Rivera et al v. The Incorporated Village of Farmingdale et al

Filing 180

ORDER denying 175 : For the reasons set forth in the attached Memorandum & Order, plaintiffs' motion to amend the Amended Complaint is denied. The case will proceed to trial as against the Village only. (See Docket No. 154.) The Court will issue a separate Scheduling Order setting forth the details for the Final Pre-Trial Conference. Ordered by Judge Denis R. Hurley on 2/19/2013. (Monaco, Laura)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ISIDORO RIVERA, JOSE ALVARADO,
JUAN BUSTILLO, NOBERTO ALVAREZ,
ELSA MEJIA VILLALOBO, BRIAN
FREDERICKS, ELI CHAVEZ, MARTA
VILLATORO, ANA MARIA MORA GOMEZ,
Plaintiffs,
-against-

MEMORANDUM & ORDER
06 CV 2613 (DRH) (ARL)

THE INCORPORATED VILLAGE OF
FARMINGDALE, SECATOGUE REALTY, LLC,
JOHN TOSINI, and MICHELLE TOSINI,
Defendants.
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APPEARANCES:
COMMUNITY LEGAL ASSISTANCE CORP.
Attorneys for Plaintiffs
108 Hofstra University
Hempstead, New York 11549
By:
Stefan Hillel Krieger, Esq.
Lynn Capuano, Esq.
NIXON PEABODY LLP
Attorneys for Plaintiffs
50 Jericho Quad
Suite 300
Jericho, New York 11753
By:
Mark L. Deckman, Esq.
WALSH MARKUS MCDOUGAL & DEBELLIS, LLP
Attorneys for Defendant the Incorporated Village of Farmingdale
229 Seventh Street
Garden City, New York 11530
By:
Stephen Paul Markus, Esq.
Claudio DeBellis, Esq.

KAPLAN BELSKY ROSS BARTELL, LLP
Attorneys for Defendants Secatogue Realty LLC, John Tosini and Michelle Tosini
666 Old Country Road
Suite 602
Garden City, New York 11530
By:
Lewis A. Bartell, Esq.
HURLEY, Senior District Judge:
Plaintiffs Isidoro Rivera, Jose Alvarado, Juan Bustillo, Noberto Alvarez, Elsa Mejia
Villalobo, Brian Fredericks, Eli Chavez, Marta Villatoro, and Ana Maria Mora Gomez
(collectively, “plaintiffs”) originally commenced this action alleging that: (1) defendant Village
of Farmingdale (the “Village”) violated the Fair Housing Act, 42 U.S.C. §§ 3601 et seq. (the
“FHA”); and (2) defendants Secatogue Realty, LLC (“Secatogue”), John Tosini, and Michelle
Tosini (collectively, “the Secatogue Defendants”) violated the FHA, New York Executive Law §
296(6) (the “NYHRL”), and New York Real Property Law § 235-b. On May 13, 2010, the
Village and the Secatogue Defendants filed separate motions seeking summary judgment
pursuant to Federal Rule of Civil Procedure (“Rule”) 56. By Memorandum & Order dated
March 30, 2011, the Court denied the Village’s motion in its entirety. (Docket No. 154.) By
separate Memorandum & Order of the same date, the Court granted the Secatogue Defendants’
motion and dismissed plaintiffs’ claims against them in their entirety. (Docket No. 153.)1
Presently before the Court is plaintiffs’ motion, made pursuant to Rule 15, seeking to
amend the Amended Complaint to “add an Exploitation Claim, under [the FHA,] 42 U.S.C. §
3604(b),” against the Secatogue Defendants. (Not. of Mot. at 1.) For the reasons set forth below,
plaintiffs’ motion is denied.
1

The reader’s familiarity with these opinions is assumed for purposes of this
Memorandum & Order.
2

BACKGROUND
The following facts are taken from the proposed Second Amended Complaint (“2d Am.
Compl.”) and are presumed true for purposes of this motion.
The Parties
Plaintiffs are “low-income Latinos who have Latin American ancestry and/or Spanish
surnames,” (2d Am. Compl. ¶ 6), and are former residents of an apartment building at 150
Secatogue Avenue (the “Building”), which is located in the Village. The Village is a municipal
corporation incorporated pursuant to New York Village Law, and is located in Nassau County,
New York. Secatogue is a New York limited liability company with its principal place of
business in New York. Secatogue owned the Building from 1999 until July 2006. At all relevant
times, John Tosini was an owner, principal, and agent of Secatogue, and Michelle Tosini was an
agent for Secatogue.
The Building and Surrounding Area
The Building is located in an area of the Village bounded by Secatogue Avenue to the
east, South Front Street to the north, Elizabeth Street to the west, and Conklin Street to the south.
(Id. ¶ 30.) Another residential building was located at 130 Secatogue Avenue, which was across
the street from the Building. (Id.) As of 2004, the majority of the Building’s tenants were
Latino. (Id. ¶ 34.) The area surrounding the Building had “a Latino population of 56.2%” and is
the only area in the Village that “does not have a majority White population.” (Id. ¶¶ 32, 33; see
also id. ¶ 80.)2 Plaintiffs allege that “[i]n 2000, the 54 units at [the Building] represented 37% of

2

Elsewhere in the proposed Second Amended Complaint, plaintiffs allege that the
relevant area surrounding the Building “was 63.5% Hispanic and 13.2% non-Hispanic white.”
(2d Am. Compl. ¶ 82.)
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all affordable ‘very low income’ housing in the Village,” and none of these 54 units were vacant
at that time. (Id. ¶ 123.)
Interactions Between John Tosini and the Village
Between 1999 and 2004, the Village “continuously expressed an interest in redeveloping”
both the Building and its surrounding area. (Id. ¶ 103.) In 1999, John Tosini met with
representatives from the Village “to discuss the Village’s interest in redeveloping” the Building.
(Id. ¶ 99.) During a second meeting with John Tosini, “the Village proposed condemning the
area and selling it to [John Tosini] who would then redevelop it into a residential condominium
complex and commercial area.” (Id. ¶ 100.) In April 2000, John Tosini received a “‘Public
Notice’ and an Acquisition Map, pursuant to New York Eminent Domain Law, and a letter from
the Village Clerk, which informed him that the Village planned to take title of 130 and 150
Secatogue on September 1, 2000.” (Id. ¶ 101.) Plaintiffs allege that, “[a]s a result of this threat
of eminent domain,” which apparently never actually came to fruition, the Secatogue Defendants
“stopped making capital improvements” to the Building. (Id. ¶ 104.) According to plaintiffs,
“[t]he Village’s threat of eminent domain eliminated market competition and the resulting
condemnation blight[ ] allowed the Secatogue Defendants to charge excessive rents for housing
in substandard condition.” (Id. ¶ 107.)
Alleged Condition of the Building
Plaintiffs allege that while they lived in the Building, their apartments were “unfit for
human habitation and [exhibited conditions] dangerous to life, health and safety,” including
mold, vermin, various leaks, defective windows, rotting wood, intermittent interruptions in heat,
electricity, and hot water, and defective toilets and bathtubs. (Id. ¶ 90.) Plaintiffs also allege that
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the common areas of the Building had raw sewage spills, foundation cracks, flooding, crumbling
walls, water damage, holes in the ceiling, and inadequate structural support. (Id. ¶ 91.) Plaintiffs
allege that John and Michelle Tosini were aware of these conditions but refused to provide any
remedy. (Id. ¶¶ 92, 93.) According to plaintiffs, despite the conditions of the Building, “the
Village issued only 17 summonses to [the Secatogue Defendants] for violations of the Village
Code” between 1999 and 2004. (Id. ¶ 110.)
The Court’s Decision on the Secatogue Defendants’ Motion for Summary Judgment
As noted above, in May 2010 the Secatogue Defendants moved for summary judgment
seeking dismissal of plaintiffs’ claims that they violated the FHA and NYHRL “by acting in
concert with the Village to implement its discriminatory redevelopment plan.” (Docket No. 153
at 6.) The Court granted the Secatogue Defendants’ motion for summary judgment, dismissing
plaintiffs’ FHA and NYHRL claims and declining to exercise supplemental jurisdiction over
plaintiffs’ claims made pursuant to Section 235-b of New York’s Real Property Law.
In its Memorandum & Order, the Court noted that plaintiffs had raised a claim under
Section 3604(b) of the FHA for the first time in their summary judgment opposition papers. (Id.
at 12.) Specifically, plaintiffs asserted a claim under an “exploitation theory of discrimination,”
and contended that defendants had taken “unfair advantage of members of a protected class in a
racially segregated housing market by assessing charges for services and conditions in excess of
fair market value.” (Id. (internal quotation marks omitted).) In support of these assertions,
plaintiffs referred the Court to allegations purportedly set forth in their Amended Complaint.
Upon review of that pleading, however, it became clear that the Amended Complaint did not
“plead (or even imply the existence of) such a claim.” (Id. at 13.) The Court, relying on “[w]ell5

settled case law within this Circuit,” concluded that it was “inappropriate to consider claims not
pleaded in the complaint in opposition to summary judgment.” (Id. at 14 (internal quotation
marks omitted).)
With the Court’s permission, plaintiffs filed the present motion to amend the Amended
Complaint to “add an Exploitation Claim, under 42 U.S.C. § 3604(b)” against the Secatogue
Defendants. (Not. of Mot. at 1.)
DISCUSSION
I.

Legal Standard
Rule 15(a)(2) provides that the Court “should freely give leave [to amend a pleading]

when justice so requires.” Fed. R. Civ. P. 15(a)(2). “The rule in this Circuit has been to allow a
party to amend its pleadings in the absence of a showing by the nonmovant of prejudice or bad
faith.” AEP Energy Servs. Gas Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir.
2010) (quoting Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993) (internal quotation
marks omitted)). A motion to amend may be denied, however, upon a showing of the futility of
the proposed amendment. Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 2008).
“[T]he standard for futility with respect to a motion to amend under Rule 15 is identical to the
standard for a Rule 12(b)(6) motion to dismiss – namely, the court must determine whether the
allegations in the complaint state a claim upon which relief can be granted.” Crippen v. Town of
Hempstead, 2009 WL 803117, at *1 n.1 (E.D.N.Y. Mar. 25, 2009). To survive a motion to
dismiss under Rule 12(b)(6), a plaintiff must allege “only enough facts to state a claim to relief
that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

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II.

Plaintiffs’ Motion to Amend is Denied as Futile
The FHA makes it unlawful “[t]o 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 therewith, because of race, color, religion, sex, familial status, or national origin.”
42 U.S.C. § 3604(b). Plaintiffs assert that an “Exploitation Claim” made pursuant to this
statutory provision “exists when (1) as a result of racial segregation, dual housing markets exist,
and (2) defendant sellers take advantage of this situation by demanding prices and terms
unreasonably in excess of fair market value because of the plaintiffs’ race.” (Pls.’ Mem. at 8.)
Plaintiffs assert that they have adequately pled an FHA exploitation claim in the proposed
Second Amended Complaint by alleging that: (1) “a segregated housing market existed in the
Village and in the County of Nassau” that resulted in “Hispanics liv[ing] in a highly-concentrated
pocket community around [the Building],” (2) “the rents Plaintiffs paid to the Secatogue
Defendants were in excess of fair market value because the Defendants failed to provide and
maintain each apartment in its warranted habitable condition,” and (3) “the threat of eminent
domain of [the Building], the Village’s inadequate code enforcement, the lack of alternative
affordable housing, and the Plaintiffs’ lack of sophistication created a non-competitive market
allowing the Secatogue Defendants to exploit the Hispanic rental market in the Village.” (Id. at
9.)
The Seventh Circuit developed the exploitation theory upon which plaintiffs rely, and
applied that theory to claims brought pursuant to 42 U.S.C. § 1982.3 As the Seventh Circuit
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Section 1982 provides: “All citizens of the United States shall have the same
right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase,
lease, sell, hold, and convey real and personal property.” 42 U.S.C. § 1982.
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described, a plaintiff could establish a prima facie case of Section 1982 liability under one of two
separate tests: “the ‘traditional’ and the ‘exploitation’ tests of discrimination.” Clark v.
Universal Builders, Inc., 706 F.2d 204, 207 (7th Cir. 1983) (“Clark II”). To make out a prima
facie case under the “traditional” theory:
there must be a showing of treating, in similar circumstances, a
member or members of one race different from the manner in which
members of another race are treated. That is, a black prospective
buyer of a dwelling demonstrates discriminatory conduct if he proves
that an owner utilizes different pricing policies with respect to blacks
and whites similarly situated.
Clark v. Universal Builders, Inc., 501 F.2d 324, 336 (7th Cir. 1974), cert. denied, 419 U.S. 1070
(1974) (“Clark I”). Under the “exploitation theory” of liability, which the Seventh Circuit
recognized for the first time in Clark I, a plaintiff “state[s] a claim under section 1982” if he
alleges:
that (1) as a result of racial residential segregation dual housing
markets exist and (2) defendant sellers took advantage of this
situation by demanding prices and terms unreasonably in excess of
prices and terms available to white citizens for comparable housing.
Id. at 334.4
Plaintiffs assert that their proposed amendment “would not be futile because Plaintiffs
can establish their Exploitation Claim against [the] Secatogue Defendants.” (Pls.’ Mem. at 8.)
As an initial matter, the Court notes that the Seventh Circuit developed and applied the
exploitation theory of liability to claims made pursuant to Section 1982 – not the FHA. Plaintiffs
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The Seventh Circuit further set out that “[i]f plaintiffs sustain the burden of proof
on these elements they make out a prima facie case, whereupon, as recently made clear by the
Supreme Court, the burden of proof shifts to the defendants ‘to articulate some legitimate,
nondiscriminatory reason’ for the price and term differential.” Clark I, 501 F.2d at 334 (quoting
McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973)).
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have offered no explanation why it would be appropriate for this Court to apply the exploitation
theory of liability to FHA claims.5 Moreover, plaintiffs have cited no authority to demonstrate
that the Second Circuit even recognizes an “exploitation theory” of liability under any statute.6
The Court’s own research has not uncovered any decisions from courts by or within the Second
Circuit adopting this theory (or some variant thereof) or otherwise applying the reasoning and
rationale of the Seventh Circuit. Plaintiffs have not addressed these issues and, thus, have failed
to establish that an FHA claim made pursuant to an exploitation theory of liability is even a
cognizable claim in the Second Circuit.
However, even assuming arguendo that an exploitation theory of liability applies to
claims made pursuant to the FHA and that the Second Circuit does (or would) recognize this
theory, the Court finds that plaintiffs’ proposed amendment is still futile because plaintiffs’
allegations are insufficient to plead an exploitation claim. As noted above, the Seventh Circuit

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Plaintiffs cite Honorable v. Easy Life Real Estate System, 100 F. Supp. 2d 885,
887 (N.D. Ill. 2000) for the proposition that an “Exploitation Claim exists” under the FHA. (See
Pls.’ Mem. at 8.) In Honorable, the plaintiffs – “African-Americans who sought to buy rehabbed
homes offered for sale by the defendants in or near the predominately black Austin area on the
west side of Chicago, Illinois” – alleged that the defendants’ selling practices violated 42 U.S.C.
§§ 1981 and 1982 as well as the FHA. Id. at 886. Although it is not entirely clear from the
opinion, it appears that the only claims plaintiffs made pursuant to the FHA were their
“intentional discrimination claims about ‘reverse redlining,’” i.e., “the practice of extending
credit on unfair terms” to “specific geographic areas due to the income, race, or ethnicity of its
residents.” Id. at 892 (noting “[t]hese sort of practices come within the ambit of the Fair Housing
Act”). The Court reads the opinion of the Honorable court as applying the “exploitation theory”
only to the plaintiffs’ remaining claims made pursuant to Sections 1981 and 1982.
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Prior to Clark I, the Seventh Circuit had never addressed the question of “whether
section 1982 covers only the so-called traditional type of discriminatory conduct, or whether a
claim may be stated under section 1982 by proof of exploitation of a discriminatory situation
already existing and created in the first instance by the action of persons other than defendants.”
Clark I, 501 F.2d at 328. It does not appear that the Second Circuit has addressed this specific
question.
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has made clear that in order to plead a claim under an exploitation theory, plaintiffs must allege
“that (1) as a result of racial residential segregation dual housing markets exist and (2) defendant
sellers took advantage of this situation by demanding prices and terms unreasonably in excess of
prices and terms available to white citizens for comparable housing.” Clark I, 501 F.2d at 334.
In addition, plaintiffs are required to show “how [those] allegedly unreasonable prices could have
been maintained against the presumably reasonable prices of the competition.” Clark II, 706
F.2d at 212. Even assuming that plaintiffs’ allegations are sufficient to establish the first two
elements, their claim still fails because they have failed to adequately plead the third. That is,
they have failed to present an “economically credible explanation of how an exploiter can stay in
business charging above-market prices.” Honorable, 100 F. Supp. 2d at 887.
One way plaintiffs could potentially plead this element would be to allege that the
Secatogue Defendants “had a sufficient market share to shelter them from the pressures of
competition.” Clark II, 706 F.2d at 211. Plaintiffs do not make any such allegation here.7
Rather, they allege that a lack of affordable alternative housing forced them to stay in the
Building despite its “deplorable conditions.” (2d Am. Compl. ¶¶ 126, 127.) However, to
paraphrase the Seventh Circuit, even if the Court were to “fully accept the proposition that
[Latinos] were completely restricted to the particular geographical housing market in which [the
Secatogue Defendants] were operating,” plaintiffs still must allege “how defendants could have
in fact charged higher prices or demanded more restrictive terms than their competitors in that
7

The Court notes that in their summary judgment opposition papers, plaintiffs did
assert that the Secatogue Defendants “controlled a dominant share of the rental market available
to Hispanics which allowed them to take advantage of Plaintiffs.” (Pls.’ Summ. J. Opp’n at 15.)
They have not made any such allegation in the proposed Second Amended Complaint, however,
and appear to have abandoned that assertion.
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particular location.” Clark II, 706 F.2d at 211. Plaintiffs have failed to do so.
Plaintiffs also assert that their “lack of sophistication created a non-competitive market
allowing the Secatogue Defendants to exploit the Hispanic rental market in the Village.” (Pls.’
Mem. at 9; see also 2d Am. Compl. ¶¶ 128-31.) Plaintiffs allege that because they “do not speak,
read, or write English,” they “lack the information, confidence, and experience to be ‘normal’
consumers.” (2d Am. Compl. ¶¶ 128, 129.) Although these allegations are similar to those made
in Honorable, 100 F. Supp. 2d at 888, that case is significantly distinguishable. There, the
plaintiffs alleged that “the defendants were able to exploit African-Americans by carving out a
noncompetitive enclave in the market.” Id. Specifically:
Whether or not the defendants had market power in the relevant
market, they were able to retain their market share and persist in these
practices while charging above-market prices by, in effect, taking the
unsophisticated, first-time minority buyers who had the misfortune to
fall into their clutches out of the competitive market by deceptively
making these buyers wholly dependant upon them for the mechanics
and wherewithal of home-buying, controlling their access to potential
properties, loans, down payments, attorneys, and all their information.
Id. The allegations in this case, i.e., that “language and cultural barriers made it difficult for the
Plaintiffs to complain about the conditions they were living in,” (2d Am. Compl. ¶ 130), are a far
cry from the “pattern of deception and misrepresentation” at issue in Honorable. See Honorable,
100 F. Supp. 2d at 888.
Plaintiffs’ remaining allegations that the Village’s “threat of eminent domain” and
inadequate enforcement of the Village Code “created a distorted market” between 1999 and 2004
(see 2d Am. Compl. ¶¶ 107, 113) really go to the first element – the existence of dual housing
markets – and do not explain “how [the Secatogue Defendants] could have in fact charged higher

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prices or demanded more restrictive terms than their competitors in that particular location.” See
Clark II, 706 F.2d at 211.
Thus, plaintiffs’ motion to amend the Amended Complaint to assert a so-called
“exploitation claim” against the Secatogue Defendants pursuant to the FHA is denied as futile8
for several reasons. First, plaintiffs have made no attempt to explain why the exploitation theory
of liability, developed by the Seventh Circuit in connection with its analysis of Section 1982
claims, is applicable to FHA claims made in this Circuit. Second, plaintiffs have failed to
sufficiently allege an essential element of an exploitation claim, to wit, an “economially credible
explanation of how an exploiter can stay in business charging above-market prices.” See
Honorable, 100 F. Supp. 2d at 887.9

8

Because plaintiffs’ motion to amend is denied on the grounds of futility, the Court
need not address the Secatogue Defendants’ arguments regarding prejudice and undue delay.
9

Plaintiffs argue, in the alternative, that their motion to amend should be granted
because the Secatogue Defendants consented to the inclusion of an exploitation claim by
addressing that claim – raised for the first time in plaintiffs’ summary judgment opposition
papers – in their reply memorandum submitted in further support of summary judgment. (Pls.’
Mem. at 6-7.) Plaintiffs also point to the Secatogue Defendants’ failure to object to plaintiffs’
inclusion of that claim in the Joint Pretrial Order, which was filed before the Court issued its
order dismissing the claim on summary judgment, as evidence of their consent. (Id. at 3-5.) As
noted in the text above, it is questionable whether plaintiffs’ exploitation claim is recognized by
the Second Circuit and, in any event, it has been insufficiently alleged. Simply put, any
purported “consent” by the Secatogue Defendants to the inclusion of a legally unsound claim is
not binding on this Court.
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CONCLUSION
For the reasons set forth above, plaintiffs’ motion to amend the Amended Complaint is
denied. The case will proceed to trial as against the Village only. (See Docket No. 154.) The
Court will issue a separate Scheduling Order setting forth the details for the Final Pre-Trial
Conference.
SO ORDERED.
Dated: Central Islip, New York
February 19, 2013

/s/
Denis R. Hurley
Unites States District Judge

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