{"id":2855,"date":"2016-04-05T18:05:27","date_gmt":"2016-04-05T18:05:27","guid":{"rendered":"https:\/\/accessdefense.com\/?p=2855"},"modified":"2016-04-09T00:28:17","modified_gmt":"2016-04-09T00:28:17","slug":"successor-liability-under-the-fair-housing-act-new-law-that-matters","status":"publish","type":"post","link":"https:\/\/accessdefense.com\/?p=2855","title":{"rendered":"Successor liability under the Fair Housing Act &#8211; New Law that Matters"},"content":{"rendered":"<p><a href=\"https:\/\/accessdefense.com\/wp-content\/uploads\/2016\/04\/Screen-Shot-2016-04-05-at-12.18.41-PM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignleft size-medium wp-image-2856\" src=\"https:\/\/accessdefense.com\/wp-content\/uploads\/2016\/04\/Screen-Shot-2016-04-05-at-12.18.41-PM-300x212.png\" alt=\"Screen Shot 2016-04-05 at 12.18.41 PM\" width=\"300\" height=\"212\" srcset=\"https:\/\/accessdefense.com\/wp-content\/uploads\/2016\/04\/Screen-Shot-2016-04-05-at-12.18.41-PM-300x212.png 300w, https:\/\/accessdefense.com\/wp-content\/uploads\/2016\/04\/Screen-Shot-2016-04-05-at-12.18.41-PM.png 414w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a>We&#8217;ve blogged more than once about the ongoing question of whether a current owner of a property built after the FHA guidelines became effective can be liable under the design\/build provisions of the Fair Housing Act. (Click, <a title=\"A victory for common sense: 11th Circuit FHA ruling rejects subsequent owner liability in multi-family housing\" href=\"https:\/\/accessdefense.com\/?p=702\" target=\"_blank\">here<\/a>, and\u00a0<a title=\"FHA liability for subsequent purchasers \u2013 what\u2019s next?\" href=\"https:\/\/accessdefense.com\/?p=533\" target=\"_blank\">here<\/a>). A March 31, 2016 decision from the United States District Court for the District of Maryland (<em>Equal Rights Center v. Equity Residential,\u00a0<\/em>Case No. 1:06-cv-01060-CCB, Document 283) adds some important clarity to this issue, but not without raising other issues.<\/p>\n<p>In\u00a0<em>Equal Rights Center<\/em> the first issue the Court considered was whether various entities that were successors to the original owner and builder could be liable under the design\/build provisions of the FHA. The Court looked at two theories; veil piercing and successor liability, to decide based on undisputed facts that some could and some couldn&#8217;t. Where there was liability the Court found that the predecessor was:<\/p>\n<ul>\n<li>merely an agency or instrumentality of the current owner, giving rise to veil piercing, and\/or<\/li>\n<li>part of a continuous enterprise giving rise to successor liability<\/li>\n<\/ul>\n<p>In every case the Court applied federal common law. As it applied the law, the effects on traditional development structures is dramatic:<\/p>\n<p>First, the Court found that when the ownership of a property owning entity\u00a0changed the entity had successor liability, apparently to itself. This analytical step is puzzling since the property owning entity did not change and would, under traditional standards, continue to be liable regardless of any changes in ownership.<\/p>\n<p>Next, if the original property owner was a typical subsidiary or subsidiary of a subsidiary of the ultimate corporate owner the Court concluded that veil piercing was always appropriate. The Court explained this holding as follows:<\/p>\n<p style=\"padding-left: 30px;\">It would be fundamentally unfair to limit liability to these entities which serve as nothing more than vehicles for holding Equity\u2019s property assets. Further, it would frustrate the purpose of the FHA\u2019s broad remedial scheme* to allow Equity to escape liability simply because it established separate subsidiaries to hold each of its properties.<\/p>\n<p>The Court did not require any element of fraud or misuse of the corporate structure, both\u00a0of which are the typical hallmarks of veil piercing. Instead it applied\u00a0&#8220;no fault&#8221; veil piercing in which the subsidiary structure is simply disregarded\u00a0for public policy reasons.<\/p>\n<p>Moreover, the Court refused to consider the implications of the timing of control; that is, the Court looked at control of the property owning subsidiary not at the time of construction, but rather at the time Equity obtained complete control by buying out its development partner. Under these holdings\u00a0the ultimate corporate owner of any traditional development subsidiary or partnership will always be liable for its subsidiary&#8217;s FHA violations. \u00a0This\u00a0denies developers any protection from the FHA through the use of typical development structures that suffice with respect to every other kind of liability.<\/p>\n<p>The second important holding from the Court is that violations of the statute will be measured by a purely objective standard; that is, the FHA Design Manual or one of the other safe harbors in the statute. This is appropriate, the Court held, because:<\/p>\n<p style=\"padding-left: 30px;\">requiring a plaintiff to make an ill-defined subjective showing of inaccessibility\u2014that is, allowing a defendant to escape liability simply by showing that <i>some <\/i>disabled persons can access a property\u2014cuts against the \u201cbroad remedial intent of Congress embodied in the [FHA]&#8221;<\/p>\n<p>In keeping with this holding the Court rejected evidence from two\u00a0experts that the property was in fact accessible, choosing a regulatory theory over actual facts. This holding\u00a0means that the standards intended by Congress to be a safe harbor standard have been converted into a national building code for multi-family housing, which Congress certainly did not intend. \u00a0In short, the FHA is not an anti-discrimination law; it is a building code that applies regardless of whether any disabled person is ever affected.**<\/p>\n<p><em>Equal Rights Center v. Equity Residential\u00a0<\/em>was first filed in 2006, and it seems reasonable to conclude that the defendant is not simply going to give up after 10 years of litigation in the District Court. It therefore remains to be seen whether the 4th Circuit will agree with any of the District Court&#8217;s departures from traditional legal principles. One thing, however, is certain. There will be more litigation, and plaintiffs will not be deterred from suing the ultimate parent entities by the ownership structures created to insulate the ultimate owners from liability of all kinds.<\/p>\n<p>*&#8221;broad remedial scheme&#8221; is, in general, a phrase used by courts just before they throw out the actual words of the statute in favor of enforcing the law the court believes Congress should have written.<\/p>\n<p>**As recently as March 23, 2016 another\u00a0Court found that disputes about actual accessibility despite deviations from the safe harbors created a fact issue:<\/p>\n<div style=\"padding-left: 30px;\">For each deviation from the safe harbors, Wales and Sheriff have proposed that no obstacle to accessibility was created. As such, there remain genuine issues of material of fact as to whether any deviation from the safe harbors resulted in a violation of the FHA and its standards.<\/div>\n<div style=\"padding-left: 30px;\"><\/div>\n<div><em>United States v. Noble Homes, Inc.<\/em>, 2016 WL 1162114, at *6 (N.D. Ohio Mar. 23, 2016). This results from application of the statutory language and the express intent of Congress instead of a\u00a0desire to make it easier for plaintiffs to prove violations of the FHA because it it might\u00a0be good policy to do so.<\/div>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<script type=\"text\/javascript\" src=\"http:\/\/platform.linkedin.com\/in.js\"><\/script><script type=\"in\/share\" data-url=\"https:\/\/accessdefense.com\/?p=2855\"><\/script><br \/>","protected":false},"excerpt":{"rendered":"<p>We&#8217;ve blogged more than once about the ongoing question of whether a current owner of a property built after the FHA guidelines became effective can be liable under the design\/build provisions of the Fair Housing Act. (Click, here, and\u00a0here). A March 31, 2016 decision from the United States District Court for the District of Maryland [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_seo_schema_type":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_wpcom_ai_launchpad_first_post":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[2,7,21,30],"tags":[186,185,187,72,188],"class_list":["post-2855","post","type-post","status-publish","format-standard","hentry","category-accessibility-litigation-trends","category-ada-fha-litigation-general","category-fha","category-multi-family","tag-alter-ego","tag-apartment-developers","tag-corporate-veil","tag-fha-litigation","tag-successor-liability"],"jetpack_shortlink":"https:\/\/wp.me\/p2BooO-K3","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/accessdefense.com\/index.php?rest_route=\/wp\/v2\/posts\/2855","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/accessdefense.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/accessdefense.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/accessdefense.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/accessdefense.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2855"}],"version-history":[{"count":8,"href":"https:\/\/accessdefense.com\/index.php?rest_route=\/wp\/v2\/posts\/2855\/revisions"}],"predecessor-version":[{"id":2874,"href":"https:\/\/accessdefense.com\/index.php?rest_route=\/wp\/v2\/posts\/2855\/revisions\/2874"}],"wp:attachment":[{"href":"https:\/\/accessdefense.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2855"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/accessdefense.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2855"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/accessdefense.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2855"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}