2d Circuit gives the Fair Housing Act a ringing endorsement

The Court of Appeals has sustained a jury verdict in favor of a Fair Housing Act plaintiff, holding that the jury had an evidentiary basis to find that a town in Connecticut violated the Act in rejecting a group home for discriminatory reasons. In sustaining the verdict, the Court rejects the Town's efforts to scale back the scope of the FHA, enacted in 1968 to prohibits discriminatory housing and rental practices.

The case is Gilead Community Services v. Town of Cromwell, issued on August 12. The Town appears to have done all it could to reject the group home, which would have served people with mental disabilities. A community outcry greeted the proposal, and public officials made the approval process more difficult for the plaintiffs. To put it mildly, this case does not give us confidence about the people who run the Town of Cromwell. The jury certainly felt that way, awarding the plaintiffs $181,000 in compensatory damages and $5 million in punitive damages.

The Court of Appeals (Parker, Lynch and Nathan) resolves a number of issues:

1. While the Supreme Court has imposed a more defendant-friendly "but-for" causation test for other civil rights statutes, including Sections 1981 and 1983, the more plaintiff-friendly "motivating factor" test still governs the Fair Housing Act. The Court reasons:

by its plain text, Section 804(c) is violated even absent any discriminatory transactions or conduct. To be liable, a defendant must simply “make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on . . . handicap,” whether or not the defendant proceeds to carry out that discriminatory preference. Id. § 3604(c). The question under Section 804(c), as this Circuit has long held, is not what caused or motivated any conduct by a defendant but whether a defendant’s statement “suggests to an ordinary reader that a particular [protected status or identity] is preferred or dispreferred[.]”

Second Circuit cases have long applied the motivating factor test to FHA cases, and the Court of Appeals stands firm on that causation test. Defendants though they could exploit recent Supreme Court cases that applied the but-for causation test, but the Court of Appeals says those cases involved different statutes that employ different liability language. So long as retaliatory motive plays a part in the discriminatory action, the FHA plaintiff wins the case.

 2. The Town may be held vicariously liable under the FHA. While Section 1983 cases require the plaintiffs to prove the municipality had a custom or practice of discrimination in order to hold the municipality liable, that is not the case under the FHA. "It is clear and undisputed that the FHA generally allows for vicarious liability, and we reject Cromwell’s invitation to create a judicial carve-out from that liability for local governments when Congress itself has declined to do so." Section 1983 cases force the plaintiffs to meet a high standard for municipal liability. But the FHA is not Section 1983.

3. The Town argues that punitive damages are not available against municipalities under the FHA. While the FHA does provide for such damages, it does not expressly state that you can recover them against municipalities. The Town argues, therefore, that the principle under Section 1983 against slapping municipalities with punitive damages should apply under the FHA. The Court of Appeals once again rejects the Town's creative arguments to scale back the FHA.

4. The jury exceeded its authority in awarding $5 million in punitive damages against the Town. First, there was evidence of reprehensible conduct by Town officials, and this set of facts favors plaintiff:

there was ample evidence of highly reprehensible conduct by the town of Cromwell. The town engaged in a deliberate and sustained campaign of discrimination and retaliation, reflecting “repeated actions” rather than “an isolated incident” and resulting from “intentional malice” rather than “mere accident.” The town also “evinced an indifference to or reckless disregard of the health or safety of others,” when its police officers leaked sensitive medical information about a Gilead resident to the public and failed to investigate an episode of vandalism of Gilead’s group home. And the ultimate targets of the town’s conduct, the residents with disabilities who relied on Gilead’s housing, “had financial vulnerability.” Finally, it bears remembering that Cromwell officials not only violated the FHA but also publicly celebrated when their discriminatory efforts succeeded in keeping Gilead’s residents out of town. This is a case where “further sanctions” beyond compensatory damages are warranted “to achieve punishment [and] deterrence.”

But to sustain a high punitive damages award, they must also be proportional to the compensatory damages. The Supreme Court requires such proportionality. Here, we have a 27.6 to 1 ratio. The Supreme Court "has cautioned that 'few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.'” This ratio is too high, and the Court of Appeals reduces the punitives to $2 million, still a healthy deterrent against illegal and discriminatory behavior. The Court says:

The high degree of reprehensibility of Cromwell’s conduct supports a significant award of punitive damages. And the fact that Cromwell’s discrimination inflicted non-economic harms that may not be easily quantifiable likewise suggests that even a relatively high ratio of punitive to compensatory damages can survive constitutional scrutiny in this case. But the 27.6 to 1 ratio here is simply too high, as confirmed by the much lower civil penalties available for comparable conduct. 

We conclude that the jury’s award of punitive damages is unconstitutionally excessive and that the maximum sustainable amount of punitive damages is $2 million.