Indianola fence ordinance not a taking

by Gary Taylor

Iowa Assurance Corporation v. City of Indianola
(Federal 8th Circuit Court of Appeals, August 16, 2011)

Vinton Watson races figure eight cars, and owns seven to eight cars at any one time. In March 2006 Watson began leasing a shop and adjacent parking lot from Ron Inman to store his cars. Inman’s property is located in Indianola and is zoned for commercial use. The shop that Watson leases consists of half of one building and amounts to “a little over 900 square feet.” The parking lot included in the lease is located immediately adjacent of the building and is twenty-seven by thirty-four-feet. Watson can store up to three cars in the shop, although it is difficult to store more than two cars when repairing vehicles inside the shop. Additionally, Watson stores up to three cars in the parking lot, although cars are not always stored there.

Neighbors have complained to the Indianola city council on numerous occasions about the appearance and noise of Watson’s cars.  As a result, the city council passed an ordinance in 2007, amended in 2009, requiring figure eight cars and other race cars to be inclosed by a fence in all outdoor areas where two or more vehicles are present.  Watson sued the city, specifically alleging that the ordinance creates an uncompensated regulatory taking by requiring him to install a fence and by reducing the overall value of the property.  The suit was brought in state court but the city had the case removed to federal court.  The Federal District Court for the Southern District of Iowa found in favor of the city and Watson appealed.

The 8th Circuit noted that regulatory takings claims come in four types:

The first type is a regulation which requires an owner to suffer a permanent physical invasion of her property. The second type is a regulation that completely deprive[s] an owner of all economically beneficial use of her property. The third type is a governmental requirement that, without sufficient justification, requires an owner to dedicate a portion of his property in exchange for a building permit. The fourth type is any other regulation which, after considering its economic impact upon the plaintiff and its essential character, is functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain.

Watson claimed that the city’s action violated the first and third types: physical invasions and land-use exactions.  The Court rejected both of Watson’s claims.  It rejected the physical invasion claim because the ordinance does not require Watson to permit either the city or any third party to enter his property to install a fence, and consequently does not erode his right to exclude others from his property.  It rejected the land use exaction claim because in those cases the government is demanding that a landowner dedicate an easement allowing public access to her property as a condition of obtaining a development permit, or other type of license.   The Indianola ordinance does not require Watson to dedicate any portion of his property to either the City’s or the public’s use as a condition of anything.

City fails to demonstrate rational basis for prohibition of billboard extensions

by Melanie Thwing

Clear Channel Outdoor v. City of St. Paul
(Federal 8th Circuit Court of Appeals, August 25, 2010)

Clear Channel Outdoor has owned and operated billboards in the City of St. Paul, MN since 1925. They regularly use billboard extensions when the customer’s needs require them. In St. Paul billboards until November 2000 were regulated with the zoning code, but were allowed. Then St. Paul, Minnesota Code §64.420 was passed which does not allow for any new billboards to be constructed. Effectively, the standing billboards were allowed as nonconforming uses. St. Paul Code §66.301(g) at the time still regulated the size and length of time for all extensions.

Then in March 2005 concerns about billboard extensions were brought to the city’s Planning Commission. The options of banning extensions altogether and allowing extensions through a permiting process were both discussed.  A resolution in support of the permitting scheme was ultimately adopted and transmitted to the city council. 

In August 2005 at a public hearing the City Council discussed the billboard extension issue, but laid the discussion over until November. During this time the Planning commission again took up the issue and again rejected the outright prohibition of billboard extensions.  Dispite this, in March 2006 the City Council adopted Ordinance 06-160, which prohibited all billboard extensions. The minutes did not reflect any discussion of costs or benefits of the ordinance.

Clear Channel filed a complaint in federal district court claiming (1) unconstitutional and unreasonable use of police power and (2) violation of Clear Channel’s due process and equal protection laws. After two years of mediation the parties were not able to reach an agreement. In January 2009 the district court ultimately found the ordinance arbitrary and capricious and therefore void because no rationale for the City Council’s decision was presented.

The City appealed the district court decision to the 8th Circuit Court of Appeals, arguing that the district court applied the wrong standard. Honn v. City of Coon Rapids was the precedent cited by the district court. Honn declares, “…[t]he municipal body need not necessarily prepare formal findings of fact, but it must, at a minimum, have the reasons for its decision recorded or reduced to writing and in more than just a conclusory fashion…” Clear Channel countered that the city was originally in favor of using the Honn standard, and originally argued it was controlling.

The 8th Circuit agreed with Clear Channel’s argument, citing specific instances where the city said Honn was controlling. Also, the 8th Circuit concurred that Honn was applicable because the procedure it announced should be followed in ‘any zoning matter, whether legislative or quasi-judicial…” Honn has legislative authority fromMinn. Stat. §462.357, subd 1, which gives a municipality the authority to regulate buildings and structures, which is the core of this case. It is concluded that Honn is applicable.

Secondly, the city argues that even if Honn is applicable, the district court was in err because it did not allow a trial that would have allowed the City to demonstrate the rational basis for its decision. The 8th Circuit noted, however, that the City had assured the district court that the record was complete and that a decision could be made. Honn does state that a trial may be allowed, but not required.  A trial is not made available simply “…to provide local governments with a routinized opportunity for a second bite at the apple by neglecting to provide and adequate record for review.” As long as the record is complete, as was the case here, no trial is necessary. The City failed to prove a rational basis for the ordinance prohibiting billboard extensions in any documents provided. The court refused to remand the case and affirmed the district court decision.

City failed to establish injury in Fair Housing Act claim

by Gary Taylor

City of Kansas City v. Yarco Company and Churchill Properties
(Federal 8th Circuit Court of Appeals, November 9, 2010)

Yarco runs an apartment complex in Kansas City. Its lease agreement with its tenants reads, “CURFEW time for everyone under the age of 18 will be 8:30 p.m. nightly.” The city filed a complaint with the Department of Housing and Urban Development (HUD) alleging that the curfew discriminated against “families with children under the age of eighteen,” in violation of the Fair Housing Act (FHA).   Yarco opted for judicial proceedings, and the city sued in state court, alleging violation of the FHA. Yarco removed the case to the District Court for the Western District of Missouri on federal question grounds. Finding that the city could not make a plausible showing of discriminatory intent, the district court granted Yarco’s Motion for Judgment on the Pleadings, and the city appealed to the Federal 8th Circuit Court of Appeals.

On appeal, the 8th Circuit found that the federal courts lacked subject matter jurisdiction to hear the case, because the city could not make the requisite showing of standing.  “The constitutional minimum of standing requires an ‘injury in fact,’ a causal connection between the injury and the conduct complained of.”  The city did not allege injury to itself, but rather that “families with children and children under the age of 18 years of age are aggrieved,” and that the city has a sovereign interest in enforcing the FHA.  The 8th Circuit disagreed, noting that the FHA does not assign claims of aggrieved parties to state and local agencies.  “The city is silent about harm to its particular interests.”  The case was remanded to district court, for further remand to state court.

St. Paul’s aggressive housing code enforcement may result in Fair Housing Act violation

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
instances. 

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.

Sioux City woman awarded damages for quid pro quo sexual harrassment claim under FHA

by Allison Arends

Quigley v. Winter
(Federal 8th Circuit Court of Appeals, March 16, 2010)

Jaymie Quigley rented a home from Dale Winter, a property owner in Sioux City Iowa, who often rented out homes to low-income individuals who received Section 8 housing vouchers from the Sioux City Housing Authority (SCHA). Quigley used housing vouchers to pay rent to Winter. In 2002 Winter began initiating numerous unwanted interactions of a sexual nature towards Quigley including visiting her home unannounced, refusing to leave her home when asked, and unwanted physical advances. Quigley felt so uncomfortable with Winter’s behavior that she met with her SCHA worker to report Winter’s actions. The SCHA worker informed Quigley that if she was to break her lease she would lose her housing voucher and that if she was to change the locks to the house she was required to provide Winter with a key. When Quigley approached Winter about releasing her from the lease, Winter refused and Quigley changed the locks on her door without giving Winter a key. When Quigley’s lease expired, she moved out of the property. Winter did not return her deposit. Quigley filed a complaint with the Sioux City Human Rights Commission and in 2006 she filed a complaint against Winter in the district court alleging sexual harassment, sex discrimination, coercion, intimidation, threats and interference with Quigley’s rights, in violation of the Fair Housing Act (FHA) and the Iowa Civil Rights Act (ICRA). Winter brought a breach of contract counterclaim against Quigley  insisting she owed him unpaid rent and failed to leave the rental home in a “clean and satisfactory condition.” The jury found in favor of Quigley and awarded her $13,685 in compensatory damages for the housing claims, $400 for Quigley’s breach of contract claim, and $250,000 in punitive damages.

Following the district court’s judgement, Winter filed a motion for a new trial objecting to the award of punitive damages. The district court entered an order denying  Winter’s motions for a new trial and judgment as a matter of law, yet reduced Quigley’s punitive damages from $250,000 to $20,527.50. Quigley appealed the district court’s judgment with respect to the amount of punitive damages and attorney fees. Winter cross-appealed asserting various errors at trial and objecting to any award of punitive damages.

The 8th Circuit Court of Appeals addressed Winter’s claims that the district court erred in denying Winter’s post-trial motions in relation to Quigley’s claims that there was (1) hostile housing environment caused by sexual harassment; (2) “quid pro quo” sexual harassment; (3) sex discrimination; and (4) coercion, intimidation, and interference with housing rights.

In response to Winter’s first objection the Court evaluated whether Winter successfully proved a “complete absence of probative facts” which would discredit Quigley’s claim of hostile housing environment. The Court determined that there was adequate evidence to support a hostile housing environment claim noting that, “[S]exual harassment is actionable when the offensive behavior unreasonably interferes with use and enjoyment of the premises.” The Court found sufficient evidence of numerous unwanted interactions of a sexual nature and, more importantly, that these interactions took place in Quigley’s own home where she was, “entitled to feel safe and secure and need not flee.” Winter was unable to provide proof sufficient to show that the jury’s decision was unreasonable.

Winter further argued that the district court erred in denying his motion for judgment as a matter of law on Quigley’s “quid pro quo” sexual harassment claim. Quid pro quo harrassment occurs when housing benefits are explicitly or implicitly conditioned on sexual favors.  In order for Quigley to prevail with this claim, the court recognized that she must demonstrate “(1) she was a member of a protected class; (2) she was subjected to unwelcome harassment in the form of sexual advances or requests for sexual favors; (3) the harassment was based on sex; and (4) her submission to the unwelcome advances was an express or implied condition for receiving job benefits or her refusal to submit resulted in a tangible job detriment”  The Court found that the specific words exchanged and advancements made during the inappropriate interactions between Winter and Quigley met the standards of “quid pro quo” harassment.  For example, when Quigley inquired about the likelihood of receiving her deposit back from Winter, Winter fluttered his hand against Quigley’s stomach and said, “My eagle eyes have not seen everything yet.” The jury could reasonably infer Winter was telling Quigley the return of her deposit was conditioned upon Winter seeing more of Quigley’s body or even receiving a sexual favor, which would amount to “quid pro quo” sexual harassment.

One of the grounds for a claim for coercion, intimidation or interference with housing rights under the FHA is retailiation, which the statute defines as “Retaliating against any person because that person has made a complaint, testified, assisted, or participated in any manner in a proceeding under the Fair Housing Act.”   Winter argued that Quigley’s coercion, intimidation, or interference with housing rights claim was essentially a retaliation claim, which she failed to prove.  However, the Court recognized that retaliation was only one form of conduct prohibited under 3617 and found that there was more than sufficient evidence supporting Quigley’s claim on the other grounds.

In response to Winter’s last claim, the court found that the provisions of the Fair Housing Act provide sufficient evidence supporting Quigley’s claim that Winter engaged in discriminatory housing practices when he coerced, intimidated, and interfered with her enjoyment of rights. The court affirmed the district court’s judgment with respect to Winter’s claims on cross-appeal.

The court also addressed Quigley’s claims that the court (1) improperly reduced the jury’s punitive damage award from $250,000 to $20,527.50, and (2) failed to conduct a proper analysis of Quigley’s entitlement to attorney fees and awarded an insufficient amount. Winter, however, conversely claims the district court erred when awarding any punitive damages at all.

In response to Winter’s claim the court recognized that the FHA provides for the recovery of punitive damages by victims of discriminatory housing practices using the same standard for punitive damages in FHA cases involving employment discrimination and civil right cases. The court notes that punitive damages are, “appropriate in a federal civil rights action when the defendant’s conduct is shown to be motivated by evil motive or intent, or when it involves reckless or callous indifference to the federally protected rights of others.” Winter confirmed he knew that sexual harassment was unlawful and Quigley presented sufficient evidence of sexual harassment by Winter. The court affirmed that punitive damages were appropriate.

The court then turned to Quigley’s claims to assess whether the punitive damages awarded were reasonable. In order to make this assessment the court considered: (1) “degree of the reprehensibility of the defendant’s conduct,” (2) the ratio between punitive damages and actual harm, and (3) “the civil or criminal penalties that could be imposed for comparable misconduct.”

After an evaluation of Winter’s actions directed specifically towards Quigley, the court found that Winter’s conduct was reprehensible because of her financial vulnerability and the power Winter held over Quigley and her family. However, when evaluating the ratio between punitive damages and actual harm, the court took guidance from the Supreme Court’s assessment of single-digit multipliers and found that the circumstances of this case and due process did not justify the jury’s original punitive damages award, which was eighteen times greater than the compensatory damages. Finally, in assessing sanctions for comparable misconduct, the court concluded that the reduced damages of $20,527.50 inadequately reflected the reprehensibility of Winter’s actions, and recommended an amount of $54,750 in punitive damages, which was four times the compensatory damages award ($13,685). The court also concluded that a reasonable attorney fee award in this case was $78,044.33.

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