$2.725 Million Settlement of Housing Discrimination Lawsuit

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Scales of JusticeHere is another example of a recent Fair Housing Act lawsuit settled by the United States Department of Justice (“DOJ”). I try to post case summaries in order to provide timely updates to real estate professionals about the "dos and don'ts" under the Fair Housing Act, since fair housing is such an important issue.

On Tuesday, November 3, 2009, the DOJ announced the largest monetary payment ever obtained by the DOJ in the settlement of a case alleging housing discrimination in the rental of apartments. Los Angeles apartment owner Donald T. Sterling agreed to pay $2.725 million to settle allegations that he discriminated against African-Americans, Hispanics and families with children at apartment buildings he controlled in Los Angeles.

The lawsuit, filed by the DOJ in August 2006, alleged that the defendants, Donald T. Sterling, his wife Rochelle Sterling and the Sterling Family Trust, engaged in discriminatory rental practices on the basis of race, national origin and familial status (having children under 18) at various apartment buildings that they owned and managed in Los Angeles. Among other things, the lawsuit alleged that the defendants discriminated against non-Korean tenants and prospective tenants at buildings the defendants owned in the Koreatown area of Los Angeles.

The lawsuit alleged that the defendants violated the Fair Housing Act on the basis of race, national origin and familial status by refusing to rent to non-Korean prospective tenants, misrepresenting the availability of apartment units to non-Korean prospective tenants, and providing inferior treatment to non-Korean tenants. The lawsuit also alleged that the defendants refused to rent to African-American prospective tenants and misrepresented the availability of apartment units to African-American prospective tenants in the Beverly Hills section of Los Angeles. In addition, the lawsuit alleged that the defendants refused to rent to families with children and misrepresented the availability of apartment units to families with children throughout the buildings that they owned or managed. Additionally, the lawsuit alleged that the defendants made statements and published notices or advertisements in connection with the rental of apartment units that expressed a preference for Korean tenants and expressed discrimination against African-Americans and families with children.

In court filings, the DOJ presented evidence that the defendants' employees prepared internal reports that identified the race of tenants at properties that the defendants purchased in Koreatown. Additionally, the defendants made statements to employees indicating that African-Americans and Hispanics were not desirable tenants. The DOJ also presented expert analysis showing that the defendants rented to far fewer Hispanics and African-Americans than would be expected based on income and other demographic characteristics.

The defendants, who manage their apartments under the name Beverly Hills Properties, own and manage approximately 119 apartment buildings comprising over 5,000 apartments in Los Angeles County. The settlement also resolves two related lawsuits filed by former tenants at one of the properties. The two families, an African-American family and an interracial married couple with bi-racial children, alleged that the defendants demolished the private yards that had been part of their apartment and took other actions against them because of their race.

dollar signUnder the terms of the settlement, the defendants are required to pay a $100,000 civil penalty to the United States. The defendants are also required to pay $2.625 million into a fund that will be used to pay monetary damages to persons who were harmed by the defendants’ discriminatory practices, including the tenants in the two related lawsuits discussed above. Any money left over would go to further fair housing education or enforcement in Los Angeles. The settlement must be approved by the court. 

In addition to the payments in damages and civil penalties, the settlement agreement requires the defendants to take various steps to ensure non-discriminatory practices at their rental properties, including:

  • Enjoining the defendants from discriminating on the basis of race, national origin, and familial status;
  • Requiring the defendants to implement a self-testing program over the next three years to monitor their employee’s compliance with fair housing laws at their properties. The testing would be conducted by an independent contractor that would report the results to the defendants and the DOJ;
  • Requiring the defendants to maintain non-discriminatory practices and procedures; and
  • Requiring the defendants to obtain fair housing training through an independent contractor for their employees who participate in renting, showing or managing apartments at the properties.

Source: U.S. Department of Justice press release and legal complaint and settlement documents(portions of press release used with permission)


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Comments (1)

Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

The BIGGER questions are if the fine$$$ are ever paid.  Insurance certainly does not pay and if the "owners" are a corporation or LLC, they just dissolve, reconstitute as another entity and THEN exchange shares/interest in the old/new entity with owners/investors.

The financial drain on the resources of the federal government is not worth a press release that no body finds, much less reads!!  The DoJ resources need to be directed elsewhere!!

Nov 30, 2009 09:52 PM