Filed February 06, 2012 (merits-stage brief)
A group of property owners brought an equal protection claim against the City of Indianapolis due to the City’s decision to provide tax relief only on a prospective basis. Prior to 2005, the City would finance sewer projects by apportioning the costs to property owners. The City allowed owners to pay in full or by installments (10, 20, 30 year options). At some point, the City decided to move away from this method of financing and moved to a completely different system and made the decision to forgive the remaining amounts owed under the old system. However, the affected owners had not all paid the same amount since some homeowners had paid in full while some had opted for the longest term financing possible.
IMLA has submitted a brief in this case to emphasize that the City’s actions meet the rational basis standard. City’s have reasonable, legitimate and even compelling reasons for differentiating between tax refunds and prospective tax relief. We invite you to read this excellent brief.
UPDATE: The Supreme Court dismissed this case after both parties agreed to dismiss on February 10, 2012.
Original post from November 10, 2011:
The Supreme Court recently granted cert in Magner v. Gallagher, a case that will likely have implications for local governments. IMLA submitted an important amicus brief in this case, you can read our brief here and see a mention of our brief in a recent Forbes.com article.
Like many cities, St. Paul has a property maintenance code which establishes minimum maintenance standards for all structures, including provisions on light, ventilation, heating, sanitation, fire safety, etc. In 2002, the City established the Department of Neighborhood Housing and Property Improvement (DNHPI) as an executive department responsible for administering and enforcing the code.
The director of DNHPI increased the level of code enforcement target at rental properties, and directed proactive “sweeps” to detect code violations. DNHPI sought to compel property owners to take greater responsibility for their properties or, alternatively, force changes in ownership. To achieve its objectives, DNHPI employed a variety of strategies for renter-occupied dwellings, including orders to correct or abate conditions, condemnations, vacant-building registration, fees for excessive consumption of municipal services, tenant evictions, real-estate seizures, revocations of rental registrations, tenant-remedies actions, and if necessary, court action.
Plaintiffs in this case are essentially landlords, with portfolios ranging from one property to over forty properties. These landlords received code enforcement citations that in many cases, cited between ten and twenty-five violations per property. As a result, Plaintiffs claim they suffered increased maintenance costs, fees, condemnations, and were forced to sell properties in some instances.
Plaintiffs brought a number of claims (11 in total), and the district court dismissed all on summary judgment. The plaintiffs appealed to the Eighth Circuit Court of appeals, where the Court affirmed in all aspects except one. On review, the 8th Circuit held that disparate impact theory applied to a claim of racial discrimination under the FHA when a city applies its housing maintenance code to substandard housing, because the cost to repair tended to reduce housing options for people of color. The standard used by the 8th Circuit is that a plaintiff “must show a facially neutral policy ha[d] a significant adverse impact on members of a protected minority group.” Plaintiffs are NOT required to show that the policy or practice was formulated with discriminatory intent. The Circuits are split on this. The Seventh Circuit (and a few others have follow) includes the following factors to be used: (1) how strong is the plaintiff’s showing of discriminatory effect; (2) is there some evidence of discriminatory intent, though not enough to satisfy the constitutional standard of Washington v. Davis [426 U.S. 229 (1976)]; (3) what is the defendant’s interest in taking the action complained of; and (4) does the plaintiff seek to compel the defendant to affirmatively provide housing for members of minority groups or merely to restrain the defendant from interfering with individual property owners who wish to provide such housing.
SCOTUSblog is a good place to follow the action.
Posted By: Dwight Merriam, Robinson & Cole, LLP
Do you recall the U.S. Supreme Court’s Rapanos decision in 2006 in which the Court split 4-1-4 on the extent of the federal government’s jurisdiction over wetlands under the Clean Water Act? That odd split, with Kennedy in the middle, left at least two possible tests for determination of jurisdiction and uncertainty that remains today.
The United States Court of Appeals, Fourth Circuit, on January 25th, handed down its decision in Precon Development Corporation Inc. the United States Army Corps of Engineers clearly showing how unclear the jurisdictional issue remains. http://pacer.ca4.uscourts.gov/opinion.pdf/092239.P.pdf
The whole doctrinal disaster brings back fond memories the former Secretary of Defense Donald Rumsfeld, who famously said:
As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don’t know
We don’t know.
I do miss him.
The Precon case arose over a dispute as to whether 4.8 acres of wetlands 7 miles from the nearest navigable water was subject to jurisdiction by the U.S. Army Corps of Engineers under the Clean Water Act. The Corps claimed jurisdiction and denied Precon’s application to impact the wetlands through development. Precon appealed and the federal district court granted summary judgment to the Corps upholding the Corps’ jurisdiction and permit denial.
Precon appealed the Corps’ jurisdictional determination and the Fourth Circuit vacated the District Court’s grant of summary judgment and remanded the case back to the District Court with instructions to remand the matter back to the Corps for reconsideration of its jurisdiction over the wetlands.
Precon is the developer of the 650-acre planned unit development known as Edinburgh in Chesapeake, Virginia. Between 2004 and 2006, Precon received Corps approval to fill 77 acres of wetlands for the development.
Precon later decided to develop 10 additional residential lots in Edinburgh, development that required impacting another 4.8 acres of wetlands. The Corps was not happy about Precon’s piecemealing the application by adding additional land. Precon said the Corps didn’t have jurisdiction over the 4.8 acres; the Corps said it did; and the issue was joined.
The wetlands in question are next to a man-made drainage ditch that is 2,500 feet long, dug through wetlands with the dredge materials thrown up on the side creating a berm between the ditch and the 4.8 acres of wetlands.
Water in the ditch flows seasonally from late winter to early spring and connects with a perennial drainage ditch about 900 feet downstream from the site. That ditch runs along the boundary of the development for about 3,000 feet until it reaches a second perennial tributary 2 ½ to 3 miles south of the Edinburgh development. From there the merged tributaries flow into the Northwest River 3 or 4 miles downstream.
The Fourth Circuit accepts Kennedy’s “significant nexus” test as controlling in this case. The court’s analysis of the significant nexus determination takes several pages in the decision.
Interestingly, the Fourth Circuit decided that it should “treat compliance with Justice Kennedy’s ‘significant nexus’ test as a question of law, as we do any question of statutory interpretation, and review for compliance de novo…. However, recognizing the Corps’ expertise in administering the CWA, we give deference to its interpretation and application of Justice Kennedy’s test where appropriate.”
The court decided that the significant nexus test “does not require laboratory tests or any particular quantitative measurements in order to establish significance.” Interpreting Kennedy’s test, the court said that “he clearly intended for some evidence of both a nexus and its significance to be presented. Otherwise, it would be impossible to engage meaningfully in an examination of whether a wetland had ‘significant’ effects or merely ‘speculative or insubstantial’ effects on navigable waters.”
The court decided: “The question is thus whether the Corps’ record contained enough physical evidence -quantitative or qualitative – to allow us to uphold its determination that a significant nexus existed here.”
The court found that the record did not appear to contain any measurements of actual flow and that “even if the record had sufficiently documented flow, we do not believe that recitation of the flow of an adjacent tributary alone, absent any additional information regarding its significance, would necessarily suffice to establish a significant nexus…. Accordingly, we must conclude that this record does not support the Corps’ determination that the nexus that exists between the 448 acres of similarly situated wetlands and the Northwest River is ‘significant.’”
And so, case goes back to the trial court and from there back to the Corps.
What a mess the Rapanos decision has left all of us.
In 2005, the Attorney General for New York began an investigation into lending practices by national banks in the State of New York and whether these practices violated New York’s fair-lending laws. As part of the investigation, the Attorney General (Eliot Spitzer) sent a letter to a number of national banks asking that they provide specific non-public information about their lending practices. These letters were sent “in lieu of subpoena.”
The Office of the Comptroller of the Currency (“OCC”) and a banking trade group, the Clearing House Association, brought suit to prevent the information request, on the basis that OCC’s regulations under the federal National Bank Act prohibited state law enforcement against national banks. Section 484(a) of the National Bank Act reads:
“No national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized.”
The OCC, charged with administering the National Bank Act adopted regulations further defining the term “visitorial powers.” The regulations stated in part that “(o)nly the OCC. . .may exercise visitorial powers with respect to national banks. . . . State officials may not exercise visitorial powers. . .such as conducting examinations, inspecting or requiring the production of books or records of national banks, or prosecuting enforcement actions.” (emphasis added).
The district court entered an injunction in favor of OCC and the Clearing House Association which prohibited an attorney general from enforcing state fair-lending laws through demands for records or judicial proceedings. The Second Circuit Court of Appeals affirmed. The Supreme Court affirmed in part and reversed in part.
The Court, in its opinion written by Justice Scalia, started its analysis by looking at prior decisions to help determine the “outer limits” of the term “visitorial powers,” noting that the Supreme Court has “always understood ‘visitation’ as [the] right to oversee corporate affairs, quite separate from the power to enforce the law.” For example, in First Nat. Bank in St. Louis v. Missouri, 263 U.S. 640 (1924), the Court upheld the right of the Attorney General of Missouri to bring a suit to enforce a state anti-bank-branching law against a national bank. In that case, the Court stated the federal government may perform visitorial administrative oversight, such as “inquir[ing] by quo warranto whether a national bank is acting in excess of its charter powers.” However, if it is a state statute of general applicability which is not substantively pre-empted, then the Court stated that “the power of enforcement must rest with the [State] and not with” the federal government. The Court went further to state that “reading ‘visitorial powers’ as limiting only sovereign oversight and supervision would produce an entirely commonplace result – the precise result contemplated by our opinion in St. Louis, which said that if a state statute is valid as to national banks, ‘the corollary that it obligatory and enforceable necessarily results.”
The Court noted that the OCC had tried to limit its regulation by noting in its argument that existing case law did recognize that states retained some power to regulate national banks, in areas such as contract, debt collection, taxation, zoning, criminal, and more. However, the Court noted that the language of OCC’s regulation was much more since it categorically prohibited “prosecuting enforcement actions” and defined visitorial powers to include “[e]nforcing compliance with any applicable. . .state laws concerning” “activities authorized or permitted pursuant to federal banking law.”
The Court concluded by applying the above-mentioned principles to the case. “Visitorial powers” in the National Bank Act:
“refers to a sovereign’s supervisory powers over corporations. They include any form of administrative oversight that allows a sovereign to inspect books and records on demand, even if the process is mediated by a court through prerogative writs or similar means.”
However, in this case the state attorney general was not acting in the “sovereign-as-supervisor” role, but instead was in the role “sovereign-as-law-enforcer.” This role is not a “visitorial power” and this, the OCC erred by extending the definition to include “prosecuting enforcement actions” in state courts.
The judgment of the Second Circuit was affirmed in part and reversed in part. The particular action by the Attorney General, the threatening letter “in lieu of subpoena,” is not an exercise of power of law enforcement “vested in the courts of justice” which the National Bank Act exempts from the ban on the exercise of supervisory power. The Court affirmed the injunction below as applied to the letter. More importantly, the Court vacated the injunction and reversed the lower courts decision that had prohibited the Attorney General from bringing a judicial enforcement action.
The decision can be found here.
In the 5-4 decision, the U.S. Supreme Court released its decision in Ricci v. DeStefano this morning. The case, an appeal from a ruling of the Second Circuit Court of Appeals, deals with Title VII of the Civil Rights Act of 1964 in the context of firefighter testing and promotion procedures. Title VII prohibits intentional acts of employment discrimination based on race, color, religion, sex, and national origin. The plaintiffs were all firefighters employed by the City of New Haven, Conn., who applied for promotion and took the necessary exams in 2003. The exams were prepared by an Illinois company that specialized in entry-level and promotional examinations for police and fire departments. The company’s vice-president subsequently testified that all of the questions were drawn from or based in the syllabus, and that the exam was facially neutral. However, when the results came in, all but one of the top candidates was white (the exception was Hispanic). New Haven’s Civil Service Board, charged with certifying the results, held hearings in which the “very significant disparate impact” was raised by the City’s corporation counsel, who “strongly advocated against certifying the exam results” (because “a statistical demonstration of disparate impact,” standing alone, “constitutes a sufficiently serious claim of racial discrimination to serve as a predicate for employer-initiated, voluntar[y] remedies – even . . . race-conscious remedies”). The Board ultimately decided not to certify the results, relying on federal, state and local anti-discrimination laws. It argued that it had a good-faith belief that Title VII mandated non-certification, and that the City could have faced Title VII liability for adopting a practice having a disparate impact on minority firefighters.
When Ricci and some of the other applicants sued, alleging violations of Title VII and their equal protection rights, the district court upheld the City’s decision and granted it summary judgment, finding that the defendants’ “motivation to avoid making promotions based on a test with a racially disparate impact, even in a political context, [did] not, as a matter of law, constitute discriminatory intent;” and that there was no Equal Protection violation in the decision not to use the promotional exams. “None of the defendants’ expressed motives could suggest to a reasonable juror that defendants acted ‘because of’ animus against non-minority firefighters who took” the exams. The Second Circuit – a panel that included now Supreme Court nominee Sonia Sotomayor – affirmed in a very brief, two-page decision. After the Supreme Court agreed to hear the case, IMLA filed an amicus brief in support of the City.
In today’s ruling, the Supreme Court reversed and remanded, focusing only on the Title VII issue and finding it unnecessary to deal with the Equal Protection arguments. Justice Kennedy delivered the opinion of the Court, ruling that the City’s action in discarding the tests violated Title VII: a “race-based action like the City’s in this case is impermissible under Title VII unless the employer can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under the disparate-impact statute. The [City], we further determine, cannot meet that threshold standard.” Fear of litigation alone could not justify the City’s reliance on race to the detriment of individuals who passed the examinations and qualified for promotions.
Certain government actions to remedy past racial discrimination – actions that were themselves based on race – were constitutional only where there was a “strong basis in evidence” that the remedial actions were necessary. Applying the strong-basis-in-evidence standard to Title VII, before an employer could engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional, disparate impact, the employer had to have a strong basis in evidence to believe it would be subject to disparate-impact liability if it failed to take the race-conscious, discriminatory action. Here, the Board’s hearings produced no strong evidence of a disparate-impact violation. The majority of the Court concluded that all of the evidence demonstrated that the City rejected the test results only because the higher-scoring candidates were white. Without some other justification, the Court held that this express, race-based decision-making was prohibited.
A threshold showing of a significant statistical disparity and nothing more was far from the required strong basis in evidence that the City would have been liable under Title VII had it certified the test results. That was because the City could be liable for disparate-impact discrimination only if the exams at issue were not job-related and consistent with business necessity, or if there existed an equally valid, less discriminatory alternative that served the City’s needs but that the City refused to adopt. Based on the record the parties developed through discovery, there was no substantial basis in evidence that the test was deficient in either respect.
Accordingly, the City’s race-based rejection of the test results could not satisfy the “strong basis in evidence” standard. “On this basis, we conclude that petitioners have met their obligation to demonstrate that there is ‘no genuine issue as to any material fact’ and that they are ‘entitled to judgment as a matter of law.’”
The majority concluded that “[o]ur holding today clarifies how Title VII applies to resolve competing expectations under the disparate-treatment and disparate-impact provisions. If, after it certifies the test results, the City faces a disparate-impact suit, then in light of our holding today it should be clear that the City would avoid disparate-impact liability based on the strong basis in evidence that, had it not certified the results, it would have been subject to disparate-treatment liability.”
The decision is available online at http://www.supremecourtus.gov/opinions/08pdf/07-1428.pdf