by Gary Taylor
Thomas J. Gallagher, et. al v. Steve Manger, et. al.
(Federal 8th Circuit Court of Appeals, September 2, 2010)
In 1993, St. Paul, Minnesota (city) enacted a Property Maintenance Code (Code), that established “minimum maintenance standards for all structures and premises for basic equipment and facilities for light, ventilation, heating and sanitation; for safety from fire; for crime prevention; for space, use and location; and for safe and sanitary maintenance of all structures and premises.” In 2002, the City established the Department of Neighborhood Housing and Property Improvement (DNHPI) to administer and enforce the Code. DNHPI was empowered to inspect all one- and two-family dwellings and administer and enforce laws regulating maintenance of residential property.
Andy Dawkins was the director of DNHPI from 2002 to 2005. The evidence presented at trial showed that Dawkins favored owner-occupied housing over rental housing “for the sake of the neighborhood.” Toward that end, he increased the level of Code enforcement targeted at rental properties. In addition to responding to citizen complaints about particular properties, DNHPI inspectors conducted proactive “sweeps” to detect Code violations. Furthermore, Dawkins raised inspection standards by directing DNHPI inspectors to “code to the max,” that is, writing up every violation—not just what was called in—and writing up all the nearby properties—not just the reported properties. DNHPI also increased its Code enforcement efforts on “problem properties.” DNHPI employed a variety of strategies for renter-occupied dwellings, including orders to correct or abate conditions, condemnations, vacant building registration, fees for excessive consumption of municipal services, tenant evictions, seizures, revocations of rental registrations, and if necessary, court actions. DNHPI coordinated its efforts with the city police and an assistant city attorney. In addition, the city used “Code Compliance Certification” to require rental properties to meet current housing and building standards. Through this certification the city required rental property owners to acquire Code Compliance Certification if a property was remodeled or deemed a dangerous structure, a nuisance building, or vacant. Code Compliance inspections were conducted by the City’s Office of License, Inspections, and Environmental Protection, which would evaluate the building’s structure, plumbing, electrical condition, and mechanical condition. Code Compliance Certification forced property owners to undertake often-expensive renovations, especially with regard to older properties that were exempt from current building codes under Minnesota law.
Gallagher and others (Appellants) own or formerly owned rental properties in the city. They rented primarily to low-income households, and a majority of their tenants received federal rent assistance. The parties agree that African-Americans generally made up a disproportionate percentage of low-income tenants in private housing in the city, and specifically, Appellants claim that they rented to a higher-than-usual percentage of African-Americans. Appellants’ properties were subject to the City’s Housing Code enforcement from 2002 to 2005. They received code enforcement orders that, in many cases, cited between ten and twenty-five violations per property for conditions including rodent infestation, missing dead-bolt locks, inadequate sanitation facilities, inadequate heat, inoperable smoke detectors, broken or missing doors and screens, and broken or missing guardrails or handrails. Several of Appellants’ properties were designated as problem properties, subject to Code Compliance Certification, or, in a few cases, both. As a result of the City’s Housing Code enforcement, Appellants suffered increased maintenance costs, fees, condemnations, and were forced to sell properties in some
Appellants filed several suits against the city in 2004 and 2005 that were consolidated into the present case. Included were three claims under the Fair Housing Act (FHA) for disparate treatment, disparate impact, and retaliation.
Disparate treatment. For a disparate treatment claim to survive summary judgment, Appellants are required to show that the city treated Appellants less favorably than others based on race, color, religion, sex or national origin. This is done through proving (1) direct evidence of discriminatory intent or (2) indirect evidence creating an inference of discriminatory intent. The record showed that Dawkins made statements that demonstrate his desire and intent to reduce the amount of low-income tenants in the city; however, all of Dawkins’ statements were facially race neutral. “Facially race-neutral statements, without more, do not demonstrate racial animus on the part of the speaker.” Merely calling these statements evidence of racial animus is not enough to create a genuine dispute of fact. Therefore, the Court affirmed summary judgment in favor of the city.
Disparate impact. For a disparate impact claim to survive summary judgment, Appellants must establish “that the objected-to action[s] result[ed] in . . . a disparate impact upon protected classes compared to a relevant population. Stated differently, Appellants “must show a facially neutral policy ha[d] a significant adverse impact on members of a protected minority group. Appellants are not required to show that the policy or practice was formulated with discriminatory intent. The Court found evidence that supported the following assertions: (1) the city experienced a shortage of affordable housing; (2) racial minorities, especially African-Americans, made up a disproportionate percentage of lower-income households in the city that rely on low-income housing; (3) the city’s aggressive Code enforcement practices increased costs for property owners that rent to low-income tenants; and (4) the increased burden on rental-property owners from aggressive code enforcement resulted in less affordable housing in the city.
According to caselaw, the city must counter the showing by demonstrating that its policy or practice had “‘manifest relationship’” to a legitimate, nondiscriminatory policy objective and was necessary to the attainment of that objective. Appellants concede that enforcement of the Code has a manifest relationship to legitimate, non-discriminatory objectives, which is providing minimum property maintenance standards to , keep housing habitable; however, caselaw also allows Appellants to show that alternative policies are available that accomplish the same objectives, yet lessen the discriminatory impact. The Court found that Appellants met this showing by highlighting the success of the city’s previous Code enforcement program, known as PP2000. PP2000 was based on a set of strategies that included identification of properties with a history of unresolved or repeat Code violations, meeting with the owners individually, encouraging the owners to take a more business-like approach to managing their properties, keeping closer tabs on changes of ownership, and using consistent inspectors at each property. These strategies resulted in “owners working hard to be pro active in maintaining their properties. The Court concluded that sufficient evidence existed to warrant remand of the disparate impact claim to the District Court.
Retaliation. The FHA prohibits retaliation against any person on account of his having exercised or enjoyed a right granted or protected by the FHA. The Court found that Appellants “vaguely asserted” that the city’s code enforcement actions were retaliatory; however, the Court refused to allow the retaliation claim to go forward because the Appellants had not identified how they exercised or encouraged others to exercise rights under the FHA or how the city retaliated.
Appellants raised nine other claims unrelated to the FHA claims, that were all dismissed by the Court. As a result, the only claim remanded to the District Court was the disparate impact claim.