Shareholders, officers not liable for employee's discrimination.

• Author: Ziemer, David

Byline: David Ziemer

The Fair Housing Act imposes vicarious liability on a principal or employer in accordance with traditional agency principles, and therefore, the mere authority of a corporation's shareholder and president to control employee conduct is insufficient to create such liability, the United States Supreme Court held on Jan. 22.

Emma Mary Ellen and David Holley, an interracial couple, tried to buy a house in California. A real estate corporation, Triad, Inc., had the house listed for sale. According to the Holleys, Grove Crank, a Triad broker, prevented the Holleys from obtaining the house for racially discriminatory reasons.

The Holleys brought a lawsuit in California federal court against Crank and Triad, alleging a violation of the Fair Housing Act. They later filed a separate suit against David Meyer, Triad's president and sole shareholder. The suit claimed that Meyer was vicariously liable in one or more of these capacities for Crank's unlawful actions.

The two lawsuits were consolidated by the district court, which later dismissed the fair housing claims against Meyer, holding that the Act does not impose personal vicarious liability on corporate officers and owners.

The court then certified its judgment as final to permit the Holleys to appeal the holding. The Ninth Circuit reversed, holding that the criteria for vicarious liability is different under the Act than under general principles of tort law.

The Ninth Circuit determined that the Act provided vicarious liability "for those who direct or control or have the right to direct or control the conduct of another" - even if they were not at all involved in the discrimination itself and even in the absence of any traditional agent/principal or employee/employer relationship, 258 F.3d at 1129, 1131.

The U.S. Supreme Court granted Meyer's petition for certiorari and reversed in a unanimous decision by Justice Stephen Breyer.

The Statute

The act forbids, in relevant part, "any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate," because of race. 42 U.S.C. 3605(a). Section 3602(d) defines "person" to include individuals, corporations, partnerships, associations, labor unions, and other organizations.

Vicarious Liability

Although the act says nothing about the subject, the court noted that it is "well established that the Act provides for vicarious liability." Under traditional vicarious liability rules...