The Inclusive Communities Project Inc v. Lincoln Property Company et al
Filing
59
MEMORANDUM OPINION AND ORDER: The Court GRANTS Defendant Lincoln Property Company's Motion to Adopt Defendants Brick Apartments LLC's Rule 12(b)(6) Motion to Dismiss and Legacy Multifamily North III LLC and HLI White Rock LLCs Rule 12(b)(6) Motion to Dismiss (Doc. No. 34 ). The Court also GRANTS Defendants Legacy and HLI White Rock's Motion to Dismiss Complaint for Failure to State a Claim and Brief in Support (Doc. No. 32 ), Defendant Lincoln Property Company's Motion to Dismiss Pursuant to Federal Rule 12(b)(6) (Doc. No. 33 ), and CPF PC Riverwalk's Motion to Dismiss ICP's Complaint for Failure to State a Claim and Supporting Brief (Doc. No. 42 ). The Court dismisses Plaintiff ICP's Complaint against Defendants Legacy, HLI White Rock, CPF PC Riverwalk, and Lincoln Property Company (Ordered by Judge Ed Kinkeade on 8/16/2017) (axm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
THE INCLUSIVE COMMUNITIES
PROJECT, INC.,
Plaintiff,
v.
LINCOLN PROPERTY COMPANY,
et. al.,
Defendants.
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Civil Action No. 3:17-CV-206-K
MEMORANDUM OPINION AND ORDER
Before the Court are Defendants Legacy Multifamily North III LLC and HLI
White Rock LLC’s Motion to Dismiss Complaint for Failure to State a Claim and
Brief in Support (Doc. No. 32), Defendant Lincoln Property Company’s Motion to
Dismiss Pursuant to Federal Rule 12(b)(6) (Doc. No. 33), Defendant Lincoln
Property Company’s Motion to Adopt Defendants Brick Row Apartments LLC’s Rule
12(b)(6) Motion to Dismiss and Legacy Multifamily North III LLC and HLI White
Rock LLC’s Rule 12(b)(6) Motion to Dismiss (Doc. No. 34), and CPF PC Riverwalk,
LLC’s Motion to Dismiss ICP’s Complaint for Failure to State a Claim and
Supporting Brief (Doc. No. 42).
Plaintiff The Inclusive Communities Project, Inc. (“ICP”) brought this lawsuit
against Defendant Brick Row Apartments LLC (“Brick Row”), Defendant Lincoln
1
Property Company, Defendant Legacy Multifamily North III, LLC (“Legacy”),
Defendant CPF PC Riverwalk LLC (“CPF PC Riverwalk”), and Defendant HLI
White Rock LLC (“HLI White Rock”) alleging that Defendants’ practice of refusing
to rent to or negotiate with Section 8 housing voucher holders violates the Fair
Housing Act, 42 U.S.C. § 3601, et. seq. The Court previously dismissed Plaintiff
ICP’s Complaint as to Defendant Brick Row in its Memorandum Opinion and Order
on July 13, 2017 (Doc. No. 55). Defendants Legacy, CPF PC Riverwalk, HLI White
Rock, and Lincoln Property Company assert that Plaintiff ICP’s claims alleged in its
Complaint should be dismissed as to each of them as well.
The Court GRANTS Defendant Lincoln Property Company’s Motion to
Adopt Defendants Brick Row Apartments LLC’s Rule 12(b)(6) Motion to Dismiss
and Legacy Multifamily North III LLC and HLI White Rock LLC’s Rule 12(b)(6)
Motion to Dismiss (Doc. No. 34). The Court takes into consideration Plaintiff ICP’s
responses to Defendant Brick Row’s motion to dismiss, and Defendants Legacy and
HLI White Rock’s motion to dismiss and incorporates Plaintiff ICP’s arguments into
Plaintiff ICP’s response to Defendant Lincoln Property Company’s motion to
dismiss.
After careful consideration of Defendants’ motions to dismiss Plaintiff ICP’s
Complaint, Plaintiff ICP’s responses to Defendants’ motions to dismiss, Defendants’
replies to Plaintiff ICP’s responses to Defendants’ motions to dismiss, and the
2
applicable law, the Court GRANTS each of the Defendants’ motions to dismiss
Plaintiff ICP’s Complaint (Doc. Nos. 32, 33, and 42). Plaintiff ICP’s Complaint
against all Defendants is dismissed.
I.
Factual Background
Defendants’ refusal to rent to or negotiate with households that participate in
the federal Housing Choice Voucher Program, commonly known as the “Section 8”
housing voucher program is the driving force behind this lawsuit.
Plaintiff ICP
alleges that Defendants instituted a policy or practice of refusing Section 8 housing
vouchers in “high opportunity” areas within the Dallas metropolitan area. Plaintiff
ICP contends that the “high opportunity” areas where Defendants refuse to rent to or
negotiate with Section 8 voucher holders are predominantly White, non-minority
areas. The “high opportunity” areas are described by Plaintiff ICP as being safe and
secure communities with higher median incomes, good schools, and lower poverty
rates.
Plaintiff ICP further alleges that Defendants do not have this policy in
majority minority areas and that Defendants rent to or negotiate with Section 8
voucher households in majority minority areas.
Plaintiff ICP asserts four claims. Two of the claims asserted by Plaintiff ICP
are asserted against all Defendants – Defendants Legacy, HLI White Rock, CPF PC
Riverwalk, and Lincoln Property Company.
Plaintiff ICP contends that all
Defendants violated the disparate impact standard under the Fair Housing Act
3
because their policy of not renting to or negotiating with Section 8 voucher holders
causes a racially discriminatory effect. All Defendants are also alleged by Plaintiff
ICP to have violated the disparate treatment standard under the Fair Housing Act, 42
U.S.C. § 3604(a), and 42 U.S.C. § 1982, because of refusing to negotiate with or
enter into leases with Plaintiff ICP based on the race and color of Plaintiff ICP’s
Section 8 voucher clients.
Plaintiff ICP additionally brings two claims solely against Defendant Lincoln
Property Company.
Plaintiff ICP asserts that Defendant Lincoln Property
Company’s advertisements violate 42 U.S.C. § 3604(c) of the Fair Housing Act
because Defendant Lincoln Property Company’s advertisements show racial
preference or discriminate based on race or color.
Plaintiff ICP alleges an additional disparate treatment claim against Defendant
Lincoln Property Company. Plaintiff ICP contends that Defendant Lincoln Property
Company’s policy of refusing to negotiate with or rent to Section 8 voucher
households violates the disparate treatment standard under 42 U.S.C. § 3604(a) and
42 U.S.C. § 1982 because Defendant Lincoln Property Company’s refusal is based on
the race or color of the voucher households.
a. Plaintiff ICP and the Section 8 Housing Voucher Program
Plaintiff ICP is a nonprofit organization that seeks to create and maintain
racially and economically inclusive communities. Plaintiff ICP pursues expansion of
4
fair and affordable housing for low income families and attempts to remedy harmful
practices that perpetuate discrimination and segregation in the community. As part
of Plaintiff ICP’s fair housing focused initiative, Plaintiff ICP provides counseling,
financial assistance, and other services for low income families.
One of the main tools that Plaintiff ICP helps its client use to achieve housing
equality is the federal Section 8 housing voucher program. Plaintiff ICP’s Section 8
housing voucher clients are predominantly African American or Black families. The
Section 8 housing voucher program is a subsidy provided to landlords who are willing
to rent dwelling units to low income households. The subsidy from the program
given to the landlords pays the difference between the rental amount and the amount
that the voucher household is required to pay under the Section 8 housing voucher
program, which ranges from 30% to 40% of the household’s income. Participation in
the Section 8 housing voucher program is voluntary rather than mandatory. See 42
U.S.C. § 1437f(o)(6)(B); TEX. LOCAL GOV’T CODE § 250.007; Austin Apartment Ass’n
v. City of Austin, 89 F. Supp. 3d 886, 890 (W.D. Tex. 2015) (“Federal law does not
require landlords to accept housing vouchers, and landlords who do accept vouchers
are not required to approve tenants merely because they are voucher holders.”); Salute
v. Stratford Greens Garden Apartments, 136 F.3d 293, 300 (2d Cir. 1998) (“We think
that the voluntariness provision of Section 8 reflects a congressional intent that the
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burdens of Section 8 participation are substantial enough that participation should
not be forced on landlords . . . .”).
African American or Black families are the largest demographic group in the
Dallas area that participate in the Section 8 housing voucher program. The Dallas
Housing Authority administers the largest number of Section 8 housing vouchers of
any agency in the Dallas, Texas metropolitan area. Out of the 17,000 plus vouchers
Dallas Housing Authority issues, 86% of the voucher holders are alleged to be African
American or Black families, and 6% are non-minority families. According to the U.S.
Housing & Urban Development Department (“HUD”) 2015 statistics, of the 30,745
Section 8 housing voucher population served by all of the housing authorities in the
Dallas-Plano-Irving TX Metropolitan Division, African American or Black families are
alleged to make up 81% of the voucher population, Hispanic families are alleged to
make up 6% of the voucher population, and White non-Hispanic families are alleged
to make up 10% of the voucher population.
Plaintiff ICP provides mobility assistance to all Section 8 voucher households
that want to move to higher opportunity communities in the Dallas area. Mobility
assistance involves Plaintiff ICP negotiating with landlords on behalf of its Section 8
voucher clients, if necessary. Plaintiff ICP offers incentive payments, to serve as a
sublessor, or to serve as a third party guarantor to encourage landlords to participate
in the Section 8 housing voucher program. The different programs and incentive
6
payments offered by Plaintiff ICP are designed in a way to address possible business
concerns a landlord may have when renting to a Section 8 voucher household.
On five occasions from August 2015 to May 2016, Plaintiff ICP sent letters to
Defendant Lincoln Property Company attempting to encourage Defendant Lincoln
Property Company to accept Section 8 housing vouchers for properties it manages –
Parkside at Legacy (owned by Defendant Legacy), Park Central at Flower Mound
(owned by Defendant CPF PC Riverwalk), White Rock Lake Apartment Villas
(owned by Defendant HLI White Rock), McKinney Uptown, and Brick Row Urban
Village (owned by Defendant Brick Row).
In the letters to Defendant Lincoln
Property Company, Plaintiff ICP proposed participation in Plaintiff ICP’s Third
Party Guarantor Program or Sublease Program to address possible business concerns
Defendants could have.
For the Third Party Guarantor Program that Plaintiff ICP offered, Plaintiff ICP
proposed to serve as the third-party guarantor for its Section 8 voucher clients using
the standard Texas Apartment Association Lease Contract Guaranty Form. Plaintiff
ICP represented that it would be willing to add provisions to the Lease Contract
Guaranty form to cover any losses due to possible housing authority delays in
processing the Section 8 housing voucher of the voucher household. An incentive
payment of one month’s rent for each Section 8 housing voucher tenant selected to
7
occupy Defendants’ apartment complexes was also offered if they participated in the
Third Party Guarantor Program.
Plaintiff ICP alternatively offered a Sublease Program to try to entice
Defendants to rent to its Section 8 voucher clients. Plaintiff ICP stated that, “ICP
has its own experience as a landlord dealing with Dallas Housing Authority and other
voucher agencies in the area and understands some of the concerns. However, we
believe, based on that experience, that such concerns can be effectively addressed in a
way that works for everyone involved.”
Plaintiff ICP began the proposal by stating that the President of the Apartment
Association of Greater Dallas endorses the merit of the Sublease Program and has
offered to work with Plaintiff ICP.
The responsibility of finding and proposing
qualified Section 8 voucher tenants to Defendants would fall solely on Plaintiff ICP.
For the Sublease Program, Plaintiff ICP would lease three to five units in the
Defendants’ apartment complexes that participated in the program. As a sublessor,
similar to the role of a corporate entity, Plaintiff ICP would pay the agreed lease
amount in a timely manner, respond to all tenant issues, and, if necessary, evict
Section 8 housing voucher tenants. If the Section 8 housing voucher tenant, or the
housing authority responsible for the subsidy to the landlord was late or delinquent
on the rent payment, Plaintiff ICP offered to cover the unpaid portion of the
payment under the lease contract. Plaintiff ICP also offered a financial incentive of
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one month’s contract rent for each unit that Defendants would agree to lease to
Section 8 housing voucher tenants.
Neither Defendants Legacy, HLI White Rock, and CPF PC Riverwalk, nor
Defendants’ agent, Defendant Lincoln Property Company, responded to Plaintiff
ICP’s letters proposing the Third Party Guarantor Program and Sublease Program.
b. Defendant Lincoln Property Company
Defendant Lincoln Property Company manages residential rental properties of
Defendants Legacy, HLI White Rock, and CPF PC Riverwalk. As the manager or
owner of apartment complexes, Defendant Lincoln Property Company is alleged to
have implemented a policy of refusing to rent to Section 8 voucher holders for 54 of
its apartment complexes.
Plaintiff ICP contends that this policy or practice is
implemented in majority White non-Hispanic census tracts that have lower poverty
rates, higher median family incomes, and higher ranking public schools.
Apartment locator services offering Defendant Lincoln Property Company’s
rental units to prospective tenants advertise Defendant Lincoln Property Company’s
policy in various ways:
•
Our community is not authorized to accept housing vouchers.
•
Our community is not authorized to accept Section 8 housing.
•
Our community is not authorized to accept any government subsidized rent
programs.
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•
No 2nd chance leasing, and no vouchers accepted.
Plaintiff ICP alleges that Defendant Lincoln Property Company publishes these
advertisements for apartment complexes in the Dallas metropolitan area that are
located in census tracts that are less than thirty percent Black or African American.
c. Defendants Legacy, HLI White Rock, and CPF PC Riverwalk
Defendants Legacy, HLI White Rock, and CPF PC Riverwalk are alleged to
have implemented Defendant Lincoln Property Company’s policy of refusing to rent
to or negotiate with Section 8 housing voucher holders at their apartment complexes.
Plaintiff ICP alleges that there were no Section 8 housing voucher households or
housing voucher households available in census tracts where Defendant Legacy’s
Parkside at Legacy complex, HLI White Rock’s White Rock Lake Apartment Villas
complex, and CPF PC Riverwalk’s Park Central at Flower Mound complex are located
as of the HUD 2015 Picture of Subsidized Housing Report.
Defendant Legacy owns the Parkside at Legacy apartment complex in Plano,
Texas 75024.
rental units.
The Parkside at Legacy apartment complex is alleged to have 293
Plaintiff ICP alleges that in the census tract block group where the
Parkside at Legacy complex is located, Black or African American renters are alleged
to occupy 14 percent of the 630 renter occupied units based on the American
Community Survey 2014 5-year estimates.
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Defendant HLI White Rock owns the White Rock Lake Apartment Villas
apartment complex located in Dallas, Texas 75218. There are 296 rental units in the
White Rock Lake Apartment Villas complex. Plaintiff ICP alleges that according to
the American Community Survey 2014 5-year estimates, 11 percent of the 1,022
renter units in the census tract block group where the White Rock Lake Apartment
Villas apartment is located are Black or African American renters.
Defendant CPF PC Riverwalk owns the Park Central at Flower Mound
apartment complex in Flower Mound, Texas 75028. There are 307 rental units at
the Park Central at Flower Mound apartment complex. Plaintiff ICP alleges that
there are no Black or African American renters in the census tract block group where
the Park Central at Flower Mound complex is located based on the American
Community Survey 2014 5-year estimates.
Because of Defendants Legacy, HLI White Rock, CPF PC Riverwalk, and
Lincoln Property Company’s refusal to rent to or negotiate with Section 8 voucher
households, Plaintiff ICP brought four claims in its Complaint against Defendants:
(1) All Defendants violated the disparate impact standard of the Fair Housing Act;
(2) All Defendants violated the disparate treatment standard of the Fair Housing Act;
(3) Defendant Lincoln Property Company violated 42 U.S.C. § 3604(c) of the Fair
Housing Act because its advertisements showed racial preference for tenants; and (4)
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Defendant Lincoln Property Company violated the disparate treatment standard of
the Fair Housing Act.
II.
Legal Standard for a Rule 12(b)(6) Motion to Dismiss
A complaint should be dismissed under Rule 12(b)(6) only where it appears
that the facts alleged fail to state a “plausible” claim for relief.
Bell Atlantic v.
Twombly, 127 S. Ct. 1955, 1964–65 (2007); FED. R. CIV. P. 12(b)(6). The plaintiff
need only give the defendant fair notice of the plaintiff’s claim and the grounds upon
which it rests. Erickson v. Pardus, 127 S. Ct. 2197, 2200 (2007) (citing Twombly, 127
S. Ct. 1955); FED. R. CIV. P. 8(a). In ruling on a motion to dismiss, the court must
accept the facts alleged in the complaint as true and construe them in the light most
favorable to the plaintiff. Ferrer v. Chevron Corp., 484 F.3d 776, 780 (5th Cir. 2007).
A claim is plausible where the plaintiff alleges factual content that “allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1940 (2009). A plaintiff is not required to
provide “detailed factual allegations” to survive dismissal, but the “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not
do.” Twombly, 127 S. Ct. at 1964–65.
The plausibility standard requires that a
plaintiff allege sufficient facts “to raise a reasonable expectation that discovery will
reveal evidence” that supports the plaintiff’s claim. Id. at 1965.
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“[C]onclusory
allegations or legal conclusions masquerading as factual conclusions will not suffice to
prevent
a
motion
to
dismiss.”
S. Christian Leadership Conference v. Supreme Court of State of La., 252 F.3d 781, 786
(5th Cir. 2001) (quoting Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284
(5th Cir. 1993)) (quotation marks omitted).
III.
Plaintiff ICP has standing and Defendants Legacy, HLI White Rock, and
CPF PC Riverwalk are subject to vicarious liability.
Defendants do not dispute whether Plaintiff ICP has standing to bring the
claims that Plaintiff ICP brings against them. Fair housing organizations have been
determined by the Supreme Court in Havens Realty Corp. v. Coleman, 102 S. Ct. 1114,
1124–25 (1982) to have standing to sue under the Fair Housing Act when the
organization devotes significant resources to identify and counteract a defendant’s
unlawful practices.
42 U.S.C. § 3602(i) (stating the aggrieved person standard);
Havens Realty, 102 S. Ct. at 1124–25. Plaintiff ICP alleges that it devotes significant
resources to eliminate segregation and integrate housing throughout the Dallas
metropolitan area.
Plaintiff ICP
further alleges that Defendants’ alleged
discriminatory practices require Plaintiff ICP to devote more time and resources to
help its Section 8 voucher clients find housing units. Plaintiff ICP has standing to
bring this lawsuit against Defendants.
Defendants Legacy, HLI White Rock, and CPF PC Riverwalk also do not
dispute Plaintiff ICP’s assertion that Defendants are vicariously liable for the actions
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of Defendant Lincoln Property Company. Defendant Lincoln Property Company is
the property manager for the apartment complexes owned by Defendants Legacy,
HLI White Rock, and CPF PC Riverwalk.
“It is well established that the [Fair
Housing Act] provides for vicarious liability.”
24 C.F.R. § 100.7 (“A person is
vicariously liable for a discriminatory housing practice by the person’s agent or
employee . . . .”); see also Meyer v. Holley, 123 S. Ct. 824, 829 (2003). A defendant
can also be vicariously liable for claims brought under 42 U.S.C. § 1982. Dillon v.
AFBIC Dev. Corp., 597 F.2d 556, 562–63 (5th Cir. 1979).
Defendant Lincoln
Property Company’s implementation of the alleged policy of refusing to rent to or
negotiate with Section 8 housing voucher holders as the agent of Defendants Legacy,
HLI White Rock, and CPF PC Riverwalk is enough to subject Defendants to
vicarious liability.
IV.
Plaintiff ICP’s disparate treatment claims against Defendants are
dismissed.
The Court holds that Plaintiff ICP’s disparate treatment claims against
Defendants are dismissed. Plaintiff ICP first asserts that all Defendants violated the
disparate treatment standard under 42 U.S.C. § 3604(a) and 42 U.S.C. § 1982
because of Defendants’ refusal to negotiate with or enter into leases with Plaintiff
ICP.
Plaintiff ICP also brought a disparate treatment claim against Defendant
Lincoln Property Company because of Defendant Lincoln Property Company’s policy
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of refusing to negotiate with or rent to Section 8 voucher households. The Court
dismisses both of Plaintiff ICP’s disparate treatment claims.
A disparate treatment claim is shown when one group is treated less favorably
than another because of their race, color, or other protected characteristic. Raytheon
Co. v. Hernandez, 124 S. Ct. 513, 519 (2003).
discrimination.
Disparate treatment is deliberate
Munoz v. Orr, 200 F.3d 291, 299 (5th Cir. 2000).
A claim of
disparate treatment is “shown by evidence of discriminatory action or by inferences
from the fact of differences in treatment.” L & F Homes & Dev., L.L.C. v. City of
Gulfport, Miss., 538 F. App’x 395, 401 (5th Cir. 2013) (quoting Int’l Bhd. of Teamsters
v. United States, 97 S. Ct. 1843, 1855 n.15 (1977)). When a subjective policy, such
as the use of discretion, has been used to achieve a racial disparity, the plaintiff has
shown disparate treatment. Inclusive Communities Project, Inc. v. Texas Dep’t of Hous. &
Cmty. Affairs, No. 3:08-CV-0546-D, 2016 WL 4494322, at *7 (N.D. Tex. Aug. 26,
2016). A disparate impact claim, in contrast, is shown when the plaintiff seeks to
establish that the existence of the policy itself, rather than how the policy is applied,
is the cause of the alleged racial disparity. Id.
Plaintiff ICP’s disparate treatment claims against Defendants are mislabeled
and are essentially disparate impact claims. The reason that Defendants refuse to
enter into leases with Plaintiff ICP is because Plaintiff ICP is seeking to enter into
leases with Defendants on behalf of its Section 8 voucher household clients.
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Defendant Lincoln Property Company refuses to rent to or negotiate with Section 8
voucher holders, regardless of race or color. There are no allegations made against
Defendants’ subjective application of their policy to Section 8 voucher holders.
Plaintiff ICP’s issue is with the existence of Defendants’ policy, which is indicative of
disparate impact rather than disparate treatment.
Plaintiff ICP’s disparate treatment claim against Defendant Lincoln Property
Company because of Defendant Lincoln Property Company’s refusal to negotiate
with or rent to voucher households also fails. There is nothing alleged as to how
Defendant Lincoln Property Company applies its policy of refusing Section 8 housing
vouchers as a means of intentional discrimination based on race or color. There is no
discretionary method of how Defendant Lincoln Property Company applies its policy
for the Court to analyze for a possible violation of the disparate treatment standard.
No facts are alleged to show that Defendant Lincoln Property Company implements
its policy in a way where it considers the race or color of the Section 8 voucher
holder. The root of Plaintiff ICP’s alleged discrimination is in Defendants’ policy
itself rather than how the policy is subjectively being implemented, which amounts to
a claim of disparate impact. Id. (“[W]here the plaintiff establishes that the existence
of the policy itself, rather than how the policy is applied, resulted in racial disparity,
the plaintiff has shown disparate impact.”).
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Plaintiff ICP’s disparate treatment claims are mislabeled. The Court dismisses
the alleged disparate treatment claims brought against Defendants Legacy, CPF PC
Riverwalk, HLI White Rock, and Lincoln Property Company.
V.
Plaintiff ICP’s disparate impact claims are dismissed.
Plaintiff ICP additionally asserts that Defendants Lincoln Property Company,
Legacy, HLI White Rock, and CPF PC Riverwalk violate the disparate impact
standard under the Fair Housing Act.
Plaintiff ICP contends that Defendants’
facially neutral policy or practice has an adverse effect on Black or African American
families and perpetuates segregation in communities, which indicates disparate
impact.
Disparate impact claims are cognizable under the Fair Housing Act.
Texas
Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507,
2521 (2015). A burden shifting approach has been adopted for disparate impact
claims under the Fair Housing Act. See 24 C.F.R. § 100.500; Inclusive Communities
Project, Inc., 2016 WL 4494322, at *4. First, a plaintiff must prove a prima facie case
of discrimination by showing that the challenged practice causes a discriminatory
effect.
24 C.F.R. § 100.500(c)(1).
If the plaintiff makes a prima facie case, the
defendant must then prove that the challenged practice is necessary to achieve one or
more of defendant’s substantial, legitimate, nondiscriminatory interests. 24 C.F.R. §
100.500(c)(2). If the defendant meets its burden, the plaintiff must then show that
17
the defendant’s interests “could be served by another practice that has a less
discriminatory effect.” 24 C.F.R. § 100.500(c)(3).
a. Requirements for a prima facie claim of disparate impact
“Courts must . . . examine with care whether a plaintiff has made out a prima
facie case of disparate impact and prompt resolution of these cases is important.”
Texas Dep’t of Hous. & Cmty. Affairs, 135 S. Ct. at 2523. Disparate impact claims
permit the plaintiff “to counteract unconscious prejudices and disguised animus that
escape easy classification as disparate treatment.” Id. at 2522. Liability for disparate
impact, however, is limited and should not be imposed based solely on a showing of
statistical disparity. Id. at 2524; see also Inclusive Communities Project, Inc., 2016 WL
4494322, at *4–5.
If the plaintiff cannot show a causal connection between the
defendants’ policy and a disparate impact, a prima facie claim for disparate impact is
not shown and plaintiff’s disparate impact claim should be dismissed. Texas Dep’t of
Hous. & Cmty. Affairs, 135 S. Ct. at 2524 (citing Inclusive Communities Project, Inc. v.
Texas Dep’t of Hous. & Cmty. Affairs, 747 F.3d 275, 283 (5th Cir. 2014) (Jones, J.
concurring), aff’d and remanded, 135 S. Ct. 2507 (2015)).
b. Plaintiff ICP did not plead a prima facie disparate impact claim.
Defendants assert that Plaintiff ICP does not show a prima facie case for
disparate impact liability because Plaintiff ICP fails to show how Defendants’ policy
caused the statistical disparities that Plaintiff ICP alleges in its Complaint. This Court
18
agrees. There is no causal link between Defendants’ policy and the alleged disparate
impact.
Defendants’ policy of refusing to rent to or negotiate with Section 8 voucher
holders is considered to be a “policy” or “practice” that can be scrutinized when
evaluating if there is disparate impact liability. See, e.g., Graoch Assocs. # 33, L.P. v.
Louisville/Jefferson Cty. Metro Human Relations Comm’n, 508 F.3d 366, 377–78 (6th Cir.
2007) (stating that for purposes of analyzing plaintiff’s prima facie case of disparate
impact, defendant’s practice of no longer accepting Section 8 vouchers constituted a
specific practice).
The plaintiff has the burden of proving that a challenged practice caused or
predictably will cause a discriminatory effect.
24 C.F.R. § 100.500(c)(1); see also
Texas Dep’t of Hous. & Cmty. Affairs, 135 S. Ct. at 2514. “A robust causality
requirement ensures that racial 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.” Texas Dep’t of Hous. & Cmty. Affairs,
135 S. Ct. at 2523 (quoting Wards Cove Packing Co. v. Atonio, 109 S. Ct. 2115, 2122–
23 (1989)) (quotation marks omitted). The causality requirement is required to be
“robust” to make sure that “defendants do not resort to the use of racial quotas to
avoid liability for statistical disparities.” Inclusive Communities Project, Inc., 2016 WL
19
4494322, at *8 (quoting Texas Dep’t of Hous. & Cmty. Affairs, 135 S. Ct. at 2523)
(quotation marks omitted).
Plaintiff ICP has not proved that Defendants’ policy caused a “robust,” or any
statistical disparity. Plaintiff ICP presents to the Court a sequence of events in an
attempt to show how Defendants’ policy caused a statistical disparity for a prima
facie disparate impact claim. Plaintiff ICP states that the following events show how
Defendants’ policy caused a disparate impact:
•
Defendant Lincoln Property Company has a general policy that it will
not negotiate with or rent to households with vouchers. Lincoln
Property Company applies this policy in White non-Hispanic areas.
Lincoln Property Company applies this policy even when the combined
income of the family and the voucher subsidy meet or exceed the
contract rent for the unit.
•
Defendant Lincoln Property Company has a general policy that it will
not negotiate with, rent to, or make units available to voucher holders .
. . Defendant Lincoln Property Company applies this policy to the
multifamily units it manages for the other Defendants.
•
Defendant Lincoln Property Company advertises its policy of refusing
to negotiate with or rent to voucher households. Defendant Lincoln
Property Company places the advertisements with internet apartment
locators seeking applicants for vacant Lincoln Property Company units.
•
Defendant Lincoln Property Company and the other multifamily
property management companies with rental units available at voucher
program rents consistently refuse to rent to voucher families.
•
Defendant Lincoln Property Company’s policy to not negotiate with or
rent to voucher households is implemented at its multifamily rental
projects located in majority White non-Hispanic census tracts in the
Dallas metropolitan area focusing on Collin, Dallas, Denton, and
Rockwall counties.
20
•
Defendant Lincoln Property Company’s policy makes Defendant
Lincoln Property Company’s managed multifamily units unavailable to
a population that is disproportionately Black or African American based
on the percent of the Black or African American renter households that
are income eligible for vouchers compared to the percent of the White
population that is income eligible for vouchers.
•
Plaintiff ICP’s voucher clients are predominantly Black. Plaintiff ICP
has Black voucher clients who are eligible under Defendant Lincoln
Property Company’s Application Criteria and with whom Plaintiff ICP
would have entered into subleases for available units. Defendants had
units available in non-minority concentrated, high opportunity areas for
which the contract rent was within the amount that could have been
paid under the voucher program.
Defendants refused to either
negotiate or enter into leases pursuant to Plaintiff ICP’s offer. Units
continue to be available at the contract rents that could be paid under
the voucher program.
•
The Dallas area voucher households are predominantly African
American or Black. There are African American or Black voucher
clients who are eligible under Defendant Lincoln Property Company’s
Application Criteria and who would have entered into leases for
available units.
Defendants had units available in non-minority
concentrated, high opportunity areas for which the contract rent was
within the amount that could have been paid under the voucher
program. Defendants refuse to either negotiate or enter into leases with
voucher households unless required to do so by law or other
government requirement. Units continue to be available at the contract
rents that could be paid under the voucher program.
(Doc. No. 39 at 7–9).
The existence of statistical disparities in the census tracts where Defendants’
apartment complexes are located are also presented by Plaintiff ICP. Black or African
American renters are alleged to occupy 14 percent of the 630 rental units in the small
census tract block group where Defendant Legacy’s Parkside at Legacy apartment
21
complex is located. Black or African American renters are also alleged to occupy 11
percent of 1,022 rental units in the small census tract block group where the White
Rock Lake Apartment Villas complex is located.
No Black or African American
renters are alleged to be in the small census tract block group where the Park Central
at Flower Mound apartment complex is located. It is also alleged that no Section 8
voucher households are in the small census tracts where the Park Central at Flower
Mound, White Rock Apartment Villas, and Parkside at Legacy apartment complexes
are located.
The statistical information and arguments presented by Plaintiff ICP is
conclusory rather than descriptive of how Defendants’ policy actually caused a
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 cause of disparate impact.” Texas Dep’t of Hous. & Cmty. Affairs, 135 S. Ct.
at 2523.
The Court finds no causal connection. Plaintiff ICP contends that Defendants’
policy perpetuates segregation and made rental units disproportionately unavailable
to African American or Black voucher holders. Plaintiff ICP provides no information
to show how Defendants’ policy has caused the racial disparity, or resulted in an
increased amount of African American or Black prospective renters being rejected in
each of the Defendants’ census tracts.
22
Plaintiff ICP also fails to show how Defendants’ policy adversely effected Black
or African American prospective renters. None of the allegations show or infer that
Defendants’ policy diminished the amount of rental opportunities for African
American or Black prospective tenants previously available before Defendants’ policy
was implemented. There is no way for the Court to link Defendants’ policy with the
alleged statistical disparities in Plaintiff ICP’s allegations. “[R]acial imbalance . . .
does not, without more, establish a prima facie case of disparate impact.” Texas Dep’t
of Hous. & Cmty. Affairs, 135 S. Ct. at 2523 (quoting Wards Cove Packing Co. v. Atonio,
109 S. Ct. at 2122–23). Plaintiff ICP’s disparate impact claims against Defendants
are dismissed.
c. Plaintiff ICP’s disparate impact claims also fail because Plaintiff’s
less discriminatory alternatives are inadequate.
Even if Plaintiff ICP met its burden to establish a prima facie showing of
disparate impact, Plaintiff ICP does not establish a disparate impact claim. For a
disparate impact claim under the Fair Housing Act, there is a burden-shifting
framework that must be met. If the plaintiff meets the burden of establishing a prima
facie case, the defendant must then prove that the challenged practice is necessary to
achieve one or more substantial, legitimate, nondiscriminatory interests of the
defendant. See 24 C.F.R. § 100.500(c)(2); Inclusive Communities Project, Inc., 2016 WL
4494322, at *4 (adopting the burden-shifting framework under 24 C.F.R. §
100.500). If the defendant meets its burden, the plaintiff must then show that the
23
defendant’s interests could be served by another practice that has a less
discriminatory alternative. 24 C.F.R. § 100.500(c)(3).
Defendants
Section
8 housing voucher policy
“substantial, legitimate, nondiscriminatory interests.”
was
implemented
for
Business concerns such as
increased costs, administrative delays in receiving payment, and other financial risks
are all reasons why landlords choose not to participate in the Section 8 housing
voucher program.
See 24 C.F.R. §§ 982.401, 982.405; 42 U.S.C. § 1437f; TEX.
LOCAL GOV’T CODE § 250.007. Defendants have similar concerns.
The proposals of the Third Party Guarantor Program and Sublease Program
acknowledge
Defendants’
legitimate
business
concerns
of
increased
costs,
administrative delays for payment, and other financial risks. For the Third Party
Guarantor Program, Plaintiff ICP offered to provide incentive payments and to serve
as a third party guarantor to eliminate any economic business concerns Defendants
could have. For the Sublease Program, Plaintiff ICP shows that Plaintiff ICP seeks to
address Defendants’ economic or administrative concerns by offering to serve as a
corporate entity subleasing to Section 8 voucher holders. Describing the Sublease
Program Plaintiff ICP states, “ICP has its own experience as a landlord dealing with
Dallas Housing Authority and other voucher agencies in the area and understands
some of the concerns.”
Because of business concerns that are acknowledged by
24
Plaintiff,
Defendants’
Section
8
policy
was
implemented
for
legitimate,
nondiscriminatory business interests.
“Before rejecting a business justification . . . a court must determine that a
plaintiff has shown that there is an available alternative . . . practice that has less
disparate impact and serves the [defendants’] legitimate needs.” Texas Dep’t of Hous.
& Cmty. Affairs, 135 S. Ct. at 2518 (quoting Ricci v. DeStafano, 129 S. Ct. 2658, 2673
(2009)) (quotation marks omitted).
Although Plaintiff ICP proposed the incentive payments, Sublease Program,
and Third Party Guarantor Program to alleviate Defendants’ anticipated business
concerns, the programs are not adequate to serve as less discriminatory alternatives.
Plaintiff ICP’s proposals, while laudable, do not show how or if the proposed
programs have performed, or if Plaintiff ICP can financially support the programs. If
Plaintiff ICP’s programs are not successfully executed, then Defendants could
experience financial harm.
Defendants could also be subject to litigation for deciding to participate in
Plaintiff ICP’s programs because it could result in favoritism of Section 8 voucher
holders that Plaintiff ICP represents. Participation in Plaintiff ICP’s programs could
create legitimate issues. Defendant Brick Row posed a fair question which is also
applicable to the other Defendants, “Can the ICP seriously contend that
[Defendants] can continue [to] refus[e] to accept vouchers from White, Hispanic and
25
handicapped tenants, if [Defendants] begin[] accepting vouchers from Black tenants
under ICP’s programs, without increasing the risk of litigation?”
Plaintiff ICP’s
programs were legitimately refused by Defendants and are not less discriminatory
alternatives that can adequately serve Defendants’ business interests. Even if Plaintiff
ICP proved a prima facie case of disparate impact, Plaintiff ICP’s disparate impact
claims against Defendants Legacy, CPF PC Riverwalk, HLI White Rock, and Lincoln
Property Company are dismissed.
VI.
Plaintiff ICP fails to plead facts that show that Defendant Lincoln
Property Company’s advertisements violate 42 U.S.C. § 3604(c).
Plaintiff
ICP
alleges
that
Defendant
Lincoln
Property
Company’s
advertisements are racially discriminatory and violate 42 U.S.C. § 3604(c) of the Fair
Housing Act. Defendant Lincoln Property Company’s advertisements state
•
Our community is not authorized to accept housing vouchers.
•
Our community is not authorized to accept Section 8 housing.
•
Our community is not authorized to accept any government subsidized rent
programs.
•
No 2nd chance leasing, and no vouchers accepted.
Section 3604(c) of the Fair Housing Act prohibits advertisements for rental dwellings
that show preference or discriminate based on race or color. 42 U.S.C. § 3604(c)
states that
26
it shall be unlawful . . . [t]o make, print, or publish, or
cause to be made, printed, or published any notice,
statement, or advertisement, with respect to the sale or
rental of a dwelling that indicates any preference,
limitation, or discrimination based on race, color, religion,
sex, handicap, familial status, or national origin, or an
intention to make any such preference, limitation, or
discrimination.
42 U.S.C. § 3604(c).
This Court must analyze whether Defendants violated § 3604(c) using
precedents from other circuits since it has not been established how this Court should
analyze this issue by the Fifth Circuit. The standard that is applied to determine if
the advertisement violates § 3604(c) is if the advertisement suggests to an “ordinary
reader” that a particular race is preferred or not preferred for the housing in question.
See, e.g., Ragin v. New York Times Co., 923 F.2d 995, 999 (2d Cir. 1991) (adopting this
standard when analyzing a possible § 3604(c) violation); Spann v. Colonial Vill., Inc.,
899 F.2d 24, 29 (D.C. Cir. 1990) (same standard); United States v. Hunter, 459 F.2d
205, 215 (4th Cir. 1972), cert. denied, 93 S. Ct. 235 (1972) (same standard). An
“ordinary reader” is neither the most suspicious nor the most insensitive person in
our society. Miami Valley Fair Hous. Ctr., Inc. v. Connor Grp., 725 F.3d 571, 577 (6th
Cir. 2013) (quotation marks omitted); Jancik v. Dep’t of Hous. & Urban Dev., 44 F.3d
553, 556 n.4 (7th Cir. 1995); Ragin, 923 F.2d at 1002. “[Section 3604(c)] prohibits
all ads that indicate a racial preference to an ordinary reader whatever the advertiser’s
intent.” Ragin, 923 F.2d at 1000. See also Jancik, 44 F.3d at 556.
27
A split among the circuits exists as to what constitutes showing racial
“preference” under the “ordinary reader” standard for § 3604(c). The Second and
the Seventh Circuits have interpreted showing “preference” to mean that the policy
could possibly “discourage” an ordinary reader from considering to rent or buy a
dwelling. See Jancik, 44 F.3d at 556; Ragin, 923 F.2d at 999–1000 (“[W]e read the
word ‘preference’ to describe any ad that would discourage an ordinary reader of a
particular race from answering it.”). The Sixth and Fourth Circuits, however, choose
not to incorporate the “discourage” language into its analysis of whether something
violates § 3604(c).
The Fourth Circuit and the Sixth Circuit analyze whether
“preference” is shown by simply analyzing whether the policy indicates any type of
racial preference. See Miami Valley Fair Hous. Ctr., 725 F.3d at 578 (“We decline to
incorporate the discourage language into our ordinary-reader analysis”); Hous.
Opportunities Made Equal, Inc. v. Cincinnati Enquirer, a Div. of Gannett Co., 943 F.2d
644, 646 (6th Cir. 1991); Hunter, 459 F.2d at 215.
This difference of opinion
between the circuits, however, does not impact this Court’s analysis. If the Court
used either description of “preference,” Defendant Lincoln Property Company’s
Section 8 policy does not show racial preference.
This Court will analyze whether Plaintiff’s § 3604(c) claim should be dismissed
at the motion to dismiss stage by using a case that involved a similar allegation of a
subtle presence of racial preference in defendant’s advertisements.
28
At the motion to dismiss stage, a racial preference can be shown that would
deny dismissal of a plaintiff’s complaint if race is used, even subtly, to show racial
preference in a defendant’s advertisements. Ragin, 923 F.2d at 999. In Ragin v. New
York Times Co., the Second Circuit affirmed the district court’s denial of the
defendant,
The
New
York
Times’
motion
to
dismiss
plaintiffs’
§ 3604(c) claim. Id. at 998. The plaintiffs were readers of The New York Times that
were African American or Black prospective renters and home buyers seeking housing
in the New York metropolitan area. Id. The plaintiffs did not allege that any words
included in the advertisements showed racial preference, but only that the mere
depictions of the human models of particular races were enough to show a possible §
3604(c) violation. Id. For twenty years, The New York Times was alleged to have
published real estate advertisements featuring human models that represented
potential home buyers that were almost always White, and never Black. Id. The few
Black models included in the real estate advertisements were alleged to depict either
potential renters or home buyers in predominantly Black communities or individuals
such as building maintenance employees, doormen, entertainers, sports figures, or
small children. Id.
The plaintiffs’ allegations stated that The New York Times’ use of models of
particular races in real estate advertisements amounted to a violation of § 3604(c)
and conveyed an illegal racial message. Id. at 1000.
29
The repeated publishing of
White models and noticeable absence of Black models in the advertisements allegedly
indicated the preferred race of the occupants of the building. Id. at 998.
The court rejected the argument made by The New York Times that only
advertisements published that include provocative or blatant expressions of a racial
preference are capable of violating § 3604(c).
Id. at 999.
The court held that
plaintiffs’ complaint could not be dismissed for failure to state a claim because it
could potentially be revealed that the usage of certain models of certain races
indicated a racial preference. Id. at 1001. Racial preference was held by the court to
be shown in an advertisement if the advertisement would discourage an ordinary
reader
of
999–1000.
a
particular
race
from
answering
it.
Id.
at
The court stated that a trier of fact may conclude that in some
circumstances a twenty year pattern of using models of a particular race for
advertisements can be perceived by an ordinary reader as showing a racial preference.
Id. at 1000–02. The subtle usage of race when using models of a particular race for
real estate advertisements was enough to deny the dismissal of plaintiffs’ § 3604(c)
claim. Id.
Unlike the advertisements in Ragin, Defendant Lincoln Property Company’s
advertisements do not involve race or show any sort of racial preference. Defendant
Lincoln Property Company simply put in writing its refusal to participate in the
voluntary Section 8 housing voucher program. The advertisements in Ragin, which
30
are interwoven with signals of possible racial preference because of the race of the
models, are unlike Defendant Lincoln Property Company’s advertisements that do
not incorporate race in any way.
Plaintiff ICP asserts that Defendant’s advertisements mentioning “housing
vouchers,” “Section 8 housing,” and “government subsidized rent programs” signal a
reference to Black or African American rental applicants. Plaintiff ICP contends that
Defendant’s advertisements “encourage White non-Hispanic or other non-Black
tenants who want to avoid living with Black neighbors to apply for housing” and
discourage Black or African American rental applicants from applying for housing.
The Court disagrees with Plaintiff ICP.
The population of Section 8 voucher holders in the Dallas, Texas metropolitan
area is composed of individuals of different races and colors.
One race is not
synonymous with the words “Section 8 housing,” “government subsidized rent
program,”
or
“housing
voucher.”
Defendant
Lincoln
Property
Company’s
advertisements do not single out a race and state that it rejects housing vouchers or
government subsidized rent only from individuals that are of a certain race or color,
which would show racial preference or discrimination. See, e.g., Hunter, 459 F.2d at
215–16 (holding that an advertisement for a “white home” showed preference and
violated § 3604(c)).
31
Plaintiff ICP also does not provide support to show the advertisements would
create the perception to an ordinary reader that African American or Black rental
applicants are discouraged to apply for housing or that White rental applicants are
encouraged to apply for housing. Plaintiff ICP attempts to support its assertion that
a reference to “Section 8” is equivalent to referencing Black or African American
rental applicants by alleging that White residents at a McKinney pool incident
“taunted the Blacks as being ‘Section 8’ and needing to leave the pool . . . and go
back to their ‘Section 8’ homes.” This “Section 8” classification during this isolated
incident, assuming it is true, could have been made for a variety of reasons besides
race.
Plaintiff ICP fails to convince the Court that an ordinary reader would
automatically equate Section 8 housing with Black or African American rental
applicants.
Nothing in Defendant Lincoln Property Company’s advertisements of its
Section 8 policy indicate an underlying racial preference or that race is involved in
any way. Unlike the court in Ragin that had a subtle, yet unmistakable, racial link
because of the particular races of the models in the advertisements for the court to
consider when deciding to deny the dismissal of plaintiffs’ § 3604(c) claim,
Defendant Lincoln Property Company’s advertisements have no hidden or facially
present racial element. See Ragin, 923 F.2d at 999–1002.
32
Because Defendant Lincoln Property Company’s advertisements do not show
racial preference, intent to show racial preference, or discriminate based on race, the
Court dismisses Plaintiff ICP’s § 3604(c) claim.
VII.
Conclusion
The Court GRANTS Defendant Lincoln Property Company’s Motion to
Adopt Defendants Brick Apartments LLC’s Rule 12(b)(6) Motion to Dismiss and
Legacy Multifamily North III LLC and HLI White Rock LLC’s Rule 12(b)(6) Motion
to Dismiss (Doc. No. 34). The Court also GRANTS Defendants Legacy and HLI
White Rock’s Motion to Dismiss Complaint for Failure to State a Claim and Brief in
Support (Doc. No. 32), Defendant Lincoln Property Company’s Motion to Dismiss
Pursuant to Federal Rule 12(b)(6) (Doc. No. 33), and CPF PC Riverwalk’s Motion to
Dismiss ICP’s Complaint for Failure to State a Claim and Supporting Brief (Doc. No.
42). The Court dismisses Plaintiff ICP’s Complaint against Defendants Legacy, HLI
White Rock, CPF PC Riverwalk, and Lincoln Property Company.
SO ORDERED.
Signed August 16th, 2017.
______________________________________
ED KINKEADE
UNITED STATES DISTRICT JUDGE
33
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