Article by David G. Savage and Daryl Strickland WASHINGTON -- The Supreme Court, taking up an appeal backed by California's real estate industry, agreed Monday to decide whether the owner of a small real estate firm can be forced to pay a damages verdict out of his own pocket if one of his agents discriminates against a prospective buyer or renter. "What sane individual would take on that responsibility" of owning or managing a real estate business if they are "going to be personally liable for the acts of all of the agents?" asked Douglas G. Benedon, a Woodland Hills attorney, in his appeal to the high court. He is representing David Meyer, the owner of a now-defunct real estate company that sold homes in the Twentynine Palms area of Southern California. He was sued for racial discrimination after one of his agents allegedly turned away a mixed-race couple and referred to them as a "salt-and-pepper team." The couple, Emma and David Holley, offered $145,000 for a house in October 1996, but the seller's agent, Grover Crank of Triad Realty, never presented the offer. The owner later sold his house for $20,000 less. The Holleys and the seller joined a race-bias suit against Crank, the Triad firm and its owner and broker, Meyer. The case has never gone to trial. It reached the Supreme Court on the question of who can be held liable for discrimination under the landmark Fair Housing Act of 1968. Initially, U.S. District Judge William Matthew Byrne Jr. dismissed Meyer from the case, ruling that the plaintiffs could sue only Crank and Triad. Since the agent and the company had little in the way of insurance or assets, the lawyers for the bias victims appealed to the U.S. 9th Circuit Court of Appeals. Last year, its judges gave the civil rights law a broad sweep, saying that liability extends to all who "direct or control" real estate sales and rentals. "Owners and officers of corporations may be held vicariously liable for an employee's violations of the Fair Housing Act," said Judge Procter Hug Jr. The court said the plaintiffs did not have to prove that Meyer knew of or condoned the alleged discrimination. Instead, they needed to show only that he supervised the agent. That ruling sent a jolt through the real estate industry, said June Barlow, general counsel for the California Assn. of Realtors, based in Los Angeles. "We don't have a problem with holding the firm liable. This went beyond that to say the owner can be personally liable, and without any finding of wrongdoing on his part," Barlow said. The California Realtors group and the Chicago-based National Assn. of Realtors joined Meyer's appeal to the high court. They said the entire real estate industry faced "much upheaval" if the personal assets of "innocent" owners and directors could be put at risk in a lawsuit. A lawyer for the bias victims said the Realtors groups are exaggerating the effect of the ruling. "This has been the law for decades. If you are licensed by the state and you are in control [of a real estate operation], with that control comes the responsibility to assure that the agents comply with the law," said Christopher Brancart of Pescadero. Arguments in Meyer vs. Holley, 01-1120, will be heard in the fall. Experts in housing discrimination say it is hard to gauge whether blatant bias persists in the real estate industry. "It's not the norm, but it's not uncommon either," said Raphael Bostic, a professor at USC and an expert on home lending practices. "It wouldn't be a big surprise to come across Realtors and brokers that use this kind of approach, but at the same time a lot of reputable Realtors don't do this." Marlene Garza, chief executive of the Housing Rights Center, which handles litigation complaints for the city and county of Los Angeles and 28 other cities, said testers continue to see stark disparities in the treatment accorded whites and racial minorities. In a recent test, the group found that a person of color was handed brochures and showed a Web site by brokers at a Pasadena agency, while a white person of similar income and housing needs got a personal tour of neighborhoods. But lawsuits are relatively rare. "We don't have a rampant number of [discrimination] cases because a lot of it goes undetected," said Gary Rhoades, litigation director for the Housing Rights Center. The National Fair Housing Alliance, a Washington group that supports equal housing opportunity, estimated in a study issued last month that only 1% of discrimination by agents is reported. The outcome in the Supreme Court case could make it harder to combat persistent bias in the sale and rental markets, Garza said.
May 21, 2002