Burbank Apartments Tenant Association v. Kargman ( 2016 )

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SJC-11872
BURBANK APARTMENTS TENANT ASSOCIATION & others1 vs. WILLIAM M.
KARGMAN2 & others.3
Suffolk. December 8, 2015. - April 13, 2016.
Present: Gants, C.J., Spina, Cordy, Botsford, Duffly, Lenk, &
Hines, JJ.
Housing. Fair Housing Act. Anti-Discrimination Law, Housing.
Civil action commenced in the Boston Division of the
Housing Court Department on March 16, 2011.
A motion to dismiss was heard by Jeffrey M. Winik, J.
The Supreme Judicial Court granted an application for
direct appellate review.
1
Satisha Cleckley, En Ci Guan, Richard Webster, Byron
Alford, Massachusetts Coalition for the Homeless, and Fenway
Community Development Corporation.
2
Individually and in his capacities as principal of Burbank
Apartments Corp. and First Realty Management Corp.
3
Robert M. Kargman, individually and in his capacity as
principal of Burbank Apartments Corp.; Burbank Apartments
Company; Burbank Apartments Corp., as general partner of Burbank
Apartments Company; and First Realty Management Corp.
2
Ann E. Jochnick (James M. McCreight with her) for the
plaintiffs.
Janet Steckel Lundberg for the defendants.
The following submitted briefs for amici curiae:
John Cann, of Minnesota, for Sargent Shriver National
Center on Poverty Law & others.
Harry J. Kelly & Joshua S. Barlow for Greater Boston Real
Estate Board & others.
Joseph D. Rich & Thomas Silverstein, of the District of
Columbia, Oren M. Sellstrom, of California, & Laura Maslow-
Armand for Lawyers' Committee for Civil Rights Under Law &
another.
John J. McDermott, of Virginia, & Eleftherios Papadopoulos
for National Apartment Association & another.
Esme Caramello, Louis Fisher, Erika Johnson, Aditya Pai, &
Katie Renzler for Fair Housing Center of Greater Boston &
others.
Roberta L. Rubin, Special Assistant Attorney General, for
Department of Housing & Community Development.
CORDY, J. This case arises out of a decision made by the
defendants, the principals and owners of Burbank Apartments
(Burbank), not to renew Burbank's project-based Section 8
housing assistance payments contract (HAP) with the United
States Department of Housing and Urban Development (HUD) when
its forty-year mortgage subsidy contract expired on March 31,
2011. In lieu of those project-based subsidies, the defendants
opted instead to accept from its tenants Section 8 enhanced
vouchers, enabling tenants living in units subsidized on a
project basis to remain as tenants under an alternative Federal
housing program.4 See 42 U.S.C. § 1437f (2012).
4
The Section 8 subsidy program, 42 U.S.C. § 1437f (2012),
is a voluntary program by which eligible low income families are
able to affordably rent housing units from private property
3
The plaintiffs, comprised of current and potential Burbank
tenants, complained that Burbank's decision violated § 3604 of
the Federal Fair Housing Act (FHA or Title VIII), 42 U.S.C.
§§ 3601 et seq. (2012), and the Massachusetts antidiscrimination
law, G. L. c. 151B, § 4, both by virtue of intentional
discrimination as well as disparate impact on members of
otherwise protected classes of citizens. In particular, the
plaintiffs alleged that the defendants' decision not to renew
their HAP would have a disproportionately negative effect on
people of color, the disabled and elderly, female-headed
households, recipients of public and rental assistance, and
families with children (collectively, members of protected
classes).
In March, 2011, the plaintiffs moved to enjoin the
defendants from allowing Burbank's project-based HAP to lapse;
the defendants demurred, and a Housing Court judge (motion
judge) denied the injunction. The plaintiffs filed an amended
complaint in June, 2011, which the defendants moved to dismiss
for failure to state a claim, pursuant to Mass. R. Civ. P.
12 (b) (6), 365 Mass. 754 (1974), and oral arguments were held
on January 25, 2012. On December 31, 2014, the motion judge
owners using rent subsidies from the Federal government. See
Figgs v. Boston Hous. Auth., 469 Mass. 354, 362 (2014).
4
granted the defendants' motion to dismiss. The plaintiffs
appealed.
The plaintiffs' housing discrimination claims, based on the
theory of disparate impact, raise an issue of first impression
in Massachusetts concerning the relationship among Section 8,
the FHA, and the Massachusetts antidiscrimination statute
(together the fair housing statutes). Specifically, can a
private building owner's decision not to renew participation in
the project-based Section 8 subsidy program in favor of tenant-
based Section 8 subsidies be the basis of a disparate impact
claim when such decision was otherwise permitted by both Federal
and State statutes, as well as by contract? And, if so, what
are the pleading requirements for making out such a claim?
In his comprehensive memorandum of decision and order, the
motion judge determined that a disparate impact claim under
these circumstances is not legally cognizable, and never reached
the second question. Subsequently, the United States Supreme
Court released its decision in Texas Dep't of Hous. & Community
Affairs v. The Inclusive Communities Project, Inc., 135 S. Ct.
2507, 2525 (2015) (Inclusive Communities), holding that claims,
such as this one, based on the theory of disparate impact are
generally cognizable under the FHA. We granted the plaintiffs'
application for direct appellate review to consider their
allegations in the context of the FHA, as well as the potential
5
for similar claims under Massachusetts antidiscrimination law,
and to examine the impact of the Inclusive Communities decision.
We affirm the decision of the motion judge granting the
motion to dismiss, although on somewhat different grounds. We
conclude that even where the property owner has acted in accord
with statute, regulation, and contract, a disparate impact claim
under the fair housing statutes can be brought, subject to
rigorous pleading requirements. The plaintiffs in the present
case, however, have not satisfied those requirements.5
1. Background. a. Statutory background. In 1965,
Congress, under the auspices of the National Housing Act of
1934, approved a mortgage insurance program known as § 221(d)(3)
of the National Housing Act, 12 U.S.C. § 1715l(d)(3) (2012).
See 12 U.S.C. § 1701s(a). Pursuant to § 221(d)(3), which was
"designed to assist private industry in providing housing for
low and moderate income families and displaced families," 12
U.S.C. § 1715l(a), HUD can offer below market interest rate
5
We acknowledge the amicus briefs submitted by the Greater
Boston Real Estate Board, the National Leased Housing
Association, the National Affordable Housing Management
Association, and the Massachusetts Association of Realtors; the
National Apartment Association and the National Multifamily
Housing Council; the Sargent Shriver National Center on Poverty
Law, Housing Justice Center, and National Housing Trust; the
Department of Housing & Community Development; Lawyers'
Committee for Civil Rights Under Law and Lawyers' Committee of
Civil Rights and Economic Justice; and the Fair Housing Center
of Greater Boston, the Boston Tenant Coalition, City Life/Vida
Urbana, and the Harvard Legal Aid Bureau.
6
(BMIR) mortgage loans to private property owners in exchange for
an agreement from those owners to provide affordable housing.6
See 12 U.S.C. § 1715l(d)(3). The regulatory agreements, and the
attached mortgages, may have up to forty-year terms, 12 U.S.C.
§ 1701s(a), but permit the owners to opt to pay down those
mortgages and withdraw from the program after twenty years. 12
U.S.C. § 1715l(g)(4)(A).
The Section 8 housing program was enacted in 1974 for the
purpose of "aiding low-income families in obtaining a decent
place to live and of promoting economically mixed housing." 42
U.S.C. § 1437f(a).7 See Figgs v. Boston Hous. Auth., 469 Mass.
354, 362 (2014); Feemster v. BSA Ltd. Partnership, 471 F. Supp.
2d 87, 91 (D. D.C. 2007), aff'd, 548 F.3d 1063 (D.C. Cir. 2008).
Housing assistance through Section 8 is obtained through either
"tenant-based" or "project-based" subsidies. 24 C.F.R.
§ 982.1(b)(1) (2015). Both forms are funded by the Federal
government and administered by State or local public housing
agencies (PHAs). See 42 U.S.C. § 1437f(a); 24 C.F.R.
6
At the time of the defendants' initial agreement under
§ 221(d)(3) of the National Housing Act, 12 U.S.C.
§ 1715l(d)(3), the United States Federal Housing Administration,
a predecessor to the United States Department of Housing and
Urban Development, was responsible for insurance under
§ 221(d)(3).
7
We are aware that 42 U.S.C. §§ 1437a and 1437f were
amended in December, 2015. The amendments do not apply to the
portions of the statutes relevant to this case. See Pub. L. No.
114-94.
7
§ 982.1(a)(1). For project-based assistance, the "rental
assistance is paid for families who live in specific housing
developments or units." 24 C.F.R. § 982.1(b)(1). Tenant-based
assistance, on the other hand, is appurtenant to the tenant, and
the "assisted unit is selected by the family," so that the
tenant may opt to "rent a unit anywhere . . . in the
jurisdiction of a PHA that runs a voucher program." Id. See 42
U.S.C. §§ 1437f(r); 24 C.F.R. §§ 982.353(a) (2010), 982.355(a)
(2015). After Congress enacted the Section 8 program in 1974,
many of the units built with the assistance of the § 221(d)(3)
mortgage program were transferred to project-based Section 8
rent subsidies, including many of those at Burbank. See
Feemster, supra.
In 1987, and in response to subsequent concerns that owners
operating under § 221(d)(3) regulatory agreements were opting to
pay down their mortgages early and opt out of the Section 8
program, see Franconia Assocs. v. United States, 536 U.S. 129,
136 (2002), citing H. R. Rep. No. 100-122, at 53 (1987)
(interpreting 1994 version of 42 U.S.C. § 1472[c][4][B]).
Congress enacted the Emergency Low-Income Housing Preservation
Act of 1987 (ELIHPA) to provide incentives for continued
participation by property owners. Franconia Assocs., supra,
citing 42 U.S.C. § 1472(c)(4)(B) (1994 ed. and Supp. V).
Congress also later provided further protection for tenants,
8
including eligibility for tenant-based vouchers on the
expiration of a project-based HAP. 12 U.S.C. § 4113 (2012).
Pursuant to that statute, where an owner opted to terminate or
discontinue project-based subsidies, low income tenants in the
units previously subject to that program automatically would be
eligible for Section 8 mobile vouchers, see 12 U.S.C. § 4113(a),
and, in some instances, enhanced vouchers. See 12 U.S.C.
§ 4113(f). Further, property owners opting out of project-based
subsidies -- but continuing to maintain the property for
residential rental occupancy -- are required to accept the
tenant-based Section 8 subsidies for which their tenants were
automatically eligible. 12 U.S.C. § 4113(d).
In 2009, the Legislature enacted cognate legislation, G. L.
c. 40T (c. 40T), which addresses the rights and obligations of
owners operating with project-based Section 8 subsidies. See
G. L. c. 40T, § 1. See also St. 2009, c. 159, § 1. Like the
equivalent Federal statutes, c. 40T provides substantive
protections for tenants previously occupying units covered by
project-based subsidies. See, e.g., G. L. c. 40T, §§ 2 (b), 7.
See also 42 U.S.C. § 1437f(c)(8)(B). Also consonant with
Federal law, however, c. 40T does not restrict owners from
prepaying their mortgages or opting out of their subsidy
contracts after doing so. See G. L. c. 40T, § 2 (a) ("Nothing
9
herein shall prohibit the owner from taking actions to terminate
an affordability restriction").
The distinctions between project-based and tenant-based
subsidies (and among the various tenant-based subsidies
themselves) are not insignificant. Generally, all Section 8
tenants contribute a portion of their income to the rent based
on an income indicator, amounting to the higher of thirty per
cent of their monthly adjusted income or ten per cent of their
monthly gross income.8 See 42 U.S.C. §§ 1437f(o)(2)(A),
1437a(a)(1). There are, however, variations on the general
scheme depending on the subsidy program, including who is
responsible for determining a unit's rental price. For project-
based entities, the PHA is responsible for setting rental prices
for specific units. See 24 C.F.R. §§ 983.301 (2014), 983.302
(2006).9
Rental prices for tenants holding tenant-based vouchers, on
the other hand, are negotiated between the owner and the tenant.
24 C.F.R. § 982.506 (1999). The Secretary of HUD sets a
"payment standard" applicable to the units selected by the
tenant, based on the fair market rental value of the unit, and
8
Gross income is all income, while adjusted income is gross
income minus deductions and allowances. See 24 C.F.R. § 5.611
(2000).
9
The PHA will redetermine the rent value upon request of
the owner or after a decrease in the unit's fair market value.
24 C.F.R. § 983.302 (2006).
10
in accordance with HUD regulation. See 42 U.S.C.
§ 1437f(o)(1)(A)-(B). Where the rent established in negotiation
between the owner and the tenant exceeds the established payment
standard, the PHA will pay only the difference between the
income indicator and the payment standard, as opposed to the
rental value, meaning that holders of tenant-based vouchers may
be subject to paying a greater portion of their income than
tenants living in project-based units. See id. at
§ 1437f(o)(2)(B).
Enhanced vouchers, a more protective variation on the
tenant-based subsidy, insulate holders from these rent
variances, as their rent payments are still determined based on
the difference between the income indicator and the rent, even
if that rent exceeds the payment standard. Id. at
§ 1437f(t)(1)(B). In either tenant-based subsidy scenario,
however, the rental value negotiation between an owner and
tenant-based subsidy holder is subject to PHA approval, meaning
that PHAs can opt not to approve a rental agreement and refuse
to pay the subsidy if the PHA determines that the rent is not
"reasonable." See 24 C.F.R. § 982.507 (2014); 42 U.S.C.
§ 1437f(o)(10)(B). Because rents are established by the PHA
under the project-based subsidy program, tenants living in
11
project-based units are not subject to any reasonableness
determination.10
b. Factual and procedural background.11 The seven named
plaintiffs in the amended complaint are an amalgamation of
current Burbank tenants, prospective tenants, and organizations
that represent the interests of other Burbank tenants and more
prospective Burbank residents in the community. The four
individual plaintiffs, En Ci Guan, Richard Webster, Byron
Alford, and Satisha Cleckley, are all members of protected
classes. Prior to the defendants' decision not to renew their
Section 8 HAP, Guan and Webster lived in units supported by
Section 8 project-based subsidies. Alford was a resident of a
Burbank unit not supported by the Section 8 project-based
subsidy, and Cleckley was a nontenant who had sought to apply
for an apartment at Burbank. Neither Alford nor Cleckley was
ever in receipt of the project-based subsidy. The individual
plaintiffs claimed that the decision to allow the project-based
subsidy to lapse discriminates against current Burbank tenants
10
Tenants with tenant-based subsidies may also be subject
to rescreening for eligibility. See 42 U.S.C. § 1437f(o)(6)(B).
This is not true for tenants living in units supported by
project-based subsidies. 24 C.F.R. § 983.255 (2010).
11
We draw the facts from the allegations in the complaint,
as well as exhibits attached thereto, which we accept as true,
and matters of public record. See Ortiz v. Examworks, Inc., 470
Mass. 784, 785 n.3 (2015); Schaer v. Brandeis Univ., 432 Mass.
474, 477 (2000).
12
and potential Burbank tenants in the Fenway community. The
three organizational plaintiffs, Burbank Apartments Tenant
Association, made up of tenants who reside at Burbank; the
Massachusetts Coalition for the Homeless, a nonprofit
corporation that works with homeless individuals and families;
and the Fenway Community Development Corporation, a nonprofit
corporation devoted to enhancing diversity in the Fenway
neighborhood, alleged that the loss of low income housing at
Burbank would harm the neighborhood. The defendants are the
principals and owners of Burbank.12
Burbank is a scattered site 173-unit rental development
located in the Fenway neighborhood of Boston. Beginning in
1970, the defendants began renovation of Burbank with the
assistance of a federally insured and subsidized § 221(d)(3)
BMIR mortgage loan. See 12 U.S.C. § 1715l(d)(3). Pursuant to
their regulatory agreement with HUD, the defendants were
obligated to lease the Burbank apartments to low or moderate
income families for "so long as the contract of mortgage
insurance continues in effect." The defendants' mortgage was to
12
Burbank Apartments is owned and managed by defendant
Burbank Apartments Company. Burbank Apartments Corporation is
the general partner of Burbank Apartments Company; First Realty
Management Corporation manages Burbank Apartments on behalf of
Burbank Apartments Company; William K. Kargman is principal of
Burbank Apartments Corporation and First Realty Management
Corporation; and Robert M. Kargman is principal of Burbank
Apartments Corporation.
13
be fully paid by April 1, 2011, with prepayment of the mortgage
permitted as of April 1, 1991.
In 1982, the eligible tenants occupying Burbank's units
began to receive support from project-based Section 8
subsidies.13 Sixty-seven of the 173 units were designated as
project-based Section 8 units.
The defendants opted not to prepay their loan in 1991.
Instead, they signed an ELIPHA use agreement14 in 1994,
specifying that HUD "shall not require the [defendants] to renew
or extend any assistance contract beyond [April 1, 2011,] and
shall not subject the [defendants] to more onerous requirements
than those which exist under the Section 8 program." The use
agreement remained in effect for the balance of the HAP.
In 2010, the defendants provided a one-year notice of
expiration to HUD and the subsidized tenants at Burbank, as
required by both Federal and State statute.15 See 42 U.S.C.
§ 1437f(c)(8); G. L. c. 40T § 2 (b). As of April, 2011 (when
the HAP ended), tenants in 129 of the 173 units at Burbank
13
Prior to 1982, low income tenants at Burbank received
rental assistance under a predecessor to the Section 8 program.
14
The agreement provided that sixty-seven units would be
set aside to very low income families; seventy-five units for
lower income families; and twenty-eight units to moderate income
families (allotting affordability restrictions on 170 of the 173
units).
15
Notice was sent in February, March, and May, 2010. It is
undisputed that the defendants satisfied the notice requirement.
14
(including each of the three individual plaintiffs who were
existing tenants) were deemed eligible for the enhanced voucher
program.16 As a consequence of Burbank's decision to leave the
project-based subsidy program, the Boston Housing Authority
obtained funding for a total of 171 new Section 8 enhanced
vouchers, which can be retained by the city of Boston regardless
of whether they would be used at Burbank.
As alleged in the complaint, Burbank tenants, including
those receiving Section 8 subsidies, are, on average, more
diverse than the surrounding neighborhood, and have a lower
income than the area median. For example, as of December 16,
2010, sixty-five per cent of the Section 8 households at the
development had heads of household who were either persons of
color, Hispanic, or both. On the other hand, the population of
the Fenway zip code area is sixty-six per cent white, and the
immediate census tract is seventy-three per cent white and only
six per cent African-American. In addition, the majority of
prospective tenants who were on the waiting list for project-
based Section 8 units at Burbank were members of protected
classes. As of December, 2009, two-thirds of the prospective
tenants on the waiting list were persons of color, and in
16
In addition to the tenants occupying the sixty-seven
units that were previously part of the project-based Section 8
program, sixty-two other Burbank apartments also were deemed
eligible to receive Section 8 enhanced vouchers due to the
defendants' decision not to renew the project-based subsidies.
15
December, 2010, only one of the responding eighty prospective
tenants on the waiting list identified himself or herself as
"white."
The plaintiffs' amended complaint raised two claims. The
first count alleged subsidy discrimination, in violation of
G. L. c. 151B, § 4 (10), because Guan and Webster, who were
receiving the project-based subsidies prior to April 1, 2011,
would no longer be eligible for such subsidies. Further subsidy
discrimination was alleged under G. L. c. 151B, § 4 (5) and
(10), because applicants and prospective applicants for the
project-based units, including Cleckley and Alford, claimed that
the defendants' decision rendered them ineligible for a
sufficient housing subsidy, and they are therefore unable to
afford market rents at Burbank.
The second count alleged that the defendants' decision not
to renew the HAP was unlawful because it was discriminatory,
based on both disparate treatment and disparate impact, in
violation of G. L. c. 151B, § 4, and 42 U.S.C. § 3604.
The judge granted the defendants' motion to dismiss both
counts of the amended complaint, pursuant to Mass. R. Civ. P. 12
(b) (6), for failure to state a claim on which relief can be
granted. With respect to the first count, subsidy
discrimination under G. L. c. 151B, § 4 (10), the judge ruled
that the defendants "lawfully transitioned from one form of
16
Section 8 subsidy (project-based) to another form of Section 8
subsidy (individual enhanced Section 8 vouchers) as [they were]
permitted to do under [F]ederal law." The tenant plaintiffs
were therefore not unlawfully discriminated against when they
received the enhanced vouchers as opposed to the project-based
subsidies. The judge dismissed the prospective applicants'
G. L. c. 151B, § 4 (10), claims as too speculative and
indefinite.
As for the second count, the judge dismissed the claim for
intentional discrimination (a ruling that the plaintiffs have
not appealed), and adopted a per se rule that precludes
disparate impact liability where the decision not to renew a
project-based subsidy was reached in compliance with applicable
statutes and regulations.
2. Discussion. We review the allowance of a motion to
dismiss de novo, accepting as true the facts alleged in the
plaintiffs' amended complaint and exhibits attached thereto, and
favorable inferences that reasonably can be drawn from them, see
Coghlin Elec. Contractors, Inc. v. Gilbane Bldg. Co., 472 Mass.
549, 553 (2015). We also take into consideration matters of
public record. See Schaer v. Brandeis Univ., 432 Mass. 474, 477
(2000). Those alleged facts, and reasonable inferences drawn
therefrom, must plausibly suggest an entitlement to relief. See
Flagg v. AliMed, Inc., 466 Mass. 23, 26-27 (2013), quoting
17
Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008). The
facts, therefore, "must be enough to raise a right to relief
above the speculative level." Iannacchino, supra, quoting Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (Twombly).
While "detailed factual allegations" are not required at the
pleading stage, mere "labels and conclusions" will not survive a
motion to dismiss. Iannacchino, supra, quoting Twombly, supra.
On appeal, the plaintiffs pursue a discrimination claim
because, as they argue, the defendants' decision has -- and
inevitably will continue to -- challenge integration efforts and
perpetuate the segregation that has plagued Boston, generally,
and the Fenway neighborhood, specifically.17 The plaintiffs
argue that the defendants' decision not to renew their HAP
subjects the defendants to subsidy discrimination, in violation
of G. L. c. 151B, § 4 (10); and housing discrimination, in
violation of 42 U.S.C. §§ 3604(a), (b) and G. L. c. 151B, §§ 4
(6), (7), and (11). Neither shoe fits.18
17
According to a Boston Globe article summarizing the
findings of the 2015 Harvard Joint Center for Housing Studies
report, "[d]evelopers aren’t building enough units suitable for
families or for senior citizens, and high development costs make
it hard to produce new housing that a low- or middle-income
renter can afford." Study Finds Rents Soaring as Apartment
Supply Lags, Boston Globe, Dec. 10, 2015, at C3.
18
The defendants' argument that § 4122(a) of the Low-Income
Housing Preservation and Resident Home Ownership Act of 1990, 12
U.S.C. §§ 4101 et seq. (prohibiting any State law that "[1]
restricts or inhibits the payment of any mortgage . . . ; [2]
18
a. Subsidy discrimination under G. L. c. 151B, § 4 (5),
(10). The plaintiffs, in the first count of their complaint,
contend that the defendants' decision not to renew the project-
based Section 8 subsidies constitutes public assistance
discrimination under G. L. c. 151B, §§ 4 (5) and (10).
It is "an unlawful practice . . . to discriminate against
any . . . tenant receiving [F]ederal, [S]tate, or local housing
subsidies . . . because of any requirement of such . . . housing
restricts or inhibits an owner . . . from receiving the
authorized annual return . . . ; [or] [3] is inconsistent with
any provision of this subchapter") preempts G. L. c. 151B, § 4
(10), is inapposite. The defendants argue that G. L. c. 151B,
§ 4, is preempted both by express preemption and by conflict
preemption. Neither applies in this case. The express
preemption argument is overcome by 12 U.S.C. § 4122(b), which
makes clear that the policy covered in § 4122(a) does not affect
laws of general applicability, such as State fair housing laws,
which are "not inconsistent with the provisions of this
subchapter." Nothing in G. L. c. 151B, § 4, is inconsistent
with Federal law. See, e.g., Attorney Gen. v. Brown, 400 Mass.
826, 829-830 (1987) ("Both G. L. c. 151B, § 4 [10] and 42 U.S.C.
§ 1437f [1982] share a common goal, i.e., affordable, decent
housing for those of low income"; no preemption of G. L.
c. 151B, § 4 [10]). The conflict preemption argument can
likewise be disposed of by our case law. See id. at 830 ("The
Federal statute merely creates the scheme and sets out the
guidelines for the funding and implementation of the program.
. . . It does not preclude State regulation").
The defendants also argue that G. L. c. 151B, § 4 (10),
would constitute an unconstitutional regulatory taking under the
Fifth Amendment to the United States Constitution. We reject
this argument, because even if we were to determine that G. L.
c. 151B, § 4, precluded the defendants from deciding not to
renew their project-based subsidy contract, the defendants still
would "continue to derive significant economic benefit from
their property as a whole." Blair v. Department of Conservation
and Recreation, 457 Mass. 634, 645 (2010).
19
subsidy program," G. L. c. 151B, § 4 (10), or to "aid[ or] abet"
such a violation.19 G. L. c. 151B, §§ 4 (5), (10). See DiLiddo
v. Oxford St. Realty, Inc., 450 Mass. 66, 78 (2007). General
Laws c. 151B, § 4 (10), has the goal of providing "affordable,
decent housing for those of low income." Attorney Gen. v.
Brown, 400 Mass. 826, 830 (1987). "[T]he decision not to enroll
in a voluntary governmental program by itself [does not]
constitute[] unlawful discrimination under G. L. c. 151B, § 4
(10)." Hennessey v. Berger, 403 Mass. 648, 652 (1988).
However, the voluntary nature of a program does not preclude the
application of State law "mandating participation [in the
voluntary Federal program] absent some valid nondiscriminatory
reason for not participating." Brown, supra.20 In short,
19
Paragraph ninety-six of the plaintiffs' complaint alleges
subsidy discrimination under G. L. c. 151B, § 4 (5), along with
§ 4 (10). A case finding a defendant liable for subsidy
discrimination under § 4 (5)'s "aid[ing or] abet[ing]" language
alone has neither been called to our attention nor disclosed by
our own research; we will therefore consider the subsidy
discrimination claim under § 4 (5) only as a base line for the
§ 4 (10) claim.
20
We recognize that the defendants' use agreement
specifically provided that it "shall not require the
[defendants] to renew or extend any assistance contract beyond
[April 1, 2011,] and shall not subject the [defendants] to more
onerous requirements than those which exist under the Section 8
program." Federal and State statutes likewise indicate that the
defendants were under no legal obligation to renew or enter into
a new project-based HAP contract when the use agreement ended.
See 42 U.S.C. § 1437f(c)(8)(A) (providing protections for
tenants after project-based subsidies end, and therefore
20
although the defendants are not obligated to participate in the
project-based subsidy program, that fact alone does not shield
them from an adequately pleaded claim. The plaintiffs, however,
have failed to adequately plead such a claim.
The plaintiffs' subsidy discrimination claim plays out
differently for the various groups. We begin with the claim
made by Guan.21 His claim relies largely on the assertion that
he will be injured by the change in subsidy program because the
enhanced vouchers he received are less favorable than the
project-based subsidies. Beyond bare "labels and conclusions,"
Iannacchino, 451 Mass. at 636, quoting Twombly, 550 U.S. at 555,
the plaintiffs allege no facts to suggest that the decision to
opt out of the project-based subsidy program violated the fair
housing statutes or was discriminatory in nature. Every
participant in the project-based subsidy program prior to its
nonrenewal was deemed eligible for an enhanced voucher, which
the defendants accepted and encouraged their tenants (both those
indicating that Federal government recognized that programs
would eventually end); G. L. c. 40T §§ 2 (a), 7 (same).
21
Richard Webster, who was, like En Ci Guan, living in a
unit supported by project-based subsidies, passed away during
pendency of the case, or he would have been included in this
group.
21
formerly part of the project-based program and those who were
not but received enhanced vouchers) to continue to use.22
This case does not present a situation in which the
property owner has placed a barrier on tenancy due to the
proffer of a certain form of subsidy, and not provided for an
alternative means to remain in the unit. Contrast DiLiddo, 450
Mass. at 72. Instead, it is the lawful replacement of one form
of subsidy (project-based) with another (tenant-based), both of
which allowed the tenants to remain in their units. It is
indeed telling that every former participant in the project-
based subsidy -- including Guan -- continued to occupy his or
her unit after the HAP lapsed, relying instead on the tenant-
based enhanced voucher subsidies. It is therefore apparent that
the defendants were willing to accept, as the Federal statute
requires, and even accommodate, tenants who were receiving
housing subsidies.
Moreover, it is not apparent that receipt of the enhanced
vouchers has, or will, disadvantage these plaintiffs.23 At any
22
The February 18, 2010, notification sent to the tenants
by the defendants explicitly stated that "[w]e want our
residents to stay at Burbank Apartments" and that "[t]he owners
and staff are working to provide assistance to our residents."
23
Allegations in the complaint imply that the protection
afforded low income tenants by enhanced vouchers are not
equivalent to that offered by project-based subsidies. Those
allegations include that the enhanced vouchers lose their
enhanced status if the tenant leaves Burbank, that tenants can
22
rate, even if we were to assume that receipt of the project-
based subsidies is more favorable than the enhanced vouchers,
what the law requires is that the defendants not discriminate
against public assistance recipients in general, not that they
must provide the best -- or any particular -- form of rental
assistance.
The next group consists of the nonparticipating plaintiffs,
Alford and Cleckley. These plaintiffs allege that the decision
not to renew the project-based subsidy constituted
discrimination because they sought to apply for the project-
based subsidy. They further allege that they and others will be
excluded from Burbank at some time in the future, whether or not
they have tenant-based subsidies.
We agree with the motion judge that these plaintiffs have
failed to state a claim under G. L. c. 151B, §§ 4 (5) and (10).
be deemed ineligible for the enhanced vouchers, that the units
in which tenants were previously living would no longer be
subsidized, and that they are more politically vulnerable, more
likely to be the target of budget cuts, and have more
detrimental program rules. Such allegations are, as they apply
to the to the participating tenant plaintiffs, both speculative
and indefinite in nature. See Iannacchino v. Ford Motor Co.,
451 Mass. 623, 636 (2008), quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007) (Twombly). The plaintiffs also allege
that tenants using tenant-based subsidies are subject to a
greater extent to fluctuations in rent prices. However, nothing
in the complaint indicates that the defendants raised the rental
value beyond any level of reasonableness, such that a PHA may
opt not to approve the lease or cover the rent. In any event,
these concerns border on being "labels and conclusions," which
carry less weight in our analysis. See Iannacchino, supra,
quoting Twombly, supra.
23
It is not only the speculative and indefinite nature of the
claims that is their death knell. Simply put, the complaint
contains no allegations that the defendants have discriminated
against any tenant receiving Section 8 subsidies, or that the
defendants have refused to consider the applications of
prospective tenants because of such subsidies. As to the
allegation that the defendants will no longer accept the
project-based subsidies, which these plaintiffs claim may be the
basis of their claim of subsidy discrimination, those subsidies
are appurtenant not to the tenant (or prospective tenant), but
to the rental unit.24
The plaintiffs have therefore failed to allege facts
"plausibly suggesting," Iannacchino, 451 Mass. at 636, quoting
Twombly, 550 U.S at 555, that the defendants' decision violated
G. L. c. 151B, §§ 4 (5) or (10). The defendants did not
discriminate against "a tenant receiving" a housing subsidy, but
instead lawfully transitioned from one form of Section 8 subsidy
to another, as is permitted under the Federal regulations.
b. Discriminatory housing accommodation. The plaintiffs
take issue with the motion judge's determination that the
defendants' decision not to renew their HAP contract is immune
from a disparate impact challenge under the fair housing
24
This same analysis precludes Cleckley's "independent
basis" for relief under G. L. c. 151B, § 4 (10), for
discrimination against a "recipient of . . . public assistance."
24
statutes. They contend that precluding such a claim would be
akin to reading an unwarranted exception for otherwise legal
nonrenewal of a Section 8 HAP into the overriding discrimination
proscriptions of the fair housing statutes. We agree.
i. Disparate impact claims under the FHA and the cognate
Massachusetts fair housing statute. Disparate impact occurs
when a decision "disproportionately disadvantage[s]" members of
a protected class. See Lopez v. Commonwealth, 463 Mass. 696,
712 (2012). See also Inclusive Communities, 135 S. Ct. at 2513,
2521. There is no "single test" to demonstrate disparate
impact. Langlois v. Abington Hous. Auth., 207 F.3d 43, 50 (1st
Cir. 2000).
We begin with the general framework for Federal housing
discrimination claims pursuant to the FHA. Claims under the FHA
may be alleged under either disparate treatment or disparate
impact theories. See Inclusive Communities, 135 S. Ct. at 2518,
2524-2525 (extrapolating disparate impact theory under Title
VIII from similar precedent, set by Griggs v. Duke Power Co.,
401 U.S. 424, 431 [1971], construing Federal employment
discrimination statute claims under Title VII). However, while
the Supreme Court has concluded that discrimination claims based
on a disparate impact theory may be brought under the FHA, we
have yet to determine whether such a fair housing claim could
also be pleaded based on discriminatory impact under the
25
Commonwealth's antidiscrimination law. We conclude that such a
claim is cognizable.
In School Comm. of Braintree v. Massachusetts Comm'n
Against Discrimination, 377 Mass. 424 (1979) (Braintree), we
recognized that, like Title VII, the Massachusetts employment
discrimination statute, G. L. c. 151B, § 4 (1), "proscribes not
only overt discrimination but also practices that are fair in
form, but discriminatory in operation." Id. at 429 n.10,
quoting Griggs, supra. We later expanded our disparate impact
jurisprudence to claims under G. L. c. 151B, § 4A (interference
claims). See Lopez, 463 Mass. at 710-711. Although we have not
considered whether disparate impact claims apply to G. L.
c. 151B, § 4, in its entirety, the Appeals Court has further
broadened disparate impact application to other subsections of
G. L. c. 151B. See Porio v. Department of Revenue, 80 Mass.
App. Ct. 57, 68-69 (2011) (reviewing disparate impact claim
under § 4 [1C]).
Our decision to amplify our disparate impact analysis
derives from the language of the statute and the purpose of our
housing discrimination laws, which, like those preventing
employment discrimination, seek to eradicate discrimination in
all its forms, be they based on intent or effect.
"[A]ntidiscrimination laws must be construed to encompass
disparate-impact claims when their text refers to the
26
consequences of actions and not just to the mindset of actors,
and where that interpretation is consistent with statutory
purpose." Inclusive Communities, 135 S. Ct. at 2518.
General Laws c. 151B, §§ 4 (6), (7) and (11), prohibit conduct
that results in a "refus[al] to rent or lease or sell or
negotiate for sale" on the basis of membership in a protected
class. This language indicates that it is not only the intent
behind discriminatory housing actions that the Legislature
sought to punish, but also the consequences of such actions.
Our conclusion is also tethered to the policy underlying
the fair housing statutes. See Inclusive Communities, supra at
2521 ("[r]ecognition of disparate-impact claims is consistent
with the FHA's central purpose"). After all, it is a steadfast
principle in the affordable housing context that "[c]onduct that
has the necessary and foreseeable consequence of perpetuating
segregation can be as deleterious as purposefully discriminatory
conduct in frustrating the national commitment to replace the
ghettos by truly integrated and balanced living patterns"
(quotation and citation omitted). Metropolitan Hous. Dev. Corp.
v. Village of Arlington Heights, 558 F.2d 1283, 1289 (7th Cir.
1977), cert. denied, 434 U.S. 1025 (1978). Therefore, just as
the Supreme Court deduced, based on precedent from Title VII,
that a disparate impact theory of liability could appropriately
be brought under Title VIII in the housing context, we too
27
conclude from our employment discrimination precedent that such
a theory of liability is cognizable under G. L. c. 151B, §§ 4
(6), (7), and (11).
ii. Disparate impact claims under fair housing statutes
where the defendant acted in accord with law. Having concluded
that disparate impact claims are generally cognizable under the
fair housing statutes, we must determine whether they may arise
in the context before us. The defendants urge us to embrace a
per se rule precluding disparate impact liability under the fair
housing statutes where a property owner has acted in accord with
statute, regulation, and contract, absent evidence of
intentional discrimination. We decline to adopt such a rule.
Our analysis begins again with the policy behind the fair
housing statutes, namely, to "provide[] a clear national policy
against discrimination in housing." H. R. Rep. No. 100-711,
100th Cong., 2d Sess., 15 (1988). See 42 U.S.C. § 3601 ("It is
the policy of the United States to provide, within
constitutional limitations, for fair housing throughout the
United States"); G. L. c. 151B, § 9 (Commonwealth's
antidiscrimination statutes, including its fair housing
statutes, "shall be construed liberally for the accomplishment
of its purposes, and any law inconsistent with any provision of
this chapter shall not apply"). See also Trafficante v.
Metropolitan Life Ins. Co., 409 U.S. 205, 211 (1972) (FHA
28
implements "policy that Congress considered to be of the highest
priority"); Massachusetts Bay Transp. Auth. v. Boston Carmen's
Union, Local 589, Amalgamated Transit Union, 454 Mass. 19, 26
(2009) (antidiscrimination policy under G. L. c. 151B is "well
defined and dominant" and "the overriding governmental policy
proscribing various types of discrimination"); Dahill v. Police
Dep't of Boston, 434 Mass. 233, 241 (2001) ("We construe G. L.
c. 151B, § 4, to . . . the fullest effect"). The statute's
"broad and inclusive compass," therefore, is accorded "generous
construction" (quotations omitted). Edmonds v. Oxford House,
Inc., 514 U.S. 725, 731 (1995), quoting Trafficante, supra at
209, 212.
Our canons of statutory construction militate toward the
same result. The defendants argue that, where "a general
statute and a specific statute cannot be reconciled, the general
statute must yield to the specific statute" (citation omitted).
Hennessey, 403 Mass. at 651. They also assert that we must give
full effect and force to the legislative intent in managing the
subsidy program, such that property owners would have some
flexibility in choosing to eschew participation in the Section 8
subsidy program. This would require a determination that the
specific statutes (those allowing for nonrenewal of project-
based HAPs) take precedence over general fair housing policies
(against discrimination in housing). The judge below agreed,
29
determining that, although the general policy behind the fair
housing statutes is to stamp out discrimination, Congress and
the Legislature indicated a specific intent to manage the manner
in which the Federal subsidy programs should be operated.
But support for such an interpretation is not so clear cut.
Although a fundamental precondition to satisfying the goals of
the fair housing statutes is incentivizing private owners,
through federally subsidized loans and tax breaks, to offer
affordable housing,25 it is also a goal to ensure that such
programs and the private owners they subsidize do not act in a
discriminatory manner with regard to such housing. It is a
balance of those interests that Congress and the Legislature
sought to strike with the fair housing statutes and regulations.
Adopting a bright-line rule prohibiting disparate impact
liability where a property owner follows the project-based
25
This goal has become increasingly important recently in
Boston. See City Will Raise its Fees on Builders, Boston Globe,
Dec. 9, 2015, at A1 ("Developers will have to pay nearly double
the current fees to put up luxury buildings in Boston's hottest
neighborhoods, with the money going to expand the city's stock
of affordable housing, according to an executive order to be
signed [December 9, 2015,] by Mayor Martin J. Walsh"); Lower
Price Housing On Rise, Boston Globe, July 7, 2015, at A1 ("So
far in 2015, the city has permitted 450 units of low-income
families, up 25 percent from the same period last year");
Boston's Struggle With Income Segregation, Boston Globe, March
6, 2016, at A1 ("In 1970, just 8 percent of families in Boston
and the surrounding cities and towns lived in the poorest
neighborhoods. Now, the figure is more than twice as high -- 20
percent. Over the same period, the proportion of families
living in the wealthiest neighborhoods has nearly tripled, from
6 percent to 16 percent").
30
Section 8 statutory scheme, absent evidence of intentional
discrimination, would run counter to those policies preventing
housing discrimination in all forms that were delineated by both
Congress and the Legislature. We will not shoehorn into the
fair housing statutes what HUD would describe as an "additional
exemption[] [that] would be contrary to Congressional intent."
78 Fed. Reg. 11460, 11477 (2013). See id. at 11460; Inclusive
Communities, 135 S. Ct. at 2514 (citing HUD regulations
favorably). See also DiLiddo, 450 Mass. at 77 (declining to
read exception into G. L. c. 151B, § 4 [10], as contrary to "the
statute's clear terms"). Therefore, although the defendants
never committed a breach of their Section 8 contract, followed
the Federal and State requirements in deciding not to renew the
project-based subsidies, and subsequently accepted the enhanced
vouchers, this alone does not end the inquiry. Instead, our
disparate impact analysis will consider whether such actions
were sufficient to insulate protected classes from
discriminatory negative impacts the defendants might have
caused. Graoch Assocs. No. 33, L.P. v. Louisville/Jefferson
County Metro Human Relations Comm'n, 508 F.3d 366, 377 (6th Cir.
2007) (Graoch) ("The mere fact that a landlord often can
withdraw from Section 8 without violating the terms of Section 8
or the FHA does not mean that withdrawal from Section 8 never
can constitute a violation of the FHA"); Brown, 400 Mass. at 830
 31
("It does not follow that, merely because Congress provided for
voluntary participation, the States are precluded from mandating
participation absent some valid nondiscriminatory reason for not
participating").
We therefore choose not to adopt the motion judge's
interpretation. Although, "[i]n the absence of explicit
legislative commands to the contrary, we construe statutes to
harmonize and not to undercut each other," School Comm. of
Newton v. Newton Sch. Custodians Ass'n, Local 454, 438 Mass.
739, 751 (2003), we perceive no contrary commands in the fair
housing statutes, nor a specific intent supplied to trump the
overarching general principle. Indeed, the statutes are
harmonious: Congress created a comprehensive incentive program
to encourage property owners to continue to offer Section 8
subsidies in order to increase affordable housing. See 42
U.S.C. § 1437f. Because it became obvious that those property
owners would inevitably opt to prepay their mortgages -- or
eventually not renew their Section 8 contract -- Congress, and
then the Legislature, through G. L. c. 40T,26 again stepped in to
ensure that the previously contracted property owners would
maintain an efficient, fair, and nondiscriminatory post-HAP
26
In an amicus brief, the Department of Housing & Community
Development expresses the policy behind G. L. c. 40T as "both
encourag[ing] the continuing existence of affordable housing and
protect[ing] tenants in the event that an affordability
restriction is terminated."
32
rental regime. In so doing, a notice requirement was
instituted, and Congress obligated the owners to accept the
mobile or enhanced vouchers. See 42 U.S.C. § 1437f; G. L.
c. 40T, § 2 (b).
The statutes and regulations creating Section 8 contracts,
and those regarding ending such contracts, are therefore
harmonious in their goals: incentivizing efforts to combat
segregation, and protecting residents living in affordable
housing while maintaining economical mechanisms by which
property owners can effectuate such a purpose. Because the
defendants in this case have benefited -- starting with the
federally subsidized loans to undertake substantial renovations
on Burbank Apartments in the early 1970s -- from the incentives
afforded by the Section 8 project-based subsidies, it is
incumbent on them, should they choose to eschew such benefits,
to do so in a manner that is in conformity with the legislative
aspirations based on which they initially entered into the
Section 8 contract. This is evidenced by the fact that Congress
has provided a program of enhanced vouchers, under which
property owners like the defendants must act if they do not
renew their HAP. See 12 U.S.C. § 4113(d). This Federal
requirement underscores that, although Section 8 participation
is initially voluntary, the policy ramifications that attend
such participation endure beyond the term of the contract. See
33
Graoch, 508 F.3d at 376-377 ("[T]o say that Section 8
participation is 'voluntary' is only to say that a landlord does
not break the law by declining to participate. . . . [A]lmost
every action that could create disparate-impact liability under
the FHA is voluntary").27
This result is in accord with fair housing precedent, as
violating a regulation or breaking the law has never been a
prerequisite to disparate impact liability. See, e.g., Graoch,
supra at 376 n.5, 377 (court "reject[ed] a categorical rule
against disparate-impact challenges to withdrawals" of private
property owners from Section 8 voucher program, even though such
withdrawal from voluntary program was in accordance with statute
and regulation: "[a]lthough Congress created the Section 8
program six years after passing the FHA, . . . it did not
include language indicating that Section 8 landlords should be
exempt from any FHA requirements"). We therefore do not agree
with the judgment below that the defendants' compliance with
Federal and State regulations and statutes is a per se bar to
disparate impact liability. Instead, we conclude that the
27
We acknowledge the decisions in Salute v. Stratford
Greens Garden Apartments, 136 F.3d 293, 302 (2d Cir. 1998), and
Knapp v. Eagle Prop. Mgt. Corp., 54 F.3d 1272, 1280-1281 (7th
Cir. 1995), concluding that disparate impact claims cannot
result from an owner's decision not to renew a project-based
Section 8 subsidy contract. It is our view, however, that these
decisions, in concluding that an action need be otherwise
violative of the law before facing a disparate impact claim,
ignore the legislative policies behind the fair housing regime.
34
general and the specific interests of the fair housing statutes
are not mutually exclusive, and a disparate impact claim is
cognizable even if a defendant who is a private owner adheres to
statutory, regulatory, and contractual obligations.
iii. Pleading requirements. Having concluded that
disparate impact claims are cognizable under G. L. c. 151B, § 4
(6), (7), and (11), as they are under the FHA, we must now
explicate pleading requirements for such claims. In so doing,
we will follow the burden-shifting framework laid out by HUD and
adopted by the Supreme Court in Inclusive Communities, 135 S.
Ct. at 2424-2425.28 See Chevron U.S.A., Inc. v. Natural
Resources Defense Council, 467 U.S. 837, 843 (1984) (court
defers to HUD's implementing regulations as long as they are
"permissible construction of the statute"). See also
Implementation of the Fair Housing Act's Discriminatory Effects
Standard, 78 Fed. Reg. 11460, 11461 (2013); Inclusive
Communities, 135 S. Ct. at 2514-2516. The first step in the
burden-shifting analysis is germane to the present case. To
establish a prima facie case for disparate impact housing
discrimination under the FHA, and therefore survive a motion to
dismiss, the plaintiffs bear the burden of alleging facts
28
"When interpreting . . . specific provisions of G. L.
c. 151B . . . we consider Federal case law construing cognate
provisions of the Fair Housing Act unless we discern a reason to
depart from those decisions." Andover Hous. Auth. v. Shkolnik,
443 Mass. 300, 306 (2005).
35
showing that the "challenged practice caused or predictably will
cause a discriminatory effect." Inclusive Communities, supra at
2514, quoting 24 C.F.R. § 100.500 (c) (1) (2014).
The Supreme Court emphasized the need to balance the
interests of both property owners and protected classes by
requiring a rigorous examination on the merits at the pleading
stage. See Inclusive Communities, 135 S. Ct. at 2523. To avoid
the risk of "interpreting disparate-impact liability to be so
expansive as to inject racial considerations into every housing
decision," id. at 2524, courts must "examine with care whether
plaintiff[s] ha[ve] made out a prima facie case of disparate
impact." Id. at 2523. Fair housing claims based on the theory
of disparate impact should therefore be limited to "avoid the
serious constitutional questions that might arise." Id. at
2522. Such a showing, for instance, may not be "imposed based
solely on a showing of a statistical disparity." Id. More
particularly, the plaintiffs cannot satisfy this burden "[i]f a
statistical discrepancy is caused by factors other than the
defendant's policy." Id. at 2514. Instead, the plaintiffs must
meet a "robust causality requirement," id. at 2523, by
"point[ing] to a defendant's policy or policies causing that
[statistical] disparity." Id. A practice or policy is
"contrary to the disparate-impact requirement [if it creates]
'artificial, arbitrary, and unnecessary barriers'" that create
36
discriminatory effects or perpetuate segregation. Id. at 2524,
quoting Griggs, 401 U.S. at 431.29
29
The explication of the Supreme Court's pleading
requirements established in Texas Dep't of Hous. & Community
Affairs v. The Inclusive Communities Project, Inc., 135 S. Ct.
2507 (2015) (Inclusive Communities), for disparate impact claims
under the FHA leaves a number of questions unanswered. Our
understanding is that the Court's call for "adequate
safeguards," including a "robust causality requirement," id. at
2523, indicates a higher burden for disparate impact plaintiffs
under the FHA than under Title VII. Contrast Swierkiewicz v.
Sorema N.A., 534 U.S. 506, 511 (2002) (plaintiffs need not plead
prima facie case to survive motion to dismiss under Title VII);
Lopez v. Commonwealth, 463 Mass. 696, 712 n.20 (2012)
("Statistical data, which generally is the source of evidence of
disparate impact, will be required at later stages of the
proceedings . . . but is not required at the pleading stage"
[citation omitted]). The Court justifies such a heightened
pleading requirement by surmising that "prompt resolution of
these cases is important." Inclusive Communities, supra at
2523.
A handful of courts have interpreted the pleading
requirements imposed by the Court in Inclusive Communities.
Each one has subjected the disparate impact claims to the
rigorous prima facie consideration called for by the Supreme
Court. See, e.g., Merritt vs. Countrywide Fin. Corp., U.S.
Dist. Ct., No. 09-cv-01179-BLF (N.D. Cal. Sept. 17, 2015)
(allowing plaintiffs to amend complaint after dismissal for
failure to show disparate impact or to identify specific policy
that causally links to alleged disparity); Ellis vs.
Minneapolis, U.S. Dist. Ct., No. 14-cv-3045(SRN/JJK), slip op.
at 21 (D. Minn. Aug. 24, 2015) (dismissing disparate impact
claim because "allegations of a statistical disparity alone are
insufficient to make out a prima facie case" without causal link
between challenged policy and disparity, particularly because
lack of "factual support[] that [plaintiffs] have been prevented
from renting any of their units or that any tenants have been
displaced"); Los Angeles vs. Wells Fargo & Co., U.S. Dist. Ct.,
No. 2:13-cv-09007-ODW(RZx), slip op. at 28 (C.D. Cal. July 17,
2015) (allowing defendant's motion for summary judgment on
plaintiffs' FHA claims).
37
iv. Application to the present case. The fair housing
statutes make it unlawful to "make unavailable or deny[] a
dwelling to any person because of race, color, religion, sex,
familial status, or national origin," and bar discrimination
"against any person in the terms, conditions, or privileges of
. . . rental of a dwelling . . . because of race, color,
religion, sex, familial status, or national origin." 42 U.S.C.
§§ 3604(a)-(b). See G. L. c. 151B, § 4 (6), (7), and (11).
Based on the Supreme Court's pleading requirements, the
plaintiffs must meet a "robust causality requirement" in order
to show that a policy by the defendants created a
disproportionately negative statistical discrepancy in available
housing for members of a protected class. See Inclusive
Communities, 135 S. Ct. at 2523; 42 U.S.C. §§ 3604(a)-(b); G. L.
c. 151B, § 4 (6), (7), and (11). The plaintiffs have failed to
satisfy such pleading requirements.
The plaintiffs' housing discrimination claims are applied
to two classes of individuals, the current tenants (with
project-based subsidies before the HAP lapsed) and the
prospective tenants (whether or not they are on the waiting
list). The claim for the current tenants boils down to two
facts: (1) the defendants' decision not to renew their project-
based Section 8 subsidy contract has denied and will deny or
38
withhold housing from current low income tenants; (2) such
tenants are disproportionately members of protected classes.
The plaintiffs have not sufficiently pleaded disparate
impact discrimination as to the existing tenants at Burbank.
Indeed, the amended complaint does not set forth any harm to
plausibly suggest an entitlement to relief. See Flagg, 466
Mass. at 26-27. All of the tenants previously enjoying the
Section 8 project-based subsidies were deemed eligible for
enhanced vouchers, which not only allow them to remain in their
apartments at Burbank, but also to choose to live at another
property while still receiving Section 8 benefits. The
plaintiffs have not pointed to anything other than speculative
prospective harm to these tenants. See part 2.a, supra. The
suggestion that at some point in the future rents might increase
beyond the level covered by the enhanced vouchers, or, because
enhanced vouchers are subject to rescreening, some tenants might
be found ineligible at some point in the future, is inadequate
to state a claim under Mass. R. Civ. P. 12 (b) (6).
The claim that the defendants' decision disproportionately
disadvantaged the prospective tenants is also tenuous. This
claim likewise is premised on two facts: (1) the prospective
tenants on the waiting list are disproportionately members of
protected classes; (2) without the benefit of project-based
subsidies, the prospective tenants will almost invariably not be
39
able to afford to live in the sixty-seven project-based
subsidized units in which they might at some point in time have
had the chance to live absent the defendants' decision. The
claim presents two problems. First, it is speculative and
indefinite. There is no guarantee that any of the individuals
on the waiting list would have had the opportunity to take
advantage of the Section 8 housing at Burbank even if the
project-based HAP was renewed; prospective tenants' eligibility
to move into the sixty-seven project-based units does not
necessarily mean they would actually, at some point in the
future, have such an opportunity. Indeed, the complaint offers
no facts, beyond bare "labels and conclusions," Iannacchino, 451
Mass. at 636, quoting Twombly, 550 U.S. at 555, that, even if
those sixty-seven units did become available in the future, the
prospective tenants who are members of a protected class would
have the opportunity to move in. Second, and more importantly,
the allegations do not meet the "robust causality requirement"
in showing that the defendants' actions resulted in a
statistical disparity, thereby supporting a claim that the
defendants disproportionately disadvantaged members of a
protected class. See Inclusive Communities, 135 S. Ct. at 2523.
In the present case, it is apparent that, as of April 1, 2011,
when the project-based subsidy ended, more tenants inhabiting
Burbank units were eligible for Section 8 subsidies (129) than
40
ever before (sixty-seven when the project-based subsidies
ended). There were, then, more low and middle income tenants
(who, based on the plaintiffs' statistics, are
disproportionately members of protected classes) eligible for
federally subsidized Section 8 housing (whether the enhanced
vouchers are as beneficial as the project-based subsidies or
not) because of the defendants' decision. The plaintiffs
therefore have not shown that the defendant's decision not to
renew their HAP has resulted in a disproportionately negative
impact on members of protected classes, and, in any event, they
cannot meet the robust causality requirement necessary to
satisfy a prima facie disparate impact claim.
The effect of the defendants' decision not to renew the
project-based subsidies is therefore distinguishable from the
"heartland" cases of disparate impact liability, id. at 2522, in
which the defendant's actions unfairly function to "exclude
[members of protected classes] from certain neighborhoods
without any sufficient justification," id., by, say, demolishing
a development and making it wholly unavailable. See Charleston
Hous. Auth. v. United States Dep't of Agric., 419 F.3d 729, 733-
734 (8th Cir. 2005) (owner's decision to discontinue Section 8
subsidies, prepay mortgage, and demolish building would have
been illegal as resulting in disparate impact on existing and
prospective African-American tenants). See also Huntington v.
41
Huntington Branch, Nat'l Assoc. for the Advancement of Colored
People, 488 U.S. 15, 16-18 (1988) (overturning zoning law
restricting construction of multifamily housing projects to part
of town where fifty-two per cent of residents were people of
color in town that was ninety-eight per cent Caucasian and four
per cent African-American). It is likewise different from other
cases in which the defendant's actions did or would alone have
caused a statistical disparity based on membership in a
protected class. See, e.g., Greater New Orleans Fair Hous.
Action Ctr. v. St. Bernard Parish, 641 F. Supp. 2d 563, 569,
577-578 (E.D. La. 2009) (invalidating ordinance allowing only
"blood relative[s]" to rent housing units in section of city
where residents were "88.3% Caucasian and 7.6% African-
American").
We are not presented here with a case in which the property
owner's actions exacerbated the differences between the project-
based and tenant-based subsidies. The complaint does not, for
instance, indicate that the defendants raised the rent for the
Burbank units to such a degree that the PHA refused to pay them
as unreasonable. See 24 C.F.R. § 982.507; 42 U.S.C.
§ 1437f(o)(10)(B) (PHAs allowed to refuse to pay unreasonable
rents). Had the defendants done so, thereby causing a
disproportionate disadvantage for tenants of protected classes
who had no other means to supplement the rental costs, it is
42
possible that such actions would have resulted in a complaint
that satisfied the "robust causality requirement" necessary to
plead a disparate impact liability claim. Here, however, there
is no evidence to show that the tenants occupying the sixty-
seven units previously subsidized by project-based Section 8
subsidies are negatively affected by the currently offered
Section 8 enhanced vouchers, nor is there any indication that
the defendants' decision will lead to a disproportionate
disadvantage to members of protected classes living in Burbank,
specifically, and the Fenway neighborhood, generally (whether
they sought to rent a project-based unit at Burbank or not).
We do not discern any alleged action by the defendants that
justifies the imposition of disparate impact liability under the
circumstances, as the plaintiffs have not sufficiently pleaded
that the defendants' decision will cause any discriminatory
effect. See Inclusive Communities, 135 S. Ct. at 2514, quoting
24 C.F.R. § 100.500(c)(1) (2014). As a consequence, the
plaintiffs have failed sufficiently to plead a prima facie case
of disparate impact discrimination under 42 U.S.C. §§ 3604(a)
and (b), as well as under G. L. c. 151B, § 4 (6), (7), and (11).
3. Conclusion. For the foregoing reasons, the allowance
of the defendants' motion to dismiss both counts of the
plaintiffs' amended complaint is affirmed.
So ordered.