Avenue 6E Investments, LLC v. City of Yuma

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
AVENUE 6E INVESTMENTS, LLC, an No. 13-16159
Arizona limited liability company;
SAGUARO DESERT LAND, INC., an D.C. No.
Arizona corporation, 2:09-cv-00297-
Plaintiffs-Appellants, JWS
v.
OPINION
CITY OF YUMA, Arizona, a municipal
corporation,
Defendant-Appellee.
Appeal from the United States District Court
for the District of Arizona
John W. Sedwick, District Judge, Presiding
Argued and Submitted
August 13, 2015—San Francisco, California
Filed March 25, 2016
Before: Stephen Reinhardt, A. Wallace Tashima,
and Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Reinhardt
2 AVENUE 6E INVESTMENTS V. CITY OF YUMA
SUMMARY*
Civil Rights
The panel reversed the district court’s dismissal of a
complaint for failure to state a claim, reversed the district
court’s summary judgment in favor of defendant, and
remanded in an action brought by two real estate developers
who asserted that the City of Yuma’s refusal to rezone land
to permit higher-density development violated, among other
things, the Equal Protection Clause and the federal Fair
Housing Act.
Plaintiffs asserted that the City’s refusal stemmed from
intentional discrimination against Hispanics and created a
disparate impact because the denial disproportionately
deprived Hispanic residents of housing opportunities and
perpetuated segregation.
Taking the factual allegations in the complaint as true, the
panel first held that plaintiffs presented plausible claims for
relief for disparate treatment under the Fair Housing Act and
under the Equal Protection Clause. The panel noted that the
City Council denied plaintiffs’ request for rezoning despite
the advice of its own experts to the contrary and in the
context of what a reasonable jury could interpret as racially
charged opposition by Yuma residents. Given these
circumstances, the panel determined that the complaint
passed the plausibility bar. The panel remanded to the
district court on these claims.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 3
The panel reversed the district court’s grant of summary
judgment in favor of the City on plaintiffs’ disparate-impact
claim and vacated the district court’s denial of the City’s
second summary judgment motion as moot. The panel
rejected the district court’s view that other similarly-priced
and similarly-modelled housing available elsewhere
necessarily precluded a finding that there was a disparate
impact. The panel remanded for the district court to address
the City’s second motion for summary judgment in the first
instance.
COUNSEL
Elizabeth Brancart (argued) and Christopher Brancart,
Brancart & Brancart, Pescadero, California, for Plaintiffs-
Appellants.
Andrew M. Jacobs (argued), Snell & Wilmer L.L.P., Tucson,
Arizona; Vaughn A. Crawford, Martha E. Gibbs, and
Benjamin M. Mitsuda, Snell & Wilmer L.L.P., Phoenix,
Arizona, for Defendant-Appellee.
OPINION
REINHARDT, Circuit Judge:
The Fair Housing Act (FHA) is one of the most important
pieces of legislation to be enacted by the Congress in the past
60 years. It strikes at the heart of the persistent racism that so
deeply troubles our Nation. Here, we deal with one aspect of
that law: zoning or rezoning of land as it affects the
4 AVENUE 6E INVESTMENTS V. CITY OF YUMA
construction of housing that may be affordable by significant
numbers of members of minority groups.
Plaintiffs, two real estate developers (“Developers”),
bring this case against the City of Yuma, contending that the
City’s refusal to rezone land to permit higher-density
development violated, among other things, the Equal
Protection Clause of the United States Constitution and the
federal Fair Housing Act (FHA). In particular, Developers
maintain that the City’s refusal stemmed from intentional
discrimination against Hispanics and created a disparate
impact because the denial disproportionately deprives
Hispanic residents of housing opportunities and perpetuates
segregation. The district court first dismissed Developers’
Equal Protection and FHA disparate-treatment claims under
Rule 12(b)(6) for failure to state a claim and denied
Developers’ motion for leave to file a Second Amended
Complaint. It then granted summary judgment in favor of the
City on Developers’ disparate-impact claim, rejecting both
theories on which Developers relied.
Taking the factual allegations in the complaint as true, we
first hold that Developers presented plausible claims for relief
for disparate treatment under the FHA and under the Equal
Protection Clause. The City Council denied Developers’
request for rezoning despite the advice of its own experts to
the contrary and in the context of what a reasonable jury
could interpret as racially charged opposition by Yuma
residents. This was the only request for rezoning that the City
had denied in the last three years or of the last 76
applications. We reverse the district court because it failed to
give sufficient weight to the City Council’s alleged
capitulation to the animus of the development’s opponents, in
the face of the City’s own expert’s recommendation to
AVENUE 6E INVESTMENTS V. CITY OF YUMA 5
approve the request and its practice of generally granting
these requests. Given these circumstances, the complaint
passes the plausibility bar. We remand to the district court on
these claims.
We also reverse and remand the district court’s grant of
summary judgment in favor of the City on Developers’
disparate-impact claim and vacate its denial of the second
summary judgment motion as moot. We reject the district
court’s view that other similarly-priced and similarly-
modelled housing available elsewhere necessarily precluded
a finding that there was a disparate impact. We remand for
the district court to address the City’s second motion for
summary judgment in the first instance.1
JURISDICTION
The district court had jurisdiction over Developers’
§ 1983 claims under 28 U.S.C. §§ 1331 and 1343 and over
Developers’ FHA claims under 28 U.S.C. § 1331. See
Munger v. City of Glasgow Police Dep’t, 227 F.3d 1082,
1085 (9th Cir. 2000). We have jurisdiction over Developers’
appeal under 28 U.S.C. § 1291. See Budnick v. Town of
Carefree, 518 F.3d 1109, 1113 (9th Cir. 2008).
LEGAL STANDARDS
Dismissal of a complaint under Rule 12(b)(6) is
inappropriate unless the complaint fails to “state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v.
1
In that motion, the City contends that Developers have failed to proffer
statistical evidence demonstrating a substantial disparate impact resulting
from the zoning denial.
6 AVENUE 6E INVESTMENTS V. CITY OF YUMA
Twombly, 550 U.S. 544, 570 (2007). “When the district court
denies leave to amend [a complaint] because of futility of
amendment, we will uphold such denial if it is clear, upon de
novo review, that the complaint would not be saved by any
amendment.” Carvalho v. Equifax Info. Servs., LLC,
629 F.3d 876, 893 (9th Cir. 2010). A district court’s grant of
summary judgment is also reviewed de novo. Pac. Shores
Props., LLC v. City of Newport Beach, 730 F.3d 1142, 1156
(9th Cir. 2013).
FACTUAL BACKGROUND
According to the complaint, Plaintiffs, Avenue 6E
Investments, LLC and Saguaro Desert Land, Inc. are business
entities owned by members of the Hall family, who develop
housing in Yuma, Arizona. Through Developers and other
affiliated companies, members of the Hall family have
developed various affordable and moderately priced housing
projects in Yuma. Thus, Developers are sometimes referred
to as “Hall” or “Hall Construction.” Developers allege that
even though the Hall family’s affiliated companies build a
full range of housing products, they nevertheless have a
reputation as a developer of Hispanic neighborhoods based
upon their development of several affordable housing projects
in Yuma in which the majority of homes were sold to
Hispanics.
Avenue 6E owned 42 acres of undeveloped land in
southeastern Yuma (the “Property”), and granted Saguaro an
option to purchase the Property for the purpose of developing
a “moderately priced” housing project. As Developers state
in their opening brief on appeal, their references to their
proposed development as “affordable” and “moderately
priced” are descriptive only and do not imply that such
AVENUE 6E INVESTMENTS V. CITY OF YUMA 7
projects are considered “affordable” as defined by the United
States Department of Housing and Urban Development.
Developers allege that the City denied a requested zoning
change in September 2008 in response to animus by
neighbors of the proposed development who wished to
prevent the development of a heavily Hispanic neighborhood
adjacent to their subdivisions, in which 75% of the population
was White.
Between 2002 and 2010, the City performed two
analyses—specifically, the Consolidated Plan and Analysis
of Impediments to Fair Housing Choice for 2002, as well as
a 2007 version by the same name (respectively, the “2002
Analysis of Impediments” and the “2007 Analysis of
Impediments”)—each showing that the Hispanic population
in Yuma was concentrated in several areas in the northern,
western, and central portions of the City. The analyses show
that substantially all of the available low- to moderate-income
housing was located in those areas, and that more than 75%
of the households in that housing were Hispanic. The reports
found that, by contrast, Whites were concentrated in separate
areas in the northwest and southeast of Yuma in which they
comprised more than 75% of the population. The Property is
on the western boundary of what was, at that time, one of the
White-majority areas in the Southeast portion of Yuma.
The City’s General Plan prohibits actions promoting
racial segregation, and its 2002 Analysis of Impediments
recognizes the need to encourage the development of more
affordable housing choices to low- and moderate-income
citizens outside the areas with high concentrations of
Hispanic households. The 2002 Analysis warned, however,
that residents had used “NIMBY” (not-in-my-backyard)
arguments to block or delay several affordable housing
8 AVENUE 6E INVESTMENTS V. CITY OF YUMA
developments; the Analysis thus recommended an
educational campaign to promote acceptance of affordable
housing, lower-income neighborhoods, and cultural diversity.
The General Plan acknowledges that large-lot zoning raises
housing costs and impairs the availability of housing
affordable to low- and moderate-income purchasers, and
identifies higher-density zoning as a means for the City to
encourage desegregation. The 2002 General Plan noted
wealth disparities within Yuma, stating that “Hispanic,
African American and Native American households are more
likely to have lower income and live below the poverty line.”
The City’s General Plan designates the Property for use
as “Low Density Residential.” This designation encompasses
two permissible zoning designations: “R-1-6” zoning, which
allows development of a residential subdivision of houses
placed on 6,000 square foot lots, and “R-1-8” zoning, which
requires the use of at least 8,000 square foot lots. In 2006,
Developers purchased the Property from KDC of Yuma, LLC
(“KDC”), another housing developer, which had previously
rezoned the Property from agricultural use to R-1-8. The
Property is bordered on the south by the 38-acre “Belleza
Subdivision,” which consists of homes on lots exceeding
9,000 square feet; on the north by the “Country Roads”
recreational village, consisting of 2,500 square foot lots
limited to persons age 55 and over; on the west by the 80-acre
“Terra Bella Subdivision” owned by Perricone Development
Group II (“Perricone”), a developer of luxury homes; and to
the east by a parcel the City intends to use to expand a
wastewater facility and a municipal park.
In 2008, Developers determined that development of the
Property with R-1-8 zoning was no longer financially feasible
due to the collapse of the housing market and a corresponding
AVENUE 6E INVESTMENTS V. CITY OF YUMA 9
difficulty in selling 8,000 square foot lots. They determined,
however, that there existed a need in Yuma for more
affordable housing, and designed a higher-density,
moderately priced housing project for the Property consistent
with the City’s General Plan and consisting of 6,000 square
foot lots. Developers subsequently applied to rezone the
Property from R-1-8 to R-1-6. The City’s staff and in-house
planning experts both recommended approval of the zoning
request.
Subsequently, the City Planning and Zoning Commission
held a public hearing on Developers’ zoning application.
Several homeowners from the Belleza Subdivision wrote
letters or spoke at the hearing objecting that Developers
“catered” to low- to moderate-income families. They
complained that the people living in “the Hall
neighborhoods” tended to have large households, use single-
family homes as multi-family dwellings, allow unattended
children to roam the streets, own numerous vehicles which
they parked in the streets and in their yards, lack pride of
ownership, and fail to maintain their residences. These
characteristics, Developers allege, coincide with a
stereotypical description of Yuma’s Hispanic neighborhoods.
The Commission voted unanimously to approve the rezoning
request, noting that many subdivisions with small-sized lots
had previously been built adjacent to large-sized lot
subdivisions without incident. The rezoning request was then
forwarded to the City Council with the recommendations of
the Planning Staff and the Planning and Zoning Commission
that the request be granted.
Prior to rendering its decision, the City Council received
complaints from landowners near the Property commenting
on the fact that Developers build affordable housing and
10 AVENUE 6E INVESTMENTS V. CITY OF YUMA
criticizing the proposed development in terms Developers
allege are well-known in Yuma as descriptive of Hispanic
neighborhoods. One landowner complained that Developers’
proposal would create “a low cost, high crime neighborhood.”
The City Council held a public hearing. Several landowners
attending the hearing brought photographs of Developers’
Trail Estate Subdivision, in which 77% of homebuyers were
Hispanic, which they identified as an “affordable housing
project.” One Belleza homeowner sent the following letter
asking the City Council to deny Developers’ rezoning
request:
We as well as many other families are very
aware of the type of ‘homes’ and
‘neighborhoods’ the ‘Hall Construction’
company has built in the past. If any of the
council members are unaware of what I am
referring to, I urge them to please drive
through the many ‘Hall’ neighborhoods in
particular the ones with the comparable price
and square footage that the Halls have
proposed to build next to us. After doing so I
ask council members to please ask themselves
if they would want to live around these areas
after having paid such a significant amount
for their home. . . . From my first hand
experience in comparing these Hall
subdivisions with our subdivisions
particularly Kerley subdivision, it is evident
that the Hall subdivision has a higher rate of
unattended juveniles roaming the streets, as
well as domestic violence, theft, burglaries,
and criminal damage/vandalism to properties.
It was my experience that many owners of
AVENUE 6E INVESTMENTS V. CITY OF YUMA 11
these homes left juveniles unattended as well
as many of these homes were not single
family dwellings like they were designated to
be and instead turned into multifamily
dwellings which in turn led to more
unattended juveniles and crime. . . . We find it
very disappointing that we have worked very
hard to keep out children out of areas like this,
as well as worked very hard to come up with
the funds in order to buy the home that we
live in. Now we are faced with the possibility
that once again the Hall Construction
company wants to add another one of these
‘subdivisions’ in Yuma.
Another landowner sent a letter to the Council stating that:
According to the US Department of Justice,
households with incomes of less than $75,000
account for 91% of all crimes nationally as
well as 91% of all rape, murder, assault,
armed robbery, etc. The type of lots and
houses that Hall Construction is considering
will be catering to this group of people. What
will this cost the city and county of Yuma to
patrol this area and how many innocent
victims from Belleza, Terra Bella and Tillman
Estates will fall victim to a predator in this
91% demographic?
A third landowner complained that graffiti is a problem in
small-home subdivisions. One Councilmember described the
Hall Companies’ subdivisions as having cars parked on the
streets and in yards, and asked whether the garages
12 AVENUE 6E INVESTMENTS V. CITY OF YUMA
envisioned for the Property would be large enough to
accommodate pickup trucks.
Developers proposed creating a “buffer” zone of 8,000
square foot lots separating the Property from the Belleza and
Terra Bella subdivisions, with 6,000 square foot lots placed
between the buffer zone and the Country Roads RV park.
One landowner commented that Developers’ proposal would
create a smooth transition in terms of lot size, but not of
“ownership demographics.” Reacting to the criticism of
Developers’ proposal, a City Council member stated that
subdivisions of different densities will inevitably abut each
other, and voiced his concern that denying Developers’
application on the basis of the community’s concerns would
create an “unsustainable precedent” for future zoning
decisions.2 At the conclusion of the hearing, the City Council
denied Developers’ rezoning request.3 This rezoning request
was the only one of 76 applications considered by the City
Council over the preceding three years that it had rejected.
PROCEDURAL BACKGROUND
Developers commenced this action in February 2009,
alleging a claim under 42 U.S.C. § 1983 for violation of the
Equal Protection Clause of the Fourteenth Amendment and
2
Although the Second Amended Complaint identifies the speaker as the
Yuma Mayor, Developers state in their Opening Brief that the speaker was
in fact a member of the City Council.
3
Although not relevant to the complaint (or motion to dismiss), the City
disputes Developers’ account and maintains that it denied the zoning
request because property owners had relied upon the pre-existing R-1-8
zoning designation and because Developers, rather than the City, rejected
a compromise buffer-zone plan.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 13
claims of disparate impact and disparate treatment under the
Fair Housing Act (FHA), 42 U.S.C. § 3601 et seq. In early
2010, the district court granted the City’s motion to dismiss
Developers’ disparate-treatment claims under the Equal
Protection Clause and the FHA,4 but denied the City’s motion
as to Developers’ disparate-impact claim under the FHA.5
Later that year, Developers filed a motion for leave to file a
Second Amended Complaint, which attempted, inter alia, to
add additional facts, including the fact that the Developers’
rezoning request was the only one rejected out of 76 in the
preceding three years. The district court denied this motion
to amend on the ground that amendment would be futile.
After completing discovery on Developers’ remaining
claim, the disparate-impact claim, the City filed two motions
for summary judgment regarding that claim. The first motion
contended that Developers could not prove disparate impact
because there was an adequate supply of similarly priced and
modelled housing in the Southeast quadrant of Yuma and that
“on this separate and distinct basis alone” summary judgment
should be granted. In that motion, the City proffered no other
reason for the grant of summary judgment. Four days later,
the City filed the second motion, in which it contended that
(1) Developers’ had failed to show a disparate impact on
Hispanics resulting from the denial of the rezoning
4
We refer to both the claim for intentional discrimination under the
Equal Protection Clause and the disparate-treatment claim under the FHA
as “disparate-treatment claims” for ease of analysis.
5
The district court also dismissed Developers’ substantive due process
claims under the Federal and Arizona Constitutions as well as a claim
under Arizona Revised Statute § 9-452-01(F), which requires that
rezoning ordinances conform to the adopted general plan of the
municipality. Developers do not appeal the dismissal of these claims.
14 AVENUE 6E INVESTMENTS V. CITY OF YUMA
application, and (2) the City denied the rezoning application
for legally sufficient reasons. The district court granted the
City’s first summary judgment motion,6 expressly stating that
it did not reach the issues raised by the second motion, and
then denied the second motion as moot.7 It entered judgment,
holding that the adequate supply of similarly-priced and
modelled housing in Southeast Yuma foreclosed any finding
of disparate impact. Ave. 6E, 2013 WL 2455928, at *2, *7.
The district court also rejected Developers’ perpetuation-of-
segregation theory for its disparate-impact claim. It held that
undisputed statistics showed that “the integrative effect of
that development . . . would not have been significant enough
to support a disparate impact claim” based on the
perpetuation-of-segregation theory. Id. at *7. Developers
timely appealed.
ANALYSIS
Developers challenge the district court’s dismissal of their
disparate-treatment claims and grant of the City’s first motion
for summary judgment on the disparate-impact claim. We
first outline the avenues for relief available under the FHA
and then turn to the issues presented by this appeal.
I.
Enacted in the late 1960s following the assassination of
Dr. Martin Luther King Jr., the Fair Housing Act came at a
6
Ave. 6E Invs., LLC v. City of Yuma, 2013 WL 2455928 (D. Ariz.
2013).
7
Order and Opinion on Motion for Summary Judgment, Ave. 6E Invs.,
LLC v. City of Yuma, No. 09-00297 (D. Ariz. June 5, 2013), ECF No. 190.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 15
time of “considerable social unrest.” Tex. Dep’t of Hous. &
Cmty. Affairs v. Inclusive Cmties. Project, Inc., 135 S. Ct.
2507, 2516 (2015). By the mid-1960s, Congress had
addressed discrimination in public accommodations and
voting through major legislation; yet, it had failed to tackle
discrimination in housing, the area that determined millions
of citizens’ daily life experiences, as well as who their
neighbors would be, which schools their children would
attend, and the general social environment in which they
would grow up or live. Combined with the advent of
Levittown-like suburban developments across the country,
“various practices . . . , sometimes with governmental
support, . . . encourage[d] and maintain[ed] the separation of
the races,” including racially restrictive covenants,
blockbusting, and redlining. Id. at 2515. Government policy,
which promised not to change a neighborhood’s composition
when constructing affordable housing, exacerbated the stark
segregation in America’s cities. Brief for Housing Scholars
as Amici Curiae Supporting Respondents, Texas Dep’t of
Hous. (No. 13-1371), 9–16. Altogether, as the Kerner
Commission warned, the nation was “moving towards two
societies, one black, one white—separate and unequal.”
Texas Dep’t of Hous., 135 S. Ct. at 2516 (quoting Report of
the National Advisory Commission on Civil Disorders 1
(Kerner Commission)). It took this “grim prophecy,” and the
social unrest that gripped the country following the murder of
Dr. King, for Congress to act and pass the FHA. Id. at 2516,
2525.
The FHA declares that “it is the policy of the United
States to provide, within constitutional limitations, for fair
housing throughout the United States.” 42 U.S.C. § 3601. To
achieve this goal, the FHA renders it unlawful to, among
other things, “make unavailable or deny, a dwelling to any
16 AVENUE 6E INVESTMENTS V. CITY OF YUMA
person because of race, color, religion, sex, familial status, or
national origin.” 42 U.S.C. § 3604(a). As relevant to this
case, it provides several tools to do so.
First, and most obvious, it prohibits intentional
discrimination—that is, disparate treatment. A private
developer or governmental body cannot refuse to sell or rent
housing to someone because of that person’s race, religion,
gender, or other protected characteristic, nor can a
government zone land or refuse to zone land out of concern
that minorities would enter a neighborhood. See Pac. Shores
Props., 730 F.3d at 1157 (noting that the FHA prohibits
discriminatory zoning practices). If a governmental actor
engages in this discrimination, such conduct also violates the
Equal Protection Clause. Arlington Heights v. Metro. Hous.
Corp., 429 U.S. 252, 265–66 (1977) (noting, in the context of
a zoning challenge, that “[w]hen there is a proof that a
discriminatory purpose has been a motivating factor” in a
government decision, judicial deference to that decision is not
justified under the Equal Protection Clause).
Given the long history and dire consequences of
continuing housing discrimination and segregation, Congress
did not stop at prohibiting disparate treatment alone. Indeed,
in enacting the FHA, Congress sought “to eradicate
discriminatory practices within a sector of our Nation’s
economy.” Tex. Dep’t of Hous., 135 S. Ct. at 2522. To this
end, as the Supreme Court recently reaffirmed, the FHA also
encompasses a second distinct claim of discrimination,
disparate impact, that forbids actions by private or
governmental bodies that create a discriminatory effect upon
a protected class or perpetuate housing segregation without
any concomitant legitimate reason. Id. at 2522. Disparate
impact provides a remedy in two situations that disparate
AVENUE 6E INVESTMENTS V. CITY OF YUMA 17
treatment may not reach. First, “[i]t permits plaintiffs to
counteract unconscious prejudices and disguised animus that
escape easy classification.” Id.; see also Huntington Branch,
N.A.A.C.P. v. Huntington, 844 F.2d 926, 935 (2d Cir. 1988)
(noting that “clever men may easily conceal their
motivations” and that disparate-impact analysis is needed
because “[o]ften, such [facially neutral] rules bear no relation
to discrimination upon passage, but develop into powerful
discriminatory mechanisms when applied”). Second,
disparate impact not only serves to uncover unconscious or
consciously hidden biases, but also targets “artificial,
arbitrary, and unnecessary barriers” to minority housing and
integration that can occur through unthinking, even if not
malignant, policies of developers and governmental entities.
Tex. Dep’t of Hous., 135 S. Ct. at 2522. In this way, disparate
impact “recognize[s] that the arbitrary quality of
thoughtlessness can be as disastrous and unfair to private
rights and the public interest as the perversity of a willful
scheme.” United States v. City of Black Jack, Mo., 508 F.2d
1179, 1185 (8th Cir. 1974).
Today, the policy to provide fair housing nationwide
announced in the FHA remains as important as ever.
42 U.S.C. § 3601. While “many cities have become more
diverse” after “the passage of the [FHA] and against the
backdrop of disparate-impact liability in nearly every
jurisdiction,” Texas Dep’t of Hous., 135 S. Ct. at 2525,
housing segregation both perpetuates and reflects this
country’s basic problems regarding race relations:
educational disparities, police-community relations, crime
levels, wealth inequality, and even access to basic needs such
as clean water and clean air. In this country, the
neighborhood in which a person is born or lives will still far
too often determine his or her opportunity for success. As the
18 AVENUE 6E INVESTMENTS V. CITY OF YUMA
Supreme Court recognized, the FHA must play a “continuing
role in moving the Nation toward a more integrated society”
and a more just one. Id.
Given this context, we now turn to Developers’ claims in
this case.
II. Disparate-Treatment Claims
Developers first bring disparate-treatment claims under
the FHA and the Equal Protection Clause, alleging that the
City refused their request to rezone the Property because of
discrimination or animus against Hispanics. The district
court dismissed these claims and found the request for leave
to amend futile, holding that Developers did not allege
plausible claims for relief in the first or seconded amended
complaints. Although Developers appeal both the dismissal
of their first amended complaint and the district court’s denial
of their motion for leave to file a second amended complaint,
we address only whether the second amended complaint
stated a plausible claim for relief because the first and second
amended complaints were both rejected based on plausibility
and because the second amended complaint would have
“supersede[d] the original” if allowed. See Ramirez v. Cnty.
of San Bernardino, 806 F.3d 1002, 1008 (9th Cir. 2015); see
also Dorf v. Bjorklund, 531 F. App’x 836, 837 (10th Cir.
2013) (ruling only on motion for leave to amend when the
plaintiffs appealed the dismissal of the first amended
complaint and the denial for leave to file a second amended
complaint on the basis of futility). Because the second
amended complaint contains sufficient allegations that the
City’s decision was driven by animus to state a plausible
claim for relief, we hold that the amendment was not futile
and reverse the dismissal of the disparate-treatment claims.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 19
Arlington Heights governs our inquiry whether it is
plausible that, in violation of the FHA and the Equal
Protection Clause, an “invidious discriminatory purpose was
a motivating factor” behind the City’s decision to deny the
zoning application. Arlington Heights, 429 U.S. at 266.
Under Arlington Heights, a plaintiff must “‘simply produce
direct or circumstantial evidence demonstrating that a
discriminatory reason more likely that not motivated’ the
defendant and that the defendant’s actions adversely affected
the plaintiff in some way.” Pac. Shores Props., 730 F.3d at
1158 (quoting McGinest v. GTE Serv. Corp., 360 F.3d 1103,
1122 (9th Cir. 2004)). “A plaintiff does not have to prove
that the discriminatory purpose was the sole purpose of the
challenged action, but only that it was a ‘motivating factor.’”
Arce v. Douglas, 793 F.3d 968, 977 (9th Cir. 2015) (quoting
Arlington Heights, 429 U.S. at 266). The court analyzes
whether a discriminatory purpose motivated the defendant by
examining the events leading up to the challenged decision
and the legislative history behind it, the defendant’s departure
from normal procedures or substantive conclusions, and the
historical background of the decision and whether it creates
a disparate impact. Id. (citing Arlington Heights, 429 U.S. at
266–68, and Pac. Shores Props., 730 F.3d at at 1158–59).
These elements are non-exhaustive, Arlington Heights,
429 U.S. at 268; Pac. Shores Props., 730 F.3d at 1159, and a
plaintiff need not establish any particular element in order to
prevail, see Pac. Shores Props., 730 F.3d at 1156 (stating
that, for the purpose of summary judgment, “any indication
of discriminatory motive may suffice to raise a question that
can only be resolved by a factfinder”). We examine each in
turn.
20 AVENUE 6E INVESTMENTS V. CITY OF YUMA
A. Sequence of Events Leading Up to the Challenged
Decision and the Legislative History
The gravamen of Developers’ disparate-treatment claims
is that the City discriminated against them by denying their
application in order to appease its constituents, despite
knowing that opposition to the application was based largely
on racial animus, and despite the recommendations of its
zoning commission and planning staff and its regular
practice. Here, the allegations in the complaint are sufficient
to raise these claims.
The presence of community animus can support a finding
of discriminatory motives by government officials, even if the
officials do not personally hold such views. Innovative
Health Sys., Inc. v. City of White Plains, 117 F.3d 37, 49 (2d
Cir. 1997), superseded on other grounds as recognized in
Zervos v. Verizon N.Y., Inc., 252 F.3d 163 (2d Cir. 2001);
LeBlanc-Sternberg v. Fletcher, 67 F.3d 412, 425 (2d Cir.
1995) (plaintiff alleging a disparate-treatment claim under the
FHA “can establish a prima facie case by showing that
animus against the protected group was a significant factor in
the position taken by the municipal decision-makers
themselves or by those to whom the decision-makers were
knowingly responsive.” (internal quotation marks omitted)).
This standard “recognize[s] the reality of such controversial
proposals in the urban setting,” United States v. City of New
Orleans, 2012 WL 6085081, at *9 (E.D. La. Dec. 6, 2012),
in which council members may vote based on constituents
concerns about “an influx of undesirables” into the
neighborhood. Smith v. Town of Clarkton, 682 F.2d 1055,
1066 (4th Cir. 1982).
AVENUE 6E INVESTMENTS V. CITY OF YUMA 21
Neither Budnick nor Arlington Heights, which the City
cites to support its position, holds otherwise. In Budnick, the
plaintiff sought a special use permit to build a continuing-care
retirement community and, only after the Town Council
denied his application, raised for the first time the contention
that the planned facility would serve disabled residents;
plaintiff in his prior declarations had asserted that residents
would be limited to “healthy, active, independent seniors.”
Budnick, 518 F.3d at 1112–13. This alone undercut any
finding of discriminatory intent by the Town Council, as the
plaintiff failed to explain how the Town could have
discriminated against residents it did not know would be
housed at the facility. Here, by contrast, Developers allege
that their reputation as developers of subdivisions favored by
Hispanics, and the general demographic trends suggesting
that the higher-density development they proposed would
attract a greater number of Hispanic homebuyers, were
known prior to the denial of their application. Accordingly,
here, unlike in Budnick, community members’ opposition to
Developers’ application, using language indicating animus
toward a protected class, provides circumstantial evidence of
discriminatory intent by the City.
The facts of Arlington Heights likewise do not support
defendant’s argument. In that case, the Supreme Court
affirmed the district court’s finding following a trial that,
although some opponents of plaintiffs’ requested zoning
change might have been motivated by opposition to minority
groups, the evidence did not warrant the conclusion that this
motivated defendants. 429 U.S. at 269–70. Unlike this case,
the Supreme Court in Arlington Heights was required to
review the district court’s factual finding for clear error after
a trial, while here we must accept Developers’ allegations as
true and review the district court’s order de novo. See
22 AVENUE 6E INVESTMENTS V. CITY OF YUMA
Anderson v. City of Bessemer City, 470 U.S. 564, 566 (1985);
Newark Branch, N.A.A.C.P. v. City of Bayonne, N.J.,
134 F.3d 113, 119–20 (3d Cir. 1998). Moreover, other facts
not similar to any before the district court on the present
motion to dismiss supported the district court’s factual
finding in Arlington Heights. For example, as the Supreme
Court noted, the area surrounding the site of the desired
zoning change to permit high-density zoning had been zoned
for single-family homes for more than a decade, and the
zoning change would have been contrary to a “buffer policy”
consistently applied in prior instances. 429 U.S. at 269.
Here, by contrast, the R-1-6 zoning sought by Developers
was entirely consistent with the City’s General Plan.
Although the relevant cases clearly hold that a city’s
denial of a zoning change following discriminatory
statements by members of the public supports a claim of
discriminatory intent, the question remains whether the
statements alleged in Developers’ Second Amended
Complaint actually constituted animus. None of the alleged
statements expressly refers to race or national origin; rather,
they raise various concerns about issues including large
families, unattended children, parking, and crime. We have
held, however, that the use of “code words” may demonstrate
discriminatory intent. Galdamez v. Potter, 415 F.3d 1015,
1024 n.6 (9th Cir. 2005) (citing McGinest, 360 F.3d at 1117).
In McGinest, we adopted the reasoning of the Third Circuit’s
opinion in Aman v. Cort Furniture Rental Corp., 85 F.3d
1074, 1083 (3d Cir. 1996). Considering comments that
plaintiff, an African American, was a “drug dealer,” we
quoted Aman at length:
[A] reasonable jury could conclude that the
intent to discriminate is implicit in these
AVENUE 6E INVESTMENTS V. CITY OF YUMA 23
comments. There are no talismanic
expressions which must be invoked as a
condition-precedent to the application of laws
designed to protect against discrimination.
The words themselves are only relevant for
what they reveal–the intent of the speaker. A
reasonable jury could find that statements like
the ones allegedly made in this case send a
clear message and carry the distinct tone of
racial motivations and implications. They
could be seen as conveying the message that
members of a particular race are disfavored
and that members of that race are, therefore,
not full and equal members of the workplace.
McGinest, 360 F.3d at 1117 (quoting Aman, 85 F.3d at 1083)
(alteration in original). The McGinest court then held that
“[t]he reference to [plaintiff, an African-American] as a ‘drug
dealer’ might certainly be deemed to be a code word or
phrase” demonstrating animus. Id.; see also Guimaraes v.
SuperValu, Inc., 674 F.3d 962, 974 (8th Cir. 2012)
(“[R]acially charged code words may provide evidence of
discriminatory intent by sending a clear message and carrying
the distinct tone of racial motivations and implications.”)
(quotation marks omitted) (alteration in original); Jenkins v.
Methodist Hosps. of Dallas, 478 F.3d 255, 265 (5th Cir.
2007) (citing Aman, 85 F.3d at 1083). Whether a code word
evidences racial animus may depend upon factors including
local custom and historical usage. Ash v. Tyson Foods, Inc.,
546 U.S. 454, 456 (2006). Although these cases involve
employment rather than housing discrimination, these lessons
are equally applicable to both types of cases. See Texas Dep’t
of Hous., 135 S. Ct. at 2522–23.
24 AVENUE 6E INVESTMENTS V. CITY OF YUMA
Here, construing the allegations in the complaint in favor
of plaintiffs as well as drawing all inferences in their favor,
the alleged statements by the neighborhood opposition
submitted to city officials contained such code words
consisting of stereotypes of Hispanics that would be well-
understood in Yuma. Neighbors expressed concern that the
type of people living in “the Hall neighborhoods” had large
households and used single-family homes as multi-family
dwellings. These people, neighbors complained, own
numerous vehicles which they park in the streets and yards,
fail to maintain their residences, and lack pride of ownership.
They also allow unattended children to roam the streets (what
some may call letting children play in the neighborhood).
Several landowners attending the public hearing even brought
pictures of another Hall subdivision, in which 77% of the
homebuyers are Hispanic, to exemplify the complaints they
had about the potential new development. See Greater New
Orleans Fair Hous. Action Ctr. v. St. Bernard Parish, 641 F.
Supp. 2d 563, 571–72 (E.D. La. 2009) (repeated references to
Village Square, where Village Square was a local complex
with a significant black population, demonstrated racial
animus). After Developers presented their compromise plan
to transition from the 8,000-foot lots down to 6,000-foot lots
near the RV park, another landowner noted that it would be
a smooth transition in terms of lot size, but not ownership
demographics, suggesting—at least to a reasonable juror—a
change in racial composition. In sum, landowners worried
that the type of people who live in “Hall neighborhoods”
create a “low cost, high crime neighborhood” that these
landowners had worked hard “to keep our children out of.”
See id. (finding references to crime were “racially-loaded”);
Atkins v. Robinson, 545 F. Supp. 852, 874 (E.D. Va. 1982)
(reference to “an abundance of crime” “may be interpreted as
[a] veiled reference[] to race”).
AVENUE 6E INVESTMENTS V. CITY OF YUMA 25
Taken together, these allegations, along with the
allegation that Developers are known to many as a developer
of Hispanic neighborhoods on the basis of their housing
projects in Yuma, provide plausible circumstantial evidence
that community opposition to Developers’ proposed
development was motivated in part by animus, and that the
City Council was fully aware of these concerns when it took
the highly unusual step of acceding to the opposition and
overruling the recommendations of its zoning commission
and planning staff.
B. City’s Departure from its Normal Procedures or
Substantive Conclusions
Developers also plausibly allege that the denial of their
zoning application departed from the City’s normal
procedures. In denying the rezoning, the City Council’s
decision ran contrary to the unanimous recommendation
provided by the City’s Planning and Zoning Commission, as
well as the recommendation of City planning staff. A city’s
decision to disregard the zoning advice of its own experts can
provide evidence of discriminatory intent, particularly when,
as here, that recommendation is consonant with the
municipality’s general zoning requirements and plaintiffs
proffer additional evidence of animus. See Innovative Health
Sys., 117 F.3d at 49 (affirming grant of preliminary injunction
and stating that city’s zoning body “ignored the requirements
of the ‘hospital or sanitaria’ classification and did not explain
why it declined to follow the Corporation Counsel’s
straightforward analysis”); Sunrise Dev., Inc. v. Town of
Huntington, N.Y., 62 F. Supp. 2d 762, 775, 776 (E.D.N.Y.
1999) (concluding that Town’s disregard of its Citizen’s
Advisory Committee’s recommendation suggested that
“defendants likely were swayed by the anti-disabled animus
26 AVENUE 6E INVESTMENTS V. CITY OF YUMA
present in the community”); Dews v. Town of Sunnyvale,
Tex., 109 F. Supp. 2d 526, 572 (N.D. Tex. 2000)
(“[Defendant’s] history of ignoring the recommendations of
its planners and proceeding in the face of sound legal and
planning advice” weighed towards finding of discriminatory
intent); MHANY Mgmt. Inc. v. Cnty. of Nassau, 843 F. Supp.
2d 287, 321–22 (E.D.N.Y. 2012) (city’s decision to disregard
its own consultant’s zoning recommendation and the
County’s desires supported finding of discriminatory intent);
but cf. Hallmark Developers, 466 F.3d at 1285 (finding
County Board’s decision to ignore recommendations of
approval from its staff and planning bodies was not suspect
because no larger context demonstrated racial animus).
Developers’ allegation that the City’s prior zoning decisions
permitted “many examples in Yuma where large lot
expensive subdivisions had been built next to moderately
priced small lot housing subdivisions without problems”
further underscores the inference that the decision to deny
Developers’ application was contrary to normal procedures.
Finally, this zoning request was the only request the City
Council denied of the 76 considered over the three years
preceding the Council’s decision. Drawing all reasonable
inferences in Developers’ favor, the City’s singling out of
their zoning request for denial supports Developers’
contention that the City had a discriminatory intent.
C. Disparate Impact and the Historical Background of
the Decision
The complaint’s statistics on the disparate impact caused
by the decision and the historical background of the decision
also tend to make the disparate-treatment claims plausible.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 27
Developers allege specific facts demonstrating city
officials’ awareness that the effect of their denial of
Developers’ application would “bear[] more heavily on one
race than another” in light of historical patterns of segregation
by race and class.8 Specifically, they allege facts
demonstrating that distinct areas of the city historically have
been populated, respectively, by lower class Hispanics and
more affluent Whites. They point to the 2002 and 2007
Analyses of Impediments, each of which shows that
“substantially all of the available low- to moderate-income
housing” in Yuma has historically been concentrated in three
areas of the city in which more than 75% of the households
are Hispanic, whereas Whites have been concentrated in two
other areas in which the White population has been more than
75%.9 They also allege facts contained in the City’s General
Plan and the U.S. Census identifying a direct relationship
between housing density and costs, and demonstrating a
8
Even though the proposed development would not have qualified as
“affordable” under HUD regulations, alleged facts regarding the
distribution of affordable housing in Yuma’s Hispanic neighborhoods help
demonstrate general income stratification supporting the inference that
Hispanics in Yuma are generally less affluent than Whites and would be
more likely to purchase homes built on the smaller lots proposed by
Developers.
9
Although not relevant to our consideration of the district court’s
dismissal of the disparate-treatment claim pursuant to Rule 12(b)(6), new
data developed during the summary judgment phase showed that this
percentage has changed in Southeast Yuma as a whole, though not
necessarily in any particular part of that quadrant of the City. While the
City’s 2002 and 2007 Analysis of Impediments noted that Southeast Yuma
had a White population of 75%, the 2012 version of the same report shows
that the White population in that area as a whole decreased to between
48% and 65% (meaning that the Hispanic population was likely between
30% and 47%, with 5% being other).
28 AVENUE 6E INVESTMENTS V. CITY OF YUMA
significant disparity (29%) between the median income of
Yuma households headed by Hispanics and Whites.
Based upon these facts, Developers assert that the City’s
denial of their application to build moderately priced housing
will have a disproportionate effect on Hispanics. Developers’
allegations, accepted as true, support the inference that “the
[City’s] decision does arguably bear more heavily on racial
minorities.” Arlington Heights, 429 U.S. at 269. Drawing all
inferences in Developers’ favor, these allegations
demonstrate a historical background of stratification by race
and class, indicating the City’s denial of Developers’
application to build moderately priced housing will have a
disparate impact on Hispanics by denying them affordable
opportunities to move into communities long dominated by
more affluent Whites.
Developers also allege facts suggesting a prior history of
animus in Yuma housing developments. Specifically, they
allege facts reported in the 2002 Analysis of Impediments
demonstrating a history of NIMBY opposition to the
development of affordable housing developments and
appearing to link such opposition at least in part to animus,
because the reports’ authors include among their
recommendations that the City collaborate on community
events celebrating cultural diversity. This further supports
Developers’ claims that animus helped motivate the
community opposition leading to the City Council’s decision
to deny their zoning application.
Citing the Seventh Circuit’s decision on remand in
Arlington Heights and the Second Circuit’s decision in
Huntington Branch, N.A.A.C.P., the City argues that the facts
before us fail to demonstrate an intent to discriminate because
AVENUE 6E INVESTMENTS V. CITY OF YUMA 29
they fall short of the facts in cases finding an intent to
discriminate in municipalities with a long history of
completely barring certain types of housing or restricting its
development to only certain locations. See Metro. Hous. Dev.
Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1294 (7th
Cir. 1977); Huntington Branch, N.A.A.C.P. v. Huntington,
844 F.2d 926, 928 (2d Cir. 1988). That the facts alleged here
are not as egregious as the facts in other cases in which
plaintiffs prevailed is of no consequence. Developers need
not demonstrate a complete absence of desired housing for
Hispanics to prevail; discriminatory zoning practices violate
the FHA even if they only “contribute to ‘mak[ing]
unavailable or deny[ing] housing’” to protected individuals.
Pac. Shores Props., 730 F.3d at 1157 (quoting City of
Edmonds v. Wash. State Bldg. Code Council, 18 F.3d 802,
805 (9th Cir. 1994) (alterations in original) (emphasis
added)). Moreover, at this stage of the proceedings all
inferences must be drawn in the plaintiffs’ favor and those
inferences alone are sufficient to preclude dismissal of the
claims regarding disparate treatment.
D. Conclusion
After public hearings filled with what a reasonable jury
could interpret to be racially tinged code words, the City
Council denied Developers’ rezoning request, overriding the
unanimous vote of the planning commission and denying a
rezoning request for the first time in three years. For the
reasons explained above, we hold that Developers’ complaint
sufficiently alleges claims of disparate treatment under the
FHA and Equal Protection Clause. We hold that the claims
of disparate treatment are, on the basis of the complaint
before us, plausible and therefore reverse the district court’s
dismissal of these claims.
30 AVENUE 6E INVESTMENTS V. CITY OF YUMA
III. Disparate-Impact Claim
Developers next assert that the district court erred in
granting the City’s first summary judgment motion as to the
claim that the denial of the zoning request caused a disparate
impact on Hispanics. The motion was granted on the sole
ground raised by the City: similarly-priced housing was
available elsewhere in Southeast Yuma; therefore, no
disparate impact could be established.10 We reject that
ground and hold that when a developer seeks to rezone land
to permit the construction of housing that is more affordable,
a city cannot defeat a showing of disparate impact on a
minority group by simply stating that other similarly-priced
and similarly-modelled housing is available in the general
area.11
A.
Developers presented a request to the City to change the
zoning of their land from lower-density to higher-density
housing. They did so mainly for financial reasons—lower-
density housing was not selling after a recession, and they
10
Alternative housing elsewhere in the area was the only ground on
which the district court relied in granting summary judgment on this
claim. The Developers, however, had an additional claim of disparate
impact based on a perpetuation-of-segregation theory. As discussed
below, the district court granted summary judgment on the perpetuation-
of-segregation claim for the reason that undisputed statistics showed that
the denial of the zoning application would not have a significant
segregative effect on the neighborhood. We affirm that ruling, infra at 38.
11
We do not address arguments in the second summary judgment
motion, including the City’s contention that Developers have failed to
proffer statistical evidence demonstrating a substantial disparate impact
resulting from the zoning denial.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 31
believed that higher-density units might sell more easily. The
City argued in its first summary judgment motion only that
the availability of similarly-priced and modelled housing in
other parts of Southeast Yuma necessitated summary
judgment in its favor. Developers’ statistics demonstrating
that Hispanics would be more likely to buy homes in the
zoned area if the proposed higher-density zoning were
approved were not at issue. The City, therefore, had a choice
of two alternatives, each of which was permissible under its
General Plan; one would enable more minority group
members to purchase homes in an area with a white majority
population than would the other. It chose the other.
As noted above, in the 1960s and earlier, national, state,
and local governments had explicit or implicit policies that
prevented integration even when developers had an economic
rationale for wanting to build more dense or more affordable
housing. In Texas Department of Housing, the Supreme
Court emphasized that disparate-impact liability was
designed to reverse this pattern by allowing “private
developers to vindicate the FHA’s objectives and to protect
their property rights by stopping municipalities from
enforcing arbitrary and, in practice, discriminatory ordinances
barring the construction of certain types of housing units.”
135 S. Ct. at 2522. Indeed, the wisdom of disparate-impact
liability under the FHA is that it addresses local government’s
(as well as other government’s) historical racism and the
continuing persistence of housing segregation not by
interjecting racial quotas as the end goal of municipal zoning
decisions, but rather by ensuring that municipalities making
such decisions will base them on legitimate objectives rather
than on discriminatory reasons, conscious or otherwise.
Moreover, when such decisions may still cause a disparate
impact, the municipality and the developer are instructed to
32 AVENUE 6E INVESTMENTS V. CITY OF YUMA
attempt to minimize that impact by determining whether there
is an alternative that accommodates both the city’s legitimate
objective and the developer’s legitimate goals. See 24 C.F.R.
§ 100.500 (describing this process under the FHA). Such a
thoughtful consideration, under disparate-impact analysis, of
how a city’s legitimate rationales may be reconciled with the
desires of developers to build higher-density affordable
housing has helped to change the old patterns prevalent in the
1960s and will continue to help produce a fairer and more just
society.
B.
Adopting the district court’s holding, which it arrived at
without the benefit of the Supreme Court’s decision in Texas
Department of Housing, would prematurely cut short the
carefully constructed mode of analysis that the Court just
recently established. Relying on Hallmark Developers, Inc.
v. Fulton County, 466 F.3d 1276 (11th Cir. 2006), a case
decided almost ten years before Texas Department of
Housing, the district court held that an adequate supply of
comparable housing in a quadrant of the City in which the
zone is located negated the possibility of any disparate impact
from the City’s denial of Developers’ application.12
In Hallmark, a Georgia county denied the developer’s
application to rezone land to build a mixed-use development
including affordable housing, and the developer sued.
12
We assume that the Eleventh Circuit, like the district court, would
reach a different decision than it did in Hallmark with the benefit of the
Supreme Court’s recent Texas Department of Housing decision. In fact,
we are not aware of any Eleventh Circuit case that has relied on
Hallmark’s rule on alternative housing since that decision.
AVENUE 6E INVESTMENTS V. CITY OF YUMA 33
466 F.3d at 1279, 1282. The developer’s expert testified that
the denial of zoning that would have allowed the construction
of lower-cost housing had a disparate impact on minorities
based on data of local home ownership and apartment rentals.
Id. at 1282. Despite these statistics, the Eleventh Circuit held
that the developer had failed to establish a disparate impact
because there was an oversupply of homes in the developer’s
projected price range in the southern part of the county. Id.
at 1287; see also Hallmark Developers, Inc. v. Fulton Cty.,
Ga., 386 F. Supp. 2d 1369, 1378 (N.D. Ga. 2005) (describing
the “South Fulton County” area). The court reasoned that
“[i]f there is a glut in the market of homes in Hallmark’s
projected price range, the lack of Hallmark’s particular
development is not likely to have an impact on anyone, let
alone adversely affect one group disproportionately.” Id.
The district court adopted Hallmark’s reasoning, finding
that “it is undisputed there was a supply of R-1-6 lots and
affordable to moderately priced homes available in the
southeast portion of Yuma at the time of the zoning denial
and a couple year[s] thereafter,” including some lots within
two miles of the proposed development in the same price
range and featuring the same type of homes. Citing
Hallmark, the district court concluded that an adequate
supply of comparably-priced and similarly-modelled homes
in the area—that is, Southeast Yuma—foreclosed the
possibility of any adverse impact resulting from the City’s
denial of Developers’ zoning application, thereby precluding
Developers from pursuing a disparate-impact claim.
We disagree. The availability of similar housing well
outside of the zoned property does not affect the analysis
whether a city’s rejection of a zoning request caused a
disparate impact by preventing a higher percentage of
34 AVENUE 6E INVESTMENTS V. CITY OF YUMA
minority group members from purchasing homes. See Texas
Dep’t of Hous., 135 S. Ct. at 2522. In fact, the Hallmark
reasoning would threaten the very purpose of the FHA. A
local government could deny a developer’s request to
construct higher-density housing that more members of
minority groups could purchase, as long as there was other
similarly-priced and modelled housing anywhere within a
quadrant of a city or the southern or northern part of a county.
Indeed, there is no necessary limit to the Hallmark theory that
similarly-priced and modelled housing located elsewhere
would preclude a finding that zoning decisions had an
adverse impact on members of minority groups. It would
permit cities to block legitimate housing projects that have
the by-product of increasing integration simply by scouring
large swaths of a city for housing in another part of town that
is largely populated by minority residents, that does not
compare in any number of respects to the neighborhood in
which the developer has sought rezoning, or that is, in fact,
far less desirable in general. The Hallmark rule ignores the
fact that neighborhoods change from mile to mile, if not from
block to block, and thereby overlooks the potential for the
purposeful creation of majority areas from which minorities
may be excluded or of minority areas with few, if any, white
homeowners. Such segregated areas, when based on
consciously or unconsciously biased decisions that
disproportionately, and needlessly, adversely affect
minorities, are the antithesis of what the Fair Housing Act
stands for. See Texas Dep’t of Hous., 135 S. Ct. at 2522.
Similar to the Eleventh Circuit’s designation of the entire
southern part of a county as the relevant unit for determining
whether comparable housing existed, the district court here
also considered far too broad an area—an area covering an
entire quadrant of the city of Yuma—when determining
AVENUE 6E INVESTMENTS V. CITY OF YUMA 35
whether comparable housing exists. For any family,
including those of potential purchasers of homes in the
proposed housing development, housing that is a fair distance
away from where the family would otherwise choose to live
cannot in all likelihood be described as comparable.13 In
other words, minority families that might want to purchase
homes in the zoned area would almost certainly be adversely
affected by the denial of the zoning application if the
existence of available housing in a distant neighborhood were
deemed dispositive.
Our rejection of the Hallmark rule does not mean that the
existence of available housing in close proximity is irrelevant
to determining whether a plaintiff proves a disparate impact.
Indeed, if a city shows that truly comparable housing is
available in close proximity to a proposed development, such
a showing would be a relevant factor in deciding whether its
zoning decision had a disparate impact in that circumstance.
Truly comparable housing, however, is not simply a question
of price and model, but also of the factors that determine the
desirability of particular locations—factors such as similarly
or better performing schools, comparable infrastructure,
convenience of public transportation, availability of amenities
13
The City contended at oral argument that such a rule is permissible
because Developers conceded that any housing at the same price as the
proposed development in the whole Southeast quadrant of Yuma would
be “similar housing.” Not so. Although Developers’ complaint and
summary judgment briefing noted that Southeast Yuma had been
historically segregated, Developers do not assert that all housing in the
same price range in Southeast Yuma would be equivalent. In fact,
Developers spent several pages of their summary judgment brief
emphasizing that other available housing in Southeast Yuma that the
district court cited was, for example, in a “different, less desirable part of
Yuma.”
36 AVENUE 6E INVESTMENTS V. CITY OF YUMA
such as public parks and community athletic facilities, access
to grocery or drug stores, as well as equal or lower crime
levels. See Clark v. Universal Builders, Inc., 501 F.2d 324,
335 (7th Cir. 1974) (finding homes comparable that “were
located in close geographical proximity to plaintiffs’ homes
and had similar communal amenities such as transportation,
schools, churches, and quality of neighborhood”). Thus, in
order to determine whether housing outside of the zoned area
is comparable, we must determine not only the close
proximity of such housing to that area but also the principal
characteristics of the neighborhood that affect families’
everyday lives.
Rejecting the Eleventh Circuit’s and the district court’s
approach does not, as the district court contended,
“effectively place an affirmative duty on governing bodies to
approve all re-zoning applications wherein a developer
sought to build housing within a particular price range.” In
addition to mischaracterizing the Developers’ contention, this
statement misapprehends the applicable law. First, it may be
that Developers have, in fact, failed to show a disparate
impact on minorities resulting from denial of the rezoning
application—as noted, we remand to the district court to
assess the arguments advanced by the City in the second
motion for summary judgment. Second, a developer’s ability
to show disparate impact does not impose a duty on a
municipality to approve all zoning applications in a particular
price range. Instead, as the Supreme Court made clear in
Texas Department of Housing, such a showing merely
requires the city to demonstrate that the action that creates an
adverse effect on minorities is supported by adequate
justification. 135 S. Ct. at 2522 (“An important and
appropriate means of ensuring that disparate-impact liability
is properly limited is to give housing authorities and private
AVENUE 6E INVESTMENTS V. CITY OF YUMA 37
developers leeway to state and explain the valid interest
served by their policies.”); see also 24 C.F.R. § 100.500(c)
(setting forth burden-shifting framework for disparate-impact
claims under the FHA).
Indeed, municipalities that have good cause for denying
zoning changes may do so, unless motivated by conscious or
unconscious racial bias. When the developer shows by
statistical data that a zoning denial will have a disparate
impact on minorities, the city’s obligation is to establish a
legitimate and credible basis for its decision. This is not an
unreasonable burden. In fact it is
a feature of the FHA’s programming, not a
bug. . . . We need not be concerned that this
approach is too expansive because the
establishment of a prima facie case, by itself,
is not enough to establish liability under the
FHA. It simply results in a more searching
inquiry into the defendant’s motivations—
precisely the sort of inquiry required to ensure
that the government does not deprive people
of housing “because of race.”
Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mount
Holly, 658 F.3d 375, 385 (3d Cir. 2011); see also Graoch
Assocs. # 33, L.P. v. Louisville/Jefferson Cty. Metro Human
Rel. Comm’n, 508 F.3d 366, 374 (6th Cir. 2007) (“Of course,
not every housing practice that has a disparate impact is
illegal.”); Metro. Hous. Dev. Corp., 558 F.2d at 1290. In
some cases, nonetheless, an adjustment or accommodation
can still be made that will allow both interests to be satisfied.
Cf. 24 C.F.R. § 100.500(c)(3).
38 AVENUE 6E INVESTMENTS V. CITY OF YUMA
In sum, we decline to follow Hallmark and reject the
district court’s determination that the availability of similarly-
priced and modelled housing in the same quadrant of the City
as the zoned property prevents Developers from showing a
disparate impact. We therefore reverse in part the district
court’s grant of the City’s first motion for summary judgment
and vacate its decision that the second motion is moot. On
remand, the district court may consider the second motion.
The parties may, of course, amend their claims as to this
motion so as to take into account this opinion and the
Supreme Court’s opinion in Texas Department of Housing as
well as any statistical data or other law that may be relevant,
including additional data regarding comparable housing in
close proximity to the proposed development.
Finally, Developers also raised a separate perpetuation-of-
segregation claim of disparate impact. We agree with the
district court that they failed to set forth sufficient facts for
any such claim. The district court need not address it on
remand.
CONCLUSION
For the foregoing reasons, we reverse the district court’s
dismissal of the Developers’ disparate-treatment claims under
the FHA and the Equal Protection Clause and its grant of the
City’s first summary judgment motion on the disparate-
impact on Hispanics claim. We remand the case to the
district court for further proceedings consistent with this
opinion, including its consideration in the first instance of the
AVENUE 6E INVESTMENTS V. CITY OF YUMA 39
arguments the City presents in its second summary judgment
motion, as that motion may be amended.
REVERSED IN PART, VACATED IN PART, AND
REMANDED.