Gilligan v. Jamco Development Corp.

Citation108 F.3d 246
Decision Date05 March 1997
Docket NumberNo. 95-56290,95-56290
Parties, 97 Cal. Daily Op. Serv. 1632, 97 Daily Journal D.A.R. 3106 Catherine GILLIGAN; Maurice Gilligan; David Gilligan and Wayne Gilligan, minors, by their guardian ad litem, Catherine Gilligan, Plaintiffs-Appellants, v. JAMCO DEVELOPMENT CORPORATION, and Ruth Fischer, individually and d/b/a Verdugo Gardens, Defendants-Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Elizabeth Brancart, Brancart & Brancart, Pescadero, California, for plaintiffs-appellants.

Robert P. Beckham, Horgan, Rosen, Beckham & Coren, Woodland Hills, California, for defendants-appellees.

Appeal from the United States District Court for the Central District of California, A. Andrew Hauk, District Judge, Presiding. D.C. No. CV-94-04382-AAH.

Before: D.W. NELSON, and TROTT, Circuit Judges, and BRYAN, * District Judge.

D.W. NELSON, Circuit Judge:

Catherine and Maurice Gilligan and their minor children, David and Wayne Gilligan (collectively, "the Gilligans"), appeal the dismissal of their action brought under the Fair Housing Act ("FHA" or "Title VIII"), 42 U.S.C. §§ 3604, 3613 (1994), and their pendent claim brought under the California Fair Employment and Housing Act, Cal. Gov't Code § 12955 (1995). The Gilligans allege that Jamco Development Corporation ("Jamco") and Ruth Fischer, the manager of Jamco's Verdugo Gardens apartment complex, refuse applications from all prospective tenants who receive benefits from the federal Aid to Families with Dependent Children program ("AFDC"). In their complaint, the Gilligans assert that such a restriction constitutes discrimination on the basis of familial status in violation of the FHA. We have jurisdiction under 28 U.S.C. § 1291, and we reverse the district court's dismissal of the Gilligans' claims.

FACTUAL BACKGROUND

Congress extended the FHA's protection to familial status in the Fair Housing Act Amendments of 1988, Pub.L. No. 100-430, 102 Stat. 1620. The FHA makes it unlawful to "refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of ... familial status." 42 U.S.C. § 3604(a). The FHA also proscribes statements with respect to the rental of a dwelling that indicate "any preference, limitation, or discrimination" based on familial status as well as representations "to any person because of ... familial status ... that any dwelling is not available for inspection, sale, or rental when such dwelling is in fact so available." 42 U.S.C. § 3604(c)-(d). "Familial status" refers to the presence of minor children in the household. 42 U.S.C. § 3602(k).

Catherine and Maurice Gilligan live with their two minor children, David and Wayne Gilligan. Since January 1993, they have received monthly AFDC benefits, which are available only to families with minor children residing in the home. See 42 U.S.C. § 606.

In January 1994, Catherine Gilligan contacted Ruth Fischer about renting an apartment at Verdugo Gardens in Burbank, California. According to the Gilligans' complaint, she informed Fischer that her family's source of income was AFDC, and Fischer replied that the Gilligans could not inspect or apply to rent an apartment because they were receiving AFDC benefits. The Gilligans maintain that Fischer never inquired about the amount of their monthly income or informed Catherine Gilligan of the monthly rent at Verdugo Gardens. They further allege that Fischer was aware of a vacant apartment unit in the building when she refused to discuss a rental with Catherine Gilligan.

On February 16, 1994, a fair housing tester posing as a prospective tenant contacted Fischer to inquire about the rental of an apartment unit for her family. The tester told Fischer that she received welfare payments, and Fischer responded that Verdugo Gardens was not a "welfare building." Fischer also stated that she had no apartments available to show until the following week.

Fifteen minutes later, a second fair housing tester contacted Fischer and inquired about the possibility of renting a unit for her family. In response to Fischer's questions, the second tester stated that she was working and did not receive welfare payments. Fischer promptly showed her an apartment that was being vacated.

PROCEDURAL HISTORY

On June 29, 1994, the Gilligans filed a complaint in federal district court alleging that Jamco enforces a discriminatory occupancy restriction in the operation of its apartments based on prospective tenants' source of income. The Gilligans claim that since March 12, 1989, Jamco has imposed a "no AFDC" policy on applicants for units at Verdugo Gardens. Because only households with children qualify for AFDC benefits, the Gilligans contend that Jamco's refusal to consider applicants receiving AFDC benefits is a pretext for intentional discrimination against families with children. They also assert that the source of income restriction, even if it is neutral on its face, has the effect of discriminating against families.

On October 13, 1994, Jamco moved to dismiss the complaint for failure to state a claim. The Gilligans responded that they had alleged sufficient facts to state claims of both disparate treatment and disparate impact. Pointing to their failure to allege that they were financially qualified, the district court dismissed the complaint without prejudice and granted the Gilligans leave to amend.

On January 23, 1995, the Gilligans filed their first amended complaint, which the district court again dismissed with leave to amend. The district court insisted that the Gilligans could not sustain a fair housing claim without alleging that they were financially qualified to rent at Verdugo Gardens. The Gilligans responded that Jamco enforced a blanket proscription, without making any inquiry into individual applicants' financial qualifications.

On May 4, 1995, the Gilligans filed a second amended complaint, and Jamco moved to dismiss a third time. The Gilligans had argued consistently that financial qualification, though relevant at the proof stage, need not form part of the pleadings in a Title VIII case. The district court, however, dismissed the Gilligans' second amended complaint with prejudice on July 10, 1995, stating that the plaintiffs had failed to "cure the deficiencies" in their complaint because they had not alleged that they "have enough money to pay the rent."

DISCUSSION

A dismissal for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6) is a ruling on a question of law subject to de novo review. Stone v. Travelers Corp., 58 F.3d 434, 436-37 (9th Cir.1995). The reviewing court considers only the contents of the complaint and construes all allegations of material fact in the light most favorable to the nonmoving party. Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir.1996); Allarcom Pay Television, Ltd. v. General Instrument Corp., 69 F.3d 381, 385 (9th Cir.1995). A complaint should not be dismissed "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Parks Sch. of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995).

The Gilligans' complaint states that they are a family, that only families receive AFDC benefits, that Jamco has a policy prohibiting all AFDC recipients from applying for apartments, and that Jamco has relied on its "no AFDC" policy to "refuse to negotiate for the sale or rental of, or otherwise make unavailable" units at Verdugo Gardens. 42 U.S.C. § 3604(a). Thus, the Gilligans allege that they are members of a class protected under the FHA, identify a policy that affects only members of that class, and set forth facts that demonstrate the enforcement of that policy in the form of actions prohibited by the FHA. We hold that these allegations are sufficient to state a claim under the FHA.

The federal rules require only a "short and plain statement of the claim showing that the pleader is entitled to relief."

Fed.R.Civ.P. 8(a). The Rule 8 standard contains "a powerful presumption against rejecting pleadings for failure to state a claim." Auster Oil & Gas, Inc. v. Stream, 764 F.2d 381, 386 (5th Cir.1985); see also Hall v. City of Santa Barbara, 833 F.2d 1270, 1274 (9th Cir.1986) ("It is axiomatic that '[t]he motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted.' ") (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1357, at 598 (1969)).

The Supreme Court has explained that "it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). In reviewing the sufficiency of a complaint, "[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Id. In particular, the Court has stated that the FHA must be given a "generous construction" to carry out a "policy that Congress considered to be of the highest priority." Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209, 211-12, 93 S.Ct. 364, 366-68, 34 L.Ed.2d 415 (1972) (noting that private suits are "the primary method of obtaining compliance with the Act"). Moreover, the Court recently rejected the concept of a "heightened pleading standard" for civil rights cases and concluded that "federal courts and litigants must rely on summary judgment and control of discovery to weed out unmeritorious claims sooner rather than later." Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168, 113 S.Ct. 1160, 1163, 122 L.Ed.2d 517 (1993).

By demanding of the Gilligans that they establish each element necessary to survive a motion for summary judgment, the district court...

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