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LLC v. City of Yuma

United States District Court, D. Arizona

January 29, 2018

AVENUE 6E INVESTMENTS, LLC, et al., Plaintiffs,
CITY OF YUMA, ARIZONA, a municipal corporation, Defendant.

          ORDER AND OPINION [Re: Motion at Docket 242]



         At docket 242, the City of Yuma, Arizona (“the City”) has filed another motion for summary judgment as to plaintiffs' Fair Housing Act disparate impact claim. The City argues that plaintiffs Avenue 6E Investments, LLC and Saguaro Desert Land, Inc. (jointly “Plaintiffs” or “the Hall Company”)[1] cannot bring a FHA disparate impact claim based upon a rezoning denial. Plaintiffs filed a response at docket 249. The City replied at docket 252. Oral argument was requested, but the briefing is thorough and argument would not assist the court.


         This action arises from the City's denial of the Hall Company's rezoning application for a 42-acre parcel of undeveloped land in Yuma, Arizona (“the Property”). The Property is located in the southeast portion of Yuma. The south end of the Property abuts a low-density R-1-8 subdivision, Belleza Phase 1. The north end of the Property is bordered by a recreational vehicle village. The City owns the parcel of land to the east of the Property, which is designated for use as a wastewater facility and municipal park. To the west of the Property is the Terra Bella development. At the time of the events in this case, Terra Bella was zoned R-1-6 (minimum 6, 000-square-foot lots) and had two phases of development. The first phase abutted the Property on the Property's southwest corner and had been platted for lots larger than the minimum lot size of 6, 000 square-feet, ranging from 8, 000 to 20, 000 square feet. Only a couple of lots within the first phase of development had been sold and developed during the relevant time period. The second phase abutted the Property to the west and northwest. It was vacant land that had not been platted.

         Prior to 2006 the Property was part of a larger 80-acre parcel of land owned by KDC of Yuma, LLC (“KDC”). KDC applied to rezone the 80-acre parcel from agricultural to R-1-8 (minimum 8, 000-square-foot lots). The City Council conditionally granted the rezoning application, after which KDC obtained approval of a preliminary plat on the entire parcel that set out single family lots that were at least 9, 000 square feet. KDC developed the southern 38 acres, Belleza Phase 1, and then sold the remaining 42 acres, the Property, to the Hall Company. The Hall Company purchased the Property from KDC for $5.8 million, or around $135, 000 an acre. At the time of the sale, the Property was still conditionally zoned R-1-8 and still had KDC's preliminary plat providing for 129 lots of least 8, 000 square feet.

         In 2008, the Hall Company determined that development of the Property with R-1-8 zoning was not financially viable because there was no demand for large-lot, higher-priced homes in Yuma due to existing inventory and the housing market decline. Consequently, the Hall Company designed a development consisting of smaller lots: approximately 198 lots, each about 6, 000 square feet. The Hall Company intended to construct affordable and moderately priced homes using a housing product it had built in another one of its subdivisions. Unlike more expensive large-lot homes, it believed that these affordable or moderately priced homes were still in demand. The Hall Company deemed “affordable” to mean entry-level houses priced between $120, 000 and $150, 000 and moderately priced to mean mid-level houses priced between $150, 000 and $175, 000. Specifically, the proposed price range for the houses to be constructed on the Property was between $125, 200 and $159, 800. They were not seeking to develop low-income housing as defined by the Department of Housing and Urban Development.

         In order to implement the new plan, the Hall Company submitted an application to the City to rezone the Property from R-1-8 to R-1-6. Zoning designations R-1-8 and R-1-6 are both considered low-density zoning in Yuma, only one density gradient apart. The City's planning staff recommended that the City Council approve the rezoning request, finding it consistent with the City's General Plan for the area, which designated the area for low-density residential development.

         Neighborhood opposition to the rezoning was subsequently communicated to City Council members through letters and at public meetings. People voicing opposition primarily based their objection to the rezoning on their belief that higher-density development and lower-priced homes would increase crime and reduce property values. Based on the substance of these comments, their expectation of increased crime and lower property values was based on the “demographics” that they associated with the Hall Company's other developments; the Hall Company was known for developing low and moderately priced homes, and its representative estimates that at least half of the purchasers of its homes were Hispanic. In September of 2008, the City Council denied the rezoning application. The rezoning denial was the first denial by the City Council since 2005 out of a total of 76 rezoning requests.

         The Hall Company filed a complaint against the City, alleging violations of their equal protection and substantive due process rights under 42 U.S.C. § 1983; claims of discriminatory intent and disparate impact under the federal Fair Housing Act, 42 U.S.C. § 33601 et seq. (“FHA”); and violations of Arizona constitutional and statutory law. The City moved to dismiss all claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The court originally granted that motion as to all of the claims except for the disparate impact claim under the FHA.

         The City later filed two motions for summary judgment on that claim. In the motion at docket 146, the City argued that Plaintiffs could not meet their prima facie burden of establishing disparate impact claim under the FHA because of the glut of housing opportunities in the southeast portion of Yuma that were similar to Plaintiffs' proposed development on the Property. The City presented an alternative basis for summary judgment at docket 148, arguing that Plaintiffs failed to present the appropriate statistics to meet the prima facie test for disparate impact and also that it had a legitimate and nondiscriminatory basis for denying the rezoning request. The court granted the motion at docket 146, finding that Plaintiffs could not meet their prima facie burden because of other housing opportunities in the area, relying on an Eleventh Circuit case Hallmark Developers, Inc. v. Fulton County.[2] It then denied the motion at docket 148 as moot and therefore did not address the City's challenge to Plaintiffs' statistical showing of disparate impact.

         On appeal, the Ninth Circuit reserved the court's initial dismissal of Plaintiffs' discriminatory intent claim under the FHA. It held that Plaintiffs' claim-that the City Council's denial of their rezoning request constituted disparate treatment under the FHA and Equal Protection-was plausible given allegations that 1) the public comments consisted of language that a reasonable jury could interpret to be racially charged code words; 2) the planning commission had unanimously voted in favor of the rezoning request; and 3) the City Council had not denied a rezoning request in three years.[3] The Ninth Circuit also reversed this court's finding of summary judgment in favor of the City as to Plaintiffs' disparate impact claim under the FHA. It rejected the Eleventh Circuit's holding in Hallmark that similar housing opportunities within the general area of the property denied for rezoning negated the possibility of any disparate impact.[4] It reasoned that adopting such a holding “would prematurely cut short the carefully constructed mode of analysis that the [Supreme] Court just recently established” in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., [5] which was issued after this court's order granting summary judgment.

         After the remand, at docket 218, the City renewed its prior motion for summary judgment on Plaintiffs' disparate impact claim based on the inadequacy of Plaintiffs' prima facie case. The court subsequently denied the motion at docket 235, concluding that Plaintiffs had presented a prima facie case of disparate impact and that there were issues of fact as to the City's stated justifications for the denial. The City now argues that a close examination of Inclusive Communities requires the court to grant summary judgment on Plaintiffs' disparate impact theory of liability, not based on an insufficient prima facie showing or its adequate justification, but based on the fact that this case involves a “one-off” zoning decision and not a greater land use policy.

         The City also asks for summary judgment as to Plaintiffs' claim for failure to further fair housing that is set forth in Count V of the proposed Second Amended Complaint, which the parties agree is now the operative complaint. Plaintiffs had originally sought to file the Second Amended Complaint in 2010 to add a claim for failure to further fair housing and to add an allegation in support of its intentional discrimination claim. The court did not allow the amendment, concluding the proposed new claim was invalid and the additional allegation would not change the court's conclusion regarding the dismissed intentional discrimination claim. After the Ninth Circuit's remand, the intentional discrimination claim was revived and therefore the additional allegation is no longer moot. Plaintiffs made clear at docket 247 that the Second Amendment Complaint is the operative complaint only for the purpose of including the additional allegation and not to add a new claim. They conceded that they do not seek to pursue any claims that they did not challenge on appeal, including the claim for failure to affirmatively further fair housing. Again, at docket 249, Plaintiffs clarify that the additional claim in the Second Amended Complaint is not a live claim. Therefore, the City's request for summary judgment on that claim is unnecessary.


         Summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[6] The materiality requirement ensures that “only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.”[7] There can be no genuine issue as to any material fact if a party “fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.”[8] Ultimately, “summary judgment will not lie if the . . . evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[9] In resolving a motion for summary judgment, a court must view the evidence in the light most favorable to the non-moving party.[10]The reviewing court may not weigh evidence or assess the credibility of witnesses.[11]

         The moving party has the burden of showing that there is no genuine dispute as to any material fact.[12] The moving party need not present evidence; it need only point out the lack of any genuine dispute as to material fact.[13] Once the moving party has met this burden, the non-moving party must set forth evidence of specific facts showing the existence of a genuine issue for trial.[14] All evidence presented by the non-movant must be believed for purposes of summary judgment, and all justifiable inferences must be drawn in favor of the non-movant.[15] However, the non-moving party may not rest upon mere allegations or denials, but must show that there is sufficient evidence supporting the claimed factual dispute to require a fact-finder to resolve the parties' differing versions of the truth at trial.[16]


         Under the FHA it is unlawful to “make unavailable or deny” a “dwelling” to a person because of that person's race, color, religion, sex, familial status, or national origin.[17] A dwelling includes “any vacant land which is offered for sale or lease for the construction or location thereon of any such building, structure, or portion thereof.”[18] A plaintiff can establish a FHA violation under a theory of disparate treatment or disparate impact. Disparate treatment is intentional discrimination; a governmental body cannot “zone land or refuse to zone land out of concern that minorities would enter a neighborhood.”[19] Disparate impact discrimination, on the other hand, includes “actions by private or governmental bodies that create a discriminatory effect upon a protected class or perpetuate housing segregation without any concomitant legitimate reason.”[20]Disparate impact “‘permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification.'”[21] It “also targets ‘artificial, arbitrary, and unnecessary barriers' to minority housing and integration that can occur through unthinking, even if not malignant, policies of developers and governmental entities.”[22]

         In Inclusive Communities, the Supreme Court confirmed what many circuits had already concluded, that disparate impact claims were cognizable under the FHA.

         As noted above, the issue in this motion is Plaintiffs' FHA disparate impact claim. Such a claim is evaluated under the familiar burden-shifting framework.[23] At docket 235, the court considered whether summary judgment in the City's favor as to Plaintiffs' disparate impact claim was appropriate based on this burden shifting framework. It concluded summary judgment was not warranted. The City now asserts that summary judgment in its favor is still necessary because a one-time denial of a rezoning request cannot support a disparate impact claim as a matter of law, relying on language in Inclusive Communities.

         In Inclusive Communities, a non-profit organization brought a FHA disparate impact action against the Texas Department of Housing and Community Affairs. It alleged that the department had allocated too many low income tax credits to development projects in predominantly black inner-city areas and too few in predominantly white suburban neighborhoods, resulting in a disparate impact on African-American residents. The district court found in favor of the plaintiffs. On appeal, the Fifth Circuit held, consistent with its prior holdings, that disparate-impact claims under the FHA are in fact cognizable, but reversed and remanded the case on the merits based on the lower court's improper application of the burden-shifting framework. The department filed a petition for a writ of certiorari on the question of whether disparate impact claims are in fact cognizable under the FHA. The Supreme Court held in the affirmative.

         In recognizing disparate impact claims, the Supreme Court emphasized the purpose of the FHA:

The FHA, like Title VII and the ADEA, was enacted to eradicate discriminatory practices within a sector of our Nation's economy . . . . These unlawful practices include zoning laws and other housing restrictions that function unfairly to exclude minorities from certain neighborhoods without any sufficient justification. Suits targeting such practices reside at the heartland of disparate-impact liability.[24]

         It stressed, however, that a plaintiff's mere demonstration of discriminatory effect does not resolve the issue of liability. FHA disparate impact claims are subject to “cautionary standards” and “safeguards”:

[D]isparate-impact liability has always been properly limited in key aspects that avoid the serious constitutional questions that might arise under the FHA, for instance, if such liability were imposed based solely on a showing of statistical disparity. Disparate-impact liability mandates the “removal of artificial, arbitrary, and unnecessary barriers, ” not the displacement of valid governmental policies. . . . The FHA is not an instrument to force housing authorities to reorder their priorities. Rather, the FHA aims to ensure that those priorities can be achieved without arbitrarily creating discriminatory effects or perpetuating segregation. . . . [H]ousing authorities and private developers [must receive] leeway to state and explain the valid interest served by their policies.[25]

         As an example, the Court stressed that government entities “must not be prevented from achieving legitimate objectives, such as ensuring compliance with health and safety codes.”[26] In addition to emphasizing the need for burden shifting to allow a defendant to justify the challenged policy, the court also emphasized the importance of causation in the context of FHA disparate-impact claims:

In a similar vein, a disparate-impact claim that relies on a statistical disparity must fail if the plaintiff cannot point to a defendant's policy or policies causing that disparity. A robust causality requirement ensures that ‘[r]acial imbalance . . . does not, without more, establish a prima facie case of disparate impact” and thus protects defendants from being held liable for racial disparities they did not create. . . . For instance, a plaintiff challenging the decision of a private developer to construct a new building in one location rather than another will not easily be able to show this is a policy causing a disparate impact because such a one-time decision may not be a policy at all. It may also be difficult to establish causation because of the multiple factors that go into investment decision about where to construct or renovate housing units.[27]

         Defendants rely on this language to argue that FHA disparate impact claims must target a more-widely implemented policy or practice. It argues that a one-time zoning decision cannot constitute a policy or practice, and that Plaintiffs' complaint fails to plead that the zoning decision constitutes a widespread ...

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