Ave. 6E Invs., LLC v. City of Yuma

• Decision Date: 25 March 2016
• Docket Number: No. 13–16159.,13–16159.
• Parties: AVENUE 6E INVESTMENTS, LLC, an Arizona limited liability company; Saguaro Desert Land, Inc., an Arizona corporation, Plaintiffs–Appellants, v. CITY OF YUMA, ARIZONA, a municipal corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

818 F.3d 493

AVENUE 6E INVESTMENTS, LLC, an Arizona limited liability company; Saguaro Desert Land, Inc., an Arizona corporation, Plaintiffs–Appellants,

v.CITY OF YUMA, ARIZONA, a municipal corporation, Defendant–Appellee.

No. 13–16159.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 13, 2015.

Filed March 25, 2016.

Elizabeth Brancart (argued) and Christopher Brancart, Brancart & Brancart, Pescadero, CA, for Plaintiffs–Appellants.

Andrew M. Jacobs (argued), Snell & Wilmer L.L.P., Tucson, AZ; Vaughn A. Crawford, Martha E. Gibbs, and Benjamin M. Mitsuda, Snell & Wilmer L.L.P., Phoenix, AZ, for Defendant–Appellee.

Before: STEPHEN REINHARDT, A. WALLACE TASHIMA, and CONSUELO M. CALLAHAN, Circuit Judges.

OPINION

REINHARDT

, Circuit Judge:

The Fair Housing Act (FHA) is one of the most important pieces of legislation to be enacted by the Congress in the past 60 years. It strikes at the heart of the persistent racism that so deeply troubles our Nation. Here, we deal with one aspect of that law: zoning or rezoning of land as it affects the construction of housing that may be affordable by significant numbers of members of minority groups.

Plaintiffs, two real estate developers ("Developers"), bring this case against the City of Yuma, contending that the City's refusal to rezone land to permit higher-density development violated, among other things, the Equal Protection Clause of the United States Constitution and the federal Fair Housing Act (FHA). In particular, Developers maintain that the City's refusal stemmed from intentional discrimination against Hispanics and created a disparate impact because the denial disproportionately deprives Hispanic residents of housing opportunities and perpetuates segregation. The district court first dismissed Developers' Equal Protection and FHA disparate-treatment claims under Rule 12(b)(6)

for failure to state a claim and denied Developers' motion for leave to file a Second Amended Complaint. It then granted summary judgment in favor of the City on Developers' disparate-impact claim, rejecting both theories on which Developers relied.

Taking the factual allegations in the complaint as true, we first hold that Developers presented plausible claims for relief for disparate treatment under the FHA and under the Equal Protection Clause. The City Council denied Developers' request for rezoning despite the advice of its own experts to the contrary and in the context of what a reasonable jury could interpret as racially charged opposition by Yuma residents. This was the only request for rezoning that the City had denied in the last three years or of the last 76 applications. We reverse the district court because it failed to give sufficient weight to the City Council's alleged capitulation to the animus of the development's opponents, in the face of the City's own expert's recommendation to approve the request and its practice of generally granting these requests. Given these circumstances, the complaint passes the plausibility bar. We remand to the district court on these claims.

We also reverse and remand the district court's grant of summary judgment in favor of the City on Developers' disparate-impact claim and vacate its denial of the second summary judgment motion as moot. We reject the district court's view that other similarly-priced and similarly-modelled housing available elsewhere necessarily precluded a finding that there was a disparate impact. We remand for the district court to address the City's second motion for summary judgment in the first instance.¹

JURISDICTION

The district court had jurisdiction over Developers' § 1983 claims under 28 U.S.C. §§ 1331

and 1343 and over Developers' FHA claims under 28 U.S.C. § 1331. See Munger v. City of Glasgow Police Dep't, 227 F.3d 1082, 1085 (9th Cir.2000). We have jurisdiction over Developers' appeal under 28 U.S.C. § 1291. See Budnick v. Town of Carefree, 518 F.3d 1109, 1113 (9th Cir.2008).

LEGAL STANDARDS

Dismissal of a complaint under Rule 12(b)(6)

is inappropriate unless the complaint fails to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "When the district court denies leave to amend [a complaint] because of futility of amendment, we will uphold such denial if it is clear, upon de novo review, that the complaint would not be saved by any amendment." Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 893 (9th Cir.2010). A district court's grant of summary judgment is also reviewed de novo. Pac. Shores Props., LLC v. City of Newport Beach, 730 F.3d 1142, 1156 (9th Cir.2013).

FACTUAL BACKGROUND

According to the complaint, Plaintiffs, Avenue 6E Investments, LLC and Saguaro Desert Land, Inc. are business entities owned by members of the Hall family, who develop housing in Yuma, Arizona. Through Developers and other affiliated companies, members of the Hall family have developed various affordable and moderately priced housing projects in Yuma. Thus, Developers are sometimes referred to as "Hall" or "Hall Construction." Developers allege that even though the Hall family's affiliated companies build a full range of housing products, they nevertheless have a reputation as a developer of Hispanic neighborhoods based upon their development of several affordable housing projects in Yuma in which the majority of homes were sold to Hispanics.

Avenue 6E owned 42 acres of undeveloped land in southeastern Yuma (the "Property"), and granted Saguaro an option to purchase the Property for the purpose of developing a "moderately priced" housing project. As Developers state in their opening brief on appeal, their references to their proposed development as "affordable" and "moderately priced" are descriptive only and do not imply that such projects are considered "affordable" as defined by the United States Department of Housing and Urban Development. Developers allege that the City denied a requested zoning change in September 2008 in response to animus by neighbors of the proposed development who wished to prevent the development of a heavily Hispanic neighborhood adjacent to their subdivisions, in which 75% of the population was White.

Between 2002 and 2010, the City performed two analyses—specifically, the Consolidated Plan and Analysis of Impediments to Fair Housing Choice for 2002, as well as a 2007 version by the same name (respectively, the "2002 Analysis of Impediments" and the "2007 Analysis of Impediments")—each showing that the Hispanic population in Yuma was concentrated in several areas in the northern, western, and central portions of the City. The analyses show that substantially all of the available low- to moderate-income housing was located in those areas, and that more than 75% of the households in that housing were Hispanic. The reports found that, by contrast, Whites were concentrated in separate areas in the northwest and southeast of Yuma in which they comprised more than 75% of the population. The Property is on the western boundary of what was, at that time, one of the White-majority areas in the Southeast portion of Yuma.

The City's General Plan prohibits actions promoting racial segregation, and its 2002 Analysis of Impediments recognizes the need to encourage the development of more affordable housing choices to low- and moderate-income citizens outside the areas with high concentrations of Hispanic households. The 2002 Analysis warned, however, that residents had used "NIMBY" (not-in-my-backyard) arguments to block or delay several affordable housing developments; the Analysis thus recommended an educational campaign to promote acceptance of affordable housing, lower-income neighborhoods, and cultural diversity. The General Plan acknowledges that large-lot zoning raises housing costs and impairs the availability of housing affordable to low- and moderate-income purchasers, and identifies higher-density zoning as a means for the City to encourage desegregation. The 2002 General Plan noted wealth disparities within Yuma, stating that "Hispanic, African American and Native American households are more likely to have lower income and live below the poverty line."

The City's General Plan designates the Property for use as "Low Density Residential." This designation encompasses two permissible zoning designations: "R– 1–6" zoning, which allows development of a residential subdivision of houses placed on 6,000 square foot lots, and "R–1–8" zoning, which requires the use of at least 8,000 square foot lots. In 2006, Developers purchased the Property from KDC of Yuma, LLC ("KDC"), another housing developer, which had previously rezoned the Property from agricultural use to R–1–8. The Property is bordered on the south by the 38–acre "Belleza Subdivision," which consists of homes on lots exceeding 9,000 square feet; on the north by the "Country Roads" recreational village, consisting of 2,500 square foot lots limited to persons age 55 and over; on the west by the 80–acre "Terra Bella Subdivision" owned by Perricone Development Group II ("Perricone"), a developer of luxury homes; and to the east by a parcel the City intends to use to expand a wastewater facility and a municipal park.

In 2008, Developers determined that development of the Property with R–1–8 zoning was no longer financially feasible due to the collapse of the housing market and a corresponding difficulty in selling 8,000 square foot lots. They determined, however, that there existed a need in Yuma for more affordable housing, and designed a higher-density, moderately priced housing project for the Property consistent with the City's General Plan and consisting of 6,000 square foot lots. Developers subsequently applied to rezone the Property from R–1–8 to R–1–6. The City's staff and in-house planning experts both recommended approval of the zoning request.

Subsequently, the City Planning and Zoning Commission held a public hearing on Developers' zoning...