GRAOCH ASSOCIATES #33, L. P., d/b/a Autumn Run Apartments, Plaintiff-Appellee, v. LOUISVILLE/JEFFERSON COUNTY METRO HUMAN RELATIONS COMMISSION, Defendant-Appellant.
No. 06-5561
United States Court of Appeals for the Sixth Circuit
Decided and Filed: November 21, 2007
07a0463p.06
Before: BOGGS, Chief Judge; and MERRITT and MOORE, Circuit Judges.
RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206. Appeal from the United States District Court for the Western District of Kentucky at Louisville. No. 05-00113—Charles R. Simpson III, District Judge. Argued: January 23, 2007.
ARGUED: Kunga Njuguna, JEFFERSON COUNTY ATTORNEY‘S OFFICE, Louisville, Kentucky, for Appellant. Bradley E. Cunningham, MIDDLETON REUTLINGER, Louisville, Kentucky, for Appellee. ON BRIEF: Kunga Njuguna, JEFFERSON COUNTY ATTORNEY‘S OFFICE, Louisville, Kentucky, for Appellant. Bradley E. Cunningham, Kenneth S. Handmaker, MIDDLETON REUTLINGER, Louisville, Kentucky, for Appellee.
BOGGS, C. J., delivered the opinion of the court. MERRITT, J. (p. 11), delivered a separate opinion concurring in the judgment and in Section IV. MOORE, J. (pp. 12-24), delivered a separate opinion concurring in part and dissenting in part.
OPINION
BOGGS, Chief Judge. The Section 8 voucher program is a voluntary program through which the federal government provides rent subsidies to eligible low-income families who rent from participating landlords. See
The district court answered the first question in the negative and therefore granted summary judgment in favor of Graoch without reaching the second question. We reach the same final result, but in a different way. Disagreeing with the position taken by the Second and Seventh Circuits, we hold that a plaintiff can, in principle, rely on evidence of some instances of disparate impact to show that a landlord violated the Fair Housing Act by withdrawing from Section 8. We also hold, however, that in this case the Metro Human Relations Commission did not even allege facts making the statistical comparison necessary to state a prima facie case of disparate-impact discrimination. Consequently, we affirm.
I
The Housing Authority of Jefferson County (“HAJC“) coordinates the local disbursement of Section 8 funds in the Louisville area. See
The Kentucky Fair Housing Council (“FHC“) and three Autumn Run tenants receiving Section 8 assistance – Joyce McNealy, Tina Gray, and Angela Thornton – filed a complaint with the Metro Human Relations Commission. The Commission found probable cause to believe that Graoch‘s withdrawal from the Section 8 program constituted unlawful racial discrimination because it had a disparate impact on blacks. On Graoch‘s motion, it then stayed administrative proceedings to give Graoch the opportunity to seek declaratory relief in federal court. Graoch responded by initiating this case.1
The parties agreed to a series of factual stipulations. Eighteen families receiving Section 8 assistance lived at Autumn Run when Graoch announced that it was withdrawing from the Section 8 program. Seventeen of those families were black. As of 2003, 6,270 of the 8,849 Jefferson County residents receiving Section 8 vouchers were black. Finally, as of the 2000 census, 18.9% of Jefferson County residents were black and 24% were members of black households. Absent from the joint stipulations, however, was any information regarding the races of the non-Section 8 tenants at Autumn Run. Indeed, the only reference contained in the record to the racial makeup of Autumn Run as a whole, or of its non-Section 8 tenants, is a remark by Graoch‘s counsel, quoted by the Commission in its probable cause finding: “the tenants at Respondent project Autumn Run Apartments were 90% minority and 10% white.”
Graoch stated that it chose to withdraw from the Section 8 program because of disputes with the HAJC regarding rent payments made on behalf of Section 8 tenants. Graoch claimed that the HAJC held Graoch “to an impossible standard” in enforcing the quality standards for Section 8, “abating rent for conditions which Graoch was either not made aware of prior to inspection, or which it attempted to fix only to be cited upon re-inspection for not making its repairs to the
Based on this record, Graoch moved for summary judgment. First, it argued that the Commission failed to state a prima facie case that Graoch‘s withdrawal from Section 8 violated the FHA because it had a disparate impact on blacks. Second, it argued that its withdrawal from Section 8 did not violate the FHA even if the Commission did state a prima facie case because the decision to withdraw resulted from a “business necessity.” The district court granted summary judgment for Graoch, holding that a party offering only evidence that a landlord‘s withdrawal from the Section 8 program had a disparate impact on members of a protected class cannot establish a prima facie case that the landlord violated the FHA.
The Commission appealed. We review the district court‘s decision de novo. See Trustees of the Mich. Laborers’ Health Care Fund v. Gibbons, 209 F.3d 587, 590 (6th Cir. 2000). Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”
II
Before delving into the specific implications of withdrawal from Section 8 and the even more-specific details of this case, we must address as a general matter the law governing disparate-impact claims under the FHA. We previously have held that a plaintiff can establish a violation of the FHA by showing either disparate treatment or disparate impact.2 Larkin v. Mich. Dep‘t of Soc. Servs., 89 F.3d 285, 289 (6th Cir. 1996). We have stated that, to show disparate impact, a plaintiff must demonstrate that a facially neutral policy or practice has the effect of discriminating against a protected class of which the plaintiff is a member. Blaz v. Barberton Garden Apartment, No. 91-3896, 1992 U.S. App. LEXIS 18508, at *8 (6th Cir. July 29, 1992) (unpublished). We have not decided, however, what framework we should use to determine whether a plaintiff has done enough to survive summary judgment on a disparate-impact claim against a private defendant under the FHA.
We find it useful to compare the frameworks that we have applied to three similar kinds of claims: disparate-treatment claims against private defendants under the FHA, disparate-impact claims against private defendants under Title VII, and disparate-impact claims against governmental defendants under the FHA. In disparate-treatment cases under the FHA, we apply “the three-part burden of proof test established in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).” Selden Apartments v. U.S. Dep‘t of Hous. & Urban Dev., 785 F.2d 152, 159 (6th Cir. 1986) (internal citation and quotation marks omitted). First, the plaintiff must state a prima facie case by showing that he is a member of a protected class, that he applied to and was qualified to rent or purchase certain housing, that he was rejected, and that the housing remained available thereafter. Maki v. Laakko, 88 F.3d 361, 364 (6th Cir. 1996).
We imported this framework from our disparate-treatment cases under Title VII. See Larkin, 89 F.3d at 289; compare Daniels v. Bd. of Educ., 805 F.2d 203, 207 (6th Cir. 1986) (addressing a disparate-treatment claim under Title VII) with Selden, 785 F.2d at 159 (applying the same framework to a disparate-treatment claim under the FHA). We agreed with the reasoning used by the Second Circuit, which found “persuasive” the “parallel between Title VII and Title VIII“:
The two statutes are part of a coordinated scheme of federal civil rights laws enacted to end discrimination; the Supreme Court has held that both statutes must be construed expansively to implement that goal. See, e.g., Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 211-12 (1972) (Fair Housing Act must be generously construed to foster integration); Griggs v. Duke Power Co., 401 U.S. 424, 429-36 (1971) (Title VII should be interpreted broadly to achieve equal employment opportunity). Courts and commentators have observed that the two statutes require similar proof to establish a violation.
Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 935 (2d Cir.), aff‘d on other grounds, 485 U.S. 18 (1988) (cited in Blaz, 1992 U.S. App. LEXIS 18508, at *8, and Bangerter v. Orem City Corp., 46 F.3d 1491, 1501 (10th Cir. 1995), which in turn was cited in Larkin, 89 F.3d at 289). In sum, we concluded that we generally should evaluate claims under the FHA by analogizing them to comparable claims under Title VII. Larkin, 89 F.3d at 289.
In disparate-impact cases under Title VII, we apply a different version of the McDonnell Douglas burden-shifting framework than in disparate-treatment cases. We follow the same three steps: the plaintiff states a prima facie case; the defendant responds; the plaintiff rebuts the response. See Kovacevich v. Kent State Univ., 224 F.3d 806, 830 (6th Cir. 2000). To state a prima facie case, however, a Title VII plaintiff basing his claim on disparate impact must “identify[] and challeng[e] a specific employment practice, and then show an adverse effect by offering statistical evidence of a kind or degree sufficient to show that the practice in question has caused the adverse effect in question.” Ibid. To respond, the defendant must articulate a “legitimate business reason” for the challenged decision, rather than simply a non-discriminatory basis. Ibid. Finally, to rebut the defendant‘s response, the plaintiff can show “either that the employer‘s reason is a pretext for discrimination, or that there exists an alternative employment practice that would achieve the same business ends with a less discriminatory impact.” Ibid. Relying on the analogy between Title VII and the FHA, several other circuits have applied essentially this approach to disparate-impact claims under the FHA. Hack v. President & Fellows of Yale Coll., 237 F.3d 81, 98-102 (2d Cir. 2000); Langlois v. Abington Hous. Auth., 207 F.3d 43, 51 (1st Cir. 2000); Mountain Side Mobile Estates P‘ship v. Sec‘y of Hous. & Urban Dev. ex rel. VanLoozenoord, 56 F.3d 1243, 1251 (10th Cir. 1995). So has a district court in our circuit. Marbly v. Home Props. of N.Y., 205 F. Supp. 2d 736, 740 (E.D. Mich. 2002).
In a disparate-impact case against a governmental defendant under the FHA, however, we did not mention the burden-shifting framework or the elements of a prima facie case. See Arthur v. City of Toledo, 782 F.2d 565, 575-78 (6th Cir. 1986). Instead, we stated that, to determine “whether conduct which produces a discriminatory effect but which did not have a discriminatory intent” violates the FHA, we must consider three factors: (1) the strength of the plaintiff‘s showing of discriminatory effect; (2) the strength of the defendant‘s interest in taking the challenged action; and (3) whether the plaintiff seeks to compel the defendant affirmatively to provide housing for
In formulating a framework to analyze disparate-impact claims against private defendants under the FHA, we think that it is best to merge the approaches we used in Arthur and in our Title VII disparate-impact cases by reading the Arthur standard as a supplement, not an alternative, to the burden-shifting framework. Treating the Arthur standard as an alternative would conflict with our statement in Larkin that similar claims under Title VII and the FHA generally should receive similar treatment. See Larkin, 89 F.3d at 289. And when applied to private defendants, the Arthur standard nicely captures the inquiry that we must perform at the third step in the burden-shifting framework. To determine whether a defendant‘s proffered business reason is a pretext for discrimination, or whether an alternative practice exists that would achieve the same business ends with a less discriminatory impact, we must consider the strength of the plaintiff‘s statistical evidence of disparate impact and the strength of the defendant‘s interest in maintaining the challenged practice. Those are the first two Arthur factors. The third Arthur factor, distinguishing defendants who wish only not to provide housing themselves from those who wish to stop others from providing housing, is not relevant to claims against private defendants, who lack the authority to control third-party behavior (though it is relevant when applied to governmental defendants, who through zoning regulations or land-use permit requirements might have the authority to control the housing development and allocation decisions of third parties). Consequently, we think that our approaches to disparate-impact claims under Title VII and disparate-impact claims against governmental defendants under the FHA are compatible, not inconsistent.
Borrowing from our Title VII cases, then, we hold that disparate-impact claims against private defendants under the FHA should be analyzed using a form of the McDonnell Douglas burden-shifting framework:
- First, a plaintiff must make a prima facie case of discrimination by “identifying and challenging a specific [housing] practice, and then show[ing] an adverse effect by offering statistical evidence of a kind or degree sufficient to show that the practice in question has caused the adverse effect in question,” Kovacevich, 224 F.3d at 830 (disparate impact claim under Title VII);
Second, if the plaintiff makes a prima facie case, the defendant must offer a “legitimate business reason” for the challenged practice, ibid.; - Third, if the defendant offers such a reason, the plaintiff must demonstrate that the defendant‘s reason is “a pretext for discrimination, or that there exists an alternative [housing] practice that would achieve the same business ends with a less discriminatory impact.” Ibid. In order to evaluate the plaintiff‘s showing, we consider the strength of the plaintiff‘s showing of discriminatory effect against the strength of the defendant‘s interest in taking the challenged action. See Arthur, 782 F.2d at 575 (disparate-impact claim against a governmental defendant under the FHA).
III
Graoch argues that, instead of analyzing the Commission‘s claims through this burden-shifting framework, we should exempt landlords from any possible liability under the FHA for a complete withdrawal from the Section 8 voucher program.4 The Second Circuit, in Salute v. Stratford Greens Garden Apartments, 136 F.3d 293 (2d Cir. 1998), and the Seventh Circuit, in Knapp v. Eagle Property Management Corp., 54 F.3d 1272 (7th Cir. 1995), have created such a categorical exemption for Section 8 withdrawals. We decline to do so.
The FHA prohibits discrimination “against any person in the terms, conditions, or privileges of sale or rental of a dwelling . . . because of race . . . .”
Of course, not every housing practice that has a disparate impact is illegal. We use the burden-shifting framework described above – and especially the final inquiry considering the strength of the plaintiff‘s statistical evidence and the strength of the defendant‘s business reason – to distinguish the artificial, arbitrary, and unnecessary barriers proscribed by the FHA from valid policies and practices crafted to advance legitimate interests. Our analysis is derived from our interpretation of the statute, and we cannot create categorical exemptions from it without a statutory basis.
In Knapp and Salute, our sister circuits seem to have taken a more circumscribed view of disparate-impact liability under the FHA. The Knapp court stated:
“[T]he courts must use their discretion in deciding whether, given the particular circumstances of each case, relief should be granted under the statute.” [Arlington Heights II,] 558 F.2d at 1290. . . . [T]his court has recognized that disparate impact analysis is not appropriate in certain contexts. See NAACP v. American Family Mutual Ins. Co., 978 F.2d 287, 290 (7th Cir. 1992) (claim alleging failure to insure in certain areas violated the Act not conducive to disparate-impact analysis), cert. denied, 508 U.S. 907 (1993); Village of Bellwood
v. Dwivedi, 895 F.2d 1521, 1533 (7th Cir. 1990) (“Some practices lend themselves to disparate impact method, others not.“).
Knapp, 54 F.3d at 1280. This passage appears to say that some disparate-impact claims should fail even if the plaintiff could prevail under the standard burden-shifting framework. We cannot endorse this view.
When we adjudicate statutory claims, “our role is limited to interpreting what Congress may do and has done.” Patterson v. McLean Credit Union, 491 U.S. 164, 188 (1989). While reasonable minds could disagree as to whether the FHA contemplates disparate impact liability, we have concluded that it does. See Larkin, 89 F.3d at 289; Arthur, 782 F.2d at 575. Nothing in the text of the FHA instructs us to create practice-specific exceptions. Absent such instruction, we lack the authority to evaluate the pros and cons of allowing disparate-impact claims challenging a particular housing practice and to prohibit claims that we believe to be unwise as a matter of social policy. Accord Salute, 136 F.3d at 312 & n.23 (Calabresi, J., dissenting) (expressing “doubt whether the Seventh Circuit‘s approach” in Knapp is “consistent with” the general use of the burden-shifting framework to analyze disparate-impact claims under the FHA).
The passage from Knapp also could mean something more limited: that if no disparate-impact challenge to a particular practice ever could succeed under the burden-shifting framework, then a court categorically may bar all disparate-impact challenges to that practice. This reading is consistent with our statement that “at least under some circumstances a violation of [the Fair Housing Act] can be established by a showing of discriminatory effect without a showing of discriminatory intent.” Arthur, 782 F.2d at 574 (quoting Arlington Heights II, 558 F.2d at 1290) (alteration in original). It is also consistent with the cases relied on by the Seventh Circuit in Knapp. In NAACP v. American Family Mutual Insurance Co., for example, the court held that insurers never can face disparate-impact liability for “charging higher rates or declining to write insurance for people who live in particular areas,” reasoning that “[i]nsurance works best when the risks in the pool have similar characteristics.” 978 F.2d at 290. Conducting an inquiry analogous to our inquiry at the third step in the burden-shifting framework, it concluded that the strength of the insurer‘s interest in declining to insure in certain areas outweighed the strength of any possible disparate impact the policy could have. See id. at 290-91.
Likewise, in Village of Bellwood v. Dwivedi, the court concluded that claims of “racial steering” were not subject to disparate-impact analysis because racial steering necessarily involves disparate treatment, not a facially neutral policy that has a discriminatory effect. 895 F.2d at 1533. We agree that categorical bars are justified when they result from a generalized application of the burden-shifting framework. We see no reason to require courts to engage in the Sisyphean task of working through the burden-shifting framework in each individual case when the plaintiff has no chance of success (for example, when a plaintiff brings a disparate-impact challenge to a landlord‘s decision to charge rent).
We do not believe, however, that it is impossible for a disparate-impact challenge to a landlord‘s withdrawal from Section 8 to succeed under the burden-shifting framework. Consider the strongest possible disparate-impact challenge to a landlord‘s withdrawal from Section 8: All of the non-Section 8 tenants at a housing complex are white. The landlord decides to participate in the Section 8 voucher program. A number of Section 8 participants move in, including the plaintiff. All are black. The landlord quickly decides to withdraw from Section 8 and refuses to renew the leases of existing Section 8 tenants. He explains his decision by saying simply that he no longer wished to participate in the program, without claiming that his participation cost him money, time, business opportunities, or any other benefit.
At the first stage of the burden-shifting framework, the hypothetical plaintiff could state a prima facie case: she could identify a challenged practice (the landlord‘s withdrawal from Section 8) and present strong statistical evidence that the practice had a disparate impact on blacks. At the second stage of the burden-shifting framework, the landlord could offer a business reason for his decision: he wanted out of the Section 8 program. At the third stage, then, the plaintiff would have to show either that the landlord‘s explanation was a pretext for discrimination or that an alternate practice would serve the same business ends with less discriminatory effect. To evaluate the plaintiff‘s showing, we would consider the strength of her evidence of disparate impact and the strength of the business interests stated by the landlord. We have little doubt that a reasonable fact-finder presented with this hypothetical set of facts could conclude that the landlord‘s withdrawal from Section 8 was pretextual, and therefore that the plaintiff‘s claim should survive summary judgment under the burden-shifting framework.
Graoch makes two arguments that could undermine this conclusion. First, it contends that because Section 8 is a voluntary program we should place exceptional weight on a landlord‘s interest in being able to withdraw without the threat of litigation. Yet to say that Section 8 participation is “voluntary” is only to say that a landlord does not break the law by declining to participate.5 As such, Graoch‘s claim proves too much: almost every action that could create disparate-impact liability under the FHA is voluntary. Cf. Buckeye, 263 F.3d at 631-32 (vacated) (approving building site plans); Maki, 88 F.3d at 64 (varying of rent based on number of occupants). 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.
Second, Graoch claims that there is no coherent way to permit disparate-impact challenges to a landlord‘s withdrawal from Section 8 without also permitting such challenges to a landlord‘s non-participation in Section 8. It reasons that “[t]he actions of both non-participating and participating owners have the same impact on minorities” and therefore that “no principled way exists” to distinguish the two groups. Knapp, 54 F.3d at 1280. While we agree that a landlord should never face disparate-impact liability for non-participation in Section 8, we do not think that withdrawal and non-participation are functionally identical. Withdrawal affects an identifiable group: tenants receiving Section 8 assistance. Non-participation could be said to have a theoretical impact on members of a protected class, but the size and composition of the affected group is indeterminate.
Moreover, the FHA does not impose liability based solely on the existence of a disparate impact. It imposes liability only when a plaintiff can meet the ultimate burden of persuasion by showing either that the landlord‘s business reason for a practice is a pretext for discrimination or that an alternative practice would serve the same business goal with less discriminatory effect. That burden is harder to meet in a challenge to non-participation than in a challenge to withdrawal. A non-participating landlord presumptively can appeal to his interests in not wanting to spend time learning about the program and not wanting to become entangled in government bureaucracy, while a withdrawing landlord who fails to cite any reason why participation in Section 8 hurt his business cannot do so. And an unexplained withdrawal from Section 8, combined with strong evidence of
IV
Because we reject a categorical rule against disparate-impact challenges to withdrawals from Section 8, we must address whether the Commission can state a prima facie case of disparate-impact discrimination against Graoch in this case. To state a prima facie case of disparate-impact discrimination under the FHA, a plaintiff must (1) identify and challenge a specific housing practice, and then (2) show that the practice had an adverse effect on members of a protected class by offering statistical evidence of a kind or degree sufficient to show that the practice in question has caused the adverse effect in question. The Commission plainly satisfied the first requirement by identifying and challenging Graoch‘s practice of no longer accepting Section 8 vouchers. We conclude that it did not satisfy the second requirement, however, because it failed even to allege any facts making the statistical comparison necessary to determine whether Graoch‘s withdrawal from Section 8 had a disparate impact on blacks.
In Arthur, we explained that there are “two types of discriminatory effects which a facially neutral housing decision can have“:
The first occurs when that decision has a greater adverse impact on one racial group than on another. The second is the effect which the decision has on the community involved; if it perpetuates segregation and thereby prevents interracial association it will be considered invidious under the Fair Housing Act independently of the extent to which it produces a disparate effect on different racial groups.
782 F.2d at 575 (citing Arlington Heights II, 558 F.2d at 1290). In a disparate-impact case under the FHA, a plaintiff must present statistical evidence showing the existence of at least one of the two effects to state a prima facie case. Here, the Commission presented three pieces of data: seventeen of the eighteen families who received Section 8 assistance and lived at Autumn Run when Graoch announced its withdrawal are black; as of 2003, 6,270 of the 8,849 Jefferson County residents receiving Section 8 vouchers were black; and as of the 2000 census, 18.9% of Jefferson County residents were black and 24% were members of black households. It made no other allegations regarding the racial makeup of Autumn Run or the surrounding community.
To determine whether a plaintiff can show the first type of discriminatory effect described in Arthur, “[t]he correct inquiry is whether the policy in question had a disproportionate impact on the minorities in the total group to which the policy was applied.” Betsey v. Turtle Creek Assocs., 736 F.2d 983, 987 (4th Cir. 1984) (emphasis added); cf. Isabel v. City of Memphis, 404 F.3d 404, 412 (6th Cir. 2005) (applying essentially the same inquiry in a Title VII case). In Betsey, a landlord managing several adjacent buildings adopted a policy banning children from Building Three. 736 F.2d at 985. The policy led to the eviction of 54.3% of the non-white tenants in Building Three, but only 14.1% of white tenants. Id. at 988. Relying on the discrepancy between those percentages, the court held that the plaintiffs had made a prima facie case even though “the percentage of blacks at [the apartment complex as a whole] continues to exceed by a substantial margin both the percentage of black renters in the election district in which [the complex] is located as well as in Montgomery County as a whole.” Id. at 986-87. This approach respects the common-sense notion that a policy applied to a population that is 95 percent black does not have a disproportionate adverse effect on blacks even if 90 percent of the people it burdens are black.
Here, Graoch applied its “no Section 8” policy to all residents of Autumn Run. Consequently, to determine whether the policy had a greater adverse effect on blacks than whites, we should compare the percentage of blacks among the Section 8 tenants whose leases were not renewed (about 94 percent) to the percentage of blacks among the total pool of tenants at Autumn Run. Yet the Commission has not presented any data regarding the total tenant pool and has not even alleged that there are more whites among the non-Section 8 tenants than among the Section 8 tenants. The only information we have about Autumn Run‘s non-Section 8 tenants is an isolated comment by Graoch‘s lawyer that “the tenants at Respondent project Autumn Run Apartments were 90% minority and 10% white.” If we consider this information (which the Commission does not dispute), it indicates that the racial mix of Autumn Run‘s Section 8 and non-Section 8 tenants was essentially the same, overwhelmingly non-white. Because the Commission has not even alleged – and very likely could not show – that Graoch‘s withdrawal from Section 8 harmed a disproportionate percentage of the black tenants at Autumn Run, we conclude that the Commission has not stated a prima facie case based on the first type of discriminatory effect. There can be no prima facie case of racial disparate impact without a showing of adverse impact on a racial group. For all that the Commission alleges, any vacancies caused by non-renewal of Section 8 leases to black tenants will be filled by black non-Section 8 tenants, who already fill the very large majority of Autumn Run‘s apartments.
The Commission has not stated a prima facie case based on the second type of discriminatory effect either. It has never claimed that Graoch‘s withdrawal from Section 8 had a segregative effect nor alleged any facts from which we could infer a segregative effect: it has not provided any information about the racial makeup of the community surrounding Autumn Run or about the likely effect of withdrawal on the racial makeup of Autumn Run itself.
Because the Commission cannot meet its burden at the first step of the burden-shifting framework, its case cannot go forward. Graoch is not required to present a legitimate business reason justifying its decision to withdraw from Section 8.
V
For the foregoing reasons, the district court‘s grant of summary judgment in favor of Graoch is affirmed.
GRAOCH ASSOCIATES #33, L. P., d/b/a Autumn Run Apartments, Plaintiff-Appellee, v. LOUISVILLE/JEFFERSON COUNTY METRO HUMAN RELATIONS COMMISSION, Defendant-Appellant.
No. 06-5561
United States Court of Appeals for the Sixth Circuit
07a0463p.06
CONCURRING IN THE JUDGMENT AND SECTION IV
MERRITT, Circuit Judge, concurring. I concur in the judgment in this case and in Section IV of Judge Boggs‘s opinion. I am not sure whether “disparate impact” analysis can “ever” apply to refusals to enter or remain in Section 8 housing because I am unable to foresee the full spectrum of such cases that could arise in the future. But I agree that there is no valid discrimination case here. The owner apparently became irritated by certain requirements the local housing administrator imposed on him, requirements he apparently regarded as too onerous, time consuming and costly. So he withdrew. This apparently angered the administrator and the Commission, and they accused him of discrimination. This seems to be the underlying situation. The local administrative body should have to show either an intent to discriminate based on race or such a significant racial impact that intent can be inferred or that serious harm to a racial minority is likely to occur. None of these elements are present here.
GRAOCH ASSOCIATES #33, L. P., d/b/a Autumn Run Apartments, Plaintiff-Appellee, v. LOUISVILLE/JEFFERSON COUNTY METRO HUMAN RELATIONS COMMISSION, Defendant-Appellant.
No. 06-5561
United States Court of Appeals for the Sixth Circuit
07a0463p.06
CONCURRING IN PART, DISSENTING IN PART
KAREN NELSON MOORE, Circuit Judge, concurring in part and dissenting in part. Defendant-Appellant the Louisville/Jefferson County Metro Human Relations Commission (“MHRC“) appeals from the district court‘s order denying its motion for summary judgment and granting summary judgment to Plaintiff-Appellee Graoch Associates #33 (“Graoch“). For the reasons set forth below, I concur in the lead opinion‘s conclusion that a landlord‘s withdrawal from the Section 8 program may give rise to a disparate-impact claim under the Fair Housing Act (“FHA“), Title VIII of the Civil Rights Act of 1968, codified as amended at
I. BACKGROUND
The Section 8 tenant-based housing-assistance program aids low-income families in obtaining housing in the private market.
The Housing Authority of Jefferson County administers the Section 8 program in the Louisville area. In March 2003, Graoch, the owner of Autumn Run apartments in Louisville, notified the Housing Authority that it would honor existing leases held by Section 8 tenants but would not renew these leases or sign any new Section 8 leases. Joint Appendix (“J.A.“) at 35. Both parties have stipulated the following facts: In 2003, 8,849 tenants in Louisville (including Jefferson County) received Section 8 voucher subsidies, and 6,270 of these tenants were African-Americans. According to the 2000 census, African-American households comprised approximately twenty-four percent and African-Americans comprised approximately nineteen percent of Louisville‘s total population (also including Jefferson County). When Graoch withdrew from the Section 8 program,
The Kentucky Fair Housing Council, Inc. and three Autumn Run tenants receiving financial assistance through the Section 8 program filed a complaint with MHRC, which subsequently found probable cause that Graoch‘s withdrawal constituted unlawful racial discrimination. J.A. at 56-57, 86. MHRC stayed administrative proceedings to allow Graoch to seek a declaratory judgment in the U.S. District Court for the Western District of Kentucky that withdrawal from the Section 8 program cannot constitute a violation of the FHA. J.A. at 65. The current case involves only Graoch and MHRC and arises from the district court‘s grant of summary judgment to Graoch.1
II. DISPARATE IMPACT UNDER THE FHA
A. Standard of Review
We must review the district court‘s order granting summary judgment de novo. DiCarlo v. Potter, 358 F.3d 408, 414 (6th Cir. 2004). “Summary judgment is proper if the evidence, taken in the light most favorable to the nonmoving party, shows that there are no genuine issues of material fact and that the moving party is entitled to a judgment as a matter of law.” Macy v. Hopkins County Sch. Bd., 484 F.3d 357, 363 (6th Cir. 2007) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) and
B. Framework for Analysis
Section 3604 of the FHA prohibits discrimination because of, inter alia, race, color, or national origin in the sale or rental of housing by (1) refusing to rent or make available any dwelling; (2) offering discriminatory “terms, conditions, or privileges” of rental; (3) making, printing or publishing “any notice, statement, or advertisement” indicating a preference, limitation, or discrimination based on race, color, or national origin; and (4) representing to any person that “any dwelling is not available for . . . rental when such dwelling is in fact so available.”
The appropriate framework for analyzing an FHA disparate-impact claim against a private entity is an issue of first impression in this circuit. I believe that we should analyze these claims according to a framework derived from that which the Fourth Circuit uses to evaluate FHA disparate-impact claims against private defendants as well as that which we use to evaluate Title VII disparate-impact claims. First, we should require a plaintiff to establish a prima facie case by showing that a challenged housing practice or policy has caused a disparate effect on a protected class. Second, if a plaintiff has established a prima facie case, the defendant can avoid liability by proving that the challenged practice constituted a business necessity and that there existed no less discriminatory alternatives that could serve the business interest.
1. FHA Disparate-Impact Claims Against Government Defendants
In deriving this standard, I have found it helpful to survey how other circuits treat FHA disparate-impact claims against both government and private entities. The circuits evaluate the claim either by applying a multi-factor test, implementing a burden-shifting framework, or combining the two approaches. In Metropolitan Housing Development Corp. v. Village of Arlington Heights (“Arlington Heights II“), 558 F.2d 1283 (7th Cir. 1977), cert. denied, 434 U.S. 1025 (1978), the first court of appeals case concerning disparate impact under the FHA, the Seventh Circuit stated: “we refuse to conclude that every action which produces discriminatory effects is illegal.” Id. at 1290.2 The Seventh Circuit accordingly set forth a four-factor test to determine whether an action producing a disparate effect violates the FHA. Its factors inquire:
(1) how strong is the plaintiff‘s showing of discriminatory effect; (2) is there some evidence of discriminatory intent, though not enough to satisfy the constitutional standard of Washington v. Davis [426 U.S. 229 (1976)]; (3) what is the defendant‘s interest in taking the action complained of; and (4) does the plaintiff seek to compel the defendant to affirmatively provide housing for members of minority groups or merely to restrain the defendant from interfering with individual property owners who wish to provide such housing.
Id. Five years later, the Fourth Circuit adopted the same four factors in considering an FHA disparate-impact claim against a government entity. See Smith v. Town of Clarkton, 682 F.2d 1055, 1065 (4th Cir. 1982). The Sixth Circuit subsequently applied the Arlington Heights II analysis in a case involving a defendant government entity, but eliminated the assessment of evidence of discriminatory intent because it agreed with the Seventh Circuit that this was “the least important
In response to confusion about the stage of litigation at which the Arlington Heights II factors came into play, the Second Circuit clarified that courts should consider the factors as part of a “final determination on the merits rather than as a requirement for a prima facie case.” Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 935 (2d Cir.), aff‘d in part, 488 U.S. 15 (1988). The Second Circuit reasoned: “treating the four factors as steps necessary to make out a prima facie case places too onerous a burden on [plaintiffs].” Id. at 935-36. Drawing on earlier Third Circuit precedent,3 the Second Circuit established a burden-shifting framework, which considered the Arlington Heights II factors “as part of a defendant‘s justification for its challenged action.” Id. at 935. The Second Circuit held that plaintiffs should first establish a prima facie case “by showing that the challenged practice of the defendant ‘actually or predictably results in racial discrimination; in other words that it has a discriminatory effect.‘” Id. at 934 (quoting United States v. City of Black Jack, 508 F.2d 1179, 1184-85 (8th Cir. 1974), cert. denied, 422 U.S. 1042 (1975)). “The plaintiff need not show that the decision complained of was made with discriminatory intent.” Id. Once a plaintiff has presented a prima facie case, a defendant “must prove that its actions furthered, in theory and in practice, a legitimate, bona fide governmental interest and that no alternative would serve that interest with less discriminatory effect.” Id. at 936 (citing Resident Advisory Bd. v. Rizzo, 564 F.2d 126, 148-49 (3d Cir. 1977), cert. denied, 435 U.S. 908 (1978)).
The Tenth Circuit takes the same approach as Huntington Branch in establishing a burden-shifting framework and then weighing the government defendant‘s justifications against the plaintiff‘s showing of disparate impact. Reinhart v. Lincoln County, 482 F.3d 1225, 1229 (10th Cir. 2007). Although the Fifth Circuit has not had occasion to develop fully the framework for assessing FHA disparate-impact claims against government entities,4 at least one district court within the Fifth Circuit follows the Huntington Branch analysis. In Dews v. Town of Sunnyvale, 109 F. Supp. 2d 526, 531-32, 565 (N.D. Tex. 2000), the U.S. District Court for the Northern District of Texas held that once a plaintiff has established a prima facie case of discriminatory effects, the defendant must prove that it acted to further a “legitimate, bona fide governmental interest” as well as prove the absence of a less discriminatory alternative. The court then evaluates the disparate-impact claim by balancing the showing of discriminatory effects against that of the defendant‘s justifications and by assessing whether the plaintiff seeks to compel or to prevent interference with housing provision. Id.
The other circuits that have addressed FHA disparate-impact claims against government defendants have not followed Huntington Branch‘s framework for incorporating the Arlington Heights II
The Ninth and Eleventh Circuits have allowed FHA disparate-impact claims against government entities but have not specified whether they incorporate the Arlington Heights II multi-factor test into a burden-shifting framework. Gamble v. City of Escondido, 104 F.3d 300, 306 (9th Cir. 1997); Jackson v. Okaloosa County, 21 F.3d 1531, 1543 (11th Cir. 1994) (citing United States v. Mitchell, 580 F.2d 789, 791 (5th Cir. 1978)); Keith v. Volpe, 858 F.2d 467, 483-84 (9th Cir. 1988), cert. denied, 493 U.S. 813 (1989).
2. FHA Disparate-Impact Claims Against Private Defendants
Plaintiffs have brought to the federal courts far fewer FHA disparate-impact claims against private entities than they have against public entities. The Fifth Circuit acknowledges the availability of a disparate-impact claim against a private defendant under the FHA, but has not developed a framework for analyzing these claims. See Simms v. First Gibraltar Bank, 83 F.3d 1546, 1555 (5th Cir.) (citing Hanson v. Veterans Admin., 800 F.2d 1381, 1386 (5th Cir. 1986)), cert. denied, 519 U.S. 1041 (1996). The Fourth and Tenth Circuits, however, have developed contrasting frameworks for evaluating FHA disparate-impact claims against private entities.5 The Fourth Circuit has applied a simple burden-shifting framework, holding that “when confronted with a showing of discriminatory impact, defendants must prove a business-necessity sufficiently compelling to justify the challenged practice.” Betsey v. Turtle Creek Assocs., 736 F.2d 983, 988 (4th Cir. 1984). In applying the business-necessity standard to disparate-impact claims against private defendants under the FHA, the Fourth Circuit followed the framework for parallel claims under Title VII.
3. Sixth Circuit Treatment of Title VII Disparate-Impact Claims
In deciding what framework to apply in the instant case, the lead opinion does not look to other circuit courts’ treatment of FHA disparate-impact claims for guidance. Instead, the lead opinion integrates the three-factor analysis outlined in Arthur v. City of Toledo with the tripartite burden-shifting approach taken in a single Sixth Circuit Title VII disparate-impact case, Kovacevich v. Kent State Univ., 224 F.3d 806 (6th Cir. 2000). In particular, the lead opinion suggests that the first two factors from Arthur—the strength of the showing of disparate effects and the strength of the defendant‘s interest in the challenged practice—should be applied at the pretext stage of analysis. I part company with the lead opinion on two grounds. First, I believe that the appropriate burden-shifting framework for a disparate-impact case is found not in Kovacevich but in an earlier Sixth Circuit decision, Alexander v. Local 496, Laborers’ International Union of North America, 177 F.3d 394 (6th Cir. 1999), cert. denied, 528 U.S. 1154 (2000). Second, I believe that the lead opinion improperly applies the factors outlined in Arthur v. City of Toledo to an FHA disparate-impact claim involving a private defendant.
The lead opinion is correct in looking to disparate-impact claims against private defendants under Title VII to derive a framework for assessing such claims under the FHA. See Larkin, 89 F.3d at 289. The Sixth Circuit‘s cases on disparate-impact claims under Title VII, however, conflict. Kovacevich holds that a once a plaintiff has shown an adverse effect, the burden shifts to the defendants to “articulate a legitimate business reason” for the challenged practice. 224 F.3d at 830. Once the defendant has proffered such a reason, under Kovacevich “the burden shifts back to the plaintiff to show either that the [defendant‘s] reason is a pretext for discrimination, or that there exists an alternative . . . practice that would achieve the same business ends with a less discriminatory impact.” Id. In contrast, Alexander holds that once a plaintiff has established a prima facie case by showing adverse effect, “the burden shifts to the [defendant] to produce evidence that the challenged practice is a business necessity.” 177 F.3d at 405-06. The difference between the two opinions lies in the fact that by requiring the plaintiff to prove pretext, Kovacevich both imports an intent-oriented principle from the disparate-treatment test into the disparate-impact analysis and places the ultimate burden of persuasion on the plaintiff rather than on the defendant.
Alexander offers the better standard for assessing disparate-impact claims against private entities. Moreover, Alexander is the earlier opinion, and “when a later decision of this court conflicts with one of our prior published decisions, we are still bound by the holding of the earlier case.” Darrah v. City of Oak Park, 255 F.3d 301, 310 (6th Cir. 2001) (citing Sowards v. Loudon County, 203 F.3d 426, 431 n.1 (6th Cir. 2000), cert. denied, 531 U.S. 875 (2000), and Brentwood Acad. v. Tenn. Secondary Sch. Athletic Ass‘n, 180 F.3d 758, 765 (6th Cir. 1999), rev‘d on other grounds,
Third, the genealogy of the pretext prong in Kovacevich renders it suspect. Kovacevich devised the requirement that a plaintiff prove pretext in a Title VII disparate-impact claim from an earlier Sixth Circuit Title VII disparate-impact case, Scales v. J.C. Bradford & Co., 925 F.2d 901 (6th Cir. 1991). Scales, in turn, derived the pretext requirement from a Supreme Court opinion, Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988). The relevant portion of Watson, however, does not make a plaintiff‘s proof of pretext a third stage of the burden-shifting in disparate-impact cases. Instead, the opinion merely observes that the factors used to assess a plaintiff‘s showing of a less discriminatory alternative in disparate-impact cases are also ones that determine whether “the challenged practice has operated as the functional equivalent of a pretext for discriminatory treatment.” Watson, 487 U.S. at 998 (emphasis added).
Moreover, the section of Watson cited by Scales for the proposition that a plaintiff retains the burden of proof in a disparate-impact claim was issued by a plurality rather than a majority of the Court and is therefore not binding. In this section of the Watson opinion joined only by three other Justices, Justice O‘Connor wrote that the plaintiff retains the burden of persuasion at each stage of the burden-shifting inquiry in a disparate-impact case. Id. at 997. Justice White‘s majority opinion in Wards Cove, 490 U.S. at 660, adopted the position taken by the O‘Connor plurality in Watson. The Civil Rights Act of 1991, § 105, 105 Stat. 1074-1075 (1994) (codified as amended at
4. Burdens of Proof and the Business-Necessity Defense
“Business necessity” is similarly the appropriate standard for private entities’ defense against disparate-impact claims under the FHA. See 2922 Sherman Ave. Tenants’ Ass‘n, 444 F.3d at 679 (observing that Griggs is the “seminal case” on the issue of disparate-impact claims and that, in the employment context, Griggs establishes “business necessity” as the sole defense to a showing of disparate effects). The Secretary of Housing and Urban Development (“HUD“) takes the position that implementing regulations promulgated in 1989 established a business-necessity defense to disparate-impact claims. The Secretary of HUD‘s Regulation of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation, 60 Fed. Reg. 61,866, 61,868 (Dec. 1, 1995) (codified at
“Business necessity” holds defendants to a higher standard than the more lenient “business justifications” test set forth in Wards Cove, 490 U.S. at 659, which defined “the dispositive issue [to be] whether a challenged practice serves, in a significant way, the legitimate [business] goals of the [defendant].” Between 1989 and 1991, some courts applied the Wards Cove standard to FHA cases.
In articulating the framework for our evaluation of FHA disparate-impact claims against private defendants, I believe that we should rely on our earlier precedent Alexander, rather than Kovacevich, and seek guidance as well from the Fourth Circuit decision in Betsey v. Turtle Creek. Thus, we should first require that plaintiffs establish a prima facie case of disparate effects. Second, upon the showing of a prima facie case, the burden of persuasion then shifts to the defendants, who must prove that the challenged housing practice constitutes a business necessity and that no less discriminatory alternatives are available. In the Title VII context, plaintiffs bear the burden of proving that a less discriminatory alternative exists. Isabel v. City of Memphis, 404 F.3d 404, 411 (6th Cir. 2005) (citing Albemarle Paper Co. v. Moody, 422 U.S. 405, 425, 432 (1975)). The consensus across the circuits, however, is that in the housing context defendants have the burden of proving the absence of a less discriminatory alternative. See Lapid-Laurel, 284 F.3d at 467 (discussing the defendant‘s burden of proof regarding the absence of less discriminatory alternatives); Langlois, 207 F.3d at 50 (same); Huntington Branch, 844 F.2d at 935 (same); Dews, 109 F. Supp. 2d at 531-32, 565 (same); see also Betsey, 736 F.2d at 988 (holding that once plaintiffs have established a prima facie case, defendants must prove business necessity).
Our analysis should stop with an evaluation of whether a private defendant has successfully rebutted the plaintiff‘s showing of disparate effects by proving “business necessity” and the unavailability of a less discriminatory alternative. Considerations of doctrine and policy preclude this court‘s use of the Arthur factors for a government defendant to evaluate an FHA disparate-impact claim against a private defendant. First, the lead opinion applies factors from a case concerning a public defendant to cases against private defendants, without explaining why they are transferable. That the lead opinion needed to excise the third Arthur factor from its analysis only highlights the unsuitability of the framework in the context of a case against a private defendant. I believe that the Tenth Circuit incorrectly integrated Arthur‘s multi-factor test into the “business necessity” framework applicable to private defendants in disparate-impact suits; it did it so without even acknowledging that the case concerned a private defendant while Arthur concerned a public
Second, by applying the Arthur factors, the lead opinion converts an inquiry into the business justification for a practice bearing a disparate impact on a protected class into a balancing test. The lead opinion suggests that this court should weigh the disparate effects of the challenged action against the strength of the defendant‘s interest in taking the challenged action. Courts appropriately countenance governments’ weighing of competing public considerations of deep importance, and they may engage in such balancing acts themselves. See, e.g., Arthur, 782 F.2d at 575 (holding that because of “the strong policy considerations underlying referendums . . . absent highly unusual circumstances, the discriminatory effect of a referendum cannot establish a violation of the Fair Housing Act“). In limited instances, Congress has reduced the burden of fair housing laws on government entities, with respect to those entities’ pursuit of important public interests, but Congress did not do the same for private landlords. See Pfaff v. U.S. Dep‘t of Hous. & Urban Dev., 88 F.3d 739, 746 (9th Cir. 1996) (holding that “Congress chose to give special deference to government-imposed occupancy limits only . . . [and] made no comparable provision for private occupancy policies“). Even if weighing relative strengths of interests were appropriate, we must follow the longstanding rule that the weighing of litigants’ competing interests belongs at trial and not at the summary judgment stage. Crestview Parke Care Ctr. v. Thompson, 373 F.3d 743, 755 (6th Cir. 2004) (“In evaluating whether summary judgment is proper, we do not weigh the evidence, but rather view the evidence in the light most favorable to [the non-moving party] to divine the existence of a genuine dispute of material fact.“)
Third, the lead opinion‘s framework mistakenly places the ultimate burden of persuasion on the plaintiff. The lead opinion states that the final step in the burden-shifting analysis involves evaluating the plaintiff‘s showing by considering “the strength of the plaintiff‘s showing of discriminatory effect against the strength of the defendant‘s interest in taking the challenged action.” Lead Op. at 10. Under the business-necessity test, however, the landlord will successfully defend against a showing of disparate effects only if he or she proves that the challenged action constitutes a business necessity. If the landlord fails to carry this burden of proof, then he or she should lose once the plaintiff has established a statistically significant showing of disparate effects regardless of its strength. Conversely, if the defendant does indeed prove business necessity, he or she should not be liable under a disparate-impact theory of the FHA no matter how strong the showing of disparate effects.
In conclusion, we are bound by the factors set forth in Arthur when evaluating FHA disparate-impact claims against government defendants. But the framework outlined in Arthur is not well suited to the evaluation of FHA disparate-impact claims against private defendants. The burden-shifting framework for FHA disparate-impact claims against private defendants is straightforward: first, the plaintiff establishes a prima facie case by showing that a challenged housing practice or policy has caused a statistically significant disparate effect on a protected group; second, the housing owner can assert the affirmative defense that the challenged action constitutes a business necessity and that there are no less discriminatory alternatives.
C. Withdrawal from the Section 8 Program and Disparate Impact
I concur in the lead opinion‘s holding that a landlord‘s withdrawal from the Section 8 program, when it has a disparate impact on members of a protected class, may violate the FHA. Courts should give the “broad and inclusive” language of the FHA a “generous construction” to effectuate its remedial purpose. Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 209, 212 (1972).
The voluntary nature of the Section 8 program does caution us to consider carefully whether a landlord‘s decision to withdraw from the program may give rise to liability under the FHA. Congress‘s revision of the FHA has only reinforced that body‘s intent to make Section 8 a voluntary program. Before 1996, some courts interpreted
The same Omnibus Budget Act also repealed the “take one, take all” provision of the United States Housing Act of 1937. Omnibus Consolidated Rescissions and Appropriations Act § 203. That provision, previously codified at
Ultimately, however, I disagree with the Seventh Circuit‘s reasoning that the voluntary character of the Section 8 program precludes liability for withdrawal from the program under a disparate-impact theory of the FHA. The repeal of the “endless lease” and “take one, take all” provisions of
In addition to Knapp, Graoch relies on the Second Circuit‘s decision in Salute v. Stratford Greens Garden Apartments, 136 F.3d 293 (2d Cir. 1998), to argue against the propriety of allowing a disparate-impact claim for withdrawal from the Section 8 program. Appellee Br. at 11-12. In Salute, however, the majority based its opinion on the fact that the defendant landlord had never accepted tenants who, at the time of application, participated in the Section 8 program. Id. at 302 (“[N]on-participation constitutes a legitimate reason for their refusal to accept section 8 tenants and . . . we therefore cannot hold them liable for . . . discrimination under the disparate impact theory.“) (quoting Knapp, 54 F.3d at 1280) (alterations in the original). Therefore, Salute is not applicable in the instant case because of the distinction between nonparticipation, at issue in Salute, and withdrawal from the Section 8 program, at issue here.7
Graoch further suggests that allowing disparate-impact claims based on a landlord‘s withdrawal from the Section 8 program will deter landlords from entering the program. Appellee Br. at 13 (“If a landlord is held to a perpetual lease—and all of the administrative burdens which Section 8 compliance entails—once it accepts a Section 8 tenant, many landlords may never agree to enter into the program at all, thereby decreasing the available private housing stock for low income tenants.“) (quoting 30 Eastchester, 2002 WL 553709, at *4). The Eastchester case upon which Graoch relies, however, did not involve a disparate-impact claim under the FHA. Instead, a tenant-plaintiff claimed that her landlord‘s allegedly illegal withdrawal from the Section 8 program, at the termination of her lease, constituted a defense to her own nonpayment of rent. Id. at *2. Allowing disparate-impact claims for withdrawal does not yoke landlords to a “perpetual lease.” A plaintiff‘s showing that a withdrawal from the Section 8 program has a disparate effect on a protected class merely establishes a plaintiff‘s prima facie case and does not automatically result in liability. Such claims require only that a landlord show business necessity. See Green v. Sunpointe Assocs., Ltd., No. C96-1542C, 1997 WL 1526484, at *4 (W.D. Wash. 1997).
Graoch argues that a landlord would incur significant expense defending itself against a disparate-impact claim at the summary-judgment stage. Appellee Br. at 16. But the Supreme Court has not shied away from allowing innovative disparate-impact claims even though newly-recognized causes of action may potentially impose costs on businesses. See, e.g., Smith v. City of Jackson, 544 U.S. 228, 232 (2005) (holding that a disparate-impact theory is cognizable under the Age Discrimination in Employment Act). Landlords have a considerable financial incentive to accept Section 8 tenants because the federal government‘s subsidy of a portion of the market-based rent expands the pool of available tenants. Clark, 6 J. AFFORD. HOUS. & CMTY. DEV. L. at 187. This
III. MHRC‘S DISPARATE-IMPACT CLAIM
A. Prima Facie Case
Because the district court ruled as a matter of law that a landlord‘s withdrawal from the Section 8 program cannot alone constitute a violation of the FHA, it did not discuss the statistical evidence that MHRC would need to produce to establish a prima facie case of disparate impact. Graoch appears to have admitted, however, “that the uncontested statistical evidence would in theory support a ‘disparate impact’ claim against Graoch if . . . Graoch‘s mere withdrawal from the voluntary Section 8 program could subject it to such a claim . . . and Graoch‘s business necessity defense were to be rejected by the Court . . . .” R. 28, Graoch‘s Response to MHRC‘s Cross-Motion for Summary Judgment, p. 2 n. 2. Because all members of this panel are in agreement that a landlord‘s withdrawal from the Section 8 program can give rise to a disparate-impact claim, Graoch‘s admission obligates this court to hold that MHRC has established a prima facie showing of disparate effects.8 As a result of Graoch‘s concession in the district court, we need not engage in any further assessment of MHRC‘s statistical evidence. In the absence of disagreement and briefing on this issue, I think it is unwise to set forth any framework for evaluating the statistical evidence necessary to prove disparate effects.
B. Business Necessity
Because Graoch has conceded that its withdrawal from the Section 8 program would have a disparate effect on African-Americans, to avoid liability under a disparate-impact theory of the FHA Graoch needs to prove that the withdrawal amounted to a business necessity and that no less discriminatory alternatives were available. Graoch stated that it decided to withdraw from the Section 8 program because participation had required that Graoch agree to a Housing Assistance Payments Contract “which imposed terms and conditions more burdensome than those contained in Autumn Run‘s standard Lease.” J.A. at 70 (Hamasaki Aff.) In addition, Graoch stated that the Housing Authority of Jefferson County held the company “to an impossible standard” in enforcing requirements for the quality of the housing provided. Id. Specifically, according to Graoch the Housing Authority abated rental payments “for conditions which Graoch was either not made aware of prior to inspection, or which it attempted to fix only to be cited upon re-inspection for not making its repairs to the arbitrary satisfaction of the inspector.” Id. Neither party devoted attention on appeal to arguing whether a business necessity existed to justify Graoch‘s withdrawal from the Section 8 program. Insufficient evidence exists for us to rule as a matter of law regarding whether business necessity justified Graoch‘s withdrawal from the Section 8 program. Under these circumstances, we should remand to the district court for further development of the business necessity factor.
Upon remand, the district court should give the parties an opportunity to brief the issue of business necessity and to present relevant evidence. To survive any motion that Graoch might make for summary judgment, MHRC would need to create a genuine issue of material fact that Graoch‘s withdrawal from the Section 8 program did not constitute a business necessity. MHRC would be
IV. CONCLUSION
For the foregoing reasons, I concur in the lead opinion‘s conclusion that a landlord‘s withdrawal from the Section 8 program may give rise to liability under the disparate-impact theory of the FHA. I believe that the appropriate action for this court to take is to REVERSE the district court‘s grant of summary judgment to Graoch, VACATE the denial of summary judgment to MHRC, and REMAND the case for further proceedings.