Seventh Circuit Court of Appeals Holds Community Association Not Liable for Discriminatory Remarks Made by Board President

Seventh Circuit Court of Appeals Holds Community Association Not Liable for Discriminatory Remarks Made by Board President

Community associations are required to comply with the federal Fair Housing Act. The Fair Housing Act protects owners and occupants in community associations from discrimination based on race, color, religion, sex, national origin, familial status, and disability. In Illinois, community associations must also comply with the Illinois Human Rights Act which prohibits discrimination against any of the foregoing as well as pregnancy, citizenship status and arrest record in employment, and discrimination based on arrest record, familial status, or source of income in real estate transactions. In Watters v. Homeowners’ Ass’n at Pres. at Bridgewater, 48 F.4th 779 (7th Cir. 2022), the Seventh Circuit discussed when a community association could be held liable for the discriminatory acts of its board of directors. This article will analyze the Watters case and set forth practical tips community associations can use to help combat discrimination within associations.

42 U.S.C. § 3604(a) and 42 U.S.C. § 3617

In Watters, the two sections of the Fair Housing Act at issue were 42 U.S.C. § 3604(a) and 42 U.S.C. § 3617. Section 3604(a) explicitly prohibits making housing “unavailable” based on the potential renter or buyer’s race or color. Section 3617 prohibits coercion, intimidation, threats, or interference with “any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed, or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section [3604] of this title.” The Seventh Circuit has held that both Sections 3604(a) and 3617 reach post-acquisition conduct, not just the initial sale or rental of housing Bloch v. Frischholz, 587 F.3d 771, 782 (7th Cir. 2009). To prevail on a Section 3617 claim, a plaintiff must prove that: (1) the plaintiff is a protected individual under the Fair Housing Act; (2) the plaintiff was engaged in the exercise or enjoyment of their fair housing rights; (3) the defendants coerced, threatened, intimidated, or interfered with the plaintiff on account of their protected activity under the Fair Housing Act; and (4) the defendants were motivated by an intent to discriminate. Id. at 783.

Facts of Watters

The Watters, an African American couple, purchased two lots in the Preserve at Bridgewater (the “Association”) in 2013 and were the only Black residents when they moved in in 2015. They faced significant hostility from Ed and Kate Mamaril (the “Mamarils”), prominent members of the Association. Kate was the president of the Association when the Mamarils initially bought their property. Ed subsequently assumed the presidency and was the president during the lawsuit. Conflicts arose immediately during construction when Ed made derogatory remarks, suggesting the Watters were not welcome.

The Mamarils’ pets frequently roamed onto the Watters’ property, and despite the Association’s rules against this, the association did not act when the Watters complained. An incident involving the Humane Society led to further confrontations, including racially charged insults from Kate. Tensions escalated at a local restaurant, resulting in the Mamarils seeking a protective order against Tonca Watters, which was later withdrawn.

The Watters also experienced issues with the Association, particularly around obtaining copies of restrictive covenants and making modifications to their property, which seemed to be enforced selectively against them. A major dispute arose over a requested privacy fence due to Terence Watters’ PTSD and lung condition. Without mentioning his PTSD or his lung condition in his accommodation request to the Association, Terence requested a privacy fence as a reasonable and necessary accommodation. The Association denied their request and suggested alternative solutions, asserting that the Fair Housing Act did not apply.

After multiple conflicts, the Watters sued the Association and the Mamarils, but the court granted summary judgment in favor of the defendants. The Watters appealed the decision concerning the Association and the Mamarils.

Analysis of Watters

The Watters’ first claim against the Association and the Mamarils was for race discrimination under the Fair Housing Act. The court found that the Watters satisfied the first two elements of the Section 3617 claim – because the Watters were African American and lived in a home in the Association – and found that the fourth element was satisfied because the Watters supplied enough evidence to prove that the defendants were motivated by an intent to discriminate. At issue was the third element – whether the Mamarils’ or the Association’s conduct interfered with the Watters’ housing rights. The court looked to the Mamarils’ repeated harassment and use of racist language to determine that a reasonable factfinder could conclude that the Mamarils’ pattern of harassment interfered with the Watters’ post-acquisition enjoyment of their property, even if the Mamarils could not or did not actually force the Watters to leave. Accordingly, the Watters could proceed with their race discrimination claim against the Mamarils.

However, the court held that the Watters could not proceed with their race discrimination claim under the Fair Housing Act against the Association. The court found that the incidents in question involve the Mamarils only in their individual capacities. Although the Mamarils held the title of president and former president of the Association, the Watters did not provide any evidence that the Mamarils were acting on behalf of the Association during any of the incidents. Accordingly, the court found that the Watters could not provide any evidence of the Association’s discriminatory intent or interference in their Fair Housing Act rights. Additionally, the court found that the Watters could not bring a claim for race discrimination against the Association because the Watters did not provide sufficient evidence that the Association intended to discriminate. Lastly, the court found that the Watters’ claim that the Association violated the Fair Housing Act by failing to accommodate Terence’s PTSD in the denial of the Watters’ request for privacy failed because the Watters did not provide any evidence that the Association knew of his PTSD.

Fair Hous. Ctr. of Cent. Ind. v. Vicki New, 1:20-cv-01176-TWP-TAB (S.D. Ind. Apr. 21, 2023)

A lawsuit with a similar set of facts to Watters was filed in the United States District Court, Southern District of Indiana. In Fair Housing Center, Vicki New made repeated discriminatory remarks directed against a minority neighbor and other minority members of the Twin Creeks Homeowners Association for more than two years (“Twin Creeks”). Unlike the Mamarils in Watters, New was not an officer or director of the association. Such a hostile environment led some of the members to request that Twin Creeks take action against New. During those two years, Twin Creeks issued three cease and desist letters to New but never initiated legal action or any other enforcement efforts to abate the discriminatory conduct. The court ordered New to pay the former neighbor $100,000 in punitive damages and $50,000 in compensatory damages. Unlike in Watters, the court did not grant the defendants’ motion for summary judgment. This led to the Fair Housing Center reaching a settlement with Twin Creeks and its property management company in which they agreed to pay $262,500 as compensation for damages, attorneys’ fees, and costs.

Unlike in Watters, the members who were subject to the harassment by Vicki New made requests to the management company and the association for action to be taken to stop Ms. New. Although Twin Creeks issued numerous cease and desist letters to Ms. New, Twin Creeks never initiated legal proceedings against the News in relation to the harassment. However, Twin Creeks did initiate a legal proceeding against the News based on non-payment of association dues.

Accordingly, once an association has received information of a bylaw violation, the association should contact an attorney to determine the necessary steps. Additionally, an association should take great care to ensure that the association is not selectively enforcing bylaw violations. Rather, an association should adopt a uniform policy, if permitted by the association’s governing documents, which sets forth the procedures the association may take when a bylaw violation occurs or when a member issues a complaint to the association’s board. Adopting and enforcing a well-drafted policy can ensure that an association does not selectively enforce bylaw violations and treats all bylaw violations uniformly.

Conclusion

A community association should not tolerate discriminatory conduct. In doing so, a community association may be in violation of the Fair Housing Act or the Illinois Human Rights Act. To combat and address discrimination, a community association should look to their governing documents to determine the enforcement actions the association may impose against an unruly owner to deter such conduct. Often times, fines or other injunctive relief can be used by the community association to deter discriminatory conduct. Furthermore, if permitted by the governing documents, an association should enact a policy which sets forth the procedure to address alleged discriminatory conduct by a member. If a bylaw violation occurs, the association should act accordingly. The association should be careful not to selectively enforce bylaw violations and instead should seek to enforce all bylaw violations. Regardless of which type of remedy a community association seeks, the community association should seek to be diligent in attempting to combat discriminatory conduct. Although the community association was not held liable in Watters, the community association was still a party to costly litigation because the association did not have a proper policy to combat discriminatory conduct. If a community association becomes aware of discriminatory conduct, the association should contact their attorney to determine the appropriate next steps. The attorneys at Hirzel Law, PLC are experienced community association attorneys who can help guide a community association’s board through this process.

Jeremy Fernando is an Associate Attorney at Hirzel Law, PLC. Mr. Fernando is licensed to practice law in the State of Illinois. He concentrates his practice on community association law, condominium law, homeowners association law, and real estate law. Mr. Fernando’s legal career includes serving in corporate practice where he represented insurance companies and institutional investors in U.S. and cross-border private placements of securities, including transactions in the Netherlands, England, Ireland, Australia, and Germany. Mr. Fernando earned his Juris Doctor from Marquette University Law School, where he graduated with honors and ranked in the top 15% of his class. He also served as an Associate Editor of the Marquette Law Review. Mr. Fernando is committed to providing effective legal representation to his clients and is passionate about helping communities navigate complex legal challenges. He may be reached at 312-552-7669 or jfernando@hirzellaw.com.