Civil Penalties for Fair Housing Act Violations; Interim Rule

[Federal Register: February 10, 1999 (Volume 64, Number 27)]
Department of Housing and Urban Development
24 CFR Part 180
Civil Penalties for Fair Housing Act Violations; Interim Rule CUT HERE

[Docket No. FR-4302-I-02]
RIN 2529-AA83

 
Civil Penalties for Fair Housing Act Violations

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity, HUD.

ACTION: Interim rule.

SUMMARY: On December 18, 1997, HUD published for public comment a 
proposed rule that would amend HUD's regulations governing hearing 
procedures for civil rights matters to clarify that, in a given case, 
an Administrative Law Judge (ALJ) may, and in appropriate circumstances 
should, assess more than one civil penalty against a given respondent, 
where the respondent has committed separate and distinct acts of 
discrimination. The rule also proposed to amend these regulations to 
describe how ALJs are to consider housing-related hate acts under the 
six factors ALJs apply in determining the amount of a civil penalty to 
assess against a respondent found to have committed a discriminatory 
housing practice. This interim rule makes effective the amendments in 
the December 18, 1997 proposed rule, takes into consideration the 
public comments received on the proposed rule, and solicits additional 
public comments on the rule. All public comments will be taken into 
consideration in the development of the final rule.

DATES: Effective date: March 12, 1999. Comment due date: Comments on 
the interim rule are due on or before: April 12, 1999.

ADDRESSES: Interested persons are invited to submit written comments 
regarding this interim rule to the Rules Docket Clerk, Office of 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410. Comments 
should refer to the above docket number and title. A copy of each 
comment submitted will be available for public inspection and copying 
between 7:30 a.m. and 5:30 p.m. weekdays at the above address. 
Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Stephen I. Shaw, Office of Litigation 
and Fair Housing Enforcement, Room 10258, Department of Housing and 
Urban Development, 451 Seventh Street, SW, Washington, DC 20410; 
telephone (202) 708-1042 (this is not a toll-free telephone number). 
Hearing or speech-impaired persons may access this number via TTY by 
calling the toll-free Federal Information Relay Service at 1-800-877-
8339.

SUPPLEMENTARY INFORMATION:

I. The December 18, 1997 Proposed Rule

    On December 18, 1997 (62 FR 66488), HUD published for public 
comment a proposed rule that would interpret the Fair Housing Act (the 
Act) to allow Administrative Law Judges (ALJs) to assess a separate 
civil penalty for a series of acts involving housing discrimination. 
Under the Act, housing discrimination violations carry maximum civil 
penalties for first-, second-, and third-time offenders. A number of 
ALJs have interpreted the Act's provisions narrowly and assessed a 
single civil penalty against a violator, even where the violator 
committed more than one separate and distinct act of discrimination.
    The December 18, 1997 proposed rule advised that it would amend 
HUD's regulations at 24 CFR part 180 (Hearing Procedures for Civil 
Rights Matters) to clarify that, in a given case, an ALJ may, and in 
appropriate circumstances should, assess more than one civil penalty 
against a given respondent, where the respondent has committed separate 
and distinct acts of discrimination. The December 18, 1997 proposed 
rule also advised it would amend part 180 to describe how ALJs are to 
consider housing-related hate acts under the six factors ALJs apply in 
determining the amount of a civil penalty to assess against a 
respondent found to have committed a discriminatory housing practice.
    In addition to the substantive amendments described above, the 
December 18, 1997 proposed rule advised of a clarifying change to 24 
CFR part 180. Specifically, the December 18, 1997 rule proposed to move 
the provisions governing the assessment of civil penalties found at 
Sec. 180.670(b)(3)(iii)(A), (B), and (C) to a new Sec. 180.671. HUD 
also proposed to make changes to certain of these provisions for 
purposes of clarity.
    This interim rule is applicable to all fair housing cases filed  
with HUD on or after the effective date of this rule. This rule, 
however, does not state to what degree it applies to pending 
administrative Fair Housing Act cases as of that date. HUD intends that 
the rule apply to any cases it charges on or after the effective date 
of the rule.
    The December 18, 1997 proposed rule provided additional information 
on the amendments to 24 CFR part 180.

II. Differences Between the December 18, 1997 Proposed Rule and 
This Interim Rule

    This interim rule makes effective the amendments in the December 
18, 1997 proposed rule and takes into consideration the public comments 
received on the proposed rule. HUD is making two additional changes to 
the proposed rule in response to public comment. First, HUD has 
clarified the definition of ``separate and distinct housing practice'' 
in Sec. 180.671(b) (see HUD's response to the comment entitled 
``Definition of `separate and distinct housing practice' is unclear'' 
in section III of this preamble for additional information regarding 
this change). HUD has also revised the definition of ``housing-related 
hate act'' in Sec. 180.671(c)(2)(ii). This revision clarifies the 
distinction between discriminatory housing practices that violate 
section 818 of the Act but would not be housing-related hate acts, and 
such hate acts (see HUD's response to the comment entitled ``Definition 
of `housing-related hate act' is confusing'' in section III of this 
preamble for additional details regarding this change).
    This rulemaking is part of President Clinton's ``Make 'Em Pay'' 
initiative, which is designed to fight housing-related acts of hate 
violence and intimidation with increased enforcement and monetary 
penalties. In order to provide additional public participation in this 
rulemaking, HUD is soliciting comments on this interim rule. All public 
comments will be taken into consideration in the development of the 
final rule.

III. Discussion of Public Comments on the Proposed Rule

    The public comment period on the proposed rule closed on January 
20, 1998. Six public comments were received by HUD. This section of the 
preamble presents a summary of the significant issues raised by the 
public commenters on the December 18, 1997 proposed rule, and HUD's 
responses to these comments.

A. The Public Comments, Generally

    Most of the commenters expressed reservations about HUD's proposed 
amendments to 24 CFR part 180. Generally, the comments can be divided 
into four broad categories: (1) Commenters that believe the proposed 
rule was unclear and request additional guidance; (2) commenters that 
express

[[Page 6745]]

concern about the impact of the proposed regulations; (3) commenters 
that question HUD's authority or justification for issuing the rule; 
and (4) commenters that question whether HUD complied with the 
necessary rulemaking requirements in issuing the proposed regulations.

B. Commenters that Believe the Proposed Rule Was Unclear

    Comment: Definition of ``housing-related hate act'' is confusing. 
One commenter wrote that the definition of ``housing-related hate act'' 
in the proposed rule included most or all discriminatory practices 
prohibited by the Act. According to the commenter, the proposed rule 
marks a sharp break with HUD's traditional practices, because it is the 
first time that HUD has characterized any such discrimination as 
``hate.'' The commenter wrote that the new interpretation would lead to 
confusion in HUD's fair housing enforcement process. The commenter 
described three possible areas of confusion:
    1. Definition may be applied too narrowly. First, the commenter 
stated that the proposed definition may result in ALJs applying the 
standard too narrowly:

    ALJs may mistakenly believe that the word ``hate'' in the 
``housing-related hate act'' standard requires that HUD must prove 
that ``hate''--rather than fear, financial self-interest, amusement, 
or any other factor--motivated a discriminatory housing act before 
an ALJ can apply that standard.

    HUD Response. In response to the commenter's first point, the 
language of the definition of ``housing-related hate act'' found in new 
Sec. 180.671(c)(2)(ii) does not imply the necessity to prove a 
motivational factor for such an act to fall within the definition. 
Rather, the definition describes the objective characteristics of the 
act that must be found for such an act to fall within the definition 
(i.e., the act is characterized by a threat or the actual carrying out 
of violence, intimidation, coercion, assault, bodily harm, and/or harm 
to property). Accordingly, HUD does not believe an ALJ applying this 
definition would be confused into thinking that the definition's 
inclusion of the term ``hate'' requires proof of a respondent's 
internal motivation before the ALJ could find that the respondent has 
committed a housing-related hate act. Therefore, HUD did not revise the 
proposed rule as a result of this comment.
    2. Definition may be applied too broadly. The commenter also wrote 
that, although the use of ``hate'' in the proposed definition could 
narrow its application, the lack of clarity in the definition may 
result in ALJs applying the standard too broadly:

[The proposed] definition of ``housing-related hate act'' includes 
discriminatory housing practices that also involve ``threat[s],'' 
``intimidation,'' and ``coercion,'' among other characteristics. 
However, those terms describe most, if not all, discriminatory 
housing practices. Absent any further clarification, an ALJ could 
determine that most or all discriminatory housing practices are 
``housing-related hate acts'' favoring the imposition of maximum 
penalties.

    HUD Response. The commenter's second concern indicates that the 
commenter believes that HUD's proposed definition of housing-related 
hate act covers all forms of housing discrimination anywhere in the 
Act. The definition of housing-related hate act does not include all 
discriminatory housing practices. For example, racial steering (i.e., 
discouraging a person from renting or buying a dwelling in a particular 
area, or encouraging a person to rent or buy in a particular area, or 
assigning a person to housing in a particular area, on account of that 
person's race, see 24 CFR 100.70(c)), would ordinarily not include a 
threat of, or actual ``violence, intimidation, assault, bodily harm, 
and/or harm to property.'' (See 24 CFR 180.671(c)(2)(ii).) As another 
example, a difference in the terms and conditions of rental, such as 
charging a tenant of a particular ethnic, national, racial or religious 
background more rent than other tenants, would not include the elements 
that HUD has identified as necessary to constitute a housing-related 
hate act.
    The commenter may have meant that HUD's proposed definition of 
housing-related hate act covers ``most, if not all'' of the conduct 
prohibited by section 818 of the Act (42 U.S.C. 3617). That provision 
makes it illegal for anyone to coerce, intimidate, threaten or 
interfere with any person in the exercise or enjoyment of his or her 
fair housing rights, or on account of having aided another person in 
the exercise and enjoyment of his or her fair housing rights. Assuming 
that this is what the commenter meant, it seems to follow that the 
substance of the comment is that it is unnecessary for HUD to define 
housing-related hate act as being something apart from section 818 
itself. In proposing and adopting this definition, HUD intends that the 
definition focus on (actual or threatened) violence, assault, bodily 
harm and property damage, as well as intimidation and coercion that 
contains those violent elements, so that the definition refers to the 
more heinous and violent acts among all the acts which violate section 
818. HUD does not intend that the proposed definition of housing-
related hate act include non-violent discriminatory acts which violate 
section 818.
    HUD believes that there are clear distinctions between 
discriminatory housing practices that violate section 818 but would not 
be housing-related hate acts. In order to clarify this distinction, HUD 
has revised the definition of housing-related hate act in new 
Sec. 180.671(c)(ii) to read as follows:

    For purposes of this section [Sec. 180.671], the term ``housing-
related hate act'' means any act that constitutes a discriminatory 
housing practice under section 818 of the Fair Housing Act and which 
constitutes or is accompanied by actual violence, assault, bodily 
harm, and/or harm to property; intimidation or coercion that has 
such elements; or the threat or commission of any action intended to 
assist or be a part of any such act.

    The following examples demonstrate conduct which violates section 
818, but which would not be within the meaning of the revised 
definition. One example of such conduct would be where the owner or 
manager of an apartment complex fired an employee because he or she 
rented apartments to African-American and Mexican-American applicants, 
contrary to the instructions of the owner or manager to discriminate 
against such applicants (See Smith v. Stechel, 510 F.2d 1162, 1164 (9th 
Cir. 1975)).
    Another example of a discriminatory housing practice that violates 
section 818 but which HUD does not intend to include in the revised 
definition of housing-related hate act involves a local jurisdiction 
using a threat of criminal prosecution to deprive members of protected 
classes of their housing rights. In People Helpers v. City of Richmond 
789 F.Supp. 725 (E.D. Va. 1992), plaintiff was a non-profit 
organization whose mission was to provide affordable housing for 
individuals with mental and physical handicaps. It purchased a building 
in Richmond, VA for the purpose of providing housing to such 
individuals. The City undertook a variety of investigations of the 
plaintiff's operations and the conditions in the building. Plaintiff 
sued, claiming the City's investigations were motivated by animus 
against plaintiff's disabled clients and interfered with the enjoyment 
of its fair housing rights. The court ruled that plaintiff's claims 
stated a viable cause of action, and it was entitled to try to prove 
that the City's investigations interfered with the organization's fair 
housing rights in violation of section 818. Because the

[[Page 6746]]

City's actions were non-violent, they would not be housing-related hate 
acts.
    Further, retaliating against a person because he or she has made a 
fair housing complaint or otherwise assisted or participated in a 
proceeding under the Act would violate section 818 (24 CFR 100.400). 
This type of retaliation, such as raising a tenant's rent because the 
tenant had engaged in a protected activity, would not amount to a 
housing-related hate act as HUD has defined that term in this interim 
rule.
    In addition, some types of harassment directed to preventing the 
enjoyment of fair housing rights can also constitute a section 818 
violation without constituting a housing-related hate act as HUD has 
defined it. One example is found in HUD v. Williams (2A Fair Housing--
Fair Lending para. 25,007 at 25,118-19 (HUD ALJ March 22, 1991)), in 
which a landlord's 6:00 a.m. telephone call to a tenant with HIV 
inquiring about the tenant's condition was found to violate section 
818. Because this activity did not involve a threat of physical 
violence to the tenant or his property, this act was found not to 
constitute a housing-related hate act.
    On the other hand, although hate acts, as defined, involve violence 
or a threat of violence, that does not mean that a respondent must have 
been convicted of a hate crime before an ALJ may find that respondent 
has committed a housing-related hate act. See, e.g., HUD v. Simpson, 2A 
Fair Housing--Fair Lending para. 25,082 (HUD ALJ Sept. 9, 1994) 
(neighbors found liable in HUD fair housing case for engaging in 
various forms of harassment and threat against neighbors of South 
American origin, violating Section 818 of the Act, 42 U.S.C. 3617).
    3. Definition may lead to inquiries about motivation. Finally, the 
commenter wrote that the proposed standard may shift the focus of 
enforcement proceedings to the motivation of the respondent:

    [A] mistaken focus on ``hate'' [in the proposed standard] may 
prompt ALJs to allow unwarranted inquiries into motivation during 
enforcement proceedings. Thus, hearings that should properly focus 
on discrimination--regardless of any underlying motivation for that 
discrimination--could instead focus on why the respondent 
discriminated.

    HUD Response. As HUD noted above, the definition in 
Sec. 180.670(c)(2)(ii) is based on objective criteria that do not 
require an inquiry into motivation. An ALJ, however, properly may 
inquire into motivation in considering whether to assess a civil 
penalty, and, if so, how much. For instance, an ALJ may consider 
motivation under the factors of degree of culpability and nature and 
circumstances of the violation (see, e.g., HUD v. Gutleben, 2A Fair 
Housing--Fair Lending para. 25,103 (HUD ALJ Aug. 15, 1994) (ALJ 
expressly considered one respondent's degree of racial animus in 
assessing the maximum civil penalty against him, while giving credit to 
another respondent's minimal culpability in declining to assess any 
civil penalty against her)).
    Comment: Recommended substitute language for proposed 
Sec. 180.671(c)(2). One commenter recommended substitute language for 
proposed Sec. 180.671(c)(2), which defines ``housing-related hate 
act.'' According to the commenter, the suggested language tracks the 
relevant portion of federal criminal civil rights legislation 
introduced by Senators Kennedy and Specter (S. 1529) and Congressmen 
Schumer and McCollum (H.R. 3081), which President Clinton and the 
Department of Justice have endorsed. The commenter believes that the 
substitute language sets clear evidentiary criteria for when an ALJ 
should maximize a civil penalty. The commenter also recommended the 
substitute language because an ALJ will be able to apply the revised 
standard only when particularly violent discriminatory housing 
practices occur. The substitute provision would read:

    Where the ALJ finds any respondent to have committed a 
discriminatory housing practice under section 818 of the Fair 
Housing Act that resulted in death or bodily injury to any person, 
or involved an attempt, through the use of fire, a firearm, or an 
explosive device to cause death or bodily injury to any person, the 
ALJ shall take this fact into account when considering the factors 
listed in paragraphs (c)(iii), (iv), (v), and (vi) of this section.
    HUD Response. For the reasons discussed above, HUD does not agree 
that the definition of ``housing-related hate act'' in 
180.670(c)(2)(ii) (as revised) is too narrow, too broad, or will lead 
to improper inquiries regarding motivation. Rather, the nature of the 
act involved in committing the discriminatory housing practice is the 
determining factor as to whether the discriminatory housing practice is 
a housing-related hate act. Furthermore, the commenter's proposed 
definition is under-inclusive. For example, a cross burning on a 
minority family's front lawn, bricks thrown through the windows of a 
minority family's house, and hate graffiti threatening violence sprayed 
on a minority family's house all would fall outside the commenter's 
proposed definition, because they neither attempt nor result in ``death 
or bodily injury.'' HUD believes that each of those acts is properly 
included within the definition of housing-related hate act in this 
interim rule.
    Comment: HUD should provide additional guidance on the six factors 
ALJs must consider in determining the civil penalty amount. Proposed 
Sec. 180.671(c) described the six factors that an ALJ must consider in 
determining the civil penalty amount for each separate and distinct 
discriminatory housing practice. Two commenters recommended that HUD 
revise the proposed rule to provide additional guidance on the six 
factors. One of the commenters saw two related benefits arising from 
the provision of the additional guidance:

    Providing this additional clarification to the six factors will 
allow the ALJ to impose the maximum civil penalties when they are 
needed, but will not penalize, with unnecessary severity, 
respondents who, for example, acted unintentionally or without 
malice. The additional guidance will also help to ensure greater 
consistency among ALJs in assessing appropriate penalties.

    HUD Response. The six factors were first included as an instruction 
to ALJs in the House Report on the Fair Housing Act Amendments of 1988 
(H. Rep. 100-711, 100th Cong., 2nd Sess. 37 (1988), 1988 U.S. Code 
Cong. & Admin. News 2198). The ALJs have applied the six factors 
consistently in their decisions (see, e.g., HUD v. Kormoczy, 2A Fair 
Housing--Fair Lending para. 25,071 at 25,664 (HUD ALJ May 16, 1994) 
(listing the six factors and specifically applying the degree of 
culpability to lower the civil penalty assessed); HUD v. Pheasant Ridge 
Associates, Ltd., 2A Fair Housing--Fair Lending para. 25,123 at 26,052 
(HUD ALJ Oct. 25, 1996) (focusing on degree of culpability and 
financial resources factors to raise the civil penalty assessed); HUD 
v. Simpson, 2A Fair Housing--Fair Lending para. 25,082 at 25,764 (HUD 
ALJ Sept. 9, 1994) (focusing on previous violations, nature and 
circumstances of the violation, the goal of deterrence, and 
respondent's financial circumstances factors to raise the civil penalty 
assessed); HUD v. Murphy, 2A Fair Housing--Fair Lending para. 25,002 at 
25,058 (July 13, 1990) (applying all the factors to reduce the civil 
penalty assessed). In other words, HUD is codifying the legislative 
history and case law relating to the six factors. HUD, therefore, finds 
it unnecessary to clarify their application further through a 
rulemaking.
    Comment: HUD should expand the list of factors to be considered by 
an ALJ in determining the civil penalty amount. One commenter 
recommended that HUD add five additional factors to the

[[Page 6747]]

list in proposed Sec. 180.671(c). Specifically, the commenter suggested 
that the ALJ should also be required to consider whether the respondent 
has:
    (1) Admitted guilt without the need for a hearing;
    (2) Already made, or begun, restitution to the victims;
    (3) Unintentionally or unknowingly committed the violation;
    (4) Previously attended or agreed to adopt additional training or 
education; or
    (5) Tried to mitigate the damage caused or undertaken corrective 
action prior to being charged with the violation.
    The commenter also suggested that the first factor listed in 
proposed Sec. 180.671(c) (``whether the respondent has previously been 
adjudged to have committed unlawful housing discrimination''), be 
revised to clearly distinguish between adjudication and consent 
agreements (where liability has been denied), as an encouragement to 
the latter.
    HUD Response. As stated above, the six factors derive from the 
legislative history and have been consistently cited and utilized in 
case law. Two of the factors (``nature and circumstances of the 
violation'' and ``other matters as justice may require'') give ALJs 
particularly broad discretion to weigh any matters that appropriately 
might affect the amount of any civil penalty to be assessed. Further, 
in cases where a respondent unknowingly committed a violation or made 
restitution without the need for a hearing, ALJs have taken these facts 
into account to lower the amount of civil money penalty assessed (see, 
e.g., HUD v. Wagner, 2A Fair Housing--Fair Lending para. 25,032 at 
25,339 (HUD ALJ June 22, 1992) (one respondent acknowledged her error 
in refusing to rent to families with children and, because of that 
admission, was assessed a lower civil penalty than the other 
respondents under the need for deterrence factor); HUD v. Murphy, 2A 
Fair Housing--Fair Lending para. 25,002 at 25,058-59 (July 13, 1990) 
(civil penalty reduced in familial status discrimination case where 
respondents were ill-informed of the law and, albeit erroneously, 
believed that they were correctly applying an exemption for housing for 
older persons); HUD v. Gutleben, 2A Fair Housing Fair Lending para. 
25,078 at 25,731 (HUD ALJ Aug. 15, 1994) (ALJ did not assess civil 
penalty against one respondent where she immediately curtailed her 
wrongful acts by rescinding an eviction notice the day after she issued 
it).
    Indeed, it would not be possible to list in a rule all the possible 
mitigating factors that might appropriately affect the assessment of a 
civil penalty. Since the six factors established by the Congress and 
which the ALJs consistently apply already allow for adjustments in the 
assessment of civil penalties based on the individual circumstances of 
the case, and since ALJs do in fact rely on those factors to make such 
adjustments, HUD declines to adopt the commenter's suggestion to add 
more factors.
    In response to the commenter's second suggestion, the first factor 
refers to whether a respondent has been ``adjudged'' to have previously 
committed a discriminatory housing act. A consent agreement in which 
liability has been denied is not a judgment of liability, but rather a 
settlement enforceable by court order. Therefore, there is no 
possibility of confusion and no need to ``clearly distinguish'' between 
a respondent who has been ``adjudged'' in violation of the Act and one 
who signs a consent agreement denying liability. Therefore, HUD 
declines to modify the first factor as suggested.
    Comment: Definition of ``separate and distinct discriminatory 
housing practice'' is unclear. Two commenters wrote that the definition 
of ``separate and distinct discriminatory housing practice'' in the 
proposed rule was unclear. One commenter stated that given the 
``[v]ague definition * * * each ALJ would be left to make such 
determinations with little guidance.'' The other commenter did not 
believe that the definition could be clarified: ``[I]t is impossible to 
draft a definition which clearly identifies the standards for defining 
a single discriminatory practice.''
    HUD Response. HUD agrees that the definition needs to be clarified. 
Accordingly, HUD has revised Sec. 180.671(b) to express HUD's intention 
more clearly. The revised definition reads as follows:

    Definition of separate and distinct discriminatory housing 
practice. A separate and distinct discriminatory housing practice is 
a single, continuous uninterrupted transaction or occurrence that 
violates section 804, 805, 806 or 818 of the Fair Housing Act. Even 
if such a transaction or occurrence violates more than one provision 
of the Fair Housing Act, violates a provision more than once, or 
violates the fair housing rights of more than one person, it 
constitutes only one separate and distinct discriminatory housing 
practice.

    The following illustrative examples are designed to help the public 
and ALJs distinguish between cases involving only one single 
discriminatory housing practice and cases involving multiple such 
practices that are potentially subject to the assessment of multiple 
civil penalties.
    Example 1: An African-American family of four visits a white 
landlord in order to rent an apartment from him. The landlord states 
that she does not rent to African-Americans.
    The entire transaction occurred at a single time and constitutes a 
single, continuous transaction, even though it affected more than one 
person and violated two sections of the Act, namely 42 U.S.C. 3604(a) 
and (c) (refusal to rent due to race and a statement indicating 
discrimination based on race). Under the definition, the conduct 
constituted a single separate and distinct fair housing practice, and 
an ALJ could assess a maximum of a single civil penalty only.
    Example 2: A man with a mental disability seeks to rent an 
apartment. Although the landlord has units available, he refuses to 
rent to this man because of the mental disability. A few weeks later, 
the man's sister, who also has a mental disability, applies to rent an 
apartment at the same development. Again, the landlord has a unit 
available, but he refuses to rent to her because of her mental 
disability. The brother and sister together file a single fair housing 
complaint.
    By refusing to rent to either sibling on account of disability, the 
landlord violated 42 U.S.C. 3604(f)(1)(A). In this case, each attempt 
to rent was a single, continuous, uninterrupted transaction, separate 
and distinct from the other. Therefore, the landlord's conduct 
constituted two separate and distinct discriminatory housing practices. 
If otherwise appropriate, an ALJ could assess two separate civil 
penalties against the respondent.
    Example 3: A Latino family moves into a neighborhood where no 
Latinos had lived before. A next-door neighbor begins organizing other 
neighbors into a campaign to force the Latino family out of the 
neighborhood. At one point, the neighbors, including the next-door 
neighbor, throw rocks through the Latino family's window. A few weeks 
later, a member of the Latino family steps outside to get her mail, at 
the same time the next-door neighbor is raking her garden. The next-
door neighbor walks over to the Latino woman, and, with her rake in 
both hands, holds it near the Latino woman's face in a threatening 
manner, and says ``if you want to live to an old age, you'd better move 
out now.'' A few more weeks pass, and, one evening, the same group of 
neighbors that threw the rocks burns a cross on the Latino family's 
front lawn.
    In this example, there are three acts that violate 42 U.S.C. 3617 
that are not

[[Page 6748]]

continuous, because they are interrupted by the passage of time. The 
entire group of neighbors committed two separate and distinct acts, and 
the hostile neighbor committed three such acts. Therefore, they are 
multiple acts and an ALJ, if otherwise appropriate, could assess a 
separate civil penalty for each act.
    Example 4: An African-American applies for a unit in a public 
housing authority's public housing system. Although there is an 
available unit of the appropriate bedroom size in a desirable section 
of the public housing system, the authority, because of the applicant's 
race, falsely states that no such unit is available and steers the 
applicant to a vacancy in a less desirable section, where crime, 
abandoned buildings and drug activity are rampant. The applicant 
accepts the unit but places her name on a list of tenants interested in 
transferring to the more desirable section, where there are fewer 
abandoned buildings, the crime rate is much lower, and ``open-air'' 
drug activity is nonexistent. After a few months, her name comes to the 
top of the transfer list. She learns through friends that a unit is 
available in the more desirable section. However, the management, again 
because of her race, falsely tells her that no such unit is available 
and denies her transfer.
    In this example, the public housing authority violated 42 U.S.C. 
3604(a) (refusal to rent a particular unit) and 3604(d) (falsely 
representing that a unit is unavailable) on each of the occasions 
mentioned in the example. The first incident, which was a form of 
racial steering, constituted a single discriminatory housing act under 
the definition, although the conduct violated two subsections of the 
Act. The second incident, a refusal to transfer, also constituted a 
single discriminatory housing practice that violated two subsections of 
the Act. The two incidents, however, were separate and distinct from 
each other and, therefore, under the definition, each constituted a 
separate and distinct discriminatory housing practice. Accordingly, the 
ALJ has the discretion to assess a civil penalty for each separate and 
distinct discriminatory housing practice, but not one for each of the 
two violations of the Act that occurred within each discriminatory 
housing practice (see HUD v. Las Vegas Housing Authority, 2A Fair 
Housing--Fair Lending para. 25,116 (HUD ALJ Nov. 6, 1995)).
    Example 5: A group of people that objects to people of foreign 
national origin gathers at the home of a family that recently arrived 
from Russia and, over a 10-minute period, throws several rocks through 
the family's window in an attempt to intimidate them into moving. At 
the time of the rock throwing, there are four people in the house: a 
husband and wife and their two children. Each person who was home when 
this occurred was traumatized by the rock throwing. The husband was 
standing by the window and was struck by a rock. The wife was standing 
next to him and was cut by glass. The children suffered emotional harm.
    In this example, each member of the group committed a single 
violation of 42 U.S.C. 3617, even though more than one rock was thrown 
and four people were affected, because the conduct was a single, 
continuous occurrence. The ALJ could at most assess one civil penalty 
against each respondent.
    Comment: HUD should clarify its fair housing regulations and 
guidance before increasing the civil penalties for violating them. One 
commenter suggested that before HUD amends its fair housing civil 
penalty regulations, it should review its fair housing regulations and 
guidance for clarity. The commenter wrote that ``[s]imple notions of 
fairness should clearly indicate that it is unreasonable for the 
Department to subject housing providers to multiple civil penalties for 
violations of unclear or ambiguous fair housing regulations and 
guidance.''
    HUD Response. During development of the December 18, 1997 proposed 
rule, HUD reviewed 24 CFR part 180 in its entirety for purposes of 
clarity. As a result of this review, the proposed rule included a 
clarifying amendment to part 180, which has been made effective by this 
rule. Specifically, this interim rule moves the lengthy provisions 
governing the assessment of civil penalties found at 
Sec. 180.670(b)(3)(iii)(A), (B), and (C) to a new Sec. 180.671. The 
transfer of these provisions to Sec. 180.671 does not involve any 
substantive revisions to part 180, but is designed solely to make the 
part 180 regulations easier to understand.
    Further, the public was afforded an opportunity to comment on the 
clarity of HUD's proposed amendments to part 180. HUD has made two 
clarifying changes to the proposed rule in response to public comment. 
First, HUD has clarified the definition of ``separate and distinct 
housing practice'' in Sec. 180.671(b). HUD has also revised the 
definition of ``housing-related hate act'' in Sec. 180.671(c)(2)(ii) to 
clarify the distinction between discriminatory housing practices that 
violate section 818 of the Act but would not be housing-related hate 
acts.

C. Commenters Expressing Concerns About Impact of Rule

    Comment: Hate violence will not be stemmed by increasing civil 
penalties. One commenter doubted that increased civil penalties would 
deter housing-related acts of hate violence and intimidation. As the 
commenter wrote: ``Violence and other hate crimes carry criminal 
penalties. If these criminal penalties do not deter the crime, we fail 
to understand how an increase in a civil fine will deter these 
actions.''
    HUD Response. The potential increase in civil money penalties to 
which the commenter refers applies to all multiple, separate acts of 
housing discrimination, not only to those with criminal penalties. 
Thus, criminal penalties will not necessarily be involved in these 
cases. Furthermore, not all potentially criminal violations of the Act 
are prosecuted as such. Finally, there is no rule of law requiring HUD 
to choose one form of deterrence over another. Some persons will be 
deterred by the threat of criminal prosecution, others may be more 
deterred by harm to the pocketbook. The President and the Secretary of 
HUD have determined to use all civil and criminal means at their 
disposal to deter housing discrimination.
    Comment: The proposed rule threatens the balance between judicial 
and administrative enforcement of the Act. Two commenters wrote that 
the Act establishes a careful balance between the benefits of a timely 
administrative process and the rights of parties to have their cases 
heard in federal court before a jury. One of the commenters wrote that 
the standards for imposition of a civil penalty are lower than those 
for punitive damages in a federal district court, and therefore result 
in additional exposure for a respondent charged of discrimination. This 
commenter noted that the administrative civil penalties are capped to 
provide a level of certainty and to offset the additional exposure 
faced by respondents. The two commenters stated that, by authorizing 
increased civil penalties, the proposed rule would upset the balance 
between administrative and judicial enforcement of the Act. As one of 
the commenters wrote:

    If multiple penalties are available in the administrative 
process, we believe the majority of respondents would elect to go to 
federal court rather than subject themselves to the possibility of 
multiple civil penalties....Although defending a case in federal 
court is likely to be more costly and time consuming than defending 
the case in the administrative process, the lack of civil penalties 
in federal court will increase the

[[Page 6749]]

attractiveness of having the case defended in federal court by a 
jury of peers.
    The second commenter wrote:
    Any proposed change in administrative procedure should weight 
[sic] any effect it might have on whether it might encourage a party 
to elect [to have the action heard in federal court.] The proposed 
rule ignores any effect and should therefore be withdrawn.

    HUD Response. Both commenters perceive that the Act established a 
``balance'' between cases that proceed before ALJs and those in which 
one or more of the parties elects that the case be heard in federal 
court. In responding to this comment, some background may prove useful. 
Historically, either a complainant or respondent in a majority of fair 
housing cases in which HUD has issued a Determination of Reasonable 
Cause and a Charge have elected to have the case heard in federal 
court. For the period 1989 (when the Fair Housing Act Amendments of 
1988 became effective) through 1997, the percentage of fair housing 
cases in which HUD found reasonable cause and where a respondent or 
complainant elected to have the case heard in federal court was 67%.
    The first commenter's concern that a particular respondent may face 
higher monetary exposure to civil penalties under the proposed rule is 
not without basis. In administrative cases in which a respondent is 
charged with having committed more than one separate and distinct act 
of housing discrimination, there is a potential for a higher total 
monetary civil penalty assessment against that respondent as a result 
of HUD's interpretation explicitly allowing an ALJ to assess multiple 
civil penalties in an appropriate case. The commenter's further 
concerns, however (i.e., this exposure renders respondents' exposure 
``uncertain'' where before it was ``capped,'' and that this uncertainty 
would upset the delicate balance between administrative and federal 
court adjudication), are unfounded.
    With regard to the first concern, a respondent's potential total 
exposure to civil penalties still would be capped. This is so because 
HUD's Charge of Discrimination would set out the allegations as to the 
separate and distinct discriminatory housing practices, and, since 
there is a statutory cap on how large a civil penalty an ALJ can assess 
per discriminatory housing practice, the respondent would know its 
total possible civil penalty exposure. Therefore, the rule does not 
create the uncertainty about which the commenter expressed concern.
    With regard to the second concern, since there is no uncertainty, 
that cannot be a basis to upset the delicate balance to which the 
commenter refers. On the other hand, since the total monetary cap on 
civil penalties in the administrative forum in cases alleging multiple 
discriminatory housing practices would be potentially higher, it is 
possible that difference might cause some respondents to elect to have 
their cases heard in federal court, where they might not have done so 
otherwise. This conclusion, however, is purely speculative.
    Furthermore, there are countervailing factors that are likely to 
curtail a significant increase in respondents electing to have their 
cases heard in federal court. For example, civil penalties cannot be 
assessed in the typical federal court fair housing case (But see 42 
U.S.C. 3614(d)(1)(C)). On the other hand, punitive damages are 
potentially available in federal court, but not in the administrative 
forum (Compare 42 U.S.C. 3612(o)(3) and 3613(c) with 42 U.S.C. 
3612(g)(3)).
    In addition, the only cases in which an ALJ may impose multiple 
civil penalties against a single respondent will be those in which the 
respondent is alleged to have committed multiple acts of 
discrimination. Thus, everything else being equal, these are likely to 
be more egregious cases--the same cases in which punitive damages are 
more likely to be awarded if heard in federal court. There seem to be 
no inherent reasons why respondents in these types of cases would 
choose to avoid the administrative forum only to face a possible award 
of punitive damages in federal court that has the potential of being 
much higher than the respondents' total civil penalty exposure in the 
administrative forum. Hence, HUD does not believe that the rule will 
necessarily affect the rate of respondents' electing to have their fair 
housing act cases heard in federal court.
    In the final analysis, however, even if the commenters' speculation 
were to turn out to be correct, HUD believes that its interpretation of 
the Act's civil penalty provisions is correct and comports with 
Congressional intent. Therefore, even if some higher percentage of 
respondents were to choose to have their fair housing cases heard in 
federal court, that also would comport with Congressional intent.
    Comment: Rule may unfairly penalize large housing providers. One 
commenter stated that the proposed rule would unfairly penalize large 
housing providers with many employees. These housing providers may be 
firmly committed to fair housing principles, but employ individuals who 
engage in discriminatory conduct. The commenter noted that a 
significant amount of time may elapse before the housing provider 
becomes aware of the discriminatory actions committed by an employee. 
If the employee committed several discriminatory acts within a short 
period of time, the housing provider would be assessed multiple 
penalties before it could take remedial action. The commenter wrote:

    [W]e have a firm policy of not tolerating any discriminatory 
acts by our personnel and we provide on-going education and training 
to our personnel. However, we have over 500 employees that interact 
with the public. With the large number of employees, it is extremely 
difficult for us to be made immediately aware that one employee, out 
of hundreds, may be engaging in discriminatory practices. Multiple 
offenses could occur in a very short time frame before we were made 
aware of the discriminatory practice and before we could take the 
necessary corrective action.

    HUD Response. Under the Act, an ALJ is not obligated to assess a 
civil penalty in an appropriate case (see, e.g., HUD v. George, 2A Fair 
Housing--Fair Lending para. 25,010 at 25,169 (HUD ALJ Aug. 16, 1991) 
(ALJ assessed civil penalty against company but not individual who was 
company's Secretary and part owner, because ``the evidence does not 
show that [he] was personally responsible in fact for the 
discriminatory conduct of [the company]. Rather, it appears he merely 
implemented company policy.'' Id.). The December 18, 1997 rule did not 
propose to change that. Moreover, while the rule made clear that the 
Act allows an ALJ to assess multiple civil penalties in appropriate 
circumstances, the rule did not, and could not have, proposed to 
mandate the assessment of multiple civil penalties whenever the ALJ 
finds multiple acts of discrimination in a single case, because the Act 
makes civil penalties discretionary (see 42 U.S.C. 3612(g)(3) (``Such 
order may, to vindicate the public interest, assess a civil penalty . . 
.'') (emphasis added)).
    Thus, where an ALJ finds multiple discriminatory housing practices, 
under the six factors for determining civil penalties codified by this 
interim rule, ALJs will consider the nature and circumstances of the 
violation, each respondent's degree of culpability, and other factors 
as justice may require in determining the amount to assess for each 
violation. Accordingly, if a rogue employee in an otherwise law-abiding 
management firm were responsible for repeated fair housing violations 
unbeknownst to company officials and contrary to their instructions, 
the ALJ could take that fact into consideration when determining the 
number of civil penalties, if any, to be assessed against each 
respondent, and the amount of

[[Page 6750]]

each. Because firms have a duty to exercise supervision over their work 
force to ensure that its members do not violate the Act, an ALJ might 
assess some civil penalty against the company even in that situation 
(see the example in the response to the comment ``Proposed amendments 
may be abused by testers'').
    Comment: Multiple penalties may unfairly penalize small housing 
providers. One commenter expressed concern that HUD's proposal to 
permit the assessment of multiple civil penalties would have an unfair 
impact on small housing providers. The commenter wrote that when a 
housing discrimination case involves multiple violations it is 
generally associated with a single property or individual. The 
commenter also wrote:

    [A]ccording to the 1990 U.S. Census, of the more than 40,455 
firms that reported their business as ``operators of apartment 
buildings,'' 39,903, or 98% are small businesses. With small 
businesses one penalty is generally sufficient to change 
discriminatory housing behavior.

    The commenter also questioned why the proposed rule did not address 
Subtitle B of the Small Business Regulatory Enforcement and Fairness 
Act of 1996 (Pub.L. 104-121, approved March 29, 1996; 5 U.S.C. 601 note 
et seq.) (SBREFA). Section 223, the only relevant substantive provision 
of Subtitle B, provides in part that:

    Each agency regulating the activities of small entities shall 
establish a policy or program . . . to provide for the reduction, 
and under appropriate circumstances for the waiver, of civil 
penalties for violations of a statutory or regulatory requirement by 
a small entity.

    HUD Response. First, the commenter provided no basis for its 
statement that ``with small businesses one penalty is generally 
sufficient to change discriminatory housing behavior.''
    Second, whether a business is large or small, the Act prohibits it 
from committing housing discrimination not only on multiple occasions, 
but also single occasions. (But see Section 803(b) of the Act, 42 
U.S.C. 3603(b), exempting from certain provisions of the Act specified 
small entities). Nevertheless, under the rule, ALJs are to consider six 
factors in assessing civil penalties, including the financial ability 
of respondent to pay, the nature and circumstances of the violation, 
and other factors as justice may require. HUD believes that the 
codification of these factors within the proposed rule provides 
assurance that the changes will not unfairly burden small housing 
providers with respect to the assessment of civil penalties against 
them. (See, e.g., HUD v. Gaultney, 2A Fair Housing--Fair Lending para. 
25,013 (HUD ALJ Sept. 27, 1991) (in race discrimination case, 
respondent's civil penalty reduced due to consideration of his 
financial circumstances). On the other hand, ALJs have consistently 
held that a respondent has the legal burden of proving that its 
financial resources are inadequate to pay a civil penalty. HUD v. 
Dellipoali, 2A Fair Housing--Fair Lending para. 24,127 (HUD ALJ Jan. 7, 
1997) at 26090. HUD does not intend to alter that burden by its 
codification of the six factors.
    With regard to the commenter's second concern, SBREFA requires that 
an agency establish a policy regarding the reduction and, if 
appropriate, the waiver of civil penalties for violations of a 
statutory or regulatory requirement by a small entity. Section 223(a) 
of SBREFA provides that, under appropriate circumstances, an agency may 
consider a small entity's ability to pay in determining the amount of 
any civil penalty to be assessed against it. In addition, section 
223(b) of SBREFA specifically allows an agency to exclude from its 
civil penalty reduction/waiver policy entities that have been subject 
to multiple enforcement actions by the agency and those that have 
committed willful violations of law.
    HUD believes the six factors that ALJs consider when assessing 
civil penalties, which this interim rule codifies, are consistent with 
these SBREFA provisions. Under the rule, ALJs may consider the 
financial ability of a respondent to pay when assessing a civil 
penalty. To the extent that a small entity may have less financial 
ability to pay a civil penalty than a large one, an ALJ may assess a 
lower civil penalty against a small entity, when to do so would 
otherwise be appropriate under this factor. (See HUD v. Gaultney, 2A 
Fair Housing--Fair Lending para. 25,013 at 25,195 (HUD ALJ Sept. 27, 
1991). On the other hand, under SBREFA, an agency can exclude entities 
that have committed wilful violations of the law from its civil penalty 
reduction policy. In cases heard by ALJs, where an ALJ finds that a 
respondent wilfully committed a series of discriminatory housing 
practices, the ALJ, applying, inter alia, the culpability factor, would 
more likely assess multiple and higher penalties for such acts than 
otherwise. If the ALJ did so, that would not offend the civil penalty 
reduction/waiver provisions of the SBREFA. Likewise, an ALJ can assess 
a higher civil penalty against a respondent who has been adjudged 
previously to have committed discriminatory housing practices. Because 
the SBREFA allows for an exclusion for entities that have been subject 
to multiple enforcement actions by the agency, assessing a higher civil 
penalty against a prior bad actor also would not offend the civil 
penalty reduction/waiver provisions.
    Comment: Proposed amendments may be abused by fair housing testers. 
One commenter stated that the proposed amendments might be abused by 
unscrupulous or overzealous fair housing testers:

    We are also concerned that testing organizations could target an 
individual employee and trap them into making multiple acts of 
discrimination in order to financially hurt an owner or manager who 
may be firmly committed to Fair Housing.

    HUD Response. Fair housing testing has a long-standing history as a 
method of gathering evidence as to whether landlords, real estate 
agents, or others in the housing industry are discriminating on the 
basis of protected class. Such testing has been consistently upheld 
against challenge. (See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 
363, 373-74 (1982) (``a tester who has been the object of a 
misrepresentation made unlawful under 804(d) has suffered an injury in 
precisely the form the statute was intended to guard against''); 
accord, Chicago v. Matchmaker Real Estate Sales Center, 982 F.2d 1086, 
1095 (7th Cir. 1992).) Indeed, such testing is perhaps the best way, 
and sometimes the only way, to prove the existence of discrimination, 
because it directly compares a housing provider's treatment of 
similarly situated minority and non-minority applicants. A district 
court commenting on Havens made a similar observation (see Independent 
Living Resources v. Oregon Arena Group, 982 F.Supp. 698, 761 n.86 (D. 
Ore. 1997) (``Testing was the most effective method--and perhaps the 
only method--of enforcing the FHA'')).
    The commenter's suggestion of a fair housing group ``targeting'' an 
employee of an apartment owner or manager who is ``firmly committed to 
Fair Housing'' does not withstand analysis. Nothing in the regulation 
would make such a scenario more likely to occur than before. First, 
multiple civil penalties against a respondent who committed multiple 
discriminatory housing practices were not prohibited by regulation 
previously, and, in fact, under some circumstances an ALJ would assess 
them. (See, e.g., HUD v. Las Vegas Housing Authority, 2A Fair Housing--
Fair Lending para. 25,116 (HUD ALJ Nov. 6, 1995).) Second, due process 
before a neutral ALJ stands between the charges of discrimination HUD 
issues as a result of complaints a fair housing

[[Page 6751]]

organization (or any other complainant) files and an ALJ's assessment 
of any civil penalty. In this situation, if the evidence showed that a 
complaining testing organization conducted one or more of its tests 
improperly or unfairly, HUD, if it found such evidence during the 
investigation, would take that into account in making its determination 
of reasonable cause or no reasonable cause. If the cases proceeded to 
hearing and the ALJ determined that there was malfeasance by the 
testing organization, the ALJ would take that into account in deciding 
whether to find liability with respect to such tests, much less assess 
a penalty (and, if so, how large). Third, the hypothetical fair housing 
group that this commenter imagines, if it had a goal of wanting to hurt 
the owner or manager financially without the possibility of assessments 
of multiple civil penalties for multiple violations, alternatively, 
could bring a series of separate cases, each based on one of a series 
of multiple incidents, and seek not only to have a series of civil 
penalties assessed against them, but possibly to have the later ones 
enhanced pursuant to clauses 812(g)(3)(B) & (C) of the Act (42 U.S.C. 
3612(g)(3)(B) and (C)). Accordingly, HUD does not believe that the rule 
presents the potential problem the commenter raises.
    On the other hand, under the law, a business owner or other 
principal can be held vicariously liable for the acts of employees or 
agents in the scope of their employment, even if the owner did not know 
or approve of them; this regulation does nothing to alter that 
preexisting legal truism. (See, Walker v. Crigler 976 F.2d 900, 904 
(4th Cir. 1992) (where owner did not know of gender discrimination by 
property manager, owner held liable because ``the duty of a property 
owner not to discriminate in the sale or leasing of that property is 
non-delegable'').) (See also, Marr v. Rife, 503 F.2d 735, 742 (6th Cir. 
1974) (applying principals of respondeat superior liability to Fair 
Housing Act violation)). Therefore, it is the responsibility of 
apartment owners, managers, real estate brokers, lenders, etc. who are 
``firmly committed to fair housing'' to supervise and train their 
employees properly so that they do not commit a single act of housing 
discrimination.

D. Commenters That Questioned HUD's Authority or Justification for 
Issuing the Proposed Rule

    Comment: HUD's reliance on FBI statistics is questionable. The 
preamble to the proposed rule cited to FBI statistics indicating that 
27% of hate crimes committed in 1996 were housing related (62 FR 
66488). One commenter questioned these statistics. The commenter wrote 
that the FBI ``does not collect information on how many hate crimes 
involve housing discrimination, only on how many of these crimes are 
`crimes against property' such as cross-burnings on the front lawn of a 
house or anti-Semitic graffiti on other property such as an 
automobile.'' The commenter went on to write:

    Interestingly, of the 3,330 crimes against property included in 
the 1996 FBI statistics, only two of those crimes reportedly 
implicated acts involving multiple bias. Of those two incidents 
covering all of 1996, one of the two was a car theft. Thus it 
appears from the most recent source of statistics of the type that 
were relied upon by HUD to explain the necessity of the new rule and 
to justify the exigency of acting on an expedited basis, that there 
was only one reported property incident in the entire United States 
that could have possibly involved the type of conduct that the 
proposed rule is intended to deter. (Emphasis in original.)

    HUD Response. The commenter is correct in that the FBI's reported 
hate crime statistics do not have a category that equates precisely 
with discriminatory acts that violate the Act. Nevertheless, HUD 
believes there is a correlation between hate acts committed against 
someone's property which the FBI reports and discriminatory housing 
practices under the Act. Accordingly, the citation to those statistics 
in the preamble to the proposed rule provides some insight into the 
number of hate crimes reported to the FBI that violated the Act.
    HUD assumes that the commenter does not suggest that the 
commenter's examples of burning a cross on someone's lawn or scrawling 
anti-Semitic graffiti on their automobile, if done for the purpose of 
forcing that person to move out of the neighborhood because of that 
person's membership in a protected class, would not violate section 818 
of the Act (42 U.S.C. 3617), as such acts, indeed, would violate that 
section. (See, e.g., Stackhouse v. DeSitter, 620 F.Supp. 208, 210-211 
(N. D. Ill. 1985) (firebombing of plaintiff's car for the purpose of 
driving him out of his home because of his race violates section 818); 
Seaphus v. Lilly, 691 F.Supp. 127, 131, 138-9 (N.D. Ill. 1988) (setting 
fire to African-American condominium owner's front door, slashing his 
tires, damaging the paint on his car, and barricading his door with 
heavy objects and other acts of vandalism designed to coerce the 
condominium owner to move because of his race violated section 818); 
cf. HUD v. Lashley, 2A Fair Housing--Fair Lending para. 25,039 (HUD ALJ 
Dec. 7, 1992) (respondent found liable under section 818 of the Act for 
placing a bottle containing a flammable liquid and wick under the home 
of an African-American family).)
    The commenter also appears to believe that only those acts 
involving ``multiple bias'' would provide justification for an ALJ to 
assess multiple civil penalties under the proposed rule. This is not 
correct. It is the commission of multiple acts, not an act based on 
multiple bias, that would provide such justification.
    Comment: The rule improperly proposed to broaden a penalty 
provision without express direction from the Congress. The preamble to 
the proposed rule stated that the Act and its legislative history are 
ambiguous with respect to the issue of whether an ALJ may assess 
multiple civil penalties for multiple discriminatory housing practices. 
The preamble stated that, under the United States Supreme Court 
decision in Chevron, U.S.A. Inc. v. Natural Resources Defense Council, 
Inc., 467 U.S. 837, 843 (1984), the interpretation of the agency in 
such cases of statutory ambiguity will be upheld if it is ``based on a 
permissible construction of the statute'' (62 FR 66488). One commenter 
questioned HUD's reliance on the Chevron decision. Specifically, the 
commenter cited case-law which appears to require that the civil 
penalty provisions of the Act be narrowly construed. The commenter 
wrote:

    HUD's approach fails to consider the well-settled principle of 
construction that ``penal statutes are to be construed strictly,'' 
Commissioner v. Acker, 361 U.S. 87, 91 (1959), and to temper its 
proposed approach to an expanded interpretation of the [Act] 
accordingly. In this regard, we note that the federal courts have 
made clear that the rule of narrow interpretation is not limited to 
criminal sanctions, but also is to be applied to penal provisions 
``involving civil penalties.'' First National Bank of Gordon v. 
Department of the Treasury, 911 F.2d 57, 65 (8th Cir. 1990).

    HUD Response. This commenter seeks to apply the rule of strict 
construction of penal statutes to resolve the statutory ambiguity HUD 
identified in the preamble to the proposed rule. The commenter invokes 
the maxim that an ambiguity in a penal statute should be resolved in 
the defendant's favor (often referred to as the ``rule of lenity'') to 
argue that HUD should resolve the statutory ambiguity against finding 
that an ALJ can assess multiple civil penalties against a single 
respondent when the ALJ has found that respondent committed multiple 
separate and distinct acts of housing discrimination

[[Page 6752]]

in a single case. The rule of lenity, however, does not apply in the 
manner that the commenter suggests.
    ``The rule of lenity . . . is not applicable unless there is an 
`ambiguity or uncertainty in the language and structure of the Act,' '' 
(Chapman v. United States 500 U.S. 453, 463, citing Huddleston v. 
United States, 415 U.S. 814, 831 (1974)). The rule of lenity is 
applied, if necessary, at the end of the process of statutory 
construction, not at the beginning i.e., after considering the 
traditional methods of statutory construction (language, structure, 
legislative history and motivating policies of the statute) to resolve 
the issue, and then only if these considerations have not been 
successful (Chapman, supra; United States v. R.L.C., 503 U.S. 291, 305 
(1992)). Where consideration of these other factors resolves the 
ambiguity, the rule of lenity does not apply as there is no reason to 
resort to it (Chapman, supra, at 464).
    HUD has considered this commenter's arguments, and believes that 
the rule of lenity is inapplicable to the statutory ambiguity in 
question. This is so because consideration of the language, purpose, 
legislative history and structure of the civil penalty provisions of 
the Act resolves the statutory ambiguity in favor of HUD's 
interpretation.
    First, the language itself is easily read to authorize the 
potential assessment of a civil penalty against a respondent for each 
separate and distinct discriminatory housing practice an ALJ finds that 
the respondent committed, rather than limiting an ALJ to a single civil 
penalty assessment for all such practices the ALJ finds the respondent 
committed:

    If the administrative law judge finds that a respondent has 
engaged or is about to engage in a discriminatory housing practice, 
such administrative law judge shall promptly issue an order for such 
relief as may be appropriate, which may include actual damages 
suffered by the aggrieved person and injunctive or other equitable 
relief. Such order may, to vindicate the public interest, assess a 
civil penalty against the respondent. * * * (42 U.S.C. 3617(g)(3) 
(emphasis added).)

    The structure of the Act also supports HUD's interpretation. The 
Act, at 42 U.S.C. 3602(f), defines a ``discriminatory housing 
practice'' as a singular ``act'' that is unlawful under sections 804, 
805, 806 of the Act (42 U.S.C. 3604, 3605, 3606, and 3617, 
respectively). Since a single case can involve more than one such 
``act,'' it follows that a single case can involve more than one 
discriminatory housing practice. Applying the general statutory 
definition of ``discriminatory housing practice'' to the language of 
the civil penalty subsection supports the reading of that provision as 
authorizing ALJs to assess more than one civil penalty against a single 
respondent, where the ALJ has found that respondent to have committed 
more that one separate and distinct discriminatory housing practice.
    The Act's purpose, as demonstrated in its legislative history, 
supports HUD's interpretation as well. The House Report stated, 
``[t]wenty years after the passage of the Fair Housing Act, 
discrimination and segregation in housing continue to be pervasive'' 
(H.R. No. 100-711 at 15, 1988 U.S. Code Cong. & Admin. News 2176). 
Congress found that pervasive discrimination continued to exist because 
it perceived a ``void'' in fair housing enforcement. Congress attempted 
to fill that void, in part, by creating a more effective enforcement 
system (H.R. No. 100-711, 100th Cong., 2d Sess., at 13 (1988), 1988 
U.S. Code Cong. & Admin. News 2174).
    A principal component of the more effective mechanism that the 
Congress created was the administrative adjudication of fair housing 
cases, and an important aspect of that administrative process was 
authorizing ALJs to assess civil penalties where appropriate. In making 
this authorization, the Congress recognized that civil penalties serve 
to deter (H.R. No. 100-711 at 37, 1988 U.S. Code Cong. & Admin. News 
2198 (deterrence one of the factors an ALJ to consider when assessing 
civil penalties)) (See also Hudson v. United States, 118 S.Ct. 488, 496 
(1997) (imposition of civil penalties will deter others from emulating 
the conduct that gave rise to the penalties)).
    HUD considers it intuitively obvious that the greater authority and 
flexibility ALJs have in assessing civil penalties increases the 
potential of deterring discriminatory housing practices. This rule is 
designed to ensure that the Act's civil penalty provisions will be 
applied, when appropriate, to reach more powerfully the repeat 
wrongdoer, and serve to deter even more effectively other potential 
wrongdoers. Thus, the Congressional goal of deterrence is enhanced by 
reading the Act's civil penalty provision to authorize ALJs to assess 
multiple civil penalties in cases involving multiple discriminatory 
housing practices. Since the standard methods of statutory construction 
resolve the identified statutory ambiguity in favor of the proposed 
rule, it is not appropriate to apply the ``rule of lenity.'' 
Accordingly, HUD declines to adopt this commenter's approach to 
construction of the Act.
    Furthermore, the proposed rule is not accurately described as an 
``expanded interpretation'' of the Act, as the commenter says. The 
proposed rule merely made explicit what some HUD ALJs have already 
construed the Act to mean. In HUD v. Las Vegas Housing Authority 2A 
Fair Housing--Fair Lending para. 25,116 (HUD ALJ Nov. 6, 1995), the 
respondent, for discriminatory reasons, first told the complainant that 
a particular housing unit was not available, and then, some months 
later, when complainant requested a transfer, refused to approve the 
transfer, also for discriminatory reasons. These two separate 
violations of the Act comprised a single case. The ALJ assessed two 
separate civil penalties against the respondent, one for each violation 
of the Act (Id. at 26,010-11). In HUD v. Sams (2A Fair Housing--Fair 
Lending 25,070 (HUD ALJ March 11, 1994), aff'd on other grounds, 76 
F.3d 375 (4th Cir. 1996)), the ALJ implicitly acknowledged that the Act 
authorizes multiple civil penalty assessments against a single 
respondent for that respondent's commission of multiple separate and 
distinct discriminatory housing practices. The ALJ, however, declined 
to assess more than one in the case before him because the ALJ viewed 
each of the discriminatory acts involved as part of a series comprising 
a single transaction and, therefore, a single discriminatory housing 
practice for which the ALJ could only assess a single civil penalty. 
This construction is incorporated in HUD's definition of separate and 
distinct fair housing practice, which recognizes that a series of acts 
may constitute a single discriminatory housing practice, if they are 
continuing and part of the same transaction.
    Comment: HUD's proposed interpretation contradicts the plain 
language of the Act. One commenter questioned HUD's proposed 
interpretation of the Act. The commenter wrote that HUD mistakenly 
relied on the definition of ``discriminatory housing practice'' in 
section 802 of the Act to justify the proposed amendments. According to 
the commenter, the proposed rule contradicts the plain meaning of 
section 812 of the Act (42 U.S.C. 3612). As the commenter wrote:

    The most obvious fault in HUD's analysis lies in 42 U.S.C. 
3612(g)(3)(A) [section 812(g)(3)(A) of the Act] which HUD 
inadvertently did not quote in the proposed rule. HUD ignores the 
temporal aspect and ignores Congress' requirement that the 
respondent have been adjudged to have committed a prior 
discriminatory. The proper construction of the intent of Congress is

[[Page 6753]]

evident. In any one proceeding, a respondent who has not previously 
been found to have violated 42 U.S.C. 3604, 42 U.S.C. 3605, 42 
U.S.C. 3606 and 42 U.S.C. 3617 [sections 804, 805, 806, 818 of the 
Act] cannot be fined more than $10,000. (Emphasis in original.)

    HUD Response. Subparagraphs 812(g)(3)(A-C) of the Act (42 U.S.C. 
3612(g)(3)(A-C)), state that the maximum civil penalty that an ALJ can 
assess can increase if the respondent has been adjudged to have 
previously committed one or two or more prior discriminatory housing 
practices within specified time frames. The commenter reads into this 
language additional language that is not there i.e., the idea that ``in 
any one proceeding'' a respondent, who has not been previously adjudged 
to have committed a discriminatory housing practice, cannot be assessed 
a total of more than $10,000 in civil penalties, regardless of how many 
separate and distinct discriminatory housing practices the respondent 
committed in the case at hand. (Indeed, the commenter's phrase ``in any 
one proceeding'' is absent from the Act's civil penalty provisions.) 
Rather, the Act ties the assessment of a civil penalty to a 
respondent's commission of ``a discriminatory housing practice;'' and 
the Act places no explicit limitation on the number of such penalties 
that may be assessed ``in any one proceeding,'' if the number of 
separate and distinct discriminatory housing practices found to have 
been committed and the surrounding circumstances otherwise warrant (42 
U.S.C. 3612(g)(3)). In other words, for a single discriminatory housing 
practice, an ALJ may assess a respondent without prior adjudicated 
violations a civil penalty up to $10,000; and if a similar respondent 
committed more than one separate and distinct discriminatory housing 
practice in a single case, the ALJ would have the discretion to assess 
against the respondent a civil penalty up to $10,000 for each such 
practice.

E. Commenters That Questioned HUD's Compliance With Rulemaking 
Requirements

    Comment: HUD should extend the public comment period. One commenter 
wrote that given the importance of establishing effective fair housing 
enforcement procedures, HUD should have provided the customary 60-day 
public comment period for the proposed rule. The commenter recommended 
that HUD provide the public with an additional 30-days to comment on 
the proposed amendments. The commenter wrote:

    We . . . respectfully request that comment period be extended 
for a minimum additional period of thirty (30) days to permit a 
meaningful review of the current record and to provide adequate time 
for submission of comments that can be useful to HUD in more 
accurately assessing the scope of the perceived problem and measures 
appropriate to addressing it.

    HUD Response. HUD recognizes the value and necessity of public 
comment in the regulatory process, and HUD is providing the public with 
an additional 60-days to comment on the amendments made by this interim 
rule. HUD welcomes public comment on this interim rule. All comments 
will be taken into consideration in the development of the final rule.
    Comment: The preamble did not adequately explain proposed 
definition of ``separate and distinct discriminatory housing 
practice.'' One commenter wrote that the preamble to the proposed rule 
did not adequately explain the definition of ``separate and distinct 
discriminatory housing practice'' in the regulatory text. According to 
the commenter, HUD's failure to explain the definition violates the 
requirements of the Administrative Procedure Act (5 U.S.C. 551 et seq.) 
(APA). The commenter wrote:

    [Proposed Sec. ]180.671(b) states that not only will a 
respondent be potentially liable for $10,000 [for] each separate 
practice, the number of complainants will also serve to multiply any 
potential fine, and the number of times that a separate violation 
occurs will multiply each potential fine. No explanation is given 
for this interpretation unless HUD's observation that such 
interpretation is not prohibited and HUD's conclusory statement that 
such an interpretation is reasonable is meant to show that the 
interpretation [is] a justified interpretation of the statute. If 
[this] is the case, HUD has misunderstood its legislative mandate 
and ignored its duty under [section 553 of the APA] to state the 
statutory basis for the rule and give a description of the subjects 
and issues involved.

    HUD Response. HUD does not agree with the assertions made by the 
commenter. Specifically, HUD believes that the preamble to the December 
18, 1997 proposed rule provided a thorough discussion of HUD's 
rationale and statutory basis for the proposed amendments to the 
regulations at 24 CFR part 180. Further, HUD believes that the December 
18, 1997 proposed rule complied with all applicable statutory and 
regulatory rulemaking requirements.

IV. Findings and Certifications.

Environmental Impact

    In accordance with 24 CFR 50.19(c)(3) of the HUD regulations, the 
policies and procedures contained in this interim rule set out 
nondiscrimination standards and, therefore, are categorically excluded 
from the requirements of the National Environmental Policy Act.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this interim rule will have no federalism implications, 
and that the policies are not subject to review under the Order. The 
interim rule amends HUD's regulations governing the assessment of civil 
penalties for Fair Housing Act cases. The rule is exclusively concerned 
with the rules of practice and procedure applicable to administrative 
proceedings before an ALJ under the Fair Housing Act. No programmatic 
or policy changes will result from this rule that would affect the 
relationship between the Federal government and State and local 
governments.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)) has reviewed and approved this interim rule, and in so 
doing certifies that the interim rule is not anticipated to have a 
significant economic impact on a substantial number of small entities. 
This interim rule explicitly interprets the Act to allow ALJs, where a 
respondent has been found to have committed separate and distinct acts 
of discrimination, to assess a separate civil penalty against the 
respondent for each such act. The rule also amends 24 CFR part 180 to 
describe how ALJs are to consider housing-related hate acts under the 
six factors ALJs apply in determining the amount of a civil penalty to 
assess against a respondent found to have committed a discriminatory 
housing practice.
    The rule will affect only those few small-entity housing providers 
who are respondents in cases where HUD determines that there is 
reasonable cause to believe that they committed multiple violations of 
the Fair Housing Act and whose cases are then heard before an ALJ, who 
may or may not then assess multiple civil penalties against them after 
a hearing comporting with due process requirements. To date, the number 
of entities who actually become respondents in Fair Housing Act cases 
before ALJs is extremely few. For example, in FY 1994, the year when 
the most administrative fair housing cases (through 1997) were 
docketed, of the 325 cases HUD charged, 220 elected to be heard in 
federal court, leaving only 115 to be heard by the ALJs. Of these

[[Page 6754]]

cases, civil penalties were only assessed against an even lesser 
number: after hearings in 15 cases, and as part of a consent order in 
another 12 cases, for a total of 27 cases, or 8.3% of the cases 
docketed. The average civil penalty was $3,727.77. Only a few of these 
cases involve multiple acts of housing discrimination.
    Furthermore, ALJs have had the authority to assess multiple civil 
penalties in instances where respondents have been found to commit 
multiple discriminatory housing practices, and have done so in 
appropriate circumstances. Thus, the economic impact of the rule on 
small entities should not be substantially greater than that already 
inherent in the Fair Housing Act.
    Finally, the rule will not have a significant economic impact on a 
substantial number of small entities because it requires ALJs to 
consider each respondent's ability to pay when assessing one or more 
civil penalties. Thus, everything else being equal, smaller entities 
with diminished ability to pay would be subject to lower penalties.
    Notwithstanding HUD's determination that this rule does not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comment regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This interim rule does not impose 
any Federal mandates on any State, local, or tribal governments or the 
private sector within the meaning of Unfunded Mandates Reform Act of 
1995.

Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this interim 
rule under Executive Order 12866, Regulatory Planning and Review. OMB 
determined that this interim rule is a ``significant regulatory 
action,'' as defined in section 3(f) of the Order (although not 
economically significant, as provided in section 3(f)(1) of the Order). 
Any changes made to the interim rule subsequent to its submission to 
OMB are identified in the docket file, which is available for public 
inspection in the office of the Department's Rules Docket Clerk, Room 
10276, 451 Seventh Street, SW, Washington, DC 20410-0500.

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance Number for this program 
is 14.400.

List of Subjects in 24 CFR Part 180

    Administrative practice and procedure, Aged, Civil rights, Fair 
housing, Individuals with disabilities, Intergovernmental relations, 
Investigations, Mortgages, Penalties, Reporting and recordkeeping 
requirements.
    Accordingly, 24 CFR part 180 is amended as follows:

PART 180--HEARING PROCEDURES FOR CIVIL RIGHTS MATTERS

    1. The authority citation for 24 CFR part 180 continues to read as 
follows:

    Authority: 29 U.S.C. 794; 42 U.S.C. 2000d-1, 3535(d), 3601-3619, 
5301-5320, and 6103.
    2. Section 180.670 is amended by revising paragraph (b)(3)(iii) 
introductory text to read as follows:

Sec. 180.670  Initial decision of ALJ.

* * * * *
    (b) * * *
    (3) * * *
    (iii) Assessing a civil penalty against any respondent to vindicate 
the public interest in accordance with Sec. 180.671.
* * * * *
    3. Section 180.671 is added to read as follows:


Sec. 180.671  Assessing civil penalties for Fair Housing Act cases.

    (a) Amounts. The ALJ may assess a civil penalty against any 
respondent under Sec. 180.670(b)(3) for each separate and distinct 
discriminatory housing practice (as defined in paragraph (b) of this 
section) that the respondent committed, each civil penalty in an amount 
not to exceed:
    (1) $11,000, if the respondent has not been adjudged in any 
administrative hearing or civil action permitted under the Fair Housing 
Act or any State or local fair housing law, or in any licensing or 
regulatory proceeding conducted by a Federal, State or local 
governmental agency, to have committed any prior discriminatory housing 
practice.
    (2) $27,500, if the respondent has been adjudged in any 
administrative hearing or civil action permitted under the Fair Housing 
Act, or any State or local fair housing law, or in any licensing or 
regulatory proceeding conducted by a Federal, State, or local 
government agency, to have committed one other discriminatory housing 
practice and the adjudication was made during the five-year period 
preceding the date of filing of the charge.
    (3) $55,000, if the respondent has been adjudged in any 
administrative hearings or civil actions permitted under the Fair 
Housing Act or any State or local fair housing law, or in any licensing 
or regulatory proceeding conducted by a Federal, State, or local 
government agency, to have committed two or more discriminatory housing 
practices and the adjudications were made during the seven-year period 
preceding the date of the filing of the charge.
    (b) Definition of separate and distinct discriminatory housing 
practice. A separate and distinct discriminatory housing practice is a 
single, continuous uninterrupted transaction or occurrence that 
violates section 804, 805, 806 or 818 of the Fair Housing Act. Even if 
such a transaction or occurrence violates more than one provision of 
the Fair Housing Act, violates a provision more than once, or violates 
the fair housing rights of more than one person, it constitutes only 
one separate and distinct discriminatory housing practice.
    (c) Factors for consideration by ALJ. (1) In determining the amount 
of the civil penalty to be assessed against any respondent for each 
separate and distinct discriminatory housing practice the respondent 
committed, the ALJ shall consider the following six (6) factors:
    (i) Whether that respondent has previously been adjudged to have 
committed unlawful housing discrimination;
    (ii) That respondent's financial resources;
    (iii) The nature and circumstances of the violation;
    (iv) The degree of that respondent's culpability;
    (v) The goal of deterrence; and
    (vi) Other matters as justice may require.
    (2)(i) Where the ALJ finds any respondent to have committed a 
housing-related hate act, the ALJ shall take this fact into account in 
favor of imposing a maximum civil penalty under the factors listed in 
paragraphs (c)(1)(iii), (iv), (v), and (vi) of this section.
    (ii) For purposes of this section, the term ``housing-related hate 
act'' means any act that constitutes a discriminatory housing practice 
under section 818 of the Fair Housing Act and which constitutes or is 
accompanied or characterized by actual violence,

[[Page 6755]]

assault, bodily harm, and/or harm to property; intimidation or coercion 
that has such elements; or the threat or commission of any action 
intended to assist or be a part of any such act.
    (iii) Nothing in this paragraph shall be construed to require an 
ALJ to assess any amount less than a maximum civil penalty in a non-
hate act case, where the ALJ finds that the factors listed in 
paragraphs (c)(1)(i) through (vi) of this section warrant the 
assessment of a maximum civil penalty.
    (d) Persons previously adjudged to have committed a discriminatory 
housing practice. If the acts constituting the discriminatory housing 
practice that is the subject of the charge were committed by the same 
natural person who has previously been adjudged, in any administrative 
proceeding or civil action, to have committed acts constituting a 
discriminatory housing practice, the time periods in paragraphs (a) (2) 
and (3) of this section do not apply.
    (e) Multiple discriminatory housing practices committed by the same 
respondent; multiple respondents. (1) In a proceeding where a 
respondent has been determined to have engaged in, or is about to 
engage in, more than one separate and distinct discriminatory housing 
practice, a separate civil penalty may be assessed against the 
respondent for each separate and distinct discriminatory housing 
practice.
    (2) In a proceeding involving two or more respondents who have been 
determined to have engaged in, or are about to engage in, one or more 
discriminatory housing practices, one or more civil penalties, as 
provided under this section, may be assessed against each respondent.

    Dated: January 12, 1999.
Andrew Cuomo,
Secretary.
[FR Doc. 99-3126 Filed 2-9-99; 8:45 am]
BILLING CODE 4210-28-P