Affordable Housing v. City of Fresno ( 2006 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellants,
v.
CITY OF FRESNO, a municipal
corporation; CITY OF FRESNO CITY
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; CHRIS MATHYS, No. 04-15625
Council Member, sued in his  D.C. No.
official and personal capacity; SAL CV-97-05498-OWW
QUINTERO, sued in his official and
personal capacity; GARRY
BREDEFELD, Council Member, sued
in his official and personal
capacity; HENRY PEREA, Council
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; TODD TOLBERT,
an individual; STEPHEN V. HENSON,
an individual; SHARON L. HENSON,

247
248 AFFORDABLE HOUSING v. CITY OF FRESNO
an individual; HERNAND J. 
KOUBRATOFF, an individual; LAURA
A. MATHER, an individual; TRAVIS
L. COMPTON, an individual;
VERNON R. WOOLEY, an individual;
ORIE REED, an individual; BARNELL 
CALDWELL, an individual; DIANE R.
DANIELS, an individual; RICHARD
ROBERTSON, an individual; JANET
REID-BILLS, an individual,
Defendants-Appellees.

AFFORDABLE HOUSING v. CITY OF FRESNO 249
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellants,
v.
CITY OF FRESNO; CITY
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; SAL QUINTERO; GARRY
BREDEFELD; HENRY PEREA; DANIEL
RONQUILLO; TODD TOLBERT; No. 04-15644
STEPHEN V. HENSON; SHARON L.
HENSON; HERNAND J. KOUBRATOFF;  D.C. No.
LAURA A. MATHER; TRAVIS L. CV-97-05498-OWW
COMPTON; VERNON R. WOOLEY;
ORIE REED; BARNELL CALDWELL;
DIANE R. DANIELS; RICHARD
ROBERTSON; JANET REID-BILLS,
Defendants,
and
CHRIS MATHYS, Councilmember,
sued in his official and personal
capacity,
Defendant-Appellee.

250 AFFORDABLE HOUSING v. CITY OF FRESNO
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellants,
v.
CITY OF FRESNO, a municipal
corporation; CITY OF FRESNO CITY
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; CHRIS MATHYS, No. 04-15650
Council Member, sued in his  D.C. No.
official and personal capacity; SAL CV-97-05498-OWW
QUINTERO, sued in his official and
personal capacity; GARRY
BREDEFELD, Council Member, sued
in his official and personal
capacity; HENRY PEREA, Council
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; TODD TOLBERT,
an individual; STEPHEN V. HENSON,
an individual; SHARON L. HENSON,

AFFORDABLE HOUSING v. CITY OF FRESNO 251
an individual; HERNAND J. 
KOUBRATOFF, an individual; LAURA
A. MATHER, an individual; VERNON
R. WOOLEY, an individual; ORIE
REED, an individual; BARNELL
CALDWELL, an individual; DIANE R.
DANIELS, an individual; RICHARD
ROBERTSON, an individual; JANET

REID-BILLS, an individual,
Defendants,
and
TRAVIS L. COMPTON, an individual,
Defendant-Appellee.

252 AFFORDABLE HOUSING v. CITY OF FRESNO
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellees,
v.
CITY OF FRESNO, a municipal
corporation; CITY OF FRESNO CITY
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; CHRIS MATHYS,
Council Member, sued in his No. 04-15683
official and personal capacity; SAL  D.C. No.
QUINTERO, sued in his official and CV-97-05498-OWW
personal capacity; GARRY
BREDEFELD, Council Member, sued
in his official and personal
capacity; HENRY PEREA, Council
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; TRAVIS L.
COMPTON, an individual,
Defendants,
and

AFFORDABLE HOUSING v. CITY OF FRESNO 253
TODD TOLBERT, an individual; 
STEPHEN V. HENSON, an individual;
SHARON L. HENSON, an individual;
HERNAND J. KOUBRATOFF, an
individual; LAURA A. MATHER, an
individual; VERNON R. WOOLEY, an
individual; ORIE REED, an 
individual; BARNELL CALDWELL, an
individual; DIANE R. DANIELS, an
individual; RICHARD ROBERTSON, an
individual; JANET REID-BILLS, an
individual,
Defendants-Appellants.

254 AFFORDABLE HOUSING v. CITY OF FRESNO
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellees,
v.
CITY OF FRESNO, a municipal
corporation,
Defendant-Appellant,
and
CITY OF FRESNO CITY No. 04-15693
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; CHRIS MATHYS,
 D.C. No.
CV-97-05498-OWW
Council Member, sued in his
official and personal capacity; SAL
QUINTERO, sued in his official and
personal capacity; GARRY
BREDEFELD, Council Member, sued
in his official and personal
capacity; HENRY PEREA, Council
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; TODD TOLBERT,
an individual; STEPHEN V. HENSON,
an individual; SHARON L. HENSON,

AFFORDABLE HOUSING v. CITY OF FRESNO 255
an individual; HERNAND J. 
KOUBRATOFF, an individual; LAURA
A. MATHER, an individual; TRAVIS
L. COMPTON, an individual;
VERNON R. WOOLEY, an individual;
ORIE REED, an individual; BARNELL 
CALDWELL, an individual; DIANE R.
DANIELS, an individual; RICHARD
ROBERTSON, an individual; JANET
REID-BILLS, an individual,
Defendants.

256 AFFORDABLE HOUSING v. CITY OF FRESNO
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellees,
v.
CITY OF FRESNO, a municipal
corporation; CITY OF FRESNO CITY
COUNCIL OF THE CITY OF FRESNO, No. 04-15753
CALIFORNIA; SAL QUINTERO, sued in  D.C. No.
his official and personal capacity; CV-97-05498-OWW
GARRY BREDEFELD, Council
Member, sued in his official and
personal capacity; HENRY PEREA,
Council Member, sued in his
official and personal capacity;
DANIEL RONQUILLO, sued in his
official and personal capacity;
TODD TOLBERT, an individual;
STEPHEN V. HENSON, an individual;
SHARON L. HENSON,

AFFORDABLE HOUSING v. CITY OF FRESNO 257
an individual; HERNAND J. 
KOUBRATOFF, an individual; LAURA
A. MATHER, an individual; TRAVIS
L. COMPTON, an individual;
VERNON R. WOOLEY, an individual;
ORIE REED, an individual; BARNELL
CALDWELL, an individual; DIANE R.
DANIELS, an individual; RICHARD
ROBERTSON, an individual; JANET 
REID-BILLS, an individual,
Defendants,
and
CHRIS MATHYS, Council Member,
sued in his official and personal
capacity,
Defendant-Appellant.

258 AFFORDABLE HOUSING v. CITY OF FRESNO
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellees,
v.
CITY OF FRESNO, a municipal
corporation; CITY OF FRESNO CITY
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; CHRIS MATHYS,
Council Member, sued in his
official and personal capacity; SAL
QUINTERO, sued in his official and No. 04-15780
personal capacity; GARRY
BREDEFELD, Council Member, sued  D.C. No.
CV-97-05498-
in his official and personal
capacity; HENRY PEREA, Council OWW/SMS
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; STEPHEN V.
HENSON, an individual; SHARON L.
HENSON, an individual; HERNAND J.
KOUBRATOFF, an individual;
VERNON R. WOOLEY, an individual;
RICHARD ROBERTSON, an individual,
Defendants,
and
TRAVIS L. COMPTON, an individual,
Defendant-Appellant.

AFFORDABLE HOUSING v. CITY OF FRESNO 259
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellees,
v.
CITY OF FRESNO, a municipal
corporation,
Defendant-Appellant,
and
CITY OF FRESNO CITY No. 04-17130
COUNCIL OF THE CITY OF FRESNO,
CALIFORNIA; CHRIS MATHYS,
 D.C. No.
CV-97-05498-OWW
Council Member, sued in his
official and personal capacity; SAL
QUINTERO, sued in his official and
personal capacity; GARRY
BREDEFELD, Council Member, sued
in his official and personal
capacity; HENRY PEREA, Council
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; TODD TOLBERT,
an individual; STEPHEN V. HENSON,
an individual; SHARON L. HENSON,

260 AFFORDABLE HOUSING v. CITY OF FRESNO
an individual; HERNAND J. 
KOUBRATOFF, an individual; LAURA
A. MATHER, an individual; TRAVIS
L. COMPTON, an individual;
VERNON R. WOOLEY, an individual;
ORIE REED, an individual; BARNELL 
CALDWELL, an individual; DIANE R.
DANIELS, an individual; RICHARD
ROBERTSON, an individual; JANET
REID-BILLS, an individual,
Defendants.

AFFORDABLE HOUSING v. CITY OF FRESNO 261
AFFORDABLE HOUSING DEVELOPMENT 
CORPORATION, a California
corporation; ASHWOOD
CONSTRUCTION, a California
corporation,
Plaintiffs-Appellants,
v.
CITY OF FRESNO, a municipal
corporation; CITY OF FRESNO CITY
COUNCIL OF THE CITY OF FRESNO, No. 05-15104
CALIFORNIA; CHRIS MATHYS,
Council Member, sued in his  D.C. No.
CV-97-05498-OWW
official and personal capacity; SAL
QUINTERO, sued in his official and OPINION
personal capacity; GARRY
BREDEFELD, Council Member, sued
in his official and personal
capacity; HENRY PEREA, Council
Member, sued in his official and
personal capacity; DANIEL
RONQUILLO, sued in his official and
personal capacity; TODD TOLBERT,
an individual; STEPHEN V. HENSON,
an individual; SHARON L. HENSON,

262 AFFORDABLE HOUSING v. CITY OF FRESNO
an individual; HERNAND J. 
KOUBRATOFF, an individual; LAURA
A. MATHER, an individual; TRAVIS
L. COMPTON, an individual;
VERNON R. WOOLEY, an individual;
ORIE REED, an individual; BARNELL 
CALDWELL, an individual; DIANE R.
DANIELS, an individual; RICHARD
ROBERTSON, an individual; JANET
REID-BILLS, an individual,
Defendants-Appellees.

Appeal from the United States District Court
for the Eastern District of California
Oliver W. Wanger, District Judge, Presiding
Argued and Submitted
November 16, 2005—San Francisco, California
Filed January 11, 2006
Before: John T. Noonan, Pamela Ann Rymer, and
Ronald M. Gould, Circuit Judges.
Opinion by Judge Noonan
AFFORDABLE HOUSING v. CITY OF FRESNO 265
COUNSEL
William J. Davis, Los Angeles, California, for plaintiffs-
appellants/appellees Affordable Housing Development Cor-
poration, et al.
Douglas T. Sloan, Fresno, California, for defendants-
appellees/appellants City of Fresno.
Nancy A. Jenner, Visalia, California, for defendant-appellee/
appellant Chris Mathys.
Howard A. Sagaser, Fresno, California, for defendant-
appellee/appellant Citizens.
Bruce Berger, Fresno, California, for defendant-appellee/
appellant Travis L. Compton.
OPINION
NOONAN, Circuit Judge:
Affordable Housing Development Corporation and its affil-
iate Ashwood Construction Co. (collectively AHDC) appeal
the judgment of the district court, following a jury trial, in
favor of defendants City of Fresno (the City) and individual
council members and citizens. Holding that the district court
properly reconciled the special verdicts of the jury, we affirm
the judgment. Holding that there should be further consider-
ation of the citizens’ claims for attorney fees, we remand that
issue to the district court.
266 AFFORDABLE HOUSING v. CITY OF FRESNO
FACTS
In October 1996, AHDC agreed with McCaffrey Develop-
ment to buy property in the northeast corner of the City.
AHDC planned to build low-rent family housing in an apart-
ment complex of 324 units to be known as Wellington Place.
Construction financing was secured through a commitment
from the Federal National Mortgage Association that included
the Wellington Place project along with three other AHDC
enterprises. AHDC entered into a $12.7 million construction
contract with its affiliate, Ashwood Construction. AHDC
expected permanent financing to be in the form of a federally-
sponsored $30 million bond issue. “Equity” was found in a
reservation of ten years of federal tax credits at over $900,000
per year. These credits were saleable. On February 24, 1997,
AHDC arranged to sell them to Related Capital Company for
71 cents per dollar of credit for a total of $6,107,808; with the
sale, Related Capital Company acquired a 99.98% limited
partnership in the project.
As of March 1997, six months after its deal with McCaf-
frey Development, AHDC had expended less than $1/2 mil-
lion. It possessed a project that its damages expert estimated
would yield almost $1/2 million to its affiliate Ashwood and
a housing project that AHDC had arranged to sell for over $6
million. But at least one more thing was needed.
That necessary thing was the approval of the Fresno City
Council. The approval was required by federal law — the Tax
Equity and Fiscal Responsibility Act, 26 U.S.C. § 147(f)
(TEFRA) — for the $30 million in tax-exempt bonds that
would be needed to finance the project. TEFRA sets condi-
tions for the issue of what the statute described as “private
activity bonds,” which might be issued to finance a variety of
projects identified by law. TEFRA includes these provisions:
(f) Public approval required for private activity
bonds. —
AFFORDABLE HOUSING v. CITY OF FRESNO 267
(1) In general.—A private activity bond shall
not be a qualified bond unless such bond satisfies the
requirement of paragraph (2).
(2) Public approval requirement.—
(A) In general.—A bond shall satisfy the
requirements of this paragraph if such bond is issued
as a part of an issue which has been approved by—
(i) the government unit —
(I) which issued such bond, or
(II) on behalf of which such bond was
issued, and
(ii) each governmental unit having jurisdic-
tion over the area in which any facility, with
respect to which financing is to be provided
from the net proceeds of such issue, is
located (except that if more than 1 govern-
mental unit within a State has jurisdiction
over the entire area within such State in
which such facility is located, only 1 such
unit need approve such issue).
(B) Approval by a governmental unit.—For
purposes of subparagraph (A), an issue shall be
treated as having been approved by an governmental
unit if such issue is approved—
(i) by the applicable elected representative of
such governmental unit after a public hearing
following reasonable public notice, or
(ii) by voter referendum of such governmen-
tal unit.
268 AFFORDABLE HOUSING v. CITY OF FRESNO
26 U.S.C. § 147(f).
The city council was the body whose approval was neces-
sary under TEFRA. Vigorous opposition to approval by the
council was expressed at neighborhood meetings held by
Councilmember Chris Mathys and at an overflow hearing
conducted by the council before the vote on approval. Persons
of various races, ethnicities, and family size expressed con-
cern over the impact of a large rental unit on nearby single
family homes. Councilmembers doubted the need for new
rental units in Fresno. On March 25, 1997, the council voted,
5-2, to deny approval of the bonds.
PROCEEDINGS
On May 13, 1997, AHDC filed its first complaint in this
suit. A second amended complaint was filed on March 15,
1999 and is the operative complaint in this action. The intro-
duction to this complaint charged Councilman Mathys and the
City with “vicious, old-fashioned rabble-rousing.” The defen-
dants were the City; Mathys and the four other members of
the council who had voted against approval; a Neighborhood
Action Committee; Travis L. Compton by himself; Todd Tol-
bert, Stephen V. Henson, Sharon L. Henson, Hernand S.
Koubratoff, Laura A. Mather, Vernon R. Wooley, Orie Reed,
Barnell Caldwell, Diane R. Daniels, Richard Robertson, Janet
Reid-Bills (collectively “citizen defendants”); and, Does 1
through 500. The complaint alleged that in refusing to autho-
rize the bonds the City had discriminated on account of dis-
abilities, family size, ethnicity or race in violation of the Fair
Housing Act, 42 U.S.C. §§ 3601-17; the California Fair
Employment and Housing Act, Cal. Gov’t Code § 12955 et
seq.; the Americans with Disabilities Act, 42 U.S.C.
§§ 12131-33; and the Civil Rights Laws, 42 U.S.C. §§ 1982,
1983 and 1985(3); that the five councilmembers had aided the
City’s unlawful act “by trading their votes”; and that the citi-
zen defendants “did threaten, intimidate and interfere” with
AHDC’s rights and conspired to do so. Additional claims
AFFORDABLE HOUSING v. CITY OF FRESNO 269
were advanced against the citizens. It was alleged that they
were aware of the Wellington neighbors’ “covenant not to
object or oppose the development of multi-family housing at
the Wellington site” and that they and the Neighborhood
Action Committee had tortiously induced these neighbors to
breach “their written covenants”; had intentionally interfered
with these contracts; and, as a number of citizen defendants
themselves had signed the contracts, had broken their own
contracts with McCaffrey Development or, apparently in the
alternative, had fraudulently entered into these contracts. As
a result of the defendants’ conduct jointly and severally,
AHDC said that it had suffered damages of $9 million.
AHDC demanded a jury trial.
On August 31, 2000, the district court granted summary
judgment to the citizen defendants on several of the claims
asserted against them. The neighbors’ agreements with
McCaffrey Development, characterized by AHDC as cove-
nants, ran as follows:
[Buyer’s] signature below shall constitute [buyer’s]
acknowledgment of, and agreement with Develop-
er’s intent to seek the [specified] zoning . . . and
hereby agrees to waive any protest of Developer
obtaining future entitlements.
The citizen defendants who had signed such agreements with
McCaffrey Development submitted evidence (in the form of
declarations and deposition testimony) establishing that they
understood their agreements to be only with McCaffrey
Development and only a waiver of any protest as to zoning.
Robert McCaffrey himself submitted a deposition that the
agreements referred only to zoning. AHDC argued that the
agreements were “estoppel certificates” waiving any right to
protest any future development. The court characterized the
agreements as “adhesion contracts” and ruled that, as a non-
party to the agreements, AHDC’s interpretation was irrele-
vant. The district court concluded that there was a meeting of
270 AFFORDABLE HOUSING v. CITY OF FRESNO
the minds of the contracting parties that the provision applies
only to zoning. Summary judgment was granted the citizens
on the claims based on the agreements. The claim of fraud fell
with this ruling.
The court also ruled on AHDC’s claim that the citizens had
conspired to violate its civil rights. AHDC, the court found,
had no standing to sue under 42 U.S.C. § 1985(3), because it
was not a member of a suspect class and could not vicariously
advance a claim under the statute. On other claims, the court
denied summary judgment to some or all of the citizens. But
on November 9, 2001, the court granted summary judgment
on all remaining claims. The citizens could not be held liable
for exercising their First Amendment right of free speech. The
court also found that AHDC had produced no evidence link-
ing any individual defendant to hostile comments made to
AHDC’s representatives at a public meeting (e.g., “I’m going
to kick your ass,” attributed by AHDC to no speaker in partic-
ular but said by AHDC to be “affirmed” by AHDC’s oppo-
nents). The court held that the actions of the City and Mathys
amounted to petitioning the government and so were immune
under the Noerr-Pennington doctrine. Eastern R.R. Presidents
Conference v. Noerr Motor Freight, Inc., 365 U.S. 127(1961); United Mine Workers v. Pennington, 381 U.S. 657(1965). See also White v. Lee, 227 F.3d 1214, 1231 (9th Cir.
2000) (Noerr-Pennington immunity has been extended
beyond the anti-trust context).
On October 17, 2002, the district court reconsidered its rul-
ing on the City’s immunity and in light of Silver Sage Part-
ners v. City of Desert Hot Springs, 251 F.3d 814 (9th Cir.
2001), denied immunity to the City and denied Mathys Noerr-
Pennington immunity. In the same order, the district court
denied attorney fees to the citizen defendants. The court held
that the citizens had not shown AHDC’s suit to be “frivolous,
unreasonable or without foundation” and that “the legal issues
were difficult,” involving the balancing of First Amendment
rights against rights under the fair-housing laws. The court
AFFORDABLE HOUSING v. CITY OF FRESNO 271
added, “Contract claims also were presented,” but did not
comment on their merit. The court found the citizen defen-
dants’ request for attorney fees under Cal. Code Civ. P.
§ 1021.5 for a defense benefitting the public was “unclear” as
to what defense was meant. The court treated at some length
the contentions of Travis Compton that AHDC had no evi-
dence against him; the court ruled that he had petitioned the
council to vote against the bonds, and the law had been “in
flux” so that it was not evident before 2002 that Compton was
immune. He, too, was denied fees.
In August 2003, the case went to trial against the City and
Mathys. After a trial lasting 15 days, the jury found in favor
of Mathys and judgment was entered September 5, 2005. As
to the City the jury entered special verdicts as follows:
Question 4: Was TEFRA bond approval for the
Wellington Place Development denied by the City of
Fresno, despite the fact that the development and
Plaintiff AHDC, as managing general partner, were
qualified?
Yes X No
INTENTIONAL HOUSING DISCRIMINATION
Question 5: Was the race, national origin, color, or
familial status of persons to whom the Wellington
Place [D]evelopment was to be available to rent and
occupy, a motivating factor in the decision of a
majority of the Fresno City Councilmembers to deny
the TEFRA bond issue?
Yes No X
HOUSING DISCRIMINATION INTERFERENCE
Question 6: Did a majority of the Councilmem-
bers of the City of Fresno purposefully interfere with
272 AFFORDABLE HOUSING v. CITY OF FRESNO
any person’s exercise or enjoyment of the opportu-
nity for affordable housing, or interfere with other
persons who aided or encouraged exercise or enjoy-
ment of that other person’s right to affordable hous-
ing at the Wellington Place Development, on
account of that person’s race, national origin, color,
or familial status?
Yes No X
DISPARATE IMPACT DISCRIMINATION
Question 9: Did the denial by a majority of the
Councilmembers of the City of Fresno of the Wel-
lington Place Development TEFRA bond issue cause
a significant adverse or disproportionate impact on
persons seeking affordable housing, because of their
race, national origin, color, or familial status?
Yes X No
SAME DECISION DEFENSE
Question 10: Do you find that Defendant City of
Fresno has proved, by a preponderance of the evi-
dence, that a majority of the members of the City
Council of the City of Fresno would have made the
same decision, even if the race, national origin,
color, or familial status, played no role in the
TEFRA bond issue? If you do, either Plaintiff should
recover nominal damages of $1.00.
AHDC: Yes X No
Ashwood: Yes X No
DEFENSE OF LEGITIMATE, NON-DISCRIMINATORY
REASONS
Question 11: Do you find that the decision to deny
the TEFRA bond issue was based only on legitimate,
non-discriminatory reasons?
AFFORDABLE HOUSING v. CITY OF FRESNO 273
Yes X No
Question 12: Was any housing discrimination by
a majority of the Fresno City Councilmembers a
cause of damage to either Plaintiff?
AHDC: Yes No X
Ashwood: Yes No X
AHDC renewed a Rule 50 motion for judgment against the
City as a matter of law. The court invited briefing. AHDC
then additionally moved to amend the judgment, alter the jury
verdict, reconsider summary judgment, and objected to the
court’s taxation of costs in favor of Compton and Mathys. On
March 9, 2004, AHDC’s motions were denied and judgment
was entered for the City. In an accompanying opinion the
court addressed the question of the jury’s special verdicts
being inconsistent. It concluded that by failing to persuade the
jury that the discrimination caused AHDC any damages,
AHDC failed to establish a prima facie element of its claim.
It also rejected AHDC’s contention that a finding of disparate
impact based on the denial of TEFRA bond financing creates
strict liability for a municipality. The district court concluded
that a legitimate, non-discriminatory motive is a valid defense
to disparate impact liability in this context.
AHDC appeals. The City and Mathys cross-appeal the dis-
trict court’s October 17, 2002 denial of summary judgment
and denial of costs. The citizens appeal the denial of attorney
fees.
ANALYSIS
Summary judgment for the citizens. AHDC appeals the
grant of summary judgment to the citizens. AHDC states that
the district court’s decision not to let AHDC’s claim on the
adhesion agreements go to trial was because of the citizens’
First Amendment right of protest. That is an inadequate and
274 AFFORDABLE HOUSING v. CITY OF FRESNO
inaccurate description of the district court’s order of August
31, 2000, which was based largely on the irrelevancy of
AHDC’s interpretation of contracts made between parties
other than itself. The district court was correct in this exposi-
tion of the law of contracts. Cal. Civil Code § 1649. The par-
ties to the agreements did not dispute their meaning. The
agreements did not apply to the financing of a housing proj-
ect.
The caption for this section of AHDC’s brief refers to
AHDC suing the citizens for “making threats” and “conspir-
ing.” The brief, however, goes on to make no mention of any
evidence of threats or of conspiracy. A caption is not an argu-
ment. These issues were abandoned as to all citizen defen-
dants except Compton. Fed. R. App. Proc. 28(a)(4); Leer v.
Murphy, 844 F.2d 628, 634 (9th Cir. 1988). As to Compton,
the testimony upon which AHDC relies in no way suggests
that Compton was a member of a conspiracy or made any
threats.
Legislative Immunity. AHDC appeals the district court’s
decision of March 9, 2004, upholding the jury’s verdict that
Mathys was not subject to liability or damages and denying
AHDC’s motion for reconsideration of the district court’s pre-
vious grant of summary judgment on the basis of legislative
immunity to all of the councilmembers. AHDC contends that
the TEFRA approval decision was not a legislative decision
because it involved a specific piece of property, and it did not
change any comprehensive, city-wide zoning ordinances or
policy. It also argues that legislative immunity cannot shield
a vote based on an illegal reason. The City responds that this
was a legislative decision because Congress mandated that the
city council vote to approve the bond issue.
[1] The councilmembers were engaged in legislative action
in making the TEFRA decision. The statute makes clear that
approval of TEFRA bonds is to be by voter referendum or by
elected representative. 26 U.S.C. § 147(f)(2)(B). The federal
AFFORDABLE HOUSING v. CITY OF FRESNO 275
focus is on the democratic nature of the approval-granting
authority: it is either the electorate as a whole or persons cho-
sen by the electorate. In their actions and votes on the council,
the councilmembers were elected representatives acting in a
legislative decision affecting a substantial area. In these activ-
ities, they were entitled to legislative immunity. San Pedro
Hotel Co. v. City of Los Angeles, 159 F.3d 470, 476 (9th Cir.
1998). We affirm the district court’s decision of March 9,
2004 with respect to legislative immunity. The city council-
members were plainly shielded from liability because their
actions were legislative in nature.
Additional Claims of Immunity. The City and Mathys cross-
appeal the district court’s October 17, 2002 denial of its sum-
mary judgment motion on the question of immunity for the
City and Mathys. Though the jury ultimately found in its
favor, the City’s position is that it should not have had to pro-
ceed to trial for the TEFRA decision because the City was
immune from liability due to the First Amendment and the
Noerr-Pennington doctrine. Further, Mathys argues that he
should not have had to proceed to trial because the district
court erred in denying his motion for summary judgment on
October 17, 2002, due to the fact that his vote on TEFRA was
protected by legislative immunity and his other actions were
petitioning activities protected by Noerr-Pennington immu-
nity.
We do not reach these questions because we do not review
the denial of summary judgment when the case has gone to
trial. De Saracho v. Custom Food Mach., Inc., 206 F.3d 874,
878 (9th Cir. 2000). As to the City, we review the verdicts
and the trial.
As to Mathys on the claim of Noerr-Pennington immunity,
AHDC argues that the district court erred in upholding the
jury verdict in favor of Mathys, but does not specifically
argue that the jury erred because Mathys’ activities were not
protected by Noerr-Pennington immunity. This Court “will
276 AFFORDABLE HOUSING v. CITY OF FRESNO
not ordinarily consider matters on appeal that are not specifi-
cally and distinctly argued in appellant’s opening brief,”
United States v. Ullah, 976 F.2d 509, 514 (9th Cir. 1992)
(quoting Miller v. Fairchild Indus., Inc., 797 F.2d 727, 738
(9th Cir. 1986)). However, this Court has “discretion to
review an issue not raised by appellant . . . . when it is raised
in the appellee’s brief.” Id. (quoting In re Riverside Linden
Invest. Co., 945 F.2d 320, 324 (9th Cir. 1991)) (alteration in
original).
[2] Here, we believe that it is imperative to make plain that
in addition to the legislative immunity Mathys was afforded
for the TEFRA vote, his other activities were protected by the
Noerr-Pennington doctrine. Mathys made and distributed fly-
ers encouraging his constituents to oppose the Wellington
Place project. He urged the executive director of the Fresno
Housing Authority to oppose it. He organized a neighborhood
meeting in opposition. As the district court found, no evi-
dence was presented that Mathys intimidated anyone or
threatened violence to anyone. His activities amounted to
petitioning the city council. The activities were protected by
the right to petition the government for a redress of griev-
ances, White v. Lee, 227 F.3d at 1227-28, and by a govern-
ment official’s right to seek to affect governmental action.
Manistee Town Center v. City of Glendale, 227 F.3d 1090,
1093 (9th Cir. 2000).
[3] Reconcilation of the special verdicts. We review de
novo a claim that the jury’s verdict is inconsistent and decide
whether its responses can be harmonized. Norris v. Sysco
Corp., 191 F.3d 1043, 1047 (9th Cir. 1999). AHDC argues
that the jury verdict that the City’s denial of TEFRA bond
approval had a disparate impact upon minorities and families
with children is dispositive and entitles AHDC to judgment as
a matter of law. The City argues that Congress could not have
intended for local approval of TEFRA bonds to be automatic
but that acceptance of AHDC’s argument would have that
effect as failure to approve bonds for low-income housing
AFFORDABLE HOUSING v. CITY OF FRESNO 277
would in most cities have a disparate impact on a minority.
We agree with the City that the federal statute’s explicit pro-
visions for a voter referendum or approval by an elected rep-
resentative indicate that Congress did not intend to make
approval automatic or to exclude the play of democratic pro-
cess in the local decision.
[4] To impose absolute liability, without defense, upon a
city whose voters or city council decided not to approve
TEFRA would frustrate the federal scheme. AHDC argues
that California law required the council to approve, but that
argument subordinates a uniform national law to local varia-
tion. AHDC argues that the discretionary approval authorized
by TEFRA is meant to kick in where other private activity
bonds are concerned but has no application to housing bonds.
Nothing in the statute creates such an exception. For approval
of every kind of private activity bond, TEFRA calls, first, for
a public hearing, then for a popular vote or a decision by an
elected authority. A public hearing would be a sham if any
opponent of housing bonds would have to keep silent. There
is no point in the statute’s requirement if, as in a dictatorship,
a referendum could have only one correct outcome. There is
no need for the statute to specify that, alternatively, an elected
representative is to decide on approval if the task to be per-
formed is the bureaucratic job of determining whether the
developer met minimal qualifications.
AHDC still seems not to have grasped what the federal stat-
ute demands. Twice in its brief on this appeal, AHDC asserts
that Councilman Mathys “maneuvered” the vote on approval
so that the vote was taken from the housing authority and
committed to the council. The housing authority was not an
elected representative of the people of Fresno. Only the peo-
ple or the elected council had the statutory authority to act for
the City in approving or disapproving the bond issue.
AHDC’s position is that by proving that the City’s decision
disparately impacted minorities and families with children, it
278 AFFORDABLE HOUSING v. CITY OF FRESNO
established liability for discrimination under the FHA. It
made a prima facie showing of discrimination. See Pfaff, 88
F.3d. at 745 (“To establish a prima facie case of disparate
impact under the FHA, ‘a plaintiff must show at least that the
defendant’s actions had a discriminatory effect.’ ”) (quoting
Keith v. Volpe, 858 F.2d 467, 482 (9th Cir. 1988)). A prima
facie showing, however, is only the first step in the liability
analysis. The next step requires us to examine the availability
of any defenses for the City.
Disparate impact doctrine evolved under Title VII as a way
to address unintentional harm having profound effects upon
protected groups. See, e.g., Watson v. Ft. Worth Bank &
Trust, 487 U.S. 977, 987 (1988) (“[T]he necessary premise of
the disparate impact approach is that some employment prac-
tices, adopted without a deliberately discriminatory motive,
may in operation be functionally equivalent to intentional dis-
crimination.”). Nevertheless, our circuit has not imposed strict
liability for disparate impact. Pfaff recognized that a defen-
dant may rebut a plaintiff’s showing of disparate impact by
“supply[ing] a legally sufficient, nondiscriminatory reason.”
88 F.3d at 746-747 (noting that “the appropriate standard of
rebuttal in [Title VII] disparate impact cases normally
requires a compelling business necessity”).
The question here is what constitutes a legally sufficient
reason for a municipality executing its congressionally man-
dated duties under TEFRA. While we are mindful of the guid-
ance Title VII often provides in FHA cases, the defense of
“business necessity” in the employment discrimination arena
does not transpose cleanly into the circumstances present
here. Resident Advisory Bd. v. Rizzo, 564 F.2d 126, 148 (3rd
Cir. 1977) (recognizing that importing the defense of “busi-
ness necessity” from the employment discrimination context
to a claim under the Fair Housing Act “is of somewhat uncer-
tain application”).
Congress required the city council to hold a public hearing
and vote on the TEFRA bond financing approval question.
AFFORDABLE HOUSING v. CITY OF FRESNO 279
TEFRA mandates that the city council decide the matter after
considering local residents’ views, and by clear implication
requires the city council to consider city priorities and hous-
ing needs, the wisdom of preferential financing for the proj-
ect, and all manner of other relevant considerations to which
elected representatives normally give weight in executing
their office. Imposing automatic liability for the exercise of
this decision for causing a disparate impact would write the
relevant considerations and the discretion out of the legisla-
tive duties in the statute. It is nearly impossible for a review-
ing court to pass judgment on what considerations were
“necessary” to the City’s business of good governance and to
implement its vision for the future of Fresno.
In Oti Kaga v. South Dakota Hous. Dev. Auth., 342 F.3d
871, 883 (8th Cir. 2003), the Eighth Circuit addressed a diffi-
culty analogous to the one presented here. That court inter-
preted the business necessity defense in the context of a FHA
housing disparate impact claim in which a low-income hous-
ing developer sued a state housing development authority
over its allocation of federal funds under the National Afford-
able Housing Act. The court held that the governmental entity
could rebut the showing of disparate impact by establishing
that its conduct had a “manifest relationship” to the allocation
of housing funds in the federal program “and is justifiable on
the ground that it is necessary” to that governmental entity’s
“exercise of its funding responsibilities.” Id. This approach is
sound.
It is also in accord with the standards other circuits have
developed for the defense available to municipalities for dis-
parate impact claims under the Fair Housing Act. See Hun-
tington Branch, NAACP v. Town of Huntington, 844 F.2d
926, 936 (2d Cir. 1988), aff’d in part, 488 U.S. 15 (1988) (per
curiam) (recognizing the defense of “a legitimate, bona fide
governmental interest”); Resident Advisory Bd. v. Rizzo, 564
F.2d at 149 (same); Langlois v. Abington Hous. Auth., 207
F.3d 43, 51 (1st Cir. 2000) (holding that there must be “a
280 AFFORDABLE HOUSING v. CITY OF FRESNO
legitimate and substantial goal of the measure in question”).
In the TEFRA context, a municipality may rebut a showing
of disparate impact by demonstrating that its reasons for
denying TEFRA bond approval were related to the exercise of
the discretion conferred by Congress. It must show that it had
a nondiscriminatory, “legitimate, bona fide governmental
interest.”
We need not and do not decide what other defenses exist
to a claim of disparate impact or whether such a showing by
a defendant shifts the burden back to the plaintiff to show that
no alternative would serve that interest with less discrimina-
tory effect. The City here was called upon to make an up or
down vote on a single housing proposal. There were no alter-
natives at issue.
[5] We hold only in this case of first impression under
TEFRA that if an elected representative authority declines to
approve TEFRA housing bonds for a legitimate non-
discriminatory reason, the defense is good. A governmental
interest in not giving approval may outweigh the desirability
of furnishing low-rent housing.
[6] A decision motivated by hostility to race, ethnicity or
family size would have been illegal under California law. The
jury found that the City’s decision was not so motivated.
Under TEFRA, the City had discretion to deny approval for
a “legitimate nondiscriminatory reason.” The jury found that
the City had such reasons. Evidence before the jury showed
that Wellington Place was opposed on account of the impact
of a large rental unit on neighboring property values and
because of an arguable lack of need for the project. AHDC
did not demonstrate that these reasons were a sham or were
pretextual. The response by the jury establishes a defense to
disparate impact.
The special verdicts approved by the district court
instructed the jury that as to question 11, the jury was consid-
AFFORDABLE HOUSING v. CITY OF FRESNO 281
ering the “Defense of Legitimate Non-Discriminatory Rea-
sons.” While AHDC objected to this jury instruction as to its
separate claim of intentional discrimination, it did not object
to instructing on this defense in relation to its disparate impact
claim. Failure to object to an instruction waives the right of
review. Bird v. Lewis & Clark College, 303 F.3d 1015, 1022-
23 (9th Cir. 2002).
[7] We have considered other points made by AHDC on
this appeal and find them without merit. Judgment for the
City, the councilmembers and the citizens was properly
entered.
Attorney fees. “Contract claims also were presented,” the
district court, ruling on attorney fees, observed but offered no
comment. The claims, based on what AHDC first called “cov-
enants” and later called “estoppel certificates,” were what the
district court found to be “adhesion contracts” attached by
McCaffrey Development to the sales of property neighboring
Wellington. Only McCaffrey Development and the purchasers
were parties to these contracts. AHDC had nothing to do with
their preparation, wording, and execution. It was the unani-
mous testimony of the parties to the contracts that the pur-
chasers agreed not to protest zoning changes if any were
sought. Neither Robert McCaffrey nor any purchaser of the
properties understood the waivers to embrace the financing of
a housing project. As the district court ruled in granting sum-
mary judgment, AHDC’s interpretation of these agreements
was irrelevant to their meaning. AHDC could not foist upon
the contracting parties a meaning favorable to it and unknown
to them when they made the agreements. It is not evident that
AHDC had a basis for alleging in its second amended com-
plaint that it alone knew what the agreements meant or for
alleging that the contracts were covenants not to object or
oppose the funding of multi-family housing at the Wellington
site, or to allege that the citizen defendants had tortiously
induced the breach of these “written covenants” or had them-
selves broken them, or to include as defendants to these
282 AFFORDABLE HOUSING v. CITY OF FRESNO
claims certain citizens, Todd Tolbert, Hernand Koubratoff,
Travis Compton, Orie Reed, Richard Robertson, and Janet
Reid-Bills, who had not signed the agreements, or to name
Richard Robertson in the second complaint, filed nearly two
years after the first complaint, and to renew the error on this
appeal when all along the person AHDC intended to sue was
Richard Robinson.
In the second amended complaint AHDC charged the citi-
zen defendants with fraud in executing the agreements. This
claim not only attributed AHDC’s interpretation to the agree-
ments but accused the citizens of duping McCaffrey in sign-
ing what was required. Facts do not appear to have been put
forward by AHDC to support this accusation. AHDC had had
two years to learn the truth from McCaffrey before its claim
was advanced.
In opposing summary judgment, AHDC attempted to back
away from some of its allegations in the second amended
complaint. It attempted to recast its claim that the citizen
defendants had breached a contract with AHDC and perpe-
trated fraud upon McCaffrey as a claim that they had merely
interfered with AHDC’s own contract with McCaffrey. What
AHDC did not acknowledge was that the means by which this
interference was allegedly accomplished was the breach of the
adhesion agreements.
Consideration may also be given to the damages sought by
AHDC. In its first complaint, AHDC alleged that the citizens
had violated the California Bane Civil Rights Act and so
could be liable for treble damages. Cal. Civ. Code § 52. The
allegation depended on a showing that the citizens had vio-
lated civil rights and that AHDC had standing to seek redress
for the violations. On October 21, 1997, the district court held
that AHDC did not have the requisite standing and that none
of the acts the citizens had allegedly committed had violated
the Bane Civil Rights Act. On the basis of these allegations,
AFFORDABLE HOUSING v. CITY OF FRESNO 283
made without standing, AHDC had threatened each citizen
with $27 million of potential liability.
A lawsuit seeking this sort of damages against each citizen
casts a cloud over his or her credit. As AHDC could not have
expected to recover these amounts from the citizens, the infer-
ence may be drawn that the claims against the citizens were
advanced in terrorem, to scare off anyone who would resist
AHDC’s demands on local government. That inference is
strengthened by the testimony of Michael Shulte from AHDC
as to how the individual defendants were selected: “the num-
ber of times essentially that the person protested.”
A separate cause of action against the citizens was that they
did “threaten, intimidate and interfere” with AHDC’s project.
AHDC supported this serious charge with references to shouts
of hostility from anonymous opponents of its project. As the
district court noted, AHDC failed to marshal this evidence
and put on the district court the burden of searching the
record. In the end, the district court found that AHDC had
produced no evidence of threat of violence or act of intimida-
tion that could be laid to the defendants.
The district court construed the complaint to allege that the
citizens had interfered with AHDC’s project by merely verbal
opposition. The district court stated that until White v. Lee,
227 F.3d 1214 (9th Cir. 2000), had clarified that First Amend-
ment rights prevailed over the fair housing laws it was not
clear that such speech was free from liability. In that light,
prior to White, AHDC’s allegation of interference stated a
possible claim, so attorney fees should not be awarded
because AHDC advanced it. The citizens argue that White
was not new law. They are correct.
In distributing flyers advocating a controversial political
position, the citizens were exercising the freedom of speech
assured by the First Amendment. McIntyre v. Ohio Elections
Comm’n, 514 U.S. 334, 347 (1995). The citizens were also
284 AFFORDABLE HOUSING v. CITY OF FRESNO
exercising the complementary right guaranteed by that
amendment to associate with others in pursuit of a political
objective. NAACP v. Alabama ex rel. Patterson, 357 U.S.
449, 460 (1958). The exercise of these constitutional rights is
not deprived of protection if the exercise is not politically cor-
rect and even if it is discriminatory against others. Boy Scouts
of America v. Dale, 530 U.S. 640, 660 (2000). Provided that
the exercise of these rights does not incite imminent violence,
it is free from governmental suppression or sanction even if
the speakers advocate violation of law. Brandenburg v. Ohio,
395 U.S. 444 (1969) (per curiam).
As important as the objectives of the federal and state fair
housing laws are, nothing in our constitutional history has
suggested that they trump the First Amendment or that they
outweigh the exercise of First Amendment rights. Indeed the
preeminence of the Amendment over fair housing was so
firmly established by 1992 that officials of the federal Fair
Housing Administration were denied qualified immunity and
held liable in damages for chilling the exercise of these rights
by three citizens of Berkeley opposed to a nonprofit’s devel-
opment of housing for handicapped and homeless persons.
White v. Lee, 227 F.3d at 1241. White v. Lee was not a bolt
from the blue but the application of established law. What
was true as to the lawless action of federal officials in 1992
is equally true of the attack launched by AHDC on the consti-
tutional rights of the citizens of Fresno in 1997.
The test on this issue is not whether AHDC asserted the
claim of interference in bad faith but whether AHDC had an
objective basis for the allegation to amount to a cause of
action. Christiansburg Garment Co. v. EEOC, 434 U.S. 412,
418-21 (1978).
As noted above, AHDC in appealing the grant of summary
judgment to the citizens used a caption referring to the citi-
zens “making threats and conspiring” but did not advance any
evidence of either activity. The appeal did make the argument
AFFORDABLE HOUSING v. CITY OF FRESNO 285
that violation of the adhesion agreements was not protected
by the First Amendment. This argument was far off the mark
of the rationale for the district court’s decision. It, however,
continued to charge the citizens with contract-breaking, tor-
tious interference, and fraud long after it was clear that these
allegations were without foundation.
[8] As the district court never ruled on the request for attor-
ney fees based on the fraud and tort claims in AHDC’s com-
plaint, we remand to the district court to make an award on
claims we have found baseless. As the district court made no
ruling on the request for fees based on the contract claims, we
similarly remand for an award of attorney fees on these claims
that we have also found baseless. As the district court erred
as to the state of First Amendment law, we reverse its ruling
on the request for fees in connection with the citizens’ defense
of the intimidation and interference claims and remand for an
award of fees on these claims.
In the determination of the fees, what has been spent on this
appeal is to be included. In assessing the fees, it will be appro-
priate for the district court to take into account that the citizen
defendants had to defend every aspect of a case claiming
astronomic damages from them. However unmeritorious the
district court ultimately discovered the contract, tort, fraud,
and intimidation claims to be, the defendants were forced over
a period of several years to defend against each of these
charges.
We reject AHDC’s appeal of the district court’s award of
costs in favor of Mathys, Compton, and the other citizen
defendants. There is a presumption in favor of awarding costs
to the prevailing party, Stanley v. Univ. of S. Cal., 178 F.3d
1069, 1079 (9th Cir. 1999), and AHDC has failed to rebut that
presumption. We also reject the City’s cross-appeal of the dis-
trict court’s order denying it costs, since the district court pro-
vided adequate reasons for its exercise of discretion.
286 AFFORDABLE HOUSING v. CITY OF FRESNO
Association of Mexican-American Educators v. California,
231 F.3d 572, 591 (9th Cir. 2002) (en banc).
For the foregoing reasons, the judgment of the district court
in favor of the City, Mathys, and the citizens is AFFIRMED.
The district court’s order taxing costs in favor of Mathys,
Compton and other citizen defendants and declining to tax
costs in favor of the City is similarly AFFIRMED. The case
is REMANDED for the award of attorney fees to the citizens
in accordance with this opinion.