A Case Study In Pretext Racial Discrimination

In Osborn v. Kellogg, 547 N.W.2d 504 (Neb. 1996), a rental applicant (“applicant”) filed a complaint with the Nebraska Equal Opportunity Commission (NEOC) alleging that the landlord rejected her application because her live-in boyfriend was black. NEOC found that the (legitimate) reasons offered by landlords for refusing the applicant’s rental application were, in fact, a pretext for intentional housing discrimination and awarded the applicant damages.

The applicant was a 31-year-old white female and the mother of an 11-year-old girl (from another relationship). Applicant’s boyfriend was a 41-year-old black male. The applicant attempted to lease the landlord’s home, which was managed by a property manager. Before submitting an application, the property manager overheard the applicant talking to someone about trying to find a rental. The property manager approached her and stated that she had rental space for lease.

At that time, the property manager and applicant discussed some of the lease terms, and the property manager gave the impression that the applicant would make a good fit for the rental. Later, the applicant went to view the house with the property manager; and at that time, the property manager asked the applicant if her boyfriend could fix some (broken) items on the property and keep the gutters clean. The applicant responded in the affirmative. Things appeared on track for renting to the applicant.

The following day, the property manager met the applicant, but this time with her boyfriend, at the house. The property manager gave them two rental applications and stated they needed to give her a deposit check. About 10 minutes later, the boyfriend started working on fixing some of the property items. The applicant returned the completed applications with the deposit check shortly thereafter. The property manager told the applicant that the property owner would make the final decision on whether to accept their application.

About two days later, the applicant received a denial letter from the property manager rejecting their applications. The reasons given follow:

Although you’re a really nice girl, we like to limit the number of people residing at any one residence to no more than three total. This is based on 30 years experience. With the tenant upstairs already in residence now for four years, the total with your applications would come to four people. Also, we feel because the downstairs unit has only one bedroom, there really isn’t room for three people to be satisfied for very long of a time. Therefore, we try to rent to only one person in that unit and not more than two people.

Although I have never met your boyfriend, and no references were [provided] on his application form, his income wouldn’t be sufficient to cover the expenses should anything happen to you, i.e., severe illness or loss of employment.

When they received this denial letter, the applicant and her boyfriend had already given notice to their current landlords that they would be moving, believing that their applications would be approved. For a period of time thereafter, landlord leased the property to Ying Li or Jimmy Suggett at different times, and the circumstances of their rental application and agreement played a factor in NEOC’s decision finding discrimination. In the denial letter, the property manager listed only four reasons for rejecting the application, but at trial with NEOC, the landlords claimed that there were in fact at least 16 reasons for rejecting the application.[1] Adding these reasons at trial did not really help the landlord.

To prevail in this case, (1) plaintiff (applicant) had to establish a prima facie case of discrimination; (2) if the plaintiff succeeded in so doing, defendant (landlord) had the burden of articulating a legitimate, nondiscriminatory reason for its action; and (3) if defendant successfully rebutted with a legitimate, nondiscriminatory reason, plaintiff had to establish by a preponderance of the evidence that the legitimate reason offered by the defendant was not its true reason, but a pretext for discrimination.

NEOC first concluded that applicant met her burden of establishing a prima facie case of housing discrimination and but then concluded that landlords met their burden of articulating legitimate, nondiscriminatory reasons for rejecting the application. Although the landlords gave many reasons for rejecting the application, NEOC found that only the following six reasons were legitimate, nondiscriminatory reasons for their action:

(1) landlords wanted to limit the total number of people in the house to three,

(2) there was insufficient space for three people to live in the lower half of the house,

(3) the boyfriend applicant did not list any credit references and his income would be insufficient to cover expenses if the applicant was unable to work,

(4) applicant’s dog was unacceptable,

(5) applicant and her boyfriend were not married and the child would have to pass through their bedroom to get to the bathroom, and

(6) the upstairs tenant did not want any downstairs tenants who smoked.

NEOC concluded that applicant met her final burden that the reasons offered by the landlords were not their true reasons, but were, instead, a pretext for intentional housing discrimination. NEOC found the following as evidence of pretext:

1) landlord’s testimony that she wanted to limit the total number of occupants in the whole residence (upper and lower units) to three; yet she rented to the Li family which had five members; and she also rented to the Suggett family which had three members, just  as the applicant’s family did.

2) landlord’s requiring two separate rental applications from the applicant and her boyfriend, while only requiring one from the Li Family and Suggett Family.

3) landlord’s requirement that the applicant have a secondary source of income, when no such demand was made upon Ying Li or Jimmy Suggett. Complainant’s total income was approximately $ 20,000.00 per year, which was about the same as Ying Li’s annual income. Mrs. Li was unemployed and provided no additional income. Jimmy Suggett’s annual income was approximately $12,000.00, which was far less than the Complainant earned annually. Mrs. Suggett was unemployed and provided no additional income. Nevertheless, Mr. Greene’s $ 9,600.00 annual salary was a secondary source of income for the Complainant. However, the Respondents still would not rent to her.

4) applicant had been on both of her current jobs in excess of six years; the boyfriend had been on his current job for approximately three years; Ying Li had been on his current job for only one year; and Jimmy Suggett had been on his current job for only nine months.

5) landlord denial letter mentions the lack of bank references and credit references on the boyfriend’s rental application as a reason for the rejection. Notably, Ying Li’s rental application did not list credit references; and Jimmy Suggett’s rental application did not contain either bank references or credit references. The applicant’s rental application was complete with bank references, credit references and person references, yet applicant was rejected for the housing.

6) landlord’s indicated that a dog would be acceptable, and her subsequent usage of the existence of applicant’s dog as a reason for the rejection.

7) landlord’s attempt to shun responsibility for the rejection, by suggesting that the tenant in the upstairs unit did not want a smoker living in the lower unit.

NEOC consequently ordered landlords to (1) pay applicant $ 900 (the difference in rent for the period June 1, 1993, to May 31, 1994); (2) cease and desist from maintaining the discriminatory housing practice of refusing to rent any house, duplex, or apartment to any individual on account of that person’s race or race by association; (3) pay applicant $ 1,197.60 in attorney fees and costs; and (4) pay $ 2,000 as a civil penalty for the discriminatory acts committed by them against applicant.

The landlord sought review of NEOC’s decision from the district court. In its review, the trial court affirmed the ruling in favor of the applicant and held the following:

1) where the applicant qualified as an “aggrieved person,” applied for and was qualified to rent the premises, her application was rejected, and the housing remained available, she met her initial burden of proof;

2) the trial court did not err in determining that the landlords stated six legitimate reasons for rejecting the applicant’s rental application and thus defeated the presumption raised by the applicant’s prima facie case; but

3) the competent evidence supported the trial court’s finding that the reasons given by the landlords for rejecting the application were a pretext for discrimination; and

4) the evidence supported an award of $ 900 to the applicant for the increased cost of renting another location.

[1] (1) property manager did not want two unmarried people living together because she felt that it was morally wrong, although her son and his wife lived together before their marriage; (2) applicant wanted two bedrooms and a shower, both of which the lower half of the house did not contain; (3) applicant had a dog, which both landlord and a terminally ill neighbor requested that the new tenant not have; (4) applicant proved unreliable and untrustworthy because she “played sick” from work, did not return the key to the house as requested, and returned the applications and deposit during work hours at the DMV, contrary to the property manager’s instructions; (5) boyfriend had no credit references; (6) she had not met boyfriend and could not understand why a roofer would not get  off work until 11 pm.; (7) boyfriend’s income was insufficient if applicant got sick or lost her job; (8) she did not want an unsupervised 11-year-old girl in the house; (9) the tenant upstairs did not want tenants downstairs who smoked; (10) applicant received a bad reference from her prior landlord; (11) applicant wanted to move in before June 1, 1993; and (12) landlord told her that he did not want a “‘bunch of singles'” living in the house.