MAPC Publishes: “Landlords Can Fight Nuisance Housing Discrimination Lawsuits”

Many local cities have contracts with private organizations to provide fair housing counseling for residents.  These contracts are intended to provide lower income renters in those cities with a resource for understanding their rights as tenants and avenues for redressing unfair and illegal treatment by landlords.

In practice, however, a disturbing trend has emerged.  Under the guise of being fair housing advocates, some of these organizations are using their fair housing advocacy business model as nothing more than a profit center for filing nuisance lawsuits against landlords and making money off settlements.

Under both California and federal housing discrimination laws, fair housing advocates have standing to be plaintiffs in lawsuits against landlords, despite the fact that such advocates are not tenants directly affected by the landlord’s practices.  Instead, such advocates have standing to sue not only to stop the allegedly illegal practices of the landlord on behalf of tenants, but to recover the advocate’s costs of “investigating” and discovering the illegal practices.

This standing has given some fair housing counseling services an incentive to inflate or make up alleged violations at apartment complexes and recruit tenants at those complexes to be plaintiffs in housing discrimination cases.  Both state and federal law allow for recovery of attorney’s fees by an aggrieved plaintiff in housing discrimination litigation in almost all circumstances where the plaintiff prevails.  So if a jury makes a token award to a plaintiff –  e.g., a plaintiff claims $1 million in damages from “pervasive” discrimination at an apartment complex, but a jury finds that there were only technical and unintentional violations of law and awards only $5,000 – the landlord can nonetheless be on the hook for the entire attorney’s fee bill for the “prevailing” plaintiff, which bill often exceeds six figures

Thus, nuisance value cases are driven to settlement by the specter that the landlord who asserts legitimate defenses to overblown and false claims will nonetheless be on the hook for hundreds of thousands of dollars in attorney’s fees for both the landlord’s attorney and plaintiff’s attorney.  Further, the law authorizing attorney’s fees for prevailing plaintiffs is not so generous to prevailing defendants.  Defendants who successfully defend a case to a $0 verdict are still not entitled to recover their attorney’s fees except in the rarest of circumstances.  The incentive then for a landlord to settle, with all risk and no reward for fighting a nuisance discrimination suit, is very high.

Some fair housing advocates know this, which is why they use their advocacy contracts with cities to not just expose the bad landlords in those cities, but to create litigation against landlords who are not violating discrimination laws, or if they are, are committing a minor technical violation unknowingly and unintentionally, and who would correct the technical violation immediately if given any sort of notice.  Thus, forcing settlement from these innocent landlords, these fair housing advocates who have adopted this profiteering business model then use these “results” to trumpet to cities how effective their housing advocacy services are, and to lobby for renewed fair housing advocacy contracts with those cities.

The worst aspect of this transmutation of victim’s rights advocacy to a profit center is that there is a perverse incentive for these advocates to coach tenants to commit perjury.  Some fair housing advocates encourage tenants to outright  lie about alleged discrimination or sign witness statements wholly drafted by the fair housing investigator that reflect made up discrimination claims never suffered by the tenant.  Worst of all, tenants are recruited en masse to join lawsuits with the fair housing advocate with unfair and sometimes undeliverable promises to the tenant of immunity from eviction, freezes in their monthly rent, or outright guarantees of specific jury awards if the tenants join the lawsuit.

These fair housing lawsuits are starting to take on the pernicious characteristics of the “unfair business practice” lawsuits of the early 2000s that led to an Attorney General investigation, a change in consumer laws to require actual standing for unfair business practice lawsuits, and disbarment for several consumer attorneys preying on small businesses with nuisance suits.  Unlike those lawsuits, however, government will likely not be investigating the fair housing advocates perpetrating these false discrimination shakedowns, as they are not politically-viable targets, and landlords are unsympathetic victims.

There is a way, however, for innocent landlords to fight back.  The advocates’ practice of bundling tenant plaintiffs and presenting them to a selected law firm to file a plaintiff’s action against the landlord is, in most instances, a violation of the Business and Professions Code prohibitions against non-attorneys soliciting clients for attorneys.  Where these fair housing advocates have a select group of law firms and attorneys that they repeatedly use to file such nuisance lawsuits, the advocates’ act of bundling the tenants and giving them to the advocates’ preferred attorney is a classic “running and capping” scenario prohibited under the law.  So too, most of these advocates are not certified legal referral services for whom such bundling might nonetheless be legal.

Thus, the landlord who wants to fight made up discrimination claims can countersue the fair housing advocate for violation of Business and Professions Code section 17200.  Turning the tables on these advocates through a legitimate countersuit can then put the landlord in the better litigation position and force an advantageous settlement or outright dismissal of the nuisance lawsuit.

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