Total Real Estate Grp., LLC v. Strode

• Docket Number: 3:21-cv-01677-HZ
• Decision Date: 03 March 2022
• Citation: Total Real Estate Grp., LLC v. Strode, 588 F.Supp.3d 1137 (D. Or. 2022)
• Parties: TOTAL REAL ESTATE GROUP, LLC, an Oregon limited liability company, Plaintiff, v. Steve STRODE, in his official capacity as the Oregon Real Estate Commissioner; and Ellen Rosenblum, in her official capacity as Attorney General for the State of Oregon's Department of Justice, Defendants.
• Court: U.S. District Court — District of Oregon

588 F.Supp.3d 1137

TOTAL REAL ESTATE GROUP, LLC, an Oregon limited liability company, Plaintiff,

v.Steve STRODE, in his official capacity as the Oregon Real Estate Commissioner; and Ellen Rosenblum, in her official capacity as Attorney General for the State of Oregon's Department of Justice, Defendants.

No. 3:21-cv-01677-HZ

United States District Court, D. Oregon.

Signed March 3, 2022

Christina M. Martin, Pacific Legal Foundation, 4440 PGA Blvd., Suite 307, Palm Beach Gardens, FL 33410, Daniel M. Ortner, Ethan Blevins, Pacific Legal Foundation, 555 Capitol Mall, Suite 1290, Sacramento, CA 95814, Attorneys for Plaintiff.

Brian Simmonds Marshall, Alexander Charles Jones, Oregon Department of Justice, 100 SW Market Street, Portland, OR 97201, Attorneys for Defendants.

OPINION & ORDER

HERNÁNDEZ, District Judge:

PlaintiffTotal Real Estate Group, LLC("TREG"), a real estate firm, seeks a preliminary injunction enjoining DefendantsSteve Strode, in his official capacity as Oregon Real Estate Commissioner, and Ellen Rosenblum, in her official capacity as Attorney General for the State of Oregon's Department of Justice, from enforcing Oregon House Bill 2550.The Court held oral argument on the Motion on February 9, 2022.For the reasons that follow, the Court grants the Motion for a Preliminary Injunction.

BACKGROUND

The State of Oregon seeks to achieve a laudable goal: to stop discrimination in home ownership based on protected class status including, race, color, religion, sex, sexual orientation, national origin, marital status, or familial status.In order to do so, it passed a law that unquestionably interferes with speech.The question before the Court is whether that law goes too far.

I.Factual Background

This case concerns the regulation of "love letters" by the State of Oregon.The term "love letters" refers to "notes, letters, and pictures that buyers may submit along with their offers to purchase in order to create an emotional connection between sellers and buyers — especially when significant competition exists on a given property."Ortner Decl. Ex. 10at 2, ECF 45-10; Compl.¶ 17, ECF 1.

A. HB 2550

In September 2021, Governor Kate Brown signed into law House Bill 2550 ("HB 2550").Compl.¶ 15.HB 2550 amends Section 696.805 of the Oregon Revised Statutes, which enumerates the duties and obligations owed by a seller's agent in a real estate transaction.The amendment states:

In order to help a seller avoid selecting a buyer based on the buyer's race, color, religion, sex, sexual orientation, national origin, marital status or familial status as prohibited by the Fair Housing Act( 42 U.S.C. 3601 et seq. ), a seller's agent shall reject any communication other than customary documents in a real estate transaction, including photographs, provided by a buyer.

Or. Rev. Stat.("ORS")§ 696.805(7).

The statute does not define "customary documents."In an article in the Oregon Real Estate News Journal, Steve Strode Oregon's Real Estate Commissioner offered the following guidance: "the Agency interprets [customary documents] to mean disclosure forms, sales agreements, counter offer(s), addenda, and reports.Love letters would not be considered customary documents."Ortner Decl. Ex. 10at 2.He stated further that "[t]he intent of the bill was clear during the legislative process, and the Agency does not envision additional rulemaking at this time."Id.The Oregon Real Estate Agency then issued "FAQs Regarding HB 2550 (The "Love Letter" Law)" on its website.It states that "lender preapproval letters for financed transactions" and "verification of funds for cash transactions" are considered "customary documents" and that a seller's agent may accept a "a cover letter written by a buyer's agent explaining the prospective buyer's interest in the property."Second Jones Decl. Ex. 1at 1, ECF 47-1.

The parties agree that HB 2550 does not prohibit communications directly between a buyer and a seller.Pl. Mem.at 23, ECF 4;Def. Resp.at 1, ECF 30.

B.Legislative History

Representative Mark Meek, a practicing real estate agent, introduced HB 2550.OrtnerDecl. Ex. 18("Def. Video 2") at 3:05, ECF 45.At the hearing on the bill, he stated that in his opinion the practice of providing love letters "perpetuates systemic issues of bias in real estate transactions."Id. at 3:05–3:16.He testified that through his work as the co-chair of the Legislative Assembly's Task Force on Addressing Racial Disparities in Home Ownership, he concluded that the practice of using "love letters" could perpetuate "implicit biases that we're not even aware of."Id. at 5:15–5:24.He also discussed and shared data on racial disparities in homeownership in Oregon.Id. at 9:07–9:51.The Oregon House of Representative unanimously approved the bill.Def. Resp. at 15.

The original house bill required the seller's agent to redact information provided by prospective buyers to help the seller avoid selection of a buyer based on a buyer's "race, color, religion, sex, sexual orientation, national origin, marital status, familial status, or source of income."Def. Video2 at 2:04–25.In the Senate, members of the Committee on Housing questioned this approach and raised concerns about the role a seller's agent would have to play in redacting the letters.OrtnerDecl. Ex. 19("Def. Video 1") at 28:19–30:18, 32:38–34:13, 35:00–36:01, ECF 45.

C.This Litigation

Plaintiff TREG is a real estate firm with offices in Bend and Portland, Oregon.Compl.¶ 12.TREG's principal broker supervises about twenty licensed real estate brokers (also called agents) throughout Oregon.Id.On November 19, 2021, Plaintiff filed this case and moved for a preliminary injunction.Compl., Mot. for Prelim.Inj., ECF 3.On December 2, 2021, Plaintiff moved for expedited review.Mot. to Expedite, ECF 20.On December 10, 2021, the case was reassigned to Judge Hernandez from Magistrate Judge Acosta and the Court denied the Motion to Expedite.ECF 26, 27.The Case was taken under advisement when Defendants filed their reply brief on January 20, 2022.Def. Reply, ECF 44.

II.Evidence Relevant to the Motion

In response to the Motion, Defendants submitted three types of evidence supporting HB 2550's purpose of addressing discrimination in housing: (1) history and prevalence of housing discrimination in Oregon; (2) prevalence of protected characteristics in love letters; and (3) evidence that shows how personal information in love letters influences which offers sellers select.Plaintiff offered evidence of HB 2550's potential effect on its business.

A.Evidence in Support of HB 2250's Stated Purpose

Oregon has a long and abhorrent history of racial discrimination in property ownership and housing.For example, the 1857 Oregon Constitution prohibited Black Americans and immigrants of Chinese descent from owning real property.First Jones Decl. Ex. 1at 21, ECF 37-1.During the same period, the Donation Land Claim ActandHomestead Act entitled white settlers to property in Oregon Territory if they lived on it and cultivated it for four years.Id.Later, the 1923 Alien Land Law banned Japanese nationals from owning or leasing land in Oregon.Id.

While people of color were eventually permitted to own land in the State of Oregon, a series of governmental policies, industry practices, and private arrangements enshrined housing discrimination and racial segregation in Oregon's communities through the 1900s and present day.Id. at 22;Bates Decl. Ex. 1at 5–8, ECF 31-1.These included racially restrictive covenants, redlining, racial steering, and urban renewal that displaced Black and Japanese-American households in particular.Id.

Considerable racial disparities persist in homeownership.Over a 21-percentage point differential separates Black, Native Hawaiian, or Pacific Islander, and Hispanic households from White households in Oregon.SeeBates Decl. Ex. 1at 8–9(Homeownership Rates by Ethnicity/Race (alone or in combination) statewide, Oregon, 2015-2019: American Indian or AK Native (59%), Asian (68%), Black (41%), Native HI or Pacific Islander (43%), White (68%), Hispanic (any race)(45%), Total Population (65%)).

Defendants’ expert, Justin Steil, Ph.D., Associate Professor of Law and Urban Planning at the Massachusetts Institute of Technology, analyzed the love letters produced by Plaintiff in this case.SteilDecl. Ex. 1, ECF 32-1.He found that the vast majority of the letters produced (93%) disclosed the buyer's race, color, religion, sex, sexual orientation, national origin, marital status, familial status, or disability.Id. at 4.About half of the letters included photographs that revealed some information about race, color, and sex or gender, among other characteristics.Id.He gave the opinion that love letters enable intentional and unintentional discrimination in housing by "providing information about characteristics on which discrimination is prohibited by state and federal law."Id. at 4.He based this conclusion on quantitative data showing the existence of conscious explicit bias in housing transactions and the growing body of research showing how implicit biases predict discriminatory behavior.Id. at 5–8.

Defendants’ expert, Lisa K. Bates, Ph.D., Associate Professor in the Toulan School of Urban Studies at Portland State University, submitted a report that details the history of racial discrimination and segregation in Oregon and the academic literature on the persistence of racial discrimination in homebuying.SeeBatesDecl. Ex. 1.Ms. Bates gave the opinion that though the practice of "buyer love letters" has not been studied in the academy, the practice is "likely to create a number of discriminatory outcomes."Id. at 17.She based this opinion on "the extensive literature" that documents "how discrimination accumulates through multiple dimensions of the real estate transaction."Id.The second half of her report catalogs this body of research.Based on that research, she described part of...