ILNews

Justices split on rental restriction case

Michael W. Hoskins
January 1, 2008
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In a ruling that could be the first of its kind in the nation, a divided Indiana Supreme Court Thursday afternoon reversed a lower court's ruling that a Kokomo subdivision's covenant restricting rentals violated the federal Fair Housing Act because of potential racial implications.

The state's highest court has been quiet on the issue since hearing arguments in October 2006, but it simultaneously decided to grant transfer and issue an opinion in the case of Villas West II of Willowridge v. Edna McGlothin, No. 34S02-0805-CV-266. The case involved a covenant that the Indiana Court of Appeals described as being "subterfuge for excluding minorities from renting homes" and a case of first impression that could affect how neighborhoods across the state implement no-rent provisions.

More than two years ago, the lower appellate court had upheld the trial judge's determination about the rental restriction. But a majority of the justices disagreed that the owner challenging the restriction, Edna McGlothin, proved any racial disparate impact.

The bottom line: the subdivision's no-lease covenant can stay in place.

"This record does not support a claim under a disparate impact theory," Chief Justice Randall T. Shepard wrote, joined by Justices Brent Dickson and Theodore Boehm. Justices Robert D. Rucker and Frank Sullivan dissented, voting to affirm the trial court.

The suit arose when the homeowners association sued McGlothin in 2002 for renting her residence in violation of a covenant barring rentals in the community to anyone other than family members. Algy and Edna McGlothin had bought the home in 1996. The developer controlled the association until turning it over to a board of homeowners in May 2000, but through their daughter the McGlothins had started leasing the home in 1998. That person rented until 2002, when the homeowner-controlled association notified the owner that they had violated the covenant. McGlothin had moved into a nursing home after her husband's death and needed the rental income to qualify for Medicaid and finance her care. The association sued her - as well as her estate after she died - and argued that the rental ban was needed to protect property values within the community and was consistent with the association's obligation to do so.

McGlothin countersued, arguing that the covenant violated the Fair Housing Act because it had a disparate impact on blacks. Howard Superior Judge Stephen Jessup ruled against the association, and the Court of Appeals upheld that decision in January 2006, holding that the covenant violates the federal Fair Housing Act. The association appealed.

But in their ruling, justices noted the trial court ruling was "clearly erroneous" because it found no "legitimate non-discriminatory reason" for the covenant despite undisputed evidence and expert testimony in the record showing that owners maintain property better than renters.

The court reflected on multiple jurisdictions' handling of how to determine whether any disparate impact had been proven, delving into federal caselaw in five of the 15 pages of the opinion. The majority noted that there is wide agreement in the federal Circuit courts that the FHA allows disparate impact claims but that there's no consensus about the proper framework for analyzing such a claim, and the U.S. Supreme Court hasn't addressed that issue.

A main federal precedent questioned, and ultimately rejected by the majority, was Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283 (7th Cir. 1977), which is known as "Arlington Heights II." The majority notes that it isn't bound by federal precedent and that it finds Arlington Heights II "doctrinally unsound" in how it outlines a procedure for establishing the burden each party must meet. Ultimately, it settled on its own framework.

"In sum, to establish a right to disparate impact recovery under the FHA, a plaintiff must establish a prima facie case by demonstrating that a policy or practice actually or predictably has a significantly adverse or disproportionate impact on a protected class," Chief Justice Shepard wrote. "To rebut this showing, the defendant must demonstrate that its policy or practice has a manifest relationship to a legitimate, nondiscriminatory interest. The plaintiff may then overcome the defendant's showing by demonstrating that a less discriminatory alternative would serve the defendant's legitimate interest equally well."

Applying that framework to the Villas West II case, justices determined that McGlothin's evidence left "something to be desired" in proving that the no-lease covenant would predictably and disproportionately affected blacks, but it proceeded on the basis that the prima facie case was established. Next, it looked at the HOA's demonstration that it had a legitimate, non-discriminatory reason for the rule by considering expert testimony that renters don't maintain homes as well as owners do and, therefore, excluding renters helps maintain property values. Lastly, the justices looked at McGlothin's rebuttal claim that other covenants helped maintain the community and property values.

Chief Justice Shepard wrote that other property-maintenance covenants - rules to maintain windows and fixtures, maintain lawns, clear trash, signs, and non-working vehicles - can be a less discriminatory alternative to no-lease covenants, and that owners typically do take more pride in their properties. He relied on expert testimony and evidence that was undisputed at trial and noted these other covenants are not an equally effective way to address the problem of divided interests in rental property.

In the dissent, Justices Rucker and Sullivan pushed to not abandon the 30-year-old precedent from the 7th Circuit Court of Appeals that much of the case's analysis of disparate impact relied upon.

"The majority works overtime and spends much ink to argue that Arlington Heights II is flawed and should not be followed," Justice Rucker wrote. "Other than to make it exceedingly more difficult for legitimate victims of housing discrimination to press their claims, I see no reason to abandon this precedent."

Now, the Kokomo case goes back to Judge Jessup to decide whether any intentional discrimination occurred and if any relief is needed.

"We find ourselves unable to discern whether relief is appropriate on McGlothin's intentional discrimination claim," the court wrote. "The need for fair adjudication suggests the desirability of remanding for further evidence and findings."
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  1. First comment on this thread is a fitting final comment on this thread, as that the MCBA never answered Duncan's fine question, and now even Eric Holder agrees that the MCBA was in material error as to the facts: "I don't get it" from Duncan December 1, 2014 5:10 PM "The Grand Jury met for 25 days and heard 70 hours of testimony according to this article and they made a decision that no crime occurred. On what basis does the MCBA conclude that their decision was "unjust"? What special knowledge or evidence does the MCBA have that the Grand Jury hearing this matter was unaware of? The system that we as lawyers are sworn to uphold made a decision that there was insufficient proof that officer committed a crime. How can any of us say we know better what was right than the jury that actually heard all of the the evidence in this case."

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  3. MCBA .... time for a new release about your entire membership (or is it just the alter ego) being "saddened and disappointed" in the failure to lynch a police officer protecting himself in the line of duty. But this time against Eric Holder and the Federal Bureau of Investigation: "WASHINGTON — Justice Department lawyers will recommend that no civil rights charges be brought against the police officer who fatally shot an unarmed teenager in Ferguson, Mo., after an F.B.I. investigation found no evidence to support charges, law enforcement officials said Wednesday." http://www.nytimes.com/2015/01/22/us/justice-department-ferguson-civil-rights-darren-wilson.html?ref=us&_r=0

  4. Dr wail asfour lives 3 hours from the hospital,where if he gets an emergency at least he needs three hours,while even if he is on call he should be in a location where it gives him max 10 minutes to be beside the patient,they get paid double on their on call days ,where look how they handle it,so if the death of the patient occurs on weekend and these doctors still repeat same pattern such issue should be raised,they should be closer to the patient.on other hand if all the death occured on the absence of the Dr and the nurses handle it,the nurses should get trained how to function appearntly they not that good,if the Dr lives 3 hours far from the hospital on his call days he should sleep in the hospital

  5. It's a capital offense...one for you Latin scholars..

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