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Equal Rights Center v. Equity Residential

United States District Court, Fourth Circuit

June 6, 2013

EQUAL RIGHTS CENTER,
v.
EQUITY RESIDENTIAL, et al.

MEMORANDUM

CATHERINE C. BLAKE, District Judge.

The Equal Rights Center (the "ERC"), a nonprofit civil rights organization, filed this suit in April 2006 against Equity Residential and ERP Operating LP (collectively, "Equity"), a publicly-traded real estate investment trust that employs various joint ventures to develop, design, acquire, manage, and operate apartment complexes throughout the United States. According to the complaint, Equity failed to comply with various provisions of the Fair Housing Act and Title III of the Americans with Disabilities Act when Equity designed and constructed roughly 300 residential housing complexes across the nation. After Equity twice challenged the ERC's standing to obtain the relief it sought, this court held in July 2011 that the claims under the Fair Housing Act could proceed but dismissed the ERC's claims under the Americans with Disabilities Act for want of standing. (ECF Nos. 158, 159.)

Since the ERC filed suit in 2006, two federal district courts in Florida and Indiana have held that owners and managers of covered multifamily dwellings may be liable for violations of the Fair Housing Act even if they were not involved with the design or construction of the properties. Unlike the plaintiffs in those suits, however, the ERC originally sought relief from Equity only in Equity's capacity as the entity that designed or constructed the buildings identified in the complaint. The ERC now seeks leave to amend its complaint to add a count related to Equity's ownership and management of hundreds of properties around the country, including almost 100 properties that were not identified in the ERC's original complaint. The motion has been fully briefed, and no oral argument is necessary. See Local R. 105.6. For the reasons set forth below, the ERC's motion for leave to amend will be granted in part and denied in part.

BACKGROUND

The ERC initiated this action in April 2006. The complaint, which was brought under the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3601-3619, and Title III of the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12181 et seq., alleges that Equity has engaged in a pattern or practice of inhibiting the access of disabled persons to its properties. The ERC brought suit "to enjoin and remedy ongoing and systematic violations" of the FHA and ADA by Equity "in the design, construction and/or operation" of 300 covered multifamily apartment complexes in numerous states and the District of Columbia. (Compl. ¶ 2, ECF No. 1.)

Since the ERC filed its complaint, this long-running and far-reaching case has progressed in fits and starts, primarily on account of the expansive scope of the suit. In June 2006 Equity moved to dismiss the suit for lack of standing and improper venue. Alternatively, in an effort to trim the scope of the suit, Equity asked the court to sever the ERC's claims with respect to certain properties and to transfer those claims to the districts in which the related properties are located. Judge Andre Davis, to whom this case originally was assigned, denied the motion.[1]

The court then entered a scheduling order in April 2007, allowing discovery to begin. Within several months, however, two significant discovery disputes arose. First, the ERC insisted that Equity provide information about properties that were not expressly identified in the complaint yet "which reflect the wrongful conduct of... Equity in the design and construction of non-compliant housing." (ECF No. 176-7.) That dispute culminated with the ERC's December 2007 motion to compel. In June 2008 that motion was granted in part and denied in part by Magistrate Judge Beth Gesner.

Second, Equity sought to scale back the scope of the litigation by eliminating from the case many of the properties that had been identified in the complaint. In an October 2007 letter, counsel for the ERC agreed not to seek information about properties (1) constructed after March 13, 1991, the effective date of the FHA, (2) "[a]cquired by Equity after the completion of construction, through an asset purchase from an unrelated third-party, and where Equity did not have any review and approval rights over design or construction prior to the closing of the asset purchase, " (3) sold by Equity to unrelated third parties prior to the initiation of this suit, or (4) that Equity managed for third parties, provided that Equity did not hold any ownership interest in the property. (ECF No. 176-5.) Insofar as Equity sought to exclude specific properties, the ERC requested "some reasonable, objective evidence" that the properties fell within one of the four exempted classes. ( Id. )

Meanwhile, the ERC's inspections of Equity properties began in September 2007 and continued through the summer of 2009. In August 2009 the court entered a scheduling order directing the parties to fully brief their respective motions for partial summary judgment on certain properties before the end of April 2010. Equity subsequently identified twelve properties on which it intended to move for summary judgment, arguing that it was not liable for alleged FHA and ADA violations on those properties because either (1) the properties had been built before the effective dates of the FHA and ADA, or (2) Equity had not been involved with their design or construction. In November 2009 the parties agreed to amend the complaint to remove two properties that Equity had neither designed nor constructed, and that same month the parties timely filed their motions for partial summary judgment. In the ERC's opposition to Equity's motion for partial summary judgment, the ERC did not oppose the motion with respect to four properties that were designed and constructed before the effective date of the FHA. (ECF No. 123 at 5 n.1.). And notably, the ERC also did not oppose Equity's motion with respect to the FHA claims against six properties that Equity neither designed nor constructed. ( Id. at 20-21.)

While those motions were pending, Equity filed a cross-motion for summary judgment in April 2010, again challenging the ERC's standing to bring its claims. The court then granted the parties' joint motion to stay discovery and briefing of the other motions until the court had resolved the issue of standing. In July 2011 the court concluded that the ERC had standing to pursue its FHA claims but could not continue to pursue its ADA claims. At the parties' request, the court subsequently stayed the litigation to enable the parties to engage in settlement negotiations.

Two federal district court decisions ostensibly contributed to the ultimate failure of those negotiations. In April 2011, during the pendency of Equity's cross-motion for summary judgment on the issue of standing, a court in the Middle District of Florida issued an unpublished decision concluding that a defendant may be liable for FHA violations even if that defendant did not participate in the design or construction of the building. See Harding v. Orlando Apartments, LLC, No. 11-cv-85-Orl-19DAB, 2011 WL 1457164 (M.D. Fla. Apr. 15, 2011). That court distinguished claims under 42 U.S.C. § 3604(f)(3)(C), which regulates the design and construction of covered dwellings, from claims under 42 U.S.C. § 3604(f)(1) and (f)(2), which proscribes discrimination in the sale or rental of such dwellings or in the provision of services or facilities in connection with such dwellings. The court concluded that both claims were properly pled, noting the absence of case law addressing whether property owners can be liable under § 3604(f)(1) and (f)(2) for offering apartments for rent "despite knowing that those dwellings failed to comply with the HUD regulations." Id. at *4.

Ten months later, in February 2012, an Indiana federal court reached the same conclusion. That court, citing Harding, held that the plaintiff had laid out a plausible claim of discrimination under § 3604(f)(1) and (f)(2) against a building owner that allegedly knew or should have known that the building it owned had been constructed in violation of § 3604(f)(3)(C). Nat'l Fair Hous. Alliance, Inc. v. S.C. Bodner Co., 844 F.Supp.2d 940, 944-45 (S.D. Ind. 2012). Citing the Supreme Court's admonition to give the FHA a "generous construction, " the court concluded that a building owner could be liable for knowingly or intentionally exploiting the provisions of the FHA to shift the costs of FHA compliance onto renters. Id. at 945.

These decisions apparently led to a stalemate in the settlement negotiations. In April 2012 the parties jointly proposed a scheduling order acknowledging the ERC's intent to amend its complaint. Two months later the ERC moved to amend the complaint to redress FHA violations in connection with Equity's ownership, operation, and management of hundreds of apartment complexes, including almost 100 properties that had not been identified in the original complaint. The ERC specifically alleged that Equity knew or should have known that hundreds of its properties "failed to provide ...


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