Fair Hous. Just. Ctr., Inc. v. Pelican Mgmt., Inc.

• Court: Court of Appeals for the Second Circuit
• Decided: January 21, 2025
• Docket: 23-7348
• Status: Unpublished

Opinion

23-7348-cv Fair Hous. Just. Ctr., Inc., v. Pelican Mgmt., Inc.

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 21st day of January, two thousand twenty-five.

PRESENT: SUSAN L. CARNEY, JOSEPH F. BIANCO, WILLIAM J. NARDINI, Circuit Judges. _____________________________________

FAIR HOUSING JUSTICE CENTER, INC.,

Plaintiff-Appellee,

ALFRED SPOONER,

Plaintiff,

v. 23-7348-cv

PELICAN MANAGEMENT, INC., FORDHAM ONE COMPANY, LLC., CEDAR TWO, LLC.,

Defendants-Counter-Claimants-Appellants,

GOLDFARB PROPERTIES, DEEGAN TWO COMPANY,

Defendants. _____________________________________ FOR PLAINTIFF-APPELLEE: DIANE L. HOUK (Sonya Levitova, on the brief), Emery Celli Brinckerhoff Abady Ward & Maazel, LLP, New York, New York.

FOR DEFENDANTS-COUNTER DAVID RABINOWITZ (Robert S. Wolf, on the -CLAIMANTS-APPELLANTS: brief), Moses & Singer, LLP, New York, New York.

Appeal from a judgment of the United States District Court for the Southern District of

New York (Edgardo Ramos, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND

DECREED that the judgment of the district court, entered on September 29, 2023, is

AFFIRMED.

Defendants-Counter-Claimants-Appellants Pelican Management, Inc. (“Pelican

Management”), Fordham One Company, LLC, and Cedar Two, LLC (collectively, “Goldfarb”) 1

appeal from the district court’s judgment granting injunctive and monetary relief to Plaintiff-

Appellee Fair Housing Justice Center, Inc. (“FHJC”). We assume the parties’ familiarity with the

underlying facts, procedural history, and issues on appeal, to which we refer only as necessary to

explain our decision to affirm.

BACKGROUND

Goldfarb is a large New York managing agent, which oversees approximately 6,000 rental

units in New York City and its surrounding suburbs. FHJC filed the instant lawsuit in February

2018, alleging that Goldfarb’s rental practices constituted housing discrimination based on

1 Pelican Management is a managing agent of rental properties and operates under the business name Goldfarb Properties. Fordham One and Cedar Two are the ownership entities of two rental buildings managed by Goldfarb Properties at which plaintiff Alfred Spooner attempted to rent an apartment, but was denied based on his income level.

2 disability and source of income, in violation of the Fair Housing Act (“FHA”), 42 U.S.C.

§ 3604(f)(1), and the New York City Human Rights Law (“NYCHRL”), N.Y.C. Admin. Code

§ 8107(5)(a). Specifically, FHJC asserted that in 2015 Goldfarb adopted a minimum income

policy for prospective renters, requiring, among other things, that all prospective renters earn a

gross annual income of at least 43 times their total monthly rent (the “2015 Policy”). FHJC

claimed that the 2015 Policy excluded virtually all renters who received certain rental subsidies, a

large percentage of whom have disabilities, and thereby disparately impacted those renters on the

basis of disability and source of income, in violation of the FHA and NYCHRL.

In 2019, while discovery in the case was ongoing, Goldfarb implemented a new policy that

included three components (the “2019 Policy”). First, with respect to applicants with no rental

subsidy, the criteria under the 2019 Policy that prospective renters earn an annual income of at

least 43 times their total monthly rent remained the same as before. Second, as to applicants with

a full subsidy (i.e., 100 percent of the rent is paid by a government program), the 2019 Policy

eliminated all income-related requirements. Finally, with respect to applicants with a partial

subsidy (i.e., a portion, but not all, of the rent is paid by a government program), the 2019 Policy,

among other things, required that prospective renters earn 40 times their share of the monthly rent,

rather than 43 times the full rent. Under the 2019 Policy, Goldfarb denied applications for the

following three reasons: (1) “voucher insufficient” (when it was determined that an available

apartment’s rent was outside the amount that the applicant’s subsidy allowed); (2) “no contact”

(when Goldfarb could not reach an applicant to have further communications); and (3) “not

3 qualified.” 2 After implementing the 2019 Policy, Goldfarb filed a counterclaim seeking a

declaratory judgment that the new policy is lawful.

The district court conducted a bench trial, during which both sides offered expert

testimony. FHJC’s expert, Dr. Justin Steil, found that, under the 2019 Policy, only 13% of partially

subsidized applicants were approved compared to 30% of unsubsidized applicants. By contrast,

Goldfarb’s expert, Dr. Paul White, found that 47% of subsidized applicants were approved

compared to 34% of unsubsidized applicants. In conducting his analysis, Dr. Steil included denials

that were categorized as “voucher insufficient” and “no contact,” while Dr. White excluded those

categories. Moreover, unlike Dr. Steil, Dr. White did not distinguish between partially-subsidized

and fully-subsidized applicants.

After the bench trial, the district court concluded that the 2015 Policy discriminated on the

bases of both disability and source of income, in violation of the FHA and NYCHRL. See Fair

Hous. Just. Ctr., Inc. v. Pelican Mgmt., Inc., No. 18-cv-1564 (ER) (OTW), 2023 WL 6390159, at

*12–16 (S.D.N.Y. Sept. 29, 2023). As to the 2019 Policy, the district court found that it violated

the NYCHRL because it continued to adversely impact applicants with partial subsidies on the

basis of their source of income. See id. at *17–18. As a result, the district court enjoined Goldfarb

from discriminating based on lawful sources of income in its rental application requirements. Id.

2 There were other categories, but neither party argues that they are relevant to this appeal.

4 at *18–19. On appeal, Goldfarb principally challenges the district court’s decision regarding the

2019 Policy. 3

DISCUSSION

The NYCHRL prohibits housing discrimination “because of any lawful source of income.”

N.Y.C. Admin. Code § 8-107(5)(a). The NYCHRL instructs courts to construe its provisions

“liberally,” even if comparable state or federal laws have not been so construed. Id. § 8-130(a).

Federal law analogues to the NYCHRL serve as the floor for the rights guaranteed by the

NYCHRL. See Mihalik v. Credit Agricole Cheuvreux N. Am., Inc., 715 F.3d 102, 109 (2d Cir.

2013). A disparate impact claim can be brought under the NYCHRL when “a facially neutral

policy or practice has a disparate impact on a protected group.” Levin v. Yeshiva Univ., 96 N.Y.2d

484, 491 (2001); see N.Y.C. Admin. Code § 8-107(17).

On appeal, Goldfarb argues that the district court’s disparate impact determination

regarding the 2019 Policy was erroneous on two grounds. First, Goldfarb asserts that the district

court erred by adopting the statistical analysis of FHJC’s expert. Second, Goldfarb contends that

the district court erred in determining the disparate impact by comparing the approval rate of

applicants with no subsidy to applicants with a partial subsidy, while excluding the applicants

approved with a full subsidy from the affected class. We find these arguments unpersuasive and

address each in turn.

3 Goldfarb does not challenge the district court’s finding as to the 2015 Policy “except insofar as determination of this appeal may affect the decision of the Court below to impose punitive damages and prospective relief.” Appellants’ Br. at 18. Because, as discussed below, we affirm the district court’s determination regarding the 2019 Policy, there is no basis to disturb the award of punitive damages or prospective relief.

5 I. Methodology of FHJC’s Expert

Goldfarb first contends that the district court “improperly accepted FHJC’s expert’s version

of the statistics, which included applicants with insufficient vouchers and applicants who dropped

out of the application process in assessing disparate adverse effect.” Appellants’ Br. at 20.

Goldfarb argued that such denials should not be counted in the analysis because they are the result

of the applicants’ actions only, and not the 2019 Policy. Following a bench trial, we review the

district court’s determination regarding “what weight to accord expert opinion” for abuse of

discretion. Clerveaux v. E. Ramapo Cent. Sch. Dist., 984 F.3d 213, 233 (2d Cir. 2021) (internal

quotation marks and citation omitted). Moreover, we review the factual findings underlying the

district court’s determination for clear error. Sacerdote v. N.Y. Univ., 9 F.4th 95, 119 (2d Cir.

2021). As set forth below, we find no basis to disturb the district court’s reliance on the

methodology of FHJC’s expert, Dr. Steil, including his incorporation of the “insufficient vouchers”

category of denials in the disparate impact analysis. 4

The district court thoroughly explained its reasons for crediting Dr. Steil’s inclusion of the

insufficient voucher denials in the analysis of the 2019 Policy’s disparate impact. In particular,

the district court noted three different ways, as recounted by Dr. Steil, that Goldfarb used its

discretion under the 2019 Policy to deny an application for “insufficient voucher,” even though

such denial did not necessarily occur because the applicant applied for an apartment with a higher

4 As set forth below, because we conclude that the inclusion of the “insufficient voucher” denials was proper, we need not consider Goldfarb’s similar argument regarding the inclusion of “no contact” denials. In particular, even with the exclusion of “no contact” denials, Dr. Steil’s analysis shows that only 20% of partially subsidized applicants were accepted compared to 30% of unsubsidized applicants. This disparity is statistically significant and alone is sufficient to establish a disparate impact claim, without regard to the dispute regarding inclusion of the “no contact” denials in the methodology.

6 rent than a subsidy program’s applicable payment standard. First, the district court explained that

Goldfarb had discretion in determining which rent (i.e., the rent for the unit the applicant applied

for, or, if that unit was unavailable, a comparable vacant unit) to use when it determined whether

an applicant’s voucher was sufficient. Second, the district court explained that some governmental

assistance voucher programs have flexibility in the amount they will contribute towards rent. For

example, the district court noted that the New York City HIV/AIDS Services Administration

(“HASA”) program may increase its subsidy to a recipient if the housing has amenities, such as an

elevator, that would be beneficial to the applicant’s health. Goldfarb introduced no evidence that

it inquired whether this exception, or any other exception, was applicable before denying an

applicant for “insufficient voucher.” Third, the district court explained that some government

programs, such as Section 8, can increase the rent limit by allowing voucher-holders themselves

under certain circumstances to pay the difference—amounting to up to ten percent of their adjusted

gross income—between the voucher’s rent limit and the rent, and that Goldfarb failed to consider

such flexibility before determining that a voucher was insufficient. After listing these three reasons

to question the precision of Goldfarb’s “insufficient voucher” label, the district court noted that

the “insufficient voucher” label accounted for more than a quarter of Goldfarb’s denials for

applicants with subsidies.

To the extent Goldfarb suggests that the district court relied upon clearly erroneous facts

in reaching this determination, we disagree. For example, there was evidence in the record that

Goldfarb sometimes used the rent of a unit to which the applicant did not apply to determine that

7 the applicant’s voucher was insufficient. 5 Similarly, although one Goldfarb employee testified

that Goldfarb took into account the ten percent flexibility allowed by Section 8 before denying an

application due to an insufficient voucher, Dr. Steil identified fifteen partial subsidy applicants

who might have been able to take advantage of the flexibility afforded by programs including

Section 8, but were denied without any apparent consideration of that flexibility by Goldfarb.

Notwithstanding this evidence, Goldfarb’s expert, Dr. White, conceded at trial that he did not seek

to verify whether Goldfarb had correctly determined the rent limit of any applicant’s subsidy

before rendering an “insufficient voucher” denial and acknowledged that, if certain applicants were

incorrectly categorized as “insufficient voucher,” his analysis could be impacted. In short, the

factual record was sufficient to support a finding that there were questions as to the accuracy and

consistency of the use of the “insufficient voucher” justification to deny an application, such that

those denials should be included in the disparate impact analysis regarding the 2019 Policy.

In sum, based on this record, Goldfarb failed to establish that the district court erred in

relying upon Dr. Steil’s statistical approach to support its finding that there was sufficient evidence

to support the disparate impact claim.

II. Fully Subsidized Applicants

Goldfarb next argues that, by adopting Dr. Steil’s decision to compare only partially

subsidized applicants against unsubsidized applicants, the district court committed legal error by

impermissibly excluding fully subsidized applicants and analyzing the impact of its 2019 Policy

5 This practice occurred when the unit the applicant originally applied for became unavailable. In such circumstances, under the 2019 Policy, Goldfarb could exercise discretion to determine what rent amount to use in its calculation, namely, the rent for the unit that was the subject of the application or the rent for another available unit in the building.

8 on a subgroup of a protected class. We disagree.

“The basis for a successful disparate impact claim involves a comparison between two

groups––those affected and those unaffected by the facially neutral policy.” Tsombanidis v.

W. Haven Fire Dep’t, 352 F.3d 565, 575 (2d Cir. 2003). Here, the fully subsidized applicants were

not subject to the part of the 2019 Policy that FHJC challenged and that the district court found

unlawful––namely, the minimum income requirements. Because fully subsidized applicants were

not affected by the challenged policy, the district court did not err in comparing only partially

subsidized applicants to unsubsidized applicants.

* * *

We have considered Goldfarb’s remaining arguments and find them to be without merit.

Accordingly, we AFFIRM the judgment of the district court.

FOR THE COURT: Catherine O’Hagan Wolfe, Clerk of Court