FROM: Henri Vanderhage
DATE: September 3, 2002
RE: Plaintiff’s burden of proof in fair housing discrimination claim.
1. What is the Ninth Circuit standard of a prima facie case of discrimination under the Fair Housing Act?
2. Is requiring a co-signor where a tenant does not have attachable income sufficient to avoid liability for discrimination under the Fair Housing Act?
3. Are the other jurisdictions in agreement with the Ninth Circuit?
1. Under a disparate treatment theory a plaintiff must establish that she is member of a protected class who applied for and was qualified to rent housing, that she was intentionally rejected because of her class, and that the housing opportunity remained available. A claim based on a disparate impact theory however, merely requires proof that an outwardly neutral practice has a significant adverse or disproportionate impact on a protected class.
2. Unfortunately the Ninth Circuit has not addressed a situation where a rental applicant has the option of getting a cosigner when unable to meet the other rental criteria. Other courts have found similar circumstances nondiscriminatory in disparate treatment cases.
3. It appears the majority of jurisdictions follow standards that are closely related with regards to disparate treatment and disparate impact case, although there may be some differences in the burden of proof for a defendant to rebut the plaintiff’s prima facie case in a disparate impact case.
· 42 U.S.C. §3604 (1999).
· Harris v. Itzhaki, 183 F.3d 1043 (9th Cir. 1999).
· Gilligan v. Jamco Dev. Corp., 108 F.3d 246 (9th Cir. 1997).
· Gamble v. City of Escondido, 104 F.3d 300 (9th Cir. 1997).
· Pfaff v. HUD, 88 F.3d 739 (9th Cir. 1996).
· Boyd v. Lefrak Organization, 509 F.2d 1110 (2nd Cir. 1975), reh’g denied, 517 F.2d 918 (2nd Cir. 1975), cert. denied, 423 U.S. 896 (1975).
· Schanz v. Village Apartments, 998 F.Supp. 784 (E.D. Mich. 1998).
· Bronson v. Crestwood Lake Section 1 Holding Corp., 724 F.Supp. 148 (S.D.N.Y. 1989).
· Peter E. Mahoney, Article, The End(s) of Disparate impact: Doctrinal Reconstruction, Fair Housing and Lending Law, and the Antidiscrimination Principle, 47 Emory L.J. 409 (1998).
· Kim Johnson-Spratt, Note, Housing Discrimination and Source of Income: A Tenant’s Losing Battle, 32 Ind. L. Rev. 457 (1999).
· John E. Theuman, Annotation, Evidence of Discriminatory Effect Alone as Sufficient to Prove, or to Establish Prima Facie Case of, Violation of Fair Housing Act, 100 A.L.R. Fed. 97 (1990).
[Clients] manage rental properties in [City], Washington. When prospective tenants are interested in renting a property, they are asked to fill out an application form. The application form is forwarded to a screening agency that evaluates the application based on a number of criteria. These criteria require that an applicant have attachable income or a co-signor in order to be considered for tenancy. [Clients] have received two complaints from the Washington State Human Rights Commission (“WSHRC”) alleging that these requirements discriminate Native Americans and disabled individuals. To illustrate its position to [Clients], the WSHRC has included a copy of Bronson v. Crestwood Lake Section 1 Holding Corp.. It appears that neither of the complainants actual submitted an application to [Clients] or was rejected. [Clients] would like to know how to respond to these complaints.
The Fair Housing Act as amended makes it illegal to discriminate in the sale or rental of housing “because of race, color, religion, sex, handicap, familial status, or national origin.” As the statute does not list economic groups or source of income as a protected class, claimants under the Fair Housing Act must tailor their claim to one of the protected classes. Apparently, this is what the two complainants have done by claiming that the attachable income requirement discriminates against them based on national origin and disability. Unfortunately source of income discrimination has not been addressed by many courts, thus making it difficult for landlords to determine what criteria may be used in screening applicants.
“Most courts applying the FHA, as amended by the [Fair Housing Amendments], have analogized it to Title VII of the Civil Rights Act of 1964, 42 U.S.C. SS 2000e et seq., which prohibits discrimination in employment.” By making this analogy, the courts allow a plaintiff to establish a claim based on disparate treatment (intentional discrimination) or disparate impact. It appears that the complaints against [Clients] could be read to allege disparate treatment as well as disparate impact.
Under either theory it does not appear the plaintiff’s have a strong case. First it does not appear that there is intentional discrimination as required to support a disparate treatment claim. And second it is likely that [Clients] will be able to rebut a claim based on disparate impact because of the business reasons behind requiring such financial criteria in rental decision making.
Disparate treatment claims are analyzed under the three part McDonnell Douglas/Burdine test used for Title VII cases. Under this test a plaintiff must first establish a prima facie case, then the defendant has the burden of articulating a legitimate nondiscriminatory reason for the action, finally the burden shifts back to the plaintiff to prove that the reason offered by the defendant is pretextual. “Proof of discriminatory motive is crucial to a disparate treatment claim.”
The elements of a prima facie case are different in each situation, as the standard is adapted to the specific circumstances. Adapted to the current situation “[t]he McDonnell Douglas/Burdine proof standard requires a plaintiff to establish that she is member of a protected class who applied for and was qualified to rent housing, that she was rejected, and that the housing opportunity remained available. 
In Gilligan, a landlord refused to accept a prospective tenant’s application because she received Aid for Families with Dependant Children benefits. The court of appeals reversed the trial court’s dismissal of the complaint for failure to state a claim. Although the court’s holding is based on reasoning that a plaintiff is not required to allege every element of a prima facie case in the complaint, the analysis is useful for determining the burden of proof in such a case. Additionally, it appears that this is one of the few times that source of income discrimination has even been addressed by the Ninth Circuit. Due to the lack of authority on financial criteria in rental applications as a form of discrimination, it is necessary to look to other jurisdictions for guidance.
In Schanz, an apartment manager rejected a handicapped person’s application because of insufficient income and credit, but offered to allow a “blood relative” to co-sign the lease if the applicant still wanted an apartment. The court for the eastern district of Michigan granted the defendant’s motion for summary judgment with respect to the plaintiff’s claim of intentional discrimination because the plaintiff failed to establish a prima facie case of discrimination. The court reasoned that the defendant did not prove that he was ready and able to accept the defendant’s offer to rent an apartment because he could not meet the financial criteria and did not exercise the co-signor option. In dictum, the court went on to analyze the defendant’s rebuttal as well as the defendant’s pretext arguments. In this analysis the court determined that the financial requirements are legitimate and non-discriminatory, and the refusal was not pretextual.
Also instructive on this issue is Boyd v. Lefrak Organization, from the second circuit court of appeals. In Boyd, a group of black public assistance recipients challenged the defendant’s rental criteria which required a certain weekly income or a qualified co-signor. In reversing the trial court, the court of appeals held that there had been no finding of racially motivated discrimination. The court reasoned that a private businessman should be allowed to establish legitimate criteria to protect his interest, and the fact that certain economic groups are excluded from rental based on these criteria does not add up to racial discrimination.
It would not appear that it is possible to state a claim against [Clients] for intentional discrimination. Currently there is no allegation that [Clients] treated the complainants differently than any other applicant for rental housing. Additionally, the decision in Boyd should be quite persuasive in ruling for [Clients]. Although the complainants may be able to meet the protected class requirement, the other elements of a prima facie case should be difficult for them to meet. The complainants did not submit an application and it does not appear that they were able to meet the rental criteria. [Clients] did not reject the applicants, but merely stated that they would be required to have a cosigner. Not only will the complainants have trouble proving that they were qualified to rent the premises, but they were not even rejected.
As it would be required to prove intent for a discrimination claim based on disparate treatment, it is unlikely [Clients] will be found to be in violation of the Fair Housing Act for intentionally discriminating against the complainants. The complainants will probably have a stronger claim based on disparate impact.
Where there is no evidence of intent to discriminate, a plaintiff may still bring a claim because the defendant’s actions had a discriminatory effect. Under this theory, proving discriminatory intent is not required. This appears to be the accepted rule among most jurisdictions. The elements of a Fair Housing Act prima facie case under this theory are an outwardly neutral practice, and proof that the practice has a significant adverse or disproportionate impact on a protected class; raising an inference of discriminatory impact is insufficient. After the plaintiff has established a prima facie case the defendant is afforded an opportunity to provide non-discriminatory reasons for the practice. With regards to the reasons, it is unclear if the defendant must prove “compelling business necessity”, legitimate business purpose, or some standard in between.
In Gamble, a developer claimed that a city’s policy regarding the size and occupancy for granting conditional use permits violated the Fair Housing Act because it made it impossible to construct care facilities for disabled people in certain residential areas. The court of appeals affirmed the district court’s grant of summary judgment in favor of the city because the plaintiff failed to prove a prima facie case. The reason for the courts holding was the defendant’s lack of statistical or other evidence that the policy actually had a discriminatory effect.
In Pfaff, a private landlord appealed a Department of Housing and Urban Development (HUD) finding them liable for discrimination based on familial status when they refused to rent a home because the family was too large. In reversing the HUD decision, the court reasoned that the defendant’s had met the burden of proof in rebutting the plaintiff’s prima facie case. The court rejected HUD’s use of “compelling business necessity” as the burden of proof for a defendant to rebut the showing that a practice has discriminatory effect. Although the decision may be limited to use of occupancy standards in the rental decision, it may indicate that the courts prefer a “reasonableness” standard.
It appear that the complainant’s case is not strong, but may survive summary judgment if enough statistical or other evidence is provided to prove that requiring attachable income or a co-signor has a discriminatory effect on disable people or Native Americans. In some circumstances it has been shown that certain financial requirements can have an adverse or disproportionate effect on members of certain classes of individuals. Unfortunately, it does not appear that the Ninth Circuit has addressed a case where a lessor has required attachable income or an alternative option of a cosigner.
Assuming the complainants are able to establish a prima facie case, it is likely that [Clients] will be able to carry the burden of providing legitimate purposes for the requirements. The courts recognize that landlords “may seek assurance that prospective tenants will be able to meet their rental responsibilities.” But when their standards become too restrictive there tends to be problems. In the opinions finding discrimination based on financial requirements, it appears that there was usually more aggravating factors than the current situation. For example, in Bronson, the defendant’s agent tried to discourage plaintiff from applying and stated they were not accepting section 8 tenants. Additionally, the defendant was inconsistent in applying the policy and refused other arrangements to assure payment. It is interesting that the Washington Human Rights Commission chose to send a copy of Bronson, to [Clients] considering the court in Bronson cites the Second Circuit’s decision in Boyd, which held that an income requirement with an option for a cosigner was not discriminatory.
The plaintiff will probably argue that [Clients] must show that their policy is absolutely necessary. If the court holds that this is the appropriate standard [Clients] will want to provide statistical evidence of both the fairness of the criteria as well as proof that the criteria protect their business interest. One of the more useful resources to describe what evidence is necessary is, Peter E. Mahoney, Article, The End(s) of Disparate impact: Doctrinal Reconstruction, Fair Housing and Lending Law, and the Antidiscrimination Principle, 47 Emory L.J. 409 (1998); particularly appendix B: Disparate Impact Test Under the FHA and the ECOA. Additionally, it may be useful for [Clients] to analogize itself to mortgage lender decision to deny a mortgage loan application. In such circumstances it has been stated that “[the Fair Housing Act] does not require that a lender disregard its legitimate business interests or make an investment that is not economically sound.”
Although it might be possible for the complainants to make a prima facie case of discrimination under a disparate impact theory without showing intent, it appears unlikely that their claim will prevail. Considering that the courts have recognized the need for landlords to have assurance that rent will be paid and a lack of facts that would indicate [Clients] are using the criteria in a discriminatory fashion, the plaintiff’s chance of success does not look strong.
Although the issue of whether a rental criteria that requires either attachable income or a consignor has not been addressed by very many courts, including the Ninth Circuit, it would appear that such standards will withstand an assertion that they are discriminatory. It is unlikely that the complainants would be able to establish a prima facie case under a disparate treatment theory because there was no intent to discriminate, they may not have submitted applications, they were not rejected, and they have not proven they were qualified to rent.
Disparate impact would appear easier to prove because intent is not required, but the claim still seems weak. First the complainants may have trouble finding statistical or other information sufficient to prove that the attachable income and cosigner requirements have an adverse impact on a protected class in order to establish a prima facie case. Second, even if a prima facie case is shown it is likely that [Clients] will be able to provide sufficient reasons for the application criteria under a reasonableness or a business necessity standard.
 Bronson v. Crestwood Lake Section 1 Holding Corp., 724 F.Supp. 148 (S.D.N.Y. 1989).
 42 U.S.C. §3604 (1999).
 See Peter E. Mahoney, Article, The End(s) of Disparate impact: Doctrinal Reconstruction, Fair Housing and Lending Law, and the Antidiscrimination Principle, 47 Emory L.J. 409 (1998); and Kim Johnson-Spratt, Note, Housing Discrimination and Source of Income: A Tenant’s Losing Battle, 32 Ind. L. Rev. 457 (1999).
 Gamble v. City of Escondido, 104 F.3d 300, ___ (1997), citing Larkin v. Michigan Dep’t of Social Servs., 89 F.3d 739, 745 n.1 (9th Cir. 1996).
 Id.; Harris v. Itzhaki, 183 F.3d 1043 (9th Cir. 1999); see McDonnell Douglas Co. v. Green, 411 U.S. 792 (1973), and Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248 (1981).
 Gamble, 104 F.3d at 305, citing Familystyle of St. Paul, Inc. v. City of St. Paul, 728 F. Supp. 1396 (D. Minn. 1990).
 See Gamble, 104 F.3d 300; and Harris, 183 F.3d at 1051. (It appears that the flexible standard of a prima facie case has been adopted from the 8th circuits ruling in Ring v. First Interstate Mortgage, Inc., 984 F.2d 924 (8th Cir. 1993).)
 Gilligan v. Jamco Dev. Corp., 108 F.3d 246 (9th Cir. 1997); Schanz v. Village Apartments, 998 F.Supp. 784 (E.D. Mich. 1998).
 Boyd v. Lefrak Organization, 509 F.2d 1110 (2nd Cir. 1975), reh’g denied, 517 F.2d 918 (2nd Cir. 1975), cert. denied, 423 U.S. 896 (1975).
 Id. at 1111.
 Gamble v. City or Escondido, 104 F.3d 300 (9th Cir. 1997), (“Demonstration of discriminatory intent is not required under disparate impact theory.” Citing Pfaff v. HUD, 88 F.3d 739 (9th Cir. 1996)). See also John E. Theuman, Annotation, Evidence of Discriminatory Effect Alone as Sufficient to Prove, or to Establish Prima Facie Case of , Violation of Fair Housing Act, 100 A.L.R. Fed. 97 (____); and Peter E. Mahoney, Article, The End(s) of Disparate impact: Doctrinal Reconstruction, Fair Housing and Lending Law, and the Antidiscrimination Principle, 47 Emory L.J. 409 (1998)
 Pfaff v. HUD, 88 F.3d 739 (9th Cir. 1996).
 Bronson v. Crestwood Lake Section 1 Holding Corp., 724 F.Supp. 148 (S.D.N.Y. 1989); Shnaz v. Village Apartments, 998 F.Supp. 784 (E.D. Mich. 1998); see also 32 Ind. L. Rev. 457.