United States of America v. Dawn Properties, Inc. et al

Filing 184

ORDER denying 171 Motion to Sever Signed by Chief District Judge Louis Guirola, Jr on 02/02/2015 (Guirola, Louis)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
UNITED STATES OF AMERICA
v.

PLAINTIFF
CAUSE NO. 1:14CV224-LG-JCG

DAWN PROPERTIES, INC.;
SOUTHERN CROSS CONSTRUCTION
COMPANY, INC.; RIDGELAND
CONSTRUCTION ONE, LLC;
THE BEACH CLUB, LLC;
THE BEACH CLUB II, LLC;
THE BELMONT OF LAMAR, LLC;
GRAND BISCAYNE APTS., LLC;
SEAINN, LLC

DEFENDANTS

AND
SUMMER MISS, LLC;
14510 LEMONYE BOULEVARD, LLC;
LEXINGTON MILL MISSISSIPPI OWNER,
LLC; INN BY THE SEA HOME OWNERS
ASSOCIATION, INC.

RULE 19 DEFENDANTS

ORDER DENYING MOTION TO SEVER
BEFORE THE COURT is the [171] Motion to Sever filed by Rule 19
Defendant Inn by the Sea Home Owners Association, Inc. (“Inn by the Sea HOA” or
“the HOA”). The United States filed a Response to the Motion and the HOA filed a
Rebuttal Memorandum. Having considered the submissions of the parties and the
applicable law, the Court is of the opinion that the Motion should be denied because
Inn by the Sea HOA has not carried its burden to show that a severance should be
granted under Federal Rule of Civil Procedure 21.
BACKGROUND
The United States (“the Government”) filed this action against Defendants

Dawn Properties, Inc.; Southern Cross Construction Company, Inc.; Ridgeland
Construction One, LLC; The Beach Club, LLC; The Beach Club II, LLC; The
Belmont of Lamar, LLC; Grand Biscayne Apts., LLC; and SeaInn, LLC (collectively,
the “Design and Construction Defendants”). The Government claims that the
Design and Construction Defendants were related entities that were the owners,
developers, and builders of several local residential multifamily dwellings. The
Government seeks to hold the Design and Construction Defendants liable for
purported violations of the Fair Housing Act (FHA) and the Americans with
Disabilities Act (ADA). The Government also alleges that the Design and
Construction Defendants engaged in a pattern and practice of discrimination in
violation of the FHA and ADA, although it does not allege that SeaInn, LLC
committed any ADA violations.
Pursuant to Federal Rule of Civil Procedure 19, the Government also named
as Defendants Summer Miss, LLC; 14510 Lemoyne Boulevard, LLC; Lexington Mill
Mississippi Owner, LLC; and Inn by the Sea HOA. The Government alleges that
SeaInn, LLC, one of the Design and Construction Defendants, “was an owner and/or
developer of Inn by the Sea and participated in the design and construction of the
complex.” (Compl. 5 (¶16), ECF No. 1). It further contends that Inn by the Sea
HOA is the “current owner of the common property at Inn by the Sea and, in that
capacity, is named as a necessary party to this lawsuit . . . in whose absence
complete relief cannot be afforded to the” Government. (Id. at 6 (¶20)).
SeaInn, LLC and Inn by the Sea HOA are represented by separate counsel.
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The Government does not allege that the HOA is liable for the purported FHA
violations or even make any FHA allegations against the HOA. (See Gov’t Mem. 5,
ECF No. 174). Instead, the Government seeks an order enjoining the Rule 19
Defendants, including Inn by the Sea HOA,
from engaging in conduct that denies access to the public and common
use areas, the covered multifamily dwellings, or the public
accommodations areas at the [subject] properties . . . under their
ownership or management, and from engaging in any other action to
impede any retrofits required to bring the properties, covered
multifamily dwelling units, and public and common use areas into
compliance with the [FHA] . . . in a prompt and efficient manner while
minimizing inconvenience to the residents and visitors at the
properties and to the Rule 19 Defendants.
(Compl. 19, ECF No. 1).
The Government states that the HOA
is in possession of information, and in control of property, that is
relevant to the pattern or practice claims against the Design and
Construction Defendants. The evidence of the Inn by the Sea property
itself, including its construction and building records, is directly
related to the United States’ claims that in designing and constructing
the Subject Properties, . . . the Design and Construction Defendants
engaged in a pattern or practice of discrimination . . . .
(Gov’t Mem. 5, ECF No. 174). The Government further states that it will need to
inspect the public common use areas at Inn by the Sea as part of the discovery
process, and, that, should the Government show that the Design and Construction
Defendants “violated federal law when they designed and constructed covered
multifamily dwellings, including Inn by the Sea, the [HOA] will be necessary to
ensure that inaccessible conditions are remedied.” (See id. at 6-7).
Inn by the Sea HOA now requests that this Court sever all claims related to
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Inn by the Sea and consider those claims in a separate action.
DISCUSSION
The United States Supreme Court has stated that “the impulse is toward
entertaining the broadest possible scope of action consistent with fairness to the
parties; joinder of claims, parties and remedies is strongly encouraged.” United
Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966). Even so, Federal Rule of
Civil Procedure 21 gives the Court authority to “sever any claim against a party.”
Fed. R. Civ. P. 21. “The court has broad discretion in matters of severance.”
Hodges v. Coldwell Banker Real Estate Corp. No. 4:05cv168-P-A, 2007 WL 1200118,
at *1 (N.D. Miss. Apr. 19, 2007) (citing Brunet v. United Gas Pipeline Co., 15 F.3d
500 (5th Cir. 1994)). The movant “bears the burden in seeking severance under
Rule 21.” Johnson v. BAE Sys. Land & Armaments, L.P., No. 3:12-cv-1790-D, 2014
WL 1714487, at *35 (N.D. Tex. Apr. 30, 2014).
While the Fifth Circuit “has not formally adopted a severance test,” it has
recognized that the “district courts have settled on a standard which accords with
that used in other circuits.” In re Rolls Royce Corp., 2014 WL 7403467, at *8 n.40
(5th Cir. Dec. 30, 2014). Under that standard, “[i]n considering a motion to sever,
the court may consider the following factors:
(1) whether the claims arise out of the same transaction or occurrence;
(2) whether the claims present some common questions of law or fact;
(3) whether settlement of the claims or judicial economy would be
facilitated;
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(4) whether prejudice would be avoided if severance were granted; and
(5) whether different witnesses and documentary proof are required for
separate claims.”
Butcher v. Allstate Ins. Co., No. 1:06cv423-KS-MTP, 2008 WL 5101339, at *2 (S.D.
Miss. Nov. 26, 2008); see also In re Rolls Royce, 2014 WL 7403467, at *8 n.40.
In considering the factors above, the Court is of the opinion that Inn by the
Sea HOA’s Motion to Sever should be denied.1
(1)

Whether the claims arise out of the same transaction or occurrence
Inn by the Sea HOA argues that the claims involving Inn by the Sea should

be severed because “[t]he claims asserted against each property are unique to each.”
(Mot. 2, ECF No. 171). In its Rebuttal Memorandum, the HOA states that, for
example, the other complexes are alleged to have violated the FHA because
“breezeways leading to covered units do not have cane detection under the stairs”
and “ground-floor covered units have barriers on the approach walkway leading up
to the primary entry door of the unit.” The HOA argues that, in contrast, the
allegations involving Inn by the Sea include that “the latch and lock of the
swimming pool and barbeque are inaccessible and are at a height greater than 48"
above the ground” and that “the top row of mailboxes is located at a height greater

1

While unclear, to the extent Inn by the Sea HOA argues that it should be
severed as a Defendant because it was not properly joined pursuant to Federal Rule
of Civil Procedure 19, case law supports the inclusion of the HOA as a Defendant.
See, e.g., Nat’l Fair Housing Alliance, Inc. v. S.C. Bodner Co., 844 F. Supp. 2d 940,
945 (S.D. Ind. 2012); Nat’l Fair Housing Alliance v. A.G. Spanos Constr., Inc., 542 F.
Supp. 2d 1054, 1066-67 (N.D. Cal. 2008); Baltimore Neighborhoods, Inc. v. Rommel
Builders, Inc., 40 F. Supp. 2d 700, 712 (D. Md. 1999).
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than 54" above the finished floor.” (Rebuttal Mem. 4, ECF No. 176). The HOA
further contends that resolution of the claims against the other Defendants “will
have no effect on the claims involving Inn by the Sea, nor will resolution of the
claims involving Inn by the Sea affect any of the claims against the owners of the
other subject properties . . . .” (Id. at 3-4). Thus, the HOA argues that the claims
related to Inn by the Sea do not arise out of the same transaction or occurrence as
the claims related to the other complexes.
The HOA’s arguments fail to acknowledge, however, that the Government is
contending that the Design and Construction Defendants engaged in a pattern and
practice of discrimination relating to all of the subject complexes. While the Court
anticipates that there will be specific fact issues regarding the alleged defects at the
Inn by the Sea property, the Government’s overarching allegation that the Design
and Construction Defendants engaged in “a pattern or practice of resistance to the
full enjoyment of rights granted by the” FHA, (Compl. 16 (¶42), ECF No. 1),
satisfies the requirement that the claims arise out of the same transaction or
occurrence. See, e.g., Castillo v. Lennar Corp., No. H-08-1469, 2008 WL 4425298, at
*1 (S.D. Tex. Sept. 23, 2008) (“Allegations of a pattern or practice of discrimination
can satisfy the ‘same transaction’ requirement . . . .”); Porter v. Milliken & Michaels,
Inc., 2000 WL 1059849, at *1 (E.D. La. Aug. 1, 2000) (same) (collecting cases).
Inn by the Sea HOA has provided no analogous law to the contrary. Instead,
it relies primarily on McFarland v. State Farm Fire & Casualty Co., No. 1:06cv466LTS-RHW, 2006 WL 2577852 (S.D. Miss. Sept. 6, 2006). The facts and claims in
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McFarland are inapposite to the facts and claims in this case. In that action,
hundreds of individual plaintiff-homeowners, as opposed to the single plaintiff here,
attempted to join in a single action against an insurance company for damage
caused to their homes by Hurricane Katrina. Significantly, there was no pattern
and practice allegation, and each homeowner was making its own individual claim
of damage to its individual property. Under those circumstances, the Court ordered
that each of the plaintiff-homeowners had to file its own action corresponding to the
actual damaged property.
McFarland does not support the HOA’s position. In this action, while the
Government is claiming different deficiencies at each complex, those deficiencies all
relate to the Government’s larger pattern and practice claim against the Design and
Construction Defendants. Similarly, there was no pattern and practice allegation
in another case cited by the HOA, Baughman v. Lee County, 554 F. Supp. 2d 652
(N.D. Miss. 2008), which case was brought by multiple plaintiffs and in which the
Court relied on McFarland in ordering a severance.
In its Rebuttal Memorandum, Inn by the Sea HOA contends that there can
be no pattern and practice claim involving Inn by the Sea. This argument is, again,
based on the differences in the alleged deficiencies found at Inn by the Sea versus
those at the other complexes. While the Court does not prejudge the merits of the
Government’s pattern and practice claim, the alleged deficiencies at Inn by the Sea
do not have to be identical to those at the other complexes for the Government to
prove that the Design and Construction Defendants engaged in an overall pattern
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and practice of discrimination with respect to all local residential multifamily
dwellings with which they were involved. Nor does it have to show that the alleged
deficiencies were the same “to demonstrate that unlawful discrimination has been a
regular procedure or policy followed by” those entities. See Int’l Bhd. of Teamsters
v. United States, 431 U.S. 324, 360 (1977).
The Court is of the opinion that this factor weighs in favor of allowing the
action to proceed without severing the claims related to Inn by the Sea.
(2)

Whether the claims present some common questions of law or fact
“The second prong does not require all questions of law and fact raised by the

dispute to be common. Rather, only ‘some question of law or fact must be common
to all parties.’” Porter, 2000 WL 1059849, at *2 (citation omitted). Inn by the Sea
HOA concedes that the Government has alleged at least one common fact – that all
of the complexes were constructed by Dawn Properties or a related entity. Further,
as shown above, whether the Defendants engaged in a pattern and practice of
discrimination is also a common question of law. See, e.g., id. The Court finds that
this factor also weighs in favor of denying the Motion to Sever.
(3)

Whether settlement of the claims or judicial economy would be
facilitated
The Court is of the opinion that settlement will be more likely if the

Government can negotiate with all of the Design and Construction Defendants as
part of one action. Similarly, the Court believes that judicial economy would be
facilitated by proceeding with the claims together, as opposed to engaging in

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separate discovery and separate trials involving many of the same issues and
witnesses, as discussed herein. See, e.g., Bolling v. Miss. Paper Co., 86 F.R.D. 6, 8
(N.D. Miss. 1979) (“To order a severance would only result in the duplication of
testimony, as well as unnecessary delay, inconvenience, and expense.”).
(4)

Whether prejudice would be avoided if severance were granted
Inn by the Sea HOA states that “prejudice would result from the confusion

that inevitably would arise in the fact-intensive process of sorting through these
disparate and unrelated claims.” (Mot. 7, ECF No. 171) (see also Rebuttal Mem. 2,
ECF No. 176). The Court has already determined that the claims are not as
“disparate and unrelated” as the HOA argues. Regardless, any potential confusion
can be addressed by jury instructions specific to each Defendant, if necessary,
including SeaInn, LLC.2 See, e.g., Fassbender v. Treasure Chest Casino, No 075265, 2008 WL 576229, at *4 (E.D. La. Feb. 28, 2008); Amie v. City of Jennings, No.
2:03cv2011, 2005 WL 3007009, at *2 (W.D. La. Nov. 8, 2005).
Finally, the HOA contends that “[i]f the claims involving Inn by the Sea are
not severed, [the HOA] will be required to expend significant cost and time
litigating claims that simply do not pertain to Inn by the Sea.” (Rebuttal Mem. 7,
ECF No. 176). The Court is unpersuaded by this argument, since the Government
has made clear that it is not alleging that the HOA is liable for any violations.

2

This would include jury instructions distinguishing between the FHA
claims and the ADA claims, since there are no ADA claims related to the Inn by the
Sea property.
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Accordingly, there are no claims against the HOA to litigate. Rather, the
Government has included the HOA in this action solely for the purposes of access,
obtaining documents, and effectuating injunctive relief, if SeaInn, LLC (not the
HOA) is found to be liable.
(5)

Whether different witnesses and documentary proof are required for
separate claims
The Government argues that it “anticipates using the same expert

witness(es) to inspect each property, and anticipates deposing some of the same
witnesses for facts relevant to the design and construction of the several Subject
Properties.” (Gov’t Mem. 9-10, ECF No. 174). This includes Ike Thrash, who is
alleged to be the owner and president of Dawn Properties, which is an owner,
principal, or member of all the other Design and Construction Defendants,
including SeaInn, LLC. (See id. at 10).
Inn by the Sea HOA responds that “[n]otwithstanding the United States’
contention that it anticipates using at least one similar witness, the allegations
involving Inn by the Sea involve different design and property features that
necessarily will require different documentary proof.” (Rebuttal Mem. 6, ECF No.
176). That contention is likely true, but it does not warrant severance of the claims,
especially when weighed in conjunction with the other factors discussed above. See,
e.g., Johnson, 2014 WL 1714487, at *36 (denying motion to sever where movant
“failed to persuade the court that a severance [was] warranted under the relevant
factors”).

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CONCLUSION
For all the reasons discussed herein, the Court declines to exercise its
discretion to sever the claims related to Inn by the Sea in this action.
IT IS, THEREFORE, ORDERED AND ADJUDGED that the [171] Motion
to Sever filed by Rule 19 Defendant Inn by the Sea Home Owners Association, Inc.
is DENIED.
SO ORDERED AND ADJUDGED this the 2nd day of February, 2015.
s/

Louis Guirola, Jr.

LOUIS GUIROLA, JR.
CHIEF U.S. DISTRICT JUDGE

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