Appendix — Ernst v. Leadership Council for Metropolitan Open Communities

—

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 91-2491 & 91-8861

CITY OF CHICAGO, a municipal corporation,

LEADERSHIP COUNCIL FOR METROPOLITAN OPEN

COMMUNITEES, a not-for-profit Illinois corporation, GLENN

BREWER, KAREN HASKINS-BREWER, VICTOR CROWN,

MELVIN DILLARD, QUEEN FRAZIER, SANDI GAFFEN,

WILLIAM MCCARTHY, and SHARON SWAN,

Plaintiffs-Appellees,

MATCHMAKER REAL ESTATE SALES CENTER,

INCORPORATED, an Illinois corporation,

DANIEL KING, SARA MUNOZ, CAROL SCARPINITI, ALAN M.

WALKER, and ERWIN ERNST,

Defendants-Appellants.

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 88 C 9695—Joan Humphrey Lefkow, Magistrate Judge

ARGUED SEPTEMBER 15, 1992—-DECIDED DECEMBER 10, 1992

Before Bauer, Chief Judge, Flaum, Circuit Judge, and Wood,

Jr., Senior Circuit Judge.

—,

Nos. 91-2491 & 91-3861

BAvuER, Chief Judge. Plaintiffs, consisting of the City

of Chicago (the “City’”), the Leadership Council for Metro-

politan Open Communities (the “Leadership Council”), and

individual “testers,” sued Matchmaker Real Estate Sales

Center, Inc. (“Matchmaker”), its sole shareholder Erwin

Ernst, and its sales agents, Daniel King, Sara Munoz,

Carol Scarpiniti, and Alan Walker. Plaintiffs sought re-

covery for violations of the Civil Rights Act of 1866, 42

U.S.C. § 1982 (“Section 1982”),' and the 1968 Fair Hous-

ing Act, 42 U.S.C. §§ 3604 (a), (b), and (d) (“Section 3604”).?

Pursuant to 28 U.S.C. § 636(c), the parties consented to

trial before a magistrate judge. After a bench trial, the

magistrate judge found the defendants liable. She awarded

the plaintiffs compensatory damages, punitive damages,

and attorneys’ fees. For the reasons set forth below, we

affirm in part and reverse in part.

1 Section 1982 states: “All citizens of the United States shall have

the same right, in every State and Territory, as is enjoyed by

white citizens thereof to inherit, purchase, lease, sell, hold, and

convey real and personal property.”

2 Section 3604 states, in pertinent part:

{It shall be unlawful—

(a) To refuse to sell or rent after the making of a bona fide

offer, or to refuse to negotiate for the sale or rental of, or

otherwise make unavailable or deny, a dwelling to any person

because of race, color, religion, sex, familial status, or national

origin.

(b) To discriminate against any person in terms, conditions,

or privileges of sale or rental of a ee or in the provi-

sion of services or facilities in connection therewith, because

of race, color, religion, sex, familial status or national origin.

s s&s &

(d) To represent to any person because of race, color, reli-

gion, sex, handicap, familial status, or national origin that any

dwelling is not available for on sale, or rental when

such dwelling is in fact so available.

3a—

Nos. 91-2491 & 91-3861

I. FACTS

In 1987, the Leadership Council suspected that the de-

fendants were engaging in the illegal practice of racial

steering.? The Leadership Council therefore conducted a

series of tests of defendants’ activities. Pairs of black and

white “testers”—individuals who posed as homeseekers—

went to Matchmaker and inquired about buying homes

on the southwest side of Chicago or nearby suburbs.‘ The

Leadership Council closely matched the black and white

teams for financial qualifications (including income and

possible down payments) and housing needs (such as fam-

ily size and preferences). Beginning in July of 1987, the

Leadership Council, through its testers, began the first

of five tests.

A. Test One

In July of 1987, Rosalinda Castillo, a white tester, called

Matchmaker and spoke to defendant Daniel King. She re-

quested information about houses for sale priced in the

70,000 range. King ascertained Castillo’s family size and

available downpayment ($10,000). Tr. at 245-46. On July

25. 1987, Castillo met King at the Matchmaker office.

3 Racial steering 1s

a ‘practice by which real estate brokers and agents preserve

and encourage patterns of racial segregation in available hous-

ing by steering members of racial and ethnic groups to build-

ings occupied primarily by members of such racial and ethnic

groups and away from buildings and neighborhoods inhabited

primarily by members of other races or groups.’

Havens Realty Corp. v. Coleman, 455 U.S. 363, 366 n.1 (1982)

(quoting plaintiffs’ complaint).

4 Certain areas of southwest Chicago had a black population of

less than ten percent. Other areas, which we categorize as racially

mixed, had a black population between 10 and 50 percent. Finally,

other areas had black populations in excess of 50 percent. We will

identify these areas as necessary throughout our discussion of the

facts.

———————

—

Nos. 91-2491 & 91-3861

They discussed financing and possible mortgage lenders.

Castillo and her white co-tester, Kenneth Govas, told King

their combined income was $39,000. King suggested that

they look in the West Lawn and Garfield Ridge areas.

Tr. at 247. Both are white neighborhoods. King had a

Multiple Listing Service (“MLS”) list of many homes with

prices up to $75,000 which provided addresses, neighbor-

hoods, and other general information.

King crossed out two houses on the list. Both houses

were in areas that had virtually a 100% black population.

King advised the testers that if they saw a house in West

Lawn, West Elsdon, or Garfield Ridge (all white areas),

they should move quickly because those houses generally

sell fast, unlike the homes in the Gage Park and Chicago

Lawn areas along Western Avenue (which were either

racially mixed or black areas). King also gave the white

testers a detailed computer printout list of six houses in

the West Lawn and West Elsdon areas.

Also in July of 1987, Deborah Bennett, a black tester,

called Matchmaker’s office and spoke with King. Tr. at

343. Bennett requested information about houses for sale

in the $70,000 price range. Bennett informed King that

her family incorne was $51,000 and that their available

down payment was $12,000. Tr. at 344. On July 25, 1987,

Bennett and her black co-tester, Maurice Bennett, met

with King. King told them they should have no problem

obtaining financing, but he made no specific suggestions

about obtaining financing as he did with the white testers.

King showed the black testers a picture of a house avail-

able for $39,900 in a racially mixed area. Tr. at 346. King

did this despite the black testers’ specific request for

houses in the $70,000 price range. King also gave the

black testers a listing of about 40 houses in Gage Park

and Chicago Lawn (both racially mixed or black areas).

The houses on the list ranged in price from $45,900 to

$52,000, well below the requested $70,000 price range. Tr.

at 571.

ae Se

Nos. 91-2491 & 91-3861

B. Test Two

In August of 1987, Rita Ernst, a white tester, called

Matchmaker and — to Alan Walker. She uested

information about houses for sale priced in the ,000

to $70,000 range, with easy access to and from Peoria.

Ms. Ernst informed Walker that she and her family had

moved from Georgia and had rented a house in Hazel-

crest, a Chicago suburb. Tr. at 225. Ernst stated that her

family’s income was $42,000 and that their available down

ay was $9,000. Tr. at 224. On August 13, 1987,

alker called Rita Ernst and told her about five houses

he had selected. All of the houses were located in white

areas west of Kedzie Avenue.® On August 15, 1987, Walker

met Rita Ernst and her white co-tester, Joseph Ernst,

to inspect the houses he had selected. After Rita Ernst

asked Walker about the absence of “For Sale” signs in

front of the houses, he responded that “these were nice

neighborhoods and that they want to keep the neighbor-

hoods nice.” Tr. at 229. He also said that the signs were

missing in order to discourage “certain parties [who] want

to come in.” Tr. at 1009.

In March of 1988, the Ernsts met Walker again and

viewed two additional homes he had selected. Tr. at 371-

72. Both houses were in their price range and located in

white areas west of Kedzie. Als , Walker told the white

testers that he had a third house in Gage Park that was

“nice” but that he would not show it te them because it

was “east of Kedzie” (in a black area) and they “wouldn't

want to live there.” Tr. at 376-78.

Also in August of 1987, Lynda Hale, a black tester,

called Matchmaker and spoke to King. Hale requested in-

formation about homes in the $70,000 to $75,000 range

in southern Gage Park and Chicago Lawn between 55th

and 71st Streets west of Western Avenue. She also told

5 All peewee apparently treated Kedzie Avenue as a racial di-

viding line. West of Kedzie was considered a white area, while

east of Kedzie was considered a black area.

a an

Nos. 91-2491 & 91-3861

King that she preferred a home near Midway Airport be-

cause her husband travelled from there often. Tr. at 387-

88. When Ms. Hale and her black co-tester, James Hill,

arrived for their appointment on August 16, 1987, King

had already selected four homes south of 71st Street, three

of which were east of Western Avenue. All of the homes

were in racially mixed areas and priced well below the

black testers’ requested price ranges. When the black

testers renewed their request to see homes which were

located north of 71st Street and west of Western, King

did not shift his focus to the west. Instead, he selected

two homes located near Western Avenue, priced between

$57,000 and $57,999, more than $12,000 below the low end

of the testers’ price range and located in racially mixed

areas. Tr. at 391. At the time the black testers visited

Matchmaker, homes were available in the requested $70,000

to $75,000 price range, as the white testers in Test One

had been given listings for West Lawn and West Elsdon

(both white areas) in that price less than two weeks

earlier. Also, the West Lawn and West Elsdon areas are

significantly closer to Midway Airport.

C. Test Three

In late October of 1987, Elvia Fernandez, a white tester,

telephoned Matchmaker’s office and asked about a house

located in West Lawn (a white area) that had been adver-

tised for sale. She spoke to Alan Walker and told him

she was married with one child and had a household in-

come of $40,000. Tr. at 300-01. He provided her with in-

formation about the advertised house and also suggested

that Fernandez drive by another house in the area that

was not yet advertised. On October 31, 1987, Fernandez

and her white co-tester, Manolo Castillo, met with Walker

and told him that they wanted to inspect the unadvertised

house. Walker asked the white testers about their pref-

erence in housing, their price range ($60,000 to $70,000),

and down payment. Tr. at 301. Walker also set up an ap-

pointment for the white testers to inspect the house. He

Nos. 91-2491 & 91-3861

showed the white testers the house and advised them to

eall him as soon as they made a decision.

On the same day the white testers called, Theresa Prim,

a black tester, telephoned Matchmaker and requested in-

formation about homes advertised in the same advertise-

ment the white testers had called about. Prim spoke with

Matchmaker agent Sara Munoz. Tr. at 990. The first house

Prim asked about was in West Elsdon (a white area). The

second house was in West Lawn (also a white area). Munoz

told Prim that the price of the first home was $82,500,

and the price of the second house was $75,000. Prim in-

formed Munoz that her price range was $60,000, but also

said she wanted to see both houses. Munoz told Prim that

Prim should make an offer and see if the owners would

negotiate. When Prim asked if Matchmaker had any other

listings, Munoz suggested two homes priced at $51,000 and

$59,900. The homes were located in Gage Park and Chi-

cago Lawn (both black areas). Munoz never asked about

Prim’s income or possible down payment. Tr. at 991.

Later, Munoz called Prim and informed black tester

Gregory Lawrence (Prim’s husband) that she could not

find anything else. Tr. at 476. Munoz made this statement

the same day the white testers received a computer list-

ing of 41 houses in response to their request to see houses

in the same price range as the black testers. Tr. at 479-81.

A few days later, Munoz told Prim that she had been un-

able to contact any of the owners of the four houses. Prim

requested that Munoz arrange viewing appointments for

the four houses during that week, preferably on Satur-

day, November 7. On Friday, November 6, Munoz made

two appointments for the next day at the two homes in

Gage Park and Chicago Lawn. Both were priced signifi-

cantly lower than the homes Prim originally called about.

Munoz showed the black testers the two houses, but she

made no effort to sell the houses and provided little in-

formation to the black testers. See Tr. at 479-81. Munoz

did not request any information about their employment

or financial situations, and did not offer any suggestions

—

Nos. 91-2491 & 91-3861

as to how they could obtain financing. After showing the

two houses, Munoz offered to go back to her office to see

if she had any more listings. The black testers declined

to go because they felt that Munoz was not interested

in dealing with them. Tr. at 481.

D. Test Four

In early June of 1988, Sharon Swan, a white tester,

called Matchmaker and spoke to King. She requested in-

formation about houses for sale priced in the $70,000 to

$80,000 range. On June 4, 1988, Swan met with King at

the Matchmaker office. King asked about the employment

of Swan and her white co-tester Victor Crown. Although

King did not ask the white testers about their income,

he advised them that they would have no trouble obtain-

ing a mortgage. Prior to their arrival, King scheduled two

appointments for the white testers to look at homes in the

white areas of West Lawn and West Elsdon. The prop-

erties were priced at $86,900 and $84,900. King also pro-

vided Swan with a detailed computer listing of 19 houses

ranging in price from $72,900 to $84,900 located in West

Lawn, Scottsdale, and Mount Greenwood—all white areas

that King described as “good neighborhoods” with houses

that had ‘“‘good resale value.” Tr. at 200, 637-39. King

made no such comments to any of the black testers with

whom he dealt in Tests One and Two.

Also in early June of 1988, a day after the white testers

called, Queen Frazier, a black tester, called Matchmaker’s

offices. The magistrate judge found that Frazier’s accent,

as heard at trial, as well as her name, probably identified

her as a black person. Op. of Nov. 7, 1990 at 18. Frazier

spoke to Munoz and requested information about houses

in the $65,000 to $70,000 range. She later told Munoz that

she needed to be near a bus line. Tr. at 270-71. Munoz

gave Frazier a list of three houses located in Chicago

Lawn, east of Kedzie, in a racially mixed area. The houses

were priced at $49,000, $64,900, and $69,000. Tr. at 271-72.

Munoz made an appointment for June 4, 1988 to see Fra-

Nos. 91-2491 & 91-3861

zier and her black co-tester, Melvin Dillard, at the Match-

maker office. This was the same day as the white testers’

appointment.

At the June 4, 1988 meeting, Munoz provided the black

testers with a computer printout of 141 houses, all in Chi-

Lawn. There were no houses above the black testers’

price range on the printout. Sixteen of the houses listed

were in the black testers’ price range of $65,000 to $70,000,

while 125 homes were priced below $65,000. See Tr. at

293-94, 739-40. White tester Swan, who was in the Match-

maker offices at the same time, received a completely dif-

ferent listing of houses available—all of which were in

white areas.

From the original list of three houses Munoz had pro-

vided over the telephone, Frazier told Munoz that she

wanted to inspect the $69,000 house. Munoz informed the

black testers that the house had no garage, although they

had not requested a house with a garage. Tr. at 272-73.

The black testers then asked to see the $64,900 house,

which was also located in Chicago Lawn, east of Kedzie.

Munoz told the black testers that she had been unable

to contact the homeowners. Munoz then requested the

black testers’ work telephone number, in case more list-

ings became available. Tr. at 275.

E. Test Five

Shortly after Test 4, but still during June of 1988,

William McCarthy, a white tester, called r’s of-

fice. McCarthy ge to King about houses for sale in the

$80,000 to $90,000 price range. McCarthy told King that

he and his wife were from the north side of Chicago and

knew nothing about the southwest side. Tr. at 159. King

asked about McCarthy’s finances and employment and

scheduled an appointment for June 13, 1988. At the meet-

ing, Sara Munoz initially met with the testers and pro-

duced a general computer list of approximately 200 houses

in white suburban areas for McCarthy and his white co-

tester, Sandi Gaffen. When it appeared that King would

—10a—

Nos. 91-2491 & 91-3861

not keep the appointment with the white testers, Carol

Scarpiniti agreed to meet with them.

Scarpiniti asked the white testers to close the door and,

after they had done this, told them that she could help

them in ways that sales manager Robert Ernst could not.

—— said she knew she was “not supposed to steer,”

but use the white testers were from the north side,

she would give them “boundaries” to tell them “where

not to live.” Pl.’s Ex. 17. She then told the white testers

~d — as far west of Kedzie as you possibly can.”’

.a ;

Unlike the black testers of Tests Two and Four, the

white testers were not given any listings of houses in Chi-

cago Lawn and Gage Park (both black areas). Scarpiniti

claimed that she did not give any Chicago Lawn listings

to the white testers because they had a much higher in-

come ($51,000) than the vast majority of Matchmaker’s

customers. The white testers’ income in Test Five, how-

ever, was the same as the black testers’ income in Test

One, yet the black testers were encouraged to see houses

in Chicago Lawn and Gage Park that were $20,000 to

$30,000 below their price range.

Scarpiniti also admitted that the white testers had ex-

pressed an interest in seeing bungalows and that “(t]he

general population for the b ows is in Chicago Lawn

and Gage Park.” Tr. at 800. Both are racially mixed or

black areas. Matchmaker had numerous listings for bun-

galows in Gage Park and Chicago Lawn, but Scarpiniti

did not show the white testers any bungalows in either

area. By comparison, an agent of Matchmaker offered

bungalows in Chicago Lawn and Gage Park to black tester

Bennett in Test One even though these bungalows were

far below her price range.* Scarpiniti took McCarthy’s

* We note also a portion of a report, admitted as evidence, that

McCarthy wrote while Scarpiniti talked:

(Footnote continued on following page)

Nos. 91-2491 & 91-3861

telephone number and encouraged the white testers to

keep in touch.

On the same day that McCarthy called Matchmaker,

Glenn Brewer, a black tester, called the Matchmaker of-

fice and spoke to Sara Munoz. Brewer told Munoz that

he was married, had one child, and had a household in-

come of $60,000. He asked about houses priced in the

$75,500 to $90,000 range for sale north of 95th Street and

informed her that he could make a down payment of up

to $15,000. Tr. at 319-20. Munoz mailed Brewer a general

listing of 26 houses in the white suburbs of Evergreen

Park and Oak Lawn. About a week later, Brewer called

Munoz with the addresses of four houses which he and

his black co-tester, Karen Haskins-Brewer, had selected

from the listings and wanted to inspect. Tr. at 322. Munoz

then asked about Brewer’s finances, income, and possible

down payment. Munoz calculated how expensive a house

Brewer could afford and offered to show him a break-

down of monthly payments. Five days later, Munoz called

Brewer to inform him that she had secured an appoint-

ment for only one of the four houses that Brewer had

suggested. That house borders on the racially mixed

Wrightwood section of Ashburn. The Brewers arrived so

late for their appointment that Munoz canceled and left.

Munoz subsequently reported that two of the four homes

the Brewers had selected were sold. She could not get

an appointment for one of the houses, but she had selected

another home for them to view. That house was located

in Wrightwood near the house that the Brewers had se-

® continued

Ms. Scarpiniti mentioned that ‘she knew she was breaking

every law of the real estate industry but that she wants us

to know where to live because we’re from the northside.’ She

also went on to state that ‘east of Kedzie gets bad and even

worse toward California’ but that ‘she never said that.’ She

defended herself by saying, ‘when I sell a home I want peo-

ple to know exactly where they are living.’

Pl.’s Ex. 17.

=)

Nos. 91-2491 & 91-3861

lected. On June 23, 1988, the black testers viewed the

two houses. Afterwards, Munoz encouraged them to con-

tinue to look for homes with her.

F. Erwin Ernst

Erwin Ernst is Matchmaker’s sole shareholder and chief

executive officer. He exercises day-to-day control over

Matchmaker and its real estate agents. Tr. at 414. Ernst

Is a signator to the “Voluntary Affirmative Marketing

Agreement” (“VAMA”), an organization sponsored by the

National Association of Realtors in cooperation with the

United States Department of Housing and Urban Devel-

opment. VAMA commits the signators to full compliance

with fair housing laws, including the avoidance of racial

steering. Ernst has actively worked with other Chicago

brokers to obtain their commitment to it. He has also

vigorously promoted the Metro Listing Service, which in-

tegrates a variety of multiple listing services so that all

cig will be available to homeseekers of every race.

See Tr. at 845-49. Ernst and Matchmaker are members

of the Metro Listing Service.

Ernst has established a number of written office policies

and procedures for Matchmaker. See Tr. at 884-86. One

of those policies is the requirement that all Matchmaker

agents abide by VAMA and all fair housing laws.’ All of

the individual defendants testified that they were aware

of this policy. In pursuit of this policy, Ernst required

7 Another of Matchmaker’s policies prohibits racial steering. Ac-

cording to Erwin Ernst’s testimony at trial, this policy states:

All sales he ge should be aware of the tendency to steer un-

intentionally when prospects do not specifically tell the sales

nt where they want to view homes, the location is open.

in these instances non-minority prospects are only shown

non-integrated areas and minorities are not shown non-inte-

grated areas, it could be concluded that steering is occurring.

Tr. at 940.

ee

—13a—

Nos. 91-2491 & 91-3861

all of his agents to attend fair housing training courses

sponsored by local real estate boards.®

The magistrate judge found that Ernst was unaware at

or near the time the events occurred of any of the tests

performed by the Leadership Council. The magistrate judge

also found that he was unaware of any pattern of con-

duct that those tests suggest. Op. of Nov. 7, 1990 at 20.

G. Decision by the Magistrate Judge

After a bench trial, the magistrate judge ruled in favor

of the plaintiffs and awarded them compensatory damages,

punitive damages, and attorneys’ fees. The magistrate judge

found that agents King, Scarpiniti, Munoz, and Walker

violated the Civil Rights Act of 1866 (Section 1982) and

the Fair Housing Act (Sections 3604(a), (b), and (d)). The

magistrate judge also held Matchmaker and Ernst vicari-

ously liable for the discriminatory actions of the agents.

The magistrate judge found that all plaintiffs—the Leader-

ship Council, the plaintiff testers, and the City—suffered

injuries as a result of defendants’ actions.

Specifically, the magistrate judge ordered the defendants

to pay each individual tester $1,000 in punitive damages

for a total of $8,000. Of this amount, King, Munoz, Scar-

piniti, and Walker were liable for $1,500 each, and Ernst.

and Matchmaker were liable for the remaining amount.

The magistrate judge ordered the defendants to pay the

Leadership Council a total of $16,500 as compensatory

damages. The magistrate judge also awarded the Leader-

ship Council $16,500 for frustration of its purpose and

another $25,000 in punitive damages. King, Munoz, Scar-

piniti, and Walker were each liable for $2,500 of the

8 Agent Danie! King, for example, testified that the office policy

was to “{t}reat everybody the same.” Tr. at 531. King also testified

that he attended two fair housing seminars, one run by the South-

west Suburban Board of Realtors and the other by the Chicago

Real Estate Board. Tr. at 532.

—l4a—

Nos. 91-2491 & 91-3861

punitive damages. The magistrate judge ordered Match-

maker and Ernst to pay the remaining amount. Finally,

the City received $25,000 in punitive damages of which

King, Munoz, Scarpiniti, and Walker were each liable for

$2,500. Again, the magistrate judge ordered Matchmaker

and Ernst to pay the remaining amount. J. Order of June

6, 1991, modified, June 18, 1991, at 5-6. Pursuant to the

Fair Housing Act, 42 U.S.C. § 3613(cX2), the magistrate

judge held all defendants jointly and severally liable for

plaintiffs’ attorneys’ fees and expenses. Mem. Decision of

Nov. 18, 1991 at 11.9

II. ANALYSIS

A. Standing

Defendants argue on appeal that none of the plaintiffs

were injured and therefore do not have standing. Appel-

lants’ Brief at 34-38; Appellants’ Reply Brief at 15-18. We

disagree and conclude that all the plaintiffs—the City, the

Leadership Council, and the testers—have standing to sue.

Article III of the United States Constitution requires

that federal courts decide only cases or controversies. U.S.

Const. art. ITI, § 2, cl. 1. In order to satisfy this require-

ment, a party must show that “he personally has suffered

some actual or threatened injury as a result of the puta-

tively illegal conduct of the defendant.’’ Gladstone, Real-

tors v. Village of Bellwood, 441 U.S. 91, 99 (1979).

The City in this case has standing. William Grander-

son, director of fair housing for the City, testified that

racial steering leads to resegregation, the process by

which a neighborhood which is predominantly white rapid-

ly becomes populated by racial or ethnic minorities. Tr.

® The magistrate judge awarded the Leadership Council and the

individual plaintiff testers fees and expenses in the amount of

$135,718.59. The magistrate judge also awarded the City costs and

fees of $25,565.25 and issued injunctive relief against defendants.

—l5Sa—

Nos. 91-2491 & 91-3861

at 428. People who have lived in the neighborhoods be-

come panicked and lose interest in the community. Tr.

at 431. This causes a destabilization of the community and

a corresponding increased burden on the City in the form

of increased crime and an erosion of the tax base. Tr. at

428. Further, the City’s fair housing agency has to use

its scarce resources to ensure eumpitanen with the fair

housing laws (including its own fair housing ordinances).

The City’s fair housing agency cannot perform its routine

services—human relations training, community workshops,

etc.—because it has to commit resources against those

engaged in racial steering. Tr. at 4382.

These injuries parallel those alluded to in Gladstone, also

a racial steering case. There, the Supreme Court noted

the adverse effects of racial steering on a city or town.

441 U.S. at 110-11. Such harms, the Court observed, in-

clude the reduction in the number of buyers in a partic-

ular community, with a co nding decrease in proper-

ty values. Jd. at 110. “A significant reduction in property

values directly injures a municipality by diminishing its

tax base, thus threatening its ability to bear the costs

of local government and to provide services.” Id. at 110-

11. Noting the importance to a community of romoting

stable, integrated housing, the Court indicated that if a

party’s sales practices begin to rob a city or town “of its

racial balance and stability, the [city or town] has stand-

ing to challenge the legality of that conduct.” 441 US.

at 111.

The injuries suffered by the City in this case are pre-

cisely those described in Gladstone. The City has shown

that it has been injured by the defendants’ illegal racial

steering. The City, like the Village of Bellwood, Iilinois

in Gladstone, has standing.

The Leadership Council also has standing. “[TJhe only

injury which need be shown to confer standing on a fair-

housing agency is deflection of the agency’s time and

money from counseling to legal efforts directed against

discrimination.” Village of Bellwood v. Dwivedi, 895 F.2d

—-16a—

Nos. 91-2491 & 91-3861

1521, 1526 (7th Cir. 1990). See also Havens Realty Corp.

v. Coleman, 455 U.S. 363, 379 (1982); South-Suburban

Housing Center v. Board of Realtors, 935 F.2d 868, 878-80

(7th Cir. 1991), cert. denied, 112 S. Ct. 971 (1992). This

standard is clearly satisfied in this case. The Leadership

Council is a fair-housing agency. By conducting the inves-

tigation into Matchmaker’s activities, the Leadership

Council deflected its time and money from counseling to

legal efforts directed against discrimination. The Leader-

ship Council therefore has standing to sue.

Defendants’ challenge to the testers’ standing is equal-

ly without merit. We note that by enacting the Fair Hous

ing Act, Congress “conferred on all ‘persons’ a legal right

to truthful information about available housing.” Havens

Realty, 455 U.S. at 373. “A tester who has been the ob-

i of a misrepresentation made unlawful under § 804(d)

Section 3604(d)] has suffered injury in precisely the form

the statute was intended to guard against, and therefore

has standing to maintain a claim for damages under the

Act’s provisions.” Jd. at 373. “{A] tester to whom a real

estate agent makes a misrepresentation forbidden by

3604(d) has standing to complain about the misrepresen-

tation, because the statute creates a right to be free from

such misrepresentations.” Dwivedi, 895 F.2d at 1526.

Here, the testers were treated in a “racially discrimina-

tory fashion, even tho they sustained no harm beyond

the discrimination itself.”” Jd. at 1527. We conclude that

the testers have standing.?°

10 As the Supreme Court pointed out in Havens Realty, Section

3604(d), unlike Section 3604(a), does not require that testers make

a bona fide offer to rent or purchase. Havens Realty, 455 U.S.

at 374.

-l7a

Nos. 91-2491 & 91-3861

B. Liability and Compensatory Damages

Defendants next challenge the magistrate judge’s award

of compensatory damages.'! Specifically, they allege that

the magistrate judge erred by finding all the defendants

liable.

Compensatory damages are an appropriate remedy un-

der both Seetions 1982 and 3604. Given the facts of this

case, the magistrate judge properly held all the defen-

dants liable for compensatory damages. The individual

agent defendants—King, Munoz, Scarpiniti, and Walker—

all engaged in racial steering. The facts demonstrate that

the four agents treated the black testers worse than the

white testers. The magistrate judge’s conclusion that this

different treatment was because of race is amply sup-

ported by the record. Matchmaker agents King, Munoz,

Scarpiniti, and Walker consistently steered white testers

toward white areas and black testers toward black areas.

The four agents also denied the black testers information

about housing that they readily gave to similarly situated

white testers. We agree with the magistrate judge’s con-

clusion that the individual agents violated the testers

rights under Sections 1982 and 3604. See Dwivedi, 895

F.2d at 1533 (holding, inter alia, that real estate brokers

who treat customers differently from one another because

of their race violate the Fair Housing Act); Tolliver v.

Amici, 800 F.2d 149 (7th Cir. 1986) (award of compensa-

tory and punitive damages affirmed where tester treated

differently because of race).

We also agree with the magistrate judge’s decision to

hold Matchmaker and Ernst vicariously liable for the

unlawful behavior of King, Munoz, Scarpiniti, and Walker.

We first consider Matchmaker’s liability for compensatory

damages. Then we examine Ernst’s personal liability.

11 Additionally, defendants raise several challenges to the factual

findings of the magistrate judge. Upon our review of the record,

we find that these claims are meritless and do not warrant discus-

sion.

=

Nos. 91-2491 & 91-3861

The doctrine of respondeat superior “enables the im-

position of liability on a principal for the tortious acts of

his agent and, in the more common case, on the master

for the wrongful acts of his servant.”’ General Building

Contractors Ass’n v. Pennsylvania, 458 U.S. 375, 392

(1982). ““As a matter of well-settled agency law, a prin-

cipal may be held liable for the discriminatory acts of his

agent if such acts are within the scope of the agent’s ap-

parent authority, even if the principal neither authorized

nor ratified the acts.’’ Coates v. Bechtel, 811 F.2d 1045,

1051 (7th Cir. 1987).!? This principle applies to suits brought

under Sections 1982 and 3604. Jd. See also, e.g., Hamilton

v. Svatik, 779 F.2d 383, 388 (7th Cir. 1985); Phiffer v.

Proud Parrot Motor Hotel, Inc., 648 F.2d 548, 552 (9th

Cir. 1980); Moore v. Townsend, 525 F.2d 482, 485 (7th Cir.

1975). A principal cannot free itself of liability by dele-

gating to an agent the duty not to discriminate. Green

v. Century 21, 740 F.2d 460, 465 (6th Cir. 1984).

Federal courts have routinely applied these principles in

fair housing cases and held principals liable for the dis-

criminatory acts of their agents. For example, in Walker

v. Crigler, No. 91-1542, 1992 WL 251459 (4th Cir. Oct.

5, 1992), the plaintiff brought suit under the Fair Housing

Act against the owner of rental property and his agent, a

professional realtor. The plaintiff, a single mother, alleged

that the realtor had discriminated against her because of

her sex. /d. at *1. A jury found the realtor liable, but

ruled in favor of the owner. On appeal, the Fourth Circuit

held that the evidence was sufficient ‘‘to support the con-

12 We note that the discriminatory acts of the four Matchmaker

agents in this case were within the scope of their employment

even though Matchmaker’s policy prohibited such discrimination.

See Yates v. Avco Corp., 819 F.2d 630, 636 (6th Cir. 1987) (em-

ployer liable for employee’s actions committed within the scope

of employment where employee engaged in sexual harassment that

was forbidden by employer’s policy). See also Restatement (Sec-

ond) of Agency § 230 (1958) (“An act, although forbidden, or done

in a forbidden manner, may be within the scope of employment.”’’).

Nos. 91-2491 & 91-3861

clusion that [the owner] specifically intended that [the real-

tor] not discriminate.” Jd. at *4 (emphasis added). Given

this finding, the court noted that “(t]he central question

to be decided . . . is which innocent party, the owner

whose agent acted contrary to instruction, or the poten-

tial renter who felt the direct harm of the agent's dis-

criminatory failure to offer the residence for rent, will

ultimately bear the burden of the harm caused.” Jd. The

court concluded that the Fair Housing Act’s ‘overriding

societal priority” requires that “the one innocent party

with the power to control the acts of the agent, the owner

of the property or other responsible superior, must act to

compensate the injured party for the harm, and to insure

that similar harm will not occur in the future.” Jd. The

court therefore reversed and ordered the district court

to enter a judgment of compensatory damages against the

owner. /d. at *5.

Here, Matchmaker (through Ernst), like the owner in

Walker, specifically instructed its agents not to discrimi-

nate. As in Walker, the question we must decide is who

among the innocent parties—the plaintiffs or Matchmaker

and Ernst—should bear the responsibility for the discrim-

inatory acts of Matchmaker’s agents. We agree with the

Fourth Circuit that “we must hold those who benefit from

the sale and rental of property to the public to the specific

mandates of anti-discrimination law if the goal of equal

housing opportunity is to be reached.” Id. at *4.

It is not enough, as defendants’ argue, that Match-

maker’s sales agents were described in their employment

agreement as independent contractors. The magistrate

judge found, and we agree, that the relationship between

Matchmaker and its four agents—King, Munoz, Scarpiniti,

and Walker—was an agency relationship. See Heights

Community Congress v. Hilltop Realty, Inc., 774 F.2d

135 (6th Cir.), cert. denied, 475 U.S. 1019 (1985).

We note that whether an agency relationship exists for

purposes of the Fair Housing Act is a question to be de-

termined by federal law. Northside Realty Assoc., Inc.

—20a—

Nos. 91-2491 & 91-3861

v. United States, 605 F.cd 1348, 1354 n.13 (5th Cir. 1979).

In Hilltop Realty, as here, the defendant realty corpora-

tion argued that its agents were independent contractors

over whom it had no control. The Sixth Circuit disagreed

and pointed out that “{tJhis argument has consistently

been rejected in Fair Housing cases.” Jd. at 141 (citing

Green, 740 F.2d at 465 and Northside Realty Assoc., 605

F.2d at 1353-54). The Fifth Circuit reached .. similar con-

clusion in Northside Realty. There, the court held that,

despite an employment agreement that purportedly estab-

lished an independent contractor relationship, the realty

corporation retained and exercised “full authority to hire,

fire, or discipline its sales people.”’ Jd. at 1353 n.11. The

district court had found that the realty corporation di-

rected the activities of its sales agents and that the sales

agents had to sell exclusively through the realty corpora-

tion. Jd. at 1353-54. Of the defendant’s claim that the em-

ployment agreement established an independent contractor

relationship, the Fifth Circuit observed that such “‘inde-

pendent contractor” agreements are “standard in the real

estate trade,” and concluded that, in fact, an agency rela-

tionship existed between the realty corporation and its

agents. Jd. at 1353-54 & n.11.

Similarly, Matchmaker and its agents were parties to

an employment agreement that purportedly established

an independent contractor relationship. In its attempt to

show that an independent contractor relationship existed,

however, Matchmaker is no more successful than the de-

fendant in Northside Realty. The agreement does not de-

feat the agency relationship enjoyed by Matchmaker and

its agents. All agents were bound to act in accordance

with various Matchmaker policies. Significantly, the four

agents worked in Matchmaker’s offices under Ernst’s day-

to-day control and supervision. Matchmaker is, according

to Ernst’s testimony, ‘‘a very small company” where there

is “a lot of one-on-one training.” Tr. at 886. Ernst also

reported of Matchmaker and its clients that “{wle have

a very small office here. We meet people and know who

they are.” Tr. at 950. Additionally, VAMA—which Ernst

Nos. 91-2491 & 91-3861

signed and thereby committed Matchmaker to—required

Ernst to make sure that the Matchmaker office performed

according to that agreement and thereby conform to the

fair housing laws. Tr. at 970. Matchmaker cannot avoid

liability by arguing that it had no control over the acts

of its agents.’

Our decision in Hamilton v. Svatik, 779 F.2d 383 (7th

Cir. 1985), further illustrates that the magistrate judge

correctly held Matchmaker vicariously liable for compen-

satory damages. In Hamilton, a black woman sued defen-

dants who, she alleged, refused to rent her an apartment

in violation of Sections 1982 and 3604. Jd. at 385. The de-

fendants, Eleanor and Stephen Svatik, were brother and

sister. Only Stephen Svatik (Eleanor’s agent) discriminated

against the plaintiif. Nevertheless, we held that ‘“{aJlthough

there may be no evidence of Eleanor’s involvement in the

incident, it is undisputed that she is the sole owner of

the building and that her brother acts as her agent. In

cases of racial discrimination in housing, a principal is li-

able for the wrongful acts of its agent.” Jd. at 388. We

therefore concluded that Eleanor was vicariously liable for

compensatory damages. Jd. at 389.

_ Matchmaker, like Eleanor Svatik in Hamilton, is vicari-

ously liable for the discriminatory acts of its agents. We

affirm the magistrate judge’s decision to hold Matchmaker

liable for compensatory damages.

13 We note also that, according to defendants, “(bly contract

Matchmaker as managed by Ernst has no right or authority...

to ‘direct or control salesperson’s actions except as specifically re-

quired by law... .’” Appellant's Brief at 39-40 (quoting the em-

ployment eement between Matchmaker and its agents) (empha-

sis added). The law, as embodied in Sections 1982 and 3604, “‘spe-

cifically requires” that real estate agents not discriminate against

persons because of their race. This contractual requirement demon-

strates that by the very terms of the employment contract, Match-

maker retained authority to ensure that its agents conformed with

the specific requirements of the law—in this case Sections 1982

and 3604.

—22a—

Nos. 91-2491 & 91-3861

We also affirm the magistrate judge’s decision to hold

Erwin Ernst personally liable for compensatory damages.

We note initially that “{iJn situations such as here, where

common ownership and management exists, corporate for-

malities must not be rigidly adhered to when inquiry is

made of civil rights violations.” Clark v. Universal Build-

ers, 501 F.2d 324, 337 (7th Cir.), cert. denied, 419 U.S.

1070 (1974). In Marr v. Rife, 503 F.2d 735 (6th Cir. 1974),

the plaintiffs, black residents of Columbus, Ohio, sued the

owner of a real estate agency and three of his agents for

violations of Section 1982 and the Fair Housing Act. Jd.

at 736-37. The plaintiffs argued, inter alia, that the owner

of the real estate agency should be liable for the conduct

of his employees, even though there was no evidence that

the owner himself had personally joined any of the dis-

criminatory acts. Jd. at 737, 740. Noting the Fair Hous-

ing Act’s “broad legislative plan to eliminate all traces

of discrimination within the housing field,” the court rea-

soned that “{aJs owner of the agency, [the defendant] had

at least the power to control the acts of his salesmen.”

Id. at 740, 742. The court therefore held that, on remand,

the defendant owner would be vicariously liable for the

discriminatory acts of his agents. Jd. at 742, 744.

Here, as in Marr, Erwin Ernst is the sole owner of

Matchmaker. He is also Matchmaker’s chief executive of-

ficer. Significantly, he supervises the day-to-day operations

of Matchmaker and its agents. Under these circumstances,

we apply the rule announced in Marr and Clark. See also

Sanders v. Dorris, 873 F.2d 938, 944 (6th Cir. 1989) (owner

of real estate agency cannot escape liability merely by

asserting that it instructed its agents not to discriminate

against blacks); Phiffer, 648 F.2d at 552 (owner of a motel,

apartment complex, or other public housing facility is vi-

cariously liable for discriminatory conduct of rental agent).

Ernst is personally liable for compensatory damages.

The defendants also challenge the amount of the magis-

trate judge’s award of compensatory damages. We will

not reverse a judge’s estimate of damages for intangible

—23a—

Nos. 91-2491 & 91-3861

injuries, such as the plaintiffs suffered in this case, un-

less her estimate is clearly erroneous. Douglas v. Metro

Rental Servs., Inc., 827 F.2d 252, 256 (7th Cir. 1987); Phil-

= vy. Hunter Trails Community Ass’n, 685 F.2d 184,

190 (7th Cir. 1982). “{TJhe damages can be no more than

what is within reason under the particular circumstances.”

Douglas, 827 F.2d at 256; Phillips v. Hunter Trails Com-

munity Ass’n, 685 F.2d 184, 190 (7th Cir. 1982). See also

Seaton v. Sky Realty Co., 491 F.2d 634, 637-38 (7th Cir.

1974) (compensatory damages may be awarded in housing

discrimination case for humiliation suffered by plaintiffs).

We will not reduce the amount of compensatory damages

awarded by the magistrate judge unless that amount is

clearly excessive. Douglas, 827 F.2d at 256.

The magistrate judge ordered the defendants to pay the

Leadership Council $3,000 for the audits it performed in

the investigation of this case. Next, the magistrate judge

awarded the Leadership Council $5,000 for expected costs

in the monitoring of Matchmaker’s records for a period

of five years and another $6,000 for continued auditing

of Matchmaker’s sales eee ee Finally, the magistrate

judge uired the defendants to pay the Leadership

Council $2,500 for the costs of training seminars it would

perform. J. Order of June 6, 1991, modified, June 18, 1991,

at 5-6. It was well within the magistrate judge’s di

tion to award these damages and the award itself is not

clearly excessive.

We do agree, however, that the magistrate judge’s deci-

sion to award $16,500 for frustration of purpose was error.

The magistrate judge appears to have merely doubled the

compensatory damage award. The magistrate judge failed

to articulate any basis for this award. We have the “ ‘defi-

nite and firm conviction that a mistake has been commit Si

Gypsum Co., 333 U.S. 364, 395 (1948)) (other citations

omitted). Because the Leadership Council has provided

no basis for a damage award for frustration of purpose,

a |

Nos. 91-2491 & 91-3861

we reverse, as clearly erroneous, that part of the mag-

istrate judge’s decision.

C. Punitive Damages

Defendants challenge the magistrate judge’s decision to

award punitive damages. First, they contend that the

magistrate judge erroneously found King, Munoz, Scar-

piniti, and Walker liable for punitive damages. Second,

the defendants claim that it was error to hold Matchmaker

and Ernst vicariously liable for punitive damages. We do

not agree that the magistrate judge erred when she held

King, Munoz, Scarpiniti, and W ker liable for punitive

damages. We do agree, however, that the magistrate ‘i

erred when she held Matchmaker and Ernst liable for

punitive damages.

In fair housing cases, punitive damages are awarded to

punish and deter outrageous conduct. See Douglas, 827

F.2d at 257. Punitive damages are appropriate when de-

fendants act wantonly and willfully or are motivated in

their actions by ill will, malice, or a desire to injure the

plaintiffs. Tolliver, 800 F.2d at 151; Hamilton, 779 F.2d

at 389. “ {An} award of punitive d s should be set

aside only if it exceeds what is required to serve the ob-

jective of deterrence and punishment.’ ” Tolliver, 800 F.2d

at 151 (quoting Hamilton, 779 F.2d at 389).

In applying these principles to this case, we have no

ifficulty in ing the portion of the magistrate —*

decision that held King, Munoz, Scarpiniti, and Walker

liable for punitive damages. Defendants argue that they

should not be liable for punitive damages because they

did not act maliciously towards the defendants and treated

them politely. Appellants’ Brief at 44. Good manners, how-

ever, do not insulate individuals from punitive damages.

Although these four agents may have n courteous to

the testers, their behavior demonstrates that they actively

discriminated against the black testers because of their

race in violation of Sections 1982 and 3604. The law does

not tolerate this behavior and punitive damages are an

—25a—

Nos. 91-2491 & 91-3861

appropriate remedy when real estate agents engage in

such blatantly obvious racial discrimination. See Tolliver,

800 F.2d at 151-53 (affirming an award of punitive dam-

ages in fair housing case against party that engaged in

discriminatory behavior); Hamilton, 779 F.2d at 389 (same).

The magistrate judge also held Matchmaker and Erwin

Ernst liable for punitive damages. The magistrate judge

found that once the plaintiffs filed their complaint, Ernst

did nothing to investigate whether his agents were behav-

ing in a discriminatory fashion. The magistrate judge rea-

soned that “{aJbsent the post-complaint inactivity of Ernst,

the court would not be convinced that Ernst’s conduct

amounted to callous indifference to plaintiffs’ rights or

ratification of the agents’ conduct justifying an award of

punitive damages.’’ Mem. Decision and Order of April 5,

1991 at 4. The magistrate judge concluded that ‘[e}ven

if treated only as accusations, his failure to investigate

or impose additional safeguards can hardly be viewed as

other than knowledgeable inaction.”” Jd. Based upon these

findings, the magistrate judge held Ernst liable for puni-

tive damages.

In Hamilton, we considered whether a principal should

be liable for punitive damages if she did not engage in the

discriminatory activity. We noted that “[a] principal is li-

able for punitive damages for the discriminatory acts of

her agent only if she knew of or ratified the acts.” Hamu-

ton, 779 F.2d at 389 (emphasis added). We reversed the

punitive damages award against the principal in Hamilton

because she was unaware of and did not ratify the dis-

crimination. Our ruling in Hamilton controls our decision

here. Because we find no evidence that Ernst knew of

or ratified the agents’ discriminatory acts, we reverse the

punitive damages award against Matchmaker and Ernst.

There is nothing in the record to suggest that Ernst

knew of or ratified his agents’ discriminatory actions.’

14 We note that whether Ernst should have known of his agents

discriminatory conduct is a question, under Hamilton, that we

(Footnote continued on following page)

—26a—

Nos. 91-2491 & 91-3861

In fact, the record reveals that Ernst affirmatively worked

against discrimination in housing. Not only is Ernst a

signator of VAMA, he has actively tried to get other Chi-

cago brokers to sign it. He has also established written

office policies for Matchmaker that require all Matchmaker

agents to abide by VAMA and the fair housing laws. All

of the individual defendants testified that they believed

they would be fired if they violated Ernst’s anti-discrim-

ination policies.15 In pursuit of his fair housing policy,

Ernst required all of his agents to attend fair housing

training courses sponsored by local real estate boards.

These facts hardly suggest that Ernst “knew of or rati-

fied” his agents’ discriminatory acts. Matchmaker and

Ernst cannot, under Hamilton, be liable for punitive dam-

ages. The magistrate judge’s conclusion that Ernst’s post-

complaint inactivity suffices for a finding of punitive dam-

ages is erroneous. See Davis v. Mansards, 597 F. Supp.

334, 347 (N.D. Ind. 1984) (punitive damages can be as-

sessed against a principal under the doctrine of respondeat

superior if the principal knew of or ratified the acts of

its employees or agents). Cf. Miller v. Apartments and

Homes of New Jersey, Inc., 646 F.2d 101, 111 (8d Cir.

1981) (principal liable for punitive damages for the con-

duct of his agent when he was by action or knowledgeable

inaction, involved in the wrongdoing or when he autho-

rized, ratified, or fostered the acts complained of); Fort

14 continued

need not consider for purposes of deciding whether Matchmaker

and Ernst should be liable for puritive damages. In order to justify

an award of punitive damages against a principal, the standard

we announced in Rosdiion Aeeuletes or ratification by the prin-

cipal of the agent’s discriminatory act—requires a greater show-

ing than mere negligence. See Hamilton, 779 F.2d at 3839.

1S For example, the magistrate judge noted of test five: ‘That

Carol Scarpiniti found it necessary to close the door when she en-

gaged in blatant steering may also indicate that she understood

that steering was not condoned at Matchmaker.”’ Mem. Decision

and Order of April 5, 1991 at 4.

=;

Nos. 91-2491 & 91-3861

v. White, 530 F.2d 1113, 1117 (2d Cir. 1976) (punitive dam-

ages are assessed against an employer for the torts of

his employee only where the former in some way autho-

rized, ratified, or fostered the acts complained of); Marr,

503 F.2d at 744-45 (principal may be iiable for punitive

damages under Section 1982 and Fair Housing Act if by

action or knowledgeabie inaction the principal was in-

volved in the: wrongdoing). Because we do not believe that

Ernst’s post-filing inactivity shows knowledge or ratifica-

tion of the discriminatory acts of Matchmaker’s agents,

we reverse the punitive damages award against Match-

maker and Ernst. |

D. Attorneys’ Fees

Defendants challenge the magistrate judge’s award of

attorneys’ fees. This issue is raised for the first time on

appeal. Defendants state two reasons why they did not

challenge the magistrate judge’s decision to award attor-

neys’ fees. First, they contend that they did not challenge

the award because defendants are not financially capable

of paying the award. Appellants’ Reply Brief at 23. Sec-

ond, they argue that they did not raise the issue because

they believed that the magistrate judge would have ig-

nored their arguments. /d.

Arguments raised for the first time on appeal are or-

dinarily waived. Matter of Establishment Inspection of

Microcosm, 951 F.2d 121, 126 (7th Cir. 1991), cert. denied,

1992 WL 89310, 61 U.S.L.W. 3256 (Sept. 29, 1992); United

States v. Blythe, 944 F.2d 356, 359 (7th Cir. 1991). We

will not consider arguments raised for the first time on

appeal ‘except in rare cases involving jurisdiction or if

justice demands flexibility.”” Magicsilk Corp. of N.J. v.

Vinson, 924 F.2d 123, 125 (7th Cir. 1991).

Jurisdiction is not at issue and justice, in this case, does

not demand flexibility. The defendants’ reasons for not

raising the issue earlier are unpersuasive. Their first

reason—that they could not afford to pay the amount—

could have been explained to the magistrate judge. Their

ir

2dsa

Nos. 91-2491 & 91-3861

“ —

second reason alleges, without any evidence, that the mag-

istrate judge somehow lacked the ability to decide issues

fairly. “Allegations of judicial bias are very serious and

should never be cast without substantiation.” Matter of

Wade, 969 F.2d 241, 243 n.1 (7th Cir. 1992). The defen-

dants’ charge impugns the integrity of the magistrate

judge and we will not consider such an unsupported alle-

gation. By challenging the attorneys’ fees award for the

first time on appeal, the defendants have waived the issue.

Ill. CONCLUSION

We affirm the magistrate judge’s decision to hold King,

Munoz, Scarpiniti, and Walker liable for compensatory and

punitive damages. We also affirm the magistrate judge’s

decision holding Matchmaker and Ernst vicariously liable

for compensatory damages. We reverse the portion of the

magistrate judge’s decision that awarded damages to the

Leadership Council for frustration of purpose. We also

reverse the punitive damages award against Matchmaker

and Erwin Ernst. The defendants’ challenge to the attor-

neys’ fee award was waived and is denied.

AFFIRMED IN PART,

REVERSED IN PART,

AND REMANDED.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA AOTXXXC-92-001—Midwest Law Printing Co., Inc., Chicago— 12-10-92

——29a—

UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

CITY OF CHICAGO, a municipal

corporation, LEADERSHIP COUNCIL FOR

METROPOLITAN OPEN COMMUNITIES,

a not-for-profit Illinois corporation, GLENN

BREWER, KAREN HASKINS-BREWER,

MELVIN DILLARD, QUEEN FRAZIER,

SANDI GAFFEN, WILLIAM McCARTHY,

and SHARON SWAN

Civil Action

No. 88 C 9695

Plaintiffs,

Vv.

MATCHMAKER REAL ESTATE SALES

CENTER, INC., an Illinois corporation,

ERWIN ERNST, DANIEL KING, SARA

MUNOZ, CAROL SCARPINITI and ALAN

M. WALKER,

NS ee ee ee ee ee ee ee ee ee ee ee ee ee ee

Defendants.

JDGMENT

Pursuant to this Court’s Orders of November 8, 1990 and

April 15, 1991, the following judgment order is entered.

1. COMPLIANCE WITH FAIR HOUSING LAWS. The

Defendants shall comply with all fair housing and civil nights

laws, and they shall deal on an open and impartial basis with

all buyers and prospective buyers and people seeking

housing as to all premises for which they have access to

listings and the ability to sell, and for which they act as agent

or representative, without regard to race, color, sex, religion,

or national origin.

2. INJUNCTION AGAINST STEERING. The

Defendants shall permanently refrain from influencing or

attempting to influence or limit the choice of homeseekers to

different areas according to their race thereby acting to per-

—30a—

petuate racial segregation and resegregation, a practice which

is commonly known as racial steering.

3. FAIR HOUSING TRAINING. The Defendants shall

in each of the next five years require all of the Defendants’

brokers, associate brokers, salespeople and agents and

employees who are employed by them as agents or have any

contractual relationship with them and are responsible for

sales of any residential properties, to attend a fair housing

seminar conducted or approved by the Leadership Council

within one hundred twenty (120) days of the date of the entry

of this order. The location of the seminar shall be selected by

the Leadership Council in consultation with a representative

of Defendants. The Defendants shall pay for such seminar at

thé rate normally charged for such seminars. At the conclu-

sion of each seminar, all those who have completed it shall

submit to the Leadership Council a signed statement under

oath, that they attended the complete program, that they

understand their legal responsibilities under this order and

the fair housing laws of the United States, state and local

Statutes, regulations and ordinances, and that they will com-

ply with the law and this order (Exhibit A). This seminar

shall be repeated once each year for a period of four (4) more

years so that all new brokers, associate brokers, salespeople

and agents of Defendant Matchmaker may receive training.

4. FAIR HOUSING POSTINGS. The Defendants shall

in each of the next five years post at each office where they

work, a notice (Exhibit B) informing all persons of their

rights under the fair housing laws, including protection

against racial steering, and which provides the address and

telephone number of the Leadership Council so that persons

may seek advice as to any suspected discriminatory treat-

ment. Defendants will also post at each office where they

work for a period of five years, the Housing and Urban

Development poster identified a number 928.1 (7-75) or the

HUD (“HUD”) poster, if any, that is subsequently printed

that contains similar language regarding equal opportunity in

housing.

5. FAIR HOUSING NOTICE TO HOMESEEKERS.

Defendants shall in each of the next five years provide a copy

—3la—

of Exhibit B to every homeseeker with whom they have

contact.

6. FAIR. HOUSING ADVERTISEMENT. The

Defendants shall place a copy of Exhibit B in the real estate

section of the Southtown Economist within 30 days of this

Order and provide Plaintiffs with confirmation of the

publication. The advertisement shall appear on three

consecutive Sundays and take the form of approximately two

columns by ten inches in length.

7. ADVERTISEMENTS. All advertising of properties

listed with defendant, in newspapers or other media or in

pamphlets, brochures, handouts or writings of any kind

which utilize visual images, photographs, or pictorial repre-

sentations of persons shall show or depict or represent both

black persons and white persons as prospective buyers and

sellers and as real estate agents.

8. FAIR HOUSING LOGO. The Defendants shall in

each of the next five years display the Equal Opportunity in

Housing slogan and logo in all of Defendants’ advertise-

ments, telephone directories, stationery forms, pamphlets,

brochures and any other written documents.

9. RECORDS ON PROSPECTIVE BUYERS. The

Defendants shall in each of the next five years keep records

of the names, addresses, race and sex of each prospective

buyer who seeks Defendants’ aid in locating housing and

shall record the subsequent showings to each prospective

buyer and the final disposition. Defendants shall use the

Equal Service Report ("ESR”’) recommended by the National

Association of Realtors which is attached hereto as part of

Exhibit C. The Defendants shall make the ESR available to

the Leadership Council or the City for inspection and copy-

ing at any reasonable time.

10. REPORTING OF COMPLAINTS. The Defendants

shall, in each of the next five years, report in writing to the

Leadership Council and the City of Chicago, Human

Relations Commission, Fair Housing Division, any com-

~~

plaints of racial discrimination which have been filed against

Defendants within 30 days after notice of filing.

11. RETENTION OF RECORDS. The Defendants shall

in each of the five years following the entry of this order,

maintain and retain copies of all listings of dwellings offered

for sales through the Defendants, whether privates listings or

listings available through any Multiple Listing Service to

which Defendants have access. The Defendants shall make

Said copies ayailable to the Leadership Council or the City

for inspection and copying at any reasonable time.

12. DAMAGES. Damages shall pay the Plaintiff the

following amounts in damages:

a. Defendants shall pay each individual tester Plaintiff

One thousand dollars ($1,000) in punitive damages

for a total of Eight thousand dollars ($8,000).

Defendant King, Munoz, Scarpiniti, and Walker shall

each be liable for One thousand five hundred dollars

($1,500) in punitive damages; Ernst and Matchmaker

are liable for the remaining amount.

b. Defendants shall pay the Leadership Council the fol-

lowing:

1. Three thousand dollars ($3,000) (five matched

audits at $600 per audit) for the audits performed

by the Leadership Council in the investigation of

this case.

tro

Five thousand dollars ($5,000) for the continued

monitored of Matchmaker’s records for a period

of five years.

3. Six thousand dollars ($6,000) for continued audit-

ing of Respondent’s sales practices (two tests per

year for five years).

4. Two thousand five hundred ($2,500) to the

Leadership Council for one training seminar per

year for five years.

ia

=

5. Sixteen thousand five hundred dollars ($16,500)

for the frustration of the mission of the

Leadership Council .

Twenty-five thousand dollars ($25,000) to the

Leadership Council in punitive damages.

Defendant King, Munoz, Scarpiniti and Walk are

each liable for Two thousand five hundred dollars

($2,500) in punitive damages. The remaining

amount shall be paid by Ernst and Matchmaker.

Defendants shall pay to the City of Chicago the fol-

lowing:

l.

Twenty-five thousand dollars ($25,000) to the

City of Chicago in punitive damages. Defendant

King, Munoz, Scarpiniti and Walker are each

liable for Two thousand five hundred dollars

($2,500) in punitive damages. The remaining

amount shall be paid by Ernst and Matchmaker.

All Defendants are jointly and severally liable for the

attorney's fees and costs incurred in bringing this

action.

COURT TO RETAIN JURISDICTION. This is a

final order that disposes of all matters raised herein, but the

Court shall retain jurisdiction of this case for the purpose of

enforcing the provisions of this order and for entering such

orders as may be necessary, including attorney’s fees.

ENTER:

JOAN HUMPHREY LEFKOW

United States Magistrate Judge

Dated: June 6, 199]

—34a—

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 91-2491-& 91-8861

CITY OF CHICAGO, a municipal corporation,

LEADERSHIP COUNCIL FOR METROPOLITAN OPEN

COMMUNITEES, a not-for-profit Illinois corporation, GLENN

BREWER, KAREN HASKINS-BREWER, VICTOR CROWN,

MELVIN DILLARD, QUEEN FRAZIER, SANDI GAFFEN,

WILLIAM MCCARTHY, and SHARON SWAN,

Plaintiffs-Appellees,

MATCHMAKER REAL ESTATE SALES CENTER,

INCORPORATED, an Illinois corporation,

DANIEL KING, SARA MUNOZ, CAROL SCARPINITI, ALAN M.

WALKER, and ERWIN ERNST,

Defendants-Appellants.

ORDER

The Defendants-Appellants Petiton For Rehearing With

Suggestions For Rehearing En Banc is denied. No active

sitting judge voted for rehearing.

January 11, 1993

CERTIFICATE OF SERVICE

The undersigned certifies that he has mailed copies of the

above Petition for Writ of Certiorari to the parties listed below

on this date April 12, 1993.

Mr. James Beyer

Seyfart, Shaw, Fairweather & Geraldson

55 East Monroe Street

Suite 4300

Chicago, IL 60603

Mr. Kelly Welsh

City of Chicago

180 North LaSalle Street

Chicago, IL 60601

- John Gubbins