Nat'l Fair Hous. Alliance v. Fed. Nat'l Mortg. Ass'n, C 16-06969 JSW
Citation | 294 F.Supp.3d 940 |
Decision Date | 21 March 2018 |
Docket Number | No. C 16-06969 JSW,C 16-06969 JSW |
Parties | NATIONAL FAIR HOUSING ALLIANCE, et al., Plaintiffs, v. FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE"), Defendant. |
Court | U.S. District Court — Northern District of California |
Glenn Schlactus, Laura Judith Gaztambi Arandes, Morgan Whitney Williams, Stephen M. Dane, Yiyang Wu, Relman, Dane & Colfax PLLC, Washington, DC, D. Scott Chang, Housing Rights Center, Los Angeles, CA, Casey G. Epp, Fair Housing of Marin, San Rafael, CA, for Plaintiffs.
Danielle Nicole Oakley, Elizabeth Lemond McKeen, O'Melveny and Myers LLP, Newport Beach, CA, for Defendant.
ORDER DENYING IN PART AND GRANTING IN PART FANNIE MAE'S MOTION TO DISMISS
Now before the Court is the motion to dismiss filed by Defendant Federal National Mortgage Association ("Fannie Mae"). Having considered the parties' arguments, relevant legal authority, the Court hereby DENIES IN PART and GRANTS IN PART Fannie Mae’s motion to dismiss.
Plaintiffs National Fair Housing Alliance, Inc., Fair Housing Advocates of Northern California, Connecticut Fair Housing Center, Denver Metro Fair Housing Center, Fair Housing Center of Central Indiana, Fair Housing Center of the Greater Palm Beaches, Fair Housing Center of West Michigan, Fair Housing Continuum, Inc., Greater New Orleans Fair Housing Action Center, HOPE Fair Housing Center, Housing Opportunities Made Equal of Virginia, Housing & Research Advocacy Center, Miami Valley Fair Housing Center, Metro Fair Housing Services, Inc., Metropolitan Milwaukee Fair Housing Council, North Texas Fair Housing Center, Open Communities, South Suburban Housing Center, and Toledo Fair Housing Center (collectively "Plaintiffs") here allege that, after the housing crisis in 2008, in violation of the Fair Housing Act, Fannie Mae failed to perform basic maintenance on foreclosed properties it suddenly owned in minority neighborhoods around the country, even while it did perform routine maintenance on properties it came to own in predominantly white neighborhoods.
When a home mortgage owned by Fannie Mae goes into default and foreclosure, Fannie Mae obtains the title to the home and, after a completed foreclosure sale, the home is referred to as "Real Estate Owned" or "REO." (Complaint ¶ 4.) As a result of the housing crisis, Fannie Mae obtained title to a "significant number of REO dwellings covered by the Fair Housing Act." (Id. ) Once an REO property, Fannie Mae "assumes all duties and responsibilities of ownership, including ordinary maintenance, while it markets the dwelling for sale to the general public." (Id. ¶ 5.) Fannie Mae’s stated strategy is to "maintain each property in [its] inventory at a level of market-readiness both inside and outside of the property, supporting neighborhood stabilization." (Id. ) The stated mission of the maintenance team is "to ensure the quality of our REO property maintenance services, consistently producing best-in-class, market-ready properties and maintaining them until removal from our inventory." (Id. )
Plaintiffs allege that Fannie Mae is required, under the Fair Housing Act, to maintain all REO properties, regardless of their location, "without regard to race, color, ... or national origin." (Id. ¶ 7.) Between July 2011 and October 2015, Plaintiffs allege that they "conducted a comprehensive investigation of [Fannie Mae]’s real estate related activities in communities of color, including predominantly African-American and Latino neighborhoods, and predominantly white neighborhoods in 38 metropolitan areas throughout the United States." (Id. ¶ 3.) Plaintiffs allege that over the course of four years, they investigated over 2,300 properties owned and maintained by Fannie Mae, and accumulated over 49,000 photographs. (Id. ¶ 7.) Plaintiffs allege that their investigation revealed that "Fannie Mae has failed to conduct routine exterior maintenance and marketing of REO properties in communities of color, thereby leaving those REOs in a state of neglect, while satisfactorily conducting routine exterior maintenance and marketing of its REO properties in predominantly white neighborhoods, therefore leaving those REOs in a materially better condition." (Id. ¶ 8.)
Although Plaintiffs alerted Fannie Mae regarding the findings of their investigation in order to secure voluntary compliance with the Fair Housing Act, Plaintiffs allege that Fannie Mae (Id. ¶ 19.) As a result of these practices, Plaintiffs allege that (Id. ¶ 23.)
Plaintiffs, a collection of twenty-one fair housing community organizations, allege that they have expended considerable resources and time away from their other projects and programs and have forgone other opportunities in an effort to address the effects of Fannie Mae’s conduct. Plaintiffs set out in detail the frustration of their mission and purpose in the diversion of resources to address Fannie Mae’s alleged conduct and remediation. (Id. ¶¶ 142-150, 152-247.) In addition, Plaintiffs further allege that the (Id. ¶ 248.)
Plaintiffs filed suit to allege violation of the Fair Housing Act which makes it unlawful to discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race or national origin. (Id. ¶ 261, citing 42 U.S.C. § 3604(b).) Plaintiffs allege that Fannie Mae’s conduct discriminates in the marketing and sale of dwellings to persons because of race or national origin. (Id. ) Plaintiffs allege that Fannie Mae has (Id. ¶ 128.) This unguided delegation of discretion without independent quality checks (Id. ¶ 131.)
The complaint is replete with allegations that the maintenance decisions were delegated to low-level employees and agents to decide when and how maintenance tasks would be undertaken. Plaintiffs allege that Fannie Mae did not specify when exterior REO maintenance should be performed, where in contrast, "Fannie Mae provided detailed instructions to its agents with regard to other REO services, including directing them to perform tasks on a monthly basis." (Id. ¶ 129.) The complaint details Fannie Mae’s practices which allowed for little or any knowledge of whether properties actually required exterior maintenance and their failure to perform independent quality control on the majority of the properties. (Id. ¶ 130.) Plaintiffs also detail how, after a report by the Office of the Inspector General of the Fair Housing Finance Agency criticized Fannie Mae’s quality control protocol, "noting that there was ‘significant risk’ that it would be insufficient to assess the quality of REO maintenance activities over a sustained period of time," Fannie Mae still did not alter its practices. (Id. )
Plaintiffs further allege that the data from their investigation establishes that "the exterior maintenance of REO properties under Fannie Mae’s maintenance practices and policies varied based on the age and/or the value of the properties." (Id. ¶ 132.) Plaintiffs allege that "Fannie Mae’s maintenance policies and practices are the direct and proximate cause of the statistical disparities in the maintenance of properties in the neighborhoods with different racial and ethnic compositions as alleged [in the complaint] and revealed by Plaintiffs' investigation." (Id. ¶ 76.)
After a temporary stay of the case, Fannie Mae moved to dismiss all claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim and pursuant to Rule 12(b)(1) for failure of Plaintiffs to establish standing. The Court shall address other specific facts as necessary in the remainder of its order.
A motion to dismiss is proper under Rule 12(b)(6) where the pleadings fail to state a claim upon which relief can be granted. The complaint is construed in the light most favorable to the non-moving party and all material allegations in the complaint are taken to be true. Sanders v. Kennedy, 794 F.2d 478, 481 (9th Cir. 1986). However, even under the liberal pleading standard of Federal Rule of Civil Procedure 8(a)(2), "a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell...
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