The Supreme Court just ruled that individual broker-owners are not personally liable for the acts of agents who commit fair housing law violations. But corporations can still be held liable. In the case of Meyer v. Holley, No. 01-1120, owner/broker Meyer is the only stockholder in his company, and may face 'vicarious liability' as the corporation behind the ownership of Triad, Realtors(r).

See PDF file of the decision by clicking here.

What happened was that an interracial couple, Emma and David Holley, alleged that they were discriminated against for reasons of race by a real estate agent of Triad, Realtors by the name of Grove Crank, according to reports.

They filed a claim under the Fair Housing Act against Crank and Triad, Realtors, for whom Crank worked. The couple also personally sued Meyer, claiming that he also was responsible for the agent's alleged conduct. In a suit filed by both the Holleys and Brooks Bauer, the builder whose home the Holleys wished to buy, it was alleged that Crank talked about the Holleys in derogatory terms and failed to give the builder their offer on a home. He later found that the Holleys were willing to pay $20,000 more than the buyer he accepted. Had he known about the Holleys offer, he would have sold the home to them.

According to reports, the justification for suing Meyer as an individual was because neither Crank nor Triad Realtors had sufficient assets to pay a judgment, and Triad's insurance policy excludes liability for racial discrimination as well as other violations of Fair Housing laws.

However, that line of reasoning hit a snag when the case was dismissed by the trial court, Federal District Court in Los Angeles. According to the NAR, the trial court "applied well-recognized principles to dismiss the Fair Housing Act claims against the individual owner, holding that vicarious liability principles permitted only the corporation, and not the individual owner and officer of the corporation, to be liable for misconduct by the corporation's agents."

The Ninth Circuit Court reversed the decision, says the NAR, concluding that traditional vicarious liability rules did not control with respect to the personal liability of corporate shareholders and officers in Fair Housing Act cases, and that owners and officers may be liable "simply on the basis that the owner or officer controlled (or had the right to control) the actions of the employee."

In a 9-0 decision, the Supreme Court reversed that conclusion of the Ninth Circuit Court. The Supreme Court opinion, delivered by Justice Stephen Breyer, said that the Fair Housing Act has not "extended traditional vicarious liability rules in that way."

NAR spokesperson Lucien Salvant explains, "The courts resolved that the Holleys can not bring a discrimination suit against David Meyer as an individual, but a corporation can be sued."

Meyer is the only shareholder in his corporation.

What happens next? "When it goes back to the Ninth Circuit Court, the court has to resolve some issues that the Supreme Court raised, then the Ninth Circuit Court would send the case back to trial court, unless they came to such a controversial decision that it goes to the Supreme Court again."

Says Laurie Janik, general counsel to the NAR, "NAR is pleased that the Supreme Court adopted the position advanced by NAR in its amicus curiae (friend of the court) brief that traditional principles of vicarious liability apply in fair housing cases. As a result, the court found that innocent officers and owners of residential real estate corporations will not be held personally liable for the unlawful conduct of the corporation's employees or agents."

While individual broker-owners are not personally liable for the acts of agents who commit fair housing law violations, broker-owners are not out of the woods, yet. A court decision could go a number of ways.

"This case hasn't yet come to trial," points out Salvant. "We are happy that the broker can’t be sued as an individual. That goes to the heart of why people form corporations so they can’t be sued as an individual."

Published: January 24, 2003

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