Short v. Manhattan Apartments, Inc.

Citations: 286 F.R.D. 248; 83 Fed. R. Serv. 3d 1104; 2012 U.S. Dist. LEXIS 150141; 2012 WL 4829615Docket: No. 11 CV 5989 (KMW)

Court: District Court, S.D. New York; October 11, 2012; Federal District Court

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Plaintiffs Keith Short and the Fair Housing Justice Center (FJHC) filed a motion for discovery sanctions and attorneys’ fees against Defendant Manhattan Apartments for noncompliance with three court orders regarding the production of discovery materials. The Court granted the motion, ordering Manhattan Apartments to pay $23,100 in attorneys' fees. 

The case centers on allegations of unlawful discrimination in housing against individuals with AIDS, with Short—a 45-year-old disabled man—attempting to rent apartments financed through a subsidy from the HIV/AIDS Services Administration (HASA). Manhattan Apartments allegedly refused to show or rent to Short based on his disability and financing source, leading to his homelessness and emotional distress. 

FJHC conducted tests to evaluate Manhattan Apartments' practices, revealing that employees denied services to testers using HASA subsidies while actively renting to non-disabled individuals. Despite a court-approved discovery schedule, Manhattan Apartments failed to provide requested documents, including critical data from their computer database that potentially contained discriminatory practices related to landlord preferences. 

After multiple requests and a court order directing the production of these documents, Manhattan Apartments continued to withhold them, citing concerns about business harm from disclosure. The Court's decision underscores the importance of compliance with discovery obligations in discrimination cases.

The Court rejected MA's explanation for non-compliance with a discovery order and criticized MA's counsel for not addressing issues earlier. Plaintiffs were encouraged to file for fees and costs. MA was ordered to produce all requested documents by July 10. On July 9, MA's counsel requested an extension and a confidentiality order, citing delays in producing hard copies of screenshots. A protective order sought by MA was denied on July 18. On July 17, MA provided a spreadsheet for discovery that was incomplete, lacking key information like apartment addresses and landlords' names, although it included some landlord requirements. At a conference on August 2, the Court reprimanded MA for failing to submit original documents and ordered compliance by August 3. The Court threatened sanctions for repeated violations of discovery orders, which MA continued to ignore. This disregard violated three Court orders, and Plaintiffs moved for discovery sanctions, seeking a factual designation regarding landlords' directives against assisting tenants with public housing subsidies, along with attorneys' fees. A bench trial is scheduled for October 16, 2012. The Court will consider the Plaintiffs' requests for factual designations and attorneys' fees.

Plaintiffs are seeking sanctions against MA for failing to provide discovery materials, violating three court orders. They request that specific facts be deemed established for this action, particularly that between July 1, 2010, and June 30, 2011, MA's rental listing database contained instructions from landlords prohibiting MA from assisting clients with government housing subsidies in securing multiple apartments. Under Federal Rule of Civil Procedure 37(b)(2), a court can designate facts as established if a party fails to comply with discovery orders. A district court has broad discretion in imposing sanctions for such failures, which can include inherent powers to manage cases. To obtain an adverse factual designation, the requesting party must prove: 1) the other party had control over the evidence and an obligation to produce it, 2) the failure to produce was due to a culpable state of mind, and 3) the missing evidence is relevant to the claims or defenses. MA had a clear obligation to produce the requested materials, which were within the permissible discovery scope, and failed to do so with a culpable state of mind. The standard for culpability in such cases aligns with standards in evidence destruction, where negligence or knowing destruction can establish culpable intent. Courts assess failures on a continuum of fault, and past cases demonstrate that a lack of bad faith or gross negligence can influence the decision not to impose adverse inferences.

The Second Circuit reversed and remanded for a new trial, determining that an adverse inference can be applied in cases of ordinary negligence to restore evidentiary balance. The court emphasized that the distinction between willful destruction of evidence and negligent destruction is irrelevant to the party affected. In this instance, MA's repeated refusal to comply with three Court orders to produce relevant documents establishes culpability beyond simple negligence, indicating intentional bad faith. MA's arguments about business risks related to document disclosure were rejected, as the Court had already mandated production of the documents, and MA ignored offers of a confidentiality agreement. Furthermore, MA's failure to produce documents relevant to the plaintiffs' case, coupled with evidence of bad faith, supports an inference of relevance. Specific evidence, including audio recordings and a spreadsheet indicating discriminatory landlord requirements, further substantiates the relevance of the withheld documents. The Court found that lesser sanctions proposed by MA would not adequately address the harm caused by its willful noncompliance with discovery obligations.

Punitive damages alone will not address the harm suffered by Plaintiffs due to MA’s deliberate noncompliance in providing discovery materials. To rectify this and deter future misconduct, the Court has exercised its discretion to impose sanctions, including designating certain facts as established. Specifically, it is established that from July 1, 2010, to June 30, 2011, MA’s rental database contained directives from landlords prohibiting MA from assisting clients with government housing subsidies in relation to multiple apartment rentals.

Additionally, Plaintiffs seek attorneys’ fees for addressing MA’s noncompliance. Under Federal Rule of Civil Procedure 37(b)(2)(A), the Court is required to order the noncompliant party or its attorney to pay reasonable expenses caused by the failure unless justified. The Court has already determined that sanctions are appropriate due to MA's failure to comply with discovery orders, and that MA lacks justification for its actions. The remaining issue is the reasonableness of the requested fees.

To assess reasonable attorneys’ fees, the Court will calculate the 'lodestar,' which involves multiplying a reasonable hourly rate by the hours worked. This 'presumptively reasonable fee' reflects what a reasonable client would pay to effectively litigate the case. The Court can adjust requested fees if the documentation of hours is unclear or if tasks could have been performed by non-attorneys.

A reasonable hourly rate is determined by what a paying client would be willing to pay, considering factors such as the skill of the attorneys, the complexity of the case, timing demands, and the availability of other counsel. This rate should be based on the prevailing market rates in the community. Plaintiffs are represented by Diane L. Houk and Armen H. Merjian, who bring specific expertise to the case.

Plaintiffs seek hourly rates of $525 for Ms. Houk and $500 for Mr. Merjian, both of whom have extensive legal experience in civil rights and housing law. Ms. Houk, a Columbia Law School graduate with over 25 years of experience, has a strong track record in fair housing law and has been influential in drafting housing discrimination policies. Mr. Merjian, also a Columbia graduate, brings 15 years of experience at Housing Works, focusing on civil rights for individuals with HIV and AIDS, and has authored multiple law review articles on civil rights law. The court finds these rates reasonable, considering prevailing rates in the Southern District, which range from $250 to $600, and acknowledges the complexity of the case, being the first alleging housing discrimination against individuals with AIDS, justifying higher rates for experienced counsel.

Defendant MA contests the rates, arguing they are excessive given the perceived simplicity of the motions involved and suggests using an alternative fee calculation method. However, the court maintains that the complexity of the case does not affect the reasonableness of the rates and declines to adopt MA's proposed method. The court ultimately approves the requested rates of $525 for Ms. Houk and $500 for Mr. Merjian. In evaluating the hours worked, the court emphasizes that the reasonableness of time expenditures should be assessed based on the circumstances at the time the work was performed, not through hindsight.

Courts assess the reasonableness of time expended on tasks in litigation by considering the case's scope and complexity, as established in N.Y. Ass’n for Retarded Children v. Carey. Evaluating reasonableness relies on the court's familiarity with the case and the parties' arguments and evidence, per Clarke v. Frank. Under Federal Rule of Civil Procedure 37(b)(2)(C), parties who breach discovery orders are liable for reasonable expenses, including attorney fees. 

In this case, Ms. Houk billed 19 hours and Mr. Merjian billed 25.5 hours of work plus 1.5 hours of travel at half his hourly rate. Both attorneys provided detailed records of their tasks, including strategy consultations, reviewing documents, correspondence with the opposing party and the court, attending conferences, and preparing motions for sanctions. 

Defendant Manhattan Apartments (MA) raised three objections to the hours claimed by the plaintiffs. First, MA contended that the travel time claimed by Mr. Merjian was excessive; however, the court found it reasonable as he used that time for case-related preparation. Second, MA argued for a smaller award due to perceived excessive entries and duplication of hours, asserting the case was not complex. The court disagreed, noting the quality of the plaintiffs' submissions and that their reported hours were conservative, especially given the substantial amount of documentation involved. Third, MA questioned discrepancies in reported call durations. The court found the plaintiffs' explanations reasonable, attributing any minor differences to related tasks.

Ultimately, the court awarded $23,100 in attorneys' fees to the plaintiffs, to be paid by MA, emphasizing that the misconduct was primarily MA's responsibility. The court clarified that the imposition of costs and sanctions would be against MA, not its counsel, and noted that MA's prior claims of inability to produce documents were more about unwillingness. MA is now producing relevant documents in hard copy format.