Fair Housing Council v. Penasquitos Casablanca Owner's Ass'n

FILED
NOT FOR PUBLICATION JUN 02 2010

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S . CO UR T OF AP PE A LS

FOR THE NINTH CIRCUIT

THE FAIR HOUSING COUNCIL OF No. 08-55069
SAN DIEGO,
D.C. No. CV-05-00072-LAB
Plaintiff,

and MEMORANDUM *

JOANN REED; et al.,

Plaintiffs - Appellants,

v.

PENASÏUITOS CASABLANCA
OWNER'S ASSOCIATION,

Defendant - Appellee.

THE FAIR HOUSING COUNCIL OF No. 08-55072
SAN DIEGO,
D.C. No. CV-05-00072-LAB
Plaintiff - Appellant,

and

JOANN REED; et al.,

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
 Plaintiffs,

v.

PENASÏUITOS CASABLANCA
OWNER'S ASSOCIATION,

Defendant - Appellee.

THE FAIR HOUSING COUNCIL OF No. 08-55151
SAN DIEGO,
D.C. No. CV-05-00072-LAB
Plaintiff,

and

JOANN REED; et al.,

Plaintiffs - Appellees,

v.

PENASÏUITOS CASABLANCA
OWNER'S ASSOCIATION,

Defendant - Appellant.

Appeal from the United States District Court
for the Southern District of California
Larry A. Burns, District Judge, Presiding

Argued and Submitted August 4, 2009
Pasadena, California

Before: CANBY, WARDLAW and CALLAHAN, Circuit Judges.
 These cross-appeals arise in connection with a special jury verdict that

defendant Penasquitos Casablanca Owner's Association ('PCOA') violated the

federal Fair Housing Act ('FHA'), California Fair Employment Act, the California

Unruh Civil Rights Act, and the Bane Act with respect to the rights of plaintiffs

Joann Reed and the Fair Housing Council of San Diego ('FHCSD').

Pretrial, the district court granted judgment as a matter of law to the PCOA

against minor plaintiffs, Milton Rodgers, Jamel Rodgers, and Antwan Ramsey,

Reed's children and grandchild, for lacµ of Article III standing because they were

not 'aggrieved persons' under the FHA, 42 U.S.C. y 3602(i)(1). It also rejected a

proposed jury instruction as to punitive damages, acµnowledging that the legal

standard was recµless indifference, but concluding that no reasonable jury could

find recµless indifference in PCOA's failure to act under the circumstances

presented. The district court concluded post-trial that Reed was entitled to

attorneys' fees, but reduced the amount awarded due to its finding of limited

success, and denied FHCSD's request for attorneys' fees in its entirety. It also

denied FHCSD's motion for injunctive relief under 42 U.S.C. y 3613.

Reed, the minors, and the FHCSD appeal these rulings, while the PCOA

cross-appeals from the jury verdict, asserting that all its actions tooµ place post-

acquisition, thus precluding subject matter jurisdiction, and the attorneys' fee

3
award to Reed.1 We have jurisdiction pursuant to 28 U.S.C. y 1291. The parties are

familiar with the facts of this case, which we recite here only to the extent

necessary to explain our decision. We affirm in part and reverse in part.

Although the district court did not have the benefit of our recent opinion in

Committee Concerning Community Improvement v. City of Modesto, it correctly

ruled that 'the FHA reaches post-acquisition discrimination.' Comm. Concerning

Cmty. Improvement v. City of Modesto, Nos. 07-16715, 07-17407, slip op. at 14397

(9th Cir. Oct. 8, 2009). The PCOA argues that 42 U.S.C. y 3604(b) covers only

discrimination in connection with the acquisition of housing. Such a narrow

interpretation, however, would preclude the FHA from reaching acts of

discrimination, including sexual harassment, on the sole basis of the timing of the

discriminatory act. City of Modesto, at 14399. As we have concluded, such an

interpretation contravenes a natural reading of the relevant statutory and regulatory

language. Id. at 14398-99.

The district court erred in granting judgment as a matter of law against the

minors for lacµ of standing. Under the FHA, 'an aggrieved person may commence

1
The United States, appearing on behalf of the Department of Housing and
Urban Development ('HUD') and the U.S. Department of Justice, filed two Briefs
for the United States as Amicus Curiae Supporting Plaintiffs-Appellants/Cross-
Appellees Seeµing to Vacate Portions of the District Court's Order and Remand.

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a civil action . . . to obtain relief with respect to such discriminatory housing

practice or breach.' 42 U.S.C. y 3613(a)(1). An aggrieved person is any person

who 'claims to have been injured by a discriminatory housing practice.' 42 U.S.C.

y 3602(i)(1). Plaintiffs need not demonstrate that the minor children were the

victims or target of the sexual harassment, but rather that they suffered an 'actual

injury as a result of the defendant's conduct,' to establish standing. Gladstone

Realtors v. Village of Bellwood, 441 U.S. 91, 103 n.9 (1979). The record contains

evidence that the minors witnessed instances of sexual assault, suffered from

emotional disturbances, were generally confined to their home, and no longer used

the housing complex's amenities as a result of the ongoing sexual harassment.

Viewed in the light most favorable to the nonmoving party, this evidence is

sufficient to create a triable issue of fact that the minors suffered injury as a result

of PCOH's discriminatory practice. See M2 Software, Inc. v. Madacy Entm't

Corp., 421 F.3d 1073, 1086 (9th Cir. 2005).

The district court properly concluded that a showing of recµless indifference

is necessary for plaintiffs to prevail on their punitive damages claim. ER 81. See

Fair Housing of Marin v. Combs, 285 F.3d 899, 906 (9th Cir. 2002) (awarding

punitive damages where the defendant's conduct 'involves recµless or callous

indifference to the federally protected rights of others'); see also 42 U.S.C. y

5
3613(c) (allowing punitive damages 'if the court finds that a discriminatory

housing practice has occurred'). However, the district court erred on punitive

damages and instead, granted judgment as a matter of law against the plaintiffs.

A finding of recµless indifference 'ultimately focus[es] on the actor's state

of mind,' and requires that the defendant 'at least discriminate in the face of a

perceived risµ that its actions will violate federal law to be liable in punitive

damages.' Kolstad v. American Dental Ass'n, 527 U.S. 526, 535 (1999). A

recµless indifference finding, however, does not require that the defendant 'engage

in conduct with some independent, 'egregious' quality before being subject to a

punitive award.' Kolstad, 527 U.S. at 537. The evidence shows that PCOA failed

to respond to numerous sexual harassment complaints from residents, including

Reed, regarding Kent McDonald ('McDonald'). Although PCOA received a copy

of Reed's temporary restraining order against McDonald, and µnew that McDonald

was on parole and had been previously convicted for spousal rape, it continued to

employ him for two months after the initial complaints, during which the sexual

harassment continued. PCOA also failed to notify Reed upon McDonald's

termination. Taµen in the light most favorable to Reed, a reasonable jury could find

that PCOA acted with recµless indifference. See M2 Software, 421 F.3d at 1086.

6
 In light of the foregoing, we vacate and reverse the district court's reduction

of the attorneys' fees award to Reed due to 'limited success.' Webb v. Sloan, 330

F.3d 1158, 1168 (9th Cir. 2003). For the same reason, we vacate the district court's

orders denying attorneys' fees to FHCSD.

Because we have determined that the FHA reaches post-acquisition

discrimination, Comm. Concerning Cmty. Improvement, slip op. at 14397, we also

vacate and remand the district court's denial of FHCSD's motion for injunctive

relief.

AFFIRMED in part, REVERSED in part, and REMANDED.

7
 FILED
Fair Hous. Council of San Diego, et al. v. Penasquitos Casablanca JUN 02 2010
Owners' Ass'n, Nos. 08-55069, 08-55072, 08-55151 MOLLY C. DWYER, CLERK
U.S . CO UR T OF AP PE A LS

CALLAHAN, Circuit Judge, concurring:

I concur in the memorandum disposition. I write separately only because I

do not agree that 'a natural reading' of 42 U.S.C. y 3604(b) mandates the result in

Committee Concerning Community Improvement v. City of Modesto, 583 F.3d 690,

713 (9th Cir. 2009).

I find y 3604(b) to be ambiguous with regard to the viability of post-

acquisition claims. However, I find that this ambiguity is resolved by the relevant

HUD regulations. Ojo v. Farmers Group, Inc., 600 F.3d 1205, 1208 (9th Cir.

2010) (en banc) (per curiam) (explaining that '[w]hen statutory language is

ambiguous, we defer to a 'permissible construction' of that statute by the agency

charged with administering that statute') (quoting Chevron U.S.A., Inc. v. Natural

Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984)). 'Congress has charged the

Department of Housing and Urban Development ('HUD') with the duty to maµe

rules to carry out the FHA.' Id. (citing 42 U.S.C. y 3614a). In turn, HUD has

promulgated 24 C.F.R. y 100.65(b)(4), which strongly supports the view that y

3604(b) covers post-acquisition claims. It provides that 'prohibited actions under'

y 3604(b) include '[l]imiting the use of privileges, services or facilities associated

1
with a dwelling because of race, color, religion, sex, handicap, familial status, or

national origin of an owner, tenant or a person associated with him or her.'

Because the use of a dwelling's services and facilities must necessarily occur after

acquisition, this regulation demonstrates HUD's interpretation of y 3604(b) as

covering post-acquisition acts of discrimination. Although we did not rely on

Chevron to decide this issue in City of Modesto, I would reach the same conclusion

through deference to HUD.

2