One of New York City’s largest real estate rental brokers and a second company will have to pay damages for discriminating against a disabled man with AIDS because he was receiving subsidies from the city’s HIV/AIDS Services Administration (HASA).

A federal judge found that Manhattan Apartments Inc. and Abba Realty Associates Inc. violated New York City’s Human Rights Law by denying housing to Keith Short once they found out that his source-of-income was HASA, a part of the city’s Department of Social Services.

Judge Samuel Conti, following a four-day bench trial in October, rejected claims by Short under provisions of the federal Fair Housing Act prohibiting discrimination on the basis of disability as well as the Human Rights Law.

But on the source-of-income claim, Conti, sitting by designation from the Northern District of California, awarded Short $20,000 ($10,000 from each defendant) and his fellow plaintiff, the non-profit Fair Housing Justice Center Inc., $5,000 ($2,500 from each). The center dispatched “covert testers,” professional actors posing as applicants for housing, to gather evidence of discrimination.

Manhattan Apartments is one of the largest rental brokers in New York City, with about 1,000 listings at any given time. Abba, based in Brooklyn and the Bronx, works with about six licensed real estate salespeople.

In his 57-page opinion from the Southern District, Conti also ordered injunctive relief spanning three years that bans the companies from denying or withholding apartments or representing that an apartment is not available for inspection. The injunction also mandates training for current and new staff at the brokerages and clearly posted notices at their offices on their anti-discrimination policies.

The plaintiffs, represented by Armen Merjian, senior staff attorney at Housing Works, and Diane Houk of Emery, Celli Brinckerhoff & Abady—will now apply for attorney fees Merjian said could be in the hundreds of thousands of dollars.

Merjian said he believes this is the first case of its kind to go to trial in New York City since the City Council added discrimination based on “legal source-of-income” to the Human Rights Law in 2008.

“There have been source-of-income cases but they have been resolved on motions to dismiss or they have settled,” Merjian said. “This is the first time you have a judge once and for all rendering a verdict—and he said this was not just an isolated incident—they were [committing] wholesale discrimination against people.”

Short was eligible to receive $1,100 from HASA when he was looking for an apartment in 2010. He went to Abba’s offices in Brooklyn and asked about some listings he thought were attractive and he could afford, but was told by an employee that “those apartments are not available for people on programs. They are only for people who are working people.”

Short said he had a similar experience with Manhattan Apartments. At trial, a real estate broker testified that Manhattan Apartments (MA) did not accept people participating in programs and could not assist Short.

At both companies, covert testers deployed by the Fair Housing Justice Center verified Short’s experience, the judge said. Abba’s representatives were caught on tape and quoted in Conti’s opinion in Short v. Manhattan Apartments, 11-cv-5989,

Short testified, “I felt discouraged. I felt humiliated.”

The claims rejected by Conti came under the Fair Housing Act. 42 U.S.C. §§3604(c) (d) and (f), as the judge ruled the plaintiffs failed to make a prima facie case of disability discrimination because they did not produce statistical evidence of disparate treatment.

The judge said that, “At the behest of landlords with which it works, MA generally will not assist prospective tenants” unless they earn 40 to 50 percent of the monthly rent or have a guarantor who earns more. He said the plaintiffs “have offered no evidence that these policies disproportionately affect persons with disabilities.”

While disability is a protected status under the FHA, Conti said, source of income is not.

The claims against Abba were based in part on the statements of its employee about “working people,” which the judge said “do not indicate a preference based on any of the protected categories identified in the statute.”

For the same reason, the disability discrimination claims under the city’s Human Rights Law, N.Y. City Admin. Code §8-107(5)(c), must fail, Conti said.

‘Smoking Gun’

But on source-of-income discrimination, Conti said the evidence was clear that Manhattan Apartments told Short it didn’t take clients from rental assistance programs, and that account was “undisputed and corroborated” by the covert testers.

Moreover, it became a “designated fact” that “multiple landlords instructed MA not to assist persons with government housing subsidies” when, in October, Southern District Judge Kimba Wood (See Profile) sanctioned Manhattan Apartments for the failure of its proprietor, Jerry Weinstein, to comply with court orders to produce responsive documents in the case, including screen shots of rental listings in Manhattan Apartments’ computer database showing landlords’ “directions and directives.”

Wood also ordered Manhattan Apartments to pay Short and the Fair Housing Justice Center $23,100 in legal fees (NYLJ, Oct. 18).

As for Abba, Conti said of the taped statements about HASA tenants and other rejected government-subsidized tenants: “in the context of Plaintiffs’ claims for source-of-income discrimination, such evidence is not just a ‘thick cloud of smoke,’ it is a smoking gun.”

The statements also prompted the judge to reject an argument by Abba that bureaucratic delays in HASA getting subsidies to recipients and then to landlords justify not accepting “program” tenants.

“Such broad and sweeping statements are direct evidence of a violation of the NYCHRL’s provisions concerning source-of-income discrimination, no matter how broadly or narrowly those provisions are construed,” he said.

He found “unavailing” the arguments of both Abba and Manhattan Apartments that they were merely conveying truthful information about landlord rental policies.

Manhattan Apartments was represented by David Wims, a Brooklyn solo practitioner.

Wims said he wanted to speak with his client about the options going forward, because either side could appeal the part of the ruling it lost.

“We’re gong to try and resolve it,” Wims said. “I’m going to strongly advise my client that we discuss with the plaintiffs a resolution in light of an appeal and in lieu of plaintiffs’ motion for attorney fees. We’d like to stop the parties from spending the amount of money they are spending on this litigation. This case really should have been settled from the outset.”

Abba Realty Associates was represented by Jay Itkowitz of Itkowitz PLLC, a three-partner, 13-lawyer firm in Manhattan.

Itkowitz noted that the plaintiffs prevailed on only one out of six causes of action and the amount awarded by Conti was far short of the $300,000 in compensatory and punitive damages sought. It was also less than the formal $50,000 settlement offer ABBA made prior pursuant to the Federal Rules of Civil Procedure – an offer he said makes it unlikely the Plaintiffs will prevail on their attorney fee motion.

“If Plaintiffs had accepted this offer, not only would Plaintiffs had benfitted, but it would have saved all the parties the efforts of a five-day trial and complex post-trial briefing,” Itkowitz said.

Itkowitz also said ABBA is one of the leading providers of housing for HASA clients in New York City.

Given this, he said, the fact that “Fair Housing Justice Center so aggressively pursued ABBA is an example of ‘impact’ litigators running wild, and seeking a precedent that they can point to while sacrificing good sense and justice in the process.”

@|Mark Hamblett can be contacted at mhamblett@alm.com.