Xia v. 65 West 87th Street Housing Development Fund Corporation

Background

Eva Xia and Paul Privitera sought to buy Unit 4 in a five-unit housing cooperative at 65 West 87th Street. Xia is a Chinese-American woman, and Privitera is a white man. The building is owned by a New York Housing Development Fund Corporation, which provides affordable housing subject to income limits. The purchase required approval by the building’s board.

The couple first submitted financial information in June 2019, and the seller accepted their offer. The purchase contract was contingent on board approval. During the approval process, the board created a three-member special committee, revised the purchase application, added fees and deposits, and required additional financial, conflict-of-interest, and other documents. The revised application increased fees and deposits by approximately $12,000 compared with the earlier application.

The plaintiffs submitted applications in November 2019 and February 2020. The special committee rejected both applications, citing missing documents, inconsistencies, financial disclosures, questions about the couple’s prior properties and rental income, and uncertainty about whether they met applicable income limits. The February rejection did not state a reason. After the rejection, the board removed several of the new application requirements and reduced or eliminated most of the increased fees.

Claims and Arguments

The plaintiffs claimed that the defendants rejected their application because Xia is Asian-American. They brought claims under the Fair Housing Act, the Civil Rights Act of 1866, the New York State Human Rights Law, and the New York City Human Rights Law. The defendants argued that their decision was based on legitimate financial and application-related concerns, not national origin or race.

The court applied the burden-shifting framework used for discrimination claims. Under that framework, a plaintiff first must show facts supporting an initial inference of discrimination. The defendant then must identify a legitimate, nondiscriminatory reason for the challenged action. The plaintiff must then show that the stated reason may be a pretext, meaning a cover for discrimination.

The court found that the plaintiffs established an initial case of housing discrimination: Xia belonged to a protected class, the plaintiffs sought and were qualified to purchase the apartment, they were rejected, and the apartment remained available. The court also found that the defendants offered legitimate nondiscriminatory reasons because the applications were incomplete or raised concerns about financial eligibility. The court rejected the defendants’ argument that the business judgment rule completely protected the board’s decision, explaining that discriminatory decision-making is not protected by that rule.

Reasons Summary Judgment Was Denied

The court identified several factual disputes that a jury could resolve in the plaintiffs’ favor. These included whether the defendants departed from their ordinary application process; whether the special committee and the exclusion of certain board members were justified; whether the new documentation requirements and increased fees were imposed for legitimate reasons; and whether the defendants applied their income-cap method consistently and correctly.

The court also noted evidence that could support an inference of discriminatory intent. The application requirements changed substantially after the plaintiffs began the process and were largely changed back after their applications were rejected. The court considered evidence that an earlier applicant had not been rejected despite failing to provide some underlying tax forms. It also considered statements and conduct involving Asian-American residents or prospective buyers, including comments about a former Asian-American tenant and an account that a board member sprayed Lysol near an Asian prospective buyer.

The court did not decide that discrimination occurred. Instead, it held that the evidence could allow a reasonable jury to find that the defendants’ stated reasons were not their only reasons and that racial or national-origin discrimination was a motivating factor. Because the dispute involved the defendants’ intent and credibility, the court concluded that it could not be resolved on summary judgment.

Disposition

Judge Ramos denied the defendants’ motion for summary judgment. The opinion directed the parties to appear for a telephone conference and directed the clerk to terminate the motion.