Civil Penalties for Fair Housing Act Violations

SUMMARY: On December 18, 1997, HUD published for public comment a

proposed rule that would amend HUD's regulations governing hearing

procedures for civil rights matters to clarify that, in a given case,

an Administrative Law Judge (ALJ) may, and in appropriate circumstances

should, assess more than one civil penalty against a given respondent,

where the respondent has committed separate and distinct acts of

discrimination. The rule also proposed to amend these regulations to

describe how ALJs are to consider housing-related hate acts under the

six factors ALJs apply in determining the amount of a civil penalty to

assess against a respondent found to have committed a discriminatory

housing practice. This interim rule makes effective the amendments in

the December 18, 1997 proposed rule, takes into consideration the

public comments received on the proposed rule, and solicits additional

public comments on the rule. All public comments will be taken into

consideration in the development of the final rule.

DATES: Effective date: March 12, 1999. Comment due date: Comments on

the interim rule are due on or before: April 12, 1999.

ADDRESSES: Interested persons are invited to submit written comments

regarding this interim rule to the Rules Docket Clerk, Office of

General Counsel, Room 10276, Department of Housing and Urban

Development, 451 Seventh Street, SW, Washington, DC 20410. Comments

should refer to the above docket number and title. A copy of each

comment submitted will be available for public inspection and copying

between 7:30 a.m. and 5:30 p.m. weekdays at the above address.

Facsimile (FAX) comments will not be accepted.

FOR FURTHER INFORMATION CONTACT: Stephen I. Shaw, Office of Litigation

and Fair Housing Enforcement, Room 10258, Department of Housing and

Urban Development, 451 Seventh Street, SW, Washington, DC 20410;

telephone (202) 708-1042 (this is not a toll-free telephone number).

Hearing or speech-impaired persons may access this number via TTY by

calling the toll-free Federal Information Relay Service at 1-800-877-

8339.

SUPPLEMENTARY INFORMATION:

I. The December 18, 1997 Proposed Rule

On December 18, 1997 (62 FR 66488), HUD published for public

comment a proposed rule that would interpret the Fair Housing Act (the

Act) to allow Administrative Law Judges (ALJs) to assess a separate

civil penalty for a series of acts involving housing discrimination.

Under the Act, housing discrimination violations carry maximum civil

penalties for first-, second-, and third-time offenders. A number of

ALJs have interpreted the Act's provisions narrowly and assessed a

single civil penalty against a violator, even where the violator

committed more than one separate and distinct act of discrimination.

The December 18, 1997 proposed rule advised that it would amend

HUD's regulations at 24 CFR part 180 (Hearing Procedures for Civil

Rights Matters) to clarify that, in a given case, an ALJ may, and in

appropriate circumstances should, assess more than one civil penalty

against a given respondent, where the respondent has committed separate

and distinct acts of discrimination. The December 18, 1997 proposed

rule also advised it would amend part 180 to describe how ALJs are to

consider housing-related hate acts under the six factors ALJs apply in

determining the amount of a civil penalty to assess against a

respondent found to have committed a discriminatory housing practice.

In addition to the substantive amendments described above, the

December 18, 1997 proposed rule advised of a clarifying change to 24

CFR part 180. Specifically, the December 18, 1997 rule proposed to move

the provisions governing the assessment of civil penalties found at

Sec. 180.670(b)(3)(iii)(A), (B), and (C) to a new Sec. 180.671. HUD

also proposed to make changes to certain of these provisions for

purposes of clarity.

This interim rule is applicable to all fair housing cases filed

with HUD on or after the effective date of this rule. This rule,

however, does not state to what degree it applies to pending

administrative Fair Housing Act cases as of that date. HUD intends that

the rule apply to any cases it charges on or after the effective date

of the rule.

The December 18, 1997 proposed rule provided additional information

on the amendments to 24 CFR part 180.

II. Differences Between the December 18, 1997 Proposed Rule and

This Interim Rule

This interim rule makes effective the amendments in the December

18, 1997 proposed rule and takes into consideration the public comments

received on the proposed rule. HUD is making two additional changes to

the proposed rule in response to public comment. First, HUD has

clarified the definition of ``separate and distinct housing practice''

in Sec. 180.671(b) (see HUD's response to the comment entitled

``Definition of `separate and distinct housing practice' is unclear''

in section III of this preamble for additional information regarding

this change). HUD has also revised the definition of ``housing-related

hate act'' in Sec. 180.671(c)(2)(ii). This revision clarifies the

distinction between discriminatory housing practices that violate

section 818 of the Act but would not be housing-related hate acts, and

such hate acts (see HUD's response to the comment entitled ``Definition

of `housing-related hate act' is confusing'' in section III of this

preamble for additional details regarding this change).

This rulemaking is part of President Clinton's ``Make 'Em Pay''

initiative, which is designed to fight housing-related acts of hate

violence and intimidation with increased enforcement and monetary

penalties. In order to provide additional public participation in this

rulemaking, HUD is soliciting comments on this interim rule. All public

comments will be taken into consideration in the development of the

final rule.

III. Discussion of Public Comments on the Proposed Rule

The public comment period on the proposed rule closed on January

20, 1998. Six public comments were received by HUD. This section of the

preamble presents a summary of the significant issues raised by the

public commenters on the December 18, 1997 proposed rule, and HUD's

responses to these comments.

A. The Public Comments, Generally

Most of the commenters expressed reservations about HUD's proposed

amendments to 24 CFR part 180. Generally, the comments can be divided

into four broad categories: (1) Commenters that believe the proposed

rule was unclear and request additional guidance; (2) commenters that

express

[[Page 6745]]

concern about the impact of the proposed regulations; (3) commenters

that question HUD's authority or justification for issuing the rule;

and (4) commenters that question whether HUD complied with the

necessary rulemaking requirements in issuing the proposed regulations.

B. Commenters that Believe the Proposed Rule Was Unclear

Comment: Definition of ``housing-related hate act'' is confusing.

One commenter wrote that the definition of ``housing-related hate act''

in the proposed rule included most or all discriminatory practices

prohibited by the Act. According to the commenter, the proposed rule

marks a sharp break with HUD's traditional practices, because it is the

first time that HUD has characterized any such discrimination as

``hate.'' The commenter wrote that the new interpretation would lead to

confusion in HUD's fair housing enforcement process. The commenter

described three possible areas of confusion:

1. Definition may be applied too narrowly. First, the commenter

stated that the proposed definition may result in ALJs applying the

standard too narrowly:

ALJs may mistakenly believe that the word ``hate'' in the

``housing-related hate act'' standard requires that HUD must prove

that ``hate''--rather than fear, financial self-interest, amusement,

or any other factor--motivated a discriminatory housing act before

an ALJ can apply that standard.

HUD Response. In response to the commenter's first point, the

language of the definition of ``housing-related hate act'' found in new

Sec. 180.671(c)(2)(ii) does not imply the necessity to prove a

motivational factor for such an act to fall within the definition.

Rather, the definition describes the objective characteristics of the

act that must be found for such an act to fall within the definition

(i.e., the act is characterized by a threat or the actual carrying out

of violence, intimidation, coercion, assault, bodily harm, and/or harm

to property). Accordingly, HUD does not believe an ALJ applying this

definition would be confused into thinking that the definition's

inclusion of the term ``hate'' requires proof of a respondent's

internal motivation before the ALJ could find that the respondent has

committed a housing-related hate act. Therefore, HUD did not revise the

proposed rule as a result of this comment.

2. Definition may be applied too broadly. The commenter also wrote

that, although the use of ``hate'' in the proposed definition could

narrow its application, the lack of clarity in the definition may

result in ALJs applying the standard too broadly:

[The proposed] definition of ``housing-related hate act'' includes

discriminatory housing practices that also involve ``threat[s],''

``intimidation,'' and ``coercion,'' among other characteristics.

However, those terms describe most, if not all, discriminatory

housing practices. Absent any further clarification, an ALJ could

determine that most or all discriminatory housing practices are

``housing-related hate acts'' favoring the imposition of maximum

penalties.

HUD Response. The commenter's second concern indicates that the

commenter believes that HUD's proposed definition of housing-related

hate act covers all forms of housing discrimination anywhere in the

Act. The definition of housing-related hate act does not include all

discriminatory housing practices. For example, racial steering (i.e.,

discouraging a person from renting or buying a dwelling in a particular

area, or encouraging a person to rent or buy in a particular area, or

assigning a person to housing in a particular area, on account of that

person's race, see 24 CFR 100.70(c)), would ordinarily not include a

threat of, or actual ``violence, intimidation, assault, bodily harm,

and/or harm to property.'' (See 24 CFR 180.671(c)(2)(ii).) As another

example, a difference in the terms and conditions of rental, such as

charging a tenant of a particular ethnic, national, racial or religious

background more rent than other tenants, would not include the elements

that HUD has identified as necessary to constitute a housing-related

hate act.

The commenter may have meant that HUD's proposed definition of

housing-related hate act covers ``most, if not all'' of the conduct

prohibited by section 818 of the Act (42 U.S.C. 3617). That provision

makes it illegal for anyone to coerce, intimidate, threaten or

interfere with any person in the exercise or enjoyment of his or her

fair housing rights, or on account of having aided another person in

the exercise and enjoyment of his or her fair housing rights. Assuming

that this is what the commenter meant, it seems to follow that the

substance of the comment is that it is unnecessary for HUD to define

housing-related hate act as being something apart from section 818

itself. In proposing and adopting this definition, HUD intends that the

definition focus on (actual or threatened) violence, assault, bodily

harm and property damage, as well as intimidation and coercion that

contains those violent elements, so that the definition refers to the

more heinous and violent acts among all the acts which violate section

818. HUD does not intend that the proposed definition of housing-

related hate act include non-violent discriminatory acts which violate

section 818.

HUD believes that there are clear distinctions between

discriminatory housing practices that violate section 818 but would not

be housing-related hate acts. In order to clarify this distinction, HUD

has revised the definition of housing-related hate act in new

Sec. 180.671(c)(ii) to read as follows:

For purposes of this section [Sec. 180.671], the term ``housing-

related hate act'' means any act that constitutes a discriminatory

housing practice under section 818 of the Fair Housing Act and which

constitutes or is accompanied by actual violence, assault, bodily

harm, and/or harm to property; intimidation or coercion that has

such elements; or the threat or commission of any action intended to

assist or be a part of any such act.

The following examples demonstrate conduct which violates section

818, but which would not be within the meaning of the revised

definition. One example of such conduct would be where the owner or

manager of an apartment complex fired an employee because he or she

rented apartments to African-American and Mexican-American applicants,

contrary to the instructions of the owner or manager to discriminate

against such applicants (See Smith v. Stechel, 510 F.2d 1162, 1164 (9th

Cir. 1975)).

Another example of a discriminatory housing practice that violates

section 818 but which HUD does not intend to include in the revised

definition of housing-related hate act involves a local jurisdiction

using a threat of criminal prosecution to deprive members of protected

classes of their housing rights. In People Helpers v. City of Richmond

789 F.Supp. 725 (E.D. Va. 1992), plaintiff was a non-profit

organization whose mission was to provide affordable housing for

individuals with mental and physical handicaps. It purchased a building

in Richmond, VA for the purpose of providing housing to such

individuals. The City undertook a variety of investigations of the

plaintiff's operations and the conditions in the building. Plaintiff

sued, claiming the City's investigations were motivated by animus

against plaintiff's disabled clients and interfered with the enjoyment

of its fair housing rights. The court ruled that plaintiff's claims

stated a viable cause of action, and it was entitled to try to prove

that the City's investigations interfered with the organization's fair

housing rights in violation of section 818. Because the

[[Page 6746]]

City's actions were non-violent, they would not be housing-related hate

acts.

Further, retaliating against a person because he or she has made a

fair housing complaint or otherwise assisted or participated in a

proceeding under the Act would violate section 818 (24 CFR 100.400).

This type of retaliation, such as raising a tenant's rent because the

tenant had engaged in a protected activity, would not amount to a

housing-related hate act as HUD has defined that term in this interim

rule.

In addition, some types of harassment directed to preventing the

enjoyment of fair housing rights can also constitute a section 818

violation without constituting a housing-related hate act as HUD has

defined it. One example is found in HUD v. Williams (2A Fair Housing--

Fair Lending para. 25,007 at 25,118-19 (HUD ALJ March 22, 1991)), in

which a landlord's 6:00 a.m. telephone call to a tenant with HIV

inquiring about the tenant's condition was found to violate section

818. Because this activity did not involve a threat of physical

violence to the tenant or his property, this act was found not to

constitute a housing-related hate act.

On the other hand, although hate acts, as defined, involve violence

or a threat of violence, that does not mean that a respondent must have

been convicted of a hate crime before an ALJ may find that respondent

has committed a housing-related hate act. See, e.g., HUD v. Simpson, 2A

Fair Housing--Fair Lending para. 25,082 (HUD ALJ Sept. 9, 1994)

(neighbors found liable in HUD fair housing case for engaging in

various forms of harassment and threat against neighbors of South

American origin, violating Section 818 of the Act, 42 U.S.C. 3617).

3. Definition may lead to inquiries about motivation. Finally, the

commenter wrote that the proposed standard may shift the focus of

enforcement proceedings to the motivation of the respondent:

[A] mistaken focus on ``hate'' [in the proposed standard] may

prompt ALJs to allow unwarranted inquiries into motivation during

enforcement proceedings. Thus, hearings that should properly focus

on discrimination--regardless of any underlying motivation for that

discrimination--could instead focus on why the respondent

discriminated.

HUD Response. As HUD noted above, the definition in

Sec. 180.670(c)(2)(ii) is based on objective criteria that do not

require an inquiry into motivation. An ALJ, however, properly may

inquire into motivation in considering whether to assess a civil

penalty, and, if so, how much. For instance, an ALJ may consider

motivation under the factors of degree of culpability and nature and

circumstances of the violation (see, e.g., HUD v. Gutleben, 2A Fair

Housing--Fair Lending para. 25,103 (HUD ALJ Aug. 15, 1994) (ALJ

expressly considered one respondent's degree of racial animus in

assessing the maximum civil penalty against him, while giving credit to

another respondent's minimal culpability in declining to assess any

civil penalty against her)).

Comment: Recommended substitute language for proposed

Sec. 180.671(c)(2). One commenter recommended substitute language for

proposed Sec. 180.671(c)(2), which defines ``housing-related hate

act.'' According to the commenter, the suggested language tracks the

relevant portion of federal criminal civil rights legislation

introduced by Senators Kennedy and Specter (S. 1529) and Congressmen

Schumer and McCollum (H.R. 3081), which President Clinton and the

Department of Justice have endorsed. The commenter believes that the

substitute language sets clear evidentiary criteria for when an ALJ

should maximize a civil penalty. The commenter also recommended the

substitute language because an ALJ will be able to apply the revised

standard only when particularly violent discriminatory housing

practices occur. The substitute provision would read:

Where the ALJ finds any respondent to have committed a

discriminatory housing practice under section 818 of the Fair

Housing Act that resulted in death or bodily injury to any person,

or involved an attempt, through the use of fire, a firearm, or an

explosive device to cause death or bodily injury to any person, the

ALJ shall take this fact into account when considering the factors

listed in paragraphs (c)(iii), (iv), (v), and (vi) of this section.

HUD Response. For the reasons discussed above, HUD does not agree

that the definition of ``housing-related hate act'' in

180.670(c)(2)(ii) (as revised) is too narrow, too broad, or will lead

to improper inquiries regarding motivation. Rather, the nature of the

act involved in committing the discriminatory housing practice is the

determining factor as to whether the discriminatory housing practice is

a housing-related hate act. Furthermore, the commenter's proposed

definition is under-inclusive. For example, a cross burning on a

minority family's front lawn, bricks thrown through the windows of a

minority family's house, and hate graffiti threatening violence sprayed

on a minority family's house all would fall outside the commenter's

proposed definition, because they neither attempt nor result in ``death

or bodily injury.'' HUD believes that each of those acts is properly

included within the definition of housing-related hate act in this

interim rule.

Comment: HUD should provide additional guidance on the six factors

ALJs must consider in determining the civil penalty amount. Proposed

Sec. 180.671(c) described the six factors that an ALJ must consider in

determining the civil penalty amount for each separate and distinct

discriminatory housing practice. Two commenters recommended that HUD

revise the proposed rule to provide additional guidance on the six

factors. One of the commenters saw two related benefits arising from

the provision of the additional guidance:

Providing this additional clarification to the six factors will

allow the ALJ to impose the maximum civil penalties when they are

needed, but will not penalize, with unnecessary severity,

respondents who, for example, acted unintentionally or without

malice. The additional guidance will also help to ensure greater

consistency among ALJs in assessing appropriate penalties.

HUD Response. The six factors were first included as an instruction

to ALJs in the House Report on the Fair Housing Act Amendments of 1988

(H. Rep. 100-711, 100th Cong., 2nd Sess. 37 (1988), 1988 U.S. Code

Cong. & Admin. News 2198). The ALJs have applied the six factors

consistently in their decisions (see, e.g., HUD v. Kormoczy, 2A Fair

Housing--Fair Lending para. 25,071 at 25,664 (HUD ALJ May 16, 1994)

(listing the six factors and specifically applying the degree of

culpability to lower the civil penalty assessed); HUD v. Pheasant Ridge

Associates, Ltd., 2A Fair Housing--Fair Lending para. 25,123 at 26,052

(HUD ALJ Oct. 25, 1996) (focusing on degree of culpability and

financial resources factors to raise the civil penalty assessed); HUD

v. Simpson, 2A Fair Housing--Fair Lending para. 25,082 at 25,764 (HUD

ALJ Sept. 9, 1994) (focusing on previous violations, nature and

circumstances of the violation, the goal of deterrence, and

respondent's financial circumstances factors to raise the civil penalty

assessed); HUD v. Murphy, 2A Fair Housing--Fair Lending para. 25,002 at

25,058 (July 13, 1990) (applying all the factors to reduce the civil

penalty assessed). In other words, HUD is codifying the legislative

history and case law relating to the six factors. HUD, therefore, finds

it unnecessary to clarify their application further through a

rulemaking.

Comment: HUD should expand the list of factors to be considered by

an ALJ in determining the civil penalty amount. One commenter

recommended that HUD add five additional factors to the

[[Page 6747]]

list in proposed Sec. 180.671(c). Specifically, the commenter suggested

that the ALJ should also be required to consider whether the respondent

has:

(1) Admitted guilt without the need for a hearing;

(2) Already made, or begun, restitution to the victims;

(3) Unintentionally or unknowingly committed the violation;

(4) Previously attended or agreed to adopt additional training or

education; or

(5) Tried to mitigate the damage caused or undertaken corrective

action prior to being charged with the violation.

The commenter also suggested that the first factor listed in

proposed Sec. 180.671(c) (``whether the respondent has previously been

adjudged to have committed unlawful housing discrimination''), be

revised to clearly distinguish between adjudication and consent

agreements (where liability has been denied), as an encouragement to

the latter.

HUD Response. As stated above, the six factors derive from the

legislative history and have been consistently cited and utilized in

case law. Two of the factors (``nature and circumstances of the

violation'' and ``other matters as justice may require'') give ALJs

particularly broad discretion to weigh any matters that appropriately

might affect the amount of any civil penalty to be assessed. Further,

in cases where a respondent unknowingly committed a violation or made

restitution without the need for a hearing, ALJs have taken these facts

into account to lower the amount of civil money penalty assessed (see,

e.g., HUD v. Wagner, 2A Fair Housing--Fair Lending para. 25,032 at

25,339 (HUD ALJ June 22, 1992) (one respondent acknowledged her error

in refusing to rent to families with children and, because of that

admission, was assessed a lower civil penalty than the other

respondents under the need for deterrence factor); HUD v. Murphy, 2A

Fair Housing--Fair Lending para. 25,002 at 25,058-59 (July 13, 1990)

(civil penalty reduced in familial status discrimination case where

respondents were ill-informed of the law and, albeit erroneously,

believed that they were correctly applying an exemption for housing for

older persons); HUD v. Gutleben, 2A Fair Housing Fair Lending para.

25,078 at 25,731 (HUD ALJ Aug. 15, 1994) (ALJ did not assess civil

penalty against one respondent where she immediately curtailed her

wrongful acts by rescinding an eviction notice the day after she issued

it).

Indeed, it would not be possible to list in a rule all the possible

mitigating factors that might appropriately affect the assessment of a

civil penalty. Since the six factors established by the Congress and

which the ALJs consistently apply already allow for adjustments in the

assessment of civil penalties based on the individual circumstances of

the case, and since ALJs do in fact rely on those factors to make such

adjustments, HUD declines to adopt the commenter's suggestion to add

more factors.

In response to the commenter's second suggestion, the first factor

refers to whether a respondent has been ``adjudged'' to have previously

committed a discriminatory housing act. A consent agreement in which

liability has been denied is not a judgment of liability, but rather a

settlement enforceable by court order. Therefore, there is no

possibility of confusion and no need to ``clearly distinguish'' between

a respondent who has been ``adjudged'' in violation of the Act and one

who signs a consent agreement denying liability. Therefore, HUD

declines to modify the first factor as suggested.

Comment: Definition of ``separate and distinct discriminatory

housing practice'' is unclear. Two commenters wrote that the definition

of ``separate and distinct discriminatory housing practice'' in the

proposed rule was unclear. One commenter stated that given the

``[v]ague definition * * * each ALJ would be left to make such

determinations with little guidance.'' The other commenter did not

believe that the definition could be clarified: ``[I]t is impossible to

draft a definition which clearly identifies the standards for defining

a single discriminatory practice.''

HUD Response. HUD agrees that the definition needs to be clarified.

Accordingly, HUD has revised Sec. 180.671(b) to express HUD's intention

more clearly. The revised definition reads as follows:

Definition of separate and distinct discriminatory housing

practice. A separate and distinct discriminatory housing practice is

a single, continuous uninterrupted transaction or occurrence that

violates section 804, 805, 806 or 818 of the Fair Housing Act. Even

if such a transaction or occurrence violates more than one provision

of the Fair Housing Act, violates a provision more than once, or

violates the fair housing rights of more than one person, it

constitutes only one separate and distinct discriminatory housing

practice.

The following illustrative examples are designed to help the public

and ALJs distinguish between cases involving only one single

discriminatory housing practice and cases involving multiple such

practices that are potentially subject to the assessment of multiple

civil penalties.

Example 1: An African-American family of four visits a white

landlord in order to rent an apartment from him. The landlord states

that she does not rent to African-Americans.

The entire transaction occurred at a single time and constitutes a

single, continuous transaction, even though it affected more than one

person and violated two sections of the Act, namely 42 U.S.C. 3604(a)

and (c) (refusal to rent due to race and a statement indicating

discrimination based on race). Under the definition, the conduct

constituted a single separate and distinct fair housing practice, and

an ALJ could assess a maximum of a single civil penalty only.

Example 2: A man with a mental disability seeks to rent an

apartment. Although the landlord has units available, he refuses to

rent to this man because of the mental disability. A few weeks later,

the man's sister, who also has a mental disability, applies to rent an

apartment at the same development. Again, the landlord has a unit

available, but he refuses to rent to her because of her mental

disability. The brother and sister together file a single fair housing

complaint.

By refusing to rent to either sibling on account of disability, the

landlord violated 42 U.S.C. 3604(f)(1)(A). In this case, each attempt

to rent was a single, continuous, uninterrupted transaction, separate

and distinct from the other. Therefore, the landlord's conduct

constituted two separate and distinct discriminatory housing practices.

If otherwise appropriate, an ALJ could assess two separate civil

penalties against the respondent.

Example 3: A Latino family moves into a neighborhood where no

Latinos had lived before. A next-door neighbor begins organizing other

neighbors into a campaign to force the Latino family out of the

neighborhood. At one point, the neighbors, including the next-door

neighbor, throw rocks through the Latino family's window. A few weeks

later, a member of the Latino family steps outside to get her mail, at

the same time the next-door neighbor is raking her garden. The next-

door neighbor walks over to the Latino woman, and, with her rake in

both hands, holds it near the Latino woman's face in a threatening

manner, and says ``if you want to live to an old age, you'd better move

out now.'' A few more weeks pass, and, one evening, the same group of

neighbors that threw the rocks burns a cross on the Latino family's

front lawn.

In this example, there are three acts that violate 42 U.S.C. 3617

that are not

[[Page 6748]]

continuous, because they are interrupted by the passage of time. The

entire group of neighbors committed two separate and distinct acts, and

the hostile neighbor committed three such acts. Therefore, they are

multiple acts and an ALJ, if otherwise appropriate, could assess a

separate civil penalty for each act.

Example 4: An African-American applies for a unit in a public

housing authority's public housing system. Although there is an

available unit of the appropriate bedroom size in a desirable section

of the public housing system, the authority, because of the applicant's

race, falsely states that no such unit is available and steers the

applicant to a vacancy in a less desirable section, where crime,

abandoned buildings and drug activity are rampant. The applicant

accepts the unit but places her name on a list of tenants interested in

transferring to the more desirable section, where there are fewer

abandoned buildings, the crime rate is much lower, and ``open-air''

drug activity is nonexistent. After a few months, her name comes to the

top of the transfer list. She learns through friends that a unit is

available in the more desirable section. However, the management, again

because of her race, falsely tells her that no such unit is available

and denies her transfer.

In this example, the public housing authority violated 42 U.S.C.

3604(a) (refusal to rent a particular unit) and 3604(d) (falsely

representing that a unit is unavailable) on each of the occasions

mentioned in the example. The first incident, which was a form of

racial steering, constituted a single discriminatory housing act under

the definition, although the conduct violated two subsections of the

Act. The second incident, a refusal to transfer, also constituted a

single discriminatory housing practice that violated two subsections of

the Act. The two incidents, however, were separate and distinct from

each other and, therefore, under the definition, each constituted a

separate and distinct discriminatory housing practice. Accordingly, the

ALJ has the discretion to assess a civil penalty for each separate and

distinct discriminatory housing practice, but not one for each of the

two violations of the Act that occurred within each discriminatory

housing practice (see HUD v. Las Vegas Housing Authority, 2A Fair

Housing--Fair Lending para. 25,116 (HUD ALJ Nov. 6, 1995)).

Example 5: A group of people that objects to people of foreign

national origin gathers at the home of a family that recently arrived

from Russia and, over a 10-minute period, throws several rocks through

the family's window in an attempt to intimidate them into moving. At

the time of the rock throwing, there are four people in the house: a

husband and wife and their two children. Each person who was home when

this occurred was traumatized by the rock throwing. The husband was

standing by the window and was struck by a rock. The wife was standing

next to him and was cut by glass. The children suffered emotional harm.

In this example, each member of the group committed a single

violation of 42 U.S.C. 3617, even though more than one rock was thrown

and four people were affected, because the conduct was a single,

continuous occurrence. The ALJ could at most assess one civil penalty

against each respondent.

Comment: HUD should clarify its fair housing regulations and

guidance before increasing the civil penalties for violating them. One

commenter suggested that before HUD amends its fair housing civil

penalty regulations, it should review its fair housing regulations and

guidance for clarity. The commenter wrote that ``[s]imple notions of

fairness should clearly indicate that it is unreasonable for the

Department to subject housing providers to multiple civil penalties for

violations of unclear or ambiguous fair housing regulations and

guidance.''

HUD Response. During development of the December 18, 1997 proposed

rule, HUD reviewed 24 CFR part 180 in its entirety for purposes of

clarity. As a result of this review, the proposed rule included a

clarifying amendment to part 180, which has been made effective by this

rule. Specifically, this interim rule moves the lengthy provisions

governing the assessment of civil penalties found at

Sec. 180.670(b)(3)(iii)(A), (B), and (C) to a new Sec. 180.671. The

transfer of these provisions to Sec. 180.671 does not involve any

substantive revisions to part 180, but is designed solely to make the

part 180 regulations easier to understand.

Further, the public was afforded an opportunity to comment on the

clarity of HUD's proposed amendments to part 180. HUD has made two

clarifying changes to the proposed rule in response to public comment.

First, HUD has clarified the definition of ``separate and distinct

housing practice'' in Sec. 180.671(b). HUD has also revised the

definition of ``housing-related hate act'' in Sec. 180.671(c)(2)(ii) to

clarify the distinction between discriminatory housing practices that

violate section 818 of the Act but would not be housing-related hate

acts.

C. Commenters Expressing Concerns About Impact of Rule

Comment: Hate violence will not be stemmed by increasing civil

penalties. One commenter doubted that increased civil penalties would

deter housing-related acts of hate violence and intimidation. As the

commenter wrote: ``Violence and other hate crimes carry criminal

penalties. If these criminal penalties do not deter the crime, we fail

to understand how an increase in a civil fine will deter these

actions.''

HUD Response. The potential increase in civil money penalties to

which the commenter refers applies to all multiple, separate acts of

housing discrimination, not only to those with criminal penalties.

Thus, criminal penalties will not necessarily be involved in these

cases. Furthermore, not all potentially criminal violations of the Act

are prosecuted as such. Finally, there is no rule of law requiring HUD

to choose one form of deterrence over another. Some persons will be

deterred by the threat of criminal prosecution, others may be more

deterred by harm to the pocketbook. The President and the Secretary of

HUD have determined to use all civil and criminal means at their

disposal to deter housing discrimination.

Comment: The proposed rule threatens the balance between judicial

and administrative enforcement of the Act. Two commenters wrote that

the Act establishes a careful balance between the benefits of a timely

administrative process and the rights of parties to have their cases

heard in federal court before a jury. One of the commenters wrote that

the standards for imposition of a civil penalty are lower than those

for punitive damages in a federal district court, and therefore result

in additional exposure for a respondent charged of discrimination. This

commenter noted that the administrative civil penalties are capped to

provide a level of certainty and to offset the additional exposure

faced by respondents. The two commenters stated that, by authorizing

increased civil penalties, the proposed rule would upset the balance

between administrative and judicial enforcement of the Act. As one of

the commenters wrote:

If multiple penalties are available in the administrative

process, we believe the majority of respondents would elect to go to

federal court rather than subject themselves to the possibility of

multiple civil penalties....Although defending a case in federal

court is likely to be more costly and time consuming than defending

the case in the administrative process, the lack of civil penalties

in federal court will increase the

[[Page 6749]]

attractiveness of having the case defended in federal court by a

jury of peers.

The second commenter wrote:

Any proposed change in administrative procedure should weight

[sic] any effect it might have on whether it might encourage a party

to elect [to have the action heard in federal court.] The proposed

rule ignores any effect and should therefore be withdrawn.

HUD Response. Both commenters perceive that the Act established a

``balance'' between cases that proceed before ALJs and those in which

one or more of the parties elects that the case be heard in federal

court. In responding to this comment, some background may prove useful.

Historically, either a complainant or respondent in a majority of fair

housing cases in which HUD has issued a Determination of Reasonable

Cause and a Charge have elected to have the case heard in federal

court. For the period 1989 (when the Fair Housing Act Amendments of

1988 became effective) through 1997, the percentage of fair housing

cases in which HUD found reasonable cause and where a respondent or

complainant elected to have the case heard in federal court was 67%.

The first commenter's concern that a particular respondent may face

higher monetary exposure to civil penalties under the proposed rule is

not without basis. In administrative cases in which a respondent is

charged with having committed more than one separate and distinct act

of housing discrimination, there is a potential for a higher total

monetary civil penalty assessment against that respondent as a result

of HUD's interpretation explicitly allowing an ALJ to assess multiple

civil penalties in an appropriate case. The commenter's further

concerns, however (i.e., this exposure renders respondents' exposure

``uncertain'' where before it was ``capped,'' and that this uncertainty

would upset the delicate balance between administrative and federal

court adjudication), are unfounded.

With regard to the first concern, a respondent's potential total

exposure to civil penalties still would be capped. This is so because

HUD's Charge of Discrimination would set out the allegations as to the

separate and distinct discriminatory housing practices, and, since

there is a statutory cap on how large a civil penalty an ALJ can assess

per discriminatory housing practice, the respondent would know its

total possible civil penalty exposure. Therefore, the rule does not

create the uncertainty about which the commenter expressed concern.

With regard to the second concern, since there is no uncertainty,

that cannot be a basis to upset the delicate balance to which the

commenter refers. On the other hand, since the total monetary cap on

civil penalties in the administrative forum in cases alleging multiple

discriminatory housing practices would be potentially higher, it is

possible that difference might cause some respondents to elect to have

their cases heard in federal court, where they might not have done so

otherwise. This conclusion, however, is purely speculative.

Furthermore, there are countervailing factors that are likely to

curtail a significant increase in respondents electing to have their

cases heard in federal court. For example, civil penalties cannot be

assessed in the typical federal court fair housing case (But see 42

U.S.C. 3614(d)(1)(C)). On the other hand, punitive damages are

potentially available in federal court, but not in the administrative

forum (Compare 42 U.S.C. 3612(o)(3) and 3613(c) with 42 U.S.C.

3612(g)(3)).

In addition, the only cases in which an ALJ may impose multiple

civil penalties against a single respondent will be those in which the

respondent is alleged to have committed multiple acts of

discrimination. Thus, everything else being equal, these are likely to

be more egregious cases--the same cases in which punitive damages are

more likely to be awarded if heard in federal court. There seem to be

no inherent reasons why respondents in these types of cases would

choose to avoid the administrative forum only to face a possible award

of punitive damages in federal court that has the potential of being

much higher than the respondents' total civil penalty exposure in the

administrative forum. Hence, HUD does not believe that the rule will

necessarily affect the rate of respondents' electing to have their fair

housing act cases heard in federal court.

In the final analysis, however, even if the commenters' speculation

were to turn out to be correct, HUD believes that its interpretation of

the Act's civil penalty provisions is correct and comports with

Congressional intent. Therefore, even if some higher percentage of

respondents were to choose to have their fair housing cases heard in

federal court, that also would comport with Congressional intent.

Comment: Rule may unfairly penalize large housing providers. One

commenter stated that the proposed rule would unfairly penalize large

housing providers with many employees. These housing providers may be

firmly committed to fair housing principles, but employ individuals who

engage in discriminatory conduct. The commenter noted that a

significant amount of time may elapse before the housing provider

becomes aware of the discriminatory actions committed by an employee.

If the employee committed several discriminatory acts within a short

period of time, the housing provider would be assessed multiple

penalties before it could take remedial action. The commenter wrote:

[W]e have a firm policy of not tolerating any discriminatory

acts by our personnel and we provide on-going education and training

to our personnel. However, we have over 500 employees that interact

with the public. With the large number of employees, it is extremely

difficult for us to be made immediately aware that one employee, out

of hundreds, may be engaging in discriminatory practices. Multiple

offenses could occur in a very short time frame before we were made

aware of the discriminatory practice and before we could take the

necessary corrective action.

HUD Response. Under the Act, an ALJ is not obligated to assess a

civil penalty in an appropriate case (see, e.g., HUD v. George, 2A Fair

Housing--Fair Lending para. 25,010 at 25,169 (HUD ALJ Aug. 16, 1991)

(ALJ assessed civil penalty against company but not individual who was

company's Secretary and part owner, because ``the evidence does not

show that [he] was personally responsible in fact for the

discriminatory conduct of [the company]. Rather, it appears he merely

implemented company policy.'' Id.). The December 18, 1997 rule did not

propose to change that. Moreover, while the rule made clear that the

Act allows an ALJ to assess multiple civil penalties in appropriate

circumstances, the rule did not, and could not have, proposed to

mandate the assessment of multiple civil penalties whenever the ALJ

finds multiple acts of discrimination in a single case, because the Act

makes civil penalties discretionary (see 42 U.S.C. 3612(g)(3) (``Such

order may, to vindicate the public interest, assess a civil penalty . .

.'') (emphasis added)).

Thus, where an ALJ finds multiple discriminatory housing practices,

under the six factors for determining civil penalties codified by this

interim rule, ALJs will consider the nature and circumstances of the

violation, each respondent's degree of culpability, and other factors

as justice may require in determining the amount to assess for each

violation. Accordingly, if a rogue employee in an otherwise law-abiding

management firm were responsible for repeated fair housing violations

unbeknownst to company officials and contrary to their instructions,

the ALJ could take that fact into consideration when determining the

number of civil penalties, if any, to be assessed against each

respondent, and the amount of

[[Page 6750]]

each. Because firms have a duty to exercise supervision over their work

force to ensure that its members do not violate the Act, an ALJ might

assess some civil penalty against the company even in that situation

(see the example in the response to the comment ``Proposed amendments

may be abused by testers'').

Comment: Multiple penalties may unfairly penalize small housing

providers. One commenter expressed concern that HUD's proposal to

permit the assessment of multiple civil penalties would have an unfair

impact on small housing providers. The commenter wrote that when a

housing discrimination case involves multiple violations it is

generally associated with a single property or individual. The

commenter also wrote:

[A]ccording to the 1990 U.S. Census, of the more than 40,455

firms that reported their business as ``operators of apartment

buildings,'' 39,903, or 98% are small businesses. With small

businesses one penalty is generally sufficient to change

discriminatory housing behavior.

The commenter also questioned why the proposed rule did not address

Subtitle B of the Small Business Regulatory Enforcement and Fairness

Act of 1996 (Pub.L. 104-121, approved March 29, 1996; 5 U.S.C. 601 note

et seq.) (SBREFA). Section 223, the only relevant substantive provision

of Subtitle B, provides in part that:

Each agency regulating the activities of small entities shall

establish a policy or program . . . to provide for the reduction,

and under appropriate circumstances for the waiver, of civil

penalties for violations of a statutory or regulatory requirement by

a small entity.

HUD Response. First, the commenter provided no basis for its

statement that ``with small businesses one penalty is generally

sufficient to change discriminatory housing behavior.''

Second, whether a business is large or small, the Act prohibits it

from committing housing discrimination not only on multiple occasions,

but also single occasions. (But see Section 803(b) of the Act, 42

U.S.C. 3603(b), exempting from certain provisions of the Act specified

small entities). Nevertheless, under the rule, ALJs are to consider six

factors in assessing civil penalties, including the financial ability

of respondent to pay, the nature and circumstances of the violation,

and other factors as justice may require. HUD believes that the

codification of these factors within the proposed rule provides

assurance that the changes will not unfairly burden small housing

providers with respect to the assessment of civil penalties against

them. (See, e.g., HUD v. Gaultney, 2A Fair Housing--Fair Lending para.

25,013 (HUD ALJ Sept. 27, 1991) (in race discrimination case,

respondent's civil penalty reduced due to consideration of his

financial circumstances). On the other hand, ALJs have consistently

held that a respondent has the legal burden of proving that its

financial resources are inadequate to pay a civil penalty. HUD v.

Dellipoali, 2A Fair Housing--Fair Lending para. 24,127 (HUD ALJ Jan. 7,

1997) at 26090. HUD does not intend to alter that burden by its

codification of the six factors.

With regard to the commenter's second concern, SBREFA requires that

an agency establish a policy regarding the reduction and, if

appropriate, the waiver of civil penalties for violations of a

statutory or regulatory requirement by a small entity. Section 223(a)

of SBREFA provides that, under appropriate circumstances, an agency may

consider a small entity's ability to pay in determining the amount of

any civil penalty to be assessed against it. In addition, section

223(b) of SBREFA specifically allows an agency to exclude from its

civil penalty reduction/waiver policy entities that have been subject

to multiple enforcement actions by the agency and those that have

committed willful violations of law.

HUD believes the six factors that ALJs consider when assessing

civil penalties, which this interim rule codifies, are consistent with

these SBREFA provisions. Under the rule, ALJs may consider the

financial ability of a respondent to pay when assessing a civil

penalty. To the extent that a small entity may have less financial

ability to pay a civil penalty than a large one, an ALJ may assess a

lower civil penalty against a small entity, when to do so would

otherwise be appropriate under this factor. (See HUD v. Gaultney, 2A

Fair Housing--Fair Lending para. 25,013 at 25,195 (HUD ALJ Sept. 27,

1991). On the other hand, under SBREFA, an agency can exclude entities

that have committed wilful violations of the law from its civil penalty

reduction policy. In cases heard by ALJs, where an ALJ finds that a

respondent wilfully committed a series of discriminatory housing

practices, the ALJ, applying, inter alia, the culpability factor, would

more likely assess multiple and higher penalties for such acts than

otherwise. If the ALJ did so, that would not offend the civil penalty

reduction/waiver provisions of the SBREFA. Likewise, an ALJ can assess

a higher civil penalty against a respondent who has been adjudged

previously to have committed discriminatory housing practices. Because

the SBREFA allows for an exclusion for entities that have been subject

to multiple enforcement actions by the agency, assessing a higher civil

penalty against a prior bad actor also would not offend the civil

penalty reduction/waiver provisions.

Comment: Proposed amendments may be abused by fair housing testers.

One commenter stated that the proposed amendments might be abused by

unscrupulous or overzealous fair housing testers:

We are also concerned that testing organizations could target an

individual employee and trap them into making multiple acts of

discrimination in order to financially hurt an owner or manager who

may be firmly committed to Fair Housing.

HUD Response. Fair housing testing has a long-standing history as a

method of gathering evidence as to whether landlords, real estate

agents, or others in the housing industry are discriminating on the

basis of protected class. Such testing has been consistently upheld

against challenge. (See, e.g., Havens Realty Corp. v. Coleman, 455 U.S.

363, 373-74 (1982) (``a tester who has been the object of a

misrepresentation made unlawful under 804(d) has suffered an injury in

precisely the form the statute was intended to guard against'');

accord, Chicago v. Matchmaker Real Estate Sales Center, 982 F.2d 1086,

1095 (7th Cir. 1992).) Indeed, such testing is perhaps the best way,

and sometimes the only way, to prove the existence of discrimination,

because it directly compares a housing provider's treatment of

similarly situated minority and non-minority applicants. A district

court commenting on Havens made a similar observation (see Independent

Living Resources v. Oregon Arena Group, 982 F.Supp. 698, 761 n.86 (D.

Ore. 1997) (``Testing was the most effective method--and perhaps the

only method--of enforcing the FHA'')).

The commenter's suggestion of a fair housing group ``targeting'' an

employee of an apartment owner or manager who is ``firmly committed to

Fair Housing'' does not withstand analysis. Nothing in the regulation

would make such a scenario more likely to occur than before. First,

multiple civil penalties against a respondent who committed multiple

discriminatory housing practices were not prohibited by regulation

previously, and, in fact, under some circumstances an ALJ would assess

them. (See, e.g., HUD v. Las Vegas Housing Authority, 2A Fair Housing--

Fair Lending para. 25,116 (HUD ALJ Nov. 6, 1995).) Second, due process

before a neutral ALJ stands between the charges of discrimination HUD

issues as a result of complaints a fair housing

[[Page 6751]]

organization (or any other complainant) files and an ALJ's assessment

of any civil penalty. In this situation, if the evidence showed that a

complaining testing organization conducted one or more of its tests

improperly or unfairly, HUD, if it found such evidence during the

investigation, would take that into account in making its determination

of reasonable cause or no reasonable cause. If the cases proceeded to

hearing and the ALJ determined that there was malfeasance by the

testing organization, the ALJ would take that into account in deciding

whether to find liability with respect to such tests, much less assess

a penalty (and, if so, how large). Third, the hypothetical fair housing

group that this commenter imagines, if it had a goal of wanting to hurt

the owner or manager financially without the possibility of assessments

of multiple civil penalties for multiple violations, alternatively,

could bring a series of separate cases, each based on one of a series

of multiple incidents, and seek not only to have a series of civil

penalties assessed against them, but possibly to have the later ones

enhanced pursuant to clauses 812(g)(3)(B) & (C) of the Act (42 U.S.C.

3612(g)(3)(B) and (C)). Accordingly, HUD does not believe that the rule

presents the potential problem the commenter raises.

On the other hand, under the law, a business owner or other

principal can be held vicariously liable for the acts of employees or

agents in the scope of their employment, even if the owner did not know

or approve of them; this regulation does nothing to alter that

preexisting legal truism. (See, Walker v. Crigler 976 F.2d 900, 904

(4th Cir. 1992) (where owner did not know of gender discrimination by

property manager, owner held liable because ``the duty of a property

owner not to discriminate in the sale or leasing of that property is

non-delegable'').) (See also, Marr v. Rife, 503 F.2d 735, 742 (6th Cir.

1974) (applying principals of respondeat superior liability to Fair

Housing Act violation)). Therefore, it is the responsibility of

apartment owners, managers, real estate brokers, lenders, etc. who are

``firmly committed to fair housing'' to supervise and train their

employees properly so that they do not commit a single act of housing

discrimination.

D. Commenters That Questioned HUD's Authority or Justification for

Issuing the Proposed Rule

Comment: HUD's reliance on FBI statistics is questionable. The

preamble to the proposed rule cited to FBI statistics indicating that

27% of hate crimes committed in 1996 were housing related (62 FR

66488). One commenter questioned these statistics. The commenter wrote

that the FBI ``does not collect information on how many hate crimes

involve housing discrimination, only on how many of these crimes are

`crimes against property' such as cross-burnings on the front lawn of a

house or anti-Semitic graffiti on other property such as an

automobile.'' The commenter went on to write:

Interestingly, of the 3,330 crimes against property included in

the 1996 FBI statistics, only two of those crimes reportedly

implicated acts involving multiple bias. Of those two incidents

covering all of 1996, one of the two was a car theft. Thus it

appears from the most recent source of statistics of the type that

were relied upon by HUD to explain the necessity of the new rule and

to justify the exigency of acting on an expedited basis, that there

was only one reported property incident in the entire United States

that could have possibly involved the type of conduct that the

proposed rule is intended to deter. (Emphasis in original.)

HUD Response. The commenter is correct in that the FBI's reported

hate crime statistics do not have a category that equates precisely

with discriminatory acts that violate the Act. Nevertheless, HUD

believes there is a correlation between hate acts committed against

someone's property which the FBI reports and discriminatory housing

practices under the Act. Accordingly, the citation to those statistics

in the preamble to the proposed rule provides some insight into the

number of hate crimes reported to the FBI that violated the Act.

HUD assumes that the commenter does not suggest that the

commenter's examples of burning a cross on someone's lawn or scrawling

anti-Semitic graffiti on their automobile, if done for the purpose of

forcing that person to move out of the neighborhood because of that

person's membership in a protected class, would not violate section 818

of the Act (42 U.S.C. 3617), as such acts, indeed, would violate that

section. (See, e.g., Stackhouse v. DeSitter, 620 F.Supp. 208, 210-211

(N. D. Ill. 1985) (firebombing of plaintiff's car for the purpose of

driving him out of his home because of his race violates section 818);

Seaphus v. Lilly, 691 F.Supp. 127, 131, 138-9 (N.D. Ill. 1988) (setting

fire to African-American condominium owner's front door, slashing his

tires, damaging the paint on his car, and barricading his door with

heavy objects and other acts of vandalism designed to coerce the

condominium owner to move because of his race violated section 818);

cf. HUD v. Lashley, 2A Fair Housing--Fair Lending para. 25,039 (HUD ALJ

Dec. 7, 1992) (respondent found liable under section 818 of the Act for

placing a bottle containing a flammable liquid and wick under the home

of an African-American family).)

The commenter also appears to believe that only those acts

involving ``multiple bias'' would provide justification for an ALJ to

assess multiple civil penalties under the proposed rule. This is not

correct. It is the commission of multiple acts, not an act based on

multiple bias, that would provide such justification.

Comment: The rule improperly proposed to broaden a penalty

provision without express direction from the Congress. The preamble to

the proposed rule stated that the Act and its legislative history are

ambiguous with respect to the issue of whether an ALJ may assess

multiple civil penalties for multiple discriminatory housing practices.

The preamble stated that, under the United States Supreme Court

decision in Chevron, U.S.A. Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837, 843 (1984), the interpretation of the agency in

such cases of statutory ambiguity will be upheld if it is ``based on a

permissible construction of the statute'' (62 FR 66488). One commenter

questioned HUD's reliance on the Chevron decision. Specifically, the

commenter cited case-law which appears to require that the civil

penalty provisions of the Act be narrowly construed. The commenter

wrote:

HUD's approach fails to consider the well-settled principle of

construction that ``penal statutes are to be construed strictly,''

Commissioner v. Acker, 361 U.S. 87, 91 (1959), and to temper its

proposed approach to an expanded interpretation of the [Act]

accordingly. In this regard, we note that the federal courts have

made clear that the rule of narrow interpretation is not limited to

criminal sanctions, but also is to be applied to penal provisions

``involving civil penalties.'' First National Bank of Gordon v.

Department of the Treasury, 911 F.2d 57, 65 (8th Cir. 1990).

HUD Response. This commenter seeks to apply the rule of strict

construction of penal statutes to resolve the statutory ambiguity HUD

identified in the preamble to the proposed rule. The commenter invokes

the maxim that an ambiguity in a penal statute should be resolved in

the defendant's favor (often referred to as the ``rule of lenity'') to

argue that HUD should resolve the statutory ambiguity against finding

that an ALJ can assess multiple civil penalties against a single

respondent when the ALJ has found that respondent committed multiple

separate and distinct acts of housing discrimination

[[Page 6752]]

in a single case. The rule of lenity, however, does not apply in the

manner that the commenter suggests.

``The rule of lenity . . . is not applicable unless there is an

`ambiguity or uncertainty in the language and structure of the Act,' ''

(Chapman v. United States 500 U.S. 453, 463, citing Huddleston v.

United States, 415 U.S. 814, 831 (1974)). The rule of lenity is

applied, if necessary, at the end of the process of statutory

construction, not at the beginning i.e., after considering the

traditional methods of statutory construction (language, structure,

legislative history and motivating policies of the statute) to resolve

the issue, and then only if these considerations have not been

successful (Chapman, supra; United States v. R.L.C., 503 U.S. 291, 305

(1992)). Where consideration of these other factors resolves the

ambiguity, the rule of lenity does not apply as there is no reason to

resort to it (Chapman, supra, at 464).

HUD has considered this commenter's arguments, and believes that

the rule of lenity is inapplicable to the statutory ambiguity in

question. This is so because consideration of the language, purpose,

legislative history and structure of the civil penalty provisions of

the Act resolves the statutory ambiguity in favor of HUD's

interpretation.

First, the language itself is easily read to authorize the

potential assessment of a civil penalty against a respondent for each

separate and distinct discriminatory housing practice an ALJ finds that

the respondent committed, rather than limiting an ALJ to a single civil

penalty assessment for all such practices the ALJ finds the respondent

committed:

If the administrative law judge finds that a respondent has

engaged or is about to engage in a discriminatory housing practice,

such administrative law judge shall promptly issue an order for such

relief as may be appropriate, which may include actual damages

suffered by the aggrieved person and injunctive or other equitable

relief. Such order may, to vindicate the public interest, assess a

civil penalty against the respondent. * * * (42 U.S.C. 3617(g)(3)

(emphasis added).)

The structure of the Act also supports HUD's interpretation. The

Act, at 42 U.S.C. 3602(f), defines a ``discriminatory housing

practice'' as a singular ``act'' that is unlawful under sections 804,

805, 806 of the Act (42 U.S.C. 3604, 3605, 3606, and 3617,

respectively). Since a single case can involve more than one such

``act,'' it follows that a single case can involve more than one

discriminatory housing practice. Applying the general statutory

definition of ``discriminatory housing practice'' to the language of

the civil penalty subsection supports the reading of that provision as

authorizing ALJs to assess more than one civil penalty against a single

respondent, where the ALJ has found that respondent to have committed

more that one separate and distinct discriminatory housing practice.

The Act's purpose, as demonstrated in its legislative history,

supports HUD's interpretation as well. The House Report stated,

``[t]wenty years after the passage of the Fair Housing Act,

discrimination and segregation in housing continue to be pervasive''

(H.R. No. 100-711 at 15, 1988 U.S. Code Cong. & Admin. News 2176).

Congress found that pervasive discrimination continued to exist because

it perceived a ``void'' in fair housing enforcement. Congress attempted

to fill that void, in part, by creating a more effective enforcement

system (H.R. No. 100-711, 100th Cong., 2d Sess., at 13 (1988), 1988

U.S. Code Cong. & Admin. News 2174).

A principal component of the more effective mechanism that the

Congress created was the administrative adjudication of fair housing

cases, and an important aspect of that administrative process was

authorizing ALJs to assess civil penalties where appropriate. In making

this authorization, the Congress recognized that civil penalties serve

to deter (H.R. No. 100-711 at 37, 1988 U.S. Code Cong. & Admin. News

2198 (deterrence one of the factors an ALJ to consider when assessing

civil penalties)) (See also Hudson v. United States, 118 S.Ct. 488, 496

(1997) (imposition of civil penalties will deter others from emulating

the conduct that gave rise to the penalties)).

HUD considers it intuitively obvious that the greater authority and

flexibility ALJs have in assessing civil penalties increases the

potential of deterring discriminatory housing practices. This rule is

designed to ensure that the Act's civil penalty provisions will be

applied, when appropriate, to reach more powerfully the repeat

wrongdoer, and serve to deter even more effectively other potential

wrongdoers. Thus, the Congressional goal of deterrence is enhanced by

reading the Act's civil penalty provision to authorize ALJs to assess

multiple civil penalties in cases involving multiple discriminatory

housing practices. Since the standard methods of statutory construction

resolve the identified statutory ambiguity in favor of the proposed

rule, it is not appropriate to apply the ``rule of lenity.''

Accordingly, HUD declines to adopt this commenter's approach to

construction of the Act.

Furthermore, the proposed rule is not accurately described as an

``expanded interpretation'' of the Act, as the commenter says. The

proposed rule merely made explicit what some HUD ALJs have already

construed the Act to mean. In HUD v. Las Vegas Housing Authority 2A

Fair Housing--Fair Lending para. 25,116 (HUD ALJ Nov. 6, 1995), the

respondent, for discriminatory reasons, first told the complainant that

a particular housing unit was not available, and then, some months

later, when complainant requested a transfer, refused to approve the

transfer, also for discriminatory reasons. These two separate

violations of the Act comprised a single case. The ALJ assessed two

separate civil penalties against the respondent, one for each violation

of the Act (Id. at 26,010-11). In HUD v. Sams (2A Fair Housing--Fair

Lending 25,070 (HUD ALJ March 11, 1994), aff'd on other grounds, 76

F.3d 375 (4th Cir. 1996)), the ALJ implicitly acknowledged that the Act

authorizes multiple civil penalty assessments against a single

respondent for that respondent's commission of multiple separate and

distinct discriminatory housing practices. The ALJ, however, declined

to assess more than one in the case before him because the ALJ viewed

each of the discriminatory acts involved as part of a series comprising

a single transaction and, therefore, a single discriminatory housing

practice for which the ALJ could only assess a single civil penalty.

This construction is incorporated in HUD's definition of separate and

distinct fair housing practice, which recognizes that a series of acts

may constitute a single discriminatory housing practice, if they are

continuing and part of the same transaction.

Comment: HUD's proposed interpretation contradicts the plain

language of the Act. One commenter questioned HUD's proposed

interpretation of the Act. The commenter wrote that HUD mistakenly

relied on the definition of ``discriminatory housing practice'' in

section 802 of the Act to justify the proposed amendments. According to

the commenter, the proposed rule contradicts the plain meaning of

section 812 of the Act (42 U.S.C. 3612). As the commenter wrote:

The most obvious fault in HUD's analysis lies in 42 U.S.C.

3612(g)(3)(A) [section 812(g)(3)(A) of the Act] which HUD

inadvertently did not quote in the proposed rule. HUD ignores the

temporal aspect and ignores Congress' requirement that the

respondent have been adjudged to have committed a prior

discriminatory. The proper construction of the intent of Congress is

[[Page 6753]]

evident. In any one proceeding, a respondent who has not previously

been found to have violated 42 U.S.C. 3604, 42 U.S.C. 3605, 42

U.S.C. 3606 and 42 U.S.C. 3617 [sections 804, 805, 806, 818 of the

Act] cannot be fined more than $10,000. (Emphasis in original.)

HUD Response. Subparagraphs 812(g)(3)(A-C) of the Act (42 U.S.C.

3612(g)(3)(A-C)), state that the maximum civil penalty that an ALJ can

assess can increase if the respondent has been adjudged to have

previously committed one or two or more prior discriminatory housing

practices within specified time frames. The commenter reads into this

language additional language that is not there i.e., the idea that ``in

any one proceeding'' a respondent, who has not been previously adjudged

to have committed a discriminatory housing practice, cannot be assessed

a total of more than $10,000 in civil penalties, regardless of how many

separate and distinct discriminatory housing practices the respondent

committed in the case at hand. (Indeed, the commenter's phrase ``in any

one proceeding'' is absent from the Act's civil penalty provisions.)

Rather, the Act ties the assessment of a civil penalty to a

respondent's commission of ``a discriminatory housing practice;'' and

the Act places no explicit limitation on the number of such penalties

that may be assessed ``in any one proceeding,'' if the number of

separate and distinct discriminatory housing practices found to have

been committed and the surrounding circumstances otherwise warrant (42

U.S.C. 3612(g)(3)). In other words, for a single discriminatory housing

practice, an ALJ may assess a respondent without prior adjudicated

violations a civil penalty up to $10,000; and if a similar respondent

committed more than one separate and distinct discriminatory housing

practice in a single case, the ALJ would have the discretion to assess

against the respondent a civil penalty up to $10,000 for each such

practice.

E. Commenters That Questioned HUD's Compliance With Rulemaking

Requirements

Comment: HUD should extend the public comment period. One commenter

wrote that given the importance of establishing effective fair housing

enforcement procedures, HUD should have provided the customary 60-day

public comment period for the proposed rule. The commenter recommended

that HUD provide the public with an additional 30-days to comment on

the proposed amendments. The commenter wrote:

We . . . respectfully request that comment period be extended

for a minimum additional period of thirty (30) days to permit a

meaningful review of the current record and to provide adequate time

for submission of comments that can be useful to HUD in more

accurately assessing the scope of the perceived problem and measures

appropriate to addressing it.

HUD Response. HUD recognizes the value and necessity of public

comment in the regulatory process, and HUD is providing the public with

an additional 60-days to comment on the amendments made by this interim

rule. HUD welcomes public comment on this interim rule. All comments

will be taken into consideration in the development of the final rule.

Comment: The preamble did not adequately explain proposed

definition of ``separate and distinct discriminatory housing

practice.'' One commenter wrote that the preamble to the proposed rule

did not adequately explain the definition of ``separate and distinct

discriminatory housing practice'' in the regulatory text. According to

the commenter, HUD's failure to explain the definition violates the

requirements of the Administrative Procedure Act (5 U.S.C. 551 et seq.)

(APA). The commenter wrote:

[Proposed Sec. ]180.671(b) states that not only will a

respondent be potentially liable for $10,000 [for] each separate

practice, the number of complainants will also serve to multiply any

potential fine, and the number of times that a separate violation

occurs will multiply each potential fine. No explanation is given

for this interpretation unless HUD's observation that such

interpretation is not prohibited and HUD's conclusory statement that

such an interpretation is reasonable is meant to show that the

interpretation [is] a justified interpretation of the statute. If

[this] is the case, HUD has misunderstood its legislative mandate

and ignored its duty under [section 553 of the APA] to state the

statutory basis for the rule and give a description of the subjects

and issues involved.

HUD Response. HUD does not agree with the assertions made by the

commenter. Specifically, HUD believes that the preamble to the December

18, 1997 proposed rule provided a thorough discussion of HUD's

rationale and statutory basis for the proposed amendments to the

regulations at 24 CFR part 180. Further, HUD believes that the December

18, 1997 proposed rule complied with all applicable statutory and

regulatory rulemaking requirements.

IV. Findings and Certifications.

Environmental Impact

In accordance with 24 CFR 50.19(c)(3) of the HUD regulations, the

policies and procedures contained in this interim rule set out

nondiscrimination standards and, therefore, are categorically excluded

from the requirements of the National Environmental Policy Act.

Executive Order 12612, Federalism

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that the policies

contained in this interim rule will have no federalism implications,

and that the policies are not subject to review under the Order. The

interim rule amends HUD's regulations governing the assessment of civil

penalties for Fair Housing Act cases. The rule is exclusively concerned

with the rules of practice and procedure applicable to administrative

proceedings before an ALJ under the Fair Housing Act. No programmatic

or policy changes will result from this rule that would affect the

relationship between the Federal government and State and local

governments.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)) has reviewed and approved this interim rule, and in so

doing certifies that the interim rule is not anticipated to have a

significant economic impact on a substantial number of small entities.

This interim rule explicitly interprets the Act to allow ALJs, where a

respondent has been found to have committed separate and distinct acts

of discrimination, to assess a separate civil penalty against the

respondent for each such act. The rule also amends 24 CFR part 180 to

describe how ALJs are to consider housing-related hate acts under the

six factors ALJs apply in determining the amount of a civil penalty to

assess against a respondent found to have committed a discriminatory

housing practice.

The rule will affect only those few small-entity housing providers

who are respondents in cases where HUD determines that there is

reasonable cause to believe that they committed multiple violations of

the Fair Housing Act and whose cases are then heard before an ALJ, who

may or may not then assess multiple civil penalties against them after

a hearing comporting with due process requirements. To date, the number

of entities who actually become respondents in Fair Housing Act cases

before ALJs is extremely few. For example, in FY 1994, the year when

the most administrative fair housing cases (through 1997) were

docketed, of the 325 cases HUD charged, 220 elected to be heard in

federal court, leaving only 115 to be heard by the ALJs. Of these

[[Page 6754]]

cases, civil penalties were only assessed against an even lesser

number: after hearings in 15 cases, and as part of a consent order in

another 12 cases, for a total of 27 cases, or 8.3% of the cases

docketed. The average civil penalty was $3,727.77. Only a few of these

cases involve multiple acts of housing discrimination.

Furthermore, ALJs have had the authority to assess multiple civil

penalties in instances where respondents have been found to commit

multiple discriminatory housing practices, and have done so in

appropriate circumstances. Thus, the economic impact of the rule on

small entities should not be substantially greater than that already

inherent in the Fair Housing Act.

Finally, the rule will not have a significant economic impact on a

substantial number of small entities because it requires ALJs to

consider each respondent's ability to pay when assessing one or more

civil penalties. Thus, everything else being equal, smaller entities

with diminished ability to pay would be subject to lower penalties.

Notwithstanding HUD's determination that this rule does not have a

significant economic impact on a substantial number of small entities,

HUD specifically invites comment regarding any less burdensome

alternatives to this rule that will meet HUD's objectives as described

in this preamble.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C.

1531-1538) establishes requirements for Federal agencies to assess the

effects of their regulatory actions on State, local, and tribal

governments and the private sector. This interim rule does not impose

any Federal mandates on any State, local, or tribal governments or the

private sector within the meaning of Unfunded Mandates Reform Act of

1995.

Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) reviewed this interim

rule under Executive Order 12866, Regulatory Planning and Review. OMB

determined that this interim rule is a ``significant regulatory

action,'' as defined in section 3(f) of the Order (although not

economically significant, as provided in section 3(f)(1) of the Order).

Any changes made to the interim rule subsequent to its submission to

OMB are identified in the docket file, which is available for public

inspection in the office of the Department's Rules Docket Clerk, Room

10276, 451 Seventh Street, SW, Washington, DC 20410-0500.

Catalog of Federal Domestic Assistance Number

The Catalog of Federal Domestic Assistance Number for this program

is 14.400.

List of Subjects in 24 CFR Part 180

Administrative practice and procedure, Aged, Civil rights, Fair

housing, Individuals with disabilities, Intergovernmental relations,

Investigations, Mortgages, Penalties, Reporting and recordkeeping

requirements.

Accordingly, 24 CFR part 180 is amended as follows:

PART 180--HEARING PROCEDURES FOR CIVIL RIGHTS MATTERS

1. The authority citation for 24 CFR part 180 continues to read as

follows:

Authority: 29 U.S.C. 794; 42 U.S.C. 2000d-1, 3535(d), 3601-3619,

5301-5320, and 6103.

2. Section 180.670 is amended by revising paragraph (b)(3)(iii)

introductory text to read as follows:

Sec. 180.670 Initial decision of ALJ.

* * * * *

(b) * * *

(3) * * *

(iii) Assessing a civil penalty against any respondent to vindicate

the public interest in accordance with Sec. 180.671.

* * * * *

3. Section 180.671 is added to read as follows:

Sec. 180.671 Assessing civil penalties for Fair Housing Act cases.

(a) Amounts. The ALJ may assess a civil penalty against any

respondent under Sec. 180.670(b)(3) for each separate and distinct

discriminatory housing practice (as defined in paragraph (b) of this

section) that the respondent committed, each civil penalty in an amount

not to exceed:

(1) $11,000, if the respondent has not been adjudged in any

administrative hearing or civil action permitted under the Fair Housing

Act or any State or local fair housing law, or in any licensing or

regulatory proceeding conducted by a Federal, State or local

governmental agency, to have committed any prior discriminatory housing

practice.

(2) $27,500, if the respondent has been adjudged in any

administrative hearing or civil action permitted under the Fair Housing

Act, or any State or local fair housing law, or in any licensing or

regulatory proceeding conducted by a Federal, State, or local

government agency, to have committed one other discriminatory housing

practice and the adjudication was made during the five-year period

preceding the date of filing of the charge.

(3) $55,000, if the respondent has been adjudged in any

administrative hearings or civil actions permitted under the Fair

Housing Act or any State or local fair housing law, or in any licensing

or regulatory proceeding conducted by a Federal, State, or local

government agency, to have committed two or more discriminatory housing

practices and the adjudications were made during the seven-year period

preceding the date of the filing of the charge.

(b) Definition of separate and distinct discriminatory housing

practice. A separate and distinct discriminatory housing practice is a

single, continuous uninterrupted transaction or occurrence that

violates section 804, 805, 806 or 818 of the Fair Housing Act. Even if

such a transaction or occurrence violates more than one provision of

the Fair Housing Act, violates a provision more than once, or violates

the fair housing rights of more than one person, it constitutes only

one separate and distinct discriminatory housing practice.

(c) Factors for consideration by ALJ. (1) In determining the amount

of the civil penalty to be assessed against any respondent for each

separate and distinct discriminatory housing practice the respondent

committed, the ALJ shall consider the following six (6) factors:

(i) Whether that respondent has previously been adjudged to have

committed unlawful housing discrimination;

(ii) That respondent's financial resources;

(iii) The nature and circumstances of the violation;

(iv) The degree of that respondent's culpability;

(v) The goal of deterrence; and

(vi) Other matters as justice may require.

(2)(i) Where the ALJ finds any respondent to have committed a

housing-related hate act, the ALJ shall take this fact into account in

favor of imposing a maximum civil penalty under the factors listed in

paragraphs (c)(1)(iii), (iv), (v), and (vi) of this section.

(ii) For purposes of this section, the term ``housing-related hate

act'' means any act that constitutes a discriminatory housing practice

under section 818 of the Fair Housing Act and which constitutes or is

accompanied or characterized by actual violence,

[[Page 6755]]

assault, bodily harm, and/or harm to property; intimidation or coercion

that has such elements; or the threat or commission of any action

intended to assist or be a part of any such act.

(iii) Nothing in this paragraph shall be construed to require an

ALJ to assess any amount less than a maximum civil penalty in a non-

hate act case, where the ALJ finds that the factors listed in

paragraphs (c)(1)(i) through (vi) of this section warrant the

assessment of a maximum civil penalty.

(d) Persons previously adjudged to have committed a discriminatory

housing practice. If the acts constituting the discriminatory housing

practice that is the subject of the charge were committed by the same

natural person who has previously been adjudged, in any administrative

proceeding or civil action, to have committed acts constituting a

discriminatory housing practice, the time periods in paragraphs (a) (2)

and (3) of this section do not apply.

(e) Multiple discriminatory housing practices committed by the same

respondent; multiple respondents. (1) In a proceeding where a

respondent has been determined to have engaged in, or is about to

engage in, more than one separate and distinct discriminatory housing

practice, a separate civil penalty may be assessed against the

respondent for each separate and distinct discriminatory housing

practice.

(2) In a proceeding involving two or more respondents who have been

determined to have engaged in, or are about to engage in, one or more

discriminatory housing practices, one or more civil penalties, as

provided under this section, may be assessed against each respondent.

Dated: January 12, 1999.

Andrew Cuomo,

Secretary.

[FR Doc. 99-3126 Filed 2-9-99; 8:45 am]

BILLING CODE 4210-28-P