Responding to Federal Fair Housing Investigations: When the DOJ Comes Calling

Responding to Federal Fair Housing Investigations: When the DOJ Comes Calling Wednesday, September 3, 2014 General Session; 1:00 2:45 p.m. Toussaint S. Bailey, Richards, Watson & Gershon DISCLAIMER: This paper is not offered as or intended to be legal advice. Readers and conference attendees should seek the advice of an attorney when confronted with legal issues. Attorneys should perform an independent evaluation of the issues raised in these materials. Copyright 2014, League of California Cities. All rights reserved. This paper, or parts thereof, may not be reproduced in any form without express written permission from the League of California Cities. For further information, contact the League of California Cities at 1400 K Street, 4 th Floor, Sacramento, CA 95814. Telephone: (916) 658-8200. 2014 League of California Cities Annual Conference City Attorneys Track Los Angeles Convention Center, Los Angeles

Notes: 2014 League of California Cities Annual Conference City Attorneys Track Los Angeles Convention Center, Los Angeles

RESPONDING TO FEDERAL FAIR HOUSING INVESTIGATIONS: WHEN THE DOJ COMES CALLING Toussaint S. Bailey Richards Watson Gershon In loving memory of my colleague, mentor, and dear friend Steven R. Orr (Nov. 3, 1962 - July 2, 2014). Neither this paper nor my professional development would have been possible without Steve s invaluable contributions.

I also gratefully acknowledge the insights and assistance provided by my colleague Julie A. Hamill. I. INTRODUCTION For even the most unflappable municipal lawyer, the thought of a client being investigated for violations of the federal Fair Housing Act by the United States Department of Justice ( DOJ ) a department of the federal government that describes itself as the world s largest law office and happens to oversee the Federal Bureau of Investigations can give rise to uncharacteristic levels of anxiety. This paper aims to demystify DOJ investigations under the federal Fair Housing Act and highlight some of the issues municipalities might face in responding to such investigations. 1 The discussion that follows (1) provides a short background on DOJ s enforcement of federal law; (2) explains DOJ s role in enforcing the Fair Housing Act; and, finally, (3) describes DOJ s primary areas of focus in investigations of alleged Fair Housing Act violations by municipalities. The discussion is followed by two short practical sections: the first provides insight into how a typical investigation might proceed and the second provides a few general tips for dealing with investigations. II. DISCUSSION A. Background on DOJ Enforcement of Federal Law Since the Enforcement Act of 1870 established DOJ as an executive department of the United States government, the Attorney General has presided over the central department for enforcement of federal laws. 2 DOJ is comprised of 40 components, which cover a variety of responsibilities. 3 Enforcement of civil rights is one of DOJ s chief responsibilities. DOJ s Civil 1 For purposes of brevity and analytical efficiency, this paper does not endeavor to provide a comprehensive analysis of the federal Fair Housing Act of 1968 and the Fair Housing Amendments Act of 1988 (collectively herein, Fair Housing Act ), 42 U.S.C. 3601 et seq. See Schwemm, Housing Discrimination Law and Litigation, (West 2014), for an in depth analysis of federal housing discrimination law. 2 http://www.justice.gov/crt/. 3 http://www.justice.gov/jmd/2011summary/pdf/overview.pdf. -2-

Rights Division, created by the enactment of the Civil Rights Act of 1957, 4 enforces federal statutes prohibiting discrimination on the basis of race, color, sex, disability, religion, familial status and national origin, including the Fair Housing Act, the Civil Rights Acts; the Voting Rights Act; the Equal Credit Opportunity Act; the Americans with Disabilities Act; the National Voter Registration Act; the Uniformed and Overseas Citizens Absentee Voting Act; the Voting Accessibility for the Elderly and Handicapped Act; and additional civil rights provisions contained in other laws and regulations. 5 The work of DOJ s Civil Rights Division is carried out by its 11 sections. 6 The Housing and Civil Enforcement Section is charged with enforcing the Fair Housing Act. 7 B. DOJ s Role in Fair Housing Act Enforcement 1. Fair Housing Act Enforcement Overview The thrust of the Fair Housing Act is found in the provisions making it unlawful to deny, or otherwise make unavailable, a dwelling because of race, color, religion, sex, familial status, national origin, or disability. 8 In Trafficante v. Metropolitan Life Ins. Co., the United States Supreme Court observed that the language of the Fair Housing Act is broad and inclusive 9 and found that it carries out a policy that Congress considered to be of the highest priority. 10 The Trafficante Court concluded that vitality can be given to this policy only by a generous construction of the statute. 11 4 71 Stat. 634 (1957). 5 http://www.justice.gov/crt/about/; http://www.justice.gov/agencies/index-list.html. 6 http://www.justice.gov/crt/about/. 7 Id. 8 42 U.S.C. 3604(a); 42 U.S.C. 3604(f)(1), extending protection to persons with disabilities under the Fair Housing Amendments Act; see also 42 U.S.C. 3604(b), (f)(2), and 3605; but see 42 U.S.C. 3604(f)(3), identifying certain types of behavior as illegal discrimination based on disability and requiring only a showing that the defendant refused or failed to take certain prescribed action. 9 409 U.S. 205, 211-12 (1972). 10 409 U.S. at 211-12. 11 409 U.S. at 212; see also City of Edmonds v. Oxford House, Inc., 514 U.S. 725 (1995) (reaffirming the propriety of generous construction of the Fair Housing Act). -3-

Although the Trafficante Court was addressing private party standing issues, its principle of generous construction has been more broadly applied by parties seeking to enforce the Fair Housing Act s substantive provisions, as well as lower courts interpreting the Act. Although most of the Fair Housing Act s substantive provisions ban discrimination because of race, color, national origin, religion, sex, handicap, or familial status, 12 California federal district courts and the Ninth Circuit have almost uniformly recognized Fair Housing Act liability for not only discriminatory intent, but also based on discriminatory effects of facially neutral laws or practices. 13 Last year, the United States Department of Housing and Urban Development ( HUD ) adopted regulations formalizing the federal government s long-held view that the Fair Housing Act encompasses discriminatory effects liability. 14 The United States Supreme Court has twice within last three years agreed to resolve whether a claim based solely on discriminatory effects, or disparate impact, is cognizable under the Fair Housing Act. However, both cases were withdrawn before the justices could rule. 15 In May, the question was presented to the Court in yet another Petition for a Writ of Certiorari in Inclusive Communities Project v. Texas Dep t of Housing. 16 Notwithstanding the petition pending before the Court, municipalities should not expect DOJ to cease relying on the 12 See 42 U.S.C. 3604(a), (b), (d), (f)(1), (f)(2), and 3605. 13 See, e.g., Ojo v. Farmers Group, Inc., 600 F.3d 1205, 1207 (9th Cir. 2010), as amended, (Apr. 30, 2010) and amended, 2010 WL 1729742 (9th Cir. 2010) (en banc); Budnick v. Town of Carefree, 518 F.3d 1109, 1118 (to establish a prima facie case a plaintiff need not establish discriminatory intent but the discriminatory impact must be proven; an inference of discriminatory impact is not sufficient ). 14 See 78 Fed. Reg. 11482 (promulgating 24 C.F.R. 100.500 ( Discriminatory effect prohibited )) (Feb. 15, 2013). 15 Twp. of Mount Holly, N.J. v. Mt. Holly Gardens Citizens in Action, Inc., cert. granted, 133 S.Ct. 2824 (2013) and cert. dismissed 134 S.Ct. 636 (2013); Magner v. Gallagher, cert. granted, 132 S. Ct. 548 (2011) and cert. dismissed, 132 S. Ct. 1306 (2012). 16 Docket No. 13 1371 (May 13, 2014). -4-

disparate impact theory of liability in Fair Housing Act investigations and settlement negotiations. 17 2. DOJ s Enforcement of the Fair Housing Act The Fair Housing Act authorizes enforcement of its substantive provisions by essentially three mechanisms: (1) private party complaints to HUD 18 ; (2) private party lawsuits 19 ; and (3) lawsuits by the United States Department of Justice ( DOJ ) 20. Although this paper focuses on the third method of enforcement, the three methods, as a general rule, are not exclusive of one another. Thus, a defendant who violated one of the Fair Housing Act s substantive provisions could be subject to a lawsuit by DOJ, even if that defendant is also the subject of a complaint to HUD and a defendant to a private court action. 21 DOJ does not involve itself in every violation of the Fair Housing Act. Violations of the Fair Housing Act s substantive provisions must be of a particular nature or severity to trigger DOJ s enforcement authority. 42 U.S.C. 3614(a) authorizes DOJ to initiate its own lawsuits in response to significant Fair Housing Act violations; 42 U.S.C. 3614(b) authorizes DOJ to file suit in certain types of cases referred to DOJ from HUD; and 42 U.S.C. 3614(c) authorizes 17 See DOJ s Quid Pro Quo with St. Paul: How Assistant Attorney General Thomas Perez Manipulated the Rule of Law, Joint Staff Report, United States Congress (April 15, 2013) (discussing DOJ s role in withdrawal of Magner v. Gallagher). 18 42 U.S.C. 3610-3612. 19 42 U.S.C. 3613. 20 42 U.S.C. 3614. 21 See Mitchell v. Cellone, 389 F.3d 86 (3d Cir. 2004) (filing of HUD complaint does not constitute a private party s election of remedies); U.S. v. Starrett City Associates, 605 F. Supp. 262 (E.D. N.Y. 1985) (DOJ s failure to intervene in a private suit will not estop DOJ from bringing its own subsequent action against the same defendant under 42 U.S.C. 3614); Huntington Branch, N.A.A.C.P. v. Town of Huntington, N.Y., 689 F.2d 391, 394 n.3 (2d Cir. 1982) (recognizing private party s right to proceed directly to court with Fair Housing Act lawsuit without first pursuing a HUD complaint). But see 42 U.S.C. 3613(a) (imposing restrictions on dual private lawsuits and HUD complaints). -5-

DOJ to enforce subpoenas issued in HUD administrative proceedings in the United States district court. 22 a. DOJ initiated lawsuits Under 42 U.S.C. 3614(a) DOJ, may initiate a civil action if there is: reasonable cause to believe that any person or group of persons is engaged in a pattern or practice of resistance to the full enjoyment of any of the rights granted by this title, or any group of persons has been denied any rights granted by this title and such denial raises an issue of general public importance (Emphasis added.) i. Pattern or practice cases The United States Supreme Court has interpreted pattern or practice, in the employment context, to mean more than a mere occurrence of isolated or accidental or sporadic discriminatory acts. 23 A pattern or practice of employment discrimination requires proof, by a preponderance of the evidence, that the discrimination is standard operating procedure the regular rather than the unusual practice. 24 Lower courts have applied a similar definition of pattern or practice in Fair Housing Act cases. 25 22 See also 42 U.S.C. 3613(e) (DOJ is authorized to intervene and seek appropriate relief in private party lawsuits if the Attorney General certifies that the case is of general public importance ). 23 International Brotherhood of Teamsters v. United States, 431 U.S. 324, 336 (1977). 24 Id. 25 See United States v. West Peachtree Tenth Corporation, 437 F.2d 221, 269 (5th Cir. 1971) (stating pattern or practice requirement was intended to encompass more than an isolated or accidental or peculiar event. ); Schwemm, Housing Discrimination Law and Litigation, 26:3 (West 2014). -6-

Among other things, a discriminatory statute, ordinance, or municipal policy may qualify as a pattern or practice under 42 U.S.C. 3614(a). 26 Neither willful nor even intentional discrimination need be shown to establish a pattern or practice. 27 Each case examining the pattern or practice issue must be decided on its own facts. 28 ii. General importance cases The DOJ can also proceed under 42 U.S.C. 3614(a) by showing that a group of persons has been denied rights granted by the Fair Housing Act and that such denial raises an issue of general public importance. 29 To prevail in a general public importance case, DOJ must prove that the defendant s discriminatory conduct affected more than a single individual. 30 However, the group of persons affected need not be subjected to the type of pattern or practice of discrimination discussed; even an isolated discriminatory act is sufficient to justify relief. 31 The group of persons has typically been a protected class of home seekers, but municipalities have been subject to general public importance lawsuits on behalf of other groups, such as current residents of an apartment complex or neighborhood that has been kept illegally segregated by the defendant. 32 26 See, e.g. United States v. City of Black Jack, Missouri, 508 F.2d 1179 (8th Cir. 1974); United States v. Parma, Ohio, 494 F. Supp. 1049, 1095 (N.D. Ohio 1980); see also United States v. Housing Authority of City of Chickasaw, 504 F. Supp. 716, 727 (S.D. Ala. 1980) ( When, as here, a [housing authority s] policy of regular application is itself alleged to be discriminatory, the pattern or practice requirement is satisfied. ). 27 See United States v. Security Management Co., Inc., 96 F.3d 260, 269 (7th Cir. 1996); United States v. Quality Built Construction, Inc., 309 F.Supp.2d 756, 760 (E.D. N.C. 2003). 28 See West Peachtree, supra, 437 F.2d at 227. 29 See Schwemm, Housing Discrimination Law and Litigation, 26:4 (West 2014). 30 U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1095 (N.D. Ohio 1980), judgment aff d, 661 F.2d 562 (6th Cir. 1981). 31 Id. at 1095; U.S. v. Hunter, 459 F.2d 205, 217 18, 22 A.L.R. Fed. 339 (4th Cir. 1972); see also U.S. v. Taigen & Sons, Inc., 303 F. Supp. 2d 1129, 1139 (D. Idaho 2003) (holding, even if defendants actions in violating the Fair Housing Act do not amount to a pattern or practice of discrimination, they can nevertheless be liable for Fair Housing Act violations under the general public importance prong of 3614(a) ). 32 U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1096 (N.D. Ohio 1980), judgment aff d, 661 F.2d 562 (6th Cir. 1981). See generally Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, -7-

The denial of rights must raise an issue of general public importance, but what constitutes an issue of general public importance is a DOJ determination courts have generally declined to review. 33 b. DOJ lawsuits based on HUD Referrals In addition to DOJ s authority to initiate lawsuits discussed above, 34 42 U.S.C. 3614(b) authorizes DOJ to bring a civil action in two types of cases that grow out of administrative complaints to HUD under 42 U.S.C. 3610 that are subsequently referred to DOJ by HUD. 35 In both situations, the statute provides that DOJ may commence a civil action, 36 which means that DOJ has the same type of prosecutorial discretion with respect to these HUD-referred cases that it does with pattern or practice and general public importance cases under 42 U.S.C. 3614(a). i. HUD complaints regarding local land use laws The first type of referral under 42 U.S.C. 3614(b) requires that HUD refer to DOJ all administrative complaints under 42 U.S.C. 3610 involving the legality of any State or local zoning or other land use law or ordinance. 37 If HUD determines that an administrative complaint raised such a legal issue, HUD may not issue a charge but instead must immediately refer the matter to the Attorney General for appropriate action under [42 U.S.C. 3614(b)(1)]. 38 The determination that a HUD complaint falls within this category is to be made by HUD s 99 S. Ct. 1601, 60 L. Ed. 2d 66 (1979); Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 93 S. Ct. 364, 34 L. Ed. 2d 415 (1972). 33 See, e.g., U.S. v. Northside Realty Associates, Inc. 474 F.2d 1164, 1168 (5th Cir. 1973); U.S. v. Yonkers Bd. of Educ., 624 F. Supp. 1276, 1291 n.9 (S.D. N.Y. 1985), judgment aff d, 837 F.2d 1181 (2d Cir. 1987); U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1095 n.64 (N.D. Ohio 1980), judgment aff d, 661 F.2d 562 (6th Cir. 1981). 34 Section II.B.2.a, supra. 35 Schwemm, Housing Discrimination Law and Litigation, 26:11 (West 2014) 36 42 U.S.C. 3614(b)(1)(A), (2)(A). 37 42 U.S.C. 3614(b)(1)(A), 3610(g)(2)(C). 38 42 U.S.C. 3610(g)(2)(C); see, e.g., U.S. v. City of Hayward, 36 F.3d 832, 835 (9th Cir. 1994). -8-

Assistant Secretary for Fair Housing and Equal Opportunity. 39 This determination may not occur until after HUD has completed its investigation of the complaint. 40 Once the case is referred to DOJ, it may commence a civil action challenging the discriminatory land-use law. 41 DOJ s suit must be brought, if at all, not later than eighteen months after the occurrence or the termination of the alleged discriminatory housing practice. 42 Note, this authority is in addition to DOJ s authority to challenge exclusionary land-use laws in pattern or practice and general public importance cases under 42 U.S.C. 3614(a). DOJ s authority to act under one of these provisions is independent of its authority to act under the other. 43 It follows that DOJ need not wait for a HUD-referral to challenge an exclusionary zoning law that involves a pattern or practice of discrimination or raises an issue of general public importance under 3614(a), and, on the other hand, DOJ may bring a HUD-referred case under 3614(b) even if it would not be important enough to qualify for a 3614(a) action. 44 The Fair Housing Act specifically authorizes courts to invalidate any state or local law that would require or permit any action that would constitute a discriminatory housing practice under the Act. 45 ii. Enforcement of conciliation agreements The second is a referral prompted by the breach of a conciliation agreement under 42 U.S.C. 3610(c). Whenever [HUD] has reasonable cause to believe that a respondent has breached a conciliation agreement, [HUD] shall refer the matter to [DOJ] with a 39 24 C.F.R. 103.400(a)(3), as amended by 59 Fed. Reg. 39956 (Aug. 5, 1994). 40 See 24 C.F.R. Part 103. 41 42 U.S.C. 3614(b)(1)(A). 42 42 U.S.C. 3614(b)(1)(B). 43 Schwemm, Housing Discrimination Law and Litigation, 26:12 (West 2014). 44 Id. 45 42 U.S.C. 3615; Astralis Condominium Ass n v. Secretary, U.S. Dept. of Housing and Urban Development, 620 F.3d 62, 70 (1st Cir. 2010) (the Fair Housing Act manifests a clear congressional intent to vitiate the application of any state law that would permit discrimination ). -9-

recommendation that a civil action be filed under [42 U.S.C. ] 3614 to enforce the agreement. 46 DOJ s suit must be filed within 90 days after the HUD referral, if at all. 47 c. DOJ enforcement of HUD administrative subpoenas The Fair Housing Act authorizes HUD to issue subpoenas in aid of its investigations and administrative proceedings under 42 U.S.C. 3610 to 3612. 48 Subpoenas may be issued on behalf of HUD itself or on behalf of any party to a HUD proceeding. 49 The statute provides that subpoenas may be ordered to the same extent and subject to the same limitations as would apply in the federal district court where the investigation is taking place. 50 42 U.S.C. 3614(c) authorizes DOJ to bring a proceeding in the United States district court to enforce a Fair Housing Act subpoena on behalf of HUD or the party at whose request the subpoena was issued. C. DOJ Fair Housing Act Investigations 1. DOJ Fair Housing Act Investigation Triggers Courts have opined that the pattern or practice and general importance requirements under 42 U.S.C. 3614(a) show that Congress did not intend DOJ to enforce private rights provided by the Fair Housing Act unless a specific violation has a measurable public impact. 51 If neither a pattern or practice nor a group violation that raises an issue of general public importance is shown, the defendant is entitled to judgment in a 3614(a) case. 52 Unfortunately, this limitation does not offer much help to a municipality at the investigation stage of a DOJ enforcement action under the Fair Housing Act. Although the courts do have responsibility for deciding the ultimate question of whether a pattern or practice of resistance or a group denial raising an issue of general public importance has been shown, DOJ need only have reasonable cause to believe such circumstances exist to 46 42 U.S.C. 3610(c). 47 42 U.S.C. 3614(b)(2)(B). 48 42 U.S.C. 3611(a). 49 42 U.S.C. 3611(a); 24 C.F.R. 180.545. 50 42 U.S.C. 3611(a) 51 U.S. v. Hunter, 459 F.2d 205, 217 (4th Cir. 1972). 52 Id.; see also U.S. v. University Oaks Civic Club, 653 F. Supp. 1469, 1476 (S.D. Tex. 1987). -10-

file a lawsuit under 42 U.S.C. 3614(a). DOJ s reasonable cause determination is not reviewable by the courts. 53 Moreover, where HUD has referred a case involving legality of a local land use law or a breached conciliation agreement, DOJ s enforcement authority under 42 U.S.C. 3614(b) is clear. If DOJ has broad discretion with respect to filing decisions, it has complete discretion over the decision to investigate a municipality for Fair Housing Act violations. It is difficult to determine, with certainty, precisely what triggers a particular DOJ investigation. HUD administrative complaints under 42 U.S.C. 3610 and private party lawsuits under 42 U.S.C. 3613 seem to be the most likely causes for DOJ investigations, but investigations might be triggered by a number of other activities or events, such as a media reports, statements or actions made by City representatives (even outside of their official capacities), statements or actions of community residents, and, perhaps, even a municipality s reputation. 2. Likely Focus of a DOJ Fair Housing Act Investigation By the time DOJ notifies a municipality that it is under investigation for Fair Housing Act violations, DOJ may have already formed strong opinions about the municipality s culpability. In practice, DOJ s Fair Housing Act investigations seem to be more about proving violations than trying to ascertain whether a violation has occurred. Thus, DOJ will likely focus on evidence to make out a claim under the Fair Housing Act; not exculpatory evidence or mitigating circumstances. Given that direct evidence of local officials animus against a protected class is rarely available, 54 DOJ will not limit its examination to statements by a municipality s decision-makers. 53 E.g., U.S. v. City of Philadelphia, Pa., 838 F. Supp. 223, 227 28, aff d, 30 F.3d 1488 (3d Cir. 1994); U.S. v. Housing Authority of City of Chickasaw, 504 F. Supp. 716, 726 (S.D. Ala. 1980); U.S. v. City of Parma, Ohio, 494 F. Supp. 1049, 1095 n.64 (N.D. Ohio 1980), judgment aff d, 661 F.2d 562 (6th Cir. 1981); see also U.S. v. Bahr, 856 F. Supp. 2d 1225, 1229 (M.D. Ala. 2012) ( For jurisdictional purposes, the statute does not require actual proof of the pattern or practice of discrimination; the Attorney General need only [have] reasonable cause to believe that it occurred. ). 54 See, e.g., Atkins v. Robinson, 545 F. Supp. 852, 870 (E.D. Va. 1982), judgment aff'd, 733 F.2d 318 (4th Cir. 1984); Smith v. Town of Clarkton, N. C., 682 F.2d 1055, 1064 65 (4th Cir. 1982); -11-

With respect to claims based on discriminatory intent, DOJ will look to sources of proof similar to those relied on in the context of equal protection claims. 55 The areas of examination may include: - the discriminatory effect of the defendant s action; - the historical background of the decision; - the specific sequence of events leading up to the decision; - departures from the normal procedural sequence; - departures from the normal substantive criteria; and - the legislative and administrative history of the decision. 56 A particularly disconcerting area of inquiry in DOJ Fair Housing Act investigations is the desires of bigoted private citizens. Such private citizen desires have been relied on as circumstantial evidence of discriminatory intent on the part of municipal decision-makers. In United States v. City of Birmingham, Michigan, the district court, siding with DOJ, held: In order to demonstrate a city's racially discriminatory intent, it is sufficient to show that the decision-making body acted for the sole purpose of effectuating the desires of private citizens, that racial considerations were a motivating factor Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283, 1290 (7th Cir. 1977). 55 See Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 264 71 (1977) (articulating equal protection standard); see also Schwemm, Housing Discrimination Law and Litigation, 13:12 (West 2014) ( Fair Housing Act cases have adopted the same standards that govern an equal protection claim as set forth by the Supreme Court in Village of Arlington Heights v. Metropolitan Housing Development Corp. ). 56 429 U.S. at 266 68. Examples of Fair Housing Act cases following Arlington Heights include U.S. v. Yonkers Bd. of Educ., 837 F.2d 1181, 1216 17 (2d Cir. 1987); U.S. v. City of Birmingham, Mich., 727 F.2d 560, 565 (6th Cir. 1984); Greater New Orleans Fair Housing Action Center v. St. Bernard Parish, 648 F. Supp. 2d 805, 809-19 (E.D. La. 2009); Atkins v. Robinson, 545 F. Supp. 852, 870 71 (E.D. Va. 1982), judgment aff'd, 733 F.2d 318 (4th Cir. 1984); In re Malone, 592 F. Supp. 1135, 1166 (E.D. Mo. 1984), judgment aff'd, 794 F.2d 680 (8th Cir. 1986). -12-

behind those desires, and that members of the decision-making body were aware of the motivations of the private citizens. 57 DOJ might also try to make out a discriminatory effects claim by collecting statistical proof to show a municipal practice either (1) actually or predictably results in a disparate impact on a protected class or (2) perpetuates segregated housing patterns along lines of race or other protected characteristics. 58 The key to each of these theories is statistical proof of effects rather than a decision-makers intent. III. WHAT TO EXPECT DURING THE INVESTIGATION Expect to be treated like a suspect As noted above, the aim of DOJ Fair Housing Act investigations seems to be finding facts to prove a violation. A municipality should not expect that facts supporting potential defenses or mitigating circumstances will persuade DOJ to walk away from its investigation. Expect broad information requests, even in the absence of subpoenas Even without the force of an administrative subpoena or civil subpoena, 59 DOJ will likely request (i.e., demand) a wide range documents and electronically stored information potentially relevant to a Fair Housing Act claim. Do not expect DOJ to limit its requests to public records municipalities are obligated to produce. Do NOT expect DOJ to consider city officials off limits 57 U.S. v. City of Birmingham, Mich., 538 F. Supp. 819, 828 (E.D. Mich. 1982), aff d as modified, 727 F.2d 560 (6th Cir. 1984). 58 24 C.F.R. 100.500(a). 59 Note, HUD may issue subpoenas in the context of administrative actions under 42 U.S.C. 3610 and DOJ is charged with enforcing such subpoenas pursuant to 42 U.S.C. 3614(c), but the Fair Housing Act does not provide DOJ independent authority to issue subpoenas absent an administrative proceeding under 42 U.S.C. 3610 or litigation under 42 U.S.C. 3614. -13-

DOJ will likely request to interview decision-makers and will likely cover a wide range of topics in such interviews. As noted above, direct evidence of discriminatory intent is rarely available. Thus, interviews may attempt to delve into circumstantial evidence of intent, such as community opposition, past decisions and changes in position, findings supporting of a decision, and events and actions surrounding a decision. Do NOT expect reciprocity in the exchange of information Because a DOJ Fair Housing Act investigation occurs prior to litigation, a municipality will not have tools of discovery or subpoena at its disposal. DOJ is not likely to volunteer information regarding its legal theories or the supporting factual basis. Such information will need to be obtained in the context of settlement negotiations and, perhaps, only if DOJ receives something in return. Expect request(s) for tolling agreement(s) Although some DOJ claims under 42 U.S.C. 3614 have relatively short limitations periods, 60 DOJ will likely request a tolling agreement and extensions while it conducts its investigation. Expect informal contact Much of a DOJ Fair Housing Act investigation will likely be conducted by informal contact from the Assistant United States Attorney(s) responsible for the case. Do not expect an outline of a formal process or significant written information from DOJ during over the course of the investigation. Expect attempts to resolve the investigation by consent decree 60 For example, under 42 U.S.C. 3614(b), DOJ must file action based on HUD-referred land use cases within eighteen months of the alleged discriminatory housing practice and DOJ must file action based upon breach of a conciliation agreement within 90 days of its referral from HUD. However, where civil penalties are sought, the five-year statute of limitations contained in 28 U.S.C. 2462 seems to control and monetary claims where the DOJ is suing in a representative capacity for the benefit of private individuals appear to be governed by the threeyear limitations period provided in 28 U.S.C. 2415(b). -14-

Consent decrees appear to be DOJ s tool of choice for resolving Fair Housing Act claims, whether after judgment or in the connection with a negotiated settlement. 61 IV. A FEW PRACTICAL TIPS FOR SURVIVING INVESTIGATIONS Immediately begin collecting and organizing all potentially relevant evidence At the investigation stage, attorneys and clients should marshal all facts and evidence potentially relevant to any legal theory DOJ might raise. There are times when a municipality may wish to focus its resources on challenging DOJ s overarching legal positions (such as DOJ s reliance on discriminatory effect theories to support claims under the Fair Housing Act), but fact collection at the investigation stage should be all encompassing. Proving and disproving discriminatory effect theories can be particularly time consuming and complex because such theories tend to involve broad demographic information and statistical analysis. Clients will be well-served by addressing facts related discriminatory effect theories before an investigation becomes litigation. Prepare litigation hold letters concerning the investigation and continue to confirm compliance Since DOJ Fair Housing Act investigations tend to be about finding evidence to support an alleged violations rather than determining whether violations have occurred, 62 notice of the investigation may, in itself, be sufficient to trigger a duty to preserve evidence. 63 Request information from DOJ, repeatedly if necessary DOJ is not legally obligated, at the investigation stage, to share information with a municipality the basis for a Fair Housing Act investigation or what facts the investigation has yielded. Still, this should not stop the municipality from requesting information about the 61 See Recent Accomplishments of the Housing and Civil Enforcement Section (updated June 3, 2014), available at http://www.justice.gov/crt/about/hce/whatnew.php. 62 Section III, infra, Expect to be treated like a suspect. 63 In re Napster, Inc. Copyright Litig., 462 F.Supp.2d 1060, 1067 (N.D. Cal. 2006) ( a litigant is under a duty to preserve evidence which it knows or reasonably should know is relevant to the action ). Apple Inc. v. Samsung Electronics Co., Ltd., 881 F.Supp.2d 1132, 1136 (N.D. Cal. 2012) (The duty attaches from the moment that litigation is reasonably anticipated ). -15-

investigation. Despite any protestations to the contrary, DOJ generally seems motivated to settle rather than litigate Fair Housing Act cases. 64 When requesting information about the investigation, remind DOJ that city staff and officials need investigation information to appropriately analyze, and make informed decisions about, potential settlement terms. Prepare city staff and officials for press inquires and public comments The record for Fair Housing Act litigation is created, in large part, during DOJ s investigation. Because direct evidence of discriminatory intent is rarely available, DOJ will rely heavily on circumstantial evidence. City staff and officials should expect that any press statements or public comments made by them or attributed to them will be scrutinized by DOJ and potentially used as evidence of discrimination. 65 Discriminatory admissions and other incriminating statements made by a defendant s agent are attributable to the principal. 66 Notify insurers or joint powers authorities of potential claim and examine availability of coverage DOJ often seeks significant monetary penalties in Fair Housing Act settlements. It is wise to notify insurers and begin exploring the availability of insurance coverage for potential Fair Housing Act violations well before DOJ completes its investigation. Complex coverage issues can arise, particularly where there are pattern and practice allegations spanning several years and touching on a variety of municipal functions. Carefully consider the costs of litigation, including attorneys fees and appeals Although damage awards in the housing discrimination field have generally been quite modest, a client can incur significant cost from its own attorneys trial preparation and from the plaintiff s fees in the event of a loss. Ironically, many defendants have been badly served by 64 http://www.justice.gov/crt/about/hce/whatnew.php 65 See, e.g., U.S. v. Big D Enterprises, Inc., 184 F.3d 924, 930 (8th Cir. 1999); Thronson v. Meisels, 800 F.2d 136, 142 (7th Cir. 1986). 66 See, e.g., Hobson v. HSC Real Estate, Inc., 483 Fed. Appx. 332, 333 (9th Cir. 2012); cf. Daniels v. Brooklyn Estates & Properties Realty, 413 Fed. Appx. 399, 401 (2d Cir. 2011) (discriminatory statement by one defendant s employee was not admissible against another defendant because this employee was not shown to be an agent of the second defendant). -16-

winning the case at the trial court level on a questionable ground, because a successful appeal by the plaintiff eventually comes to be paid for by the defendant. Settlement should be carefully considered at the investigation stage. 67 Tell your story to an influential audience The DOJ attorneys leading an investigation might not have authority to settle a case or a complete understanding of all the factors driving the decision to undertake the investigation. Municipal attorneys and their clients should do everything in their power to get an audience with an ultimate decision maker at the DOJ. Support fair housing 67 See Schwemm, Housing Discrimination Law and Litigation, 33:13 (West 2014). -17-

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