Reprinted with permission from the American Bar Association Journal of Affordable Housing and Community Development Law, Spring 1996
(Cite as 5-SP G J. Affordable Housing & Community Dev. L. 227)
Despite the efforts of lawmakers over the past thirty years, discrimination in housing still pervades the United States. Today, litigation against those who discriminate remains one of the most effective tools for promoting equal housing opportunity for all. To ensure such equal opportunity, Congress enacted the Fair Housing Act of 1968 (FHA) to prohibit housing discrimination on the basis of race, color, religion, sex, or national origin.1 Congress amended the FHA to extend these prohibitions to discrimination based on familial status or disability in 1988.2 The FHA prohibits a variety of discriminatory conduct in housing, including discrimination in the rental, sale, financing, and advertising of real estate.3
Primary responsibility for enforcement of the Fair Housing Act rests with private citizens and private nonprofit fair housing organizations.4 These nonprofit fair housing organizations, whose activities include education, monitoring, counseling, investigation, and litigation, are usually best equipped to uncover activities that violate the FHA because private individuals who feel that they have been discriminated against often report their experiences to these organizations for further investigation. Additionally, fair housing organizations are more likely than private individuals to have the knowledge, experience, resources, and contacts to conduct an investigation and pursue litigation. Thus, the burden of conducting lawsuits under the FHA often rests with fair housing agencies.
Unlike individual plaintiffs, however, fair housing organizations cannot receive compensatory damages for intangibles such as pain, suffering, and humiliation, which usually constitute the bulk of compensatory damages awarded to individual plaintiffs in Fair Housing Act lawsuits.5 Because most nonprofit fair housing organizations operate on restricted budgets, these organizations must be able to recover the maximum amount of damages to which they are entitled. The ability to command higher damage awards not only provides fair housing organizations with additional compensation for their efforts, but it also gives them more leverage in settlement negotiations. Defendants are more likely to agree to take affirmative steps to integrate housing, rather than merely refraining from discriminatory conduct, when faced with the possibility of paying large damage awards.
This article outlines the kinds of damages fair housing organizations may recover, the kinds of records that are most effective for proving damage claims in court, and the recent trends in damage awards to fair housing organizations. The article is intended to help fair housing organizations and their attorneys design more effective strategies for promoting equal housing opportunities.
Section 3613(c) of the FHA provides that "if the court finds that a discriminatory housing practice has occurred or is about to occur, the court may award to the plaintiff actual and punitive damages."6 For fair housing organizations, actual (or compensatory) damage awards compensate the fair housing organization for any economic harm it suffered as a result of the defendant's illegal housing practices. There are two categories of compensatory damages to fair housing organizations: damages for diversion of resources and damages for frustration of purpose.
Both types of compensatory damages appear to be derived from the Supreme Court's language in Havens Realty Corp. v. Coleman,7 which established the circumstances under which nonprofit organizations have standing under the FHA. Under Havens, for a fair housing organization to file suit, the organization must have sustained a "concrete and demonstrable" injury resulting in a "drain in its resources."8 Subsequent courts concluded that if "the 'deflection of the agency's time and money from counseling to legal efforts directed against discrimination' is sufficient injury to confer standing to sue on a fair housing agency ... it follows that ... the fair housing organization may collect for it."9
Damages for Diversion of Resources
Damages for diversion of a fair housing organization's resources compensate for any expenditures the organization made "to identify and counteract the defendant's ... discriminatory ... practices."10 Such damages are equivalent to the fair housing organization's opportunity costs, which are the activities the fair housing organization had to forgo to address the defendant's actions.11 These expenditures should be itemized in detail. Failure to specifically identify resources the organization has diverted to pursue the lawsuit may result in an award of only nominal damages. For example, in Heights Community Congress v. Hilltop Realty,12 the court awarded only $1 to the plaintiff fair housing organization, stating that "the amount of the fair housing organization's expenditures attributable to defendants' violations was too speculative to support a damage award."13 Therefore, to maximize actual damages, fair housing organizations must record carefully time and resources the organization spent combating the defendant's conduct and pursuing the lawsuit.
For instance, fair housing organizations should document all time spent interviewing victims of the defendant's discriminatory conduct, investigating statements by victims and defendants, auditing the defendant's records or reviewing related documents, training any testers used in investigation, meeting with attorneys or other parties related to the lawsuit, and any other activity related to the lawsuit that prevented the fair housing organization's staff from pursuing other activities.14 "While a plaintiff may not be entitled to recover such investigative costs per se, such costs offer a reasonable guideline for ascertaining the value of plaintiff's 'diversion of resources' element of damage."15 Additionally, if the organization spent a considerable portion of its employee time on a particular lawsuit, a court may allow compensation for the portion of overhead costs attributable to the case.16 Thus, organizations should keep track of any phone call expenses, photocopying costs, and transportation costs associated with the lawsuit.
The organization should also demonstrate the value of its employees' time. In United States v. Balistrieri,17 for example, the fair housing organization received compensation for its employees' time because the director of the fair housing organization testified regarding staff time devoted to that effort and the corresponding cost and explained her figures to the jury.18 To calculate the value of staff time, fair housing organizations should use the hourly rate they charge for their employees to conduct revenue-generating activities, such as training seminars. Providing this baseline figure will help ensure that the court and jury do not underestimate the market value of the organizational employees' time or conclude that such damages are merely speculative.
Similarly, records documenting the activities the organization's personnel were unable to pursue because of time spent on the lawsuit may support the organization's claim for compensation for diversion of resources. For instance, in Ragin v. Harry Macklowe Real Estate Co.,19 the fair housing organization collected damages for diversion of the organization's resources partly because the director testified that " as a result of her efforts in pursuit of the lawsuit ... she ... had to turn down meetings, delay working on booklets and postpone other research and client work."20
In addition to damages for a previous diversion of resources caused by the defendant's conduct, fair housing organizations also should document and request compensation for any future expenditures resulting from defendant's conduct and the consequent lawsuit. For example, in City of Chicago v. Matchmaker Real Estate Sales Center,21 the court awarded $5,000 in damages to the fair housing organization for the cost of continued monitoring of the realty corporation's records to assure future compliance with the FHA, $6,000 for continued auditing of the realty corporation's sales practices, and $2,500 for the costs of FHA compliance training seminars to be conducted by the plaintiffs for the defendants.22 However, merely itemizing a "wish list" to counteract the defendant's activities is insufficient without a sound basis for the award. These costs should relate to some specific affirmative future action that the fair housing organization can prove is necessary to counteract the defendant's discriminatory conduct.23
In sum, every expenditure of time and money by the fair housing organization to counteract the defendant's actions should be recorded and quantified in detail to increase the likelihood that the court or jury will compensate the organization for that expense under the diversion of resources rubric. The likelihood that the court, jury, or both will make any award increases when the organization can establish a direct causal link to the defendant's conduct and can show that these figures are reasonable and not merely an attempt to receive a windfall at the expense of the defendant. Such a detailed record of the defendant's potential liability will also enhance the fair housing organization's ability to negotiate favorable settlement agreements.
In addition to awarding fair housing organizations compensatory damages for "diversion of resources," some courts have awarded additional or alternative compensatory damages for "frustration of purpose" or "frustration of mission,"24 that is, interference with the organization's ability to promote integration of and equal access to housing. The frustration of purpose language can be traced to Havens, in which the plaintiff fair housing organization alleged that it had "been frustrated by defendants' racial steering practices in its efforts to assist equal access to housing through counselling and other referral services."25
These awards can be substantial. For example, in Saunders v. General Services Corp., the court awarded the plaintiff fair housing organization $10,000 in 1987 to compensate it for "damage to its fair housing goals."26 This award augmented compensation for costs the organization had incurred in connection with the lawsuit and investigation.27 In making the award, the court explained that in this lawsuit over racially discriminatory real estate advertisements, the plaintiffs had provided substantial testimony about the importance of nondiscriminatory advertising to promotion of equal housing opportunity.28 Because the plaintiffs demonstrated that the defendant who created the discriminatory ads was a major housing provider in the area and published the ads widely, the court held that the advertising had "a subtle, but substantial, impact on the fair housing organization's mission of ensuring equal housing and conveying the availability of equal housing to the public."29 In Davis v. Mansards30 the court similarly awarded the fair housing organization $1,000 for frustration of mission because " it was clear that this litigation had not enhanced the cooperation between the Housing Center and local landlords."31 One troubling aspect of the Davis court's application of the "frustration of purpose" doctrine is that the court limited the amount of damages for frustration of purpose to $1,000. The court reasoned that although the defendant's conduct hurt the organization's mission, "the outcome of this litigation ... furthered the Center's goals and perhaps provided it with additional leverage in its continued negotiations with other area apartment complexes."32 While it is true that any fair housing litigation resolved in the fair housing organization's favor will benefit the organization, the Davis court apparently did not understand that the defendant's actions prior to litigation form the basis for the frustration of purpose award; no defendant should be liable for fewer damages simply because its misconduct allowed the fair housing organization to enforce the FHA successfully.
Davis illustrates the confusion courts exhibit when deciding whether to award damages for frustration of purpose. Case law is unclear about what constitutes "frustration of purpose" damages, and to what extent they should be awarded in addition to damages for diversion of resources. For this reason, frustration of purpose damages have been criticized as too speculative and vague,33 and as duplicative of the regular diversion of resources damages.34 If the "frustration of purpose" award is based on an abstract injury to the organization's goals,35 such an injury alone would be insufficient under Havens to establish legal standing.36 Similarly, if the court awards the fair housing organization substantial damages for "frustration of purpose" based on some concrete calculation of what the organization will have to spend to undo the damage to its mission, this is suspiciously like an award for diversion of future resources.
Prior to 1988 courts may have been more generous in awarding damages for frustration of purpose without a clear basis in reaction to the FHA's $1,000 restriction on punitive damages.37 Both Saunders and Davis were decided before the 1988 amendment removing the cap on punitive damages. Cases decided after the 1988 amendments typically have rejected such requests from the plaintiff fair housing organizations. For instance, in Matchmaker Real Estate Sales Center, 38 the Seventh Circuit overturned a magistrate judge's $16,500 award for frustration of purpose to a fair housing organization, because " the magistrate judge appears to have merely doubled the compensatory damages award"39 and the fair housing organization provided no basis for damages for frustration of purpose.40
Because no court has categorically rejected damages for "frustration of purpose," a fair housing organization should attempt to prove that the defendant's activities did in fact hurt the "mission" or "purpose" of the fair housing organization. Additionally, fair housing organizations can claim frustration of purpose when negotiating settlements with FHA defendants. For example, in 1995 one fair housing organization received $50,000 for investigation costs and frustration of purpose in a settlement for a lending discrimination case.41 Such arguments are most likely to succeed when the defendant is a major landlord, developer, or realtor whose activities have a substantial impact on the community.
The 1988 amendments to the Fair Housing Act removed the $1,000 cap on punitive damage awards42 to increase the incentives for private individuals to bring suit enforcing the FHA.43 One expert calls this "the most important provision in the FHA with respect to enforcement."44 For fair housing organizations, the removal of the punitive damages cap provided a new opportunity to send a message to FHA violators and potential violators that ignoring FHA provisions can be extremely expensive. In 1992, for example, two fair housing organizations and one individual plaintiff were awarded $2 million in punitive damages for a familial discrimination case.45 In another recent case, a fair housing organization and an individual plaintiff were awarded $1.2 million in punitive damages in a racial discrimination real estate advertising case.46 While such awards represent the high end of the punitive damage award spectrum, it is not uncommon for current punitive damage awards to reach $25,000.47 These high punitive damage awards provide a substantial incentive for the fair housing organization to pursue its claim and a substantial incentive for a defendant in an FHA lawsuit to settle the case.
Courts will award punitive damages under the FHA to deter and punish outrageous conduct. 48 "Punitive damages are appropriate when defendants act wantonly and willfully or are motivated in their actions by ill will, malice, or a desire to injure the plaintiffs,"49 or when the defendants acted "with actual knowledge or reckless disregard that their actions violated a federally protected right."50 For example, in City of Chicago v. Match-maker Real Estate Sales Center,51 a racial steerage case, the court found the evidence of the defendants' active race discrimination against the black testers merited a punitive damage award, even though the defendants argued that they treated the testers politely. However, although a defendant can be held liable under the FHA without a specific finding of intent to discriminate,52 the absence of such intent to discriminate can bar a punitive damage award to the plaintiff. Thus, the court in Ragin held that the defendants were not liable for punitive damages for using only white human models in their real estate advertisements because there was no evidence that the defendants' purpose was to discourage African-Americans from responding to their ads.53 In addition to proving that the defendant knowingly or wilfully violated the FHA, the fair housing organization should prove that it has suffered injury warranting a compensatory damage award. Although the FHA is silent regarding whether punitive damage awards are proper when only nominal compensatory damages are awarded, at least one judge has held that such circumstances preclude recovery of punitive damages under the FHA because such an award would constitute a windfall to the plaintiffs.54 Finally, punitive damage awards should not be "so high as to result in the financial ruin of the defendants, or to constitute a disproportionately large percentage of the defendant's net worth." 55 One court has held that 8.85 percent of a defendant's net worth was not an excessive punitive damage award under the FHA because "it represented less than 10 percent of his net assets before accounting for his annual income."56 Therefore, a fair housing organization should attempt to assess the defendant's net worth when determining the amount of punitive damages to seek.
Recent Trends in Fair Housing Litigation
The amount of damage awards to fair housing plaintiffs has risen dramatically in recent years. 57 The removal of the punitive damages cap and the increasing involvement of fair housing organizations in FHA litigation are part of the reason for the growth in damage awards.58 Another factor contributing to the larger awards is that recent FHA defendants have been large corporate defendants. Such defendants are particularly prevalent in the increasingly common real estate advertising cases and the discriminatory lending practices cases, where the potential number of people affected by the discriminatory practice is greater. Additionally, juries throughout the United States may be acknowledging that discriminatory housing practices are intolerable and are punishing FHA violators through larger damage awards. 59
However, although juries have been awarding substantial damages in many recent cases, a number of these awards have been set aside or overturned on appeal. For example, a $100,000 punitive damage verdict in a family status discrimination case was reduced to $25,000,60 and a judge reduced a jury-recommended damage award to a fair housing organization in a discriminatory real estate advertisement case from $100,000 to $20,000,61 because both courts felt the awards were excessive. Therefore, fair housing organizations should request a jury trial under the FHA because juries appear more willing than judges to award damages for housing discrimination.62
The growth in damage awards also has given fair housing organizations stronger leverage in settlement negotiations with FHA defendants. Recently, six-figure settlements have become more common.63 Awareness and careful documentation of all types of damages in a fair housing case can enable a fair housing organization to negotiate a larger settlement award or more favorable settlement terms. In exchange for the fair housing organization relinquishing any claim for damages, an FHA defendant may be willing to do more than simply comply with the law in the future. For example, a real estate developer may agree to produce more integrated housing ads than the FHA would require. Fair housing organizations can use this additional leverage to negotiate creative agreements that promote integrated housing.
Fair housing organizations are becoming increasingly sophisticated in suing under the Fair Housing Act. To maximize potential damage awards from FHA violators, fair housing organizations should carefully document all resources expended to counteract the defendant's discriminatory housing practices. Such records are valuable both as a negotiating tool and as proof of injury in court. Large damage awards, combined with attorneys' fee awards if the fair housing organization prevails,64 and any injunctive relief the court may award.65 will help send a strong message to potential FHA violators that no discriminatory housing practices will be tolerated.
* Reproduced by permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
a1 . Sarah Rigdon Bensinger is currently a Visiting Assistant Professor of Law at Illinois Institute of Technology, Chicago-Kent College of Law. Formerly she was a litigation associate at Robinson, Curley, and Clayton, in Chicago, where she represented several fair housing organizations.
4 . Robert G. Schwemm, The Future of Fair Housing Litigation, 26 J. MARSHALL L. REV. 745, 747 (1992).
5 . Alan Heifetz & Thomas C. Heinz, Separating the Objective, the Subjective and the Speculative: Assessing Compensatory Damages, 26 J. MARSHALL L. REV. 3, 9 (1992).
14 . See, e.g., Ragin v. Harry Macklowe Real Estate Co., Inc., 801 F. Supp. 1213, 1224-25 (S.D.N.Y. 1992), aff'd in part and rev'd in part, 6 F.3d 898 (2d Cir. 1993), where the fair housing organization received $20,000 to compensate it for the over 150 hours it spent investigating the lawsuit at issue; see also City of Chicago v. Matchmaker Real Estate Sales Center, Inc., 982 F.2d 1086 (7th Cir. 1992) (fair housing organization awarded $3,000 for audits the organization performed in investigation of a racial steerage case).
16 . Id.
23 . See, e.g., Ragin v. Harry Macklowe Real Estate Co., Inc., 6 F.3d 898, 909 (2d Cir. 1993) (court refused to award damages for the cost of a full- page ad in the New York Times to counteract the defendant's racially discriminatory real estate ad because the organization provided no evidence that it was forced to increase educational, counseling, or referral services as a specific consequence of the defendant's ad).
28 . Id.
29 . Id. at 1061.
32 . Id.
33 . Heifetz & Heinz, supra note 5, at 16; Ragin v. Harry Macklowe Real Estate Co., 6 F.3d 898, 909 (2d Cir. 1993) .
34 . Heifetz & Heinz, supra note 5, at 17; City of Chicago v. Matchmaker Real Estate Sales Ctr., Inc., 982 F.2d 1086, 1099 (7th Cir. 1992), cert. denied, 113 S. Ct. 2961 (1993).
36 . Heifetz & Heinz, supra note 5, at 16.
38 . 482 F.2d at 1099.
39 . Id.
40 . Id.; see also Ragin v. Harry Macklowe Real Estate Co., 6 F.3d 898, 909 (2d Cir. 1993) .
41 . Boyer v. First Va. Bank of Md., No. PJM 92-3632 (D. Md. 1995), reprinted in 11 Fair Housing-Fair Lending Rep. (P-H).
43 . Schwemm, supra note 4, at 749.
44 . Id. at 759.
45 . Timus v. William J. Davis, Inc., No. 91 Civ. 0882 (D.D.C. 1992), reprinted in 1 Fair Housing-Fair Lending Rep. (P-H) § 3.1 (1992). The plaintiffs later settled for a total of $765,000 while the verdict was being appealed by the defendant. 9 Fair Housing-Fair Lending Rep. (P-H) § 8.6 (1994).
46 . The Fair Housing Organization in that case was also awarded $800,668 in compensatory damages. Fenwick-Schafer v. Winchester Homes, No. 90066002/CL110092 (Md. Cir. Ct. 1993), reprinted in 9 Fair Housing-Fair Lending Rep. (P-H) § 8.3 (1994).
47 . Schwemm, supra note 4, at 759, n.96.
49 . Id.
53 . Id.
54 . People Helper's Found. v. City of Richmond, Nos. 92-1839 & 93- 1501 (CA-4 1993), reprinted in Fair Housing-Fair Lending Rep. (P-H) § 15,888.1 (1994).
57 . Schwemm, supra note 4, at 758.
58 . Id. at 759.
59 . Id. at 759-60.
60 . Gamble v. Cortland Courts/Realty Trust, No. 5: 93CV2537 (N.D. Ohio 1995), reprinted in 11 Fair Housing-Fair Lending Rep. (P-H) § 7.9 (1995).
62 . Schwemm, supra note 4, at 760.
63 . For example, a fair housing organization received $300,000 in settlement in a race discrimination case, Fair Housing Center of Metropolitan Detroit v. The Fourmidable Group, No. 92-73776 (E.D. Mich. 1994), reprinted in 9 Fair Housing-Fair Lending Rep. (P-H) § 14.10 (1994); $100,000 was awarded in a settlement to one individual and a fair housing organization for race and rental discrimination, Webster v. Florida East Coast Properties, No. 90-2279-CIV-KEHOE (S.D. Fla. 1994), reprinted in 9 Fair Housing-Fair Lending Rep. (P-H) § 11.29 (1994); and $935,000 in settlement went to one individual and one fair housing organization in a racially discriminatory home sale case, Travis v. Hartz Construction Co., No. 92 C 3254 (N.D. Ill. 1994), reprinted in 10 Fair Housing-Fair Lending Rep. (P-H) § 2.6 (1995).