Michael Corey v. HUD

• Court: Court of Appeals for the Fourth Circuit
• Decided: July 5, 2013
• Docket: 12-2096
• Status: Published

Opinion

PUBLISHED

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

No. 12-2096

MICHAEL COREY,

Petitioner,

v.

THE SECRETARY, UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT, on behalf of: Delores Walker, G.W., by and through Delores Walker, his legal guardian,

Respondent.

No. 12-2239

UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT, Office of the Secretary, on behalf of: Delores Walker, G.W., by and through Delores Walker, his legal guardian,

On Petition for Review of an Order of the Department of Housing and Urban Development. (10-M-207-FH-27)

Argued: May 15, 2013 Decided: July 5, 2013

Before DAVIS, WYNN, and DIAZ, Circuit Judges. Petition for review denied; Cross-application for enforcement granted, by published opinion. Judge Diaz wrote the opinion, in which Judge Davis and Judge Wynn joined.

ARGUED: Frederick F. Holroyd, II, HOLROYD & YOST, Charleston, West Virginia, for Petitioner/Cross-Respondent. Christopher Chen-Hsin Wang, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent/Cross-Petitioner. ON BRIEF: Thomas E. Perez, Assistant Attorney General, Dennis J. Dimsey, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Respondent/Cross-Petitioner.

2 DIAZ, Circuit Judge:

Petitioner/Cross-Respondent Michael Corey appeals a final

agency order of the Secretary of the United States Department of

Housing and Urban Development (the “Department”). The Secretary

determined that Corey had committed intentional and egregious

violations of the Fair Housing Act (“FHA”) by discriminating on

the basis of disability against Delores and Gregory Walker, and

ordered Corey to pay a civil monetary penalty as well as damages

for Ms. Walker’s emotional distress. Finding no error, we deny

Corey’s Petition for Review and grant the Department’s Cross-

Application for Enforcement of the Secretary’s order.

I.

A.

In April 2009, Corey, a landlord with over fifteen years of

rental management experience, advertised that a two-bedroom

house in Charleston, West Virginia, was available for a monthly

rent of $600. When Delores Walker called to inquire about the

property, she informed Corey that she would be living with her

forty-eight-year-old brother, Gregory Walker, who she said

suffered from autism and mental retardation. According to Ms.

Walker, Corey responded to this revelation by insisting that she

would need to obtain a bond to protect his property as a

condition of her potential tenancy. Although this requirement

3 disturbed her, Ms. Walker nevertheless made an appointment to

view the house.

At the viewing, Ms. Walker told Corey that her brother, Mr.

Walker, suffered from what she termed “severe autism.” J.A. 74.

But despite her assurances that Mr. Walker had never been

violent or aggressive, Corey expressed reservations about him

living in the house and insisted upon meeting Mr. Walker in

person. Based on his prior observations of “children with

autism . . . flailing their arms and hollering and screaming in

outrage,” Mr. Walker’s “severe” autism raised what Corey would

later describe as a “red flag.” J.A. 134. Believing that Mr.

Walker posed a liability risk, Corey required Ms. Walker, in

order to proceed with the application process, to (1) provide a

note from Mr. Walker’s doctor stating that he would not pose a

liability threat, (2) obtain a renter’s insurance policy with $1

million in liability coverage, and (3) assume responsibility for

any damage Mr. Walker might cause to the property. Corey gave

Ms. Walker a handwritten note listing these three conditions.

As she was leaving, Corey asked Ms. Walker whether she earned

the $2,000 minimum monthly income that he regularly imposed as a

prerequisite for renters, and she replied in the affirmative.

Ms. Walker took an application but never submitted it because

she felt Corey would not have rented to her.

4 About a week after he placed his advertisement, Corey

rented the house to Shelley Dearien and her son, neither of whom

is disabled. Corey did not require Dearien to purchase

liability insurance, did not ask for a doctor’s note, and did

not require her to meet the monthly minimum income requirement

he quoted to Ms. Walker.

According to Ms. Walker, Corey’s conduct caused her

significant emotional distress for several months and caused her

to fear future discrimination against her brother. She also

suffered sleeplessness, panic attacks, and difficulty eating and

drinking--symptoms later corroborated by the testimony of her

friends and sister.

B.

The Department, on behalf of the Walkers, filed a Charge of

Discrimination against Corey, which was heard by an

Administrative Law Judge (“ALJ”). The Department alleged that

Corey had discriminated against the Walkers based on disability

in violation of the FHA by (1) making facially discriminatory

statements, in violation of 42 U.S.C. § 3604(c); (2) making

housing unavailable because of a disability, in violation of 42

U.S.C. § 3604(f)(1); and (3) imposing discriminatory terms and

conditions because of a disability, in violation of 42 U.S.C.

§ 3604(f)(2). Specifically, the Department alleged that Corey

had violated the FHA by requiring Ms. Walker to provide the note

5 from Mr. Walker’s doctor, to obtain a renter’s insurance policy

with $1 million in liability coverage, and to assume

responsibility for any damage Mr. Walker might have caused to

the property. Corey filed an Answer denying the charges,

arguing that he had “an absolute[ly] legitimate basis for

refusing to rent to” the Walkers because they failed to

establish financial eligibility. J.A. 9-12.

The ALJ, viewing Corey’s statements as reasonable requests

for information that would determine whether Mr. Walker was a

threat, issued an initial decision concluding that Corey had not

violated the FHA. The Department petitioned for Secretarial

Review. The Secretary reversed the ALJ’s decision, determining

that the Department had offered evidence sufficient to prove

each of the charged violations, and remanded the case for a

hearing on damages and the civil penalty.

On remand, the ALJ awarded Ms. Walker $5,000 in emotional

distress damages and imposed on Corey an additional $4,000 civil

monetary penalty--short of the $16,000 maximum civil penalty.

The ALJ also ordered injunctive remedies, directing Corey to

provide the Department with certain disability-related

information regarding his rental properties and to participate

in a fair housing training.

Both the Department and Corey petitioned for Secretarial

Review of the ALJ’s remand decision: Corey asked the Secretary

6 to reinstate the ALJ’s initial decision, while the Department

argued that the remand decision minimized both the degree of Ms.

Walker’s emotional distress and the need for a more significant

civil monetary penalty. The Secretary issued a Final Agency

Order denying Corey’s petition as untimely, granting in part the

Department’s petition, and imposing a steeper damages award and

civil penalty.

Corey filed with this court a timely Petition for Review of

the Final Agency Order, and the Department filed a Cross-

Application for Enforcement of the order. We consolidated these

actions.

II.

Corey contests the Secretary’s determination that he

violated § 3604(c), (f)(1), and (f)(2) of the FHA, arguing that

his conduct was justified under the circumstances.

Pursuant to the Administrative Procedures Act, “federal

courts can overturn an administrative agency’s decision . . . if

it is ‘arbitrary, capricious, an abuse of

discretion, . . . otherwise not in accordance with the law,’ or

‘unsupported by substantial evidence.’” Knox v. U.S. Dep’t of

Labor, 434 F.3d 721, 723 (4th Cir. 2006) (quoting 5 U.S.C. §

706(2)(A), (E)). The substantial evidence standard is a

“necessarily . . . limited” appellate review of the agency’s

7 factual determinations. Almy v. Sebelius, 679 F.3d 297, 302

(4th Cir. 2012) (internal quotations omitted).

As a charging party, the Department may prove an FHA

violation by showing “that a defendant had a discriminatory

intent either directly, through direct or circumstantial

evidence, or indirectly, through the inferential burden shifting

method known as the McDonnell Douglas test.” Kormoczy v. HUD,

53 F.3d 821, 823-24 (7th Cir. 1995) (referring to McDonnell

Douglas Corp. v. Green, 411 U.S. 792 (1973)). Of course, if the

Department provides sufficient direct evidence of discrimination

to prove a violation, resort to the McDonnell Douglas method of

proof is unnecessary. Pinchback v. Armistead Homes Corp., 907

F.2d 1447, 1452 (4th Cir. 1990).

Section 3604(c) of the FHA prohibits oral or written

statements with respect to the rental of a dwelling that

indicate a “preference, limitation, or discrimination” based on

certain protected statuses, including disability. Thus, to

establish Corey’s liability under § 3604(c), the Department must

show that (1) Corey made a statement; (2) the statement was made

with respect to the sale or rental of a dwelling; and (3) the

statement indicated a preference, limitation, or discrimination

on the basis of disability. See White v. HUD, 475 F.3d 898, 904

(7th Cir. 2007). To determine whether a statement meets the

8 third prong, courts use an “ordinary listener” standard. Id. at

905-06; see United States v. Hunter, 459 F.2d 205, 215 (4th Cir.

1972) (using an “ordinary reader” standard to determine whether

advertisements indicated a racial preference in the acceptance

of tenants). If an ordinary listener would believe that the

statement suggests a preference, limitation, or discrimination

based on a protected status, the statement is deemed

discriminatory. White, 475 F.3d at 905-06. Evidence of the

speaker’s motivation for making the discriminatory statement is

unnecessary to establish a violation. Jancik v. HUD, 44 F.3d

553, 556 (7th Cir. 1995).

Based on direct evidence, the Secretary determined that

Corey had violated § 3604(c). As the Secretary observed, Corey

admitted to imposing conditions, both verbally and in writing,

on the Walkers’ prospective tenancy because of Mr. Walker’s

disability. Corey also acknowledged that he made these

statements based on his assumption that Mr. Walker could pose a

threat to neighbors or property due to his disability. The

Secretary thus concluded that Corey violated the statute by

making statements to Ms. Walker that an ordinary listener would

deem reflected a “preference or limitation against [the

Walkers’] tenancy because of Mr. Walker’s disability.” J.A.

281.

9 Corey does not deny telling Ms. Walker that he intended to

impose special conditions on the Walkers’ prospective tenancy,

but disagrees that he violated § 3604(c). He argues that he

imposed the conditions only after Ms. Walker’s “voluntary and

unsolicited statement that her brother suffers from ‘severe

autism and mental retardation.’” Pet’r’s Br. 20. Corey also

notes that he never indicated a flat refusal to rent to the

Walkers, “only that . . . risk insurance maybe [sic] required.”

Id. at 21.

Corey’s arguments are unavailing. For one, the fact that

Ms. Walker disclosed her brother’s disability does not excuse

Corey’s discriminatory responsive statements. Nor does it

matter that Corey did not refuse to rent to the Walkers; the

statute simply prohibits statements to renters that indicate a

limitation based on disability, and Corey admits to making such

statements. This ends the inquiry, as substantial evidence

supports the Secretary’s determination.

In addition to its ban on discriminatory statements, the

FHA makes it unlawful “[t]o discriminate in the sale or rental,

or to otherwise make unavailable or deny, a dwelling to any

buyer or renter because of a [disability].” 42 U.S.C.

§ 3604(f)(1); see United States v. Youritan Constr. Co., 370 F.

Supp. 643, 648 (N.D. Cal. 1973) (interpreting “otherwise make

10 unavailable” language to include “[t]he imposition of more

burdensome application procedures, of delaying tactics, and of

various forms of discouragement by resident managers and rental

agents”). Relatedly, landlords are forbidden “[t]o discriminate

against any person in the terms, conditions, or privileges of

sale or rental of a dwelling . . . because of a [disability].”

42 U.S.C. § 3604(f)(2). However, FHA § 3604(f)(9) contains a

limited exception to these prohibitions, allowing a landlord to

reject “an individual whose tenancy would constitute a direct

threat to the health or safety of other individuals or whose

tenancy would result in substantial physical damage to the

property of others.”

The Secretary concluded that Corey had imposed “written

discriminatory conditions upon” the Walkers, in violation of

§ 3604(f)(1) and (2). J.A. 282. First, the Secretary

determined that the Department had proven the statutory

violations by direct evidence. This included Corey’s testimony

that he (1) imposed the conditions because of Mr. Walker’s

disability, (2) believed “persons diagnosed with autism and

mental retardation pose a greater risk in terms of liability,”

and (3) did not typically impose the challenged conditions on

his tenants. Id. Second, the Secretary determined that the

Department had proven both violations via indirect evidence

under the McDonnell Douglas burden-shifting method. Finally,

11 the Secretary ruled that Corey’s conduct could not be excused

pursuant to § 3604(f)(9)’s “direct threat” exception, since

Corey’s reluctance to rent to the Walkers was not sufficiently

supported by objective, individualized evidence that Mr. Walker

might pose a direct threat.

Corey contests these determinations, but not persuasively.

Focusing on perceived flaws in the Secretary’s McDonnell Douglas

indirect evidence analysis, Corey overlooks the Secretary’s

direct evidence findings, which alone may sustain the

violations. Rather than attempt to account for this evidence,

Corey insists that these facts present a “mixed motives” case,

and that he would have been justified in ultimately rejecting

Ms. Walker’s application because her net monthly income--despite

her affirmation to the contrary--was below his $2,000 income

threshold. Corey also contests the Secretary’s refusal to apply

the § 3604(f)(9) “direct threat” exception, arguing that his

requests for a doctor’s note and a meeting with Mr. Walker

constituted lawful attempts to obtain objective evidence of

whether Mr. Walker posed a direct threat.

These arguments fall flat, and again, substantial evidence

supports the Secretary’s determinations. First, we agree with

the Secretary that direct evidence established both § 3604(f)

violations. Corey admitted that he imposed what amounted to

discriminatory terms and obligations on his rental negotiations

12 with Ms. Walker based on his fears about Mr. Walker’s

disability. This admission alone supports the FHA violations:

by imposing more burdensome application procedures and generally

discouraging the Walkers’ application, Corey “otherwise ma[de]

[the property] unavailable” to the Walkers because of a

disability, in violation of § 3604(f)(1), see Youritan, 370

F.Supp. at 648, and “discriminate[d] against [the Walkers] in

the terms, conditions, or privileges” of a rental because of a

disability, in violation of § 3604(f)(2). And the fact that Ms.

Walker earned less than $2,000 per month does not excuse Corey’s

conduct. To begin with, Ms. Walker’s ability to pay could not

possibly have motivated Corey’s conduct, as he learned of Ms.

Walker’s income only after he imposed the discriminatory

conditions. In any case, this justification is baldly

pretextual, as Corey failed to impose the $2,000 minimum income

requirement on the nondisabled applicant to whom he subsequently

leased the house.

Second, since the Department established Corey’s violations

with sufficient direct evidence, we need not address Corey’s

argument that the Secretary erred in his handling of the

McDonnell Douglas indirect evidence inquiry. See Pinchback, 907

F.2d at 1452.

Finally, we affirm the Secretary’s conclusion that the

§ 3604(f)(9) “direct threat” exception does not apply. Corey

13 makes no showing that his discriminatory conduct was supported

by any objective evidence that Mr. Walker posed a direct threat

to persons or property, as is required to trigger the exception.

See H.R. Rep. No. 711, at 30 (1988), reprinted in 1988

U.S.C.C.A.N. 2173, 2191. And even if Corey’s request for a

meeting with Mr. Walker and a doctor’s note was, as he

maintains, an attempt to obtain such objective evidence, Corey

cannot justify the other discriminatory conditions he sought to

impose, based as they were on unsubstantiated stereotypes about

autistic people in general.

III.

For these reasons, we deny Corey’s Petition for Review and

grant the Department’s Cross-Application for Enforcement of the

Secretary’s order.

PETITION FOR REVIEW DENIED; CROSS-APPLICATION FOR ENFORCEMENT GRANTED.