New York common law has long shielded landlords from tort liability for intentional injury suffered by one tenant at the hands of another tenant, unless the landlord "has the authority, ability, and opportunity to control the actions of the assailant." Britt v. New York City Housing Authority, 3 AD2d 514, 770 NYS2d 744, 745 (2d Dept. 2004).

The 'Francis' Decisions

However, this shield was recently pierced by the U.S. Court of Appeals for the Second Circuit in Francis v. Kings Park Manor, 944 F3d 370 (2d Cir. 2019) (Francis III), en banc review granted, 949 F3d 67 (2d Cir. Feb. 3, 2020), in which the court held that a landlord may be liable under Title VIII of the Civil Rights Act of 1968, the Fair Housing Act (FHA), 42 USC §3604(b), "for intentionally discriminating against a tenant based on the tenant's race, where the landlord allegedly refused to take any action to address what it knew to be a racially hostile housing environment created by one tenant targeting another, even though the landlord had acted against other tenants to redress prior, non-race related issues."

In addition, the court also held that such "post-acquisition conduct," occurring after the initial rental transaction and during the period the plaintiff actually resided in the rental property, separately violated FHA §3617 which makes it "unlawful to coerce, intimidate, threaten, or interfere 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." 42 USC §3617.

In doing so, the Second Circuit majority opinion relied upon the Supreme Court's "directive" that the FHA's language has a "broad and inclusive compass," see City of Edmonds v. Oxford House, Inc., 514 US 725, 731 (1995), and thus the court's majority read the FHA's text "broadly" to include the liability standard applied in employment discrimination cases adjudicated under Title VII of the 1964 Civil Rights Act, 42 USC §2000e-2(a)(1), which prohibits employers from creating or tolerating a hostile or abusive working environment, arising from discriminatory motives or actions, based on race, color, religion, sex, or national origin—whether or not the employer has himself engaged in the alleged harassment. See, e.g., Davis v. Monsanto Chemical Co., 858 F2d 345 (6^th Circuit 1988).

In Francis III, the panel majority reaffirmed the holding of landlord liability that the court had previously declared in its March 4, 2019 decision in Francis v. Kings Park Manor, 917 F3d 109 (2d Cir. 2019) (Francis I), which, presumably in response to Judge Debra Ann Livingston's eviscerating dissent of the majority opinion in that decision, was precipitously withdrawn by the order of the court just four weeks later, on April 5, 2019. See Francis v. Kings Park Manor, Inc, 920 F3d 168 (2d Circuit 2019)(Francis II).

Court Divided Over "Evidence" Necessary

Francis III creates a serious dilemma for housing landlords. As noted by Judge Livingston, in her dissent to the majority's opinion, "any faithful application of the pleading standard employed today would appear to expose all landlords to suit for purposeful discrimination based on the wrongful conduct of one tenant vis-à-vis another so long as such landlords have ever responded to a lease violation." (italics in original).

Thus, when a landlord demands overdue rent payments, thus "interven[ing] against…tenants…regarding non-race-related violations of their leases," [citing the majority opinion] she assumes an ill-defined responsibility to intervene (and immediately commence an eviction proceeding?) whenever a tenant complains about the allegedly racially-motivated behavior of another tenant. Landlords in this Circuit may therefore face a choice between two lawsuits: one for violating the FHA, the other for wrongful eviction, with unforeseen consequences for those improperly accused of discrimination, not to mention those attempting to obtain housing on reasonable economic terms. (emphasis added, italics in original).

The plaintiff in Francis was an African-American who, in 2010, entered into a lease agreement with defendant Kings Park Manor (KPM) for an apartment unit in a complex owned by KPM. On several occasions, between February and September 2012, Francis's next-door neighbor, Endres, engaged in highly offensive, racially-based, harassing rants directed at Francis, including, on one occasion, "I ought to kill you, you fucking nigger." Francis filed police reports complaining of Endres's abusive conduct in March and in May 2012. By letter dated May 23, 2012, Francis notified KPM directly about Endres's racist conduct between March and May 2012. On Aug. 10, the Suffolk County Police Department arrested Endres for aggravated harassment in violation of New York Penal Law §240.30, and Francis sent a second letter to KPM advising of Endres's continued racial slurs and of Endres's arrest for harassment. He sent a third letter to KPM on Sept. 2 again complaining of Endres's continued racial harassment.

KPM advised its property manager to "not get involved." However, it is not alleged that Francis did actually, at any time, request KPM to take any action against Endres. Endres's lease expired at the end of 2012, at which time KPM declined to renew the lease, and Endres vacated his unit at the end of January 2013. He later pleaded guilty to harassment in violation of New York Penal Law 240.26(1) and was also subjected to an order of protection prohibiting him from contacting Francis.

Livingston's dissent noted that Francis's brief on appeal did not contend that the complaint even plausibly alleged intentional discrimination by KPM, "but instead primarily urged this court to impose liability under the FHA for the 'negligent failure to remedy a discriminatory [housing] environment.'" (Italics in original). Accordingly, KPM argued that, "even if a hostile housing environment claim were cognizable under the FHA," Francis had failed to allege that KPM intentionally discriminated against Francis.

Moreover, the District Court had concluded that, "assuming without deciding that a 'hostile housing environment' claim is actionable against a landlord or property owner under FHA, a question unresolved at this time by the Second Circuit [before Francis III], such a claim would require allegations of intentional discriminatory conduct, or failure to intervene, by the landlord or property owner based on a protected category." Francis v. Kings Park Manor, 91 F.Supp.3d 420, 433 (EDNY 2015). (emphasis added). The District Court held, therefore, that "naked assertions by plaintiffs that race was a motivating factor without a fact-specific allegation of a causal link between defendant's conduct and the plaintiff's race are too conclusory" (citation omitted), and the District Court thereupon found "on the facts in this case, that the plaintiff alleges no basis for imputing the allegedly harassment conduct to the KPM defendants as opposed to Endres, or that the KPM defendants failed to intervene on account of their own racial animus toward the plaintiff." Id.

Nevertheless, the Francis III majority of the Second Circuit panel proceeded to consider "whether a landlord may be liable under the FHA for intentionally discriminating against a tenant by, as is alleged to have occurred here, choosing not to take any reasonable steps within its control to address tenant-on-tenant harassment of which it has actual notice that is specifically based on race, even though it chooses to take steps to address other forms of tenant misconduct unrelated to race."

In response to the argument that Francis had failed to allege intentional discrimination, the majority said:

[W]e assume, without deciding that intentional discrimination is an element of an FHA violation and conclude that Francis's complaint, viewed in the light most favorable to Francis plausibly and adequately alleges that the KPM Defendants engaged in intentional racial discrimination. (emphasis added).

In reply, the dissent argued that the majority had "conjur[ed] a plausible basis for inferring intentional discrimination" by "latch[ing] onto Francis's conclusory statement in the complaint that the KPM Defendants 'have intervened against other tenants at Kings Park Manor regarding non-race-related violations of their leases or of the law.'" The dissent further expounded that:

This amounts to the claim that because the KPM Defendants did something with regard to some incident involving some tenant at some past point, the alleged failure to intervene here must have been based on racial animus. But the majority cannot say (because the complaint does not allege) whether these other vaguely referenced interventions involved members of a protected class, intratenant relations, the heating system, or a shower curtain. (Italics in original).

The dissent further argued that "this 'bland abstraction [ ]—untethered from allegations' regarding any actual interventions in either tenant-on-tenant disputes specifically or even lease violations generally – is thus a very far cry from what [the Second Circuit has previously] required in the employment context to assert a plausible claim of purposeful discrimination." (citing E.E.O.C. v. Port Authority of New York & New Jersey, 768 F3d 247, 257 [2d Cir. 2014]). Continuing, the dissent concluded, "[s]imply put, the 'naked assertion' on which the majority relies to once again revive this complaint (after over three years of review) does not plausibly support an inference of discriminatory intent, dooming [Francis's claims]." In addition, citing the Supreme Court's decision, in Ashcroft v. Iqbal, 556 US 662, 676-678 (2009), the dissent noted that "a complaint fails to state a claim 'if it tenders naked assertions[s] devoid of further factual enhancement,' and that pleading 'purposeful discrimination requires more than…intent as awareness of consequences.'" (Emphasis added).

The New York Landlords' Dilemma

Francis III not only held that the allegations against the landlord satisfied the racially-based motivation requirements of the FHA, but the court also held, citing Stalker v. Stewart Tenants Corp., 93 AD3d 550, 940 NYS2d 600, 602-03 (1^st Dept. 2012), that the allegations of Francis's complaint sufficiently alleged a violation of the New York State Human Rights Law, which "is substantially similar to" and which "like the FHA, prohibits housing discrimination" and makes it "'an unlawful discriminatory practice for the owner, lessee, sub-lessee, assignee, or managing agent…[t]o discriminate against any person because of race…in the terms, conditions or privileges or the sale, rental or lease of any such housing accommodation or in the furnishing or facilities or services in connection therewith.' N.Y. Exec. Law §296(5)(a)(2)" and §296(6), which prohibits aiding and abetting "any of the acts forbidden under this article."

Francis III not only creates a dilemma for landlords from tenant-on-tenant racial discrimination, but Francis III may now also provide a basis for claims being made, under Executive Law §296(h), against landlords for tenant-on-tenant sexual harassment, even if the landlord has instituted the sexual harassment prevention policy for its employees now required under §201-g of the New York Labor Law.

The decision of the Second Circuit in Francis III, which may have been issued with good intentions, is nevertheless judicial legislation that, if not modified in the very rare en banc review ordered in the case on Feb. 3, 2020 (now scheduled for hearing on Sept. 24, 2020), will be precedent for many unintended consequences in New York's housing industry. As a consequence of the majority ruling, Francis III potentially may have greater impact on New York housing than any other housing decision in recent memory. As the FHA makes no distinctions based on ownership, all forms of housing owners will need to update their leases and/or corporate documents. Leases will need to be amended to include default provisions that permit landlords to commence eviction proceedings for the uttering of discriminatory words or the commission of any conduct that violates the FHA. Cooperatives will need to amend their corporate documents and by-laws to include Pullman-like provisions, see 40 West 67^th Street Corp. v. Pullman, 100 NY2d 147 (2003), that allow boards to evict and to cancel the shares of shareholder-tenants who make discriminatory comments or commit discriminatory conduct in violation of the FHA. Condominiums will need to make similar changes in their by-laws, and, in the first instance, they may elect to impose severe fines on tenant-on-tenant harassment, in obedience to the mandate of Francis III, before expending substantial amounts of capital funds on lawsuits in Supreme Court. Many rental properties may not impose fines upon their rent regulated tenants; as a consequence, landlords of those properties will be forced to sue to evict.

Conclusion

The Francis III decision requires that property owners protect themselves by implementing policies to ensure (a) that they can be made aware of the violation of the Fair Housing Act by one tenant against another, and (b) that they will have the opportunity to take appropriate action to stop the unlawful discriminatory harassment.  Nevertheless, the ruling in Frances III may not be the final word. The case is scheduled to be reheard, in a very rare en banc proceeding, before all of the judges of the Second Circuit.  And if those judges do not understand the impact that Francis III can have on the workings of the complex housing laws in New York, landlords will no doubt turn their eyes to the U.S. Supreme Court for relief.  But, in the interim, if property owners in New York do not follow the decisions of the appellate courts, disobedience will be painfully expensive.

Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C., and John M. Desiderio is the managing partner of the firm's Real Estate Litigation Group.