Kelly v. Secretary, U.S. Dept. of Housing and Urban Development on Behalf of Staples

• Decision Date: 24 January 1997
• Docket Number: Nos. 95-3008,95-3107 and 95-4141,s. 95-3008
• Citation: 97 F.3d 118
• Parties: Michael P. KELLY and John T. Kelly (95-3008/4141), Petitioners, Dionne Staples (95-3107), Petitioner, v. SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, on behalf of Dionne STAPLES, Respondent.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 118

97 F.3d 118

Michael P. KELLY and John T. Kelly (95-3008/4141), Petitioners, Dionne Staples (95-3107), Petitioner, v. SECRETARY, UNITED STATES DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT, on behalf of Dionne STAPLES, Respondent.

Nos. 95-3008, 95-3107 and 95-4141.

United States Court of Appeals, Sixth Circuit.

Argued April 18, 1996.

Decided Sept. 30, 1996.

Rehearing and Suggestion for Rehearing En Banc Denied Jan.

24, 1997. ^*

Robert G. Kelly (argued and briefed), Norwood, OH, for Michael P. Kelly, John T. Kelly in Nos. 95-3008, 95-3107 and 95-4141.

Dennis J. Dimsey, Marie K. McElderry (argued and briefed), U.S. Department of Justice, Civil Rights Division, Appellate Section, Washington, DC, for U.S. Department of Housing and Urban Development in Nos. 95-3008, 95-4141.

Frederick M. Morgan, Jr. (argued and briefed), Helmer, Lugbill, Martins & Neff, Cincinnati, OH, for Dionne Staples in Nos. 95-3008, 95-3107 and 95-4141.

Before: MERRITT, Chief Judge; LIVELY and RYAN, Circuit Judges.

MERRITT, C.J., delivered the opinion of the court, in which LIVELY, J., joined. RYAN, J. (pp. 122-24), delivered a separate dissenting opinion.

MERRITT, Chief Judge.

This case is on appeal for the second time from an order of the Department of Housing and Urban Development ("HUD" or "the agency") finding liability and ordering damages against apartment owners Michael and John Kelly for housing discrimination. In this decision we carry out the earlier decision of this court that HUD's neglect and mishandling of the case seriously impaired the ability of the parties to settle the claim and substantially increased the damages sought by Ms. Staples. See Kelly v. HUD, 3 F.3d 951 (6th Cir.1993) (Kelly I). Since the Administrative Law Judge (ALJ) did not reduce the damages as instructed on remand beyond a nominal $1.00 amount, we REVERSE that decision and award damages as described below. On the matter of attorney's fees, we AFFIRM the ALJ's grant of fees and costs to Ms. Staples but REVERSE the denial of fees to the Kellys and order that $20,000 of their fees and costs be paid by HUD.

Facts and Procedural History

The facts of this case are described extensively in Kelly I, 3 F.3d at 952-953, and we summarize them only briefly here. The Kellys own apartments in Cincinnati, Ohio. While looking for an apartment, Dionne Staples, a single mother of twin five-year old daughters, called the telephone number on a "For Rent" sign outside an apartment owned by the Kellys. After describing her family situation, Ms. Staples was informed that the Kellys only allowed "one child per bedroom" which implied that the two bedroom apartment she had asked about would not be available to her. Ms. Staples hung up the telephone and immediately called H.O.M.E., Inc., a non-profit fair housing organization in Cincinnati. She made no further attempt to rent an apartment from the Kellys. After a month and a half, she rented another apartment, which was not as convenient, increasing her commute to work and creating other transportation and child care problems. She filed her complaint with HUD alleging housing discrimination in violation of 42 U.S.C. § 3604 on May 17, 1990. ¹

HUD appointed Charles Jung to investigate the claim and also to act as conciliator between the parties. Jung completed his investigation on October 2, 1990, after which time he made no further contact with the Kellys. HUD did not issue its Charge of Discrimination until March 2, 1992, two years after the incident took place.

After a hearing in May 1992, the ALJ found the Kellys liable under 42 U.S.C. § 3604 and awarded $10,430.76 in damages. Of that amount, over $6,000 accounted for actual economic damages and $3,500 was ordered to compensate for emotional distress. The ALJ cited HUD's unexplained delay in completing its investigation and noted that the damage award would have been substantially lower had the case been processed in a timely manner. J.A. at 177. Specifically, the ALJ noted that Ms. Staples' out-of-pocket damages "are nearly double what they would have been if the case had been tried within the period contemplated by the Congress." J.A. at 174.

On appeal in Kelly I, the Sixth Circuit upheld the ALJ's liability finding, but vacated the damage award and remanded the case for further attempts at conciliation. Kelly I, 3 F.3d at 958. Failing that, the court ordered the ALJ to reconsider his damage award in light of the opinion, "but in no case should damages be assessed for the period during which HUD completely neglected this case." Id. On remand, the ALJ stated that he could find no period of "complete neglect" and reduced the damages by only a nominal $1.00. The ALJ subsequently ordered an award of attorney's fees and costs to Ms. Staples and denied an award of fees to the Kellys.

Discussion

1. Damages

In this appeal, we undertake the task set by the Sixth Circuit in Kelly I, but not met by the ALJ on remand, of ascertaining the proper damage award for Ms. Staples in light of the agency's misconduct in this case. This is a case of an administrative agency run amok. It is not necessary here to repeat the list of HUD's delays and missteps other than to recall that the agency's conduct violated not only Congressional statute and HUD's own regulations but also basic principles of adjudication. See Kelly I, 3 F.3d. at 953-56. We follow the mandate of Kelly I that a respondent in a housing discrimination case cannot be made to pay for the government's neglect. Baumgardner v. HUD, 960 F.2d 572 (6th Cir.1992), supports our view that an appellate court may reduce damages caused by HUD's delay.

The ALJ's initial award of over $6,000 for economic damages was based on an accrual period from the date of the incident to the date that HUD finally issued its Charge of Discrimination. While this might be a reasonable accrual period in the case where HUD processes the claim in accordance with statutory time limits, it is unreasonable where, as here, HUD takes twenty-five months to issue its Charge of Discrimination without so much as an explanation to the parties. Instead, we find that the reasonable accrual period for damages in this case is twelve months: the period within which Congress intended HUD to carry out its administrative responsibilities and the standard term of a rental lease. By the ALJ's calculations, twelve months after the incident, Ms. Staples' had incurred damages totalling $3,571.03, and this is the proper measure of her economic damages. See J.A. at 174, n. 19. By the same reasoning, we find that the damages awarded to Ms. Staples for emotional distress and loss of housing opportunity are more properly set at $1,000. Again, although the ALJ's award was higher, it included the period during which HUD mishandled the case. We cannot ask the Kellys to pay for emotional distress caused by HUD. Thus, we find that Ms. Staples is entitled to damages totalling $4,571.03.

2. Attorney's fees

The ALJ was technically correct that Ms. Staples is entitled to an award of attorneys fees and costs under the Fair Housing Act, 42 U.S.C. § 3612(p) (1988), since she prevailed on her claim of housing discrimination. In the exercise of our equitable jurisdiction, we hold, in addition, that the Kellys are entitled to some portion of their fees and costs from HUD under the Equal Access to Justice Act ("EAJA"), 28 U.S.C.A. § 2412(d)(1)(A) and 5 U.S.C. § 504(a)(1) (1988).

EAJA is a fee-shifting statute which provides that in litigation brought by or against the United States, the government shall be responsible for the attorney's fees and expenses of the prevailing party if the government's position was not "substantially justified." 28 U.S.C.A. § 2412(d)(1)(A) (1988). The Supreme Court has held that in order to be a prevailing party for the purposes of fee-shifting under the civil rights statutes, a party need not prevail on the "central issue" but may prevail on significant secondary issues. Texas State Teachers Ass'n v. Garland Independent School District, 489 U.S. 782, 109 S.Ct. 1486, 103 L.Ed.2d 866 (1989). Here, even though the Kellys were defeated--we believe narrowly and just barely--on the question of liability, they prevailed on several other significant issues, including the vindication of their right to receive reasonable conciliation and to the payment of damages that reflect only the price of their conduct, not the costs attributable to the government's neglect. Thus, for the purposes of applying EAJA here, the Kellys were a prevailing party. Furthermore, although HUD's initial posture in bringing the claim may have been justified, given its untoward conduct in the case throughout, its overall position cannot be said to be "substantially justified." To fail to correct this situation and to enforce an award of attorneys' fees against petitioners without a set off or recoupment against HUD would be a dereliction of judicial responsibility of a high order.

Although this case does not present the typical EAJA award scenario, we limit our holding to these facts because we find that the circumstances for which the statute was intended present themselves here. Congress enacted EAJA in 1980 in order to curb "the unreasonable exercise of Government authority." See Gregory C. Sisk, The Essentials of the Equal Access to Justice Act: Court Awards of Attorney's Fees for Unreasonable Government Conduct (Part One), 55 La.L.Rev. 217, 220 n. 1 (quoting H.R.Rep. No. 1418, 96th Cong., 2d Sess. 12 (1980)). Here, the government abused its authority by subjecting the Kellys to an unreasonable administrative procedure that not only tread dangerously close to violating their due process rights but that, if unreviewed, would have subjected them to double damages. The Kellys prevailed on not one, but two appeals at great cost to themselves. They have also incurred the increased fees of Ms. Staples due to the two appeals. For these reasons, we find that under EAJA the Kellys are entitled...