compliance with antidiscrimination laws: strategies for sales and marketing€¦ · strategies for...

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©2009 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not clients but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500

Compliance With Antidiscrimination Laws:

Strategies for Sales and Marketing12:00 p.m. – 1:00 p.m. Central

October 29, 2009

Michael C. Lueder Christi R. AdamsRichard M. Caron Andrew T. Marcus

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©2009 Foley & Lardner LLP

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Today’s Presenters Michael C. LuederFoley & Lardner LLP

Christi R. AdamsFoley & Lardner LLP

Andrew T. MarcusTempus Resorts International, Ltd.

Richard M. CaronFoley & Lardner LLP

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The purpose of this program is to heighten awareness of laws that may impact your business. We will focus on the Fair Housing Act, The Equal Credit Opportunity Act, and Sections 1981 and 2000a of the Civil Rights Act. Because we have a national audience, we will not address the law of any individual state.


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Common industry prescreening practices usedto determine who gets premiums to tour:1. Age parameters.2. Citizenship/residency restrictions.3. Creditworthiness.4. Income.5. Type of local accommodations.6. Partners traveling together.7. Home ownership.

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First this critical point:There are only two reported cases in the entire United States addressing the application of the statutes we will cover to the timeshare industry. We will mention them both.


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Good news: There is no onslaught of litigation challenging existing timeshare industry practices.Bad news: There is little to no authority giving comfort on these practices. There really is not another real estate or lending based industry with such heavy up front marketing costs. Thus, nothing to use by analogy.

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Nonetheless an aggressive plaintiff’s lawyer--even if ultimately unsuccessful-- could challenge some of the prescreening criteria used under one or more of the statutes we will discuss. Our objective is to make you aware of possible issues so you can address them in your policies and practices.


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Fair Housing Act

The Fair Housing Act makes it unlawful for any person or entity “whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status or national origin.”

42 U.S.C. § 3605(a).

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It is unlawful to engage in any conduct relating to the provision of housing which otherwise makes unavailable or denies dwellings to persons because of race, color, religion, sex, handicap, familial status, or national origin.

24 C.F.R. 100.50(b)(3).


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It is unlawful to represent to any person, because of race, color, religion, sex, handicap, familial status, or national origin, that a dwelling is not available for sale or rental when such dwelling is in fact available.

42 U.S.C. § 3604(d).

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It is unlawful to make, print, or publish or cause to be made, printed, or published any notice, statement or advertisement that indicates any preference, limitation or discrimination based on membership in a protected class or an intention to make any such preference, limitation or discrimination.

42 U.S.C. § 3604(c).


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It is unlawful to use different qualification criteria or applications, or sale or rental standards or procedures, such as income standards, application requirements, application fees, credit analysis or sale or rental approval procedures or other requirements, because of race, color, religion, sex, handicap, familial status, or national origin.

24 C.F.R. 100.60(b)(4).

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It is unlawful to:1. Discourage any person from inspecting, purchasing or renting a dwelling

because of his protected status or the status of the persons in the community, neighborhood or development.

2. Discourage the purchase or the rental of a dwelling by exaggerating drawbacks or failing to inform any person of desirable features of the dwelling or of a community, neighborhood or development because of membership in protected class.

3. Communicate to any prospective purchaser that he or she may not be comfortable or compatible with the existing residents of the community, neighborhood or development because of his or her membership in a protected class.

24 C.F.R. 100.70(c)(1)-(3).


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The Fair Housing Act is “broad enough to cover each of the [following] types of dwellings: mobile home parks, trailer courts, condominiums, cooperatives, and time sharing properties.”

Preamble I, 24 C.F.R. Ch. 1, Subch. A, App. I, 54 Fed. Reg. 3232, 3238 (Jan. 23, 1989).

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Only one case has determined whether timeshares are “dwellings” within the meaning of the FHA. InLouisiana AC0RN Fair Housing v. Quarter House, 952 F. Supp. 352, 360 (E.D. La. 1997), the court ruled because government regulators included timeshares in their definition of a dwelling and because owners pay a mortgage, property taxes and possess a right to return to their unit, timeshares fall within the purview of the FHA.


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The application of the FHA to the timeshare industry is by no means settled. Moreover, the industry has evolved so that some of the factors considered in the ACORN case are no longer universally true.

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The FHA does cause concerns not present in other businesses. Bars offer special drink prices to women. Premium structures for men and women are different in auto insurance. There is risk here that is not found elsewhere.


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National origin is a protected classification under the FHA. However, neither alienage (whether or not a person is a U.S. citizen) nor legal status (whether or not a noncitizen is legally present in the United States, and, if so, under what type of status) are covered.

Rigel C. Oliveri, Between a Rock and a Hard Place: Landlords, Latinos, Anti-illegal Immigrant Ordinances, and Housing Discrimination, 62 Vand. L. Rev. 55, 83-84 (2009).

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Some courts have held that merely inquiring as to someone’s place of birth, national origin, or citizenship may violate of the FHA. In one case, the management of an apartment complex made tenants fill out an application to apply for a parking spot. It required the tenants to state their country of birth, citizenship and naturalization date. The court found these questions showed unlawful national origin bias in violation to the FHA.

Housing Rights Ctr. v. Donald Sterling Corp., 274 F. Supp. 2d 1129, 1141-43 (C.D. Cal.), Aff’d, 84 F. App’x 801 (9th Cir. 2003).


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FHA does not apply to age.

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Equal Credit Opportunity Act

The Equal Credit Opportunity Act prohibits discrimination in the extension of credit.


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ECOA applies to “creditors.” The statute defines a “creditor” as:

Any person who regularly extends, renews orcontinues credit; any person regularly arrangesfor the extension, renewal, or continuation of credit;or any assignee of an original creditor who participatesin the decision to extend, renew, or continue credit.For purposes of the antidiscrimination or discouragementsection the creditor “includes a person who, in the ordinarycourse of business, regularly refers applicants or prospectiveapplicants to creditors, or selects or offers to select creditorsto whom request for credit are made.”

12 C.F.R. § 202.2(l).

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ECOA’s protected classes:1. Race, color, religion, national origin, sex, marital

status or age.2. Individuals who derive income in full or part from

public assistance.3. Individuals who have exercised a right under the

Consumer Credit Protection Act.

15 U.S.C. § 1691(a).


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The courts have found “alienage”discrimination not to be covered by ECOA. In Bhandari the bank had a guideline that stated “applicant must be a U.S. citizen.”

Bhandari v. First National Bank of Commerce, 808F.2d 1082, 1084 (5th Cir. 1987).

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Similarly in another case, the court concluded that although ECOA prohibits credit discrimination based on national origin, “neither the statute nor its legislative history shows an intent of Congress to proscribe a denial of credit on the ground of lack of citizenship. Moreover, the regulations promulgated pursuant to the [ECOA] specifically provide that a creditor may take immigration status into account in evaluating a credit application.”

Nguyen v. Montgomery Ward & Co., 513 F. Supp 1039, 1040 (D. Tx. 1981),


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Civil Rights Act

All persons within the jurisdiction of the United States shall have the same right is every State and Territory to make and enforce contracts . . . as enjoyed by white citizens.

42 U.S.C. § 1981(a).

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“Make and enforce contracts” includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms and conditions of the contractual relationship.”

42 U.S.C. § 1981(b).


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In a § 1981 case, a life insurance company sent a rejection letter refusing to cover individuals of Middle Eastern origin because “it is company policy not to issue coverage on non-U.S. Citizens.” The life insurance company argued that in reality it was not denying on the basis of non-citizenship, but rather place or nation of origin. The court ruled that the rejection letter itself was evidence of alienage discrimination and sent the caseto a jury.

Nagy v. Baltimore Life Ins. Co., 215 F.3d 1320 (4th Cir. 2000).

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The Civil Rights Act § 1981 does not apply to advertising. Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968). One could argue that providing a promotional item, incentive, or premium is the marketing of a timeshare, and thus is not covered by § 1981.


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The cases regarding whether 42 U.S.C. § 1981 covers private acts of alienage discrimination are split. Some say covered. Some say not.

Rigel C. Oliveri, Between a Rock and a Hard Place: Landlords, Latinos, Anti-illegal Immigrant Ordinances, and Housing Discrimination, 62 Vand. L. Rev. 55, 83-84 (2009).

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Discrimination based on legal status (as opposed to alienage or national origin), language or ethnic traits are not likely to be successfully challenged under § 1981.


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TYPES OF DISCRIMINATION

Disparate treatment.Disparate impact.

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Disparate treatment occurs when one treats someone less favorably than others because of their membership in a protected class. It is conscious discrimination.Intent is a necessary element of a disparate treatment claim.


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To prove disparate impact discrimination the plaintiff tries to prove that a facially neutral policy adversely affects a protected class. Bad faith and intent are irrelevant. The focus is the practice not the motivation.

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A defendant faced with evidence of disparate impact must prove that the policy or practice is consistent with business necessity and, ultimately, that there is no other policy or practice that accomplishes the same objective without the adverse impact.


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Disparate impact theory is not available for §1981 cases. Gen. Bldg. Contractors Ass’n, Inc. v. Pennsylvania, 458 U.S. 375, 386 (1982).

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“All persons shall be entitled to full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation . . . without discrimination on the ground of race, color, religion or national origin.”

42 U.S.C. § 2000a.


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At least one court has ruled that a timeshare is not a place of public accommodation covered by 42 U.S.C. 2000a. A timeshare owner is not just “passing through” his time share. He owns it in fee simple.

Bartley v. Virgin Grand Villas, 197 F. Supp. 2d 291 (2002).

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The court in Bartley did not consider that some owners rent out excess inventory. That fact might have changed the analysis.


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Here are things that are permissible to consider when determining who gets promotional items:– Income– Home ownership– Creditworthiness

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It is probably okay to set age restrictions as the Civil Rights Act and Fair Housing Act do not cover age. However, there could be risk associated with age limitations in the extension of credit. Also, there are various state laws that address age that could impact this.


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Asking whether one is a U.S. Citizen or permanent resident is permissible as neither the FHA nor the ECOA cover alienage. However, there is a slight risk here in connection with the Civil Right Act.

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It seems risky to make exclusions based on a person’s country of origin. Assuming your concerns are legitimate business concerns, (e.g. person’s ability to remove assets from home country) you can get to the same place by looking at residency.


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Steps to Take

Review your marketing materials. You should not have restrictions which plainly violate any of the above statutes.

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You should state everywhere you advertise and in your discussions with third parties and prospects that the qualifying criteria control only the availability of premiums for tour participation and that all individuals are invited by the company to tour the resort and to buy a timeshare.


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Remedies

All of the statutes we discussed provide the plaintiff can recover compensatory and punitive damages, attorneys fees and injunctive relief.All the statutes we discussed allow for class action lawsuits under appropriate circumstances.

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Presenter Contacts

Michael C. Lueder(414) 297-5643 [email protected]

Richard M. Caron(407) 244-3223 [email protected]

Christi R. Adams(407) 244-3235 [email protected]

Andrew T. Marcus(407) [email protected]


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Thank You

A copy of the PowerPoint presentation and a multimedia recording will be available on our website within 24 to 48 hours: http://www.foley.com/news/event_detail.aspx?eventid=3044

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