U.S. v. City of Hayward

• Decision Date: 19 September 1994
• Docket Number: Nos. 93-15190,93-15195,s. 93-15190
• Citation: 36 F.3d 832
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. CITY OF HAYWARD, Defendant-Appellee. UNITED STATES of America, Plaintiff-Appellee, v. CITY OF HAYWARD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 832

36 F.3d 832

63 USLW 2193

UNITED STATES of America, Plaintiff-Appellant, v. CITY OF HAYWARD, Defendant-Appellee.

UNITED STATES of America, Plaintiff-Appellee, v. CITY OF HAYWARD, Defendant-Appellant.

Nos. 93-15190, 93-15195.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 14, 1994.

Decided Sept. 19, 1994.

Kathy M. Banke, Crosby, Heafey, Roach & May, Oakland, CA, for defendant-appellee and cross-appellant.

Lisa Stark, U.S. Dept. of Justice, Washington, DC, for plaintiff-appellant and cross-appellee.

Appeals from the United States District Court for the Northern District of California.

Before: FLETCHER and TROTT, Circuit Judges, and KING, ^* District Judge.

TROTT, Circuit Judge:

In response to the 1988 Fair housing Act ("FHA") Amendments prohibiting discrimination based on familial status, a mobilehome park owner terminated the park's adults-only status. A city-appointed arbitrator concluded that this change in policy decreased the housing services provided by the park to its tenants and accordingly required the owner to reduce the rent pursuant to a city rent control ordinance. The United States sued the City of Hayward in federal court for violating Sec. 3617 of the FHA. The district court granted summary judgment for the United States because it concluded that, as a matter of law, the City may not penalize the mobilehome park's owner for complying with federal law. The district court permanently enjoined the City from interpreting its ordinance in a manner that conflicts with the FHA and ordered the park's base rent restored to the level it would have been absent the arbitrator's ruling, but did not award compensatory or punitive damages. 805 F.Supp. 810. The City appeals summary judgment, and the United States cross-appeals the court's refusal to award compensatory damages. We affirm summary judgment but reverse the district court's denial of compensatory damages.

I

S.G. Borello & Sons, Inc. ("Borello") has been the owner and operator of the Eden Roc Mobilehome Park in Hayward, California since 1984. Until 1989, the park had a written policy to rent only to tenants over 18 years of age. As a result of this policy, by December 13, 1988, over 80% of Eden Roc's units were occupied by at least one person age 55 or older.

In 1988 Congress amended the FHA to prohibit discrimination against families with minor children. See Fair Housing Amendments Act of 1988, Pub.L. No. 100-430, 102 Stat. 1619 (codified as amended at 42 U.S.C. Secs. 3601-3631 (1988)). Congress found wide-spread discrimination against families with children and enacted the 1988 Amendments to protect this social institution from discriminatory housing practices. H.R.Rep. No. 711, 100th Cong., 2d Sess., 19-21 (1988), reprinted in, 1988 U.S.C.C.A.N. 2173, 2180-81 [hereinafter House Report]. The goal of the FHA was to make more housing opportunities available to families with children. Nevertheless, Congress recognized a need for senior housing and created an exclusion for "housing for older persons." Pub.L. No. 100-430, Sec. 6, 102 Stat. at 1622 (codified at 42 U.S.C. Sec. 3607(b) (1988)). The 1988 Amendments became effective in March of 1989. See id. Sec. 13(a), 102 Stat. at 1636.

Confronted with the 1988 Amendments, Borello initially considered making the park a senior housing facility, in accordance with the FHA's senior housing exemption. See 42 U.S.C. Sec. 3607(b). But, when it concluded that Eden Roc would not qualify for the senior housing exemption, Borello decided to end the park's adults-only policy and so notified the residents. The first family with children moved into the park in the summer of 1989. On January 1, 1990, Borello issued new park rules making the park a family park, effective July 2, 1990.

On January 16, 1990, approximately 190 park tenants filed a petition with the City of Hayward's Rent Review Office. They sought a rent reduction under the City's rent control ordinance, on the ground that admitting children to the park constituted a reduction in housing services. The City's rent control ordinance provides:

In any case where the arbitrator determines that a reduction in services has effectively resulted in an increase of rent without notice thereof, the arbitrator may either order the owner to fix, repair or otherwise cure the reduction in services, or reduce the rent owed to the owner in an amount that will compensate the tenant for such reduction in services.

City of Hayward Ord. No. 89-057 C.S. Sec. 8(k). The City Rent Review Office assigned the tenants' petition to an arbitrator. ¹ On March 13, 1990, Borello filed a complaint in state court, seeking to enjoin the petitioners' actions. Two weeks later, the state court dismissed the complaint.

On May 30, 1990, the arbitrator granted the tenants' petition. She reasoned that maintaining an adults-only environment constituted a service and that by removing the restriction, the owner deprived the tenants of this service. Consequently, the arbitrator ordered a permanent reduction in the tenants' base rents by the amount of the most recent rent increase--approximately $6.60 per month per tenant.

Borello then filed a petition in state court for a writ of mandamus against the City, requesting that the arbitrator's decision be set aside. The court denied the petition. Borello also filed administrative complaints with the Secretary of the Department of Housing and Urban Development ("HUD"), alleging the City interfered with Borello's ability to encourage families with children to live at the mobilehome park. The Secretary referred the matter to the Attorney General of the United States, see 42 U.S.C. Sec. 3610(g)(2)(C) (1988), who filed this action in federal court against the City of Hayward for violating Sec. 3617 of the Fair Housing Act, see id. Sec. 3614(b)(1)(A).

The district court granted summary judgment for the United States. The court concluded that, as a matter of law, the City of Hayward had violated Sec. 3617 of the FHA because the arbitrator's decision "penalize[d] and interfere[d] with Borello's decision to provide housing to families with children." The district court permanently enjoined the City from interpreting its ordinance in such a manner but denied the United States' request for compensatory and punitive damages. Both parties appeal.

II

"A grant of summary judgment is reviewed de novo to determine whether, viewing the evidence in a light most favorable to the nonmoving party, there are any genuine issues of material fact and whether the district court applied the relevant substantive law." Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

A.

We are first asked to determine whether, under Sec. 3617 of the FHA, the rent reduction constituted "interference" with the mobilehome park owner on account of its action in encouraging families with children to live in the park. We hold that it did.

The FHA provides: "It shall be unlawful to coerce, intimidate, threaten, or interfere with any person ... on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605 or 3606 of this title." 42 U.S.C. Sec. 3617 (1988). "[T]he language 'interfere with' has been broadly applied 'to reach all practices which have the effect of interfering with the exercise of rights' under the federal fair housing laws." Michigan Protection & Advocacy Serv. v. Babin, 18 F.3d 337, 347 (6th Cir.1994) (quoting United States v. American Inst. of Real Estate Appraisers, 442 F.Supp. 1072, 1079 (N.D.Ill.1977)); see also Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209, 93 S.Ct. 364, 366-67, 34 L.Ed.2d 415 (1972) ("The language of the [FHA] is broad and inclusive."). Courts have found various types of conduct to constitute "interference." "Interference" ranges from racially motivated firebombings, see Stirgus v. Benoit, 720 F.Supp. 119, 123 (N.D.Ill.1989), to exclusionary zoning, see United States v. City of Birmingham, 727 F.2d 560, 563 (6th Cir.), cert. denied, 469 U.S. 821, 105 S.Ct. 95, 83 L.Ed.2d 41 (1984); United States v. City of Black Jack, 508 F.2d 1179, 1188 (8th Cir.1974), cert. denied, 422 U.S. 1042, 95 S.Ct. 2656, 45 L.Ed.2d 694 (1975), and insurance redlining, see Laufman v. Oakley Bldg. & Loan Co., 408 F.Supp. 489, 497-98 (S.D.Ohio 1976). Recently, however, the Sixth Circuit concluded that economic competition did not constitute interference. Michigan Protection, 18 F.3d at 347 (finding no Sec. 3617 violation where neighbors outbid a prospective purchaser who intended to use the residence as a group home for mentally disabled students).

The City argues the rent reduction did not constitute a penalty or interference, but was simply a reflection of the reduced value of housing services. We reject this argument because we cannot attach value to unlawful discrimination. The Supreme Court has suggested that the law should not sanction private biases. See Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 448-49, 105 S.Ct. 3249, 3258-59, 87 L.Ed.2d 313 (1985); Palmore v. Sidoti, 466 U.S. 429, 433, 104 S.Ct. 1879, 1882, 80 L.Ed.2d 421 (1984) ("Private biases may be outside the reach of the law, but the law cannot, directly or indirectly, give them effect."). Therefore, if the difference in the value of housing services was solely attributable to the termination of a discriminatory practice, we cannot recognize that change in value as legitimate.

The arbitrator's conclusion that changing the adults-only policy reduced housing services hinged on her determination that the tenants would no longer be "assured the stability and predictability of their environment." Her decision provided no explanation how changing the adults-only policy reduced housing services, other than to reflect the lost value of a discriminatory practice. If Borello had terminated certain services, there might have been a legitimate...