United States District Court, D. Maryland
Catherine C. Blake United States District Judge
The Equal Rights Center (“ERC”) is a non-profit organization based in Washington, D.C. dedicated to, among other things, ensuring equal opportunities in housing for persons with disabilities through education, research, training, counseling, enforcement and advocacy. The ERC has sued Equity Residential (“EQR”) and ERP Operating L.P. (“ERPOP”) (collectively, “Equity”), alleging that Equity has “repeatedly and continually” designed and constructed properties that violate the Fair Housing Act (FHA), 42 U.S.C. §§ 3601-3619, and Title III of the Americans with Disabilities Act, 42 U.S.C. §§ 12181 et seq. Those violations, ERC alleges, render the properties inaccessible to persons with disabilities. Twelve motions are currently pending before the court. For the reasons discussed below, ERC’s motion for partial summary judgment (ECF No. 228) will be granted in part and denied in part; Equity’s motion for partial summary judgment (ECF No. 230) will be denied; ERC’s motion to strike the affidavits of Mark Tennison and Scott Fenster (ECF No. 251) will be denied; ERC’s motion to strike the testimony and expert report of Paul Sheriff (ECF No. 248) will be granted; ERC’s motion to strike the testimony and expert report of Dr. Alison Vredenburgh (ECF No. 249) will be granted; ERC’s motion to strike the testimony and expert reports of David Kessler and Mariesha Blazik (ECF No. 250) will be granted in part and denied in part; ERC’s motion to withdraw its motion for sanctions (ECF No. 255) will be granted; ERC’s motion to amend/correct its reply (ECF No. 258) will be granted in part and denied in part; Equity’s motion to exclude the expert report and testimony of Ken Schoonover (ECF No. 259) will be granted; Equity’s motion for leave to file an opposition to the Statement of Interest of the United States (ECF No. 260) will be granted; and Equity’s motion for leave to file a sur-reply (ECF No. 261) will be denied as moot.
On April 27, 2006, the Equal Rights Center filed this lawsuit against Equity Residential and ERP Operating Limited Partnership alleging FHA and ADA violations relating to the design and construction of approximately 300 apartment complexes. (ECF No. 1). On June 26, 2006, Equity moved to dismiss, primarily challenging ERC’s standing, but also seeking transfer of venue and severance of claims. (ECF No. 15). Judge Andre M. Davis-who was assigned to the case at the time-denied this motion in full. (ECF No. 42).
On May 20, 2009, the case was reassigned. The parties were directed to file motions for partial summary judgment. On November 10, 2009, Equity filed its motion on twelve properties on the grounds that the properties either (1) predated the effective dates of the ADA and FHA provisions at issue, or (2) were not owned by Equity when they were built. (ECF No. 106). On November 13, 2009, ERC filed its motion on nine properties that allegedly had FHA and ADA violations. (ECF No. 108).
Equity filed a cross-motion for summary judgment, once again challenging ERC’s standing. (ECF No. 121). The court stayed the pending partial summary judgment motions until that standing challenge could be resolved. (ECF No. 135). On July 22, 2011, the court granted Equity’s cross-motion as to ERC’s standing to raise the ADA claim, but denied it as to the FHA claim. (ECF No. 158). At the parties’ request, the court subsequently stayed the litigation to enable the parties to engage in settlement negotiations. Unfortunately, the negotiations were unsuccessful, and litigation proceeded with the motions now under consideration.
On June 25, 2013, ERC filed an amended complaint. (ECF No. 184). Equity again moved to dismiss and to strike ERC’s pattern and practice allegations. (ECF No. 187). On November 27, 2013, the court denied the motion because factual issues remained regarding successor liability, and relief under FRCP 12(f) would have been premature. (ECF No. 195). The parties proposed, and the court approved, a return to the partial summary judgment process. (ECF No. 196).
On September 16, 2014, ERC refiled its partial summary judgment motion, this time regarding eight properties. (ECF No. 228). On September 17, 2014, Equity refiled its partial summary judgment motion regarding twelve properties. (ECF No. 230). On October 8, 2014, the parties filed supplemental memoranda regarding ERC’s partial summary judgment motion. (ECF Nos. 238, 239).
On November 13, 2014, ERC filed four motions to strike expert reports or testimony. (ECF Nos. 249-51). That same day, ERC filed a motion for sanctions for spoliation of evidence. (ECF No. 252). On December 22, 2014, ERC filed a motion seeking to withdraw the motion for sanctions. (ECF No. 255).
On January 14, 2015, ERC filed a motion to amend or correct its reply brief in support of its partial summary judgment motion, which Equity apparently had consented to. (ECF No. 258). On January 27, 2015, however, Equity filed a motion for leave to file a sur-reply regarding the statement of undisputed facts attached to ERC’s pending motion to amend. (ECF No. 261).
I. ERC’s Motion for Partial Summary Judgment
ERC seeks summary judgment on design and construction violations at eight Equity properties. It contends Equity,  or a predecessor entity, was responsible for design and construction violations at each of these properties. Equity, in turn, claims genuine disputes of material fact exist as to the ownership of the properties. Further, Equity argues, ERC asks this court to adopt the wrong standard for assessing compliance with the FHA. For the reasons discussed below, summary judgment is appropriate for a subset of noncompliant features at seven of the eight properties.
A. Standard of Review
Federal Rule of Civil Procedure 56(a) provides that summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a) (emphases added). “A dispute is genuine if ‘a reasonable jury could return a verdict for the nonmoving party.’” Libertarian Party of Va. v. Judd, 718 F.3d 308, 313 (4th Cir. 2013) (quoting Dulaney v. Packaging Corp. of Am., 673 F.3d 323, 330 (4th Cir. 2012)). “A fact is material if it ‘might affect the outcome of the suit under the governing law.’” Id. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). Accordingly, “the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment[.]” Anderson, 477 U.S. at 247-48. The court must view the evidence in the light most favorable to the nonmoving party, Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (per curiam), and draw all reasonable inferences in that party’s favor. Scott v. Harris, 550 U.S. 372, 378 (2007) (citations omitted); see also Jacobs v. N.C. Admin. Office of the Courts, 780 F.3d 562, 568-69 (4th Cir. 2015). At the same time, the court must “prevent factually unsupported claims and defenses from proceeding to trial.” Bouchat v. Balt. Ravens Football Club, Inc., 346 F.3d 514, 526 (4th Cir. 2003) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 2003)).
B. Equity as a Responsible Party
“When a group of entities enters into the design and construction of a covered dwelling, all participants in the process as a whole are bound to follow the FHAA. . . . In essence, any entity who contributes to a violation of the FHAA would be liable.” Balt. Neighborhoods, Inc. v. Rommel Builders, Inc., 3 F.Supp.2d 661, 665 (D. Md. 1998). In filing this action, ERC brought claims against two specific entities, EQR and ERPOP. The parties agree ERPOP participated in the design and construction of one property at issue in ERC’s motion. For the remaining properties, Equity argues it cannot be liable for design and construction violations because neither ERPOP nor EQR was a direct participant in the design and construction process. ERC contends Equity is liable under doctrines of veil piercing and successor liability: at each of the properties, either an Equity subsidiary or a predecessor entity played a role in the design and construction process.
a. Legal Standard: Piercing the Corporate Veil
The court applies federal common law in deciding whether to pierce the corporate veil because that decision implicates an important federal interest: liability for violations of the FHA. See United States v. Pena, 731 F.2d 8, 12 (D.C. Cir. 1984) (explaining that courts have applied federal common law when the decision whether to pierce the corporate veil implicated a federal interest); Thomas v. Peacock, 39 F.3d 493, 503 (4th Cir.1994), rev'd on other grounds, 516 U.S. 349, 353-54 (1996) (adopting federal common law rule of veil piercing in ERISA enforcement actions).
Identifying exactly what standard comprises the federal common law on veil piercing is a complicated question that may depend on the federal statute involved in the case. In Thomas v. Peacock, the Fourth Circuit cited approvingly the First Circuit’s discussion of the issue:
The general rule adopted in the federal cases is that ‘a corporate entity may be disregarded in the interests of public convenience, fairness and equity, ’ . . . . In applying this rule, federal courts will look closely at the purpose of the federal statute to determine whether the statute places importance on the corporate form, an inquiry that usually gives less respect to the corporate form than does the strict common law alter ego doctrine.
Thomas, 39 F.3d at 503-04 (quoting Alman v. Danin, 801 F.2d 1, 3-4 (1st Cir.1986)). Under this approach, the court considers “the specific legislative policies at issue and whether piercing the corporate veil is necessary to further those policies.” Bhd. of Locomotive Engineers v. Springfield Terminal Ry. Co., 210 F.3d 18, 27 (1st Cir. 2000).
Although Thomas embraces the language of a liberal approach focused on whether veil piercing furthers the policies behind a federal statutory scheme, the Fourth Circuit nonetheless approved the district court’s consideration of traditional factors in its veil piercing analysis. See Thomas, 39 F.3d at 504-505. And in a maritime case, the Circuit explained that “the question of whether to pierce the corporate veil is a fact-intensive inquiry, because ‘the circumstances necessarily vary according to the circumstances of each case, and every case where the issue is raised is to be regarded as sui generis to be decided in accordance with its own underlying facts.’” Vitol, S.A. v. Primerose Shipping Co., 708 F.3d 527, 544 (4th Cir. 2013) (quoting DeWitt Truck Brokers, Inc. v. W. Ray Flemming Fruit Co., 540 F.2d 681 (4th Cir.1976)). Thus, while a court should consider the implications of veil piercing in regard to the legislative policies behind a federal statute, it should not limit its analysis to only that consideration.
What additional facts play a role in this analysis depends, as mentioned above, on the circumstances of the particular case. For example, in Vitol, the Fourth Circuit focused more on traditional criteria when applying the federal common law standard in a maritime case, where a specific statutory scheme is not implicated. In Vitol, the Circuit identified the following factors that may be relevant to a court’s decision to pierce the corporate veil:
[G]ross undercapitalization, insolvency, siphoning of funds, failure to observe corporate formalities and maintain proper corporate records, non-functioning of officers, control by a dominant stockholder, and injustice or fundamental unfairness. Other factors properly considered by the district court in this case include intermingling of funds; overlap in ownership, officers, directors, and other personnel; common office space; the degrees of discretion shown by the allegedly dominated corporation; and whether the dealings of the entities are at arm's length.
Vitol, S.A., 708 F.3d at 544 (internal quotation marks and citations omitted). But not all of these factors need be present for the court to pierce the corporate veil, and considering the emphasis federal common law places on the legislative policies behind federal statutes, the interests of “public convenience, fairness, and equity, ” Thomas, 39 F.3d at 503-04, likely will require fewer of these traditional factors when those policies are affected by respect for the corporate form. In any event, there must be some factual circumstances suggesting an improper use of the corporate form; absent a statutory directive to the contrary, frustration of federal legislative policy alone is insufficient justification for piercing the corporate veil. Cf. United States v. Bestfoods, 524 U.S. 51, 63 (1998) (“[T]he failure of the statute to speak to a matter as fundamental as the liability implications of corporate ownership demands application of the rule that ‘[i]n order to abrogate a common-law principle, the statute must speak directly to the question addressed by the common law.’” (quoting United States v. Texas, 507 U.S. 529, 534 (1993))).
Additionally, courts should consider the possibility that where a case raises the issue of veil piercing, a closer look may reveal that the parent’s involvement in activities related to the subsidiary may give rise to direct liability. “[D]erivative liability cases are to be distinguished from those in which the alleged wrong can seemingly be traced to the parent through the conduit of its own personnel and management and the parent is directly a participant in the wrong complained of. . . . In such instances, the parent is directly liable for its own actions.” Bestfoods, 524 U.S. at 64-65 (internal quotation marks and citations omitted).
b. Legal Standard: Successor Liability
The court’s analysis of ERC’s motion also relies on the doctrine of successor liability. The FHA is silent as to whether federal or state common law standards should apply in evaluating successor liability. Faced with a similar question, the Fourth Circuit applied a federal common law standard in evaluating liability under the Comprehensive Environmental Response, Compensation, and Liability Act, explaining “the national interest in the uniform enforcement of CERCLA and the same interest in preventing evasion by a responsible party by even legitimate resort to state law are the reasons we think the successor liability is appropriate where factually justified.” United States v. Carolina Transformer Co., 978 F.2d 832, 837 (4th Cir. 1992). Congress was silent as to choice of law, and a uniform federal standard is needed for determining liability under the FHA. Cf. Clearfield Trust Co. v. United States, 318 U.S. 363, 366-367 (1943) (federal courts should establish federal common law when a federal statute is silent as to choice of law and the statute furthers overriding federal interests). Accordingly, this court will apply federal common law in assessing successor liability under the FHA.
“The settled rule is that a corporation which acquires the assets of another corporation does not take the liabilities of the predecessor corporation from which the assets are acquired unless one of four generally recognized exceptions are met: (1) the successor expressly or impliedly agrees to assume the liabilities of the predecessor; (2) the transaction may be considered a de facto merger; (3) the successor may be considered a “mere continuation” of the predecessor; or (4) the transaction is fraudulent.” Carolina Transformer Co., 978 F.2d at 838.
In addition to this “traditional rule” of successor liability, the Fourth Circuit endorsed a “continuity of enterprise” theory of successor liability. Under the continuity of enterprise theory, the court looks to a series of factors in deciding whether a successor entity assumes the liabilities of its predecessor. In the context of CERCLA, the Fourth Circuit described this test as whether the plaintiff had shown “(1) retention of the same employees; (2) retention of the same supervisory personnel; (3) retention of the same production facilities in the same location; (4) production of the same product; (5) retention of the same name; (6) continuity of assets; (7) continuity of general business operations; and (8) whether the successor holds itself out as the continuation of the previous enterprise.” Id. These same factors, with the obvious exception of those pertaining to production facilities and products, are appropriate in analyzing successor liability under the FHA.
c. Legal Standards as Applied to ERC’s Motion
Relevant here is the interplay between the doctrines of successor liability and corporate veil piercing. If a successor entity acquires liability from its predecessor, and the successor is a mere agent or instrumentality (or alter-ego) of its owner(s), the liability acquired from the predecessor may be attributed to the successor’s owner(s) using veil piercing principles. This varies the traditional veil piercing analysis wherein the court focuses on the parent-subsidiary relationship at the time of the events giving rise to the liability. It would not be feasible in this scenario to focus on the parent-subsidiary relationship during the time period in which the initial liability arose because, by its very nature as a successor entity, the subsidiary did not cause liability to accrue in the first instance.
For the purposes of assessing corporate liability in the instant case, a shift in an entity’s ownership structure is the functional equivalent of a successor acquiring the assets of a predecessor entity. For several of the disputed properties, ERPOP (and sometimes other Equity subsidiaries) acquired a complete ownership interest in the property-holding entity after construction was completed. In these instances, the post-construction property-holding entity is a de facto successor to the property-holding entity at the time of construction (during which time it was operated as a joint venture). Accordingly, the court will analyze successor liability as it pertains to the post-construction property-holding entities prior to deciding whether to pierce the corporate veil of those entities and hold Equity liable for design and construction violations.
1. West End
ERPOP currently owns West End and owned the property during its construction. (Aff. Scott Fenster ¶ 5, ECF No. 247-6; Opp’n MSJ 26-27, ECF No. 247-6). Equity does not dispute that ERPOP was involved in the design and construction process at West End. The defendants can ...