United States v. Starrett City Associates, Starrett City, Inc., Delmar Management Company , 840 F.2d 1096 ( 1988 )

MINER, Circuit Judge:

The United States Attorney General, on behalf of the United States (“the government”), commenced this action under Title VIII of the Civil Rights Act of 1968 (“Fair Housing Act” or “the Act”) against defendants-appellants Starrett City Associates, Starrett City, Inc. and Delmar Management Company (collectively, “Starrett”) in the United States District Court for the Eastern District of New York (Neaher, J.). The government maintained that Starrett’s practices of renting apartments in its Brooklyn housing complex solely on the basis of applicants’ race or national origin, and of making apartments unavailable to black and hispanic applicants that are then made available to white applicants, violate section 804(a), (b), (c) and (d) of the Act, 42 U.S.C. § 3604(a) (d) (1982).

The parties made cross-motions for summary judgment based on extensive documentary submissions. The district court granted summary judgment in favor of the government and permanently enjoined appellants from discriminating on the basis of race in the rental of apartments. Starrett appeals from this judgment.

BACKGROUND

Appellants constructed, own and operate “Starrett City,” the largest housing development in the nation, consisting of 46 highrise buildings containing 5,881 apartments in Brooklyn, New York. The complex’s rental office opened in December 1973. Starrett has made capital contributions of $19,091,000 to the project, the New York State Housing Finance Agency has made $362,720,000 in mortgage loans, and the U.S. Department of Housing and Urban Development subsidizes Starrett’s monthly mortgage interest payments. The United Housing Foundation abandoned a project to build a development of cooperative apartments at the Starrett City site in 1971. Starrett proposed to construct rental units on the site on the condition that the New York City Board of Estimate approve a transfer to Starrett of the city real estate tax abatement granted to the original project. The transfer created “substantial community opposition” because “the neighborhood surrounding the project and past experience with subsidized housing” created fear that “the conversion to rental apartments would result in Starrett City’s becoming an overwhelmingly minority development.” United States v. Starrett City Assocs., 660 F.Supp. 668, 670 (E.D.N.Y.1987). The transfer was approved, however, “upon the assurance of Starrett City’s developer that it was intended to create a racially integrated community.” Id.

Starrett has sought to maintain a racial distribution by apartment of 64% white, 22% black and 8% hispanic at Starrett City. Id. at 671. Starrett claims that these racial quotas are necessary to prevent the loss of white tenants, which would transform Star-rett City into a predominantly minority complex. Starrett points to the difficulty it has had in attracting an integrated applicant pool from the time Starrett City opened, despite extensive advertising and promotional efforts. Because of these purported difficulties, Starrett adopted a tenanting procedure to promote and maintain the desired racial balance. This procedure has resulted in relatively stable percentages of whites and minorities living at Star-rett City between 1975 and the present. See id. at 672.

The tenanting procedure requires completion of a preliminary information card stating, inter alia, the applicant’s race or national origin, family composition, income and employment. The rental office at Star-rett City receives and reviews these applications. Those that are found preliminarily eligible, based on family composition, income, employment and size of apartment sought, are placed in “the active file,” in which separate records by race are maintained for apartment sizes and income levels. Applicants are told in an acknowledgement letter that no apartments are presently available, but that their applications have been placed in the active file and that they will be notified when a unit becomes available for them. When an apartment becomes available, applicants are selected from the active file for final processing, creating a processed applicant pool. As vacancies arise, applicants of a race or national origin similar to that of the departing tenants are selected from the pool and offered apartments.

In December 1979, a group of black applicants brought an action against Starrett in the United States District Court for the Eastern District of New York. The district court certified the plaintiff class in June 1983. Arthur v. Starrett City Assocs., 98 F.R.D. 500 (E.D.N.Y.1983). Plaintiffs alleged that Starrett’s tenanting procedures violated federal and state law by discriminating against them on the basis of race. The parties stipulated to a settlement in May 1984, and a consent decree was entered subsequently, see Arthur v. Starrett City Assocs., No. 79-CV-3096, slip op. at 1 (E.D.N.Y. April 2, 1985). The decree provided that Starrett would, depending on apartment availability, make an additional 35 units available each year for a five-year period to black and minority applicants. Id. at 10.

The government commenced the present action against Starrett in June 1984, “to place before the [cjourt the issue joined but left expressly unresolved” in the Arthur consent decree: the “legality of defendants’ policy and practice of limiting the number of apartments available to minorities in order to maintain a prescribed degree of racial balance.” United States v. Starrett City Assocs., 605 F.Supp. 262, 263 (E.D.N.Y.1985). The complaint alleged that Starrett, through its tenanting policies, discriminated in violation of the Fair Housing Act. Specifically, the government maintained that Starrett violated the Act by making apartments unavailable to blacks solely because of race, 42 U.S.C. § 3604(a); by forcing black applicants to wait significantly longer for apartments than whites solely because of race, id. § 3604(b); by enforcing a policy that prefers white applicants while limiting the numbers of minority applicants accepted, id. § 3604(c); and by representing in an acknowledgement letter that no apartments are available for rental when in fact units are available, id. § 3604(d). Because the government had refused to intervene in the Arthur suit, defendants moved to dismiss this suit as barred under the judicial estoppel doctrine. On April 2, 1985, that motion was denied. 605 F.Supp. at 265.

Following a period for taking discovery, the government moved for summary judgment on January 30, 1986. Defendants made a cross-motion for summary judgment on May 5, 1986. Extensive documentary submissions were made, and arguments on the motion were heard on August 26, 1986.

Starrett maintained that the tenanting procedures “were adopted at the behest of the [sjtate solely to achieve and maintain integration and were not motivated by racial animus.” 660 F.Supp. at 673. To support their position, appellants submitted the written testimony of three housing experts. They described the “white flight” and “tipping” phenomena, in which white residents migrate out of a community as the community becomes poor and the minority population increases, resulting in the transition to a predominantly minority community. See id. at 674. Acknowledging that “ ‘the tipping point for a particular housing development, depending as it does on numerous factors and the uncertainties of human behavior, with precision,’ ” one expert stated that the point at which tipping occurs has been estimated at from 1% to 60% minority population, but that the consensus ranged between 10% and 20%. Id. Another expert, who had prepared a report in 1980 on integration at Starrett City for the New York State Division of Housing and Community Renewal, estimated the complex’s tipping point at approximately 40% black on a population basis. Id. at 674-75. A third expert, who had been involved in integrated housing ventures since the 1950’s, found that a 2:1 white-minorFy ratio produced successful integration. See id. at 676.

The court, however, accepted the government’s contention that Starrett’s practices of making apartments unavailable for blacks, while reserving them for whites, and conditioning rental to minorities based on a “tipping formula” derived only from race or national origin are clear violations of the Fair Housing Act. The district court found that apartment opportunities for blacks and hispanics were far fewer “than would be expected if race and national origin were not taken into account,” while opportunities for whites were substantially greater than what their application rates projected. Id. at 672. Minority applicants waited up to ten times longer than the average white applicant before they were offered an apartment. Id. at 676. Starrett City’s active file was 21.9% white in October 1985, but whites occupied 64.7% of the apartments in January 1984. Although the file was 53.7% black and 18% hispanic in October 1985, blacks and hispanics, respectively, occupied only 20.8% and 7.9% of the apartments as of January 1984. Id. at 672. Appellants did not dispute this. Further, the court found that appellants’ tipping argument was undercut by the “wide elasticity of that standard” and the lack of difficulty they had in increasing their black quota from 21% to 35% “when it became necessary to avoid litigating the private Arthur lawsuit which threatened their unlawful rental practices.” Id. at 678. The court also found that Starrett violated the Act by making untrue representations of apartment unavailability to qualified minority applicants in order to reserve units for whites. Id. at 676. Finally, the court rejected Starrett’s claim that the duty imposed upon government to achieve housing integration justified its actions, stating that “[defendants cannot arrogate to themselves the powers” of a public housing authority. Id. at 678.

The court concluded that Starrett’s obligation was “simply and solely to comply with the Fair Housing Act” by treating “black and other minority applicants ... on the same basis as whites in seeking available housing at Starrett City.” Id. The court noted that Starrett did not dispute any of the operative facts alleged to show violations of the Fair Housing Act. Id. at 672, 678-79. Accordingly, Judge Neaher granted summary judgment for the government, enjoining Starrett from discriminating against applicants on the basis of race and “[requiring [them] to adopt written, objective, uniform, nondiscriminatory tenant selection standards and procedures” subject to the court’s approval. Id. at 679. The court retained jurisdiction over the parties for three years. Id.

On appeal, Starrett presses arguments similar to those it made before the district court. We affirm the district court’s judgment.

DISCUSSION

Title VIII of the Civil Rights Act of 1968 (“Fair Housing Act” or “the Act”), 42 U.S. C. §§ 3601-3631 (1982), was enacted pursuant to Congress’ thirteenth amendment powers, see Williams v. Matthews Co., 499 F.2d 819, 825 (8th Cir.), cert. denied, 419 U.S. 1021 & 1027, 95 S.Ct. 495 & 507, 42 L.Ed.2d 294 & 302 (1974); United States v. Bob Lawrence Realty, Inc., 474 F.2d 115, 120-21 (5th Cir.), cert. denied, 414 U.S. 826, 94 S.Ct. 131, 38 L.Ed.2d 59 (1973); United States v. Hunter, 459 F.2d 205, 214 (4th Cir.), cert. denied, 409 U.S. 934, 93 S.Ct. 235, 34 L.Ed.2d 189 (1972), “to provide, within constitutional limitations, for fair housing throughout the United States.” 42 U.S.C. § 3601. Section 3604 of the statute prohibits discrimination because of race, color or national origin in the sale or rental of housing by, inter alia: (1) refusing to rent or make available any dwelling, id. § 3604(a); (2) offering. discriminatory “terms, conditions or privileges” of rental, id. § 3604(b); (3) making, printing or publishing “any notice, statement, or advertisement ... that indicates any preference, limitation, or discrimination based on race, color ... or national origin,” id. § 3604(c); and (4) representing to any person “that any dwelling is not available for ... rental when such dwelling is in fact so available,” id. § 3604(d).

Housing practices unlawful under Title VIII include not only those motivated by a racially discriminatory purpose, but also those that disproportionately affect minorities. See, e.g., Robinson v. 12 Lofts Realty, Inc., 610 F.2d 1032, 1036-37 (2d Cir.1979). Section 3604 “is designed to ensure that no one is denied the right to live where they choose for discriminatory reasons.” See Southend Neighborhood Improv. Ass’n v. County of St. Clair, 743 F.2d 1207, 1210 (7th Cir.1984). Although “not every denial, especially a temporary denial, of low-income public housing has a discriminatory impact on racial minorities” in violation of Title VIII, see Arthur v. City of Toledo, 782 F.2d 565, 577 (6th Cir.1986), an action leading to discriminatory effects on the availability of housing violates the Act, see Southend Neighborhood Improv. Ass’n, 743 F.2d at 1209-10.

Starrett’s allocation of public housing facilities on the basis of racial quotas, by denying an applicant access to a unit otherwise available solely because of race, produces a “discriminatory effect ... [that] could hardly be clearer,” Burney v. Housing Auth., 551 F.Supp. 746, 770 (W.D.Pa.1982). Appellants do not contend that the plain language of section 3604 does not proscribe their practices. Rather, they claim to be “clothed with governmental authority” and thus obligated, under Otero v. New York City Housing Auth., 484 F.2d 1122 (2d Cir.1973), to effectuate the purpose of the Fair Housing Act by affirmatively promoting integration and preventing “the reghettoization of a model integrated community.” We need not decide whether Starrett is a state actor, however. Even if Starrett were a state actor with such a duty, the racial quotas and related practices employed at Starrett City to maintain integration violate the antidis-crimination provisions of the Act.

Both Starrett and the government cite to the legislative history of the Fair Housing Act in support of their positions. This history consists solely of statements from the floor of Congress. See Hunter, 459 F.2d at 210 n. 4. These statements reveal “that at the time that Title VIII was enacted, Congress believed that strict adherence to the anti-discrimination provisions of the [A]ct” would eliminate “racially discriminatory housing practices [and] ultimately would result in residential integration.” Burney, 551 F.Supp. at 769; see Rubinow-itz & Trosman, Affirmative Action and the American Dream: Implementing Fair Housing Policies in Federal Home-ownership Programs, 74 Nw.U.L.Rev. 491, 538 n. 178 (1979). Thus, Congress saw the antidiscrimination policy as the means to effect the antisegregation-integration policy. See 551 F.Supp. at 769. While quotas promote Title VIII's integration policy, they contravene its antidiscrimination policy, bringing the dual goals of the Act into conflict. The legislative history provides no further guidance for resolving this conflict.

We therefore look to analogous provisions of federal law enacted to prohibit segregation and discrimination as guides in determining to what extent racial criteria may be used to maintain integration. Both the thirteenth amendment, pursuant to which Title VIII was enacted, and the fourteenth amendment empower Congress to act in eradicating racial discrimination, Constructors Ass’n of W. Pa. v. Kreps, 573 F.2d 811, 816 n. 12 (3d Cir.1978), and both the fourteenth amendment and Title VIII are informed by the congressional goal of eradicating racial discrimination through the principle of antidiscrimination, see Kennedy Park Homes Ass’n v. City of Lackawanna, 318 F.Supp. 669, 694 (W.D.N.Y.), aff'd, 436 F.2d 108 (2d Cir.1970), cert. denied, 401 U.S. 1010, 91 S.Ct. 1256, 28 L.Ed.2d 546 (1971) (stating that each of these provisions “proscribes discriminatory conduct because of race or color”). Further, the parallel between the antidiscrim-ination objectives of Title VIII and Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2000e-17 (1982), has been recognized. See, e.g., Smith v. Town of Clarkton, 682 F.2d 1055, 1065 (4th Cir.1982). Thus, the Supreme Court’s analysis of what constitutes permissible race-conscious affirmative action under provisions of federal law with goals similar to those of Title VIII provides a framework for examining the affirmative use of racial quotas under the Fair Housing Act.

Although any racial classification is presumptively discriminatory, see Personnel Admin. v. Feeney, 442 U.S. 256, 272, 99 S.Ct. 2282, 2292, 60 L.Ed.2d 870 (1979), a race-conscious affirmative action plan does not necessarily violate federal constitutional or statutory provisions, see, e.g., United States v. Paradise, — U.S. -, 107 S.Ct. 1053, 1064, 94 L.Ed.2d 203 (1987) (plurality opinion) (fourteenth amendment); United Steelworkers v. Weber, 443 U.S. 193, 208, 99 S.Ct. 2721, 2729, 61 L.Ed.2d 480 (1979) (Title VII). However, a race-conscious plan cannot be “ageless in [its] reach into the past, and timeless in [its] ability to affect the future.” Wygant v. Jackson Bd. of Educ., 476 U.S. 267, 106 S.Ct. 1842, 1848, 90 L.Ed.2d 260 (1986) (plurality opinion). A plan employing racial distinctions must be temporary in nature with a defined goal as its termination point. See, e.g., Johnson v. Transportation Agency, — U.S. -, 107 S.Ct. 1442, 1456, 94 L.Ed.2d 615 (1987); Paradise, 107 S.Ct. at 1070; Sheet Metal Workers v. EEOC, 478 U.S. 421, 106 S.Ct. 3019, 3053, 92 L.Ed.2d 344 (1986) (fifth amendment equal protection); Fullilove v. Klutznick, 448 U.S. 448, 489, 100 S.Ct. 2758, 2780, 65 L.Ed.2d 902 (1980); Weber, 443 U.S. at 208-09, 99 S.Ct. at 2729-30; see also Jaimes v. Lucas Metropolitan Housing Auth., 833 F.2d 1203, 1208 (6th Cir.1987) (stating that affirmative integration plan for public housing authority “should end upon the [district] court’s finding that its goal has been accomplished”). Moreover, we observe that societal discrimination alone seems “insufficient and over expansive” as the basis for adopting so-called “benign” practices with discriminatory effects “that work against innocent people,” Wygant, 106 S.Ct. at 1848, in the drastic and burdensome way that rigid racial quotas do. Furthermore, the use of quotas generally should be based on some history of racial discrimination, see id. at 1847, or imbalance, see Johnson, 107 S.Ct. at 1452-53, within the entity seeking to employ them. Finally, measures designed to increase or ensure minority participation, such as “access” quotas, see Burney, 551 F.Supp. at 763, have generally been upheld, see, e.g., Johnson, 107 S.Ct. at 1456-57; Paradise, 107 S.Ct. at 1070-71; Weber, 443 U.S. at 208, 99 S.Ct. at 2729. However, programs designed to maintain integration by limiting minority participation, such as ceiling quotas, see Burney, 551 F.Supp. at 763, are of doubtful validity, see Jaimes, 833 F.2d at 1207 (invalidating public housing authority integration plan to the extent it acts as strict racial quota), because they “ ‘single[ ] out those least well represented in the political process to bear the brunt of a benign program,’ ” Fullilove, 448 U.S. at 519, 100 S.Ct. at 2796 (Marshall, J., concurring) (quoting Regents v. Bakke, 438 U.S. 265, 361, 98 S.Ct. 2733, 2784, 57 L.Ed.2d 750 (1978) (Brennan, J., concurring in part and dissenting in part)).

Starrett’s use of ceiling quotas to maintain integration at Starrett City lacks each of these characteristics. First, Star-rett City’s practices have only the goal of integration maintenance. The quotas already have been in effect for ten years. Appellants predict that their race-conscious tenanting practices must continue for at least fifteen more years, but fail to explain adequately how that approximation was reached. In any event, these practices are far from temporary. Since the goal of integration maintenance is purportedly threatened by the potential for “white flight” on a continuing basis, no definite termination date for Starrett’s quotas is perceivable. Second, appellants do not assert, and there is ho evidence to show, the existence of prior racial discrimination or discriminatory imbalance adversely affecting whites within Starrett City or appellants’ other complexes. On the contrary, Starrett City was initiated as an integrated complex, and Starrett’s avowed purpose for employing race-based tenanting practices is to maintain that initial integration. Finally, Starrett’s quotas do not provide minorities with access to Starrett City, but rather act as a ceiling to their access. Thus, the impact of appellants’ practices falls squarely on minorities, for whom Title VIII was intended to open up housing opportunities. Starrett claims that its use of quotas serves to keep the numbers of minorities entering Starrett City low enough to avoid setting off a wave of “white flight.” Although the “white flight” phenomenon may be a factor “take[n] into account in the integration equation,” Parent Ass’n of Andrew Jackson High School v. Ambach, 598 F.2d 705, 720 (2d Cir.1979), it cannot serve to justify attempts to maintain integration at Starrett City through inflexible racial quotas that are neither temporary in nature nor used to remedy past racial discrimination or imbalance within the complex.

Appellants’ reliance on Otero is misplaced. In Otero the New York City Housing Authority (“NYCHA”) relocated over 1800 families in the Lower East Side of Manhattan to make way for the construction of new apartment buildings. 484 F.2d at 1125. Pursuant to its regulations, NY-CHA offered the former site occupants first priority of returning to any housing built within the urban renewal area. Id. at 1125-26. However, because the response by the largely minority former site residents seeking to return was nearly seven times greater than expected, NYCHA declined to follow its regulation in order to avoid creating a “pocket ghetto” that would “tip” an integrated community towards a predominantly minority community. Id. at 1124, 1126. It instead rented up half of these apartments to non-former site occupants, 88% of whom were white. Id. at 1128.

In a suit brought by former site occupants who were denied the promised priority, the district court held as a matter of law that “affirmative action to achieve racially balanced communities was not permitted where it would result in depriving minority groups” of public housing, and thus granted summary judgment in favor of plaintiffs. Id. at 1130. This court reversed the grant of summary judgment, stating that public housing authorities had a federal constitutional and statutory duty “to fulfill, as much as possible, the goal of open, integrated residential housing patterns and to prevent the increase of segregation, in ghettos,” but we recognized that “the effect in some instances might be to prevent some members of a racial minority from residing in publicly assisted housing in a particular location.” Id. at 1133-34.

Otero does not, however, control in this case. The challenge in Otero did not involve procedures for the long-term maintenance of specified levels of integration, but rather, the rental of 171 of 360 new apartments to non-former site occupants, predominantly white, although former site residents, largely minority, sought those apartments and were entitled to priority under NYCHA’s own regulation. The Ote-ro court did not delineate the statutory or constitutional limits on permissible means of integration, but held only that NYCHA’s rent-up practice could not be declared invalid as a matter of law under those limits. In fact, the court in Otero observed that the use of race-conscious tenanting practices might allow landlords “to engage in social engineering, subject only to. general undefined control through judicial supervision” and could “constitute a form of unlawful racial discrimination.” Id. at 1136.

It is particularly important to note that the NYCHA action challenged in Otero only applied to a single event — the initial rent up of the new complexes — and determined tenancy in the first instance alone. NYCHA sought only to prevent the immediate creation of a “pocket ghetto” in the Lower East Side, which had experienced a steady loss of white population, that would tip the precarious racial balance there, resulting in increased white flight and inevitable “non-white ghettoization of the community.” Id. at 1124. Further, the suspension of NYCHA’s regulation did not operate as a strict racial quota, because the former site residents entitled to a rental priority were approximately 40% white, id. at 1128. As a one-time measure in response to the special circumstances of the Lower East Side in the early 1970’s, the action challenged in Otero had an impact on non-whites as a group far less burdensome or discriminatory than Starrett City’s continuing practices.

CONCLUSION

We do not intend to imply that race is always an inappropriate consideration under Title VIII in efforts to promote integrated housing. We hold only that Title VIII does not allow appellants to use rigid racial quotas of indefinite duration to maintain a fixed level of integration at Starrett City by restricting minority access to scarce and desirable rental accommodations otherwise available to them. We therefore affirm the judgment of the district court.