.
IV.
ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED THAT:
1. Defendants City of Minneapolis, Betsy Hodges, Nuria Rivera-Vandermyde, and
JoAnn Velde’s Motion for Judgment on the Pleadings [Doc. No. 23] is
GRANTED IN PART AND GRANTED WITHOUT PREJUDICE IN
PART;
2. Counts I, IV, V, VI, VII, VIII, and IX are DISMISSED WITH PREJUDICE;
35
3. Count III is DISMISSED WITH PREJUDICE to the extent that it is based on a
claim of disparate treatment;
4. Count III is DISMISSED WITHOUT PREJUDICE to the extent that it is
based on a claim of disparate impact;
5. Count II is DISMISSED WITHOUT PREJUDICE to the same extent as Count
III; and
6. Plaintiffs have 30 days from the date of this Order to file a Second Amended
Complaint re-pleading their disparate impact claim in Count III consistent with
U.S. Supreme Court authority, as discussed herein. If Plaintiffs fail to file a
Second Amended Complaint within 30 days, Counts II and III will be dismissed
with prejudice. If Plaintiffs do file a Second Amended Complaint in accordance
with this Order, Defendants will be permitted an opportunity to challenge the
sufficiency of the amended pleading if they so choose.
Dated: August 24, 2015
s/Susan Richard Nelson
SUSAN RICHARD NELSON
United States District Judge
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