Reach of Fair Housing Act Crux of High Court Case
The plight of a mixed-race couple who were turned away from buying a house in this small desert town will come before the Supreme Court this week in a case that will decide who can be held liable for blatant racial discrimination in real estate sales.
At issue is whether brokers and supervisors can be sued if an agent discriminates against a potential buyer.
Realtors are urging the court to strictly limit the reach of the Fair Housing Act. They say the law should punish only those who engage in misconduct.
But civil rights lawyers say the only way to stop discrimination in home sales is to hold supervisors and brokers liable for the actions of their sales staff.
When it passed the housing rights law in 1968, Congress made it illegal to discriminate against prospective buyers or renters because of race.
Yet, racial bias in real estate persists across the nation, civil rights lawyers say. About one in five black or Latino buyers experiences discrimination when inquiring about a newly advertised house, according to a recent study of 20 metropolitan markets, including Los Angeles.
Under state law, real estate brokers are licensed, and typically one broker manages a staff of agents.
“When we hand you a license [as a broker], it says you are responsible. The burden is on you,” says John Relman, a lawyer for the National Fair Housing Alliance in Washington. “The best deterrent to discrimination on a day-to-day basis is to hold the broker liable for it.”
Dave Meyer, a broker and former owner of Triad Realtors whose case is before the Supreme Court, says it is unfair to be sued personally for something he did not do.
“Everyone acknowledges I was not involved in this. I’ve never met the Holleys,” said Meyer, referring to the couple who sued for discrimination. “Who in their right mind would want a job in this industry if everything you and your family have worked for can be put at risk?”
The National Assn. of Realtors and the California Assn. of Realtors support Meyer. But Bush administration lawyers side with the Holleys, saying that, at least in some instances, an owner and broker can be held liable if he failed to supervise his agents.
The Supreme Court will hear arguments in the case Tuesday of Meyer vs. Holley.
It was 1996 when Mary Holley, a registered nurse, and her husband, Dave, a Kmart employee, decided they needed a larger house to make room for their growing son and her ailing father. And they had the money to buy, because they were selling a small house in Los Angeles.
But their house hunt proved frustrating.
$150,000 to Spend
They contacted Triad Realtors, the leading real estate firm in town, and said they were willing to pay about $150,000, an ample sum in the depressed market of Twentynine Palms.
The Marine Corps base on the edge of town is the largest employer, but the base went into decline after the Persian Gulf War ended in 1991 and took the housing market down with it, residents say.
The Holleys said Triad agent Grove Crank, an ex-Marine, showed them only a few smallish homes and some others that were well beyond their means.
When driving around, they spotted a new home under construction on the other side of town. The Holleys knew the builder, Brooks Bauer, and he said he was asking $145,000 for it. They told him they were very interested.
The home was listed with Triad. They toured the home with a young agent and liked what they saw.
There was only one unpleasant moment, said Mary Holley, who is black and whose husband is white. She was standing in the driveway when a senior agent at Triad, who happened to live next door, stopped by. “She said, ‘Oh, it’s you,’ ” Holley said, a comment that struck her as odd.
But the house had the extra rooms they wanted, and they told the Triad agent they planned to make an offer. They would put down $5,000 now and pay the asking price of $145,000 when it was completed.
Not Enough
That evening, the agent who had shown them the house called to say the senior agents in the office, including Crank, said the $5,000 down payment was not sufficient. When the Holleys went to Triad the next day, they said, the agent confirmed that their offer was too low. Upset and angry, they left.
A few months later, Bauer saw Holley at a store and said he was surprised she had not put in an offer on the house.
“I said we would have loved to have bought the house, but they didn’t want to take our offer,” she said.
Bauer was upset and surprised. He became even more so after he stopped by to talk to Crank at Triad. He said Crank described the Holleys as a “salt-and-pepper team” and dismissed them with a racial epithet.
“I never expected to hear something like it. It was as clear as could be they had been discriminated against. And that’s just wrong,” Bauer said.
By then, Bauer had sold the new home for $20,000 less than the Holleys had been willing to pay. He reported the incident and Crank’s comment to a fair housing group.
After the Holleys learned the full story, they joined with Bauer in suing Crank and Triad Realtors under the Fair Housing Act.
But the lawyers soon discovered a problem. Neither Triad nor Crank had any assets.
Civil rights lawyers say they were not surprised. Real estate firms are often “mom-and-pop operations,” lawyer Relman said. “The company has desks, a few chairs and some cell phones. So, if you sue the company, they say, ‘Sorry, we have no money.’ ”
Triad had insurance, but its policy excluded acts of discrimination.
So the lawsuit was amended to include Meyer, Triad’s founder, president and broker. Unlike his co-workers, Meyer and his wife had several houses and pieces of property.
Now 60, Meyer said he withdrew from the real estate agency’s day-to-day operation by the mid-1990s and left Crank in charge.
Before the Holleys’ suit could go to trial, Meyer tried to have himself removed from the case.
A federal judge in Los Angeles ruled Meyer cannot be held liable for the discrimination by Crank and Triad Realtors.
But the U.S. 9th Circuit Court of Appeals disagreed and ruled the Fair Housing Act should be read broadly to outlaw discrimination by all those who “direct or control” the buying and selling of homes.
The decision sent a jolt through the real estate industry, and when Meyer appealed to the Supreme Court, he was backed by the industry.
“Brokers have a duty to supervise, but we don’t think they should be strictly liable for the actions of others,” said June Barlow, general counsel for the California Assn. of Realtors in Los Angeles. There are nearly 209,000 real estate salespeople in the state, and most of them work for a corporate broker like Meyer, she said. But the Holleys’ lawyers say Meyer failed to carry out his legal duties.
“This case presents the unusual circumstances where a corporate officer-owner and real estate broker completely abdicated his responsibilities for supervising his real estate salespersons,” said Elizabeth Brancart, a fair-housing expert from Pescadero who represents the Holleys.
For its part, the Supreme Court has said remarkably little about the Fair Housing Act over its 34-year history. It has decided only half a dozen cases, and most of them came in the early 1970s. Then, a more liberal court broadened the reach of the law by allowing more people to bring claims for housing discrimination. Testers, as well as actual buyers or renters, can serve as plaintiffs in suits for housing bias, the court said.
But the justices have not ruled on how broadly the liability can be assessed once the discrimination is proved.
If the Holleys prevail in the Supreme Court, the case will return to Los Angeles for a trial.
But if Meyer prevails in the Supreme Court, the case will likely end. The plaintiffs’ lawyers say it would be foolish to try a case of housing discrimination if no judgment can be paid at the end.
Grove Crank, the original target of the suit, has been all but forgotten. In an interview, he denied making any racist comments. “I’ve known [the Holleys] since they came to town. I showed them houses. I even showed them my own house once. I could care less what color they are.”
The Marine veteran blames the Holleys for walking out and not pursuing the house they wanted. “We had no offer from them,” he said.
“In all honesty, I think this is about greed. They are hunting for a pot of gold.”
Holley said she and her husband gave up hunting for a new home, and that she remains saddened by the experience.
Her father eventually went to a nursing home.
“I think about that a lot. All we wanted was a bigger home,” she said. “I suppose God didn’t want us to move after all.”
