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Habitat Magazine Business of Management 2021

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LEGAL/FINANCIAL

HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

U.S. Appeals Court Sides With Co-op Boards in Major Discrimination Case

Bill Morris in Legal/Financial on March 26, 2021

Kings Park, Long Island

Fair Housing Act, U.S. Court of Appeals, co-op boards, racial harassment.

Kings Park Manor on Long Island was the site of a major discrimination lawsuit.

March 26, 2021

In a case that has massive implications for co-op boards and landlords, the U.S. Court of Appeals for the Second Circuit has ruled that boards and landlords cannot be held liable under the Fair Housing Act for failing to intervene in race-based harassment between residents.

A 13-judge panel handed down the long-awaited ruling on March 25, siding with the landlord – and, by implication, with co-op boards, which have a landlord-tenant relationship with shareholders.

Circuit Judge Jose A. Cabranes wrote: “Does a plaintiff state a claim under the Fair Housing Act of 1968 (FHA) for intentional discrimination by alleging that his landlord failed to respond to reports of race-based harassment by a fellow tenant? On the record before us, we answer the question in the negative… (W)e think landlords typically do not, and therefore cannot be presumed to, exercise the degree of control over tenants that would be necessary to impose liability under the FHA for tenant-on-tenant harassment.”

The verdict is a huge win for co-op boards. The case revolved around a dispute between two neighbors at a rental complex called Kings Park Manor in Kings Park, Long Island. A black tenant named Francis Donahue claimed that a white neighbor, Raymond Endres, bombarded him with racial slurs and caused him to feel “fear and anxiety.” Donahue summoned the Suffolk County Police Department’s Hate Crimes Unit, which charged Endres with aggravated harassment, a misdemeanor.

Then, in 2014, Donahue filed a lawsuit in U.S. District Court against Endres, the owners of Kings Manor and the property manager, Corinne Downing, claiming that Endres’s actions – and the landlord’s refusal to address those actions – resulted in a “negligent infliction of emotional distress” that was a violation of the Civil Rights Act, the Fair Housing Act and the state’s Executive Law.

“Contrary to the Plaintiff’s contention,” U.S. District Judge Arthur D. Spatt wrote in his decision, “the mere fact that the Kings Park Manor Defendants were allegedly made aware of the underlying verbal abuse and threats of physical assault did not trigger a common-law duty on their part to investigate and intervene.”

Donahue appealed that decision to the U.S Court of Appeals for the Second Circuit, which covers New York, Connecticut and Vermont. A three-judge panel reversed the District Court’s decision in a split 2-to-1 ruling, then reversed its reversal and asked attorneys to submit new briefs so the case could be heard by all of the Second Circuit’s 13 judges.

While the judges were weighing the case, landlords and co-op boards were in a state of high anxiety. At that time, Andrew P. Brucker, a partner at the law firm Armstrong Teasdale, speculated on how co-op governance would change if the court ruled in favor of Donahue. “The scary thing,” Brucker said, “is that if the person making the complaint is a member of a protected class, the board might be under a microscope. Even the way you treat them after they move in will be under a microscope.”

Stanley Somer, a partner in the law firm Somer & Heller, represented Kings Park Manor and Downing. “Depending on how the Second Circuit rules,” he said before the March 25 decision came down, “the impact of this could be nationwide, and the cost could be astronomical. If you have to investigate every complaint, boards would have to hire outside companies. By not acting, the co-op board or landlord is discriminating? That’s insanity.”

For now, the insanity is over. Donahue has only one avenue of appeal left: the U.S. Supreme Court.

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