Lindsay v. Yates ( 2007 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 07a0318p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiffs-Appellants, -
DOUGLAS LINDSAY, SR.; TINA LINDSAY,
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No. 06-4430
v.
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BRENT YATES; JOANN YATES; THE ESTATE OF GENE -
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Defendants-Appellees. -
YATES; SLUSS REALTY COMPANY; CAROL EICHER,
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Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 05-01625—Ann Aldrich, District Judge.
Argued: July 27, 2007
Decided and Filed: August 15, 2007
Before: KEITH, MOORE, and COLE, Circuit Judges.
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COUNSEL
ARGUED: Edward L. Gilbert, SLATER, ZURZ & GILBERT, Akron, Ohio, for Appellants. Maura
L. Hughes, CALFEE, HALTER & GRISWOLD, Cleveland, Ohio, for Appellees. ON BRIEF:
Edward L. Gilbert, Michael J. Wright, SLATER, ZURZ & GILBERT, Akron, Ohio, for Appellants.
Julia A. Harris, Jeffrey J. Lauderdale, CALFEE, HALTER & GRISWOLD, Cleveland, Ohio, James
L. Childress, CALHOUN, KADEMENOS & CHILDRESS, Mansfield, Ohio, for Appellees.
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OPINION
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R. GUY COLE, JR., Circuit Judge. Plaintiffs-Appellants Douglas and Tina Lindsay brought
suit against Defendants-Appellees JoAnn Yates, the Estate of Gene Yates, and Brent Yates
(collectively, the “Yateses”), as well as Sluss Realty Company and realtor Carol Eicher, on the
grounds that Defendants terminated a real-estate sales contract with the Lindsays one day after
learning that the Lindsays are black. The district court dismissed the Lindsays’ complaint,
concluding that they failed to plead facts establishing each element of a prima facie case as set forth
in McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), and Texas Department of Community
Affairs v. Burdine, 450 U.S. 248 (1981). Although the district court did not address it, the Yateses
argued below, and now argue before this Court, that the Lindsays’ complaint must be dismissed for
1
No. 06-4430 Lindsay, et al. v. Yates, et al. Page 2
the further reason that they failed to plead facts showing that the purchase agreement executed by
the parties was valid and enforceable.
For the reasons described below, we REVERSE the judgment of the district court and
REMAND for further proceedings consistent with this opinion.
I. BACKGROUND
A. Facts
The Lindsays are an African-American couple who reside in Richland County, Ohio. They
allege that on or about August 8, 2004, Gene and JoAnn Yates contracted with Sluss Realty and
Sluss realtor, Carol Eicher, to advertise the Yateses’ home in Lexington, Ohio, for sale. The
Yateses’ home is located at 2268 Eckert Road, and the Yateses own several adjacent parcels of
property, which were not for sale. In addition, the Yateses’ son, Brent, operates a business on one
of these adjacent parcels.
Gene Yates died in January 2005, but the Yateses’ Eckert Road property remained on the
market. The Lindsays allege that Sluss and Eicher told them that Brent Yates was authorized by his
mother to negotiate the sale of the property and execute a purchase agreement. On May 12, 2005,
the Lindsays signed a purchase agreement to buy the property for an agreed price of $175,000. They
tendered the signed purchase agreement to Brent Yates through Eicher and deposited $500 in earnest
money with him in the form of a promissory note. Brent Yates signed the purchase agreement as
the seller of the property on May 13, 2005.
On May 23, 2005, the Lindsays visited their soon-to-be new home to identify the property
lines. At that time, they introduced themselves to Brent Yates. The next day, Sluss and Eicher
informed the Lindsays that the Yateses intended to terminate the sales contract because JoAnn Yates
wished to keep the house “for sentimental reasons.” The Lindsays appeared for the June 10, 2005
scheduled closing, but the Yateses did not.
B. Procedural History
The Lindsays filed suit on June 16, 2005, asserting that Defendants unlawfully refused to sell
them the Yateses’ property on account of their race. The Lindsays brought claims for violation of
federal and state anti-discrimination laws, including (1) the Fair Housing Act (“FHA”), 42 U.S.C.
§§ 3603-3604,1 (2) 42 U.S.C. § 1981,2 (3) 42 U.S.C. § 1982,3 and (4) Ohio Revised Code
§ 4112.02(H)(1), as well as a common-law claim for breach of contract.
Rather than move to dismiss the Lindsays’ complaint under Federal Rule of Civil Procedure
12(b)(6), Defendants answered. The Yateses answered on August 22, 2005, and Sluss and Eicher
answered on August 29, 2005. The parties then proceeded to discovery. Nearly a year later, on June
1
42 U.S.C. § 3604 makes it unlawful to, among other things, “refuse to sell or rent after the making of a bona
fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any
person because of race, color, religion, sex, familial status, or national origin.”
2
42 U.S.C. § 1981 provides: “All persons within the jurisdiction of the United States shall have the same right
in every State and Territory to make and enforce contracts . . . .”
3
42 U.S.C. § 1982 provides: “All citizens of the United States shall have the same right, in every State and
Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal
property.”
No. 06-4430 Lindsay, et al. v. Yates, et al. Page 3
13, 2006, the Yateses moved for judgment on the pleadings under Rule 12(c)4 on the grounds that
the Lindsays were not entitled to relief on any of their claims because the parties had never entered
into a valid sales contract. The Yateses argued that the Lindsays’ pleading was deficient because
they failed to allege facts showing that the owner of the property, JoAnn Yates, had signed the
purchase agreement, or that she had authorized her son, Brent, to sign on her behalf.
The district court granted the Yateses’ motion on October 17, 2005, but not on the grounds
urged by the Yateses or otherwise briefed by the parties.5
First, the district court dismissed the Lindsays’ claim under 42 U.S.C. § 3603. The district
court reasoned that § 3603 does not constitute an independent cause of action under the FHA, but
simply works in conjunction with the prohibitions set forth in § 3604 of the Act. Lindsay v. Yates,
No. 05-1625, slip op. at 3-4 (N.D. Ohio Oct. 17, 2006) (“Dist. Ct. Op.”).
Second, the district court sua sponte concluded that the Lindsays failed to plead a prima facie
case of racial discrimination because they did not allege facts establishing that the Eckert Road
property remained on the market after the Yateses rejected them. Id. at 4-6. The district court
therefore dismissed all the Lindsays’ federal claims, dismissed the Lindsays’ state-law claims
without prejudice, and stated that its order was final and appealable. Id. at 6. The district court
never ruled on whether the Lindsays adequately pleaded facts regarding the existence of a valid
contract, which was the entire premise of the Yateses’ Rule 12(c) motion. The Lindsays timely
appealed.
II. DISCUSSION
A. Standard of Review
We review a district court’s dismissal of a plaintiff’s complaint de novo. EEOC v. J.H.
Routh Packing Co., 246 F.3d 850, 851 (6th Cir. 2001). The same standards apply irrespective of
whether the complaint has been dismissed under Federal Rule of Civil Procedure 12(b)(6) for failure
to state a claim or under Rule 12(c) for judgment on the pleadings. Id. We construe the complaint
in the light most favorable to the plaintiffs, accept all of the complaint’s factual allegations as true,
and decide whether the plaintiffs can prove any set of facts in support of their claims that would
entitle them to relief. Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp., 399 F.3d 692,
697 (6th Cir. 2005).
B. Merits
On appeal, the Lindsays do not challenge the district court’s dismissal of their claim under
42 U.S.C. § 3603. Instead, the Lindsays argue that the court erred in dismissing the remainder of
their federal claims (which includes their claims asserted under 42 U.S.C. §§ 1981, 1982, and 3604)
on the grounds that they failed to plead all the elements of a McDonnell Douglas/Burdine prima
facie case. The Lindsays further argue, contrary to the Yateses, that they are not required to plead
4
Unlike a Rule 12(b)(6) motion, which must be brought prior to answering the complaint, a Rule 12(c) motion
may be brought “[a]fter the pleadings are closed but within such time as not to delay the trial. . . .” Fed. R. Civ. P. 12(c).
5
The district court couched its order as one granting relief under Rule 12(b)(6). As described above, however,
the Yateses elected to answer the complaint, rather than bring a Rule 12(b)(6) motion to dismiss. Almost a year after
filing their answer, the Yateses brought a Rule 12(c) motion to dismiss. Thus, the district court should have stated that
its ruling was pursuant to Rule 12(c). Because the legal standards for adjudicating Rule 12(b)(6) and Rule 12(c) motions
are the same, the error was harmless.
No. 06-4430 Lindsay, et al. v. Yates, et al. Page 4
the existence of a valid sales contract to state a claim for relief. Each of these issues will be
discussed in turn.
1. The District Court Erred by Requiring the Lindsays to Plead Facts Establishing a
Prima Facie Case Under the McDonnell Douglas/Burdine Framework
The familiar McDonnell Douglas/Burdine analysis applies to federal housing-discrimination
claims, whether they are brought under the FHA or 42 U.S.C. §§ 1981 or 1982. Mencer v. Princeton
Square Apts., 228 F.3d 631 (6th Cir. 2000) (applying the McDonnell Douglas burden-shifting
framework to claims brought under the FHA and §§ 1981 and 1982); Selden Apts. v. U.S. Dep’t of
Housing and Urban Dev., 785 F.2d 152, 159 (6th Cir. 1986) (same). First, a plaintiff who alleges
discrimination on the basis of race must make out a prima facie case by showing “(1) that he or she
is a member of a racial minority, (2) that he or she applied for and was qualified to rent or purchase
certain property or housing, (3) that he or she was rejected, and (4) that the housing or rental
property remained available thereafter.” Mencer, 228 F.3d at 634-35. However, the Supreme Court
has instructed that “the precise requirements of a prima facie case can vary depending on the context
and were ‘never intended to be rigid, mechanized, or ritualistic.’” Swierkiewicz v. Sorema N.A., 534
U.S. 506, 512 (2002) (quoting Furnco Constr. Corp. v. Waters, 438 U.S. 567, 577 (1978)).
If the plaintiff satisfies the prima facie requirements, the burden shifts to the defendant to
produce evidence of a legitimate, non-discriminatory reason for rejecting the plaintiff. Mencer, 228
F.3d at 634. Finally, the burden shifts back to the plaintiff to show that the defendant’s proffered
non-discriminatory reason is a pretext. Id. “Although the burden of production shifts between the
parties, the plaintiff bears the burden of persuasion throughout the process.” Dixon v. Gonzales, 481
F.3d 324, 333 (6th Cir. 2007).
The question on appeal is whether, at the pleading stage, a housing-discrimination plaintiff
must establish each of the elements of the prima facie case to survive a motion to dismiss the
complaint. As described above, the district court held that the Lindsays’ complaint failed to state
a claim because they did not plead facts showing that the Eckert Road property remained available
to other potential buyers, and that therefore the Lindsays did not satisfy the fourth element of the
prima facie case. Both the district court and the parties failed to consider controlling Supreme Court
authority that contravenes the district court’s judgment.
In Swierkiewicz, the Supreme Court unanimously held that a plaintiff who asserted federal
employment-discrimination claims was not required to plead facts establishing a prima facie case
to state a claim for relief. The Court stated that “[t]he prima facie case under McDonnell Douglas
. . . is an evidentiary standard, not a pleading requirement.” Id. at 510. Thus, the Court held that
an employment-discrimination plaintiff satisfies her pleading burden by drafting “a short and plain
statement of the claim” consistent with Federal Rule of Civil Procedure 8(a). Id. at 508. Provided
that the plaintiff “‘give[s] the defendant fair notice of what the plaintiff’s claim is and the grounds
upon which it rests,’” the complaint must be upheld. Id. at 512 (quoting Conley v. Gibson, 355 U.S.
41, 47 (1957)).
Although Swierkiewicz was an employment-discrimination case, our sister Circuits have
expressly extended its holding to housing-discrimination claims. Meyer v. Bear Rd. Assocs., 124
F. App’x 686, 688 (2d Cir. 2005); Edwards v. Marin Park, Inc., 356 F.3d 1058, 1061-63 (9th Cir.
2004). Indeed, both the Second and Ninth Circuits have stated that Swierkiewicz applies to any
claim covered by the McDonnell Douglas framework. Williams v. N.Y. City Hous. Auth., 458 F.3d
67, 72 (2d Cir. 2006) (“The Swierkiewicz holding applies with equal force to any claim . . . that the
McDonnell Douglas framework covers.”); Edwards, 356 F.3d at 1062 (stating that the reasoning of
Swierkiewicz “applies to any claim to which the McDonnell Douglas framework is applicable . . .”).
We agree.
No. 06-4430 Lindsay, et al. v. Yates, et al. Page 5
Swierkiewicz was not directed at explaining what an employment-discrimination plaintiff,
in particular, does or does not need to plead to survive a motion to dismiss, so much as it was
directed to making clear that McDonnell Douglas does not set the standard for pleading any
complaint. The Supreme Court held, without limiting its comments to employment-discrimination
claims, that McDonnell Douglas “is an evidentiary standard, not a pleading requirement” and that
“the prima facie case relates to the employee’s burden of presenting evidence. . . .”6 Swierkiewicz,
534 U.S. at 510.
A fair reading of the Lindsays’ complaint shows that they have pleaded claims for which
relief may be granted. The Lindsays have alleged the statutory bases for their claims (42 U.S.C.
§§ 1981, 1982, and 3604) and have set forth the factual predicate of those claims. They allege that
the Yateses advertised their house for sale, that they (the Lindsays) executed a purchase agreement
to buy the house, and that nearly two weeks after signing the purchase agreement and depositing
$500 in earnest money with Brent Yates—and one day after Brent learned they were black—the
Yateses terminated the contract. Cf. Swierkiewicz, 534 U.S. at 514 (holding that the plaintiff stated
national-origin and age-discrimination claims where he “detailed the events leading to his
termination, provided relevant dates, and included the ages and nationalities of at least some of the
relevant persons involved with his termination”). Because these allegations are sufficient to apprise
the Defendants of the Lindsays’7 claims and the grounds upon which they rest, the Lindsays have
satisfied their pleading burden.
2. The Lindsays Are Not Required to Plead Facts Showing That the Purchase
Agreement Was Valid and Enforceable to State a Claim for Relief
The district court did not rule on whether the Lindsays were required to plead the existence
of a valid sales contract. “It is the general rule that a federal appellate court does not consider an
issue not passed upon below.” United States v. Henry, 429 F.3d 603, 618 (6th Cir. 2005) (internal
quotation marks and ellipses omitted). Here, however, we exercise our discretion to decide the
question because “both parties have briefed and argued the issue’s merits,” AAR Int’l, Inc. v.
Nimelias Enters. S.A., 250 F.3d 510, 523 (7th Cir. 2001) (internal quotation marks and citation
omitted), and because a decision will serve the interests of judicial economy, U.S. v. Koyomejian,
970 F.2d 536, 541 (9th Cir. 1992) (“Although the district court did not pass on the Fourth
6
Swierkiewicz was discussed extensively by the dissent in the Supreme Court’s recent decision in Bell Atlantic
Corp. v. Twombly, __ U.S. __, 127 S. Ct. 1955 (2007). Twombly addressed requirements for pleading an antitrust claim
under § 1 of the Sherman Act. The dissent argued that the Twombly majority had devised a “new pleading rule” that
called into question the continued vitality of Swierkiewicz. 127 S. Ct. at 1974 (Stevens, J., dissenting). Because the
Supreme Court majority distinguished Swierkiewicz and nowhere expressed an intent to overturn it, we have no basis
for concluding that Swierkiewicz is no longer good law. Moreover, although this case does not present the question of
if, or exactly how, Twombly has changed the pleading requirements of Federal Rule of Civil Procedure 8(a), we note that
in Erickson v. Pardus, __ U.S. __, 127 S. Ct. 2197 (2007), decided after Twombly, the Supreme Court reaffirmed that
Rule 8(a) “requires only a short and plain statement of the claim showing that the pleader is entitled to relief.” Id. at
2200 (internal quotation marks omitted) (concluding that the petitioner had stated an Eighth Amendment claim where
he alleged that prison officials had endangered his life by removing him from hepatitis C medication shortly after he
began a year-long treatment regimen, that he was still in need of the treatment, and that prison officials continued to deny
him treatment). In any event, for the reasons described infra, we conclude that the Lindsays have pleaded sufficient facts
giving rise to a “reasonably founded hope that the discovery process will reveal relevant evidence” to support their
claims. Twombly, 127 S. Ct. at 1967 (internal quotation marks omitted).
7
The McDonnell Douglas/Burdine framework applies only when discrimination plaintiffs rely on circumstantial
evidence to prove their claims. Thus, if, after discovery, the Lindsays are able to present direct evidence of
discrimination, there will be no need to evaluate their claims under the McDonnell Douglas/Burdine burden-shifting
approach. See, e.g., Talley v. Bravo Pitino Rest., 61 F.3d 1241, 1248 (6th Cir. 1995) (“The McDonnell Douglas formula
is inapplicable . . . to cases in which the Title VII plaintiff presents credible, direct evidence of discriminatory animus.”)
(citation omitted).
No. 06-4430 Lindsay, et al. v. Yates, et al. Page 6
Amendment issue in this case, we address it nonetheless because it is a purely legal issue, and in the
interest of judicial economy.”).
In their complaint, the Lindsays pleaded that
Sluss Realty Company and Carol Eicher represented to the Plaintiffs
and Plaintiffs’ real estate agent, that co-defendant, Brent Yates, had
authority to negotiate the sale of the real property and sign the
purchase agreement on behalf of his mother, Jo[A]nn Yates, who was
at that time out of town.
(Joint Appendix (“JA”) 21 (Compl. ¶ 15).)
The Yateses argue that the Lindsays are required to allege that the purchase agreement is
valid and enforceable in order to state a claim under federal and state law for housing discrimination.
To do so, the Yateses insist that the Lindsays had to plead facts showing that JoAnn Yates
authorized Brent to act on her behalf in negotiating and completing the sale. Paragraph 15 of the
Lindsays’ complaint, set forth above, does just that. But, the Yateses disagree, arguing that it was
not enough for the Lindsays to plead that Sluss and Eicher told them that Brent was acting on his
mother’s behalf in arranging the sale, nor was it enough to attach to the complaint the purchase
agreement, showing that Brent held himself out as his mother’s agent by negotiating the sale terms
and signing the purchase agreement. Instead, the Yateses contend that the Lindsays were required
to plead facts showing that JoAnn Yates represented to them that Brent was her authorized agent in
the transaction. Absent such an allegation, argue the Yateses, the Lindsays’ claims are doomed.
In support of their position, the Yateses cite the recent Supreme Court decision in Domino’s
Pizza, Inc. v. McDonald, 546 U.S. 470 (2006). The Yateses read Domino’s Pizza to stand for the
expansive proposition that any time plaintiffs bring claims under 42 U.S.C. §§ 1981, 1982 or 3604,
they must show that they “would have had enforceable rights as a result of the transaction at issue,”
“even where unlawful discrimination may have occurred. . . .” (Appellees’ Br. 24.) Domino’s Pizza
does not extend nearly that far.
Domino’s Pizza dealt exclusively with § 1981. The Supreme Court reaffirmed that § 1981
prohibits racial discrimination in both the making and enforcement of contracts. Domino’s Pizza,
546 U.S. at 476. The Court held that to state a colorable claim under § 1981, a plaintiff must plead
that she, rather than someone else, has or would have enforceable rights under the contract:
Section 1981 offers relief when racial discrimination blocks the
creation of a contractual relationship, as well as when racial
discrimination impairs an existing contractual relationship, so long
as the plaintiff has or would have rights under the existing or
proposed contractual relationship.
Id. at 476. Applying this rule, the Court held that the plaintiff in Domino’s Pizza failed to state a
claim because he personally did not have any rights under the proposed contracts; rather, it was the
corporation, of which the plaintiff was president, that had the contractual rights at issue.
Thus, in holding that a § 1981 plaintiff must plead facts showing that she “has or would have
rights under the existing or proposed contractual relationship,” the Supreme Court meant only that
the plaintiff had to allege that she was an actual party to, or beneficiary of, the contract, not that she
had to allege, as the Yateses argue, that the contract itself was valid. Id. at 476. The inquiry has
nothing to do with the validity or invalidity of the contract, but with whether the plaintiff is seeking
to enforce her own rights, “not [] someone else’s.” Id. at 480.
No. 06-4430 Lindsay, et al. v. Yates, et al. Page 7
Here, there can be no doubt that the Lindsays are seeking vindication of their own
contractual rights. Domino’s Pizza therefore has no bearing on their claims.
The Yateses also argue that the purchase agreement was not valid and enforceable under
Ohio law. Just as Domino’s Pizza does not stand for the proposition that a housing-discrimination
plaintiff must plead the existence of a valid sales contract to state a claim, neither do any of the Ohio
cases cited by the Yateses. True, Ohio agency law provides that a principal will not be bound by
the acts of an agent made in excess of the agent’s authority, Hairston v. Goodman, No. 58193, 1991
Ohio App. LEXIS 1176 *16-17 (Ohio Ct. App. Mar. 21, 1991), but even according to the cases cited
by the Yateses, questions of agency are evidentiary in nature. See, e.g., Minnielli v. Davidson, No.
95-05-090, 1995 Ohio App. LEXIS 4788 (Ohio Ct. App. Oct. 30, 1995); Hairston, 1991 Ohio App.
LEXIS 1176 at *1; Ottawa County Comm’rs v. Mitchell, 478 N.E.2d 1024 (Ohio Ct. App. 1984).
Thus, whether JoAnn Yates actually authorized Brent to arrange for the sale of the Eckert Road
property, and what the scope of that authority was, are questions of fact that cannot be resolved at
the pleading stage, and may even turn on a credibility determination that is unsuitable for summary
judgment. Accordingly, we hold that in pleading that Sluss and Eicher told them that Brent was
authorized to arrange for the sale; that Brent did, through Sluss and Eicher, negotiate the sale terms
and accept the signed purchase agreement and the earnest money; that Brent himself signed the
purchase agreement; and that everything proceeded without incident until the sale was canceled one
day after Brent learned they were black, the Lindsays have adequately stated a claim for relief.
III. CONCLUSION
For the foregoing reasons, we REVERSE the judgment of the district court and REMAND
for further proceedings consistent with this opinion.