• Supreme Court Finds No Individual Liability Under the Fair Housing Act
  • April 29, 2003
  • Law Firm: Ford & Harrison LLP - Atlanta Office
  • The U.S. Supreme Court ruled yesterday that owners and officers of real estate agencies are not ordinarily individually liable under the Fair Housing Act (FHA) for the discriminatory acts of the agency's employees. In Meyer v. Holley the Court held that the FHA imposes liability without fault upon the corporation but not upon its officers or owners, in accordance with traditional agency principles.

    This decision reverses the decision of the Ninth U.S. Circuit Court of Appeals in Holley v. Crank. In Holley, an interracial couple claimed they tried to buy a house but were turned away by agents of Triad Realtors. The couple and the builder who lost the sale sued Triad and the agent, whom they claim dismissed the couple as a "salt and pepper" team. When they discovered the agent and Triad had no assets, they amended their suit to include Triad's owner and broker. None of the plaintiffs claim the owner engaged in discriminatory conduct; however, the Ninth Circuit held that "a corporation and its officers may be held liable for their failure to ensure the corporation's compliance with the FHA, whether or not the officers directed or authorized the particular discriminatory acts that occurred." The Ninth Circuit acknowledged that its holding went beyond traditional principles of agency law but held that the "overriding societal objective" of eliminating discrimination in housing justified the imposition of strict liability on the owners and officers of corporations whose employees violate the FHA.

    The Supreme Court agreed to review the case and held unanimously that while the company itself may be held liable, without any evidence of wrong-doing on its part, for the acts of its employees in the course of their employment, the owner of the company is not automatically subject to personal liability. The Court noted that a corporate employee typically acts on behalf of the corporation, not the owner or officers. The Court agreed with the Ninth Circuit that the FHA's objective of eliminating racial discrimination in housing is an "overriding societal objective" but rejected the court's determination that such an objective carries with it a legal rule that would hold every corporate supervisor personally liable without fault for the unlawful act of every corporate employee whom he or she had the right to supervise.

    The Bush administration filed a friend of the court brief arguing that although the Ninth Circuit's analysis was incorrect, there was evidence that the owner/broker acted as the agency's "alter ego" and could be held liable under traditional agency principles that permit "piercing the corporate veil." The Court did not rule on this issue because it was not considered by the Ninth Circuit, but remanded the case to the Ninth Circuit to determine this issue and the issue of liability under California law.