By Alison Rice. The story is simple. An interracial couple tries to put an offer on a new home, only to be told by their agent that their deposit won't be enough. Months later, they learn that the house they wanted was sold for significantly less than their offer and that their agent allegedly made racial comments about them. So they sued the owner of the brokerage for housing discrimination, charging that he's personally responsible for the behavior of his agent.
That's the tale behind Meyer vs. Holley, a federal Fair Housing Act case heard by the U.S. Supreme Court in early December. But sorting out the issues in the case--and how it should be handled--is more complicated, touching on corporate liability, real estate regulations, and state and federal laws, which can be conflicting. The main question: Can a corporate officer of a real estate company be held personally liable under the Fair Housing Act for the illegal and discriminatory actions of an employee?
For Elizabeth Brancart, lawyer for Emma Mary Holley, her husband David, and the builder Brooks Bauer, the answer is yes. "It's not that the Fair Housing Act is making them liable, it's the fact that they are real estate [professionals], and they are under all these real estate licensing rules. ... Our position is that the court should look to what the Fair Housing Act is trying to accomplish, namely bringing housing discrimination to an end." Attorney Doug Benedon, who represents Meyer, the owner, designated broker, and president of Triad, the real estate brokerage that allegedly discriminated against the Holleys, disagrees. "Our position is that under established law, they have a remedy" of suing the discriminating agent or the corporation, he says. "There's no need to start going after individuals. David Meyer neither knew nor approved of the alleged discrimination. This is based solely on whether he is vicariously liable."
That question of liability is a big one, and its answer matters to builders, realtors, and others who work, manage, or own real estate corporations.
According to the Ninth Circuit of the U.S. Court of Appeals, someone such as Meyer is personally liable for those illegal actions, even if he had no knowledge or involvement in the discrimination.
That's the "scary thing" about the lower court's ruling--the one currently being appealed to the U.S. Supreme Court--says June Barlow, vice president and general counsel for the California Association of Realtors, which filed an amicus brief on behalf of Meyer. "Just by virtue of your position as a corporate officer in a real estate company, your personal assets are at risk."
"The Fair Housing Act doesn't authorize personal liability," says Jon Luther, staff counsel for the NAHB, which also supported Meyer. "If it's read that it does, who knows how far it could extend? [Personal liability] shouldn't extend at all regardless of whether there's one owner or 100 owners."
Before the bench
That seemed to be the attitude of Justice Antonin Scalia as well on Dec. 3, when the case was argued before the U.S. Supreme Court. If incorporation offers no protection for real estate brokers, and they will always be held liable, regardless of whether they hold their licenses personally or they're simply designated brokers for a corporation, "What's the use of having a corporation then?" he asked.
Justice Stephen Breyer viewed the corporate situation differently, pointing out the close ties between Meyer and Triad. "He was the sole shareholder. He was the president. He did control it. He paid the taxes under his own Social Security number. He made various transactions that violated the terms under which it was supposed to be the corporate form, and he didn't train the person properly," he said.
Those topics of broker responsibility and corporate liability dominated the discussion between the lawyers and the justices, who also questioned whether all the legal and procedural issues had been satisfactorily addressed in the lower courts. "... I'm just debating with myself whether we should send this back to the Ninth Circuit, [and] tell them to work this out or not," Justice Breyer said.
Whether the justices will do that remains to be seen; court-watchers say they aren't willing to speculate on the ruling, which probably won't be issued until spring 2003. But they are anxious to see what the justices decide. "If they hold Meyer liable, it will be important to hear why," says Laurie Janik, general counsel for the National Association of Realtors. "Was it as a broker under licensing laws, as a corporate owner, or as an officer? They have to determine why. He wore a lot of different hats, and the court below said he was liable under any of those."
Editor's note: This story is based on original reporting at the Dec. 3, 2002, oral argument, and the official Supreme Court transcript provided by Alderson Reporting, which does not identify individual justices.