"Unintentional" Discrimination: A Recent Lawsuit Illustrates How Not to Do That

Defendant Amelia Lewis was an independent real estate broker who showed homes in Edgewater, which made up a large portion of her business. The FHJC began an investigation into Edgewater after an article in The New York Times described the co-op as not "open to just anyone." The article stated that prospective buyers were required to obtain references from three current residents. FHJC sent both black and white testers to meet with Lewis to inquire about housing at Edgewater.

On September 18, 2009, a white tester, posing as a married woman with no children, met with Lewis. Lewis informed the tester that she would arrange for her to see several houses at Edgewater, each priced below $300,000. Lewis described the co-op as "very nice" and "mostly ethnic Irish, German, Italian . . . there's some Puerto Rican, not many." Lewis also said the co-op "would love" the tester. When the white tester asked about the reference policy and informed Lewis she did not know anyone in the community, Lewis downplayed the importance of the policy, described the admission procedures as "technicalities" and said she would help the tester satisfy the requirements.

When a rule is in place, it

must be applied uniformly,

unless there is a good and

identifiable reason for deviation.

On September 29, 2009, the black testers, posing as a married couple, met with Lewis to ask about homes in nearby Silver Beach (not Edgewater) that were priced below $300,000. On the phone, Lewis told one of the testers she had a home available to show, describing Edgewater and Silver Beach as "the same" and asked if the testers knew three residents. When they said they did not, Lewis stated, "There's no way you are going to get in there."

"Archie Bunker territory"

Lewis stated she could not help with references, and said that there were very few people of color and that "it is like Archie Bunker territory." Lewis related a story that 15 or 20 years ago a cross was burned in the yard of a house just outside Edgewater. Lewis cited the reference requirement as a "categorical bar" to showing apartments. Lewis then wanted to show them a home that was above the testers' stated price range and near project housing. None of the testers ever spoke with a representative of Edgewater.

Edgewater told the court that Lewis was not an agent, employee or representative of Edgewater and that therefore her comments could not have been attributed to Edgewater. The court explained that FHJC was not suing Edgewater based on the statements and actions of Lewis, but rather because the co-op's three-reference policy violated the applicable statutes. Edgewater also contended that blacks have been accepted by Edgewater, but failed to identify any living there or any who had applied.

Disparate Stories

Board members testified as to the reason for the three-reference rule. They gave slightly different answers. They asserted the need to confirm the potential buyer's financial soundness and lack of a criminal record. The court noted "troubling inconsistencies" when board members described what constituted a good reference and who could provide one. Notably, there were discrepancies about whether the requirement that one giving a reference live in the co-op for one year was actually adhered to, whether the individual selling the house could provide a reference, and whether there was a requirement that the one giving the reference knew the prospective buyer.

Ultimately, the court determined that there were issues of fact that would have to be determined by a jury.

Comment: The court discussed intentional discrimination and the way in which the actions of an independent real estate broker can be used as circumstantial evidence of discrimination. Specifically, the court found that a jury could determine that the broker's actions, even though she was not an agent or employee of the co-op, were evidence of intentional discrimination.

The court also discussed "disparate impact" discrimination and cited statistics offered by the plaintiff based on census data. The statistics were glaring: the percentage of blacks who owned homes at Edgewater (to the extent there were any – the decision was not entirely clear on this point, apparently because Edgewater was not clear) was far less than the percentage of black homeowners in The Bronx and in New York City.

Further, the court considered that the board members could not agree on who was eligible to give a reference under the three-reference rule. It is important for boards to remember that when a rule is in place, it must be applied uniformly, unless there is a good and identifiable reason for deviation.

Richard Siegler is a partner in the New York City law firm of Stroock & Stroock & Lavan.  Dale J. Degenshein is a special counsel for that firm.

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