Acheson Hotels – tester standing at the crossroad 2.

By in Accessibility Litigation Trends, ADA - Standing, FHA Standing Tags: , , , ,

In my last blog I looked at why testers became embedded in the enforcement of civil rights laws from a practical standpoint. Now it’s time to look at the law of standing as it relates to testers.¹

The Supreme Court recognized long ago that Article III of the Constitution only gives federal courts the right to decide “cases” or “controversies.” Those words are in the text of Article III itself. By the 1960’s this requirement was interpreted to mean that the plaintiff had:

such a personal stake in the outcome of the controversy’ as to warrant his invocation of federal-court jurisdiction and to justify exercise of the court’s remedial powers on his behalf.

Warth v. Seldin, 422 U.S. 490, 498–99 (1975) [citing earlier cases]. To have such personal stake required that the plaintiff have suffered or be threatened with an actual injury. The plaintiff could not merely “rest his claim to relief on the legal rights or interests of third parties.” Id. A plaintiff who met the requirements of Article III had “standing” to sue in federal court.

Hand in hand with the development of the idea of Article III standing came the idea of “prudential” limits on standing. Simply put, “prudential” meant that sometimes the federal courts would not hear a case where there was a real injury because enforcement of the law or constitutional provision in question was better left to federal agencies. Of course, it was a different matter when Congress itself gave someone the right to sue. If Congress gave an individual the right to sue then it was hard to say that prudence meant the courts should not hear the case.

That brings us to Havens Realty v. Coleman, the case often cited for the proposition that “testers have standing.” It was a classic tester case – a white tester and a black tester asked about the availability of an apartment. The white tester was told it was available. The black tester was told it was not. A crystal-clear case of racial discrimination in violation of the Fair Housing Act. However, neither tester really wanted to rent an apartment. The defendant claimed that without any desire to rent the black tester suffered no harm from being lied to and therefore lacked standing to sue. The Supreme Court disagreed. It pointed out that the FHA has a specific provision (Section 3604(d)) making it unlawful to give false information to someone based on their race. Because the black tester suffered exactly the injury the FHA was intended to prevent he had standing.

The key thing to notice here is that the Supreme Court said, in essence, if Congress gave someone the right to sue then their statutorily defined “injury” would enough to satisfy the Constitution. Congress could decide who met the requirements of Article III of the Constitution.

We’ll skip the next 36 years of legal developments to keep this blog a reasonable length. In 2021 the Supreme Court decided, in TransUnion that Congress could not create a right to sue and expect the statutory injury would automatically satisfy the requirements of Article III. Congress could create a statutory injury but only the Supreme Court could decide whether the statutory injury was good enough for Article III. In TransUnion the Court decided that some of the victims of the law concerning credit reporting had suffered an injury sufficient for Article III standing, but others who were also victims with a right to sue had not because they had not been affected in any way by the violation.

The problem for tester standing is obvious. If the black tester in Havens Realty had only suffered a statutory injury (being lied to) but that did not result in any real injury (because the truth didn’t matter) maybe tester standing was not enough to satisfy Article III of the Constitution. Soon there were soon both scholars and bloggers like me suggesting that Havens Realty might be dead and tester standing along with it. If testers didn’t want to rent an apartment, use a website, or buy from a business then being turned down because of race or disability didn’t matter and Article III was not satisfied.

This is why there is so much riding on Arpan Hotels v. Laufer. Laufer goes to hotel websites to see if they have the information about accessibility required by ADA regulations. She does not intend to go to the hotel, she wants the information for its own sake. If it is missing, she sues. That sounds very much like the black tester in Havens Realty, who was entitled to truthful information although he had no use for it. If Laufer does not have an injury that satisfies Article III then fair housing testers might not either and so a victory for the hotel could spell the end of FHA testing as well as ADA testing.

The case is in the Supreme Court because different courts of appeal have different views of whether a plaintiff like Laufer has standing after the TransUnion decision. The pro-Laufer courts of appeal say that she suffered either or both of an “informational injury” or a “dignitary harm.” The argument for an “informational injury” is simply that if Congress says you have a right to information then being deprived of that information is a real harm because you have a right to it. It doesn’t matter whether you needed it or not. The “dignitary harm” argument is that those with disabilities and others that have been discriminated against feel a special emotional distress when they see violations of the anti-discrimination laws even if the violation doesn’t make any difference to them other than making them feel bad.

These arguments are still possible because the Supreme Court found it hard to precisely define just what Article III requires. The conservative members of the Court look to the law as it existed in the late 18th century when the Constitution was written as a guide what it means. The common law causes of action that existed at the time were the starting point for finding a sufficient injury for Article III. If an injury looked like an injury that you could sue for in 1789 then it was good enough for the Constitution. The Court recognized that there could be newer kinds of injury, but similarity to common law injuries was key. They also looked back to Warth v Seldin and the concern that if anyone could sue to vindicate the public interest, rather than their own private interests, you might get private law enforcement that interfered with the agencies charged to protect the public interest. Based on earlier cases like Spokeo Inc. v. Robins the Court found that a injury had to be “concrete” and “particularized” to satisfy Article III.

It isn’t hard to see how the arguments line up for and against standing for testers given these parameters. Those who believe Laufer should have standing argue that once she was given a right to information taking it away from her was very much like common law claims related to theft. This argument was aided by the Supreme Court’s recognition in cases like Fed. Election Commn. v. Akins that an informational injury could support standing. TransUnion suggested that informational injury could stem from being denied information that was required to be publicly available (good for the Laufer side) but insisted that it also had to “downstream consequences” or “adverse effects.” (not so good for the Laufer side).

There is also the argument that Laufer and other testers suffer a “dignitary harm” similar to that suffered by those who are defamed. The Supreme Court has often recognized that dignitary harms can be actionable, so they neatly fit the “like the common law” requirement. The Justices even glanced at the question of whether a dignitary harm was sufficient for standing in Trump v. Hawaii, but just long enough to say they didn’t have to answer that question. The problem here is that dignitary harm is usually actionable only when there is some other harm – for example to reputation. Equally important, if information is supposed to be available to all the dignitary harm suffered by a tester like Laufer is indistinguishable from the harm suffered by every other person who wants but cannot find the information. If invoking “dignitary harm” allows someone with no distinct interest in the information to have standing we are back to individuals who sue to enforce the public interest rather than their private interests.

So, does Laufer being offended by a statutory violation constitute a sufficient harm for Article III? The ultimate argument on the pro-Laufer side of the dispute about standing goes like this:

  • Being subjected to discrimination (as in Havens Realty) is bad in a way that has been recognized in many cases. No one should be treated differently because of their race or disability, regardless of the circumstances.
  • Not including accessibility information on a hotel website is defined as a kind of discrimination in the ADA. It may not be treating people differently, but it is “discrimination” because Congress said it is.
  • Thus even though both the non-disabled and disabled are treated the same because neither gets the information, the “discrimination” is just as bad as if they were treated differently.

It is a tortured argument because, of course, treating people the same isn’t the same as treating them differently. The most important holding in TransUnion is that Congress cannot create an Article III injury just be defining a statutory violation as an actionable injury. The ADA and FHA both recognize that equality of treatment may not result in equality of opportunity and so in some cases they define “discrimination” as equal treatment when the law requires special kinds of unequal treatment. Nonetheless, defining equal treatment as “discrimination” does not make it the psychological or dignitary equivalent of differential treatment. In some respects claiming Laufer suffered the same harm from knowing there was a technical violation of a DOJ regulation that a young black person suffered when refused service in a diner is offensive. Defining equal treatment as discrimination does not make it so; indeed, one of the reasons Congress had to put in place standards that require special treatment for the disabled is that there is no historical precedent for equal treatment being actionable.

I don’t know how the Supreme Court will come down on these arguments, but there is an obvious way to preserve tester standing without supporting the current litigation industry based on testing. Simply hold, consistent with earlier precedent, that differential treatment causes a concrete and particularized harm to those who experience it. At the same time being exposed to some failure to satisfy the thousands of pages of technical regulations that define the inequality of treatment required to give those with disabilities equal opportunity only constitutes an injury to those who have a reason to care. Those who suffer from differential treatment suffer a concrete and particularized harm; those who merely see a violation of a highly technical regulation suffer no harm at all.

+++++++++++++++++++++++++++++++++++++++

¹  This very abbreviated explanation is bound to miss all the subtleties, but those interested can download all the briefs in the Acheson Hotels case from the Supreme Court’s website.

 


Share

Acheson Hotels: tester standing at the crossroads part 1.

By in Accessibility Litigation Trends, ADA - drive-by litigation, ADA - Hotels, ADA - serial litigation, FHA, FHA design/build litigation Tags: , , ,

Now that everyone (and I mean everyone¹ ) has weighed in on tester standing as presented to the Supreme Court in Acheson Hotels v Laufer I thought I might as well try to explain the issue for those who don’t live and breathe disabilities rights litigation.

In my next blog I’ll look at the legal arguments about tester standing, but first I want to talk about a more practical question. Why did this case generate 16 amicus briefs filed by a total of 47 organizations?  The legal questions are fascinating, but the intense interest in the case has nothing to do with those questions. It stems instead from the way tester standing has developed since the 1960’s from being a useful tool to root out discrimination into the fuel driving a new kind of industrial litigation in the 1990’s.

To start at the beginning, “tester standing” is the shorthand description of individuals who seek out discrimination so they can enforce the civil rights laws. There is no question that the government can enforce its laws – that’s what the Department of Justice does. Congress however believed that to get rid of discrimination would require more lawsuits than the DOJ had time and resources to file, so it created private rights of action under those laws, turning enforcement over to the private sector. Testing is done by  individuals and organizations that enlisted in what Congress called an “army of private attorneys’ general” to enforce the civil rights laws.

Of course there were victims who got drafted into this army because they couldn’t rent the apartment they wanted or get the job the deserved.  Unfortunately, individuals of the kind who certainly suffer from discrimination cannot be relied upon to file a lawsuit, especially when, as is the case with the ADA, there is nothing in it for them. In addition, relying on random acts of discrimination to generate enforcement actions might not result in rational enforcement, especially when the discrimination is subtle. You can’t fight an effective war against discrimination relying on the individual choices of victims of discrimination.

The solution, developed long before any disability rights laws were passed, was the use of mercenaries, more politely called testers². Testers would go out and pretend to be interested in buying or renting or patronizing a business to see how they were treated. In the pre-disability rights era this typically meant seeing whether a white tester and a Black or Hispanic tester were treated differently. By the time the ADA and FHA were passed in the late 1980’s and early 1990’s testing was very widely used by civil rights organizations to find and prosecute discriminatory conduct and had the imprimatur of the Supreme Court in the Havens case.³

Any tool that can be used can also, it turns out, be misused. Very soon after the ADA was passed lawyers realized that testing represented a great opportunity to generate lawsuits and legal fees. Why wait for someone to get hit by a car or slip on a spilled carton of milk at Walmart when you could simply persuade a disabled plaintiff to look for litigation as a tester? As a bonus the ADA and FHA included a unique kind of no-fault discrimination; the failure to design and build housing or business establishments to a set of complex design standards. And the FHA disability discrimination provisions included a right to accommodation that required only being treated badly, regardless of whether others were treated badly. Testers no longer needed to go out in pairs looking to be treated differently. Instead, a single disabled tester could drive around looking for a lack of accessible parking or similar obvious design/build violations and then file suit. In the FHA context they could just call landlords, ask a few questions, and hope for a wrong answer. After the Department of Justice announced that it believed the ADA covered the internet testing became even easier. There was no need to drive anywhere or even make a phone call – a disabled tester could roam the internet looking for inaccessible websites from the comfort of their living room.

Tester standing was not a fan favorite of businesses before the ADA and FHA disability rights provisions were passed, but after Havens there wasn’t a huge effort to oppose it. After all, it is hard to be against a system that generates a relatively small number of lawsuits against obvious racists, which is what most testing did. Disability rights testing, on the other hand, soon generated a lot of criticism. The design/build requirements are not always obvious and liability does not depend on fault. In fact, for the internet there are still no legal standards so even a business that wants to have an accessible website doesn’t know exactly what the law requires. The people getting sued under the disability rights provisions of the ADA and FHA were not evil; they were negligent. More important, traditional testing was relatively time consuming and expensive, so the number of lawsuits generated was relatively small. ADA testing was quick and cheap – a single plaintiff could generate a dozen lawsuits a day. The only limit on quantity was what the lawyer could afford to pay in filing fees.

Industrial scale litigation of the kind practiced by ADA litigation specialists was obviously problematic. While the lawyers portrayed themselves as advocates for the disabled they very often just took the money and ran, making no effort to make sure the problem that triggered the lawsuit was ever fixed. Also, because the litigation model involved settling for a small enough amount that a defense was senseless, ADA plaintiffs filed suit over trivial technical violations of the design standards that made little or no difference to the disabled.

That brings us back to the intense interest in Acheson Hotels. The Appellee, Deborah Laufer, is not an attractive litigant. She has filed thousands of lawsuits against hotels she never plans to visit for the profit of her lawyers and very likely herself. She even abandoned this lawsuit when she feared she might lose, hoping to preserve her right to sue in the different courts that have allowed her to file suit. Unfortunately, this unattractive plaintiff is the standard bearer for tester standing, on which the civil rights community relies for its legitimate efforts to combat real discrimination.(4) The amicus briefs reflect on one side the business community’s concern with the amounts of money being spent on litigation of no obvious merit and, on the other, the concern of the civil rights community that it may lose a very effective tool simply because a group of mostly unscrupulous lawyers are abusing tester standing for their own profit.

However, just as the rain falls on the just and unjust alike, the legal principles that govern tester standing do not take into account whether it is used for the public good or misused for private profit. In my next blog I’ll look at those legal arguments.

+++++++++++++++++++++++++++++++++++++++++

¹ The following is a list of the parties who have filed amicus briefs in Acheson Hotels, LLC v. Laufer. The United States represents every citizen, so “everybody” is literally true.

For Petitioner Acheson Hotels

  1. Retail Litigation Center, Inc.
  2. National Retail Federation
  3. Chamber Of Commerce of The United States of America
  4. American Resort Development Association
  5. American Bankers Association
  6. ICSC
  7. Atlantic Legal Foundation
  8. DRI Center for Law and Public Policy
  9. Restaurant Law Center
  10. American Hotel & Lodging Association
  11. National Federation of Independent Business Small Business Legal Center, Inc.
  12. RI Hospitality Association
  13. Puerto Rico Restaurant Association/Asociación De Restaurantes De Puerto Rico
  14. New Hampshire Lodging & Restaurant Association
  15. Massachusetts Restaurant Association
  16. Hospitality Maine
  17. Center for Constitutional Responsibility
  18. Buckeye Institute
  19. Maine Policy Institute
  20. Job Creators Network Foundation
  21. National Real Estate Investors Association,
  22. Ohio Hotel and Lodging Association
  23. National Association of Home Builders of the United States

For neither party

            United States of America

For Respondent Deborah Laufer

  1. NAACP
  2. American Civil Liberties Union Foundation
  3. American Civil Liberties Union Foundation of Maine
  4. National Women’s Law Center
  5. Impact Fund
  6. Lawyers Committee for Civil Rights Under Law
  7. Lambda Legal Defense and Education Fund
  8. Howard University School of Law Civil Rights Clinic
  9. Constitutional Accountability Center
  10. National Fair Housing Alliance and it 50 member organizations
  11. Antidiscrimination Law Scholars
  12. Public Citizen
  13. Massachusetts,
  14. Connecticut
  15. The District Of Columbia
  16. Illinois
  17. Maryland
  18. New Jersey
  19. New York
  20. Oregon
  21. Washington
  22. Philip L Schuler, Jenny Rodriquez-Fee and Michael M. Epstein in ass’n with Amicus Project at Southwestern Law School
  23. Disability Rights Education and Defense Fund

²  I should emphasize that many testers are volunteers working for legitimate civil rights organizations, including those who filed amicus briefs. They are mercenaries only in the sense that they signed up for the fight. This is not true, however, of many of the “testers” who file industrial scale lawsuits of the kind I discuss in this blog. Tester standing makes allies of the purely noble and the purely greedy.

³ I have had a thing or two to say about Havens. See, among others, ADA serial litigation – will the Supreme Court cut off the head of this snake?

Stigmatic Injury, how the 11th Circuit got it wrong

Laufer v Looper – the death of tester standing

Laufer v Looper Ch. 2

(4) The division between the legitimate and (in my view) illegitimate uses of the ADA and FHA is not as black and white as this makes it seem. Many legitimate civil rights organizations believe there is no such thing as a bad tester or a misuse of the ADA and FHA. In their view all discrimination is intentional and evil and those who fail to maintain a 2% or less slope in accessible parking are no different than the landlord who refuses to rent to blacks.


Share

California versus the Constitution – who can regulate internet accessibility?

By in Accessibility Litigation Trends, ADA Internet, ADA Internet Web, ADA Website Accessibility Tags: , ,

picture of the opening paragraph of the U.S. ConstitutionSeveral other sources have reported on recent legislation in California that would establish WCAG 2.1 AA as the minimum accessibility requirement for websites that do business in California.¹ The bill is a disaster in many ways, but rather than look at its many individual flaws I think it is useful to ask whether the entire law is invalid as an improper attempt to regulate interstate commerce. That’s right, the “dormant commerce clause” could make this and any similar effort by other states invalid.

The dormant commerce clause, for those who did not take Constitutional Law at some point in their lives, is a kind of mirror image of the Commerce Clause. The Commerce Clause – Article 1, Section 8, Clause 3 of the U.S. Constitution – gives Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” The dormant commerce clause interprets this to mean that states cannot make laws that excessively burden interstate commerce; that is, only Congress can regulate interstate commerce and state laws that have the effect of regulating it are not valid.

The reach of the dormant commerce clause has been the subject of many Supreme Court decisions, so summarizing its reach is almost impossible. However, it would seem that it certainly includes any effort by the states to establish minimum accessibility requirements for websites. Here’s what the Supreme Court observed in 1989 about the dormant commerce clause:

First, the “Commerce Clause … precludes the application of a state statute to commerce that takes place wholly outside of the State’s borders, whether or not the commerce has effects within the State,” . . . and, specifically, a State may not adopt legislation that has the practical effect of establishing “a scale of prices for use in other states,” . . . Second, a statute that directly controls commerce occurring wholly outside the boundaries of a State exceeds the inherent limits of the enacting State’s authority and is invalid regardless of whether the statute’s extraterritorial reach was intended by the legislature. The critical inquiry is whether the practical effect of the regulation is to control conduct beyond the boundaries of the State . . . . Third, the practical effect of the statute must be evaluated not only by considering the consequences of the statute itself, but also by considering how the challenged statute may interact with the legitimate regulatory regimes of other States and what effect would arise if not one, but many or every, State adopted similar legislation. Generally speaking, the Commerce Clause protects against inconsistent legislation arising from the projection of one state regulatory regime into the jurisdiction of another State.

Healy v. Beer Inst., Inc., 491 U.S. 324, 336 (1989). Taking these up one at a time, the California bill would certainly affect commerce taking place outside the State of California, not only because it regulates websites that are available in other states, but also because it regulates the design and development of websites that might take place outside the State of California. More important, the bill will almost certainly interact with the legitimate regulatory regimes of other States, because if California can decide what it means for a website to be accessible then other States can certainly do the same. Websites would potentially be subject to fifty different accessibility standards as well as whatever regulatory standard the Department of Justice ultimately chooses for the ADA.
Despite the obvious extraterritorial effects of internet regulation the Ninth Circuit and other courts have suggested the dormant commerce clause does not forbid such regulations. In Greater Los Angeles Agency on Deafness, Inc. v. Cable News Network, Inc., 742 F.3d 414, 433 (9th Cir. 2014) the Court held that even if California’s Disabled Persons Act required captioning videos on the internet the law did not interfere with interstate commerce because:

Even though CNN.com is a single website, the record before us shows that CNN could enable a captioning option for California visitors to its site, leave the remainder unchanged, and thereby avoid the potential for extraterritorial application of the DPA.

This followed the rationale in one of the very first internet accessibility cases, Natl. Fedn. of the Blind v. Target Corp., 452 F. Supp. 2d 946, 961 (N.D. Cal. 2006). The assumption in both cases is that because websites can be targeted to particular geographic areas any website owner can comply with a state regulation by just creating a separate website for that state..
Despite the notion that websites can simply target their content to particular states courts have held that content regulation violates the dormant commerce clause. For example, a Vermont law forbidding internet transmission of pornography to minors violated the dormant commerce clause because, given the interstate nature of the internet, it inevitably regulated activities that were wholly outside the state. Am. Booksellers Found. v. Dean, 342 F.3d 96, 104 (2d Cir. 2003).  The same was true of a California law that forbade the display of information about state legislators on websites that were run and viewed outside the state. Publius v. Boyer-Vine, 237 F. Supp. 3d 997, 1023 (E.D. Cal. 2017).
The difference in these two lines of cases seems to be whether the court has a real appreciation of just how expensive it would be to create fifty different websites to comply with fifty different sets of state regulation and then make sure that users in one state only had access to their state’s website. While that might be possible for CNN or Target, it certainly isn’t possible for the hundreds of thousands of small e-commerce websites and blogs run by individuals or small businesses that do not have the resources to make one website perfectly conform to WCAG 2.1 AA, let alone make sure that their non-conforming website could not be reached by someone in California. The internet has, in many ways, begun to erase the difference between local and interstate commerce that is central to the analysis of commerce clause issues and it has done so for businesses with very small amounts of revenue. As a practical matter regulating internet accessibility is always going to be a burden on interstate commerce that has the potential to destroy hundreds of thousands of businesses.
This doesn’t mean accessibility regulation is impossible; only that it has to be the exclusive province of Congress or the DOJ and that it must be implemented with sensitivity to the costs it imposes on small internet businesses.²  There isn’t any evidence that DOJ is capable of such sensitive regulation, but the pending bill in California proves that state legislatures certainly cannot do so.

++++++++++++++++++++++++++++++++++++++++++++

¹ The most thorough analysis is found in “New California Assembly Bill on Website Accessibility Could Result in a Lawsuit Tsunami” published by Seyfarth Shaw.

² There is an argument to be made that the ADA will preempt any state laws concerning website accessibility as soon as DOJ adopts accessibility standards applicable in all fifty states. That argument seems to be at least a few years away given DOJ’s very slow movement toward adoption such regulations.


Share

Georgia Court of Appeals rejects HUD’s position on pet fees

By in FHA, FHA Emotional Support Animals, FHA Reasonable Accommodation Tags: , , , ,

HUD has consistently taken the position that a landlord can never charge pet rent or a pet deposit for a service or assistance animal.¹ It is not a position that makes any sense although HUD has held it for a long time.² In Leslie v. 1125 Hammond, LP, 2023 WL 3858575 (Ga. App. June 7, 2023) the Georgia Court of Appeals explains why the position is wrong:

As an initial matter, it appears that Leslie has failed to show that his requested accommodation to waive the pet fees for his dog was “necessary to afford him an opportunity to use and enjoy his dwelling.” . . . . A “necessary” accommodation is one that “alleviates the effects of a disability,” and a plaintiff must “show, at a minimum, that the accommodation affirmatively enhances his quality of life by ameliorating (or reducing) the effects of his disability.” . . . . Here, Leslie’s requested accommodation was not itself to have a service dog (as that was apparently already allowed), but he instead requested that Sync Residential waive any relevant pet fees for the dog. Leslie has not shown that waiving the pet fees would itself “alleviate the effect of his disability” any further than the benefit already provided by having the service dog.  . . . Leslie has not pointed to evidence that he lacks the reasonable financial capability to pay the pet fees, whether because of his disability or otherwise.4  . . .  Thus, it appears that Leslie has failed to show that his request to waive the pet fees was necessary to accommodate his PTSD.
The Georgia Court is not the first to make the common sense argument that waiver of a pet deposit should only be required if it is necessary for the equal use and enjoyment of a dwelling.³ In U.S. v. Barber, 2014 WL 4988200, at *8 (W.D. Wash. Oct. 7, 2014) for example, the court rejected the notion that waiver of a pet deposit was required as a matter of law, finding that whether an accommodation was necessary depended on the facts of each case.
The analysis for waiving pet rent or pet deposits as an accommodation is simple. An accommodation is necessary if without it the tenant cannot equally use and enjoy their apartment. If everyone else pays a pet deposit then for the disabled tenant to pay a pet deposit is equality, not discrimination. Saying that an assistance animal is not a pet is just word play – the landlord can call it an animal deposit and the argument disappears. In addition, HUD admits the tenant is required to pay for damage caused by the animal, which is what a pet deposit and pet rent are supposed to cover. If the tenant has to pay for damage why not require the tenant to pay a deposit to cover future damage? A tenant with an assistance or service animal may as a matter of fact need an accommodation with respect to pet fees, but that cannot be said to be universally true.
It isn’t clear what rationale HUD has for its position. Perhaps since 66% of American households include a pet(4) this just reflects the fact that a majority of HUD’s regulators are pet lovers and can’t imagine why landlords want a deposit in the first place. It is almost certain that no one involved in the various non-binding guidances published by HUD has any experience with the costs landlords incur when badly behaved pets ruin carpets and sheet rock or with the practical reality that a landlord simply cannot recover losses from a tenant who has already moved out because renters are generally transient and rarely possessed of substantial assets that are subject to execution.
Most important though, HUD cannot seem to grasp the fact that treating those with disabilities as if they are, by definition, incapable of paying pet fees that those without disabilities routinely pay, is the worst kind of insult. Those with disabilities may need accommodations directly related to their disability, but they do not need to be treated like helpless children who are unable to manage ordinary financial obligations like pet rent and pet deposits. Treating those with disabilities as equals means starting with the assumption that they are equal in every respect except their specific disability. The “no pet fee” rule does exactly the opposite.

+++++++++++++++++++++++++++++++++++++++++++++++++++

¹ The latest formal statement in found in FHEO 2020-1, “Assessing a Person’s Request to Have an Animal as a Reasonable Accommodation Under the Fair Housing Act.”

² See, Joint Statement of the Department of Housing and Urban Development and the Department of Justice, Reasonable Accommodations Under the Fair Housing Act (“Joint Statement”), Q and A 11 (May 17, 2004),  

³ See my blog: Unconventional wisdom concerning pet deposits under the Fair Housing Act.

(4) See, Forbes, Pet Ownership Statistics and Facts in 2023.


Share

Indemnity and Contribution under the Fair Housing Act

By in FHA, FHA design/build litigation, FHA indemnity contribution, FHA Insurance, Uncategorized Tags: , , , ,

A recent decision from the Northern District of New York has  a useful summary of the law of contribution and indemnity in Fair Housing Act cases. Clover Communities Beavercreek, LLC et al v. Mussachio Architects P.C. et al, 2023 WL 3864965 (N.D.N.Y. June 7, 2023). For the plaintiffs, who were developers and owners, there is a happy ending, but the sunny result is shadowed by an important mistake carried on from earlier cases. Before we get there, a little backgound is in order.¹

The FHA establishes accessibility standards for multi-family housing. It is illegal to fail to design or construct multi-family housing that does not meet those standards. The parties that can be liable for this kind of illegal contract are the architect, the general contractor (and perhaps subcontractors) and the owner. Among these three parties  liability may or may not overlap. It is not uncommon for the plans to be wrong, for the general contractor to have made mistakes on things where the plans were correct and for the owner to have ignored the need for accessible design altogether.

In ordinary construction defect cases, liability is divided among these parties based on state law rules of contribution and indemnity. With contribution liability is shared based on the relative degree of fault. With indemnity one party takes all the liability.  These are matters of state law, not federal law, and they vary from state to state. It is also common for these parties to agree among themselves on who will be liable for what. This is especially true where everyone has insurance and dividing up the insurance coverage makes sense.

This very common division of liability is a source of disagreement in cases brought for violations of the FHA’s design and construction rules. Some courts hold that one of the liable parties – usually the owner or developer – cannot transfer their liability to another party even if that party is completely at fault for the design/build failure. This is directly contrary to the state law principle that every party bears their fair share of the liability, or at least the share they agreed to bear in a contract.

This brings us to Judge Sannes’ opinion in Clover  Communities. She begins with a look at Equal Rights Center v. Niles Bolton Associates, 602 F.3d 597 (4th Cir. 2010), the leading case on this subject.² In Niles Bolton the Forth Circuit considered what would happen in the very common situation in which the owner blames the architect because the plans were defective. Although the Fourth Circuit didn’t say it quite this directly, it held that the FHA preempted all state law indemnity claims because the purpose of the FHA was to punish people who made mistakes and if you could escape punishment you would not be incentivized to do better in the future. Shifting liability based on indemnity would undermine the FHA and so any state law of indemnity had to yield to the punitive purpose of the FHA’s liability provisions. The innocent owner has to pay 100% of the loss caused by the guilty architect to encourage the owner to be more careful in the future.

This decisions was limited to indemnity; that is, shifting 100% of the loss to someone else. Contribution – shifting only part of the loss – was not addressed. However, after the decision in Niles Bolton a number of district courts extended this rationale to contribution claims, holding they were preempted as well. Under these cases, the owner could not shift even a small part of the liability to the responsible parties. Based on these decisions the plaintiffs in Clover Communities, who were owners and developers suing the designers of the various apartment complexes, would be out of luck and have to bear the entire loss.

Recognizing that Niles Bolton was really only about transferring liability through indemnity rather than sharing liability through contribution Judge Sannes next turned to the Ninth Circuit’s decision in City of Los Angeles v. AECOM Servs., Inc., 854 F.3d 1149, 1161 (9th Cir. 2017). In City of Los Angeles the City was sued because some of its facilities were not accessible. Those not accessible facilities were built or designed by AECOM and so the City filed a third-party complaint seeking to make it pay for its failures. Rejecting Niles Bolton the Ninth Circuit pointed out that the City had to rely on third parties and shifting their share of the blame to them was likely to make them more cognizant of their own obligations under the ADA. It was good for ADA compliance to make those responsible for design and construction liable for their mistakes.

Judge Sannes agreed with the reasoning in City of Los Angeles with respect to contribution under general state laws. As long as the plaintiff is not seeking to recover 100% of what it costs them to comply with the FHA, then bringing in all the responsible parties encourages everyone involved to be more careful about their FHA obligations in the future. The Judge writes, citing City of Los Angeles, that if the FHA preempted contribution claims this would reduce the “incentives to comply with the FHA, which in turn frustrates the objective of the Act to provide fair housing, including by designing and constructing multifamily dwellings in accordance with the Act’s accessibility guidelines.”  2023 WL 3864965, at *7.

So much for claims created by state law. Judge Sannes then turned to claims for breach of contract and architectural malpractice. Here she observes an important distinction between the breach of contract claims and the malpractice claims. An architect or contractor can breach their contract in ways that have nothing to do with the FHA. For those claims the entire question of what the FHA can or should allow don’t matter. Those claims were not subject to dismissal. Finding that the breach of contract claims included some non-FHA claims, the judge kept them alive.³

She reached a different result with the architectural malpractice claims because she found they were based entirely on the FHA defects and did not shift only some, but rather all of the liability to the architect. Going back to the standard in Niles Bolton, she found that these were indemnity claims and were preempted by the FHA.

The opinion in Clover Communities leads the reader through all the steps and the most important cases analyzing contribution and indemnity for claims arising out of FHA design and construction failures. Based on Clover Communities and similar cases the rules for contribution and indemnity in FHA design build cases are simple. If the claimant seeks to shift all of its liability to the architect or contractor or some other party they cannot do so, even if they have a contract. These are indemnity claims and they are preempted by the FHA. If, on the other hand, the claimant only seeks to share liability then the claims are for contribution and are not preempted. Finally, of course, if the claims are not based on an FHA design/build failure then the FHA simply is not in play, regardless of whether the claim is for contribution or indemnity.

Clover Communities provides a good outline of the law, but never asks whether the Niles Bolton rule about indemnity makes sense. Niles Bolton relied on the notion that a property owner has a “non-delegable duty” not to discriminate and that even an innocent owner can be liable for the acts of its agents. It took this notion from a housing sex discrimination case, Walker v. Crigler, 976 F.2d 900 (4th Cir. 1992).  In Walker v. Crigler both the owner and the owner’s agent were sued. The owner’s agent was found liable but the owner was not because the jury found the agent engaged in discrimination without the owner’s knowledge or authority. Under traditional common law rules an owner is only liable for the agent’s misconduct if it was authorized, and in this case it was not. The Fourth Circuit said traditional rules do not apply in sex discrimination cases. It said the owner was also liable because as between the innocent owner and the innocent renter it made sense for the owner to “bear the burden” of the harm the renter suffered. The owner was responsible for his agents even if he not not authorize them to discriminate. The Fourth Circuit cited a number of situations in which an owner is liable for the unauthorized misconduct of its agents to support this idea.

Walker v. Criger is a poor analog for the design/built discrimination at issue in Niles Bolton. First, and most important, in Walker v Criger both the agent and the landlord were sued.The agent was found liable and presumably had to pay the judgment against her. Under common law rules when there is a judgment against two individuals and only one is at fault then the party who is not at fault can usually recover what they have to pay from the other party. In other words, the agent wasn’t going to get off the hook just because the owner might also be liable. The court did not hold that the person who is primarily responsible for discrimination  should be exempt from liability just because of the plaintiff’s choice of whom to sue.

Equally important, the discrimination in question is a kind that any landlord can know and understand. The landlord can can “control the acts of the agent” with respect to sex discrimination because the landlord knows what it is and how to forbid it. In a design/build case the owner cannot meaningfully “control the acts” of the architect and contractor; indeed, they are hired precisely because the design and construction of an apartment complex requires specialized skills and knowledge the owner does not have. If a leasing agent tells the owner she isn’t going to lease to an unmarried mother the owner knows it is wrong. If an architect gives the owner dozens of drawings to review the owner is not likely to know that the toilet centerline must be 18″ from the adjacent wall, or that there must be blocking in the walls behind the shower for future grab bars. The best an owner can do is hire another expert to check the work of the first, but under Niles v Bolton that second expert also cannot be sued for doing a bad job. In a design/build case the only way an owner can try to insure the architect and contractor do a good job is by making them contractually liable for their mistakes, but that is the very thing Niles v. Bolton says the owner cannot do.

Most important though, the rule in Niles v Bolton tends to discourage rather than promote accessibility because it insulates the most responsible parties from liability rather than exposing them to it. In Walker v Criger and other similar cases holding the owner liable expanded the reach of the Fair Housing Act. Niles v Bolton reduced the reach of the FHA, leaving decisions about who would be liable in the hands of private plaintiffs whose personal incentives might have nothing to do with improving the accessibility of multi-family housing. Punishing the innocent, which is what Niles v. Bolton certainly does, cannot be justified if the result is to leave the guilty untouched.

+++++++++++++++++++++++++++++++++++++++++++++++++

¹  I’ve written about this before. See, Contribution, Indemnity and Disability – Does the FHA make sense?, What were they thinking? Indemnity and accessibility under the ADA and FHA

² That is a little bit of an oversimplification. She begins by noting that the FHA itself has no right of indemnity or contribution, something on which there appears to universal agreement. With federal contribution or indemnity out of the way she only has to deal with claims arising out of state law.

³ You may wonder why anyone would care about breach of contract if state law contribution gets the same thing. The reason is probably attorneys’ fees, which are usually not awarded in cases brought under state law contribution statutes and often are provided for in contracts.


Share
1 2 3 4 5 >»