Knapp v. Eagle Property Management Corp.

• Decision Date: 06 April 1995
• Docket Number: Nos. 94-1751,94-1977,s. 94-1751
• Citation: Knapp v. Eagle Property Management Corp., 54 F.3d 1272 (7th Cir. 1995)
• Parties: Linda KNAPP, Plaintiff-Appellant/Cross-Appellee, v. EAGLE PROPERTY MANAGEMENT CORP., Defendant-Appellee, v. Douglas D. SMILJANIC and Sun Valley Apartments, Defendants/Third-Party Plaintiffs-Appellees/Cross-Appellants, v. ECONOMY PREFERRED INSURANCE COMPANY, Third Party Defendant-Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1272

54 F.3d 1272

63 USLW 2750

Linda KNAPP, Plaintiff-Appellant/Cross-Appellee, v.EAGLE PROPERTY MANAGEMENT CORP., Defendant-Appellee, v.Douglas D. SMILJANIC and Sun Valley Apartments, Defendants/Third-Party Plaintiffs-Appellees/Cross-Appellants, v.ECONOMY PREFERRED INSURANCE COMPANY, Third Party

Defendant-Cross-Appellee.

Nos. 94-1751, 94-1977.

United States Court of Appeals Seventh Circuit.

Argued April 6, 1995. ^*

Decided May 17, 1995.

Jeffrey Spitzer-Resnick(argued), Madison, WI, for Linda Knapp.

Frederick R. Croen, Charles H. Barr(argued), Lisa C. Paul, Croen & Barr, Milwaukee, WI, for Douglas D. Smiljanic, Sun Valley Apartments, Eagle Property Management Corp.Jeffrey Spitzer-Resnick(argued), Rachel Spector, Madison, WI, for Linda Knapp.

Randy S. Parlee, Ronald G. Pezze, Jr.(argued), Peterson, Johnson & Murray, Milwaukee, WI, for Economy Preferred Ins. Co.

Before BAUER, COFFEY, and FLAUM, Circuit Judges.

FLAUM, Circuit Judge.

Linda Knapp brought a variety of claims against defendants, alleging that they had discriminatorily refused to rent her an apartment because of her race and her status as a recipient of federal rent assistance under the "section 8" voucher program.42 U.S.C. Sec. 1437f.A jury found for defendants on the race claims, but found that they had discriminated against Knapp on the basis of her section 8 vouchers.The jury awarded Knapp $95,000 in damages, which the district court reduced to $1 after finding that Knapp could only recover contractual damages under Sec. 1437f(t).The court also awarded summary judgment for Economy Preferred Insurance Company, holding that it had no duty to defend or indemnify defendants under their multi-peril liability policy.Knapp appealed and defendants cross-appealed.We now affirm the district court's decision in all respects.

I.

Knapp, an African-American woman with two children, receives rent assistance from the federal government in the form of a section 8 voucher.42 U.S.C. Sec. 1437f.Under this program, the government subsidizes a portion of a voucher recipient's rent to an owner who has volunteered to participate in the section 8 program.Section 1437f(t) prohibits participating owners from refusing to rent an apartment to a section 8 voucher holder because of her status as such.The provision does not expressly grant a private cause of action to enforce its proscription.

Knapp, who lives in Dane County, Wisconsin, sought a section 8 apartment in the spring of 1992, intending to move when her current lease expired on July 1, 1992.In April, Knapp saw an advertisement in Start Renting magazine stating that defendant Sun Valley, managed by defendant Eagle Property Management, both of which are owned by defendantDouglas Smiljanic(hereinafter collectively the "defendants"), had two-bedroom apartments available.Around April 8, 1992, Knapp telephoned Sun Valley and spoke with a rental agent, Sue Erickson, who informed her that Sun Valley had vacant apartments and that the complex accepted section 8 vouchers.Knapp spoke with Erickson a few days later to confirm this information and arranged a time to view an apartment.Her friend, Theresa Hayes, was also on the telephone and heard this conversation.

Knapp went to Sun Valley on April 13, 1992, and met with Erickson, ¹ who once again stated that defendants accepted section 8 vouchers.Erickson showed Knapp an apartment that she liked, but Knapp did not submit an application because she did not have with her either a one month security deposit or a $150 application fee.Knapp and Hayes, who does not receive section 8 assistance, returned to Sun Valley on June 2, 1992, so Knapp could complete an application.Hayes had been accepted for an apartment at Sun Valley in May, 1992.If Sun Valley also accepted Knapp for tenancy the women planned for Hayes to care for Knapp's children, thereby enabling Knapp to obtain work and end her dependence on public assistance.When Knapp handed Erickson her completed application and fee, Erickson refused to take either and stated: "We don't accept section 8."At trial, Knapp presented memoranda from Smiljanic to Erickson stating that defendants would not sign any contracts other than their own.The program, however, requires owners to sign Housing Assistance Payment contracts with the local housing authority as well as sign an addendum containing certain provisions, unless the owner's contract already includes them.

Knapp filed a multi-claim suit in state court and defendants removed the case to district court.Knapp alleged that defendants had violated 42 U.S.C. Sec. 1437f(t)(1)(B) by refusing to accept her application for tenancy because of her status as a section 8 voucher holder.She complained that defendants' actions had forced her to rent a less desirable apartment far from Hayes, other friends and her church, leaving Knapp socially isolated and depressed.She also asserted that she was unable to find work because of her lack of childcare.The district court held that an implied cause of action exists under Sec. 1437f(t) to allow Knapp to enforce that provision.The jury found defendants liable and awarded Knapp $95,000 in compensatory damages.Although requested by Knapp, the court refused to give punitive or future damages instructions.In response to defendants' post-trial motion for judgment as a matter of law, the court held that Knapp could only recover contractual damages for a violation of Sec. 1437f(t), damages which would include the costs of finding and renting a different apartment.The court based its conclusion on the theory that the potential for recovery of monetary damages beyond economic ones would deter landlords from participating in the voluntary section 8 program.The court then reduced Knapp's award to $1 because she had not proven any foreseeable economic damages.

Knapp also alleged that defendants had discriminated against her on account of her race, thereby violating the Fair Housing Act(the "Act"), 42 U.S.C. Sec. 3601 et seq.,42 U.S.C. Secs. 1981and1982, and the Wisconsin Open Housing Act (The "Wisconsin Act"), Wis.Stat. Sec. 101.22(6).The district court excluded expert witnesses that Knapp proffered to testify as to the disparate impact defendants' actions had on African-Americans, as well as evidence of the racial make-up of defendants' current section 8 tenants.At trial, Knapp did not testify to any overt racial comments made by defendants and the jury returned a verdict for defendants on these claims.

Third, Knapp alleged discrimination in housing on the basis of "lawful source of income," in violation of Wis.Stat. Sec. 101.22(6).The district court granted summary judgment for defendants on this claim, holding that a section 8 voucher did not constitute income.The court noted that a contrary determination would make the section 8 program mandatory for Wisconsin landlords, a position it rejected in the absence of clearer direction from the statelegislature or courts.

Finally, defendants filed a third-party complaint against Economy Preferred Insurance Company("Economy Preferred"), seeking a declaration that Economy Preferred had a duty to defend and indemnify defendants under their general liability insurance policy.The court granted Economy Preferred's motion for summary judgment, holding that the policy covered only "occurrences," which it defined as accidents, while Knapp's complaint alleged only intentional acts.This appeal and cross-appeal followed.

II.

A.

Enacted in 1987, 42 U.S.C. Sec. 1437f(t)(1)(B) provides that:

No owner who has entered into a contract for housing assistance payments under this section on behalf of any tenant in a multifamily housing project shall refuse--

.. to lease any available dwelling unit ... to a holder of a voucher ..., a proximate cause of which is the status of such prospective tenant as a holder of such voucher.

The statute does not expressly grant voucher holders a private cause of action so we must first inquire whether the district court properly concluded that Sec. 1437f implies such a right.

When determining whether an implied cause of action exists under a statute, we consider four factors: (1) whether the plaintiff is a member of the class for whose benefit the statute was enacted; (2) whether there is any indication of legislative intent to create or deny such a remedy; (3) whether an implied remedy is consistent with the underlying purposes of the statutory scheme; and (4) whether the cause of action is one traditionally relegated to the states so that it would be inappropriate to imply a federal remedy.Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2087-88, 45 L.Ed.2d 26(1975);see alsoCannon v. University of Chicago, 441 U.S. 677, 99 S.Ct. 1946, 60 L.Ed.2d 560(1979);Price v. Pierce, 823 F.2d 1114(7th Cir.1987), cert. denied, 485 U.S. 960, 108 S.Ct. 1222, 99 L.Ed.2d 422(1988).Although implied causes of action have fallen into disfavor, the Supreme Court has not yet forbidden them.The Court has, however, emphasized that Congressional intent is the most important element in the analysis.SeeThompson v. Thompson, 484 U.S. 174, 179, 108 S.Ct. 513, 516, 98 L.Ed.2d 512(1988);Spicer v. Chicago Bd. of Options Exchange, Inc., 977 F.2d 255, 258(7th Cir.1992).

A review of the legislative history accompanying the amendment adding subsection (t) to Sec. 1437f indicates that Congress intended voucher holders to have a cause of action to enforce its prohibition.The House Report states:

[Section 1437f(t) ] creates an enforceable right for applicants that would prohibit owners that receive Section 8 subsidies for any other units in the project from refusing to rent a unit to a certificate or voucher holder ... because the applicant has a Section 8 certificate or voucher subsidy.

H.R. No. 122(I), 100th Cong., 1st Sess. 32(1987), reprinted in1987 U.S.C.C.A.N. 3317, 3348.The report continues:

The Committee intends, and has always intended,...