Fair Housing Center of Washington v. Breier-Scheetz Properties, LLC et al

Filing 42

ORDER granting Plaintiff's 17 Response/Counter-Motion for Summary Judgment, by Judge Thomas S. Zilly. Plaintiff's Supplemental Brief due by 6/2/2017; Defendants' Response, if any, due by 6/16/2017; Plaintiff's Reply, if any, due by 6/23/2017.(SWT)

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1 2 3 4 5 6 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 7 8 9 FAIR HOUSING CENTER OF WASHINGTON, 10 11 Plaintiff, C16-922 TSZ v. ORDER 12 BREIER-SCHEETZ PROPERTIES, LLC, et al., 13 Defendants. 14 15 16 17 THIS MATTER comes before the Court on plaintiff’s counter-motion for summary judgment, docket no. 17. Having reviewed the motion and all relevant filings, the Court enters the following Order.1 18 19 1 Plaintiff’s supplemental reply, docket no. 40, requests that the Court sanction defendants for abusing Fed. R. Civ. P. 56(d) in light of defendants’ failure to conduct any 21 discovery after the Court renoted plaintiff’s motion for that specific purpose. Although ultimately no additional discovery was conducted, there is no indication that defendants’ request 22 under Fed. R. Civ. P. 56(d) was made in bad faith or to deliberately cause delay or additional expense to plaintiff. Accordingly, the Court declines to impose sanctions against defendants on this basis. 20 23 ORDER - 1 1 Background 2 A. Factual Background Plaintiff Fair Housing Center of Washington (“Fair Housing”), alleges that 3 4 defendants Frederick Breier-Scheetz and Breier-Scheetz Properties, LLC (“Breier5 Scheetz Properties”) employ a facially neutral occupancy restriction policy that results in 6 a disparate, adverse impact on persons based on their familial status in violation of the 7 Fair Housing Act, the Washington Law Against Discrimination, and the Seattle 8 Municipal Code. Mr. Breier-Scheetz is an owner and manager of defendant Breier9 Scheetz Properties, LLC (“Breier-Scheetz Properties”), which owns and operates the 10 Granada Apartments (“Granada”) located on Capitol Hill. Decl. of Frederick Breier11 Scheetz, docket no. 39, ¶ 2. The Granada is a 96-unit apartment building comprised of 12 fifty-seven 425 square-foot studios, six 560 square-foot studios, and thirty-three one 13 bedroom apartments. Id. The policy at issue in this lawsuit is both undisputed and 14 straightforward: Breier-Scheetz Properties will only rent studio apartments at the Granada 15 to single occupants.2 Answer, docket no. 9, ¶ 4.12. Plaintiff discovered the occupancy policy after it performed “fair housing testing” 16 17 in 2012 and 2013. During such testing, individuals trained by plaintiff pose as 18 prospective tenants and typically operate in pairs: one tester poses as a member of the 19 protected class while the other represents the control group. Decl. of Christa Lenssen, 20 docket no. 19, ¶¶ 6-8. In connection with the Granada, two pairs of testers, one set in 21 22 2 Mr. Breier-Scheetz indicates in his declaration that the 560 square-foot studios have housed families with children in the past, but does not deny that he has enforced the general policy with 23 respect to occupancy of studio apartments at the Granada. Breier-Scheetz Decl. at ¶¶ 2-3. ORDER - 2 1 November of 2012 and another in October of 2013, confirmed that defendants were not 2 renting studio apartments at the Granada to more than one occupant. Complaint, docket 3 no. 1, Ex A, 9-10; Decl. of Tester 152, docket no. 21, ¶ 4; Decl. of Tester 401, docket 4 no. 22, ¶ 8; Decl. of Tester 405, docket no. 23, ¶ 8. 5 In February of 2014, plaintiff filed a complaint against defendants with the United 6 States Department of Housing and Urban Development (“HUD”). Decl. of Jesse Wing, 7 docket no. 18, Ex. 2, 14-16. Through a work-sharing agreement with HUD, see id. at 178 18, the Seattle Office for Civil Rights investigated the complaint, Complaint, Ex. A at 99 15. The Seattle Office for Civil Rights determined that there was “reasonable cause to 10 believe” that defendants’ policy violated section 804(a) of the Fair Housing Act and 11 section 14.08.040(A) of the Seattle Municipal Code. Complaint, Ex. A at 15. Plaintiff 12 filed the instant action on June 16, 2016. Complaint, docket no. 1. 13 Discussion 14 15 A. Legal Standard The Court should grant summary judgment if no genuine issue of material fact 16 exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 17 56(c). The moving party bears the initial burden of demonstrating the absence of a 18 genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A 19 fact is material if it might affect the outcome of the suit under the governing law. 20 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). While “all justifiable 21 inferences” are to be drawn in favor of the non-moving party, id. at 255, when the record, 22 taken as a whole, could not lead a rational trier of fact to find for the non-moving party, 23 ORDER - 3 1 summary judgment is warranted. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio 2 Corp., 475 U.S. 574, 587 (1986) (citations omitted). 3 B. Fair Housing Act—Disparate Impact Discrimination Section 804(a) of the Fair Housing Act, 42 U.S.C. § 3604(a), prohibits refusing “to 4 5 sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or 6 rental of, or otherwise make unavailable or deny, a dwelling to any person because of 7 race, color, religion, sex, familial status, or national origin.” 42 U.S.C. § 3604(a) 8 (emphasis added). The Washington Law Against Discrimination and the Seattle 9 Municipal Code likewise prohibit any person from refusing to engage in a real estate 10 transaction based on “families with children status,” see RCW 49.60.222(1)(a), and 11 “parental status,” see SMC 14.08.020 and 14.08.040(A)(1), respectively. When 12 interpreting the WLAD in connection with claims of discrimination in housing, 13 Washington courts look to federal interpretations of the Fair Housing Act’s 14 discrimination provisions. See Tafoya v. State Human Rights Com’n, 177 Wn. App. 216, 15 224 (2013).3 16 To establish a prima facie case of discrimination under a theory of disparate 17 impact, a plaintiff must show (1) the occurrence of outwardly neutral practices; that 18 (2) result in “a significantly adverse or disproportionate impact on persons of a particular 19 3 Although there is no Washington case addressing whether the Seattle Municipal Code’s anti- 20 discrimination provisions can also be analyzed through the prism of federal decisional law, the definitions of “parental status” and “families with children status” are substantially similar, 21 compare SMC 14.08.020 and RCW 49.60.040(13), and both the Seattle Municipal Code, SMC 14.08.040(A)(1), and the Revised Code of Washington, RCW 49.60.222(1)(a), prohibit any 22 person from refusing to engage in a real estate transaction based on a protected trait. Accordingly, the Court will examine plaintiff’s allegations of discrimination under all three statutes using the framework established by federal law for analyzing disparate impact claims 23 under the Fair Housing Act. ORDER - 4 1 type produced by the defendant’s facially neutral acts or practices.” Pfaff v. U.S. Dept. of 2 Housing and Urban Development, 88 F.3d 739, 745 (9th Cir. 1996). Once a plaintiff 3 establishes a prima facie case, a presumption of illegality arises and the burden shifts to 4 the defendant to articulate a legitimate, non-discriminatory business reason for the 5 challenged policy. See Fair Housing Council of Orange County, Inc. v. Ayres, 855 F. 6 Supp. 315, 318 (C.D. Cal. 1994) (citing United States v. Badgett, 976 F.2d 1176, 1178 7 (8th Cir. 1992)). Defendants concede that plaintiff has established a prima facie case of 8 disparate impact discrimination through the statistical evidence presented in in the 9 declaration of plaintiff’s expert Dr. Guest, Supplemental Response, docket no. 38, 2:7-9, 10 and instead submit that issues of material fact concerning defendants’ alleged legitimate, 11 non-discriminatory reasons for the numerical occupancy restriction precludes summary 12 judgment in favor of plaintiff. 13 Disparate-impact liability mandates the removal of policies that create artificial, 14 arbitrary, or unnecessary barriers for members of a protected class. See Texas Dept. of 15 Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507, 16 2522 (2015). Accordingly, proof of a legitimate non-discriminatory business reason 17 sufficient to rebut a prima facie case of disparate impact discrimination requires a private 18 defendant to proffer a business necessity sufficiently compelling to justify the challenged 19 practice and show that the policy was the least restrictive means to that end.4 See Fair 20 21 4 The Ninth Circuit has not explicitly adopted a standard for evaluating a private defendant’s alleged non-discriminatory business reason, and there is little, if any, consensus among the 22 circuits as to the standard to be applied in a disparate impact case against a private defendant. See United States v. Weiss, 847 F. Supp. 819, 824, 831 (D. Nev. 1994); and compare Pfaff, 88 23 F.3d at 747 & n.3 with HUD v. Mountain Side Mobile Estates, 56 F.3d 1243 (10th Cir. 1995). Since the Ninth Circuit’s ruling in Pfaff, however, district courts in this circuit have required a ORDER - 5 1 Housing Congress v. Weber, 993 F. Supp. 1286, 1292 (C.D. Cal. 1997); see also Ayres, 2 993 F. Supp. at 318-19.5 In evaluating a defendant’s proffered business justification, 3 subjective judgments are insufficient to rebut a plaintiff’s prima facie case absent 4 objective evidence in support of those judgments. See Gashi v. Grubb & Ellis Property 5 Management Services, Inc., 801 F. Supp.2d 12, 16 (D. Conn. 2011) (noting that courts 6 generally view “subjective rationales” skeptically); see also Ayres, 855 F. Supp. at 319 7 (“[Defendant] simply relies on his own subjective judgment which, notwithstanding his 8 experience in the real estate industry, falls short of the necessary showing.”). Defendants’ supplemental response offers two justifications for the occupancy 9 10 restriction: (1) that because the Granada has “one electric meter, one water meter and one 11 gas meter for the entire building,” allowing multiple tenants to occupy the studio 12 apartments would require defendants to install a meter for every apartment to ensure “a 13 fair system of billing for the use of utilities in the building,”; and (2) that the 14 private defendant to offer a sufficiently compelling business necessity for the policy at issue and 15 show that the policy is the least discriminatory means to achieve that end in order to rebut a prima facie case of discrimination under the Fair Housing Act. See, e.g., Mathews v. Arrow 16 Wood LLC, 2009 WL 8659593, at *6 (C.D. Cal. April 2, 2009); United States v. Plaza Mobile Estates, 273 F. Supp. 2d 1084, 1091 (C.D. Cal. 2003). Although Mathews and Plaza Mobile are 17 disparate treatment cases involving facially discriminatory policies, the Ninth Circuit has suggested that, if anything, the burden of rebuttal is higher in a case such as this one, where 18 plaintiff has proven a prima facie case of disparate impact discrimination. See Pfaff, 88 F.3d at 747 n. 3 (“The burden of rebuttal is said to be heavier in cases of disparate impact than disparate 19 treatment. This is because it is often harder to establish a prima facie case of disparate impact than disparate treatment.”). 5 Defendants cite Gashi v. Grubb & Ellis Prop. Mgmt. Servs., Inc., 801 F. Supp. 2d 12 (D. Conn. 2011) for the proposition that where a defendant raises a material issue of fact as to whether the 21 occupancy policy reasonably advanced a legitimate business interest, denial of summary judgment is appropriate. But defendants mischaracterize the rule applied in Gashi. In Judge 22 Hall’s words, “[t]o rebut a prima facie case, the defendant must prove ‘that its actions furthered . . . a legitimate . . . interest and that no alternative would serve that interest with less discriminatory effect.” Gashi, 801 F. Supp. 2d at 18-19 (emphasis in original) (quoting 23 Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 929, 936 (2d Cir. 1988)). 20 ORDER - 6 1 configuration of the studio apartments is designed to accommodate only one person. 2 Neither of these justifications, however, are sufficient to rebut plaintiff’s prima facie 3 case. 4 With regard to installing a new metering system, because there is only a single 5 meter for the entire building, tenants do not pay for water, electricity, or gas separately— 6 defendants foot the bill and incorporate the costs into the tenants’ rent using a formula 7 that “reflects the occupancy characteristics of the building and has generated no 8 complaints from tenants.” Breier-Scheetz Decl. at ¶ 4. Although ensuring a fair system 9 of billing for the use of utilities in a particular apartment building is a worthy goal, 10 defendants have offered no evidence that would allow the Court to conclude that 11 defendants’ concern about fairness is anything more than an arbitrary, post-hoc 12 justification for a discriminatory policy. 13 To begin, the “free-rider” problem Mr. Breier-Scheetz contends would arise in the 14 absence of the occupancy policy already exists. Any system of billing for utilities that 15 does not monitor the usage of each apartment independently has a certain “unfairness” 16 built in. Not all tenants use utilities at the same rate. And, as plaintiff points out, because 17 defendants incorporate utility costs as a fixed amount in a tenant’s rent, even with the 18 occupancy restriction in place, some tenants will invariably pay for more than their fair 19 share of utility costs. 20 Moreover, even assuming that the removal of the occupancy restriction would 21 exacerbate the “free-rider” problem, and there is no evidence in the record that would 22 support such a conclusion, defendants have not shown that installing new meters is 23 necessary. See Weiss, 847 F. Supp. at 831 (holding that defendants had shown a ORDER - 7 1 compelling business necessity where the defendants would have needed to perform a 1.63 2 million dollar upgrade to hot water capacity to allow the complex to accommodate 3 families with children). Defendants have offered no evidence that abolishing the 4 occupancy restriction without installing new meters would result in any financial 5 hardship, either through the loss of current or prospective tenants, or due to increased cost 6 of operation. Nor have they provided any explanation for why apparently less expensive 7 alternatives to installing new meters, such as implementing a small rent increase at the 8 Granada to offset any increase in utility costs that might arise, would be infeasible.6 9 Defendants’ proffer of Mr. Breier-Scheetz’s subjective judgment that installing new 10 meters for each apartment would be necessary if the occupancy policy were removed, 11 without any objective evidence in support of that judgment, is not sufficient to rebut 12 plaintiff’s prima facie case of discrimination under the Fair Housing Act. See Ayres, 855 13 F. Supp. at 319. 14 With regard to the configuration of the studio apartments, defendants have 15 similarly failed to provide any evidence that the apartments cannot adequately 16 accommodate more than one person, other than to simply conclude that the apartments 17 are too small. Contrary to defendants’ contentions, however, the Seattle Municipal Code 18 allows two people to occupy a studio apartment as small as 150 square feet. See SMC 19 22.206.020(C). Defendants have offered no evidence that would distinguish the studios 20 at the Granada from any of the other apartments to which the occupancy limits in 21 22 6 Not only is a rent increase likely to be less expensive than installing new meters, it also represents a less discriminatory alternative to implementing a strict single-person occupancy 23 restriction. ORDER - 8 1 SMC 22.206.020 would apply and have entirely failed to provide any explanation for 2 why the Granada requires a more restrictive occupancy policy than set forth by the 3 Seattle Municipal Code. Again, without a shred of objective evidence in support of their 4 contentions, defendants’ subjective judgment that the apartments are configured in such a 5 way that they can only accommodate one person provides an insufficient basis to rebut 6 plaintiff’s prima facie case. 7 Plaintiff has met its burden of showing that defendants’ one-person-per studio 8 policy has a disparate impact on families with children and defendants have failed to 9 prove a “business necessity sufficiently compelling to justify the challenged practice.” 10 See Weiss, 847 F. Supp. at 831. Accordingly, as to liability, plaintiff’s counter-motion 11 for summary judgment is GRANTED. 12 13 C. Remedies In its counter-motion, plaintiff requests that the Court enter the following 14 injunctive relief: (a) enjoining defendants from applying the one-person-per studio 15 occupancy restriction and deviating from the Seattle Municipal Code; and (b) requiring 16 defendants to provide quarterly logs of each residential property to plaintiff for three 17 years, identifying all prospective tenant inquiries and defendants’ responses. Plaintiff 18 also requests that the Court assess a civil penalty pursuant to RCW 49.60.225. The 19 parties, however, have dedicated little argument to the appropriateness of these remedies 20 under the facts of this case and have not addressed whether issues of fact preclude some 21 or all of these remedies at this time. Accordingly, the Court finds that additional briefing 22 on these topics is warranted. In addition to addressing the court’s authority to grant 23 plaintiff’s requested relief and any relevant standards to be applied in determining ORDER - 9 1 whether such relief is appropriate, the parties’ supplemental briefing should address: 2 (1) whether plaintiff’s proposed injunctive relief is appropriately “tailored to remedy the 3 specific harm alleged,” see, e.g., McCormack v. Hiedeman, 694 F.3d 1004, 1019-20 (9th 4 Cir. 2012); (2) whether an order requiring defendants to provide quarterly logs to plaintiff 5 is appropriate given that plaintiff is a non-governmental entity; (3) the appropriate scope 6 and duration of any order requiring the provision of quarterly logs; and (4) the factors the 7 Court should consider in assessing any civil penalty. To the extent possible, the Court 8 encourages the parties to confer and attempt to reach agreement on the remedies that are 9 appropriate in this case. 10 11 D. Issues Remaining for Trial To the extent that the remedies requested in plaintiff’s counter-motion for 12 summary judgment can be granted or denied as a matter of law, the only issues that 13 remain for trial concern the damages, both actual and punitive, that should be awarded. 14 “If the court finds that a discriminatory housing practice has occurred . . . the court may 15 award to the plaintiff actual and punitive damages . . . .” 42 U.S.C. § 3613(c)(1). A fair 16 housing organization is entitled to receive actual damages for a violation of the Fair 17 Housing Act when such violation has caused damage in the form of diverted resources to 18 combat the violation. See Fair Hous. Center of Greater Palm Beaches, Inc. v. Sonoma 19 Bay Community Homeowners Association, Inc., 164 F. Supp. 3d 1375, 1382 (S.D. Fl. 20 2016); see also Fair Hous. of Marin v. Combs, 285 F.3d 899, 904-05 (9th Cir. 2002). 21 Plaintiff concedes that issues of fact concerning its actual damages must be resolved at 22 trial, see Pl.’s Mot. for Summ. J., docket no. 17 at 25, and did not move for summary 23 judgment on the issue of punitive damages. ORDER - 10 1 Conclusion 2 For the foregoing reasons, plaintiff’s counter-motion for summary judgment, 3 docket no. 17, is GRANTED. Defendants’ one-person-per studio occupancy restriction 4 at the Granada has a disparate impact on families with children in violation of the Fair 5 Housing Act, Washington Law Against Discrimination, and Seattle Municipal Code. On 6 or before Friday June, 2, 2017, plaintiff is DIRECTED to file a supplemental brief, not to 7 exceed fourteen (14) pages, in support of the equitable relief and civil penalty it requests 8 on summary judgment and which addresses the topics discussed in Section C above. Any 9 response from defendants shall not exceed fourteen (14) pages and shall be filed on or 10 before Friday, June 16, 2017. Plaintiff’s reply, if any, shall be filed on or before Friday, 11 June 23, 2017, and shall not exceed seven (7) pages. 12 13 IT IS SO ORDERED. 14 Dated this 11th day of May, 2017. 15 A 16 17 Thomas S. Zilly United States District Judge 18 19 20 21 22 23 ORDER - 11

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