Emigrant Sav. Bank v. Elan Management Corp.

• Decision Date: 12 January 1982
• Docket Number: No. 327,D,327
• Citation: 668 F.2d 671
• Parties: EMIGRANT SAVINGS BANK, Plaintiff-Appellee, v. ELAN MANAGEMENT CORP., et al., Defendants. Elan Management Corp., Defendant-Appellant. ocket 81-7449.
• Court: U.S. Court of Appeals — Second Circuit

Page 671

668 F.2d 671

EMIGRANT SAVINGS BANK, Plaintiff-Appellee, v. ELAN MANAGEMENT CORP., et al., Defendants Elan Management Corp., Defendant-Appellant.

No. 327, Docket 81-7449.

United States Court of Appeals Second Circuit.

Argued Oct. 28, 1981.

Decided Jan. 12, 1982.

Judson A. Parsons, Jr., New York City (Dewey, Ballantine, Bushby, Palmer & Wood, J. Patrick Deely, New York City, of counsel), for plaintiff-appellee.

Marcia Berger Hershkowitz, Mineola, N. Y. (Goldweber & Hershkowitz, Mineola, N. Y., Elyse S. Goldweber, of counsel), for defendant-appellant.

Before FEINBERG, Chief Judge, and FRIENDLY and PIERCE, Circuit Judges. ^*

FRIENDLY, Circuit Judge:

By a petition filed in the District Court for the Eastern District of New York, Elan Management Corp. (Elan) sought to remove, under 28 U.S.C. § 1443(1), ¹ an action brought by Emigrant Savings Bank (Emigrant) in the Supreme Court of New York for Queens County to foreclose a mortgage on an apartment building owned and managed by Elan. The petition alleged that tenants in 36 of the 45 apartments are members of racial minority groups; that the building is located in a predominantly non-white area; and that the foreclosure action was brought in retaliation for Elan's having exercised rights under the Fair Housing Act, 42 U.S.C. §§ 3601 et seq., the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691 et seq., and the Thirteenth Amendment. Elan went on to elaborate its claims as follows: About February 1979, Elan became interested in purchasing the apartment building. Prudential Savings Bank (Prudential), later merged with Emigrant, held the largest of three mortgages encumbering the building, which required extensive repair and rehabilitation and was the subject of numerous Building Code violations. Prudential agreed that if Elan purchased the building and completed the necessary repairs and rehabilitation, Prudential would issue a new mortgage to reflect the building's improved condition and would waive the collection of monthly interest payments until July 1979. In reliance upon this Elan purchased the building and expended some $100,000 on repairs, corrected all the violations, and satisfied the second and third mortgages. Elan began negotiations to reconstruct the mortgage with Emigrant in July 1979. The negotiations dragged. Elan claims it "was advised by an EMIGRANT representative that the reason EMIGRANT would not issue a new mortgage was because the majority of the building's tenants were non-white." Elan filed complaints with the New York State Banking Department and the Federal Deposit Insurance Corporation and advised Emigrant, by letter dated April 25, 1980, that it had done so. Emigrant notified Elan, which had not resumed interest payments after July 1, 1979, that it was in default, and filed a lis pendens in the foreclosure action on April 30, 1980. A receiver of rents and profits was appointed on May 8, 1980. Elan responded by filing a civil action in the District Court for the Eastern District of New York, entitled Elan Management Corp., et al. v. Emigrant Savings Bank, et al., CV-80-1381 (CPS), complaining of violations of the Fair Housing Act, the Equal Credit Opportunity Act, and the Thirteenth Amendment and by petitioning for removal of the foreclosure action.

Emigrant moved for a remand, arguing primarily that Elan had failed to demonstrate, as required by 28 U.S.C. § 1443(1), that the state court cannot fairly deal with the questions raised in Elan's defense. Elan, joined in the district court by the United States as amicus curiae, ² argued that Emigrant's refusal to live up to the promises made by Prudential because of the race of the tenants and the racial composition of the neighborhood violated the provisions of the Fair Housing Act, 42 U.S.C. § 3605, which prohibits a bank from "deny(ing) a loan or other financial assistance to a person applying therefor ... or discriminat(ing) against him in the fixing of the amount, interest rate, duration, or other terms or conditions of such loan or other financial assistance, because of the race ... of such person ... or of the ... tenants", and that Emigrant's commencement of the foreclosure action was a retaliatory measure violating 42 U.S.C. § 3617, which provides that "(i)t shall be unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, ... or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by (these sections)." ³

The district court granted the motion to remand without conducting a hearing and this appeal followed, 28 U.S.C. § 1447(d). We affirm. While this is essentially on the grounds stated in Judge Sifton's well reasoned opinion, we have thought it worthwhile to write since most if not all the appeals in the Supreme Court and in this circuit since § 1447(d) was amended in 1964, 78 Stat. 266, to allow appeals from remands where removal was sought under § 1443, have dealt with criminal prosecutions.

We begin by agreeing with Judge Sifton and Elan that §§ 3604, 3605 and 3617 of Title 42 are laws "providing for the equal civil rights of citizens" within the meaning of 28 U.S.C. § 1443(1). We implied as much in New York v. Davis, 411 F.2d 750, 753 (2 Cir.), cert. denied, 396 U.S. 856, 90 S.Ct. 119, 24 L.Ed.2d 105 (1969), and Emigrant now does not seriously dispute this.

Decision whether Elan showed that it "is denied or cannot enforce" these rights in the courts of New York requires application of the distinction first made in Strauder v. West Virginia, 100 U.S. 303, 25 L.Ed. 664 (1880), and Virginia v. Rives, 100 U.S. 313, 25 L.Ed. 667 (1880), developed in a line of decisions ending with Kentucky v. Powers, 201 U.S. 1, 26 S.Ct. 387, 50 L.Ed. 633 (1906), and reviewed in Georgia v. Rachel, 384 U.S. 780, 86 S.Ct. 1783, 16 L.Ed.2d 925 (1966), and City of Greenwood v. Peacock, 384 U.S. 808, 86 S.Ct. 1800, 16 L.Ed.2d 944 (1966). See also Johnson v. Mississippi, 421 U.S. 213, 95 S.Ct. 1591, 44 L.Ed.2d 121 (1975). The Strauder-Rives line of distinction was that removal would lie when enforcement of the petitioner's rights in a state court was barred by a state statute or constitutional provision which was applicable in terms although unconstitutional on its face, but not when the allegation was simply that in practice he would be denied or be unable to enforce his rights. As said in Virginia v. Rives, supra, 100 U.S. at 319-20, "in the absence of constitutional or legislative impediments he (the person seeking removal) ... has only an apprehension that such rights will be withheld from him when his case shall come to trial, (and thus) cannot affirm that they are actually denied, or that he cannot enforce them."

The Rachel and Greenwood decisions left this distinction unimpaired. Justice Stewart, the author of both opinions, said in Rachel, 384 U.S. at 800, 86 S.Ct. at 1794:

Removal is warranted only if it can be predicted by reference to a law of general application that the defendant will be denied or cannot enforce the specified federal rights in the state courts.

The reason for allowing removal in Rachel was that "In the narrow circumstances of this case, any proceedings in the courts of the State will constitute a denial of the rights conferred by the Civil Rights Act of 1964, as construed in Hamm v. City of Rock Hill, (379 U.S. 306, 85 S.Ct. 384, 13 L.Ed.2d 300 (1964)), if the allegations of the removal petition are true." 384 U.S. at 804, 86 S.Ct. at 1796. (emphasis in original). Section 201(a) of the Civil Rights Act created a federal statutory right to service in a place of public accommodation free from any discrimination because of race or color. Beyond this, the Court in Hamm read the provision of § 203(c) that no person shall "punish or attempt to punish any person for exercising or attempting to exercise any right or privilege secured by section 201 or 202" as prohibiting any state prosecution for asserting such a right. 379 U.S. at 311, 85 S.Ct. at 389. Hence the very attempt by Georgia to invoke its criminal trespass statute, see 384 U.S. at 783 n.1, 86 S.Ct. at 1785 n.1, against persons exercising their right specifically created by the 1964 Civil Rights Act not to leave a restaurant, if the request that they leave was based solely on racial reasons, would constitute a denial of a federally protected right "without any detailed analysis of the likely behavior of any particular state court." 384 U.S. at 805, 86 S.Ct. at 1797.

The narrowness of the extension of Strauder made in Rachel was immediately demonstrated in Peacock. In that decision the Court refused to allow removal of criminal prosecutions on charges for obstructing public streets, disturbing the peace and other offenses, which petitioners claimed to have been brought in violation of a federal statute providing that "(n)o person ... shall intimidate, threaten, coerce, or attempt to intimidate, threaten, or coerce any other person for the purpose of interfering with the right of such other person to vote or to vote as he may choose," 42 U.S.C. § 1971(b). Justice Stewart summarized Rachel as resting on two rights of the defendants in that case, 384 U.S. at 826, 86 S.Ct. at 1811.

(1) the federal statutory right to remain on the property of a restaurant proprietor after being ordered to leave, despite a state law making it a criminal offense not to leave, and (2) the further federal statutory right that no State should even attempt to prosecute them for their conduct.

By contrast, no federal law conferred on the Peacock defendants an absolute right to do what they were charged with having done, and "no federal law confers immunity from state prosecution on such charges." 384 U.S. at 827, 86 S.Ct. at 1812 (footnote omitted). The meaning of the latter phrase was amplified in fn. 25 which, after quoting the no person shall "punish or attempt to punish" language of § 203(c) of the Civil...