Fair Housing Center of Wash. v. Breier-Scheetz Properties, LLC ( 2018 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS NOV 19 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
FAIR HOUSING CENTER OF No. 17-35898
WASHINGTON,
D.C. No. 2:16-cv-00922-TSZ
Plaintiff-Appellee,
v. MEMORANDUM*
BREIER-SCHEETZ PROPERTIES, LLC, a
Washington corporation and FREDERICK
BREIER-SCHEETZ, an individual,
Defendants-Appellants.
Appeal from the United States District Court
for the Western District of Washington
Thomas S. Zilly, District Judge, Presiding
Argued and Submitted October 10, 2018
Seattle, Washington
Before: BLACK,** PAEZ, and BEA, Circuit Judges.
Breier-Scheetz Properties, LLC and Frederick Breier-Scheetz (collectively
“Breier-Scheetz”) appeal the district court’s judgment in favor of the Fair Housing
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Susan H. Black, United States Circuit Judge for the
U.S. Court of Appeals for the Eleventh Circuit, sitting by designation.
Center of Washington (“Fair Housing Center”). The Fair Housing Center
challenged Breier-Scheetz’s policy of restricting occupancy in certain studio
apartments to one-person-per-studio, arguing that this policy has a disparate impact
on families in violation of the Fair Housing Act, Washington Law Against
Discrimination, and Seattle Municipal Code. On appeal, Breier-Scheetz challenges
the district court’s grant of partial summary judgment to the Fair Housing Center
as well as the district court’s award of punitive damages. We affirm.
1. We review de novo the district court’s grant of partial summary judgment
to the Fair Housing Center. See Jones v. Royal Admin. Servs., Inc., 887 F.3d 443,
447 (9th Cir. 2018). In the district court, Breier-Scheetz admitted that the Fair
Housing Center established a prima facie case of disparate impact discrimination.
Thus, Breier-Scheetz was required to justify its one-person-per-studio occupancy
as “necessary to achieve one or more substantial, legitimate, nondiscriminatory
interests.” 24 C.F.R. § 100.500.1 This standard is analogous to the “business
necessity” defense under Title VII. See Tex. Dep’t of Hous. & Cmty. Affairs, 135
1
Under 24 C.F.R. § 100.500, when a plaintiff establishes a prima facie case of
disparate impact, the burden of proof shifts to the defendant to prove—through
evidence that is not speculative or hypothetical—that the challenged policy is
“necessary to achieve one or more substantial, legitimate, nondiscriminatory
interests.” See also Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys.
Project, Inc., 135 S. Ct. 2507, 2514–15 (2015) (recognizing 24 C.F.R. § 100.500 as
establishing the liability framework for disparate impact claims brought under the
Fair Housing Act); Ave. 6E Invs., LLC v. City of Yuma, 818 F.3d 493, 510 (9th Cir.
2016).
2
S. Ct. at 2522. Breier-Scheetz has never argued that its one-person-per-studio
occupancy policy is necessary to achieve any substantial, legitimate,
nondiscriminatory interest; Breier-Scheetz has only argued that its policy is
reasonable.
The only evidence that Breier-Scheetz submitted to support the
reasonableness of its policy—a declaration by part-owner Frederick Scheetz
uncorroborated by any independent expert or supporting documentation—is too
“hypothetical” and “speculative” to carry its burden of proof. 24 C.F.R. §
100.500(b). Thus, Breier-Scheetz has not met its burden of proof to rebut the Fair
Housing Center’s prima facie case of disparate impact discrimination.
Accordingly, we conclude that the district court correctly granted partial summary
judgment to the Fair Housing Center on its Fair Housing Act claim.
2. We review the district court’s award of punitive damages for abuse of
discretion and its factual findings underlying the award for clear error. See Fair
Hous. v. Combs, 285 F.3d 899, 906 (9th Cir. 2002); In re Wolverton Assocs., 909
F.2d 1286, 1297 (9th Cir. 1990). We will only disturb a district court’s award of
punitive damages if we are “convinced firmly that the reviewed decision lies
beyond the pale of reasonable justification under the circumstances.” Harman v.
Apfel, 211 F.3d 1172, 1175 (9th Cir. 2000).
A district court may award punitive damages for violations of the Fair
3
Housing Act where a defendant’s unlawful activity “involves reckless or callous
indifference to the federally protected rights of others.” Fair Hous., 285 F.3d at
906. Where a defendant engages in discrimination “in the face of a perceived risk
that [his or her] actions will violate federal law,” such conduct may constitute
reckless indifference. Kolstad v. Am. Dental Ass’n, 527 U.S. 526, 536 (1999)
(emphasis added).
The district court, in its Findings of Fact and Conclusions of Law, concluded
that Breier-Scheetz’s “actions rise to the level of recklessness or callous
indifference to the fair housing rights of others.” The district court had the
opportunity to observe the demeanor of part-owner and witness Frederick Scheetz
and found that Scheetz recklessly ignored “several wake-up calls” that the one-
person-per-studio policy infringed on families’ fair housing rights. Scheetz
testified at the bench trial on damages that Breier-Scheetz did not change the one-
person-per-studio policy after the Seattle Office of Civil Rights found that the
occupancy restriction violated fair housing laws. Breier-Scheetz also did not
revise the policy when an expert opined that the restriction created a disparate
impact on families. Finally, Scheetz testified that Breier-Scheetz did not change its
occupancy policy in the four months between the district court’s finding that
Breier-Scheetz was violating the Fair Housing Act and the bench trial on damages.
At that point, Breier-Scheetz did not just discriminate in the face of a perceived
4
risk that its actions would violate federal law; it continued to discriminate in the
face of the district court’s ruling that its policy violated the Fair Housing Act.2 We
hold that the district court’s findings were not clearly erroneous and, consequently,
the court did not abuse its discretion in awarding punitive damages.
Because we affirm the district court’s finding of liability and grant of relief
solely with reference to the Fair Housing Act claim, we do not address the Fair
Housing Center’s state or local claims of housing discrimination.
AFFIRMED.
2
The district court also entered an injunction on October 6, 2017, ordering Breier-
Scheetz to change its occupancy policy. Though not relevant to our review of the
district court’s award of punitive damages, as of the date of oral argument on
October 10, 2018, Breier-Scheetz still had not complied with the injunction by
changing its occupancy policy.
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FILED
NOV 19 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
Fair Housing Center of Wash. v. Breier-Scheetz Properties, LLC, et al, 17-35898
BEA, Circuit Judge, dissenting in part:
I agree with the majority that the district court correctly granted partial
summary judgment to the Fair Housing Center on its Fair Housing Act (“FHA”)
claim against Breier-Sheetz. Under 24 C.F.R. § 100.500, Breier-Sheetz was
required to justify its one-person-per-studio occupancy policy as “necessary to
achieve one or more substantial, legitimate, nondiscriminatory interests.” Breier-
Sheetz did not make such a showing, and even conceded on appeal that it would
not prevail under such a standard.1
I disagree with the majority on the issue of punitive damages. This court has
held that punitive damages may only be awarded for violations of the FHA when a
defendant’s unlawful activity “is shown to be motivated by evil motive or intent,”
or when it “involves reckless or callous indifference to the federally protected
rights of others.” Fair Hous. of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002)
(importing the punitive damages standard from the § 1983 context). This is similar
1
Instead, Breier-Sheetz argued that a “reasonableness” standard applied to the
rebuttal of a prima facie showing of disparate impact discrimination under the
FHA, primarily citing an internal guidance document from the Department of
Housing and Urban Development. Although Breier-Sheetz’s arguments were not
completely unfounded, they were ultimately unavailing.
1
to the standard applicable under both Title VII and the Americans with Disabilities
Act, where punitive damages are “limited . . . to cases in which [the defendant] has
engaged in intentional discrimination and has done so with malice or with reckless
indifference to the federally protected rights of an aggrieved individual.” Kolstad
v. American Dental Association, 527 U.S. 526, 529-30 (1999) (internal quotations
and citations omitted) (noting that “[t]he terms ‘malice’ and ‘reckless’ ultimately
focus on the actor’s state of mind”).
The majority accuses Breier-Sheetz of “recklessly ignor[ing] ‘several wake-
up calls’ that its policy infringed on families’ fair housing rights.” The “wake-up
calls” that Breier-Sheetz purportedly ignored—resulting in a finding of “reckless
or callous indifference”—include: (1) the filing of a complaint against Breier-
Sheetz with the Department of Housing and Urban Development; (2) the issuance
of a report by the Seattle Office of Civil Rights finding that Breier-Sheetz’s
occupancy policy had a disparate impact on families; (3) the filing of a complaint
against Breier-Sheetz in federal court; (4) the issuance of a disparate impact report
by plaintiff’s expert; and (5) the district court’s grant of summary judgment against
Breier-Sheetz on FHA liability (importantly, issued before it conducted a bench
trial to determine remedies such as injunctive relief).
Breier-Sheetz did not ignore any “wake-up calls.” It was simply unwilling
to change a longstanding and reasonable business policy—which Breier-Sheetz
2
maintained was legal—until ordered to do so by a court. 2 It cannot be the case that
in order to avoid being subjected to punitive damages, a business must
immediately change its policies whenever it is accused of misconduct by an
advocacy group or an administrative agency, rather than insist that the group or
agency prove liability in a court of law. A defendant similarly cannot be subjected
to punitive damages for failing prophetically to cease conduct that is only
subsequently enjoined by a court order.
None of the district court’s findings in this case come close to evincing the
“reckless or callous indifference” required to award punitive damages under the
FHA. In Fair Housing of Marin—where this court rightly upheld an award of
punitive damages against a landlord for an FHA violation—there was evidence that
the landlord treated black applicants to his apartment complex differently than
white applicants, stated that he wanted an “all-white building,” used “offensive and
racially derogatory language when telling several tenants he did not want to rent to
African-Americans,” and stated that “he could use the pretext of bad credit to
2
The district court characterized Breier-Sheetz’s single-occupancy policy as
“arbitrary,” but the policy had at least several reasonable justifications, including
that single occupants tend to stay in apartments longer, thereby reducing tenant
turnover, which is expensive for landlords; and that single occupants generally
cause less wear-and-tear on small apartments. That Breier-Sheetz ultimately failed
to show that the policy was a business necessity does not make the policy
“arbitrary,” and certainly does not by itself evince a reckless or callous indifference
to the rights of others.
3
refuse to rent to African-Americans.” Fair Housing of Marin, 285 F.3d at 907.
Breier-Sheetz’s conduct with respect to its single-occupancy policy is not in the
same category as the landlord’s conduct in Fair Housing of Marin, and it does not
justify an award of punitive damages.
Because I would hold that the district court abused its discretion in awarding
punitive damages, I dissent as to that section of the memorandum disposition. I
otherwise join the disposition in full.
4