Graoch Assoc. #33 v. Louisville/Jefferson County

• Decision Date: 21 November 2007
• Docket Number: No. 06-5561.,06-5561.
• Citation: 508 F.3d 366
• Parties: GRAOCH ASSOCIATES # 33, L. P., d/b/a Autumn Run Apartments, Plaintiff-Appellee, v. LOUISVILLE/JEFFERSON COUNTY METRO HUMAN RELATIONS COMMISSION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

508 F.3d 366

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, Sixth Circuit.

Argued: January 23, 2007.

Decided and Filed: November 21, 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.

Before: BOGGS, Chief Judge; and MERRITT and MOORE, Circuit Judges.

BOGGS, C.J., delivered the opinion of the court. MERRITT, J. (p. 379), delivered a separate opinion concurring in the judgment and in Section IV. MOORE, J. (pp. 379-94), 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 42 U.S.C. § 1437f(a). The Fair Housing Act, also known as Title VIII, bars discrimination "against any person in the terms, conditions, or privileges of sale or rental of a dwelling ... because of race...." 42 U.S.C. § 3604(b). In this case, Graoch, the owner of Autumn Run Apartments in Louisville, seeks a declaratory judgment that it did not violate the FHA by withdrawing from the Section 8 program. Its claim presents two questions regarding the interplay between Section 8 and the FHA. First, can a landlord's withdrawal from the Section 8 program ever violate the FHA solely because it has a disparate impact on members of a protected class? Second, if so, what are the standards for measuring disparate impact?

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 42 U.S.C. § 1437f(b)(1) ("The Secretary is authorized to enter into annual contributions contracts with public housing agencies pursuant to which such agencies may enter into contracts to make assistance payments to owners of existing dwelling units in accordance with this section."). In March 2003, Graoch notified the HAJC that it intended to withdraw from the Section 8 voucher program, stating that it would honor existing leases by Section 8 tenants but would not renew those leases or sign any new Section 8 leases.

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 arbitrary satisfaction of the inspector." See 24 C.F.R. § 982.401 (stating "the housing quality standards ... for housing assisted" through the Section 8 program).

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." Fed.R.Civ.P. 56(c). Ordinarily, we may affirm a grant of summary judgment on any basis fairly presented by the record, as long as the opposing party "is not denied an opportunity to respond to the new theory." Herm v. Stafford, 663 F.2d 669, 684 (6th Cir.1981). In this case, however, both parties agree that we should remand the case to the district court if it is necessary to consider the adequacy of Graoch's business justification for its withdrawal from Section 8. As a result, we consider only whether the Commission has stated a prima facie case.

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 WL 180180, at *3, 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, 93 S.Ct. 1817, 36 L.Ed.2d 668 (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). Second, the defendant may then articulate a legitimate non-discriminatory basis for its challenged decision. Selden Apartments, 785 F.2d at 160. Third, if the defendant does proffer such a basis, the plaintiff must establish that the articulated reason is pretextual. Ibid. The burden of persuasion always remains with the plaintiff.

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...