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The Inclusive Communities Project, Inc. v. Heartland Community Association, Inc.

United States District Court, N.D. Texas, Dallas Division

August 7, 2019

THE INCLUSIVE COMMUNITIES PROJECT, INC., Plaintiff,
v.
HEARTLAND COMMUNITY ASSOCIATION, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay United States District Judge.

         Before the court are Defendant Heartland Community Association Inc.'s Motion to Dismiss for Failure to State a Claim (Doc. 7), filed October 9, 2018; Defendant's First Amended Rule 12(b)(6) Motion to Dismiss (Doc. 14), filed December 4, 2018; Plaintiff The Inclusive Communities Project, Inc.'s Response to Defendant's First Amended 12(b)(6) Motion to Dismiss (Doc. 16), filed December 21, 2018; and Defendant's Reply in Support of the First Amended Rule 12(b)(6) Motion to Dismiss (Doc. 17), filed January 4, 2019. After careful consideration of the motion, briefs, pleadings, and applicable authority, the court denies as moot Defendant's Motion to Dismiss for Failure to State a Claim (Doc. 7); grants Defendant's First Amended Rule 12(b)(6) Motion to Dismiss (Doc. 14) and dismisses with prejudice this action.

         I. Factual and Procedural Background

         On July 24, 2018, the Inclusive Communities Project (“ICP” or “Plaintiff”) filed this action against Heartland Community Association, Inc. (“HCA” or “Defendant”), asserting that a policy enacted by HCA in a single-family development located in an unincorporated area of Kaufman County, Texas, constitutes race discrimination in violation of 42 U.S.C. § 1982 (“§ 1982”), and the disparate impact and disparate treatment standards under 42 U.S.C. § 3604(a) of the Fair Housing Act (“FHA”). On October 9, 2018, HCA filed a Motion to Dismiss for Failure to State a Claim (Doc. 7).[1] On October 30, 2018, ICP filed an Amended Complaint (the “Amended Complaint”) (Doc. 10) pursuant to Federal Rule of Civil Procedure 15(a)(1)(B), which allows a party to amend its pleading once as a matter of course within 21 days after service of a motion under Federal Rule of Civil Procedure 12(b). On December 4, 2018, HCA filed the Amended Rule 12(b)(6) Motion to Dismiss (Doc. 15), seeking to dismiss all claims asserted in ICP's Amended Complaint.

         ICP is a nonprofit organization that assists households in seeking access to housing in predominately nonminority locations in the Dallas, Texas area. Pl.'s Am. Compl., Doc. 10 at 2. ICP's clients are predominantly Black or African American, and some of them participate in the Section 8 (“Section 8”) Housing Choice Voucher Program administered by the Dallas Housing Authority (“DHA”). Id. at 2-3.

         HCA is a nonprofit property owners' association with the authority to enact and enforce rules and regulations for Heartland, Texas, a single-family development located in Kaufman County. Id. at 5. HCA's authority to enact and enforce rules and regulations is set forth in the deed restrictions and covenants for each single-family property in Heartland. Id. at 6. On March 19, 2018, HCA enacted the policy (the “Policy”) at issue in this case. Id. at 6-7. The Policy is codified in Section 1.5.5 of the Tenth Supplemental Certificate and Memorandum of Recording of Dedicatory Instruments for Heartland Community Association, Inc. Id. at 7. The purpose of Section 1.5.5 is “to establish minimum criteria by which the Owner of a Rental Property must qualify tenants and any other occupants of the Owner's Rental Property.” The section sets forth three specific qualifications for rental tenants. One of the qualifications is codified in Section 1.5.5.2 and titled “No Section 8 Housing.” Id. It provides, “A Rental Property may not be used for a publicly financed or subsidized housing program, such as Section 8 Housing.” Id. ICP asserts that the other two requirements prohibit renting to sex offenders and tenants with a history of evictions, and, by grouping these categories of individuals with Section 8 voucher households, the Policy “directly classifies voucher participants as undesirable tenants” and “reinforces the unjustified stigma on voucher families.” Id. at 10. ICP contends that, if an owner violates this requirement by renting to a prohibited person or household, such action is sanctionable under HCA's Violation Enforcement Policy, which authorizes the assessment of liens and court action to obtain injunctive relief and collect fines. Id. at 11-12.

         In its first claim against HCA, ICP asserts that the Policy has a disparate impact on two Black or African-American populations: (1) the existing Section 8 voucher residents living in rentals located in Heartland and (2) any future voucher holders who may wish to apply for a rental property in Heartland. Id. at 10. With respect to the existing voucher residents in Heartland, ICP contends that all 96 of the families renting property in Heartland using a Section 8 voucher are Black or African American. Id. at 12. ICP alleges that the Policy “causes the exclusion of the current voucher group by expressly limiting the terms upon which an existing voucher lease can be renewed to households for which there is no change in occupants.” Id. at 13. It further contends that the Policy “causes the exclusion of the current voucher group by its effect causing landlords to sell the properties currently being leased to voucher tenants rather than continue to own a unit that cannot be leased to another voucher resident once the current voucher occupant no longer leases the unit.” Id. ICP argues that the Policy has a disparate impact on the 96 Black or African- American families using Section 8 vouchers because, in contrast, the White non-Hispanic renters in Heartland who do not use a Section 8 voucher will not be adversely affected by the Policy. Id.

         With respect to future voucher holders who may wish to apply for a rental property in Heartland, ICP argues that the Policy will have a disparate impact on the Black or African-American population because a high percentage of Black or African-American individuals are currently on DHA's Section 8 voucher waiting list. ICP sets forth statistics in support of its position. Specifically, as of June 13, 2017, ICP alleges that 82.8% of the households on the Section 8 voucher waiting list were Black or African American. Id. at 16. In contrast, ICP alleges that only 3.9% of households on the waiting list at that time were White. Id. As of May 31, 2018, 84.34% of the households on the waiting list were Black or African American, whereas 2.4% were White. Id. at 17. ICP sets forth additional race-related statistics regarding the total number of households renting property in the Dallas Metropolitan Division in 2017 and 2018, and the relative number of households seeking Section 8 assistance. Id. at 16-17. ICP also sets forth statistics comparing the incomes of Black or African-American renter households to White non-Hispanic renter households in the Dallas Metropolitan Division and Kaufman County. ICP argues that these statistical allegations show that the Policy “causes a greater impact on a protected class, Black or African American, than it does on White non-Hispanic households.” Id. at 13. ICP contends that the Policy “sets a preference for higher income non Section 8 voucher households that can afford to rent a single family home in Heartland.” Id. at 22.

         In addition to asserting a disparate impact claim, ICP contends that the Policy violates the disparate treatment standard under the FHA and § 1982 because HCA allegedly had a discriminatory intent in adopting it. ICP contends that HCA harbors a racially-discriminatory motive with respect to current Section 8 voucher holders in Heartland because all of them are currently Black or African American. Id. at 24. It alleges that HCA harbors a racially discriminatory motive with respect to future applicants of rental properties seeking to use a Section 8 voucher because the population of applicants in the Dallas Metropolitan Division is disproportionately Black or African American. Id. at 26-27. ICP contends, “The fact that DHA's voucher program and the other Section 8 voucher programs in the Dallas Metropolitan Division are predominantly Black or African American is common knowledge, ” and “[t]he exclusionary effect of this disproportionately Black or African[-]American group [as a result of the Policy] is foreseeable.” Id. at 28. In asserting that HCA had a discriminatory intent in enacting this Policy, ICP alleges that HCA “began to consider the policy in 2018 after the number of Black or African [-]American DHA Section 8 voucher households increased from 0 in 2013 to 72 in 2017, ” and “doubled from 2016 to 2017.” Id. at 28-29. It contends, “While this increase did not substantially affect the racial composition of Heartland, it was a significant increase in the number of Black renter households in Heartland, ” and “[t]aking action to exclude Black tenants from a majority White non-Hispanic community after a significant increase in the number of those tenants shows discriminatory intent.” Id. at 29.

         ICP contends that, prior to filing this lawsuit, ICP asked HCA for its purpose in adopting the Policy prohibiting rentals to Section 8 housing voucher holders, and they “gave no reason[s].” Id. at 26. ICP alleges that “[t]he failure to give any reason for the absolute prohibition against renting to Section 8 voucher households is consistent with the existence of an illegal purpose that the defendant did not want to disclose.” Id. at 29. ICP further alleges that, “[g]iven the racially discriminatory result of the action, it is a reasonable inference that the illegal purpose is the deliberate exclusion of Black tenants because of their race.” Id. at 10. ICP notes that HCA, in its “Rental Amendment Questions and Answers” explaining the proposed Policy, stated in part that:

[W]e believe too many rental properties will reduce the homeowner's ability to feel like a large, tight knit community and reduces the number of people willing to serve on Committees/Boards and local school's PTA/PTO and may have a long-term impact on the community in which they live.

Id. at 25-26.

         In its Motion to Dismiss, HCA argues that, with respect to the disparate impact claim asserted under the FHA, ICP has failed to meet the Supreme Court's robust causality requirement set forth in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. 135 S.Ct. 2507 (2015). HCA argues that, pursuant to the robust causality requirement, ICP is required to plead facts showing that the Policy caused the statistical disparity in the allegedly impacted geographical area. Def.'s Mot. to Dismiss, Doc. 15 at 16. HCA argues that ICP has merely shown that “a disproportionately higher number of Black or African-American households participate in the Section 8 program.” Id. at 16. It argues that these allegations fall short of the causality requirement because:

Nowhere does ICP contend that the Policy caused more Black or African-Americans than White non-Hispanics to be on the DHA's Section 8 waiting list, caused more Black or African-Americans than White non-Hispanics to participate in the Section 8 program, caused more Blacks or African-Americans than White non-Hispanics to be eligible for Section 8 vouchers, or caused a disproportionate number of Black or African-American renter households to be part of the Section 8 program.

Id. at 16. HCA notes that the Supreme Court established the causality requirement because it “wants to protect defendants from abusive disparate-impact claims so that race would not be used and . . . cause defendants to be liable for racial disparities that they did not create.” Id. (citing Texas Dep't of Hous. & Cmty. Affairs, 135 S.Ct. at 2524).

         With respect to ICP's disparate treatment claim asserted under the FHA, HCA first argues that ICP's claim solely relies on allegations that the Policy will disproportionately affect more Black or African-American households, and it is, therefore, “really ICP's disparate impact claim recast as a disparate treatment claim.” Id. at 19-20. HCA next argues that the Policy is “racially neutral and applies to all Section 8 voucher recipients regardless of race, ” and ICP does not set forth factual allegations that HCA had a racially-discriminatory motive in enacting it. Id. at 20. HCA next argues that the claim should be dismissed because ICP relies on circumstantial evidence of discriminatory intent or motive that does not adequately establish a prima facie case of discrimination. Id. at 18. HCA contends that ICP solely relies on “subjective and unsupported assumptions, ” such as the allegation that the Policy classifies voucher participants as undesirable tenants and reinforces an unjustified stigma on voucher families by including them as one of three categories of rental applicants, the two other prohibited groups being sex offenders and tenants with a history of evictions. Id. at 20-21 (citing Pl.'s Am. Compl., Doc. 10 at 10). HCA argues that, per the text of the Policy, there are no pejorative references made to Section 8 tenants and any stigma perceived by ICP “exists solely within ICP's subjective reading of the Policy.” Id. at 21. HCA further argues that ICP fails to allege that HCA had knowledge that DHA's Section 8 voucher program ...


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