Fielder v. Sterling Park Homeowners Ass'n

Citations: 914 F. Supp. 2d 1222; 2012 WL 6114839; 2012 U.S. Dist. LEXIS 174750Docket: Case No. C11-1688RSM

Court: District Court, W.D. Washington; December 9, 2012; Federal District Court

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The Court addressed the motions to dismiss and for attorney fees filed by individual Defendants Waverly Hagen and Don Shoemaker in response to Plaintiff Elizabeth Fielder’s lawsuit against the Sterling Park Homeowners Association (SPHA) and its members. Fielder alleges violations of the Fair Housing Act, the Washington Law Against Discrimination, and state-law torts related to SPHA's efforts to shut down her in-home daycare. Hagen and Shoemaker assert immunity as individual board members and invoke Washington's anti-SLAPP statute. The Court held a hearing on October 31, 2012, and ultimately denied both motions.

Fielder, one of only two African-American residents in Sterling Park, opened her daycare in 1998 with prior approval from SPHA's then president. The SPHA's governing documents included a no-commercial-business clause, but an “invisibility clause,” allowing certain home-based businesses, was adopted informally by the board without the necessary majority. Fielder operated her daycare successfully until 2009, caring for local children, including those of board members. 

In mid-2009, Fielder began caring for a child from a Muslim family, which led to increased scrutiny from neighbors. Several neighbors, including Shoemaker, were observed engaging in harassing behavior towards Fielder and her clients, such as photographing them, blocking access to her home, and making unfounded complaints.

Ms. Singleton and Mr. Kelly discontinued their use of Ms. Fielder’s daycare due to harassment from neighbors. On October 19, 2009, the SPHA Board addressed a homeowner complaint regarding Ms. Fielder's daycare, citing excessive noise, a high number of children outside, a barking dog, and traffic issues. Ms. Fielder was not informed about these complaints until January 31, 2010, when the Board sent her a letter requesting operational information and referencing relevant community regulations. Following this, Ms. Fielder communicated with her clients about noise and traffic rules and attempted to address the Board's concerns directly, but was escorted off Ms. Hagen's property when delivering her response.

Responses from other home business operators indicated that their activities were minimal compared to Ms. Fielder's. On April 5, 2010, Ms. Fielder received a letter of non-compliance solely directed at her. Her son, Leon Richardson, attended an April 22 meeting to contest the complaints, which the Board deemed largely unfounded, except for traffic concerns. Despite Ms. Fielder’s attempts to engage with the complainants, they refused to communicate with her. Subsequently, she was ordered to close her daycare in a June 7 letter. In response, Ms. Fielder filed complaints with HUD and the Washington State Human Rights Commission, later withdrawing the latter and refiling with the King County Office of Human Rights. The OCR later found evidence of racial discrimination against her based on disparate treatment, noting that at least ten other home businesses operated within the same area.

On May 26, 2011, the SPHA Board informed Ms. Ronning via email about a homeowner's fair housing complaint against them for selectively enforcing the community covenants and restrictions (CCRs) by requiring one business to close while allowing others to operate. Following legal advice, the Board decided to send compliance notices to other businesses in Sterling Park, including letters to Ronning and Atkins, which stated their properties were not compliant with CCR 3.6. However, these letters did not demand immediate closure or relocation of their businesses. On October 10, 2011, the Board voted to amend the CCRs to allow businesses under certain limitations, specifically restricting operations to four visitors per day and hours from 7 a.m. to 6 p.m. Ms. Fielder's business remained non-compliant, and the SPHA asserted she must close or relocate.

In the legal analysis section, the court evaluates a Rule 12(b)(6) motion to dismiss, determining if the plaintiff's allegations are sufficient to support a plausible claim for relief. The court accepts the factual allegations as true while not being bound by the plaintiff's legal conclusions. The plaintiff must provide more than mere labels or formulaic recitations of claims. The defendants, Shoemaker and Hagen, argue they are protected from personal liability under the Washington Nonprofit Corporation Act and the Business Judgment Rule (BJR), while the plaintiff contends her federal claims preempt state statutes and support individual liability for civil rights and housing discrimination violations under 42 U.S.C. 1981 and 1982, as well as the Fair Housing Act (FHA).

Defendants argue that Shoemaker and Hagen are immune from individual liability as directors of the SPHA. Courts have held that directors can be personally liable for civil rights or fair housing violations if they participate in, authorize, or ratify the unlawful actions. Notable cases include Smith v. Stechel and Tillman v. Wheaton-Haven Recreation Assoc., which establish that personal involvement in discrimination is necessary for liability under 42 U.S.C. §§ 1981 and 1982. Additionally, for Fair Housing Act (FHA) violations, liability may apply even without discriminatory intent, as seen in United States v. Tropic Seas, Inc., where corporate officers could be liable for failing to ensure compliance. The plaintiff has alleged sufficient facts to suggest Hagen and Shoemaker were personally involved and acted with discriminatory intent. 

Further, the plaintiff asserts claims under the Washington Law Against Discrimination (WLAD) and state tort law, including tortious interference. Under RCW 4.24.264(1), directors of a nonprofit corporation can only be held individually liable for discretionary decisions if gross negligence is proven, defined as a failure to exercise slight care. Liability hinges on whether the Board's unequal enforcement of the CCRs against Ms. Fielder constitutes gross negligence. While directors are presumed to act in the corporation's best interest, RCW 4.24.264(1) allows for personal liability if gross negligence is established. The Washington Supreme Court case Eastwood v. Horse Harbor Foundation, Inc. indicates that directors may face individual liability for torts if their level of care is significantly below ordinary negligence. Defendants also invoke the Business Judgment Rule, which protects directors from liability in corporate transactions made in good faith and within their authority, as courts generally defer to the judgment of corporate directors.

Directors are not protected from liability for failing to exercise appropriate care, skill, and diligence. In this case, the court dismisses the defendants' claims of director immunity. The plaintiff presents sufficient allegations for her federal claims, indicating that board members (1) enforced the CCRs (Covenants, Conditions, and Restrictions) in a discriminatory manner, (2) intentionally discriminated against her based on race, and (3) were personally involved in this disparate enforcement. 

Specifically, the plaintiff, Ms. Fiedler, claims that she was uniquely required to close or relocate her daycare, while other businesses were not subjected to similar treatment. The board's justification, the "invisibility clause," lacked clear standards and had never been formally adopted as an amendment to the CCRs. Notably, Ms. Fiedler’s daycare had operated without issue for nearly twelve years prior to this enforcement.

Additionally, Ms. Fiedler alleges intentional racial discrimination, stating that harassment from neighbors began following the presence of Ms. Singleton, who was identified as a racial and religious minority. The harassment included targeting Ms. Fiedler’s clients while allowing other white-owned businesses to operate freely. An independent investigation by the OCR found reasonable cause to suspect unfair housing practices based on Ms. Fiedler's race.

Regarding personal involvement, Ms. Hagen, the SPHA president, is alleged to have demanded the closure of Ms. Fiedler's daycare and denied her access to her property, while allowing other businesses to persist based on informal claims. Mr. Shoemaker, another board member, is accused of harassing Ms. Fiedler’s clients and raising complaints about her business. The court finds that these allegations support claims of gross negligence against both Hagen and Shoemaker.

Lastly, the court emphasizes that violations of the Washington Law Against Discrimination (WLAD) cannot be justified in good faith, and the business judgment rule does not serve as a defense against unlawful discrimination.

A factfinder should not scrutinize an employer's business judgment; however, terminating an employee for unlawful reasons cannot be justified by framing it as a business decision. Purposeful discrimination exceeds mere negligence, and while the Plaintiff may struggle to prove such discrimination post-discovery, she has made a plausible claim of disparate enforcement of operational compliance rules (OCRs) against her due to her race. The Defendants reference the case of Schwarzmann to argue that business judgment rule (BJR) protects individual board members from liability. In Schwarzmann, condo owners sued their board for inadequate response to complaints, and the court upheld the dismissal of board members, citing lack of bad faith or improper motive. However, this case is not applicable here, as the Plaintiff's claims involve race-based discrimination, suggesting improper motives by the board members. The Plaintiff may question the legitimacy of the business decisions made, particularly if they are shown to be flawed. The Plaintiff has provided factual support for claims of pretext, such as the Board's selective enforcement of OCRs against her following her HUD complaint. Consequently, the Court denies the Defendants' motion to dismiss regarding Mr. Shoemaker and Ms. Hagen in both federal and state claims.

Additionally, the Defendants seek attorney fees, costs, and a statutory penalty, arguing that the Plaintiff’s claims against Mr. Shoemaker violate Washington’s anti-SLAPP statutes, which aim to protect citizens from lawsuits that suppress free speech and public participation. The anti-SLAPP Act allows for motions to strike claims related to public participation, including any statements made in public forums concerning matters of public concern.

RCW 4.24.525 establishes an anti-SLAPP (Strategic Lawsuits Against Public Participation) law in Washington, providing defendants with immunity from suit and addressing concerns over the chilling effects on free speech and the financial burdens of litigation. The statute allows a defendant who prevails on an anti-SLAPP motion to recover attorney's fees, costs, and a statutory award of $10,000. Conversely, if the court finds the motion frivolous or intended to cause unnecessary delay, the plaintiff may recover similar costs from the defendant. 

To succeed on an anti-SLAPP motion, the defendant must demonstrate that the plaintiff’s claim arises from an act of public participation, shifting the burden to the plaintiff to prove a likelihood of success on the claim. In this case, Shoemaker argues that the plaintiff’s claims against him are based on his protected speech and actions related to reporting to authorities, thus invoking his First Amendment rights. The plaintiff counters the motion on several grounds, including timeliness, preemption of federal claims, protection under the Noerr-Pennington doctrine, failure to meet statutory criteria, and presenting clear evidence of a prima facie case.

The court focuses on the timeliness and preemption arguments. The anti-SLAPP statute allows a motion to be filed within 60 days of a complaint, or later at the court's discretion. The defendants filed their motion over five months after the plaintiff's amended complaint without court permission, and did not adequately justify the delay. However, the court refrains from dismissing the motion solely based on this procedural issue. On preemption, the defendants failed to specify which claims the anti-SLAPP statute applies to, and the plaintiff correctly argues that anti-SLAPP protections do not extend to federal claims, which is established in the Ninth Circuit.

The court addressed federal preemption of California’s anti-SLAPP statute, determining it does not apply to federal claims, citing California's lack of interest in regulating federal procedural rules. The ruling referenced a similar conclusion in In re Bah, affirming that anti-SLAPP statutes cannot apply to federal questions. Defendants did not challenge the argument that the Supremacy Clause preempts the application of Washington's anti-SLAPP statute to the plaintiffs' federal claims, leading to a denial of the motion regarding those claims.

For an anti-SLAPP motion to succeed, defendants must prove, by a preponderance of the evidence, that the claims involve public participation and petition. Courts assess the "principle thrust or gravamen" of the plaintiffs' claims and require defendants to demonstrate that the acts underlying these claims are protected under the right to petition and free speech. If the court denies an anti-SLAPP motion, it indicates that the plaintiffs' claims may have merit but does not assess their likelihood of success.

In this case, the plaintiff asserted a state law claim for tortious interference. The defendants failed to specifically argue how the plaintiff's claims related to public participation and instead made general assertions about the claims being based on statements made to the SPHA. The court noted the defendants did not provide detailed reasoning about the applicability of the anti-SLAPP statute to the plaintiff's claims. Even if they had, they did not demonstrate that the gravamen of the plaintiff's complaint targeted protected acts of public participation by Shoemaker. The plaintiff's allegations included specific instances of harassment and interference by her neighbors, indicating that Shoemaker’s actions were not the central focus of her claims.

Plaintiff claims she lost clients due to her neighbors' actions, which made parents uncomfortable dropping off their children. In evaluating a special motion to strike, courts must assess if the conduct falls within the First Amendment's protected activities. The allegations in the complaint primarily describe unprotected behavior, as the First Amendment does not shield neighbors from misconduct towards one another. Even if Shoemaker’s comments to the board were considered protected speech, the overall complaint addresses Shoemaker's broader actions, which are predominantly unprotected. Incidental references to protected activity do not warrant anti-SLAPP statute protection.

Defendants argue that Shoemaker’s actions were investigative and akin to detailing facts to law enforcement. However, this interpretation is deemed improper, as the plaintiff's claims are primarily centered on non-protected activities. Additionally, defendants did not demonstrate that Shoemaker's comments to the Sterling Park Homeowners Association (SPHA) qualified as acts of public participation under the anti-SLAPP statute. They failed to establish that the SPHA meetings were governmental proceedings or public forums, or that the complaints about noise and traffic were matters of public concern. The meetings took place in private homes within a community of approximately 120 residents, and evidence suggests limited attendance at the relevant meeting. Defendants' claims that the SPHA operates like a government entity and that the issues raised are of public concern do not meet statutory requirements. Consequently, the court determined that defendants did not fulfill their burden, and thus there is no need to evaluate the likelihood of the plaintiff's success on the merits.

Plaintiff claims entitlement to anti-SLAPP sanctions under RCW 4.24.525(6)(b) due to Defendants' allegedly frivolous special motion to strike. However, the court finds the motion not wholly devoid of merit, referencing Decker v. U.D. Registry, Inc. to establish the high bar for frivolity. Consequently, the court declines to award the anti-SLAPP sanction as Defendants' motion combined with a motion to dismiss indicated a good-faith effort to challenge the claims.

In the conclusion, the court rules as follows: Defendants’ motion to dismiss is denied, their request for attorney fees, costs, and statutory penalties is also denied, and the Clerk is instructed to notify all parties. The motion to dismiss by Defendants was based solely on directorship immunity, despite later assertions questioning one defendant's status as merely a member at large. The court limits its consideration to directorship liability, leaving the factual nature of Shoemaker’s responsibilities for later resolution. The court rejects Defendants' director immunity argument based on federal civil rights pleading standards, RCW 4.24.264, and the Business Judgment Rule, finding no need to discuss piercing the corporate veil or ultra vires doctrines. The court references California case law for guidance due to the similarities between Washington's new anti-SLAPP statute and California’s Anti-SLAPP Act. It remains uncertain if the Amended Complaint includes any additional state law claims, but the court indicates that the same analysis would apply to any such claims, as Defendants have not demonstrated that each is independently based on Shoemaker’s right to public participation.