Affordable Housing v. City of Fresno

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellants,

v.

CITY OF FRESNO, a municipal

corporation; CITY OF FRESNO CITY

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; CHRIS MATHYS, No. 04-15625

Council Member, sued in his  D.C. No.

official and personal capacity; SAL CV-97-05498-OWW

QUINTERO, sued in his official and

personal capacity; GARRY

BREDEFELD, Council Member, sued

in his official and personal

capacity; HENRY PEREA, Council

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; TODD TOLBERT,

an individual; STEPHEN V. HENSON,

an individual; SHARON L. HENSON,



247

248 AFFORDABLE HOUSING v. CITY OF FRESNO

an individual; HERNAND J. 

KOUBRATOFF, an individual; LAURA

A. MATHER, an individual; TRAVIS

L. COMPTON, an individual;

VERNON R. WOOLEY, an individual;

ORIE REED, an individual; BARNELL 

CALDWELL, an individual; DIANE R.

DANIELS, an individual; RICHARD

ROBERTSON, an individual; JANET

REID-BILLS, an individual,

Defendants-Appellees.



AFFORDABLE HOUSING v. CITY OF FRESNO 249

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellants,

v.

CITY OF FRESNO; CITY

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; SAL QUINTERO; GARRY

BREDEFELD; HENRY PEREA; DANIEL

RONQUILLO; TODD TOLBERT; No. 04-15644

STEPHEN V. HENSON; SHARON L.

HENSON; HERNAND J. KOUBRATOFF;  D.C. No.

LAURA A. MATHER; TRAVIS L. CV-97-05498-OWW

COMPTON; VERNON R. WOOLEY;

ORIE REED; BARNELL CALDWELL;

DIANE R. DANIELS; RICHARD

ROBERTSON; JANET REID-BILLS,

Defendants,

and

CHRIS MATHYS, Councilmember,

sued in his official and personal

capacity,

Defendant-Appellee.



250 AFFORDABLE HOUSING v. CITY OF FRESNO

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellants,

v.

CITY OF FRESNO, a municipal

corporation; CITY OF FRESNO CITY

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; CHRIS MATHYS, No. 04-15650

Council Member, sued in his  D.C. No.

official and personal capacity; SAL CV-97-05498-OWW

QUINTERO, sued in his official and

personal capacity; GARRY

BREDEFELD, Council Member, sued

in his official and personal

capacity; HENRY PEREA, Council

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; TODD TOLBERT,

an individual; STEPHEN V. HENSON,

an individual; SHARON L. HENSON,



AFFORDABLE HOUSING v. CITY OF FRESNO 251

an individual; HERNAND J. 

KOUBRATOFF, an individual; LAURA

A. MATHER, an individual; VERNON

R. WOOLEY, an individual; ORIE

REED, an individual; BARNELL

CALDWELL, an individual; DIANE R.

DANIELS, an individual; RICHARD

ROBERTSON, an individual; JANET



REID-BILLS, an individual,

Defendants,

and

TRAVIS L. COMPTON, an individual,

Defendant-Appellee.



252 AFFORDABLE HOUSING v. CITY OF FRESNO

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellees,

v.

CITY OF FRESNO, a municipal

corporation; CITY OF FRESNO CITY

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; CHRIS MATHYS,

Council Member, sued in his No. 04-15683

official and personal capacity; SAL  D.C. No.

QUINTERO, sued in his official and CV-97-05498-OWW

personal capacity; GARRY

BREDEFELD, Council Member, sued

in his official and personal

capacity; HENRY PEREA, Council

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; TRAVIS L.

COMPTON, an individual,

Defendants,

and



AFFORDABLE HOUSING v. CITY OF FRESNO 253

TODD TOLBERT, an individual; 

STEPHEN V. HENSON, an individual;

SHARON L. HENSON, an individual;

HERNAND J. KOUBRATOFF, an

individual; LAURA A. MATHER, an

individual; VERNON R. WOOLEY, an

individual; ORIE REED, an 

individual; BARNELL CALDWELL, an

individual; DIANE R. DANIELS, an

individual; RICHARD ROBERTSON, an

individual; JANET REID-BILLS, an

individual,

Defendants-Appellants.



254 AFFORDABLE HOUSING v. CITY OF FRESNO

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellees,

v.

CITY OF FRESNO, a municipal

corporation,

Defendant-Appellant,

and

CITY OF FRESNO CITY No. 04-15693

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; CHRIS MATHYS,

 D.C. No.

CV-97-05498-OWW

Council Member, sued in his

official and personal capacity; SAL

QUINTERO, sued in his official and

personal capacity; GARRY

BREDEFELD, Council Member, sued

in his official and personal

capacity; HENRY PEREA, Council

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; TODD TOLBERT,

an individual; STEPHEN V. HENSON,

an individual; SHARON L. HENSON,



AFFORDABLE HOUSING v. CITY OF FRESNO 255

an individual; HERNAND J. 

KOUBRATOFF, an individual; LAURA

A. MATHER, an individual; TRAVIS

L. COMPTON, an individual;

VERNON R. WOOLEY, an individual;

ORIE REED, an individual; BARNELL 

CALDWELL, an individual; DIANE R.

DANIELS, an individual; RICHARD

ROBERTSON, an individual; JANET

REID-BILLS, an individual,

Defendants.



256 AFFORDABLE HOUSING v. CITY OF FRESNO

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellees,

v.

CITY OF FRESNO, a municipal

corporation; CITY OF FRESNO CITY

COUNCIL OF THE CITY OF FRESNO, No. 04-15753

CALIFORNIA; SAL QUINTERO, sued in  D.C. No.

his official and personal capacity; CV-97-05498-OWW

GARRY BREDEFELD, Council

Member, sued in his official and

personal capacity; HENRY PEREA,

Council Member, sued in his

official and personal capacity;

DANIEL RONQUILLO, sued in his

official and personal capacity;

TODD TOLBERT, an individual;

STEPHEN V. HENSON, an individual;

SHARON L. HENSON,



AFFORDABLE HOUSING v. CITY OF FRESNO 257

an individual; HERNAND J. 

KOUBRATOFF, an individual; LAURA

A. MATHER, an individual; TRAVIS

L. COMPTON, an individual;

VERNON R. WOOLEY, an individual;

ORIE REED, an individual; BARNELL

CALDWELL, an individual; DIANE R.

DANIELS, an individual; RICHARD

ROBERTSON, an individual; JANET 

REID-BILLS, an individual,

Defendants,

and

CHRIS MATHYS, Council Member,

sued in his official and personal

capacity,

Defendant-Appellant.



258 AFFORDABLE HOUSING v. CITY OF FRESNO

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellees,

v.

CITY OF FRESNO, a municipal

corporation; CITY OF FRESNO CITY

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; CHRIS MATHYS,

Council Member, sued in his

official and personal capacity; SAL

QUINTERO, sued in his official and No. 04-15780

personal capacity; GARRY

BREDEFELD, Council Member, sued  D.C. No.

CV-97-05498-

in his official and personal

capacity; HENRY PEREA, Council OWW/SMS

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; STEPHEN V.

HENSON, an individual; SHARON L.

HENSON, an individual; HERNAND J.

KOUBRATOFF, an individual;

VERNON R. WOOLEY, an individual;

RICHARD ROBERTSON, an individual,

Defendants,

and

TRAVIS L. COMPTON, an individual,

Defendant-Appellant.



AFFORDABLE HOUSING v. CITY OF FRESNO 259

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellees,

v.

CITY OF FRESNO, a municipal

corporation,

Defendant-Appellant,

and

CITY OF FRESNO CITY No. 04-17130

COUNCIL OF THE CITY OF FRESNO,

CALIFORNIA; CHRIS MATHYS,

 D.C. No.

CV-97-05498-OWW

Council Member, sued in his

official and personal capacity; SAL

QUINTERO, sued in his official and

personal capacity; GARRY

BREDEFELD, Council Member, sued

in his official and personal

capacity; HENRY PEREA, Council

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; TODD TOLBERT,

an individual; STEPHEN V. HENSON,

an individual; SHARON L. HENSON,



260 AFFORDABLE HOUSING v. CITY OF FRESNO

an individual; HERNAND J. 

KOUBRATOFF, an individual; LAURA

A. MATHER, an individual; TRAVIS

L. COMPTON, an individual;

VERNON R. WOOLEY, an individual;

ORIE REED, an individual; BARNELL 

CALDWELL, an individual; DIANE R.

DANIELS, an individual; RICHARD

ROBERTSON, an individual; JANET

REID-BILLS, an individual,

Defendants.



AFFORDABLE HOUSING v. CITY OF FRESNO 261

AFFORDABLE HOUSING DEVELOPMENT 

CORPORATION, a California

corporation; ASHWOOD

CONSTRUCTION, a California

corporation,

Plaintiffs-Appellants,

v.

CITY OF FRESNO, a municipal

corporation; CITY OF FRESNO CITY

COUNCIL OF THE CITY OF FRESNO, No. 05-15104

CALIFORNIA; CHRIS MATHYS,

Council Member, sued in his  D.C. No.

CV-97-05498-OWW

official and personal capacity; SAL

QUINTERO, sued in his official and OPINION

personal capacity; GARRY

BREDEFELD, Council Member, sued

in his official and personal

capacity; HENRY PEREA, Council

Member, sued in his official and

personal capacity; DANIEL

RONQUILLO, sued in his official and

personal capacity; TODD TOLBERT,

an individual; STEPHEN V. HENSON,

an individual; SHARON L. HENSON,



262 AFFORDABLE HOUSING v. CITY OF FRESNO

an individual; HERNAND J. 

KOUBRATOFF, an individual; LAURA

A. MATHER, an individual; TRAVIS

L. COMPTON, an individual;

VERNON R. WOOLEY, an individual;

ORIE REED, an individual; BARNELL 

CALDWELL, an individual; DIANE R.

DANIELS, an individual; RICHARD

ROBERTSON, an individual; JANET

REID-BILLS, an individual,

Defendants-Appellees.



Appeal from the United States District Court

for the Eastern District of California

Oliver W. Wanger, District Judge, Presiding

Argued and Submitted

November 16, 2005—San Francisco, California

Filed January 11, 2006

Before: John T. Noonan, Pamela Ann Rymer, and

Ronald M. Gould, Circuit Judges.

Opinion by Judge Noonan

AFFORDABLE HOUSING v. CITY OF FRESNO 265

COUNSEL

William J. Davis, Los Angeles, California, for plaintiffs-

appellants/appellees Affordable Housing Development Cor-

poration, et al.

Douglas T. Sloan, Fresno, California, for defendants-

appellees/appellants City of Fresno.

Nancy A. Jenner, Visalia, California, for defendant-appellee/

appellant Chris Mathys.

Howard A. Sagaser, Fresno, California, for defendant-

appellee/appellant Citizens.

Bruce Berger, Fresno, California, for defendant-appellee/

appellant Travis L. Compton.

OPINION

NOONAN, Circuit Judge:

Affordable Housing Development Corporation and its affil-

iate Ashwood Construction Co. (collectively AHDC) appeal

the judgment of the district court, following a jury trial, in

favor of defendants City of Fresno (the City) and individual

council members and citizens. Holding that the district court

properly reconciled the special verdicts of the jury, we affirm

the judgment. Holding that there should be further consider-

ation of the citizens’ claims for attorney fees, we remand that

issue to the district court.

266 AFFORDABLE HOUSING v. CITY OF FRESNO

FACTS

In October 1996, AHDC agreed with McCaffrey Develop-

ment to buy property in the northeast corner of the City.

AHDC planned to build low-rent family housing in an apart-

ment complex of 324 units to be known as Wellington Place.

Construction financing was secured through a commitment

from the Federal National Mortgage Association that included

the Wellington Place project along with three other AHDC

enterprises. AHDC entered into a $12.7 million construction

contract with its affiliate, Ashwood Construction. AHDC

expected permanent financing to be in the form of a federally-

sponsored $30 million bond issue. “Equity” was found in a

reservation of ten years of federal tax credits at over $900,000

per year. These credits were saleable. On February 24, 1997,

AHDC arranged to sell them to Related Capital Company for

71 cents per dollar of credit for a total of $6,107,808; with the

sale, Related Capital Company acquired a 99.98% limited

partnership in the project.

As of March 1997, six months after its deal with McCaf-

frey Development, AHDC had expended less than $1/2 mil-

lion. It possessed a project that its damages expert estimated

would yield almost $1/2 million to its affiliate Ashwood and

a housing project that AHDC had arranged to sell for over $6

million. But at least one more thing was needed.

That necessary thing was the approval of the Fresno City

Council. The approval was required by federal law — the Tax

Equity and Fiscal Responsibility Act, 26 U.S.C. § 147(f)

(TEFRA) — for the $30 million in tax-exempt bonds that

would be needed to finance the project. TEFRA sets condi-

tions for the issue of what the statute described as “private

activity bonds,” which might be issued to finance a variety of

projects identified by law. TEFRA includes these provisions:

(f) Public approval required for private activity

bonds. —

AFFORDABLE HOUSING v. CITY OF FRESNO 267

(1) In general.—A private activity bond shall

not be a qualified bond unless such bond satisfies the

requirement of paragraph (2).

(2) Public approval requirement.—

(A) In general.—A bond shall satisfy the

requirements of this paragraph if such bond is issued

as a part of an issue which has been approved by—

(i) the government unit —

(I) which issued such bond, or

(II) on behalf of which such bond was

issued, and

(ii) each governmental unit having jurisdic-

tion over the area in which any facility, with

respect to which financing is to be provided

from the net proceeds of such issue, is

located (except that if more than 1 govern-

mental unit within a State has jurisdiction

over the entire area within such State in

which such facility is located, only 1 such

unit need approve such issue).

(B) Approval by a governmental unit.—For

purposes of subparagraph (A), an issue shall be

treated as having been approved by an governmental

unit if such issue is approved—

(i) by the applicable elected representative of

such governmental unit after a public hearing

following reasonable public notice, or

(ii) by voter referendum of such governmen-

tal unit.

268 AFFORDABLE HOUSING v. CITY OF FRESNO

26 U.S.C. § 147(f).

The city council was the body whose approval was neces-

sary under TEFRA. Vigorous opposition to approval by the

council was expressed at neighborhood meetings held by

Councilmember Chris Mathys and at an overflow hearing

conducted by the council before the vote on approval. Persons

of various races, ethnicities, and family size expressed con-

cern over the impact of a large rental unit on nearby single

family homes. Councilmembers doubted the need for new

rental units in Fresno. On March 25, 1997, the council voted,

5-2, to deny approval of the bonds.

PROCEEDINGS

On May 13, 1997, AHDC filed its first complaint in this

suit. A second amended complaint was filed on March 15,

1999 and is the operative complaint in this action. The intro-

duction to this complaint charged Councilman Mathys and the

City with “vicious, old-fashioned rabble-rousing.” The defen-

dants were the City; Mathys and the four other members of

the council who had voted against approval; a Neighborhood

Action Committee; Travis L. Compton by himself; Todd Tol-

bert, Stephen V. Henson, Sharon L. Henson, Hernand S.

Koubratoff, Laura A. Mather, Vernon R. Wooley, Orie Reed,

Barnell Caldwell, Diane R. Daniels, Richard Robertson, Janet

Reid-Bills (collectively “citizen defendants”); and, Does 1

through 500. The complaint alleged that in refusing to autho-

rize the bonds the City had discriminated on account of dis-

abilities, family size, ethnicity or race in violation of the Fair

Housing Act, 42 U.S.C. §§ 3601-17; the California Fair

Employment and Housing Act, Cal. Gov’t Code § 12955 et

seq.; the Americans with Disabilities Act, 42 U.S.C.

§§ 12131-33; and the Civil Rights Laws, 42 U.S.C. §§ 1982,

1983 and 1985(3); that the five councilmembers had aided the

City’s unlawful act “by trading their votes”; and that the citi-

zen defendants “did threaten, intimidate and interfere” with

AHDC’s rights and conspired to do so. Additional claims

AFFORDABLE HOUSING v. CITY OF FRESNO 269

were advanced against the citizens. It was alleged that they

were aware of the Wellington neighbors’ “covenant not to

object or oppose the development of multi-family housing at

the Wellington site” and that they and the Neighborhood

Action Committee had tortiously induced these neighbors to

breach “their written covenants”; had intentionally interfered

with these contracts; and, as a number of citizen defendants

themselves had signed the contracts, had broken their own

contracts with McCaffrey Development or, apparently in the

alternative, had fraudulently entered into these contracts. As

a result of the defendants’ conduct jointly and severally,

AHDC said that it had suffered damages of $9 million.

AHDC demanded a jury trial.

On August 31, 2000, the district court granted summary

judgment to the citizen defendants on several of the claims

asserted against them. The neighbors’ agreements with

McCaffrey Development, characterized by AHDC as cove-

nants, ran as follows:

[Buyer’s] signature below shall constitute [buyer’s]

acknowledgment of, and agreement with Develop-

er’s intent to seek the [specified] zoning . . . and

hereby agrees to waive any protest of Developer

obtaining future entitlements.

The citizen defendants who had signed such agreements with

McCaffrey Development submitted evidence (in the form of

declarations and deposition testimony) establishing that they

understood their agreements to be only with McCaffrey

Development and only a waiver of any protest as to zoning.

Robert McCaffrey himself submitted a deposition that the

agreements referred only to zoning. AHDC argued that the

agreements were “estoppel certificates” waiving any right to

protest any future development. The court characterized the

agreements as “adhesion contracts” and ruled that, as a non-

party to the agreements, AHDC’s interpretation was irrele-

vant. The district court concluded that there was a meeting of

270 AFFORDABLE HOUSING v. CITY OF FRESNO

the minds of the contracting parties that the provision applies

only to zoning. Summary judgment was granted the citizens

on the claims based on the agreements. The claim of fraud fell

with this ruling.

The court also ruled on AHDC’s claim that the citizens had

conspired to violate its civil rights. AHDC, the court found,

had no standing to sue under 42 U.S.C. § 1985(3), because it

was not a member of a suspect class and could not vicariously

advance a claim under the statute. On other claims, the court

denied summary judgment to some or all of the citizens. But

on November 9, 2001, the court granted summary judgment

on all remaining claims. The citizens could not be held liable

for exercising their First Amendment right of free speech. The

court also found that AHDC had produced no evidence link-

ing any individual defendant to hostile comments made to

AHDC’s representatives at a public meeting (e.g., “I’m going

to kick your ass,” attributed by AHDC to no speaker in partic-

ular but said by AHDC to be “affirmed” by AHDC’s oppo-

nents). The court held that the actions of the City and Mathys

amounted to petitioning the government and so were immune

under the Noerr-Pennington doctrine. Eastern R.R. Presidents

Conference v. Noerr Motor Freight, Inc., 365 U.S. 127

(1961); United Mine Workers v. Pennington, 381 U.S. 657

(1965). See also White v. Lee, 227 F.3d 1214, 1231 (9th Cir.

2000) (Noerr-Pennington immunity has been extended

beyond the anti-trust context).

On October 17, 2002, the district court reconsidered its rul-

ing on the City’s immunity and in light of Silver Sage Part-

ners v. City of Desert Hot Springs, 251 F.3d 814 (9th Cir.

2001), denied immunity to the City and denied Mathys Noerr-

Pennington immunity. In the same order, the district court

denied attorney fees to the citizen defendants. The court held

that the citizens had not shown AHDC’s suit to be “frivolous,

unreasonable or without foundation” and that “the legal issues

were difficult,” involving the balancing of First Amendment

rights against rights under the fair-housing laws. The court

AFFORDABLE HOUSING v. CITY OF FRESNO 271

added, “Contract claims also were presented,” but did not

comment on their merit. The court found the citizen defen-

dants’ request for attorney fees under Cal. Code Civ. P.

§ 1021.5 for a defense benefitting the public was “unclear” as

to what defense was meant. The court treated at some length

the contentions of Travis Compton that AHDC had no evi-

dence against him; the court ruled that he had petitioned the

council to vote against the bonds, and the law had been “in

flux” so that it was not evident before 2002 that Compton was

immune. He, too, was denied fees.

In August 2003, the case went to trial against the City and

Mathys. After a trial lasting 15 days, the jury found in favor

of Mathys and judgment was entered September 5, 2005. As

to the City the jury entered special verdicts as follows:

Question 4: Was TEFRA bond approval for the

Wellington Place Development denied by the City of

Fresno, despite the fact that the development and

Plaintiff AHDC, as managing general partner, were

qualified?

Yes X No

INTENTIONAL HOUSING DISCRIMINATION

Question 5: Was the race, national origin, color, or

familial status of persons to whom the Wellington

Place [D]evelopment was to be available to rent and

occupy, a motivating factor in the decision of a

majority of the Fresno City Councilmembers to deny

the TEFRA bond issue?

Yes No X

HOUSING DISCRIMINATION INTERFERENCE

Question 6: Did a majority of the Councilmem-

bers of the City of Fresno purposefully interfere with

272 AFFORDABLE HOUSING v. CITY OF FRESNO

any person’s exercise or enjoyment of the opportu-

nity for affordable housing, or interfere with other

persons who aided or encouraged exercise or enjoy-

ment of that other person’s right to affordable hous-

ing at the Wellington Place Development, on

account of that person’s race, national origin, color,

or familial status?

Yes No X

DISPARATE IMPACT DISCRIMINATION

Question 9: Did the denial by a majority of the

Councilmembers of the City of Fresno of the Wel-

lington Place Development TEFRA bond issue cause

a significant adverse or disproportionate impact on

persons seeking affordable housing, because of their

race, national origin, color, or familial status?

Yes X No

SAME DECISION DEFENSE

Question 10: Do you find that Defendant City of

Fresno has proved, by a preponderance of the evi-

dence, that a majority of the members of the City

Council of the City of Fresno would have made the

same decision, even if the race, national origin,

color, or familial status, played no role in the

TEFRA bond issue? If you do, either Plaintiff should

recover nominal damages of $1.00.

AHDC: Yes X No

Ashwood: Yes X No

DEFENSE OF LEGITIMATE, NON-DISCRIMINATORY

REASONS

Question 11: Do you find that the decision to deny

the TEFRA bond issue was based only on legitimate,

non-discriminatory reasons?

AFFORDABLE HOUSING v. CITY OF FRESNO 273

Yes X No

Question 12: Was any housing discrimination by

a majority of the Fresno City Councilmembers a

cause of damage to either Plaintiff?

AHDC: Yes No X

Ashwood: Yes No X

AHDC renewed a Rule 50 motion for judgment against the

City as a matter of law. The court invited briefing. AHDC

then additionally moved to amend the judgment, alter the jury

verdict, reconsider summary judgment, and objected to the

court’s taxation of costs in favor of Compton and Mathys. On

March 9, 2004, AHDC’s motions were denied and judgment

was entered for the City. In an accompanying opinion the

court addressed the question of the jury’s special verdicts

being inconsistent. It concluded that by failing to persuade the

jury that the discrimination caused AHDC any damages,

AHDC failed to establish a prima facie element of its claim.

It also rejected AHDC’s contention that a finding of disparate

impact based on the denial of TEFRA bond financing creates

strict liability for a municipality. The district court concluded

that a legitimate, non-discriminatory motive is a valid defense

to disparate impact liability in this context.

AHDC appeals. The City and Mathys cross-appeal the dis-

trict court’s October 17, 2002 denial of summary judgment

and denial of costs. The citizens appeal the denial of attorney

fees.

ANALYSIS

Summary judgment for the citizens. AHDC appeals the

grant of summary judgment to the citizens. AHDC states that

the district court’s decision not to let AHDC’s claim on the

adhesion agreements go to trial was because of the citizens’

First Amendment right of protest. That is an inadequate and

274 AFFORDABLE HOUSING v. CITY OF FRESNO

inaccurate description of the district court’s order of August

31, 2000, which was based largely on the irrelevancy of

AHDC’s interpretation of contracts made between parties

other than itself. The district court was correct in this exposi-

tion of the law of contracts. Cal. Civil Code § 1649. The par-

ties to the agreements did not dispute their meaning. The

agreements did not apply to the financing of a housing proj-

ect.

The caption for this section of AHDC’s brief refers to

AHDC suing the citizens for “making threats” and “conspir-

ing.” The brief, however, goes on to make no mention of any

evidence of threats or of conspiracy. A caption is not an argu-

ment. These issues were abandoned as to all citizen defen-

dants except Compton. Fed. R. App. Proc. 28(a)(4); Leer v.

Murphy, 844 F.2d 628, 634 (9th Cir. 1988). As to Compton,

the testimony upon which AHDC relies in no way suggests

that Compton was a member of a conspiracy or made any

threats.

Legislative Immunity. AHDC appeals the district court’s

decision of March 9, 2004, upholding the jury’s verdict that

Mathys was not subject to liability or damages and denying

AHDC’s motion for reconsideration of the district court’s pre-

vious grant of summary judgment on the basis of legislative

immunity to all of the councilmembers. AHDC contends that

the TEFRA approval decision was not a legislative decision

because it involved a specific piece of property, and it did not

change any comprehensive, city-wide zoning ordinances or

policy. It also argues that legislative immunity cannot shield

a vote based on an illegal reason. The City responds that this

was a legislative decision because Congress mandated that the

city council vote to approve the bond issue.

[1] The councilmembers were engaged in legislative action

in making the TEFRA decision. The statute makes clear that

approval of TEFRA bonds is to be by voter referendum or by

elected representative. 26 U.S.C. § 147(f)(2)(B). The federal

AFFORDABLE HOUSING v. CITY OF FRESNO 275

focus is on the democratic nature of the approval-granting

authority: it is either the electorate as a whole or persons cho-

sen by the electorate. In their actions and votes on the council,

the councilmembers were elected representatives acting in a

legislative decision affecting a substantial area. In these activ-

ities, they were entitled to legislative immunity. San Pedro

Hotel Co. v. City of Los Angeles, 159 F.3d 470, 476 (9th Cir.

1998). We affirm the district court’s decision of March 9,

2004 with respect to legislative immunity. The city council-

members were plainly shielded from liability because their

actions were legislative in nature.

Additional Claims of Immunity. The City and Mathys cross-

appeal the district court’s October 17, 2002 denial of its sum-

mary judgment motion on the question of immunity for the

City and Mathys. Though the jury ultimately found in its

favor, the City’s position is that it should not have had to pro-

ceed to trial for the TEFRA decision because the City was

immune from liability due to the First Amendment and the

Noerr-Pennington doctrine. Further, Mathys argues that he

should not have had to proceed to trial because the district

court erred in denying his motion for summary judgment on

October 17, 2002, due to the fact that his vote on TEFRA was

protected by legislative immunity and his other actions were

petitioning activities protected by Noerr-Pennington immu-

nity.

We do not reach these questions because we do not review

the denial of summary judgment when the case has gone to

trial. De Saracho v. Custom Food Mach., Inc., 206 F.3d 874,

878 (9th Cir. 2000). As to the City, we review the verdicts

and the trial.

As to Mathys on the claim of Noerr-Pennington immunity,

AHDC argues that the district court erred in upholding the

jury verdict in favor of Mathys, but does not specifically

argue that the jury erred because Mathys’ activities were not

protected by Noerr-Pennington immunity. This Court “will

276 AFFORDABLE HOUSING v. CITY OF FRESNO

not ordinarily consider matters on appeal that are not specifi-

cally and distinctly argued in appellant’s opening brief,”

United States v. Ullah, 976 F.2d 509, 514 (9th Cir. 1992)

(quoting Miller v. Fairchild Indus., Inc., 797 F.2d 727, 738

(9th Cir. 1986)). However, this Court has “discretion to

review an issue not raised by appellant . . . . when it is raised

in the appellee’s brief.” Id. (quoting In re Riverside Linden

Invest. Co., 945 F.2d 320, 324 (9th Cir. 1991)) (alteration in

original).

[2] Here, we believe that it is imperative to make plain that

in addition to the legislative immunity Mathys was afforded

for the TEFRA vote, his other activities were protected by the

Noerr-Pennington doctrine. Mathys made and distributed fly-

ers encouraging his constituents to oppose the Wellington

Place project. He urged the executive director of the Fresno

Housing Authority to oppose it. He organized a neighborhood

meeting in opposition. As the district court found, no evi-

dence was presented that Mathys intimidated anyone or

threatened violence to anyone. His activities amounted to

petitioning the city council. The activities were protected by

the right to petition the government for a redress of griev-

ances, White v. Lee, 227 F.3d at 1227-28, and by a govern-

ment official’s right to seek to affect governmental action.

Manistee Town Center v. City of Glendale, 227 F.3d 1090,

1093 (9th Cir. 2000).

[3] Reconcilation of the special verdicts. We review de

novo a claim that the jury’s verdict is inconsistent and decide

whether its responses can be harmonized. Norris v. Sysco

Corp., 191 F.3d 1043, 1047 (9th Cir. 1999). AHDC argues

that the jury verdict that the City’s denial of TEFRA bond

approval had a disparate impact upon minorities and families

with children is dispositive and entitles AHDC to judgment as

a matter of law. The City argues that Congress could not have

intended for local approval of TEFRA bonds to be automatic

but that acceptance of AHDC’s argument would have that

effect as failure to approve bonds for low-income housing

AFFORDABLE HOUSING v. CITY OF FRESNO 277

would in most cities have a disparate impact on a minority.

We agree with the City that the federal statute’s explicit pro-

visions for a voter referendum or approval by an elected rep-

resentative indicate that Congress did not intend to make

approval automatic or to exclude the play of democratic pro-

cess in the local decision.

[4] To impose absolute liability, without defense, upon a

city whose voters or city council decided not to approve

TEFRA would frustrate the federal scheme. AHDC argues

that California law required the council to approve, but that

argument subordinates a uniform national law to local varia-

tion. AHDC argues that the discretionary approval authorized

by TEFRA is meant to kick in where other private activity

bonds are concerned but has no application to housing bonds.

Nothing in the statute creates such an exception. For approval

of every kind of private activity bond, TEFRA calls, first, for

a public hearing, then for a popular vote or a decision by an

elected authority. A public hearing would be a sham if any

opponent of housing bonds would have to keep silent. There

is no point in the statute’s requirement if, as in a dictatorship,

a referendum could have only one correct outcome. There is

no need for the statute to specify that, alternatively, an elected

representative is to decide on approval if the task to be per-

formed is the bureaucratic job of determining whether the

developer met minimal qualifications.

AHDC still seems not to have grasped what the federal stat-

ute demands. Twice in its brief on this appeal, AHDC asserts

that Councilman Mathys “maneuvered” the vote on approval

so that the vote was taken from the housing authority and

committed to the council. The housing authority was not an

elected representative of the people of Fresno. Only the peo-

ple or the elected council had the statutory authority to act for

the City in approving or disapproving the bond issue.

AHDC’s position is that by proving that the City’s decision

disparately impacted minorities and families with children, it

278 AFFORDABLE HOUSING v. CITY OF FRESNO

established liability for discrimination under the FHA. It

made a prima facie showing of discrimination. See Pfaff, 88

F.3d. at 745 (“To establish a prima facie case of disparate

impact under the FHA, ‘a plaintiff must show at least that the

defendant’s actions had a discriminatory effect.’ ”) (quoting

Keith v. Volpe, 858 F.2d 467, 482 (9th Cir. 1988)). A prima

facie showing, however, is only the first step in the liability

analysis. The next step requires us to examine the availability

of any defenses for the City.

Disparate impact doctrine evolved under Title VII as a way

to address unintentional harm having profound effects upon

protected groups. See, e.g., Watson v. Ft. Worth Bank &

Trust, 487 U.S. 977, 987 (1988) (“[T]he necessary premise of

the disparate impact approach is that some employment prac-

tices, adopted without a deliberately discriminatory motive,

may in operation be functionally equivalent to intentional dis-

crimination.”). Nevertheless, our circuit has not imposed strict

liability for disparate impact. Pfaff recognized that a defen-

dant may rebut a plaintiff’s showing of disparate impact by

“supply[ing] a legally sufficient, nondiscriminatory reason.”

88 F.3d at 746-747 (noting that “the appropriate standard of

rebuttal in [Title VII] disparate impact cases normally

requires a compelling business necessity”).

The question here is what constitutes a legally sufficient

reason for a municipality executing its congressionally man-

dated duties under TEFRA. While we are mindful of the guid-

ance Title VII often provides in FHA cases, the defense of

“business necessity” in the employment discrimination arena

does not transpose cleanly into the circumstances present

here. Resident Advisory Bd. v. Rizzo, 564 F.2d 126, 148 (3rd

Cir. 1977) (recognizing that importing the defense of “busi-

ness necessity” from the employment discrimination context

to a claim under the Fair Housing Act “is of somewhat uncer-

tain application”).

Congress required the city council to hold a public hearing

and vote on the TEFRA bond financing approval question.

AFFORDABLE HOUSING v. CITY OF FRESNO 279

TEFRA mandates that the city council decide the matter after

considering local residents’ views, and by clear implication

requires the city council to consider city priorities and hous-

ing needs, the wisdom of preferential financing for the proj-

ect, and all manner of other relevant considerations to which

elected representatives normally give weight in executing

their office. Imposing automatic liability for the exercise of

this decision for causing a disparate impact would write the

relevant considerations and the discretion out of the legisla-

tive duties in the statute. It is nearly impossible for a review-

ing court to pass judgment on what considerations were

“necessary” to the City’s business of good governance and to

implement its vision for the future of Fresno.

In Oti Kaga v. South Dakota Hous. Dev. Auth., 342 F.3d

871, 883 (8th Cir. 2003), the Eighth Circuit addressed a diffi-

culty analogous to the one presented here. That court inter-

preted the business necessity defense in the context of a FHA

housing disparate impact claim in which a low-income hous-

ing developer sued a state housing development authority

over its allocation of federal funds under the National Afford-

able Housing Act. The court held that the governmental entity

could rebut the showing of disparate impact by establishing

that its conduct had a “manifest relationship” to the allocation

of housing funds in the federal program “and is justifiable on

the ground that it is necessary” to that governmental entity’s

“exercise of its funding responsibilities.” Id. This approach is

sound.

It is also in accord with the standards other circuits have

developed for the defense available to municipalities for dis-

parate impact claims under the Fair Housing Act. See Hun-

tington Branch, NAACP v. Town of Huntington, 844 F.2d

926, 936 (2d Cir. 1988), aff’d in part, 488 U.S. 15 (1988) (per

curiam) (recognizing the defense of “a legitimate, bona fide

governmental interest”); Resident Advisory Bd. v. Rizzo, 564

F.2d at 149 (same); Langlois v. Abington Hous. Auth., 207

F.3d 43, 51 (1st Cir. 2000) (holding that there must be “a

280 AFFORDABLE HOUSING v. CITY OF FRESNO

legitimate and substantial goal of the measure in question”).

In the TEFRA context, a municipality may rebut a showing

of disparate impact by demonstrating that its reasons for

denying TEFRA bond approval were related to the exercise of

the discretion conferred by Congress. It must show that it had

a nondiscriminatory, “legitimate, bona fide governmental

interest.”

We need not and do not decide what other defenses exist

to a claim of disparate impact or whether such a showing by

a defendant shifts the burden back to the plaintiff to show that

no alternative would serve that interest with less discrimina-

tory effect. The City here was called upon to make an up or

down vote on a single housing proposal. There were no alter-

natives at issue.

[5] We hold only in this case of first impression under

TEFRA that if an elected representative authority declines to

approve TEFRA housing bonds for a legitimate non-

discriminatory reason, the defense is good. A governmental

interest in not giving approval may outweigh the desirability

of furnishing low-rent housing.

[6] A decision motivated by hostility to race, ethnicity or

family size would have been illegal under California law. The

jury found that the City’s decision was not so motivated.

Under TEFRA, the City had discretion to deny approval for

a “legitimate nondiscriminatory reason.” The jury found that

the City had such reasons. Evidence before the jury showed

that Wellington Place was opposed on account of the impact

of a large rental unit on neighboring property values and

because of an arguable lack of need for the project. AHDC

did not demonstrate that these reasons were a sham or were

pretextual. The response by the jury establishes a defense to

disparate impact.

The special verdicts approved by the district court

instructed the jury that as to question 11, the jury was consid-

AFFORDABLE HOUSING v. CITY OF FRESNO 281

ering the “Defense of Legitimate Non-Discriminatory Rea-

sons.” While AHDC objected to this jury instruction as to its

separate claim of intentional discrimination, it did not object

to instructing on this defense in relation to its disparate impact

claim. Failure to object to an instruction waives the right of

review. Bird v. Lewis & Clark College, 303 F.3d 1015, 1022-

23 (9th Cir. 2002).

[7] We have considered other points made by AHDC on

this appeal and find them without merit. Judgment for the

City, the councilmembers and the citizens was properly

entered.

Attorney fees. “Contract claims also were presented,” the

district court, ruling on attorney fees, observed but offered no

comment. The claims, based on what AHDC first called “cov-

enants” and later called “estoppel certificates,” were what the

district court found to be “adhesion contracts” attached by

McCaffrey Development to the sales of property neighboring

Wellington. Only McCaffrey Development and the purchasers

were parties to these contracts. AHDC had nothing to do with

their preparation, wording, and execution. It was the unani-

mous testimony of the parties to the contracts that the pur-

chasers agreed not to protest zoning changes if any were

sought. Neither Robert McCaffrey nor any purchaser of the

properties understood the waivers to embrace the financing of

a housing project. As the district court ruled in granting sum-

mary judgment, AHDC’s interpretation of these agreements

was irrelevant to their meaning. AHDC could not foist upon

the contracting parties a meaning favorable to it and unknown

to them when they made the agreements. It is not evident that

AHDC had a basis for alleging in its second amended com-

plaint that it alone knew what the agreements meant or for

alleging that the contracts were covenants not to object or

oppose the funding of multi-family housing at the Wellington

site, or to allege that the citizen defendants had tortiously

induced the breach of these “written covenants” or had them-

selves broken them, or to include as defendants to these

282 AFFORDABLE HOUSING v. CITY OF FRESNO

claims certain citizens, Todd Tolbert, Hernand Koubratoff,

Travis Compton, Orie Reed, Richard Robertson, and Janet

Reid-Bills, who had not signed the agreements, or to name

Richard Robertson in the second complaint, filed nearly two

years after the first complaint, and to renew the error on this

appeal when all along the person AHDC intended to sue was

Richard Robinson.

In the second amended complaint AHDC charged the citi-

zen defendants with fraud in executing the agreements. This

claim not only attributed AHDC’s interpretation to the agree-

ments but accused the citizens of duping McCaffrey in sign-

ing what was required. Facts do not appear to have been put

forward by AHDC to support this accusation. AHDC had had

two years to learn the truth from McCaffrey before its claim

was advanced.

In opposing summary judgment, AHDC attempted to back

away from some of its allegations in the second amended

complaint. It attempted to recast its claim that the citizen

defendants had breached a contract with AHDC and perpe-

trated fraud upon McCaffrey as a claim that they had merely

interfered with AHDC’s own contract with McCaffrey. What

AHDC did not acknowledge was that the means by which this

interference was allegedly accomplished was the breach of the

adhesion agreements.

Consideration may also be given to the damages sought by

AHDC. In its first complaint, AHDC alleged that the citizens

had violated the California Bane Civil Rights Act and so

could be liable for treble damages. Cal. Civ. Code § 52. The

allegation depended on a showing that the citizens had vio-

lated civil rights and that AHDC had standing to seek redress

for the violations. On October 21, 1997, the district court held

that AHDC did not have the requisite standing and that none

of the acts the citizens had allegedly committed had violated

the Bane Civil Rights Act. On the basis of these allegations,

AFFORDABLE HOUSING v. CITY OF FRESNO 283

made without standing, AHDC had threatened each citizen

with $27 million of potential liability.

A lawsuit seeking this sort of damages against each citizen

casts a cloud over his or her credit. As AHDC could not have

expected to recover these amounts from the citizens, the infer-

ence may be drawn that the claims against the citizens were

advanced in terrorem, to scare off anyone who would resist

AHDC’s demands on local government. That inference is

strengthened by the testimony of Michael Shulte from AHDC

as to how the individual defendants were selected: “the num-

ber of times essentially that the person protested.”

A separate cause of action against the citizens was that they

did “threaten, intimidate and interfere” with AHDC’s project.

AHDC supported this serious charge with references to shouts

of hostility from anonymous opponents of its project. As the

district court noted, AHDC failed to marshal this evidence

and put on the district court the burden of searching the

record. In the end, the district court found that AHDC had

produced no evidence of threat of violence or act of intimida-

tion that could be laid to the defendants.

The district court construed the complaint to allege that the

citizens had interfered with AHDC’s project by merely verbal

opposition. The district court stated that until White v. Lee,

227 F.3d 1214 (9th Cir. 2000), had clarified that First Amend-

ment rights prevailed over the fair housing laws it was not

clear that such speech was free from liability. In that light,

prior to White, AHDC’s allegation of interference stated a

possible claim, so attorney fees should not be awarded

because AHDC advanced it. The citizens argue that White

was not new law. They are correct.

In distributing flyers advocating a controversial political

position, the citizens were exercising the freedom of speech

assured by the First Amendment. McIntyre v. Ohio Elections

Comm’n, 514 U.S. 334, 347 (1995). The citizens were also

284 AFFORDABLE HOUSING v. CITY OF FRESNO

exercising the complementary right guaranteed by that

amendment to associate with others in pursuit of a political

objective. NAACP v. Alabama ex rel. Patterson, 357 U.S.

449, 460 (1958). The exercise of these constitutional rights is

not deprived of protection if the exercise is not politically cor-

rect and even if it is discriminatory against others. Boy Scouts

of America v. Dale, 530 U.S. 640, 660 (2000). Provided that

the exercise of these rights does not incite imminent violence,

it is free from governmental suppression or sanction even if

the speakers advocate violation of law. Brandenburg v. Ohio,

395 U.S. 444 (1969) (per curiam).

As important as the objectives of the federal and state fair

housing laws are, nothing in our constitutional history has

suggested that they trump the First Amendment or that they

outweigh the exercise of First Amendment rights. Indeed the

preeminence of the Amendment over fair housing was so

firmly established by 1992 that officials of the federal Fair

Housing Administration were denied qualified immunity and

held liable in damages for chilling the exercise of these rights

by three citizens of Berkeley opposed to a nonprofit’s devel-

opment of housing for handicapped and homeless persons.

White v. Lee, 227 F.3d at 1241. White v. Lee was not a bolt

from the blue but the application of established law. What

was true as to the lawless action of federal officials in 1992

is equally true of the attack launched by AHDC on the consti-

tutional rights of the citizens of Fresno in 1997.

The test on this issue is not whether AHDC asserted the

claim of interference in bad faith but whether AHDC had an

objective basis for the allegation to amount to a cause of

action. Christiansburg Garment Co. v. EEOC, 434 U.S. 412,

418-21 (1978).

As noted above, AHDC in appealing the grant of summary

judgment to the citizens used a caption referring to the citi-

zens “making threats and conspiring” but did not advance any

evidence of either activity. The appeal did make the argument

AFFORDABLE HOUSING v. CITY OF FRESNO 285

that violation of the adhesion agreements was not protected

by the First Amendment. This argument was far off the mark

of the rationale for the district court’s decision. It, however,

continued to charge the citizens with contract-breaking, tor-

tious interference, and fraud long after it was clear that these

allegations were without foundation.

[8] As the district court never ruled on the request for attor-

ney fees based on the fraud and tort claims in AHDC’s com-

plaint, we remand to the district court to make an award on

claims we have found baseless. As the district court made no

ruling on the request for fees based on the contract claims, we

similarly remand for an award of attorney fees on these claims

that we have also found baseless. As the district court erred

as to the state of First Amendment law, we reverse its ruling

on the request for fees in connection with the citizens’ defense

of the intimidation and interference claims and remand for an

award of fees on these claims.

In the determination of the fees, what has been spent on this

appeal is to be included. In assessing the fees, it will be appro-

priate for the district court to take into account that the citizen

defendants had to defend every aspect of a case claiming

astronomic damages from them. However unmeritorious the

district court ultimately discovered the contract, tort, fraud,

and intimidation claims to be, the defendants were forced over

a period of several years to defend against each of these

charges.

We reject AHDC’s appeal of the district court’s award of

costs in favor of Mathys, Compton, and the other citizen

defendants. There is a presumption in favor of awarding costs

to the prevailing party, Stanley v. Univ. of S. Cal., 178 F.3d

1069, 1079 (9th Cir. 1999), and AHDC has failed to rebut that

presumption. We also reject the City’s cross-appeal of the dis-

trict court’s order denying it costs, since the district court pro-

vided adequate reasons for its exercise of discretion.

286 AFFORDABLE HOUSING v. CITY OF FRESNO

Association of Mexican-American Educators v. California,

231 F.3d 572, 591 (9th Cir. 2002) (en banc).

For the foregoing reasons, the judgment of the district court

in favor of the City, Mathys, and the citizens is AFFIRMED.

The district court’s order taxing costs in favor of Mathys,

Compton and other citizen defendants and declining to tax

costs in favor of the City is similarly AFFIRMED. The case

is REMANDED for the award of attorney fees to the citizens

in accordance with this opinion.