Michael Corey v. HUD ( 2013 )

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-2096
MICHAEL COREY,
Petitioner,
v.
THE SECRETARY, UNITED STATES DEPARTMENT OF HOUSING & URBAN
DEVELOPMENT, on behalf of: Delores Walker, G.W., by and
through Delores Walker, his legal guardian,
Respondent.
No. 12-2239
UNITED STATES DEPARTMENT OF HOUSING & URBAN DEVELOPMENT,
Office of the Secretary, on behalf of: Delores Walker,
G.W., by and through Delores Walker, his legal guardian,
Petitioner,
v.
MICHAEL COREY,
Respondent.
On Petition for Review of an Order of the Department of Housing
and Urban Development. (10-M-207-FH-27)
Argued: May 15, 2013 Decided: July 5, 2013
Before DAVIS, WYNN, and DIAZ, Circuit Judges.
Petition for review denied; Cross-application for enforcement
granted, by published opinion. Judge Diaz wrote the opinion, in
which Judge Davis and Judge Wynn joined.
ARGUED: Frederick F. Holroyd, II, HOLROYD & YOST, Charleston,
West Virginia, for Petitioner/Cross-Respondent. Christopher
Chen-Hsin Wang, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Respondent/Cross-Petitioner. ON BRIEF: Thomas E.
Perez, Assistant Attorney General, Dennis J. Dimsey, UNITED
STATES DEPARTMENT OF JUSTICE, Washington, D.C., for
Respondent/Cross-Petitioner.
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DIAZ, Circuit Judge:
Petitioner/Cross-Respondent Michael Corey appeals a final
agency order of the Secretary of the United States Department of
Housing and Urban Development (the “Department”). The Secretary
determined that Corey had committed intentional and egregious
violations of the Fair Housing Act (“FHA”) by discriminating on
the basis of disability against Delores and Gregory Walker, and
ordered Corey to pay a civil monetary penalty as well as damages
for Ms. Walker’s emotional distress. Finding no error, we deny
Corey’s Petition for Review and grant the Department’s Cross-
Application for Enforcement of the Secretary’s order.
I.
A.
In April 2009, Corey, a landlord with over fifteen years of
rental management experience, advertised that a two-bedroom
house in Charleston, West Virginia, was available for a monthly
rent of $600. When Delores Walker called to inquire about the
property, she informed Corey that she would be living with her
forty-eight-year-old brother, Gregory Walker, who she said
suffered from autism and mental retardation. According to Ms.
Walker, Corey responded to this revelation by insisting that she
would need to obtain a bond to protect his property as a
condition of her potential tenancy. Although this requirement
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disturbed her, Ms. Walker nevertheless made an appointment to
view the house.
At the viewing, Ms. Walker told Corey that her brother, Mr.
Walker, suffered from what she termed “severe autism.” J.A. 74.
But despite her assurances that Mr. Walker had never been
violent or aggressive, Corey expressed reservations about him
living in the house and insisted upon meeting Mr. Walker in
person. Based on his prior observations of “children with
autism . . . flailing their arms and hollering and screaming in
outrage,” Mr. Walker’s “severe” autism raised what Corey would
later describe as a “red flag.” J.A. 134. Believing that Mr.
Walker posed a liability risk, Corey required Ms. Walker, in
order to proceed with the application process, to (1) provide a
note from Mr. Walker’s doctor stating that he would not pose a
liability threat, (2) obtain a renter’s insurance policy with $1
million in liability coverage, and (3) assume responsibility for
any damage Mr. Walker might cause to the property. Corey gave
Ms. Walker a handwritten note listing these three conditions.
As she was leaving, Corey asked Ms. Walker whether she earned
the $2,000 minimum monthly income that he regularly imposed as a
prerequisite for renters, and she replied in the affirmative.
Ms. Walker took an application but never submitted it because
she felt Corey would not have rented to her.
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About a week after he placed his advertisement, Corey
rented the house to Shelley Dearien and her son, neither of whom
is disabled. Corey did not require Dearien to purchase
liability insurance, did not ask for a doctor’s note, and did
not require her to meet the monthly minimum income requirement
he quoted to Ms. Walker.
According to Ms. Walker, Corey’s conduct caused her
significant emotional distress for several months and caused her
to fear future discrimination against her brother. She also
suffered sleeplessness, panic attacks, and difficulty eating and
drinking--symptoms later corroborated by the testimony of her
friends and sister.
B.
The Department, on behalf of the Walkers, filed a Charge of
Discrimination against Corey, which was heard by an
Administrative Law Judge (“ALJ”). The Department alleged that
Corey had discriminated against the Walkers based on disability
in violation of the FHA by (1) making facially discriminatory
statements, in violation of 42 U.S.C. § 3604(c); (2) making
housing unavailable because of a disability, in violation of 42
U.S.C. § 3604(f)(1); and (3) imposing discriminatory terms and
conditions because of a disability, in violation of 42 U.S.C.
§ 3604(f)(2). Specifically, the Department alleged that Corey
had violated the FHA by requiring Ms. Walker to provide the note
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from Mr. Walker’s doctor, to obtain a renter’s insurance policy
with $1 million in liability coverage, and to assume
responsibility for any damage Mr. Walker might have caused to
the property. Corey filed an Answer denying the charges,
arguing that he had “an absolute[ly] legitimate basis for
refusing to rent to” the Walkers because they failed to
establish financial eligibility. J.A. 9-12.
The ALJ, viewing Corey’s statements as reasonable requests
for information that would determine whether Mr. Walker was a
threat, issued an initial decision concluding that Corey had not
violated the FHA. The Department petitioned for Secretarial
Review. The Secretary reversed the ALJ’s decision, determining
that the Department had offered evidence sufficient to prove
each of the charged violations, and remanded the case for a
hearing on damages and the civil penalty.
On remand, the ALJ awarded Ms. Walker $5,000 in emotional
distress damages and imposed on Corey an additional $4,000 civil
monetary penalty--short of the $16,000 maximum civil penalty.
The ALJ also ordered injunctive remedies, directing Corey to
provide the Department with certain disability-related
information regarding his rental properties and to participate
in a fair housing training.
Both the Department and Corey petitioned for Secretarial
Review of the ALJ’s remand decision: Corey asked the Secretary
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to reinstate the ALJ’s initial decision, while the Department
argued that the remand decision minimized both the degree of Ms.
Walker’s emotional distress and the need for a more significant
civil monetary penalty. The Secretary issued a Final Agency
Order denying Corey’s petition as untimely, granting in part the
Department’s petition, and imposing a steeper damages award and
civil penalty.
Corey filed with this court a timely Petition for Review of
the Final Agency Order, and the Department filed a Cross-
Application for Enforcement of the order. We consolidated these
actions.
II.
Corey contests the Secretary’s determination that he
violated § 3604(c), (f)(1), and (f)(2) of the FHA, arguing that
his conduct was justified under the circumstances.
Pursuant to the Administrative Procedures Act, “federal
courts can overturn an administrative agency’s decision . . . if
it is ‘arbitrary, capricious, an abuse of
discretion, . . . otherwise not in accordance with the law,’ or
‘unsupported by substantial evidence.’” Knox v. U.S. Dep’t of
Labor, 434 F.3d 721, 723 (4th Cir. 2006) (quoting 5 U.S.C. §
706(2)(A), (E)). The substantial evidence standard is a
“necessarily . . . limited” appellate review of the agency’s
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factual determinations. Almy v. Sebelius, 679 F.3d 297, 302
(4th Cir. 2012) (internal quotations omitted).
As a charging party, the Department may prove an FHA
violation by showing “that a defendant had a discriminatory
intent either directly, through direct or circumstantial
evidence, or indirectly, through the inferential burden shifting
method known as the McDonnell Douglas test.” Kormoczy v. HUD,
53 F.3d 821, 823-24 (7th Cir. 1995) (referring to McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973)). Of course, if the
Department provides sufficient direct evidence of discrimination
to prove a violation, resort to the McDonnell Douglas method of
proof is unnecessary. Pinchback v. Armistead Homes Corp., 907
F.2d 1447, 1452 (4th Cir. 1990).
A.
Section 3604(c) of the FHA prohibits oral or written
statements with respect to the rental of a dwelling that
indicate a “preference, limitation, or discrimination” based on
certain protected statuses, including disability. Thus, to
establish Corey’s liability under § 3604(c), the Department must
show that (1) Corey made a statement; (2) the statement was made
with respect to the sale or rental of a dwelling; and (3) the
statement indicated a preference, limitation, or discrimination
on the basis of disability. See White v. HUD, 475 F.3d 898, 904
(7th Cir. 2007). To determine whether a statement meets the
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third prong, courts use an “ordinary listener” standard. Id. at
905-06; see United States v. Hunter, 459 F.2d 205, 215 (4th Cir.
1972) (using an “ordinary reader” standard to determine whether
advertisements indicated a racial preference in the acceptance
of tenants). If an ordinary listener would believe that the
statement suggests a preference, limitation, or discrimination
based on a protected status, the statement is deemed
discriminatory. White, 475 F.3d at 905-06. Evidence of the
speaker’s motivation for making the discriminatory statement is
unnecessary to establish a violation. Jancik v. HUD, 44 F.3d
553, 556 (7th Cir. 1995).
Based on direct evidence, the Secretary determined that
Corey had violated § 3604(c). As the Secretary observed, Corey
admitted to imposing conditions, both verbally and in writing,
on the Walkers’ prospective tenancy because of Mr. Walker’s
disability. Corey also acknowledged that he made these
statements based on his assumption that Mr. Walker could pose a
threat to neighbors or property due to his disability. The
Secretary thus concluded that Corey violated the statute by
making statements to Ms. Walker that an ordinary listener would
deem reflected a “preference or limitation against [the
Walkers’] tenancy because of Mr. Walker’s disability.” J.A.
281.
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Corey does not deny telling Ms. Walker that he intended to
impose special conditions on the Walkers’ prospective tenancy,
but disagrees that he violated § 3604(c). He argues that he
imposed the conditions only after Ms. Walker’s “voluntary and
unsolicited statement that her brother suffers from ‘severe
autism and mental retardation.’” Pet’r’s Br. 20. Corey also
notes that he never indicated a flat refusal to rent to the
Walkers, “only that . . . risk insurance maybe [sic] required.”
Id. at 21.
Corey’s arguments are unavailing. For one, the fact that
Ms. Walker disclosed her brother’s disability does not excuse
Corey’s discriminatory responsive statements. Nor does it
matter that Corey did not refuse to rent to the Walkers; the
statute simply prohibits statements to renters that indicate a
limitation based on disability, and Corey admits to making such
statements. This ends the inquiry, as substantial evidence
supports the Secretary’s determination.
B.
In addition to its ban on discriminatory statements, the
FHA makes it unlawful “[t]o discriminate in the sale or rental,
or to otherwise make unavailable or deny, a dwelling to any
buyer or renter because of a [disability].” 42 U.S.C.
§ 3604(f)(1); see United States v. Youritan Constr. Co., 370 F.
Supp. 643, 648 (N.D. Cal. 1973) (interpreting “otherwise make
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unavailable” language to include “[t]he imposition of more
burdensome application procedures, of delaying tactics, and of
various forms of discouragement by resident managers and rental
agents”). Relatedly, landlords are forbidden “[t]o discriminate
against any person in the terms, conditions, or privileges of
sale or rental of a dwelling . . . because of a [disability].”
42 U.S.C. § 3604(f)(2). However, FHA § 3604(f)(9) contains a
limited exception to these prohibitions, allowing a landlord to
reject “an individual whose tenancy would constitute a direct
threat to the health or safety of other individuals or whose
tenancy would result in substantial physical damage to the
property of others.”
The Secretary concluded that Corey had imposed “written
discriminatory conditions upon” the Walkers, in violation of
§ 3604(f)(1) and (2). J.A. 282. First, the Secretary
determined that the Department had proven the statutory
violations by direct evidence. This included Corey’s testimony
that he (1) imposed the conditions because of Mr. Walker’s
disability, (2) believed “persons diagnosed with autism and
mental retardation pose a greater risk in terms of liability,”
and (3) did not typically impose the challenged conditions on
his tenants. Id. Second, the Secretary determined that the
Department had proven both violations via indirect evidence
under the McDonnell Douglas burden-shifting method. Finally,
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the Secretary ruled that Corey’s conduct could not be excused
pursuant to § 3604(f)(9)’s “direct threat” exception, since
Corey’s reluctance to rent to the Walkers was not sufficiently
supported by objective, individualized evidence that Mr. Walker
might pose a direct threat.
Corey contests these determinations, but not persuasively.
Focusing on perceived flaws in the Secretary’s McDonnell Douglas
indirect evidence analysis, Corey overlooks the Secretary’s
direct evidence findings, which alone may sustain the
violations. Rather than attempt to account for this evidence,
Corey insists that these facts present a “mixed motives” case,
and that he would have been justified in ultimately rejecting
Ms. Walker’s application because her net monthly income--despite
her affirmation to the contrary--was below his $2,000 income
threshold. Corey also contests the Secretary’s refusal to apply
the § 3604(f)(9) “direct threat” exception, arguing that his
requests for a doctor’s note and a meeting with Mr. Walker
constituted lawful attempts to obtain objective evidence of
whether Mr. Walker posed a direct threat.
These arguments fall flat, and again, substantial evidence
supports the Secretary’s determinations. First, we agree with
the Secretary that direct evidence established both § 3604(f)
violations. Corey admitted that he imposed what amounted to
discriminatory terms and obligations on his rental negotiations
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with Ms. Walker based on his fears about Mr. Walker’s
disability. This admission alone supports the FHA violations:
by imposing more burdensome application procedures and generally
discouraging the Walkers’ application, Corey “otherwise ma[de]
[the property] unavailable” to the Walkers because of a
disability, in violation of § 3604(f)(1), see Youritan, 370
F.Supp. at 648, and “discriminate[d] against [the Walkers] in
the terms, conditions, or privileges” of a rental because of a
disability, in violation of § 3604(f)(2). And the fact that Ms.
Walker earned less than $2,000 per month does not excuse Corey’s
conduct. To begin with, Ms. Walker’s ability to pay could not
possibly have motivated Corey’s conduct, as he learned of Ms.
Walker’s income only after he imposed the discriminatory
conditions. In any case, this justification is baldly
pretextual, as Corey failed to impose the $2,000 minimum income
requirement on the nondisabled applicant to whom he subsequently
leased the house.
Second, since the Department established Corey’s violations
with sufficient direct evidence, we need not address Corey’s
argument that the Secretary erred in his handling of the
McDonnell Douglas indirect evidence inquiry. See Pinchback, 907
F.2d at 1452.
Finally, we affirm the Secretary’s conclusion that the
§ 3604(f)(9) “direct threat” exception does not apply. Corey
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makes no showing that his discriminatory conduct was supported
by any objective evidence that Mr. Walker posed a direct threat
to persons or property, as is required to trigger the exception.
See H.R. Rep. No. 711, at 30 (1988), reprinted in 1988
U.S.C.C.A.N. 2173, 2191. And even if Corey’s request for a
meeting with Mr. Walker and a doctor’s note was, as he
maintains, an attempt to obtain such objective evidence, Corey
cannot justify the other discriminatory conditions he sought to
impose, based as they were on unsubstantiated stereotypes about
autistic people in general.
III.
For these reasons, we deny Corey’s Petition for Review and
grant the Department’s Cross-Application for Enforcement of the
Secretary’s order.
PETITION FOR REVIEW DENIED;
CROSS-APPLICATION FOR ENFORCEMENT GRANTED.
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