Daily Development for
April 28, 2000
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu
FAIR HOUSING; PUNITIVE
DAMAGES: In a federal fair housing suit, punitive damages are available even
when no actual damages are shown, and punitive damages are available against
co-owners for discriminatory acts of other co-owners or managers, except when
an owner can show an affirmtive (though unsuccessful) effort to avoid
discrimination.
Alexander v. Riga, Nos.
98-3597 and 98-3622 (3rd Cir. 3/22/00)
At least based upon the
narrative in the case, the plaintiffs made out a clear case of discrimination,
aided by the local Fair Housing Council, which had provided several
"testers" of both African American and white races, whom the landlord/co-owner
treated quite differently.
But the jury returned a
verdict of discrimination, but no legal injury either to the proposed tenants
or to the Fair Housing Council. The trial court refused to proceed to
consideration of punitive damages when no actual damages could be shown. It
entered a judgment for the Fair Housing Council, but not for the plaintiffs
(based upon inconsistencies in the jury's conclusions).
On appeal: held: Reversed.
Noting that this was an
issue of first impression in the Third Circuit, the court concluded that there
need be no actual damages in order to justify punitive damages in Fair Housing
Act cases, although it noted that in this case it is likely that the jury,
properly instructed, would have returned a verdict of $1 in token damages
anyway, and that this traditionally is enough to trigger punitive damages.
As to the requirement that
classcially punitive damages are available only in cases of egregioius conduct,
the court noted that conduct that is "reckless and malicious" is a
sufficient basis for punitive damages, and that: "Indeed, recklessness and
malice may be inferred when a manager responsible for showing and renting
apartments repeatedly refuses to deal with African- Americans about the
apartment, and misrepresents the apartment's availability.
In another part of the
case, the court dealt with the claims of one of the co-owners that he could not
be found liable for punitive damages because he was in Italy at all relevant
times and had no knowledge of discriminatory conduct carried on by his co-owner
wife. The court elects to follow the general rule applied in other federal
courts that the duty of a landlord under the Fair Housing Act not to
discriminate in the leasing of property may not be delegated to the landlord's employee.
The vicarious liability of
a principle for discrimination by a manager, however, has been limited by the U.S.
Supreme Court in Kolstad v. American Dental Association, 527 U.S. 526, ___, 119
S.Ct. 2118, 2124 (1999) (dealing with employment discrmination charges). There
the Court held that punitive damages will not lie if the employer has made good
faith, albeit unsuccessful atempts, to prevent discrimination by his agents. The
Supreme Court noted that "[g]iving punitive damages protection to
employers who make good-faith efforts to prevent discrimination . . .
accomplishes [the civil rights laws'] objective of `motivat[ing] employers to
detect and deter [civil rights] violations.' " (119 S.Ct. At 1228). Comment
1: (Walking very carefully here.) Punitive damages for fair housing violations
are undoubtedly a very sensitive subject. Although the appeals court here makes
out a very compelling case that there was discrimination, any experienced
landlord can point to numerous cases in which discrimination is charged where
it doesn't exist. You're still allowed to refuse to rent to people whom you believe
will be bad tenants, so long as they all aren't part of a protected class and
your reason for refusing them has nothing to do with that class. But the
problem is that you may only have "bad tenant types" apply from that
class, so it's difficult to prove your motives were pure.
On the other hand, we
ought to suffer a few "false positives" in order to eradicate the
very bad result of sly discrimination that is difficult to prove but
nevertheless demeaning and unacceptable. We probably can get general agreement
on the above.
But, Mr. Hyde says:
Punitive damages where there is no economic injury goes to far. The Fair
Housing Act provides for attorney's fee awards. A finding of discrimination and
the granting of an injunction, regardless of the lack of actual damages, would
justify a plaintiff in recovering attorney's fees. Why isn't the threat of
attorney's fees (in addition to the defendant's own fees) enough of a
deterrent?
Is it really wise to throw
all inner city landlords to the jury for a punitive damages chewing over, even
in cases in which there is no evidence of actual damages? Note that
"egregious conduct" is not required. Evidence satisfactory to the
jury that discrimination occurred is enough.
Comment 2: Now for the
other side of the argument. Dr. Jekyll says: Discrimination is destructive and
invasive even if no economic damages are suffered. Discrimination is always a
deliberate act. It's true that owners are vicariously liable for their
manager's acts, and that's not based upon deliberate discrimination by the
owners, but note that owners who make attempt to train and control their agents
avoid punitive damages liability.
If we believe in the jury
system, we have to accept the consequences right down the line. There are
adequate controls in the system for controlling "runaway juries." And
other dispute resolution mechanisms aren't any better. So fear of the jury is
no reason to let discriminating landlords get away with a "slap on the
wrist" when they need a board to the buttocks.
Readers are urged to respond, comment, and argue with the daily development
or the editor's comments about it.
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