According to the lawsuit, Taylor officials had refused to allow the facility to house more than six residents because of zoning laws. The residential facility was in a single family area. Zoning requirements in single family areas limited the number of persons living together to six. When the facility asked that their property be rezoned to allow 12 residents, Taylor officials said no.
Both Smith and Lee Associates, the owners and operators of the facility, and the US Department of Justice filed separate federal lawsuits. Both lawsuits claimed that rezoning the property to allow more residents is a reasonable accommodation under the Fair Housing Act's disability provisions. Taylor settled the Justice Department suit by agreeing to allow nine residents at the facility. Smith and Lee Associates continued its lawsuit.
In December 1996, the Sixth Circuit court issued a ruling on behalf of the plaintiffs, agreeing that the city of Taylor had failed to make a reasonable accommodation. The court also held that the city must allow up to nine residents in adult care facilities even if those facilities are in single family zones.
Following the Sixth Circuit's ruling, the city of Taylor agreed to settle with Smith and Lee Associates. The cash settlement included money for lost profits, damages, attorneys' fees, legal costs, and interest. Taylor officials also agreed to an injunction prohibiting it from interfering with the operations of adult foster care facilities in single family neighborhoods so long as they had nine or fewer residents.