Daily Development for
Wednesday, November 6, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

FAIR HOUSING; PROCEDURE: Sixth Circuit spanks HUD and permits landlord to recover attorney's fees from HUD for neglect in timely pursuing a discrimination claim against landlord even where landlord is found liable on the discrimination claim itself.

Kelly v. U.S. Department of Housing and Urban Development, 97 F.3d 118 (6th Cir. 1996)

Plaintiff, a single mother of twin five-year old daughters, called the telephone number on a "For Rent" sign outside an apartment owned by defendants. After describing her family situation, Plaintiff was informed that the Defendants only allowed "one child per bedroom" which implied that the two bedroom apartment she had asked about would not be available to her. Plaintiff hung up the telephone and immediately called H.O.M.E., Inc., a non-profit fair housing organization in Cincinnati. She made no further attempt to rent an apartment from the Kellys. After a month and a half, she rented another apartment, which was not as convenient, increasing her commute to work and creating other transportation and child care problems. She filed her complaint with HUD alleging housing discrimination on May 17, 1990.

HUD appointed an investigator to investigate the claim and also to act as conciliator between the parties. According to the Sixth Circuit, this investigator had shown distinct bias against the Defendants in the past, but still was selected to be a "conciliator" here. The investigator completed his investigation on October 2, 1990, after which time he made no further contact with the Kellys. HUD did not issue its Charge of Discrimination until March 2, 1992, two years after the incident took place.

After a hearing in May 1992, the ALJ found the Defendants liable under 42 U.S.C.3604 and awarded $10,430.76 in damages. Of that amount, over $6,000 accounted for actual economic damages and $3,500 was ordered to compensate for emotional distress.

In a prior decision, the Sixth Circuit remanded the case to HUD to evaluate whether HUD's substantial delay in pursuing this complaint "ran up" the damages amount unfairly. A HUD Administrative Law Judge concluded that there had not been a "total neglect" by HUD, and consequently reduced the damages amount by $1.00.

Fortunately for this landlord, the Cincinnati office of HUD had caught the attention of the Sixth Circuit. The court apparently decided to make an object lesson here. On appeal from the HUD decision, the Sixth Circuit reduced the damages claim significantly. It operated on the assumption that HUD, pursuant to its statutory mandate, normally should bring an action on a housing discrimination complaint within one year from completion of its investigation. Thus, it prorated the damages award to reflect the shorter period of emotional distress damages and actual damages attributable to a more appropriate one year period, rather than the two years that actually occurred.

One paragraph of the Sixth Circuit panel's language is enough to convey the court's attitude:

"This is a case of an administrative agency run amok. It is not necessary here to repeat the list of HUD's delays and missteps other than to recall that the agency's conduct violated not only Congressional statute and HUD's own regulations but also basic principles of adjudication. See Kelly I, 3 F.3d. at 953-56. We follow the mandate of Kelly I that a respondent in a housing discrimination case cannot be made to pay for the government's neglect."

The court goes beyond a simple reduction in damages, however. Applying the Equal Access to Justice Act ("EAJA"), 28 U.S.C.A. 2412(d)(1)(A) and 5 U.S.C. & 504(a)(1) (1988), the court also requires that HUD pay $20,000 of the Defendant's attorney's fees. Although the court acknowledged that the Defendants lost on the principle issue of discrimination in the case, the court nevertheless concluded that Defendants prevailed on significant issue relating to HUD's propriety, and therefore are entitled to compensation. The EAJA requires that a prevailing party obtain attorney's fees from the government except where the government position is "substantially justified." The court has not problem with that analysis:

"Furthermore, although HUD's initial posture in bringing the claim may have been justified, given its untoward conduct in the case throughout, its overall position cannot be said to be "substantially justified." To fail to correct this situation and to enforce an award of attorneys' fees against petitioners without a set off or recoupment against HUD would be a dereliction of judicial responsibility of a high order. Although this case does not present the typical EAJA award scenario, we limit our holding to these facts because we find that the circumstances for which the statute was intended present themselves here."

A stinging dissent by Judge Ryan, characterizes the majority opinion as "an unedifying exercise in unrestrained judicial power." Judge Ryan points out in particular that the Equal Access to Justice Act limits attorney's fees to $75 per hour in most cases, and requires a careful accounting. The Sixth Circuit panel here required no such accounting, but just handed the lump sum $20,000 award to the defendants. He also criticizes the characterization of the Defendants as "prevailing parties" just because they won a few skirmishes that Judge Ryan views as minor in light of the overall conclusion that discrimination occurred. As to the alleged delay, Judge Ryan points out accurately that the majority does not cite to any authority supporting its conclusion that there is a mandatory twelve month period within which HUD must bring a discrimination action, and further maintains that the administrative law judge below heard extensive argument before concluding that the delay in this case did not represent a case of HUD "neglect."

Comment: When an "agency run amok" collides with "unrestrained judicial power," we can get the kind of train wreck we see in this case. Reading between the lines, it seems clear that the court concludes that the landlords were guilty of a technical violation that should never have been prosecuted by HUD. The court appears suspicious that HUD had targeted this landlord for particularly severe treatment, and that HUD may have had ulterior motives behind the delay in prosecution.

The sad story is that we cannot and should not rely upon Federal Circuit Courts of Appeal to remedy such wrongs. How many other landlords have been and will be "ground under" by such conduct before some other appeals court rises up in indignation? The fact is that most cases of agency aguse are routinely affirmed on the grounds of administrative discretion. If there is a problem, the remedy ought to be a political one. Certainly landlord groups ought to be able the political voice to counter what they perceive to be inbred institutional hostility at HUD.

If, indeed, the appropriate remedy is political, then what is gained and what is lost by a federal appeals court distorting the Equal Access to Justice Act to use it as a weapon in cases such as this? And, at least if we accept Judge Ryan's unrebutted allegations, this is a distortion. Although the editor claims no familiarity with the underlying case or the statutes involved, it does seem clear that the Sixth Circuit should not unilaterally declare that HUD operates under a one year time limit to bring discrimination cases unless this limit is crystal clear in statute or regulation. To go beyond specific law in this area is for the court to do a job specifically (and appropriately) entrusted to an agency. Further, to award $20,000 in attorney's fees with no analysis of their legitimacy under specific statutory guidelines is a sanctioning of a device for further "payoffs" in other cases where judges wish to vent their spleen. Federal appeals court judges should keep their spleens sealed. Spleen venting at that level is not consistent with judicial decorum. The the judges want to vent their spleens, let them write comments to Daily Developments in DIRT!!!

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