Real-estate agency owners win liability protection in Supreme Court.

Owners of real-estate corporations cannot be held personally liable under the federal Fair Housing Act (FHA) for discrimination by their agents, the U.S. Supreme Court has ruled.

In Meyer v. Holley, a unanimous Court vacated and remanded a Ninth Circuit decision holding that David Meyer, owner and president of California's Triad Realty, could be held responsible for alleged racial discrimination by one of his agents. (No. 01-1120, WL 141310 (U.S. Jan 23, 2003).)

"No convincing argument supports the Ninth Circuit's decision to apply nontraditional vicarious liability principles" toward designated brokers or corporate officers, Justice Stephen Breyer wrote for the Court.

The ruling is significant in part because Triad and George Crank, the agent alleged to have discriminated against Emma and David Holley in 1996, have no significant assets and are considered essentially judgment-proof. The Holleys, an interracial couple, claim that Crank called them a "salt-and-pepper team" and used a racial epithet while obstructing their attempts to purchase a house through Triad.

"Nothing in the [FHA's] language or legislative history supports the existence of a corporate owner's or officer's `nondelegable duty' not to discriminate," Breyer wrote. "Such a duty imposed on a principal would ... create liability although the principal has done everything that could reasonably be required of him, and irrespective of whether the agent was acting with or without authority."

The decision drew immediate praise from the National Association of Realtors, whose amicus brief supported Meyer. In a statement, the organization said the Court protected "innocent officers and owners of residential real-estate corporations" from their employees' unlawful conduct.

In remanding the case to the Ninth Circuit, Breyer said the Holleys remain "free" to raise arguments the justices did not address. During oral arguments before the Supreme Court, the Holleys' attorneys argued that Triad's shaky finances and lack of attention to business formalities should strip Meyer of the liability protections typically afforded corporate partners. Piercing the corporate veil would allow the couple to hold Meyer personally liable for Crank's actions.

David Hudson, an attorney with the First Amendment Center at Vanderbilt University who has followed the case, expressed hope that the Ninth Circuit would take up that argument on remand.

"Assuming what the Holleys said about Crank was true, these people did suffer real damage," he said. "The spirit of the FHA is that you should be able to buy a house without experiencing that kind of discrimination."