US v. AM. INST. OF REAL ESTATE APPRAISERS, ETC.

• Decision Date: 23 November 1977
• Docket Number: No. 76 C 1448.,76 C 1448.
• Citation: 442 F. Supp. 1072
• Parties: UNITED STATES of America, Plaintiff, v. The AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS OF the NATIONAL ASSOCIATION OF REALTORS, the Society of Real Estate Appraisers, the United States League of Savings Associations, and the Mortgage Bankers Association of America, Defendants.
• Court: U.S. District Court — Northern District of Illinois

442 F. Supp. 1072

UNITED STATES of America, Plaintiff, v. The AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS OF the NATIONAL ASSOCIATION OF REALTORS, the Society of Real Estate Appraisers, the United States League of Savings Associations, and the Mortgage Bankers Association of America, Defendants.

No. 76 C 1448.

United States District Court, N. D. Illinois, E. D.

November 23, 1977.

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Thomas P. Sullivan, U. S. Atty., Chicago, Ill., for plaintiff.

Thomas F. Tobin, Michael K. Murtaugh, Baker & McKenzie, Chicago, Ill., for intervening petitioners.

Paul L. Periot, Washington, D. C., and Frank M. Covey, Jr., Harold Bressler, McDermott, Will & Emery, Charles R. McKirdy, Thomas J. Regan, Pope, Ballard, Shepard & Fowle, Lord, Bissel & Brook, John H. Hanson, Jr., Raymond Jensen, Burditt & Calkins, Chicago, Ill., for defendants.

MEMORANDUM

LEIGHTON, District Judge.

This cause is before the court on the motion of F. Gregory Opelka and 71 other individuals for leave to intervene and oppose a proposed settlement agreement between plaintiff United States and defendant American Institute of Real Estate Appraisers (hereinafter "AIREA" or "Institute"). Also, the settling parties have applied for entry of the proposed settlement order, approval of the settlement agreement and a confidentiality order between the United States and AIREA. For the following reasons, the motion to intervene as of right under Rule 24(a)(2), Fed.R. Civ.P., is denied; but the court grants Opelka leave to intervene permissively under Rule 24(b), Fed.R.Civ.P., solely for the purpose of contesting the legality of the settlement agreement insofar as it may infringe his constitutional right to freedom of speech. Further, the settlement order, the agreement, and the confidentiality order between the United States and AIREA are approved; their immediate entry is ordered.

I.

On April 16, 1976, the United States filed this suit against four organizations: The American Institute of Real Estate Appraisers, the Society of Real Estate Appraisers, the United States League of Savings Associations, and the Mortgage Bankers Association of America, pursuant to 42 U.S.C. § 3613, to secure relief from alleged violations of the Fair Housing Act, Title VIII of the Civil Rights Act of 1968, 42 U.S.C. §§ 3601, et seq. (hereinafter the "Fair Housing Act"). The complaint alleges that since the effective date of the Fair Housing Act, defendants have engaged in unlawful discriminatory practices by promulgating standards which have caused appraisers and lenders to treat race and national origin as negative factors in determining the value of dwellings and in evaluating the soundness of home loans; and by failing to take adequate steps to correct the continuing effect of past discrimination and ensure non-discrimination by appraisers and lenders whose practices are subject to the influence or authority of the four organizations. Defendants' practices, it is alleged, have made dwellings unavailable to persons because of race and national origin; denied home loans to such persons; and have interfered with their exercise and enjoyment of rights secured by the Fair Housing Act in violation of 42 U.S.C. §§ 3604(a), 3605, and 3617. The United States seeks injunctive and declaratory relief from these alleged violations. Jurisdiction is invoked under 42 U.S.C. § 3613 and 28 U.S.C. § 1345.

After extensive negotiations, which included development of an affirmative action program,¹ the United States and AIREA have agreed not to seek a litigated resolution of their controversy. Instead, they have applied for entry of a settlement order which incorporates a proposed settlement agreement and affirmative action program. The agreement is divided into two parts: (1) the affirmative action program (Pts. I-VI); and (2) a plan for implementation of the agreement and resolution of the litigation (Pts. VII-VIII).

In the affirmative action section, it is agreed that AIREA will adopt three fundamental policy statements:

(1) It is improper to base a conclusion or opinion of value upon the premise that the racial, ethnic, or religious homogeneity of the inhabitants of an area or or a property is necessary for maximum value.

(2) Racial, religious or ethnic factors are deemed unreliable predictors of value trends or price variance.

(3) It is improper to base a conclusion or opinion of value, or a conclusion with respect to neighborhood trends, upon stereotyped or biased presumptions relating to race, color, religion, sex or national origin or upon unsupported presumptions relating to the effective age or remaining life of the property being appraised or the life expectancy of the neighborhood in which it is located.

AIREA is to implement these stated general policies through specific changes in its textbook, The Appraisal of Real Estate, through review and, if necessary, prompt revision of its other instructional materials, courses, and seminars to ensure that they reflect the policy statements. Further, AIREA is to prepare, for use in its courses, an educational memorandum which explains civil rights legislation pertinent to the real estate appraisal profession. It is to develop special seminars for its members and the general public concerning appraisal of real estate and explaining the general policies and educational memorandum. AIREA agrees to add new explanatory comments to Canon 4 of Regulation 10 of its Code of Professional Ethics and Standards of Professional Conduct. The comment is to clarify its position with respect to appraisal practices and its commitment to the stated general policies. In addition, it will add to the explanatory comments to Canon 5 a new reporting rule which provides, in part:

All written appraisal reports relating to residential real estate which state that a neighborhood is undergoing decline or is about to undergo decline must contain the specific facts or reasoning upon which the . . . conclusion . . . is based.

A similar provision is made requiring that the specific facts or reasoning upon which similar oral appraisal reports are based must be contained in the appraiser's files. AIREA will issue a new interpretation of Canon 6 which states that it is not improper for an appraiser to permit a government agency investigating alleged unlawful activity to have access to appraisal reports. The decision to permit or deny such access is reserved to the appraiser. AIREA agrees to maintain a procedure for review of the appraisal reports relating to residential real estate in order to ensure that members and candidates understand the general policies. It will also expand its recruitment and scholarship outreach program which is aimed at acquainting women and minority group members with opportunities in the real estate appraisal profession.

The implementation section of the settlement agreement provides a termination date at which time the parties will petition the court for dismissal of AIREA from the litigation. AIREA is to advise the OFHEO/OVC and the United States of each material step taken to implement the agreement. However, it is provided that no part of the agreement

shall be interpreted to limit AIREA's right to implement its plans or publish or distribute any materials which it has developed pursuant to the affirmative action plan without prior approval of Justice.

The United States will, however, be placed on AIREA's mailing list and, subject to the confidentiality order, will have access to AIREA's files which relate to the settlement obligation. AIREA may, at its sole option and discretion, obtain review and comments of the United States regarding any material it plans to distribute pursuant to the agreement.

The parties shall remain subject to the continuing jurisdiction of the court during the term of the agreement. The agreement is enforceable by court order, should the parties disagree as to its interpretation following negotiations attempting to resolve the dispute. The settlement order specifically provides that it and the agreement

do not in any way affect any of the defendants to this action other than AIREA and shall not be deemed to limit or prejudice the rights of the United States or any of said other defendants to apply for any relief they deem appropriate whether or not such relief is different than or in addition to the remedies provided for herein.

Similarly, the agreement provides:

Except as expressly provided for herein and in the Settlement Order, this Settlement Agreement does not constitute a determination of the rights of any party to this litigation.

F. Gregory Opelka, an AIREA member, filed suit in the Circuit Court of Cook County, Illinois, against AIREA challenging its power to enter into the settlement agreement. On March 29, 1977, the circuit court issued an order restraining AIREA from executing the documents intended by the United States and AIREA to resolve the controversy between them. On March 31, 1977, this court entered a temporary order restraining Opelka from attacking the settlement agreement in any state or other federal court. The temporary restraining order was converted into a preliminary injunction on April 8, 1977. Shortly thereafter, Opelka moved for leave to intervene as a party defendant in this action.

Opelka argues that his interest as a member of AIREA is inadequately represented in this action because he and other AIREA members have not been given an opportunity to exercise their right to review and vote on the proposed settlement agreement. The complaint he seeks to file addresses itself solely to the propriety of the settlement. It alleges that the agreement has the effect of binding all AIREA members to its provisions in the practice of their profession and would violate their first amendment rights; that the governing council exceeded its authority under AIREA by-laws by entering into the agreement; that the...