Austin v. Miller

Background

Fair Housing Advocates of Northern California, Tenisha Tate-Austin, and Paul Austin sued Janette C. Miller and Perotti Real Estate Appraisals, Inc. The Austins, described in the opinion as an African American couple, owned a house in Marin City, California. They alleged that Miller appraised the house at $995,000 in connection with a planned mortgage refinancing, while another appraisal issued after the Austins hid their family photographs and had a white friend pose as the homeowner valued it at $1,482,500.

The plaintiffs alleged seven claims against the Miller Defendants: violations of the federal Fair Housing Act; California’s Fair Employment and Housing Act; Sections 1981 and 1982 of the Civil Rights Act of 1866; California’s Unruh Civil Rights Act; California’s Unfair Competition Law; and negligent misrepresentation. The Miller Defendants moved under Rule 12(b)(6), which allows dismissal when a complaint does not allege enough facts supporting a legally recognized claim.

Fair Housing Act claim

The court rejected the Miller Defendants’ arguments that the Fair Housing Act did not apply to the dispute. The court held that the Act covers appraisals connected with financing or refinancing a home under Section 3605, and that the statutory exemption for certain owner-sold or owner-rented single-family homes did not apply because this case involved refinancing rather than a sale or rental.

The court found the allegations sufficient to support a plausible disparate-treatment claim. Disparate treatment means intentional discrimination, which may be shown when race was a motivating factor in the challenged conduct. The complaint alleged that Miller knew the Austins were African American, selected allegedly noncomparable properties in Marin City, made downward adjustments to properties in predominantly white surrounding areas, described Marin City as having a “distinct marketability,” valued the home substantially below other appraisals, and departed from recognized appraisal methods.

The court dismissed the Fair Housing Act claim to the extent it relied on Sections 3604(a) and 3604(c). It reasoned that those provisions generally concern the sale or rental of a dwelling, or conduct that makes housing unavailable, while the Austins already owned the house before and after refinancing. The court denied dismissal to the extent the claim relied on Section 3605, which covers discrimination in residential real-estate-related transactions such as appraisals connected with refinancing, and Section 3617, which prohibits interference with rights protected by the Act.

The court also found that FHANC adequately alleged that it was an “aggrieved person” because the challenged conduct allegedly caused it to divert staff time and financial resources from other activities and frustrated its mission.

State and civil-rights claims

The court denied dismissal of the Fair Employment and Housing Act claim. It concluded that the relevant California provisions protect substantially the same rights as the federal provisions under which the plaintiffs had adequately pleaded claims.

The court also denied dismissal of the claims under Sections 1981 and 1982 of the Civil Rights Act of 1866. It rejected the argument that a denied loan application was required for a claim based on a discriminatory appraisal. It also rejected the argument that the statutes could not apply because the alleged undervaluation did not prevent the Austins from refinancing. The court treated the alleged undervaluation of Black-owned property as legally relevant and concluded that the complaint adequately alleged race-based interference with equal treatment and with the Austins’ ability to use their property in connection with a loan.

The court denied dismissal of the Austins’ Unruh Civil Rights Act claim. It held that appraisers fall within the Act’s broad definition of a “business establishment” and that the complaint sufficiently pleaded a race-discrimination claim under the same analysis used for the related federal housing claim.

Unfair competition and negligent misrepresentation

The court granted the motion as to the Unfair Competition Law claim. The plaintiffs did not identify with sufficient clarity the specific statutory violation underlying that claim or plead the supporting facts with reasonable particularity. Incorporating all of the complaint’s factual allegations by reference was not enough.

The court also granted the motion as to the negligent-misrepresentation claim. The plaintiffs alleged that they relied on Miller’s appraisal, but the court found those allegations insufficient because the Austins were shocked by the low valuation, obtained another appraisal, and were able to refinance based on the second appraisal. The court did not address the Miller Defendants’ additional argument concerning whether they owed a duty to provide accurate information.

Disposition

Judge Maxine Chesney granted in part and denied in part the Miller Defendants’ motion to dismiss. The motion was granted as to the Fair Housing Act claim based on Section 3604, and as to the Unfair Competition Law and negligent-misrepresentation claims. The motion was denied as to the Fair Housing Act claim based on Sections 3605 and 3617 and as to the Fair Employment and Housing Act, Sections 1981 and 1982, and Unruh Civil Rights Act claims. The court granted plaintiffs leave to amend, requiring any amended complaint to be filed by May 6, 2022.