# Amicus Curiae Brief — Meyer v. Holley

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0540%3A14

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 537 U.S. 280

## Text

( g FILED |
No. 01-1120 | AUG 2 2
OFFICE OF THE Oar

Supreme Court of the Gnited States

DAVID MEYER,

Petitioner,
vs.

EMMA MARY ELLEN HOLLEY; DAVID HOLLEY;
MICHAEL HOLLEY, a minor; BROOKS BAUER,

Respondents.

On Writ Of Certiorari To The United States
Court Of Appeals For The Ninth Circuit

BRIEF OF AMICUS CURIAE
National Association of REALTORS®
IN SUPPORT OF PETITIONER

LAURENE K. JANIK
Counsel of Record

General Counsel

RALPH W. HOLMEN
Associate General Counsel
NAN ROYTBERG

Associate Counsel

National Association of REALTORS®
430 North Michigan Avenue
Chicago, Illinois 60611-4087
(312) 329-8375

Attorneys for Amicus Curiae
National Association of REALTORS®

Midwest Law Printing Company/Photex — Chicago — (312) 321-0220

—— —————

i

TABLE OF CONTENTS

PAGE
TABLE OF ALPUTSORITED «occ ccccccccccccccsccccccccs i
IDENTITY AND INTEREST OF AMICUS CURIAE ...... 1
i 8 es | Pre rrrrrrrrrrrrrrrrrrrrrr rrr 2
SUMMARY OF ARGUMENT ............-00000eeeeeee 4
REFIT o cvccctedsnavecctocsciccvccenivesscesass 6
I. Neither the Text of the Fair Housing Act, Its
Legislative History, Nor the Regulations
Promulgated Pursuant to the Act Provide
That an Innocent Owner or Officer of an
Incorporated Real Estate Firm Is Strictly
Liable for the Fair Housing Act Violations of
the Firm’s Agents ...........------eeeeeeeeeees 6
II. The Non-Delegation Doctrine Does Not Re-
quire an Innocent Owner or Officer of a Real
Estate Brokerage Corporation To Be Held
Strictly Liable for the Fair Housing Act Vio-
lations of the Corporation’s Agents ............ 10

A. The Non-Delegation Doctrine Creates an
Exception to the Rule of Respondeat
Superior Such That a Principal May Be
Held Liable for the Conduct of a Corpo-
rate Agent Regardless of Whether the
Conduct Was Within the Scope of the
Agent’s Employment ..........--++++++5+: 10

B. Courts Have Inconsistently Applied the
Non-Delegation Doctrine in Their Analy-
ses of Prior Fair Housing Act Cases ........

C. The Non-Delegation Doctrine Does Not
Apply to Owners and Officers of Real
Estate Brokerage Corporations Because
Such Owners and Officers Are Not the
Principals of the Corporate Agents Who
Committed the Unlawful Acts .............

III. Common Law Provides No Basis for Aban-
doning Traditional Principles of Corporate
Law to Hold an Innocent Corporate Owner
or Officer Strictly Liable for the Fair Hous-
ing Act Violations of the Corporation's
AGIOED oc ccccccccscccccess PPTTTIT TIT TTTTie

A. Accepted Principles of Corporate Law
Clearly Provide that Corporate Owners
and Officers Are Not Personally Liable,
Solely on the Basis of their Positions, for
the Unlawful Acts Committed by the
Corporation's Agents ..... 2... 6... .cee cues

B. Courts Do Not Disregard Established
Principles of Corporate Law im Other
Contexts of Significance, and Have No
Need to Do So to Protect the Important
Interests of the Fair Housing Act...........

C. There Is No Need to Abandon Tradition-
al Principles of Corporate Law to Pre-
vent Injustice Because Existing Principles
Already Provide Victims With Just Rem-
BD senccnncssecctdbecdecds cvccecccccss

ill

IV. An Owner or Officer of a Real Estate Broker-
age Corporation May Be Personally Liable
for the Fair Housing Violations of a Corpo-
rate Agent Only If the Owner or Officer
Participated in, or Was Otherwise Specifi-
cally Responsible for, the Agent’s Conduct .....

CONCLUSION

iv
TABLE OF AUTHORITIES
CASES: PAGE(S)

Alexander v. Riga,
208 F.3d 419 (3 Cir. 2000),

cert. denied by 531 U.S. 1069 (2002) ................. 15
American Soc’y of Mechanical Eng’rs v. Hydrolevel

Comp... 36 US. SEG (19GR) .... occ ccccccscccces 19, 20, 26
Anderson v. Abbott,

Se Es bbs dedncconvenceesnen 19, 21, 24, 27
Barnhart v. Sigmon Coal Co.,

Pe nnrnaboscesenevéianedssecsanbaes 6

Berry v. Stevinson Chevrolet,
804 F.Supp. 121 (D.Colo. 1992) .............. 12, 18, 23

Bischofshausen, Vasbinder, & Luckie v. D.W. Jaquays
Mining & Equip. Contractors Co., 700 P.2d 902
ee ae GS Be raccencccacecocessvcoeccss 20-21

Bramesco v. Drug Computer Consultants,
834 F.Supp. 120 (S.D.N.Y. 1993) ................05. 23

Browning-Ferris Indus. of Ill. v. Ter Maat,
195 F.3d 953 (7™ Cir. 1999), cert.
denied by Ter Maat v. Browning-Ferris
Indus. of Ill., Inc., 529 U.S. 1098
GREED cceceseccceccvcseusesccces 18, 20, 21, 22, 24, 27

Burnet v. Clark,
I il eee Se Dae 19, 20

Cancun Adventure Tours v. Underwater Designer Co.,
862 F.2d 1044 (4™ Cir. 1988) .............. 2. eee eee 21

v

Cedric Kushner Promotions, Ltd. v. King,

35S US. 158 (2001)... 2... cece cece cece cece 18, 19
Circle T Corp. v. Deerfield,
444 P.2d 404 (Colo. 1968) .......................... 7

City of Chicago v. Matchmaker Real Estate Sales
Center, Inc., 982 F. 2d 1086 (7 Cir. 1992),
cert. denied by Ernst v. Leadership Council
for Metropolitan Open Communities, 508

IE elheteen ch ginicen ce) tecucisss., 14, 24
City of Evanston v. Baird & Warner, Inc.,

1989 WL 134310 (N.D. Ill. 1989) ................... 20
Coastal Abstract Serv., Inc. v. First Am. Title Ins. Co.,

173 F.3d 725 (9" Cir. 1999) ..................... 20, 24
Coates v. Bechtel,

811 F.2d 1045 (7™ Cir. 1987) ....................... 15
Commissioner, Indiana Dep't of Envtl Mgmt. v.

RLG, Inc., 755 N.E.2d 556 (Ind. 2001) ........ 19, 25-26
Crigler v. Salac,

438 So.2d 1375 (Ala. 1983) ..................... 21, 24
Dillon v. AFBIC Dev. Corp.,

597 F.2d 556 (5™ Cir. 1979) .................. 20, 21, 26

Escrude Cruz v. Ortho Pharmaceutical Corp.,
619 F.2d 902 (1° Cir. 1980) ...... 2.0... cece cee ee 24

Fair Housing Congress v. Weber,
993 F.Supp. 1286 (C.D. Cal. 1997) .................. 16

vi

General Bldg. Contractors Ass’n., Inc. v. Pennsylvania,

GB UG. BPG (IGE) oc ccccccccccccccscccccccsceces 11
Harrison v. Otto G. Heinzeroth Mortgage Co.,

430 F.Supp 893 (N.D. Ohio 1977) .......----+++55+- 16
Hart v. Bayer Corp.,

199 F.3d 239 (5™ Cir. 1999) .... 0... cece cece ee eee 20

Heights Community Congress v. Hilltop Realty, Inc.,
629 F.Supp. 1232 (N.D. Ohio 1983), aff'd
in part, rev'd in part on other grounds, 774
F.2d 135 (6™ Cir. 1985), cert. denied by Hilltop
Realty, Inc. v. City of Cleveland Heights, 475

UG. BEBO CIGEED 20 ccccccccccccccccces 20, 21, 27-28, 29
Holley v. Crank,

258 F.3d 1127 (9™ Cir. 2001) ..........-..-. 8, 10, 18, 20
In the Matter of Jesse Jenkins,

788 A.2d 268 (N.J. 2002) .... 2... cece cece cece eens 20

Johnson v. Harrigan-Peach Land Dev. Co., Inc.,
489 P.2d 923 (Wash. 1971) .......---- cece eee e neers 25

Lawlor v. District of Columbia,
758 A.2d 964 (Ct.App. DC 2000) .....-.-------eeee- 23

Leadership Council for Metropolitan Open Communities
v. Chicago Southwest Holiday Inn Operators Oak
Lawn Lodge, Inc., 1985 WL 3601 (N.D. Ill. 1985) ...... 16

Maguire v. Montana,
835 P.2d 755 (Mont. 1992) .......---- cece eeeeeeeee 11

Vii

Mark v. Universal Builders,
501 F.2d 324 (7™ Cir.) cert.
denied by 419 U.S. 1070 (1974) ............0000cceee 24

Marr v. Rife,
503 F.2d 735 (6 Cir. 1974) ..............04-. 13-14, 29

Matter of Dougherty,
482 N.W.2d 485 (Minn. Ct. App. 1992).......... 25, 26

Micro Chem., Inc. v. Great Plains Chem. Co., Inc.,
194 F.3d 1250 (Fed. Cir. 1999) .................. 20, 24

Moline v. IRS,
eo ee eee eid eeabne 26-27

Moss v. Ole South Real Estate, Inc.,
Se ee SO” Ge BOOED cc ccccccccccesccccccecs 21

Mozingo v. Correct Mfg. Corp.,
752 F.2d 168 (5™ Cir. 1985) ...............0-. 18, 21, 24

One Pacific Towers Homeowners’ Association v.
Hal Real Estate Investments, Inc., 30 P.3d 504
GOS, CD. TEEED cccccccccccesccccecccccccsesees 21

Phiffer v. Proud Parrot Motor Hotel, Inc.,
Ge BED cc ccncccccsccccceseceiss 15

PMC, Inc. v. Kadisha,
78 Cal.App.4” 1368, 93 Cal.Rptr.2d 663 (2000) ... 20,24

Portee v. Hastava,
853 F.Supp. 1335 (E.D.N.Y. 1994) .............2005. 16

Reed v. Michael Realty & Associates, Inc.,
1994 WL 559225 (N.D. Ill. 1994) ............. 17, 27, 29

viii

Riverside Mkt. Dev. Corp. v. Int'l Bldg. Prods., Inc.,
931 F.2d 327 (5™ Cir.), cert. denied by Riverside
Market Ltd. Partnership v. Prescott, 502 U.S.
PRT cc cdccccccdvcccccscescesscosecccosoes 22

Robinson v. Shell Oil Co.,
GEE, BE GN oc voce cccccvcvsccccessecsceeeses 6

Rooney, III] v. Commonwealth of Virginia,
500 S.E.2d 830 (Va. 1998) .... 6... cece eee eens 24, 25

Saltiel v. GSI Consultants, Inc.,
788 A.2d 268 (N.J. 2002) ........6 0c cece eee eeee 19, 25

Sasso v. Cervoni,
985 F.2d 49 (2d Cir.), cert. denied by

Bourgal v. Cervoni, 508 U.S. 973 (1993) ....-..---+++. 22
Saunders v. General Servs Corp.,

659 F.Supp. 1042 (E.D. Va. 1987) ......-.----++eees 16
Scribner v. O’Brien, Inc.,

363 A.2d 160 (Conn. 1975) ....... 66. e cece eens 21, 24
Shipley v. Perlberg,

780 A.2d 396 (Md. 2001) ........- ee eee e cues 19, 22, 25
Skelton v. Chem. Leaman Tank Lines, Inc.,

1996 WL 278343 (Conn. Super. 1996).........--. 19, 25
Tillman v. Wheaton-Haven Recreation Ass'n, Inc.,

517 F.2d 1141 (4 Cir. 1975) .......-- 06 eee e eens 28, 29
U.S. v. Bestfoods,

524 US. 51 (1998) . 0... . ccc ccccvccccecscees 19, 20, 27

U.S. v. Dotterweich,
ena 25, 26

U.S. v. Garden Homes Mgmt. Corp.,
156 F.Supp. 2d 413 (D.N.J. 2001) .................. 16

U.S. v. Hodges X-Ray, Inc.,
FOP POET GUNG BOUND vcccccccccccccccesecees 25

U.S. v. L & H Land Corp., Inc.,
407 F.Supp. 576 (S.D.Fla 1976) .............000000. 16

U.S. v. Lorantffy Care Center,
999 F.Supp. 1045 (N.D. Ohio 1998) .......... 27, 28-29

U.S. v. Northeastern Pharmaceutical & Chem. Co., Inc.,
810 F.2d 726 (8" Cir.), cert. denied by 484 U.S.

SPEED S0bseedodesévsciccdcdseseseveseseccess 22
U.S. v. Northside Realty Associates, Inc.,

C55 P26 1968 OH” Cer. 1979) cc cccccccccccccces 20, 26
U.S. v. Park,

ee Sc cscccccscsccvccososes 18, 19, 25, 26

U.S. v. Real Estate Dev. Corp.,
347 F.Supp. 776 (N.D. Miss. 1972) ................. 12

U.S. v. Tropic Seas, Inc.,
887 F.Supp. 1347 (D. Haw. 1995) .................. 16

U.S. v. Youritan Const. Co.,
370 F.Supp. 643 (N.D. Cal. 1973), aff'd in part,
remanded in part by 509 F.2d 623 (9 Cir. 1975) . 12-13, 16

Walker v. Crigler,
SP TE” Ge BOUED ov ccccccccccescccecccs 9,15

Whidbee v. McDonald's Corp.,
75 F.Supp.2d 183 (S.D.N.Y. 1999), aff'd in
relevant part by Whidbee v. Garzarelli Food

Specialties, Inc., 223 F.3d 62 (2d Cir. 2000) ........ 22-23
Wicks v. Milzoco Builders, Inc.,

SFO A.28 G6 Da. ISEB)... oc cccccccscvcccccsceces 21, 25
Williams v. Poretsky Mgmt., Inc.,

955 F.Supp. 490 (D.Md. 1996) ........--..--eeeeeee 16
Zuch v. Hussey,

394 F.Supp. 1028 (E.D. Mich. 1975) ............+++. 16

STATUTES, RULES AND REGULATIONS:

ES a roe le de lacgdersaenaaemaen 7
21 U.S.C. § 301-92 ........... Ope a rar N EET 26
USL. OF 1961 and 1988 .....0..ccccccccccccccvesss 29
A I iiss isc ndteiianshademamennis 2
I ov ininixvenencitiencessdiuenn 6
I a iciciineceinsiniahdbavediontan 6
oid cic cdchinnbukeadonreiwal 2
SOOM. CADDO oo on ios cc ccsicccsvcccsacseces 7
24 C.F.R. § 103.20 (b) (1999) ........eeeeeeeeeeeeees 7,8,9
SG Ci OI a. isis ecivesexiviennciusaiis 9

ee ey CEE vo. sunddunus sdk: cabdeeveceaseeses 7

LEGISLATIVE HISTORY:

Fair Housing Act, Pub. L. No. 90-284, 82 Stat. 81;

Pub. L. No. 100-430, 102 Stat. 1619.................. 7
113 CONG. REC. H22818-819

SO SOUND wes cccescesonececsnsovocee 7
114 CONG. REC. H9551-613

Se ls GUNG By BUEED sccdccescsesecccccesccceces 7
114 CONG. REC. $5995-6002

Se SN Ss OEE cdccccesccccenesiscescesune 7
134 CONG. REC. H16475-512

Sy HUEY SUED 9 cvccoccvecsccrceecececcess 7
134 CONG. REC. H20910-920

Ge OU UN, TE TUG se cccevcccvccccvecseccecees 7
134 CONG. REC. $19870-907

GREY OG Aaa, Z, TOGED occ cccccccccccccccccccccces 7

RESTATEMENT AND PUBLICATIONS:
Restatement (Second) of Agency § 214 (1958) ......... 10-11

Fletcher Cyclopedia of the Law of Private Corporations,
§§ 7, 14, 33, and 1137 (Perm. Ed) ............ 19, 21, 25

NATIONAi ASSOCIATION OF REALTORS®:

a de ce ueedeeseceaes 2

1

BRIEF OF AMICUS CURIAE, NATIONAL
ASSOCIATION OF REALTORS®, IN SUPPORT
OF PETITIONER DAVID MEYER

Pursuant to Rule 37.2 of the Rules of this Court, amicus
curiae, the National Association of REALTORS® (“NAR”), sub-
mits this brief in support of the Petitioner, DAVID MEYER.

IDENTITY AND INTEREST
OF AMICUS CURIAE'

NAR is a nationwide, non-profit professional association,
incorporated in Illinois, that represents persons engaged in all
phases of the real estate business, including, but not limited
to, brokerage, appraising, management, and counseling. As
such, NAR is a champion of the interests of real estate pro-
fessionals and real property owners throughout the United
States.

Founded in 1908, NAR was created to promote and encour-
age the highest and best use of the land, to protect and
promote private ownership of real property, and to promote
professional competence. In pursuit of these objectives, NAR
is concerned with a wide range of activities, including
promotion of equal opportunity in housing, real estate
licensing, neighborhood revitalization, housing affordability,
and cultural diversity. Its members are bound by a strict Code
of Ethics to ensure professionalism and competence. The
membership of NAR includes 54 State Associations of
REALTORS®, approximately 1,600 Local Associations of

' The parties have consented to the filing of this brief and the letters
of consent are filed with the Clerk of the U.S. Supreme Court
herewith. Pursuant to Rule 37.6, amicus curiae states that counsel for
a party did not author this brief in whole or in part, and no person
or entity other than the amicus curiae made a monetary contribution
to the preparation and submission of this brief.

2

REALTORS®, and approximately 795,000 “REALTOR™"” and
REALTOR-ASSOCIATE® members. Petitioner David Meyer
has retired from active real estate practice, but was, at the
time of the events at issue in this case, a member of NAR.

INTRODUCTION

NAR has a substantial and long-standing commitment to

equal opportunity in housing and fair housing compliance. .

Pursuant to this commitment and immediately upon the
adoption of the Fair Housing Act, 42 U.S.C. §§ 3601-3619,
NAR adopted Article 10 of its Code of Ethics which mandated
that:

The REALTOR® shall not deny equal professional services
to any person for reasons of race, creed, sex or country of
national origin. The REALTOR® shall not be a party to
any plan or agreement to discriminate against a person or
persons on the basis of race, creed, sex or country of
national origin.’

In 1975, NAR and the U.S. Department of Housing and
Urban Development (“HUD”) created and adopted a Vol-
untary Affirmative Marketing Agreement (“VAMA”). The
VAMA was the first nationwide program to implement § 809
of the Fair Housing Act, which calls for the Secretary of HUD
to “work out programs of voluntary compliance and of en-
forcement” with persons in the housing industry. 42 U.S.C.
§ 3609. Renewed in 1981, 1987 and 1992, the VAMA served as
the model for agreements subsequently adopted by other
segments of the real estate market, including the National
Association of Homebuilders, the National Association of

? “REALTOR®” isa federally registered collective membership mark
used by members of NAR to indicate their membership status.

* Article 10 was amended to add the protected classes of handicap
and familial status in 1988.

3

Real Estate License Law Officials and the American Institute
of Real Estate Appraisers. The VAMA was replaced in 1996
with the NAR/HUD Fair Housing Partnership Agreement,
which remains in effect today. This Agreement lays out a
comprehensive program for NAR and HUD, as partners, to
implement their commitment to fair housing.

NAR’s concern about the opinio:. of the Ninth Circuit
derives directly from its commitment to Fair Housing Act
compliance. The opinion below is of far reaching importance
to NAR’s many members, as well as hundreds of thousands
of incorporated real estate brokerage firms, because it aban-
dons a fundamental tenet of corporate law relied on by many
real estate firms. NAR is deeply troubled by the way in which
the Ninth Circuit's opinion inappropriately and unnecessarily
imposes personal liability on owners and officers of real estate
brokerage corporations, solely as a result of those positions,
for discriminatory conduct by the sales agents of such cor-
porations. This conclusion is unprecedented, unsupported by
the Fair Housing Act or any other authority, including that
cited by the Ninth Circuit, and squarely at odds with existing
principles of corporate law and fairness. Any imposition of
personal liability should be in accordance with a fault-based
standard.

NAR urges this Court to reverse the Ninth Circuit and
establish the principle that corporate owners and officers are
not, as a consequence of holding those positions alone, strictly
liable for the Fair Housing Act violations of corporate agents,
but instead may be liable only when they participate in or
otherwise are directly responsible for the conduct that con-
stitutes the violation.‘

* NARemphasizes that its interest and concern is solely with respect
to the Ninth Circuit’s holding that Petitioner Meyer is liable for the
Fair Housing Act violations of an agent of Triad Realty because he is
Triad’s shareholder and president. All references in this amicus brief

(continued...)

4
SUMMARY OF ARGUMENT

This case presents the question “whether . . . owners and
officers of (real estate brokerage) corporations are absolutely
liable for an employee's or agent’s violation of the (Fair
Housing) Act, whether or not they personally directed, auth-
orized, or were even aware of the particular acts that oc-
curred.” Petition for Certiorari at i. This case does not raise the
issue of whether individuals acting in their capacity as real
estate brokers are liable for the Fair Housing Act violations of
their agents.

The question for this Court, and that which invokes NAR’s
concern, is whether Petitioner, as an innocent owner and
officer of Triad, is liable under the Fair Housing Act for
Crank’s misconduct. The Ninth Circuit’s holding that Meyer
may be liable on the basis of his status as owner and president
of Triad Realty, without fault or culpability, is incorrect, and
requires reversal by this Court.

First, the starting point for the question presented is, of
course, the Act itself. Straightforward examination of the text
of the Act, the relevant regulations and the Act's legislative
history, reveals that the Act provides no basis whatsoever for
holding owners or officers personally liable for discrimina-
tory conduct by agents of such firms.

Second, the principle of “non-delegability” cannot be ap-
plied to hold owners or officers personally liable for viola-
tions of the Act by their corporation’s agents. The Ninth

(...continued)

to Meyer’s liability, or that of owners or officers of real estate
corporations generally, should be understood to refer only to liability
arising from an individual’s position as owner or officer of the
corporation and without reference to any personal involvement in
allegedly discriminatory conduct. Correspondingly, all references to
the holding and conclusions of the Ninth Circuit below refer ex-
clusively to that court’s decision as it relates to this issue.

5

Circuit erred in doing so. Courts have not cited or applied the
concept of non-delegability in Fair Housing Act cases in a
consistent fashion, with some treating it as little more than
another name for the familiar doctrine of respondeat superior,
while others correctly apply it as an exception to respondeat
superior that disregards whether the agent was acting within
the scope of his employment. In either case, however, the
non-delegability doctrine applies only to hold a person acting
in the capacity of a principal liable for actions of his agent.
Accordingly, non-delegability may cause the corporation that
is the employer of a real estate sales agent to be liable for the
agent's violations of the Act. However, non-delegability is
simply .napplicable to the owners and officers of the corpora-
tion, since they are not principals of the corporation’s agents.

Third, traditional corporate law does not dictate a conclu-
sion that owners or officers are personally and strictly liable
for the acts of corporate agents. Contrary to the Ninth Cir-
cuit’s suggestion, there is no basis to apply a different rule in
the context of the Fair Housing Act. Courts do not hold cor-
porate owners and officers personally liable for the unlawful
conduct of corporate agents with respect to other matters of
significant public concern, unless there has been personal in-
volvement. Moreover, existing theories of law afford victims
with recourse when corporate agents act wrongfully and
corporate owners and officers are truly culpable.

Finally, since neither the Fair Housing Act, the common
law, nor the principle of non-delegability provide a basis for
owners and officers of incorporated real estate brokerages to
be held personally liable for violations of the Act by firm
agents, any Fair Housing Act liability of those owners and
officers must be based on personal fault. Liability is appropri-
ate where the individuals participated in the alleged discrimi-
natory conduct, or where they bore responsibility or were
otherwise culpable for the conduct which allegedly violated
the Act.

ARGUMENT

I. Neither the Text of the Fair Housing Act, Its Legislative
History, Nor the Regulations Promulgated Pursuant to the
Act Provide That an Innocent Owner or Officer of an
Incorporated Real Estate Firm Is Strictly Liable for the Fair
Housing Violations of the Firm’s Agents.

The proper place to begin any inquiry as to whether owners
or officers of an incorporated real estate brokerage firm bear
personal and strict liability under the Fair Housing Act
(“Act”) for violations of the Act by employees or agents of the
firm is, of course, the language of the Act itself. Barnhart v.
Sigmon Coal Co., 534 U.S. 438 (2002); Robinson v. Shell Oil Co.,
519 U.S. 337 (1997). Examination of the text of the Act yields
nothing to suggest that owners and officers may be held per-
sonally liable. The Act prescribes the discriminatory conduct
made unlawful under the Act, but does not explicitly identify
those who may be liable for violations of the Act. 42 U.S.C.
§§ 3604-06. ‘Respondent’ is defined to mean only
(1) the person or other entity accused in a complaint of an
unfair housing practice; and (2) any other person or entity
identified in the course of investigation and notified as
required with respect to respondents so identified under
§ 3610(a) of this title.

42 U.S.C. § 3602.

In short, the Act proscribes conduct without expressly, or
even implicitly, suggesting that liability is to be strictly im-
posed on corporate owners or officers when a corporate
employee or agent engages in conduct that violates the Act.°

° The Act is silent even as to any fault-based liability of corporate
owners or officers, in sharp contrast to the clear intent of Congress
with respect to antitrust violations:

(continued...)

7

The Act's legislative history is equally silent on the issue.
Although both chambers of Congress engaged in extensive
and active debate preceding enactment, nothing said by any
Member of Congress, nor any portion of the House and
Senate reports, suggests any Congressional intent that owners
and officers of corporate real estate firms be held liable for
violations of the Act, in that capacity alone and without
more.°

The regulations promulgated by the Department of Hous-
ing and Urban Development (“HUD”) in connection with
enforcement of the Act, 24 C.F.R. §§ 100-103 (2002), likewise
do not impose liability for violations of the Act by corporate
employees on the shareholders or officers of the corporation.
To be sure, the prior version of 24 C.F.R. §103.20(b) (1999), on
which the Ninth Circuit relied, in part, did address “Persons

(...continued)
Whenever a corporation shall violate any of the penal
provisions of the antitrust laws, such violation shall be
deemed to be also that of the individual directors, officers,
or agents of such corporation who shall have authorized,
ordered, or done any of the acts constituting in whole or in

15 U.S.C. § 24. See also Circle T Corp. v. Deerfield, 444 P.2d 404, 407

(Colo. 1968), where the statute expressly provided that a person
injured by a corporation’s breach of fiduciary duty could bring a
claim for relief against the and “the designated member
or director acting as broker.” C.R.S. 1963, 117-1-5(8).

* Fair Housing Act, Pub. L. No. 90-284, 82 Stat. 81; 113 CONG. REC.
H22818-819 (daily ed. Aug. 16, 1967); 114 CONG. REC. H9551-613
(daily ed. Apr. 10, 1968); 114 CONG. REC. S5995-6002 (daily ed. Mar.
11, 1968); Pub. L. No. 100-430, 102 Stat. 1619; 134 CONG. REC.
H16475-512 (daily ed. June 29, 1988); 134 CONG. REC. H20910-920
(daily ed. Aug. 8, 1988); 134 CONG. REC. S$19870-907 (daily ed. Aug.
2, 1988).

against whom complaints may be filed.”’ For several reasons,
however, the Ninth Circuit's reliance on that regulation was
erroneous, and this Court should reject any suggestion that
the regulation indicates the intent of Congress or HUD that
corporate owners and officers be personally liable for viola-
tions of the Act by corporate employees or agents.

First, the text of that regulation does not support liability
for corporate owners and officers. The Ninth Circuit em-
phasized the language that permits complaints against any

“who directs or controls, or has the right to direct or
control, the conduct of another person” and concluded that
David Meyer, as owner and officer, could be personally liable
for the conduct of Triad Realty agent Crank. Holley v. Crank,
258 F.3d 1127, 1130-31 (9" Cir. 2001) quoting 24 C.F.R. §103.20
(1999). Although the court did not expressly state this, it
presumably determined that as owner and officer, Meyer
controlled, or had the right to control, Crank. But the court
ignored the language following that which it quoted. That
language further requires that the “other person” (that is, the
individual actually engaged in discriminatory conduct) be
“acting within the scope of his or her authority as employee or
agent of the directing or controlling person. . . .” (Emphasis
added.) 24 C.F.R. §103.20(b) (1999). As sales agent for Triad
Realty, Crank was an employee of Triad, not of Meyer, and
Triad was “the directing or controlling person.” Thus, even if
applicable, this regulation leads only to the conclusion that

” 24 C.F.R. §103.20 (1999): “Persons against whom complaints may
be filed. (a). . . (6) A complaint may also be filed against any person
who directs or controls, or has the right to direct or control, the
conduct of another person with respect to any aspect of the sale,
rental, advertising or financing of dwellings or the provision of
a ee

person, acting within the scope of his or her authority as em-
ceneapanmaaliedbninasentedimmmnn danamen tine
engaged, or is about to engage, in a discriminatory housing practice.”

ee

Triad Realty, not Meyer, bears liability for the actions of
Crank.

Moreover, examination of the history of 24 C.F.R. § 103.20
clearly demonstrates that it was not intended to be applied
with the broad brush wielded by the Ninth Circuit. That
history is accurately and articulately set forth in the dissent-
ing opinion in Walker v. Crigler:

The history of the promulgation of the present §103.20
confirms that HUD in no way intended to impose strict
vicarious liability upon innocent property owners. . . .

... HUD’s comments accompanying the publication of the

final version of the rule in question, which remains the
version in force today, both make clear that no strict lia-
bility was intended:

‘[I]t is not HUD’s intent to impose absolute liability on
any principal; the intent, in proposing paragraph (b), was
to follow the law enunciated by the courts in recent Fair
Housing Act cases with respect to the liability of a princi-
pal for acts of an agent. . . . 53 Fed. Reg. 24185 (1988)’

976 F.2d 900, 906-07 (4 Cir. 1992) (Widener, dissenting) (foot-
notes omitted).

The dissent in Walker concludes that “the most straightfor-
ward reading of the text of the present §103.20, . . . (provides)
that familiar principles of agency law, and not strict liability,
control a principal's liability for the acts of an agent.” Id.

Thus, this regulation was not intended to impose absolute
liability even on real estate brokers to whom sales agents are
directly responsible, let alone the owners and officers of the
real estate firm who employ these brokers and agents. In-
stead, be agama amp Aap: prema aet sge
the liability of a for acts of an agent, including the
requirement that the principal (the broker) is liable only if the
agent was acting within the scope of his or her authority.

10

Given that, it is incorrect to apply this regulation to hold that
innocent owners and officers of corporate real estate firms,
who are not, as noted above, principals of the agents of the
firm, absolutely liable for the conduct of agents.

In short, neither the text of the Act, its legislative history,
nor the regulations adopted by HUD for enforcement of the
Act, including the specific regulation relied on below, support
the Ninth Circuit's conclusion that “owners and officers of
corporations may be held vicariously liable for an employee's
violations of the Fair Housing Act... .” Holley, 258 F.3d at
1129.

II. The Non-Delegation Doctrine Does Not Require an
Innocent Owner or Officer of a Real Estate Brokerage
Corporation To Be Held Strictly Liable for the Fair Hous-
ing Act Violations of the Corporation’s Agents.

The Ninth Circuit also concluded that Meyer was liable as
sole owner and officer of Triad “because the duty not to
discriminate is a non-delegable one. . . .” Holley, 258 F.3d at
1134. Contrary to the Ninth Circuit’s holding, the non-
delegation principle does not require or support the conclu-
sion that owners and officers of real estate brokerage corpora-
tions are strictly liable for the acts of agents of the corpora-
tion.

A. The Non-Delegation Doctrine Creates an Exception to

the Rule of Respondeat Superior Such That a Principal
May Be Held Liable for the Conduct of a Corporate

Agent Regardless of Whether the Conduct Was Within
the Scope of the Agent's Employment.

The concept and the consequences of non-delegable duties
are set forth in the Restatement (Second) of Agency § 214
(1958), which subjects a principal “to liability to others for
harm caused to them by the failure of (an) agent to perform
(a non-delegable) duty.” Comment (a) to this section explains

11

that a principal “is normally not responsible for the conduct
of others, except that of his agent or servant acting within the
scope of their employment .. .,” and then explains that when
a principal has “a duty to see that due care is used in the
protection of another, . . . the duty of care is non-delegable.”
In such event, the Restatement continues, a principal may be
responsible for harm caused by conduct of his agents or
servants not within the scope of employment. Id.

Relying on this section of the Restatement, this Court
addressed the doctrines of non-delegable duties and re-
spondeat superior, albeit not in a Fair Housing Act context, in
General Bldg. Contractors Ass‘n., Inc. v. Pennsylvania, 458 U.S.
375 (1982). In that decision, this Court noted that “the (non-
delegation) doctrine creates an exception to the common-
law rule that a principal normally will not be liable for the
tortious conduct of an independent contractor.” Id. at 396.°
This Court went on to comment that “[i]n a sense, to charac-
terize such a duty as ‘nondelegable’ is merely to restate the
duty. . . . The question is what duty does (the statute) im-
pose.” Id.°

Under respondeat superior, therefore, principals are liable
only for acts of their agents within the scope of their employ-
ment. Where the principal has a duty deemed to be non-
delegable, however, liability may be imposed on the principal
even if the agent acts outside the scope of employment. In
either -ase, the threshold question is whether the defendant
is a principal of the person who committed the actions on

. See also Maguire v. Montana, where the Montana Supreme Court
also described § 214 as providing a “nondelegable duty exception to
the (common law) respondeat superior doctrine.” 835 P.2d 755, 759
(Mont. 1992).

* As explained in Section I of this amicus brief, the Act imposes no
duties on owners and officers of real estate brokerage corporations

in such capacities alone.

12

which the plaintiff's claims are based. As a matter of law,
owners and officers of real estate corporations are not, as a
consequence of those capacities alone, principals of the agents
of the corporation. Berry v. Stevinson Chevrolet, 804 F.Supp.
121, 134 (D.Colo. 1992).

B. Courts Have Inconsistently Applied the Non-Delega-
tion Doctrine in Their Analyses of Prior Fair Housing
Act Cases.

The non-delegation concept in Fair Housing Act cases
appears to have been first suggested in U.S. v. Real Estate Dev.
Corp., 347 F.Supp. 776 (N.D. Miss. 1972). In Real Estate Dev.
Corp., acase involving alleged racial discrimination in making
rental housing available, the court attributed the actions of
the resident apartment managers to the defendants who had
employed them—that is, to their principals. Id. at 785.'° The
court noted that the managers/agents’ “acts and statements,
made within the scope of their agency, were attributable to
the defendants, whose duty to comply with the law is ‘non-
delegable.’” Id. at 785. Thus, the court improperly addressed
the “scope of agency” question in its non-delegability analy-
sis.

Real Estate Dev. Corp. was subsequently quoted and relied
on in U.S. v. Youritan Constr. Co., where the court concluded
that the owner and property manager of an apartment
complex was liable for the discrimination of its apartment
manager rental agent “both under the doctrine of respondeat
superior and because the duty to obey the law is non-
delegable.” 370 F.Supp. 643, 649 (N.D. Cal. 1973), aff'd in part,

' The principals were both the corporation that had owned the
property and the individual owner, who had become the property
owner upon dissolution of the corporation, which had taken place
prior to the court’s decision. 347 F. Supp. at 779.

13

remanded in part by 509 F.2d 623 (9 Cir. 1975). The court did
not explain its understanding of the distinction between those
two doctrines, but merely noted that “where, as here, manage-
ment’s lack of supervision and failure to establish objective
and reviewable procedural standards have resulted in apart-
ments being made unavailable to blacks by agents and em-
ployees, management's failure to act is in itself violative of
§ 3604(a).” Id.

Shortly thereafter, in Marr v. Rife, the Sixth Circuit reversed
the District Court’s conclusion that the owner of a real estate _
firm could not be held liable for the discrimination of the ~
firm's agents, citing the non-delegability principle articulated
in Youritan and Real Estate Dev. Corp. Marr v. Rife, 503 F.2d 735,
741 (6" Cir. 1974). The District Court had held that defendant
Doug Rife, proprietor of the Doug Rife Realtor Agency, could
not be charged with liability because there was no evidence
that he had personally joined in any of his agent's discrimina-
tory conduct, or that the agent “acted with the approval or at
the direction of Rife.” Id. at 740-42.

The Sixth Circuit reversed, asserting that “as owner of the
agency, Rife had at least the power to control the acts of his
salesmen.” Id. at 742. Thus, in Marr, the court concluded that
the duty of an owner to comply with the Fair Housing Act
is non-delegable, and held the owner—the principal of the
agents who engaged in the discriminatory conduct—liable,
notwithstanding his lack of knowledge or involvement in the
discriminatory acts. Id."

" It is important to note that Marr is distinguishable from the facts
in this case because the firm is described only as “a real estate
agency,” and thus not necessarily a corporation. Indeed, the opinion
refers to defendant Doug Rife as “proprietor of the agency,” at least
suggesting that the firm was a sole proprietorship, rather than a
corporation. In either event, the court in Marr correctly applied the

(continued...)

14

Subsequent Fair Housing Act cases have likewise held that
compliance with the Act is non-delegable, but that conclusion
is inapt to the question of liability of corporate owners and
officers of real estate corporations for the acts of corporate
agents. These cases are not consistent in imposing liability on
a principal without consideration of whether the agent acted
within his scope of employment, or whether the principal
engaged in his own culpable conduct. But they are completely
consistent in applying the non-delegability doctrine to the
question of whether a principal is liable for the acts of an
agent, which is, of course, the fundamental purpose of the
doctrine of respondeat superior and the non-delegability
exception to that common law rule.

For example, in City of Chicago v. Matchmaker Real Estate Sales
Center, Inc., the Seventh Circuit applied non-delegability to
hold the defendant corporation liable for the acts of its sales
agents, citing General Bldg. Contractors as to the application of
respondeat superior and agency law: “[Aj principal cannot
free itself of liability by delegating to an agent the duty not to
discriminate.” (Citations omitted.) 982 F.2d 1086, 1096 (7™ Cir.
1992), cert. denied by Ernst v. Leadership Council for Metro. Open
Communities, 508 U.S. 972 (1993). By contrast, the court did not
reference non-delegability to conclude that Erwin Ernst, the
owner of the defendant corporation, was personally liable for
the Fair Housing Act violations of certain sales agents of the
firm. Id. at 1098. Instead, the court cited Ernst’s conduct and
functional responsibilities as sole owner, chief executive offi-
cer and “[s]ignificantly, (supervisor of) the day-to-day opera-
tions of Matchmaker and its agents.” Id. Based on Ernst’s
personal involvement in real estate activities, with the corre-

(...continued)

non-delegability doctrine in that it imposed liability on the principal
without regard to whether the agent was acting within or outside the
scope of his agency.

15

sponding duty of Fair Housing Act compliance because of
that personal involvement, and not simply and solely based
on non-delegability or his status as owner and CEO of Match-
maker Real Estate Sales Center, Inc., the court held Ernst
personally liable. Id.

Walker v. Crigler is also consistent with this formulation. 976
F.2d 900 (4" Cir. 1992). In Walker, the owner of rental property
was held liable for discriminatory conduct by the property
manager, whose duties included renting the property and
who had been hired by the owner. Id. at 904-05. The Walker
court applied non-delegation to hold the rental property
owner liable for the acts of its agents, but that conclusion is
inapplicable to the quite different question of whether a
violation of the Fair Housing Act by agents of the corporation
can be imputed to the corporation’s owners and officers.

In Coates v. Bechtel, the Seventh Circuit acknowledged that
under the Fair Housing Act “the courts have imputed the
wrongful acts of a real estate sales or rental agent to the
property owner he is representing regardless of whether the
owner specifically authorized the agent to engage in the racial
discrimination” and that “the duty of property owner ‘to obey
the laws relating to racial discrimination’ is nondelegable.”
811 F.2d 1045, 1051 (7 Cir. 1987) (emphasis added). Similarly,
in Alexander v. Riga, the court “adopt(ed) the general rule
applied by other federal courts that the duty of a landlord
not to discriminate in the leasing of property may not be
delegated to the landlord’s employee.” 208 F.3d 419, 433 (3"
Cir. 2000), cert. denied by 531 U.S. 1069 (2001) (citing Walker,
Marr, Phiffer, and Coates) (emphasis added)."* Numerous
courts in other Fair Housing Act cases have cited “non-

'2 See also Phiffer v. Proud Parrot Motor Hotel, Inc., 648 F.2d 548 (9" Cir.
1980) (although non-delegation was cited, the court also noted a
fault-based reason for holding the individual defendant personally
liable for the desk clerk’s discrimination where the desk clerk’s
actions were dictated by the hotel management's policies).

16

delegation” as a basis on which to do nothing more than

apply vicarious liability to hold a principal liable for the acts
of an agent.”

C. The Non-Delegation Doctrine Does Not Apply to Own-
ers and Officers of Real Estate Brokerage Corporations
Because Such Owners and Officers Are Not the Princi-
pals of the Corporate Agents Who Committed the Un-
lawful Acts.

When the doctrinal underpinnings of non-delegation are
properly understood, it is clear that the conclusion that
compliance with the Fair Housing Act is “non-delegable” has
no significance to the issue presented here: whether owners
and officers of an incorporated real estate brokerage firm are
liable for Fair Housing Act violations by agents of the firm.
Non-delegability applies only to impose liability on a princi-
pal for the conduct of his agent, and therefore can result in
liability only for the principals of those agents—that is, the
real estate brokerage corporations that employ the agents.

'? U.S. v. Garden Homes Mgmt. Corp., 156 F Supp. 2d 413 (D.N.J. 2001);
Fair Housing Congress v. Weber, 993 F.Supp. 1286 (C.D. Cal. 1997);
Williams v. Poretsky Mgmt., Inc. 955 F.Supp. 490 (D.Md. 1996); Portee
v. Hastava, 853 F.Supp. 1335 (E.D.N.Y. 1994); Zuch v. Hussey, 394
F.Supp. 1028 (E.D. Mich. 1975); U.S. v. Youritan Constr. Co., 370
F.Supp. 643 (N.D. Cal. 1973). A few federal district courts have held
that corporate officers may be held personally liable for violations by
corporate employees. These cases, however, are essentially uniform
in failing to provide any analysis, or usually much discussion, as to
why they disregard the corporation, and must be dismissed as
simply misguided. See U.S. v. Tropic Seas, Inc., 887 F.Supp. 1347
(D.Haw. 1995); Saunders v. General Servs Corp., 659 F.Supp. 1042 (E.D.
Va. 1987); Leadership Council for Metropolitan Open Communities v.
Chicago Southwest Holiday Inn Operators Oak Lawn Lodge, Inc., 1985 WL
3601 (N.D. Ill. 1985); Harrison v. Otto G. Heinzeroth Mortgage Co., 430
F.Supp. 893 (N.D. Ohio 1977); U.S. v. L & H Land Corp., Inc., 407
F.Supp. 576 (S.D.Fla 1976).

— -

—

17

The correct approach is illustrated by the thoughtful
analysis of the Northern District of Illinois in Reed v. Michael
Realty & Associates, Inc., where the court found that the
president and secretary of a real estate brokerage corporation,
George S. Michael, was not personally liable for the discrimi-
natory acts of the corporation’s apparent agent by virtue of
being a corporate officer and nothing more. 1994 WL 559225,
10 (N.D. Ill. 1994). The court noted “Courts of Appeal, in-
cluding our own, . . . have observed that the duty of a
property owner not to discriminate is non-delegable.” The
court went on to recognize the wrongdoer as an agent of the
corporate real estate firm employed by the property owner,
rather than an agent of Michael personally. Id. at 6-7. The
court thus refused to hold Michael liable, by virtue of his
status as secretary and president alone, for the acts of the
corporation’s agent. Id. at 10. Though the court noted that the
duty of Fair Housing Act compliance is non-delegable, be-
cause the alleged wrongdoer was not an agent of defendant
Michael, Michael could not be personally liable, based solely
on the fact that he was an officer of the corporation of which
the wrongdoer was an agent.

In short, the Ninth Circuit erred in concluding that because
Fair Housing Act compliance is non-delegable, personal
liability may be extended to owners and officers of corporate
firms when corporate agents violate the Act. Non-delegability
and ordinary principles of respondeat superior address
whether principals may be held liable for the misconduct of
agents, and both hold that a principal may be liable for
violations of the Act by an agent. But neither applies or is
instructive with regard to the question before this Court,
which is whether owners and officers of an incorporated real
estate brokerage firm are liable for Fair Housing Act viola-
tions by the firm’s agents.

18

III. Common Law Provides No Basis for Abandoning Tradi-
tional Principles of Corporate Law to Hold an Innocent
Corporate Owner or Officer Strictly Liable for Fair Hous-
ing Act Violations of the Corporation’s Agents.

The Ninth Circuit correctly recognized that “under general
principles of tort law corporate shareholders and officers
usually are not held vicariously liable for an employee's
action...” Holley, 258 F.3d at 1129. Turning to the question of
whether courts should apply different criteria when the
employee’s conduct violates the Fair Housing Act—that is,
“whether owners and officers of corporations may be held
vicariously liable for an employee's violations of the Fair
Housing Act (FHA),” the Ninth Circuit answered, “We con-
clude that they can.” Id.

This conclusion is wrong. As explained below, there is no
merit to the claim that departure from traditional principles
of corporate law is warranted by the highly important in-
terests safeguarded by the Fair Housing Act. In cases involv-
ing other significant interests, such as equal employment
opportunity, environmental protection, product liability,
RICO and consumer health, which are also of critical impor-
tance, courts have not abandoned long-standing corporate
principles when examining the potential liability of corporate
owners and officers. Cedric Kushner Promotions, Ltd. v. King,
533 U.S. 158 (2001) (RICO); U.S. v. Park, 421 U.S. 658 (1975)
(Federal Food, Drug and Cosmetic Act); Browning-Ferris

Industries of Illinois v. Ter Maat, 195 F.3d 953 (7™ Cir. 1999), cert.

denied by Ter Maat v. Browning-Ferris Indus. of Ill., Inc., 529 U.S.
1098 (2000) (environmentai); Mozingo v. Correct Mfg. Corp., 752
F.2d 168 (5" Cir. 1985) (products liability); Berry v. Stevinson
Chevrolet, 804 F.Supp. 121 (S.D.N.Y. 1993) (employment/ race
discrimination).

Neither is the Ninth Circuit’s determination to ignore these
time-honored principles of corporate law required in order to
adequately protect the victims of Fair Housing Act violations.

gras ae ee eee -

19

Such victims have other remedies and opportunities to re-
cover against truly culpable parties. First, courts can hold the
corporation itself liable. American Soc’y of Mechanical Eng’rs v.
Hydrolevel Corp., 456 U.S. 556 (1982). See also Fletcher Cyclopedia
of the Law of Private Corporations, § 33 (Perm. ed).

Second, courts, including this Court, have used at least two
other existing theories of law to hold corporate officers and
owners personally liable, under appropriate circumstances,
for the unlawful conduct of corporate agents: (1) the partici-
pation theory, Saltiel v. GSI Consultants, Inc., 788 A.2d 268 (N.J.
2002); Shipley v. Perlberg, 780 A.2d 396 (Md. 2001); Skelton v.
Chem. Leaman Tank Lines, Inc., 1996 WL 278343 (Conn. Super.
1996), and (2) the responsible corporate officer doctrine. Park,
421 U.S. at 673-74; Commissioner, Indiana Dep't of Envt! Mgmt.
v. RLG, Inc., 755 N.E.2d 556 (Ind. 2001).

Finally, when there is evidence that the corporation is a
sham and does not have the financial resources necessary to
provide recourse, courts can pierce the corporate veil so that
the plaintiff may recover from an owner who was at fault.
U.S. v. Bestfoods, 524 U.S. 51, 62 (1998); Anderson v. Abbott, 321
U.S. 349, 356 (1944). For these reasons, this Court should reject
the Ninth Circuit’s suggestion that courts should abandon
established corporate law principles in the context of fair
housing.

A. Accepted Principles of Corporate Law Clearly Provide
that Corporate Owners and Officers Are Not Personally
Liable, Solely on the Basis of their Positions, for the
Unlawful Acts of the Corporation’s Agents.

A fundamental tenet of corporate law, recognized consis-
tently by this Court, is that the corporate entity is separate
from its owners and officers. Kushner, 533 U.S. at 163; Best-
foods, 524 U.S. at 61; Burnet v. Clark, 287 U.S. 410, 415 (1932).

20
What underlies this recognition is that
the principle of limited liability . . . serves the important
social purpose of encouraging investment by individuals
who are risk averse and therefore will not invest (or will
insist on a much higher return) in an enterprise if by doing

so they expose their entire wealth to the hazards of litiga-
tion.

Browning-Ferris, 195 F.3d at 959.

In addition, judicial recognition of the corporate structure,
including its limitations on individual liability, is not incon-
sistent with justice for the victims of corporate employee /
agent misconduct because wronged plaintiffs retain a legiti-
mate and usually adequate source for remedy—the corpora-
tion itself. Hydrolevel, 456 U.S. at 556; Dillon v. AFBIC Dev.
Corp., 597 F.2d 556, 563 (5 Cir. 1979); U.S. v. Northside Realty
Associates, Inc., 605 F.2d 1348, 1353-54 (5" Cir. 1979); Heights
Community Congress v. Hilltop Realty, Inc., 629 F.Supp. 1232
(N.D. Ohio 1983), aff'd in part, rev'd in part on other grounds, 774
F.2d 135 (6™ Cir. 1985), cert. denied by Hilltop Realty, Inc. v. City
of Cleveland Heights, 475 U.S. 1019 (1986).

Federal and state courts across the country uniformly and
consistently apply the axiom that even the Ninth Circuit in
Holley has acknowledged: corporate owners and officers are
generally not personally liable for the torts committed by
agents of their corporations. 258 F.3d at 1129."* This is true

“ See also Bestfoods, 524 U.S. 51 at 61-62; Burnet, 387 U.S. at 415; Micro
Chem., Inc. v. Great Plains Chem. Co., Inc., 194 F.3d 1250 (Fed. Cir.
1999); Hart v. Bayer Corp., 199 F.3d 239 (5 Cir. 1999); Coastal Abstract
Serv., Inc. v. First Am. Title Ins. Co., 173 F.3d 725 (9" Cir. 1999);
Northside, 605 F.2d at 1353-54; In the Matter of Jesse Jenkins, 788 A.2d
268 (N.J. 2002); PMC, Inc. v. Kadisha, 78 Cal.App.4® 1368, 93 Cal.
Rptr.2d 663 (2000); City of Evanston v. Baird & Warner, Inc., 1989 WL
134310, 3 (N.D. Ill. 1989); Bischofshausen, Vasbinder, & Luckie v. D.W.

(continued...)

21

even when the defendant is the sole shareholder of a corpora-
tion. Cancun Adventure Tours v. Underwater Designer Co., 862
F.2d 1044, 1047 (4" Cir. 1988); Dillon, 597 F.2d at 563; One
Pacific Towers Homeowners’ Association v. Hal Real Estate
Investments, Inc., 30 P.3d 504 (Wash. App. 2001). As this Court
has said, “[l]imited liability is the rule, not the exception.”
Anderson, 321 U.S. at 361-62.

Thus. courts do not automatically impose strict liability on
corporate officers and owners. E.g., Browning-Ferris, 195 F.3d
at 956 (“the officer is (not) automatically liable for the acts of
the corporation; . . . there is no doctrine of ‘superiors’ liabil-
ity,’ comparable to the doctrine of respondeat superior, . .. .”).
Rather, courts look for actual participation or involvement in
the wrongful act. Mozingo, 752 F.2d at 173-74; Moss v. Ole
South Real Estate, Inc., 933 F.2d 1300 (5 Cir. 1991); Hilltop, 629
F.Supp. at 1303-04; RLG, 755 N.E.2d at 561; Bischofshausen,
Vasbinder, & Luckie v. D.W. Jaquays Mining & Equip. Contractors
Co., 700 P.2d 902, 908-09.

B. Courts Do Not Disregard Established Principles of
Corporate Law in Other Contexts of Significance, and
Have No Need to Do So to Protect the Important Inter-
ests of the Fair Housing Act.

This bedrock principle of corporate law is adhered to by
courts in many contexts, which, like fair housing, have critical
societal importance. For instance, courts have upheld this

(...continued)

Jaquays Mining & Equip. Contractors Co., 700 P.2d 902, 908-09 (Ariz.

Ct. App. 1985); Crigler v. Salac, 438 So.2d 1375, 1380 (Ala. 1983); -

Hilltop, 629 F.Supp. at 1304; Wicks v. Milzoco Builders, Inc., 470 A.2d

86, 90 (Pa. 1983); Scribner v. O'Brien, Inc., 363 A.2d 160, 168 (Conn.

1975); Fletcher Cyc. Corp., §§ 7, 14 (Perm. ed.) (“The shareholders of
ion, unless they personally participate, are not liable in-

a corporation,
dividually for torts committed by the corporation.”).

22

principle when determining whether officers or owners of
corporations responsible for environmental hazards are liable
individually. E.g., Browning-Ferris, 195 F.3d at 956 (remanded
to determine whether the defendant had actually “operated
the landfill personally, rather than merely directing the
business of the corporations of which he was the president”);
Riverside Mkt. Dev. Corp. v. Int'l Bldg. Prods., Inc., 931 F.2d 327,
330 (5™ Cir.), cert. denied by Riverside Market Ltd. Partnership v.
Prescott, 502 U.S. 1004 (1991) (CERCLA imposes liability only
on persons who actually participate in the operation of the
facility; thus, inactive shareholder and officer not personally
liable for environmental clean-up costs); U.S. v. Northeastern
Pharmaceutical & Chem. Co., Inc., 810 F.2d 726, 744 (8 Cir.),
cert. denied by 484 U.S. 848 (1987) (corporate officer individu-
ally liable under CERCLA, but only because he had person-

ally arranged for the transportation and disposal of hazard- ~

ous substances for the corporation); Shipley v. Perlberg, 780
A.2d 396 (Md. 2001) (corporate officer not personally liable
for negligent lead based paint poisoning of resident of prop-
erty that was owned by corporation because officer had no
involvement in decision making, maintenance, or rental
aspects.) Thus, while charged with the responsibility to en-
sure that important environmental goals are met, courts none-
theless refuse to hold corporate officers and owners person-
ally liable for violations of environmental laws committed by
their corporations or their corporations’ agents solely on the
basis of their corporate positions.

Neither do courts hold corporate owners and officers
strictly liable in the employment arena. E.g., Sasso v. Cervoni,
985 F.2d 49, 51 (2d Cir.), cert. denied by Bourgal v. Cervoni, 508
US. 973 (1993) (sole officer, director and shareholder not

liable for the ERISA obligations of his corporation

where he had not participated in wrongdoing and where
tion was not a sham); Whidbee v. McDonald's Corp., 75
F.Supp.2d 183, 193 (S.D.N.Y. 1999), aff'd in relevant part by
Whidbee v. Garzarelli Food Specialties, Inc., 223 F.3d 62 (2d Cir.

23

2000) (restaurant owners not personally liable under §1981
because there was no evidence of a “causal relationship”
between the owners and the alleged racial harassment of em-
ployees); Bramesco v. Drug Computer Consultants, 834 F.Supp.
120, 123 (S.D.N.Y. 1993) (Potential liability of the corporation
under Title VII or the ADEA does not “necessarily impute
vulnerability to suit on the part of its officers, directors or
owners . . . at least absent separate intentional misconduct.”);
Berry v. Stevinson Chevrolet, 804 F.Supp. 121, 133-34 (D. Colo.
1992) (corporation’s owner and manager not personally liable
for race discrimination because he had not participated in
discrimination; employees who had engaged in unlawful
discrimination were agents of the corporation rather than
agents of the owner/manager); Lawlor v. District of Columbia,
758 A.2d 964, 975-78 (Ct.App. DC 2000) (Father and daughter
shareholders / officers personally liable under the Wage Pay-
ment Law because of the level of their involvement in wrong-
ful act, while wife / mother, who was corporate secretary, not
personally liable because she had not meaningfully partici-
pated in the unlawful conduct).

Although these decisions are based on employment law
statutes that differ from one another as to their definitions of
an “employer”, whether an individual is within the definition
under a specific statute and may thus be held liable depends
on the individual's specific conduct and fault. This includes
considerations such as whether the corporate owner and/or
officer participated in or directed the wrongdoing, or whether
he/she knowingly acquiesced in the unlawful conduct. In
short, in the employment context, including the employment
discrimination context, where the law, like fair housing law,
seeks to guarantee equal treatment to groups of individuals
that have historically been discriminated against, liability is
fault-based, and not strictly imposed on individuals merely
because of their positions.

Courts in a wide range of other contexts, too, consistently
require evidence of individual fault before they hold a
corporate owner or officer personally liable for the wrongful

24

acts of the corporation's agent."° Of particular note is that
courts adhere to this established principle in product liability
cases, where public health and safety concerns are often
preeminent. For instance, the Fifth Circuit refused to hold the
corporation’s president personally liable for defects in a
cherry picker because the president's involvement in the
manufacture of the cherry picker was inadequate to warrant
such liability. Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 173-
74 (5" Cir. 1985). The court noted that to be held personally
liable, an officer “must have some direct, personal participa-
tion in the tort, as where the defendant was the ‘guiding
spirit’ behind the wrongful conduct. . . or the ‘central figure’
in the challenged corporate activity.” Id., quoting Escrude Cruz
v. Ortho Pharmaceutical Corp., 619 F.2d 902, 907 (1* Cir. 1980).

C. There Is No Need to Abandon Traditional Principles of
Corporate Law to Prevent Injustice Because Existing
Principles Already Provide Victims With Just Remedies.

Some courts conclude that it is occasionally necessary to
adhere to traditional corporate law principles less rigidly in
order to prevent injustice. Mark v. Universal Builders, 501 F.2d
324, 337 (7™ Cir.) cert. denied by 419 U.S. 1070 (1974); Anderson,
321 U.S. at 356; Browning-Ferris, 195 F.3d at 959; Matchmaker,
982 F.2d at 1089-94. In such instances, courts have articulated
special doctrines or theories to “do right” by the innocent tort
victim by seeking a reasoned basis to impose what really is
fault-based liability on a corporate officer and owner.

A number of courts have applied the “participation theory,”
under which a corporate officer may be liable for the corpora-

'S E.g., Micro Chem., Inc., 194 F.3d at 1261 (patent infringement);
Coastal Abstract Serv., 173 F.3d 725 (9 Cir. 1999) (false advertising);
PMC, 78 Cal.App.4® 1368, 93 Cal.Rptr.2d 663 (intellectual property);
Rooney, III v. Commonwealth of Virginia, 500 S.E.2d 830 (Va. 1998)
(criminal embezzlement); Salac, 438 So.2d at 1380 (fraud); Scribner,
363 A.2d at 168 (construction defects).

25

tion’s breach of its duty to an injured third party, where the
corporation delegated this duty to the corporate officer and
where the corporate officer breached this duty through personal
fault. Saltiel, 788 A.2d at 271; Shipley, 780 A.2d at 396; Skelton,
1996 WL 278343 at 7-8; Wicks, 470 A.2d at 90."* The court in
Wicks thus noted that “[lJiability under this theory attaches
only where the corporate officer is an actor who participates
in the wrongful acts. Therefore, corporate officers may be
held liable for misfeasance.” 470 A.2d at 90.

Courts have also relied on the “responsible corporate officer
doctrine.” E.g., Commissioner, Indiana Dep't. of Envtl. Mgmt. v.
RLG, Inc., 755 N.E.2d 556 (Ind. 2001). The Supreme Court of
Indiana recently applied this doctrine to hold a sole share-
holder and corporate officer liable for the violation of a state
environmental law because of his direct involvement in the
violation, and not because of his corporate positions alone. Id.
at 561. In doing so, the court, relied on two decisions of this
Court, U.S. v. Dotterweich, 320 U.S. 277 (1943), and U.S. v. Park,
421 U.S. 658 (1975), and articulated the doctrine to require
that:

(1) the individual must be in a position of responsibil-
ity which allows him to influence corporate policies
or activities; (2) there must be a nexus between the
individual’s position and the violation in question
such that the individual could have influenced the
corporate actions which constituted the violations;
and (3) the individual's actions or inactions facilitated the

"© See Johnson v. Harrigan-Peach Land Dev. Co., Inc., 489 P.2d 923, 928
(Wash. 1971); Fletcher Cyc. Corp., §1137 (Perm. ed.).

” See U.S. v. Hodges X-Ray, Inc., 759 F.2d 557, 560-61 (6th Cir. 1985);
Saltiel, 788 A.2d at 268; Rooney, 500 S.E.2d at 830; Matter of Dougherty,
482 N.W.2d at 488-90 (Minn. Ct. App. 1992).

26

RLG, 755 N.E.2d at 561 (emphasis added), quoting Matter of
Dougherty, 482 N.W.2d 485, 488-90 (Minn. Ct. App. 1992).

In both Dotterweich and Park, tis Court was willing to hold
defendants liable for violations of the Federal Food, Drug and
Cosmetic Act, 21 U.S.C. §§ 301-92 (1938) only where it could
be shown that they “had a responsible relation to the viola-
tion of the statute” and not merely because of their corporate
positions. Park, 421 U.S. at 673-74; Dotterweich, 320 U.S. at 284.

The Indiana court summarized its analysis under the doc-
trine by indicating that it was not the defendant's

status as officer, director, or sole shareholder of RLG that
is determinative under this theory. Each of these in itself
may be sufficiently removed from the relevant corporate
activities that the individual is not a ‘responsible corporate
officer’ despite high corporate office. Rather it is Roseman’s
(the defendant) direction of and involvement in operating
the landfill, his representation to IDEM that he was the
responsible party, and his actual role in the corporation's
activities that are critical.

RLG, 755 N.E.2d at 561.

Thus, both the participation theory and the responsible
corporate officer doctrine are available to provide substantial
protection for the public and to prevent injustice to victims.
Under neither doctrine, however, is a corporate officer or
owner liable simply because of his position. There must be a
degree of wrongful conduct by the corporate owner or officer.

Finally, it is unnecessary to ignore established corporate
law principles to protect victims of misconduct by corporate
agents in any context, including fair housing. First, the vic-
tims may seek remedies from the corporations themselves.
Dillon, 597 F.2d at 563; Northside, 605 F.2d at 1353-54. Under
agency principles, a corporation can be sued and held liable
for the torts committed by its agents. Hydrolevel, 456 U.S. at
556; Moline v. IRS, 319 U.S. 436, 440 (1943) (corporate em-

27

ployee is the agent of the corporation, not the agent of the
officers or owners personally). Second, when the corporation
has insufficient assets, traditional legal principles provide a
remedy against corporate owners and officers by allowing,
under appropriate facts, p'ercing of the corporate veil. Best-
foods, 524 U.S. at 62-63; Anderson, 321 U.S. at 362; Browning-
Ferris, 195 F.3d at 959.

In sum, the principle that corporate owners and officers are
not personally liable for the unlawful conduct of the corpora-
tion’s agents solely on the basis of their corporate positions is
well-established and consistently upheld by courts—even
with regard to other issues of high societal concern. It is
unnecessary to disregard this principle to provide a remedy
for victims of wrongful conduct, whether such conduct be
discriminatory actions or other types of misfeasance, and this
Court should declare that the Ninth Circuit erred when it
did so.

IV. An Owner or Officer of a Real Estate Brokerage Corpora-
tion May Be Personally Liable for the Fair Housing Vio-
lations of a Corporate Agent Only If the Owner or Officer
Participated in, or Was Otherwise Specifically Responsi-
ble for, the Agent’s Conduct.

The correct answer to the question before this Court—
whether owners and officers are strictly and personally liable
for the Fair Housing Act violations by agents of the firm—is
aptly illustrated by prior decisions of courts that have started
with the basic tenet of corporate law that “no individual may
be held vicariously liable for a company pattern or practice
simply because she is an officer or manager of the company.”
U.S. v. Lorantffy Care Cntr., 999 F.Supp. 1045 (N.D. Ohio 1998).
A number of courts have refused to hold corporate owners
and officers liable under the Fair Housing Act by virtue of
their status alone. Reed v. Michael Realty & Associates, Inc., 1994
WL 559225 9, 10 (N.D. Ill. October 7, 1994); Heights Community

28

Congress v. Hilltop Realty, Inc., 629 F. Supp. 1232 (N.D. Ohio
1983), aff'd in part, rev'd in part on other grounds, 774 F.2d 135
(6" Cir. 1985), cert. denied by Hilltop Realty, Inc. v. City of
Cleveland Heights, 475 U.S. 1019 (1986). Accord, Lorantffy, 999
F.Supp. at 1045; Tillman v. Wheaton-Haven Recreation Ass‘n,
Inc., 517 F.2d 1141 (4th Cir. 1975). These courts have opted
instead for a thorough analysis of the facts regarding the
relationship between the corporate owners or officers and the
discriminatory conduct. This is the proper result and that
which this Court should adopt.

For example, in Hilltop, the U.S. District Court, District of
Northern Ohio, declined to hold Vincent Aveni, the president,
chief operating officer and co-owner of Hilltop Realty, Inc.,
vicariously liable for the fair housing violations of Hilltop
agents, absent a showing “that he participated in their acts or
knew of and ratified their acts and statements.” 629 F. Supp.
at 1304. The court recognized that the agents had a contrac-
tual relationship with the corporation, not with Aveni, so only
the corporation was liable for the imputed actions of the
agents, noting specifically that Aveni’s “status as president
and chief operating officer in and of itself does not render him
personally liable for acts of the corporation or its agents or
employees.” Id. at 1303-04."

In Lorantffy, the court found that four individual defendants
“associated with” a nursing home owned by a not-for-profit
corporation (relationship not specified) were entitled to judg-
ment as a matter of law. 999 F.Supp. at 1040-41. The law, the
court said, provides that “no individual may be held vicari-
ously liable for a company pattern or practice simply because
she is an officer or manager of the company.” Id. at 1044. The

'® The court also conducted a thorough review of the facts and
concluded that Aveni had not participated in, knew of or ratified the
discriminatory conduct, and refused to hold him liable on that basis
as well. Hilltop, 629 F.Supp. at 1305.

29

court held that the individual defendants could not be held
liable for the discriminatory conduct, and that only the “com-
pany is liable for the acts and statements of its employees.” Id.
at 1045. The court also noted that the other courts in its circuit
that had addressed similar violations of the Fair Housing Act
had applied the “doctrine of vicarious liability to the com-
pany, not the company’s individual officers.” Id., citing
Hilltop, 629 F.Supp. at 1303; Marr v. Rife, 503 F.2d 735 (6th Cir.
1974). See also Reed v. Michael Realty & Associates, Inc., 1994 WL
559225, discussed infra, and Tillman, 517 F.2d at 1144.

In Tillman, the Fourth Circuit held that §§1981 and 1982 of
the Civil Rights Acts of 1866 and 1964 “should be interpreted
as neither enlarging nor diminishing the liability of directors
under general corporation law for tortious acts performed
nominally by the corporation.” Id. The court was thus un-
willing to hold the directors of Wheaton-Haven Recreation
Association personally liable for discrimination by the As-
sociation by virtue of their positions as directors alone. Id.
Instead, the court engaged in a comprehensive examination
of the directors’ actions and intentions and reasoned that
“directors become personally liable when they intentionally
cause a corporation to infringe the rights secured by §§ 1981
and 1982.” Id. at 1146.

In sum, since owners and officers of real estate brokerage
corporations may not be held liable for the Fair Housing Act
violations of corporate agents merely by virtue of their
positions, such individuals may be held liable only on the
basis of personal fault or culpability for the discriminatory
conduct. Such a fault-based standard requires a showing that
the owner or officer personally participated in the discrimina-
tory acts, or that, in addition to serving as owner or officer,
the individual was actually engaged in conduct that led to the
Fair Housing Act violations. In those instances, liability may
be imposed in accordance with traditional corporate law prin-
ciples.

30

CONCLUSION

For the foregoing reasons, NAR respectfully urges this
Court to hold that owners and officers of real estate brokerage
corporations are not personally and absolutely liable for an
employee's or agent's violation of the Fair Housing Act. This
Court should reverse the Ninth Circuit and affirm the District
Court’s ruling that owners and officers of real estate corpora-
tions are not, as a matter of law, liable for the Fair Housing
Act violations of the firm’s agents. Personal liability of own-
ers and officers must be grounded in their personal participa-
tion in the allegedly unlawful conduct, or their personal
involvement in, or responsibility for, the real estate activities
out of which the alleged violation arose.

DATED: August 2, 2002
Respectfully submitted,

LAURENE K. JANIK
Counsel of Record

General Counsel

RALPH W. HOLMEN
Associate General Counsel
NAN ROYTBERG

Associate Counsel

National Association of REALTORS®
430 North Michigan Avenue
Chicago, Illinois 60611-4087
(312) 329-8375

Attorneys for Amicus Curiae
National Association of REALTORS®

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0540%3A14. Public record. Not legal advice.