Scott E. Mollen Scott E. Mollen

 

Landlord-Tenant—Landlord May Be Liable Under Federal Fair Housing Act and State Human Rights Law For Not Addressing Acts of Racial Hostility—Tenant-On-Tenant Racial Discrimination

The salient issue in this case was “whether a landlord may be liable under §§3604 and 3617 of the Fair Housing Act of 1968 (FHA) or Act…and analogous provisions of the New York State Human Rights Law (NYSHRL),… for failing to take prompt action to address a racially hostile housing environment created by one tenant targeting another, where the landlord knew of the discriminatory conduct and had the power to correct it.” The trial court had dismissed the plaintiff’s claims. The U.S. Court of Appeals for the Second Circuit (court), reversed and remanded the matter for further proceedings.

The African American plaintiff (tenant) had signed a lease for an apartment and had taken occupancy. Several months later, a neighbor “began to subject (tenant) to what can only be described as a brazen and relentless campaign of racial harassment, abuse, and threats.” The tenant alleged that he heard the defendant neighbor say “Jews, f… Jews,” while standing in front of their apartments. The neighbor thereafter called the tenant, a “f… (N word).” The neighbor “approached the tenant’s open front door and repeatedly called him (the N word),” and uttered other similarly offensive words.

After additional such incidents, the tenant “understandably ‘felt afraid, anxious, and unwelcome.’” The neighbor also stood at the tenant’s “open front door and photographed the interior of the (tenant’s) apartment.” The tenant, “fearing for his personal safety,” called “the police” and the landlord to complain. A county police “hate crimes unit” interviewed witnesses and warned the neighbor to stop threatening the tenant with racial epitaphs. The landlord allegedly “did nothing.”

The tenant again called the police, filed a police report and also notified the landlord about the neighbor’s “racist conduct between March and May 2012.” The tenant provided the landlord with contact information for the police hate crimes unit. Again, the landlord “failed to do anything at all, even as little as respond to (tenant’s) letter.” After the neighbor’s conduct escalated, the police arrested the neighbor for “aggravated harassment.” The tenant again wrote to the landlord, citing “racial slurs” and anti-semantic comments and advised the landlord that the neighbor had recently been arrested for harassment. The landlord advised its manager “not to get involved” and “declined to respond….”

The complaint alleged that the landlord failed to investigate or attempt to resolve the tenant’s complaints and allowed the neighbor to live at the complex through January 2013 “without reprisal.” When the neighbor’s lease expired, his lease was not renewed. In April 2013, the neighbor pled guilty to harassment and a court entered an order of protection prohibiting him from contacting the tenant.

In June 2014, the tenant sued the landlord and the neighbor, claiming violations of the FHA, the Civil Rights Act of 1866, violations of the NYSHRL and for “negligent infliction of emotional distress.” He also sued the landlord for “breach of contract and breach of the implied warranty of habitability” and sued the neighbor for “intentional infliction of emotional distress.” A default judgment was entered against the neighbor. The landlord moved to dismiss the complaint for failure to state a claim.

The trial court granted the landlord’s motion, except as to an implied warrant habitability claim, which the tenant had withdrawn, and the trial court granted partial final judgment in favor of the landlord so that the tenant could pursue the subject appeal.

The court explained that §3604(b) of the Act 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 or race, color, religion, sex, familial status, or national origin.” Section 3617 of the Act also makes it “‘unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed’ any right protected by the act.” The Act’s language is “‘broad and inclusive,’… and we therefore give it a ‘generous construction.’…. Together, the Act’s provisions are designed ‘to eliminate all traces of discrimination within the housing field.’” The court cited judicial precedent involving the Act, as well as the language and judicial precedent relating to Title VII, including documentary practices with respect to employment.

The court then held that §3604 bars discrimination occurring “after a plaintiff buys or rents housing.” It noted that §3604 “prohibits discrimination in the ‘terms, conditions, or privileges or sale or rental of a dwelling, or in the provision of services or facilities in connection therewith’” and that some other circuits “have located in that text some degree of post-acquisition protection.” It cited the U.S. Supreme Court’s “directive that we read the statute broadly,” and also relied upon the “statutory text itself.” The court also stated that “every other circuit faced with the issue has acknowledged that Section 3604(b) at least prohibits ‘discrimination related to the…actual or constructive eviction,’ which is necessarily post-acquisition.” It acknowledged that if a “division” exists, it “relates to the scope or degree of the provision’s reach.” It noted that “coercion, intimidation, threats, or interference with or on account of a person’s exercise of his or her (§3604 (b)) rights can be distinct from outright violations of [3604(b)].”

Additionally, the court cited HUD’s regulations which “for thirty years clearly contemplated claims based on post-acquisition conduct, consistent with our interpretation of §§3604 and 3617.” It opined that “contrary interpretations of §§3604(b) and 3617 would contravene Congress’s intent to root out discrimination in housing….” Accordingly, the court held that the FHA precludes the subject of misconduct, as such conduct “would constitute discrimination and the enjoyment of residence in a dwelling or in the provision of services associated with that dwelling ‘after acquisition.’”

As to whether “a landlord may ever be liable under the FHA for intentionally failing to address tenant-on-tenant racial discrimination,” the court acknowledged that the FHA text “nowhere explicitly endorses landlord liability for tenant-on-tenant harassment.” However, it noted that it had never “required every last detail of a legislative scheme to be spelled out in a statute itself-especially a civil rights statute.” It cited the “statutory text, legislative history, and a pattern of expansive readings of the FHA,” in concluding that the statute “prescribes landlord liability for tenant-on-tenant harassment.”

The court also cited HUD’s interpretation of the FHA, citing a 2016 HUD final rule (rule), which amended HUD’s rules for discriminatory conduct under the FHA. A HUD amicus brief explained that the rule merely “formalizes HUD’s long-standing view that, under the FHA, a housing provider may be held liable in certain circumstance for failing to address tenant-on-tenant harassment.” The landlord would be liable for “failing to intervene in the conduct of a third party only where an obligation to do so exists under the FHA, consistent with the statute’s broad objective of eliminating discrimination in housing.”

The landlord argued that the rule failed to “consider a landlord’s variable levels of control over tenants.” However, HUD’s rule “contemplates degrees of landlord control, by providing that ‘the power of the landlord to take prompt action to correct and end a discriminatory housing practice by a third party depends upon the extent of the landlord’s control or any other legal responsibility the landlord may have with respect to the conduct of such third party.’” Thus, this would be a “fact-dependent inquiry. In some cases, a landlord may not have enough control over its tenants to be held liable for failing to intervene. In other cases, it will.” Thus, under the rule, the landlord “can be held liable only… where the landlord had the power to take corrective action yet failed to do so” and a landlord would not be liable under the FHA “if appropriate corrective action is ‘beyond the scope of its power to act.’”

The court reasoned the courts would consider that “housing providers… ordinarily have a range of mechanisms at their disposal to correct discriminatory tenant-on-tenant harassment, such as ‘issuing and enforcing notices to quit, issuing threats of eviction and,… enforcing evictions,’ all of which are ‘powerful tools’ that may be ‘available to a housing provider to control or remedy a tenant’s illegal discriminatory conduct.’” It emphasized that landlords are obligated to “furnish housing services in a nondiscriminatory manner….” It further noted that it is relevant whether a landlord or manager “had actual knowledge of the severe harassment the tenant was enduring and whether they were deliberately indifferent to it.”

The landlord also argued that HUD’s rule, as applied to the subject case, is “impermissibly retroactive.” The court stated that the tenant would have a “cognizable claim under the FHA even in the absence of the rule….” However, it held that the rule was “not retroactive but interpretive.” “An interpretive rule,… ‘merely clarifies an existing statute or regulation,’ and creates no new rights.” It reasoned that an interpretive rule is “no more retroactive… than is a judicial determination construing and applying a statute to a case in hand.”

Here, the court found that HUD’s rule “codifies HUD’s long-standing view that a property owner…may be held liable for failing to take corrective action within its power in response to tenant-on-tenant harassment of which the owner knew or should have known,” i.e., the rule did not “add any new forms of liability under the FHA or create obligations that did not otherwise exist.”

The landlord further argued “that even if a hostile housing environment claim were cognizable under the FHA, (tenant) failed to allege that they intentionally discriminated against him.” The court stated that to establish an FHA violation, a plaintiff “need not show discriminatory intent but need only prove that the challenged practice has a discriminatory effect,” i.e., it was sufficient that the plaintiff alleged “harassing acts of a third party over which the landlord has a real measure of control.”

Even if the tenant had to show deliberate intent by the landlord, the court found that that the complaint adequately alleged that the landlord engaged in an intentional racial discrimination by alleging that the landlord had discriminated against the tenant “by tolerating and/or facilitating a hostile environment,” notwithstanding that the defendants had the authority to “counsel, discipline, or evict (neighbor) due to his continued harassment.”

The tenant claimed that the landlord had “intervened against other tenants…regarding non-race related violations of their leases or of the law.” The court noted that trial evidence may show that the landlord had “tried but failed to respond” or that the landlord was “powerless to evict or otherwise deal with (neighbor), in ‘which case not even a discriminatory effects test could save (tenant’s) case.’” The court held that the tenant was entitled to discovery as to the level of control that the landlord “actually exercised over tenants” and its “power to act to address (neighbor’s) abuse.”

Accordingly, the court held that the complaint adequately stated the claims under the FHA, the Civil Rights Act of 1866 (so long as the alleged indifference “was such that the defendant intended the discrimination to occur”) and under the NYSHRL. It affirmed the dismissal of the negligent infliction of emotional distress claim, since such claim is “‘compensable only when it is a direct, rather than a consequential, result of the breach’ of the duty that a defendant owes to a plaintiff.”

The Dissent

A dissent reasoned that the majority incorrectly construed the FHA “to impose such third-party liability for the conduct of neighbors” and that the majority “steers the FHA into ‘uncharted territory,’…, where the courts improbably discover new causes of action in half-century-old provisions, and heedless of the deleterious consequences for parties, courts, and the housing market.” Further, the dissent argued that the majority “justifies its… theory of landlord liability for tenant-on-tenant harassment by invoking the ‘broad language’ of the FHA.” The dissent found no such support in the FHA’s text, judicial precedent or the “background tort principles that informed Congress at the time the FHA was enacted.”

As to whether the FHA reaches post acquisition conduct, the dissent cited a case which stated that the FHA “contains no hint either in its language or its legislative history of a concern with anything but access to housing.” It noted that the FHA’s “central focus was the ‘wide spread practice’ in 1968 ‘of refusing to sell or rent homes in desirable residential areas to members of minority groups….” The dissent believed that Congress was not trying to solve the “future problem” of conduct after a sale or lease and such intent would require “careful drafting” to assure that “quarrels between neighbors did not become a routine basis for federal litigation.” It further asserted that the majority “obfuscates the deep division that does exist” as to the extent that the FHA reaches “post-acquisition” conduct. The dissent believes that the majority provides “a blanket privilege to be free from all discrimination from any source when such discrimination affects residential enjoyment.” It asserted that “‘privileges of sale or rental,’ like ‘terms and conditions,’ requires a connection with the sale or rental, so that not all impairments of a person’s post-acquisition enjoyment of residence are sufficiently connected to the sale or rental to trigger Section §3604(b).”

The dissent contended that there was no evidence that the landlord had undertaken “any obligation in its rental arrangement…, for monitoring the conduct of other tenants and remediating their behavior.” The dissent noted that the majority now joined the U.S. Court of Appeals for the Ninth Circuit “in eliminating any required connection between the ‘terms, conditions, or privileges of sale or rental’ and the sale of rental itself, placing this court on the wrong side of the significant circuit split as to §3604(b)’s post-acquisition reach.”

The dissent disagreed with the majority’s “evisceration of any discriminatory intent requirement from these provisions of the FHA.” It stated that the “smattering of Second Circuit cases on which the majority does rely predates” a recent Supreme Court decision. The majority and dissent disagreed as to whether an allegation of intentional discrimination was required and whether it was adequately pled.

The dissent asserted that “the debate over the FHA’s meaning must take place primarily on the terrain of statutory text—where the majority’s expansive holding finds no support.” It found that relevant precedent was “sparse” and it could find no case from any circuit or district court recognizing the claim “recognized by the majority today….” Further, it believed that the majority also improperly relied on an analogy to Title VII hostile work environments cases. In addition, it believed that Title VII caselaw was inapplicable, citing “distinctions between the employer-employee relationship and the landlord-tenant relationship—including, that an employee is… an agent of the employer while the tenant is not… an agent of the landlord.”

The dissent believed that the amount of control that a landlord “exercises over his tenant is not comparable to that which an employer exercises over his employee,” i.e., “landlords do not have the same capacity as employers to monitor their tenants, neither do they ordinarily have similar tools at their disposal to investigate and remediate misconduct.” Landlords may not “temporarily evict a tenant or force all tenants to undergo harassment training and provide information about each other’s behavior.” Although an employer may transfer a “problematic employee,” a landlord cannot relocate tenants.

Additionally, the dissent argued that the majority failed to consider precedent that provides that “an action brought for compensation by a victim of housing discrimination is, in effect, a tort action” and it is “appropriate to consider traditional ‘tort-related…liability rules….’” It reasoned that a landlord does not have a “‘reasonable opportunity or effective means to control a third person’” from the “’mere power to evict that person as a tenant.’” Further, it noted that landlords do not have a duty to “protect the tenant from even the criminal act of another ‘since it cannot be said that the landlord had the ability or reasonable opportunity to control [the offending tenant].’”

The dissent also noted that the tenant did not immediately request the landlord’s assistance and the landlord had declined to renew the harassing tenant’s lease “in the aftermath of his bad behavior, which by that point had resulted in his arrest.” It asked whether the failure to renew a lease constitutes “prompt” remedial action and opined that “Courts will be grappling with such questions for years to come.”

The dissent further asserted that Congress “did not contemplate the problem of harassment by ‘neighbors’ when it enacted the FHA” and if it had “the most ‘careful drafting’ would have been required.” It opined that the majority’s decision “may benefit law firms and insurance companies, which sometimes profit from legal anomalies” and “the real winners today will not include those in pursuit of fair housing, and certainly not the renters among them, who will likely be left to foot the bill.”

The dissent also believes that the HUD rule “carries little to no persuasive force,” since the rule “misinterprets the FHA’s text, finds no support in precedents… relies on a flawed analogy to Title VII,” and “undeniably paves the way for a new category of FHA litigation….” The dissent argued that the rule is “legislative, and so cannot have the retroactive effect….” Contrary to HUD’s claims, the dissent believed that the Rule “significantly expands the class of persons subject to a legal requirement… by creating a new form of liability for an entire class of housing providers” and that giving retroactive effect to a legislative rule is unfair “because it can deprive parties of legitimate expectations and upset settled transactions.” Thus, the dissent would have affirmed the dismissal of the federal and state civil rights claims.

Francis v. Kings Park Manor Inc., U.S. Court of Appeals, 2d Cir., Case No. 15-1823-cv, decided March 4, 2019, Pooler, Livingson, Lohier, JJ., Livingston, J. dissents by separate opinion.

 

Scott E. Mollen is a partner at Herrick, Feinstein.