The Supreme Court first applied the continuing violations doctrine to the FHA in Havens Realty Corp. v. Coleman. The case is instructive because the Court clearly laid out the doctrine’s applicability to claims based on actions occurring outside the statute of limitations, distinguishing those claims that ought to remain valid because they are continuing violations, from those claims that should remain time-barred.
In Havens, an equal-housing non-profit organization on different occasions sent “testers” (one white person and two black people) to inquire about the availability of apartments in a particular housing complex. The black testers were told that no apartments were available, while the white tester was told there were vacancies. One black tester—Coles—was lied to about vacancies within the limitations period, while the other black tester—Coleman—was turned away after the limitations had expired. In filing their discrimination claim, the plaintiffs claimed that they had been denied the right to rent real property and that the housing complex’s practices deprived them of the benefits associated with living in integrated neighborhoods free from discriminatory housing practices.
Distinguishing the former claim (the tester claim) from the latter claim (the neighborhood claim), the Court noted that “a ‘continuing violation’ of the Fair Housing Act should be treated differently from one discrete act of discrimination.” In analyzing the applicability of the continuing violations doctrine to Coleman’s two claims, the Court examined the nature of the injury suffered. The Court ruled that, while Coleman’s “neighborhood” claim was timely because it came under the continuing violations doctrine, her “tester” claim did not and was, therefore, time-barred. Because the discriminatory acts against Coleman took place outside of the limitations period, she was required to argue that her claims were timely because they were continuing violations of the claims made by Coles.
With respect to the neighborhood claim, Coleman sought to remedy the deprivation of the benefits of an integrated neighborhood. Insomuch as the realty company engaged in discriminatory practices against others, the policy of discrimination would continue to prevent Coleman, as well as others, from achieving the benefits of living in an integrated neighborhood. Therefore, the very act of discrimination against Coles continued the injury against Coleman.
Conversely, Coleman in her “tester” claim sought only to challenge the single discriminatory incident wrought against her and sought only a personal remedy as a result of the act. The Court held that this claim was not a continuing violation because it was completely separate from the act that occurred within the limitations period—the discriminatory act against Coles. As the Court noted, “it is not alleged, nor could it be, that the incident of steering involving Coles on July 13, 1978, deprived Coleman of her Section 804(d) right to truthful housing information.” With respect to these distinct, personal discrimination claims, the plaintiff who fails to file within the statute of limitations cannot tack his or her claim onto the claim of another who timely filed his or her action.
Continuing Violation vs. Continuing Effect of a Violation
While continuing violations may enlarge a limitations period, the continuing effects of an alleged violation do not. The Ninth Circuit recently clarified this distinction under the FHA in Garcia v. Brockaway. In Garcia, the Ninth Circuit held that the FHA statute of limitations had run on an alleged discriminatory housing practice because the injury was the result of continuing effects of the discriminatory act, not a continuation of the violation itself. In 1994, Dennis Brockaway completed construction of an apartment complex that did not comply with FHA handicap accessibility requirements. A disabled man rented an apartment in the complex in 2001 and brought suit under the FHA in 2003. The question then was whether the claim was timely.
The Ninth Circuit held that it was not. The statute of limitations was triggered by the termination of the discriminatory housing practice, which in this case was the conclusion of the design-and-construction phase. The Garcia court explained that “a continuing violation is occasioned by continual unlawful acts, not by continual ill effects from an original violation.” The court went on to note that, “although the ill effects of a failure to properly design and construct may continue to be felt decades after construction is complete, failing to design and construct is a single instance of unlawful conduct.”
After concluding that the claim arose from the continuing effect of the violation and not from the violation itself, the Court then made a strong public policy point. Congress presumably put in place a two-year statute of limitation for private claims under the FHA to limit the liability of companies after a particular period of time had elapsed. To hold instead that developers remain liable until the violation is occasioned upon or cured would be to read the statute of limitations out of the U.S. Code.
Authority Split in Discretionary Pricing Policy Cases
The application of the continuing violations doctrine to mortgage payments has resulted in a split of authority among federal district courts—in some cases, on nearly identical facts. In particular, a split of authority has arisen within the Ninth Circuit in the interpretation of Havens and the continuing violations doctrine as it applies to mortgage payments resulting from loans made pursuant to allegedly discriminatory discretionary pricing policies. In these cases, the plaintiffs have alleged that discretionary pricing policies—policies that allowed originators some discretion in setting loan pricing—violated the FHA. Some district courts have held that each mortgage payment is a continuing violation that enlarges the limitations period to include the original pricing decision. Other courts have held that mortgage payments are merely continuing effects of the pricing decision, but are not continuing violations that justify the enlargement of the limitations period.
One case that closely tracks the Havens precedent is Kimbrew v. Fremont Reorganization Corp. In Kimbrew, the lender defendants issued loans through mortgage brokers pursuant to a discretionary pricing policy that allegedly had a disparate impact on minority borrowers. Four of the seven plaintiffs received or refinanced their loans outside of the limitations period and would only be able to bring their claims if they were embraced by the continuing violations doctrine.
In its analysis of whether the doctrine applied, the court carefully applied the Havensneighborhood/tester framework to the facts at hand. In explaining the neighborhood claim, the court focused on the Havens analysis (where the neighborhood claim was allowed to proceed but the tester claim was denied). Regarding the neighborhood claim, each incident of racial steering, irrespective of against whom it was perpetrated, deprived each plaintiff of the benefits of an integrated neighborhood. However, each “tester” claim, and the remedies arising from that claim, were distinct to the person against whom the act was perpetrated. The act of discrimination aimed at Coleman was, in fact, unrelated to the act of discrimination aimed at the plaintiff who was steered during the limitations period.
Applying the framework to mortgage payments, the court arrived at two conclusions arising from the fact that the extension of a mortgage pursuant to discretionary pricing policies is an individual act. First, even if the discretionary pricing policy exists at the time the suit is filed, the act triggering the statute of limitations is the loan origination. Second, if the terms are discriminatory and they are set when the loan is originated, then the act of discrimination is the origination, with the mortgage payments merely “continuing effects” that flow from the initial act of discrimination.
The court in Ramirez v. GreenPoint Mortgage Funding, Inc., reached a different conclusion. In Ramirez, minority consumers who received loans under GreenPoint’s discretionary pricing policy sued on the grounds that the fees they received were higher than those received by similarly situated white borrowers. However, the plaintiffs had received their mortgages from GreenPoint more than two years before filing the lawsuit.
In choosing to apply the “continuing violations doctrine” to the claims, the court focused on precedent addressing hostile work environments in interpreting Havens. The court analogized the discretionary pricing policy claims to hostile work environment claims, which the Supreme Court held in 2002 to be a “single unlawful employment practice.” Acknowledging that each loan origination could be seen as a separate violation, the court instead concluded that, just like hostile work environment claims, “‘the ongoing discrimination plaintiffs allege could only manifest itself after a critical mass of similarly situated people experienced it, so as to bring an over-arching pattern to light.’”
Returning to Havens
Ultimately, the Kimbrew line of cases provides a more faithful interpretation of Havens. The borrowers challenging a discretionary pricing policy are in fact, using the terminology of Havens, bringing “tester” claims and not, as the court in Ramirez decided, “neighborhood” claims. The Ramirez court construes Havens as holding that the continuing violations doctrine will apply to claims brought as a result of an ongoing existence of an allegedly discriminatory policy. However, this construction ignores the critical distinction between “neighborhood” claims and “tester” claims. In a private action against the lender, the borrower claiming he is paying discriminatory fees and charges may claim to be challenging the broad discretionary policy, but what he really wants is relief from the discriminatory act that resulted in his paying more for a mortgage. The “tester” claim, where the plaintiff seeks relief for the specific act of discrimination carried out against him, is the better fit to mortgage payments.
The Ledbetter Coda
While Havens and its progeny provide a strong enough stand-alone argument to support the notion that mortgage payments are continuing effects, and not violations, of alleged discriminatory policies, it is nonetheless informative to look to employment discrimination jurisprudence given that much of the common law surrounding the FHA is derived from the same origins. In particular, congressional action to overturn Ledbetter v. Goodyear Tire & Rubber Co., provides an instructive analogy. In Ledbetter, the Supreme Court held wage payments are continuing effects of an allegedly discriminatory salary decision, not continuing violations in themselves.
Under the Lilly Ledbetter Fair Pay Act of 2009, every paycheck received as a result of a discriminatory pay decision or other practice constitutes an actionable violation of Title VII. The rationale for this decision is that with each paycheck, the employer has intentionally retained and carried out a discriminatory pay structure. However, the bill’s findings state that Congress does not change the law with regard to pension distributions. Explaining the inclusion of this finding, the Committee Report from the U.S. House Committee on Education and Labor states that “[p]ension checks, however, are based on a pension structure that is applied only once, when the employee retires, and the pension checks merely flow from that single application.”
Like the pension distributions, a borrower’s monthly mortgage payment flows from the initial pricing established at the origination of the loan. When a lender originates a loan, it disburses a lump sum payment to a borrower in accordance with terms contained in the mortgage loan note. The loan payments are not determined anew with every payment coupon that is sent to the borrower; instead they flow from the agreement set out in the note. Whereas an employer may change employment compensation practice at will, the terms of the mortgage are already set, and the mortgage payment is merely derived from the original agreement. For the same reasons a pension payment is a continuing effect of a pension decision rather than a continuing violation, mortgage payments are merely the continuing effects of loan pricing and not a continuing violation.
Like the “tester” claims in Havens, mortgage payments are specific to the individual borrower. One borrower does not sustain additional harm if another borrower is charged too much for a mortgage loan. And, like the pension payments in the Lilly Ledbetter Fair Pay Act, mortgage payments are established at the outset of a transaction. The mortgage note governs the amount of mortgage payments, and lenders generally are not free to unilaterally alter the terms of the note. For these reasons, mortgage payments are properly viewed as the continuing effects of an initial pricing decision, and, as a result, should not enlarge the limitations period under the continuing violations doctrine.
Kirk D. Jensen is a partner with BuckleySandler LLP. The author thanks Joshua Kotin, an associate at BuckleySandler LLP, for his assistance with this article.
- 42 U.S.C. § 3613(a)(1)(A).
- 455 U.S. 363 (1982).
- Id. at 380.
- Id. at 381.
- 526 F.3d 456 (9th Cir. 2008).
- Id. at 463.
- 2008 U.S. Dist. LEXIS 108632 (C.D. Cal. 2008).
- 633 F. Supp. 2d 922 (N.D. Cal. 2008).
- Ramirez, 633 F. Supp. 2d at 930 citing Nat'l R.R. Passenger Corp. v. Morgan, 536 U.S. 101 (2002).
- Ramirez, 633 F. Supp. 2d at 930 citing Davis v. Gen. Motors Acceptance Corp., 406 F. Supp. 2d 698, 705 (N.D. Miss. 2005).
- 550 U.S. 618 (2007).
- H.R. Rep. 110-237, at 18 (2007).