Meyer v. Holley: Supreme Court Reverses Ninth Circuit's Holley Decision

The Supreme Court of the United States has considered whether the federal Fair Housing Act ("Act") imposes personal liability without proof of fault upon an officer or owner of a residential real estate corporation because of the actions of the corporation's employee or agent. This decision reverses an earlier appellate court decision in this case, previously summarized in The Letter of the Law- click here to read the earlier version.

To briefly summarize the facts, Mary Ellen and David Holley ("Buyers"), a mixed race couple, were looking to purchase property in Twenty-Nine Palms, California. The Buyers visited Triad, Inc., d/b/a Triad Realtor ("Brokerage") to help them with their search and spoke with Grove Crank, a Triad representative. The Brokerage was a corporation whose sole shareholder was David Meyer ("Broker"), who was also the president of Triad and also the designated officer/broker for the Brokerage. During the Buyers' home search, Crank allegedly prevented the Buyers from purchasing a home for racially discriminatory reasons. The Buyers eventually built their own house in the town, and the home they intended to bid on sold for less than the Buyers' offering price.

The Buyers filed lawsuits against both the Brokerage and the Broker personally, alleging violations of the Act. The Act is broadly worded to eliminate discrimination from the housing market. Because Crank's license was held by the Brokerage, rather than the Broker, the trial court dismissed the allegations made against the Broker in his capacity as a corporate officer of the Brokerage. The court also entered judgment in favor of the Broker individually on the other alleged violations of the Act, ruling that Crank's actions could not be attributed to the Broker individually, only the Brokerage, because the Brokerage was a corporation.

The trial court allowed the Buyers to appeal these rulings, and the appellate court reversed the trial court's ruling. The appellate court determined that the Broker had potential liability in his capacity as owner, president, or designated officer/broker for Crank's actions because the Broker's duty to conform with the Act were non-delegable. The court stated that even though corporate officers and shareholders are generally immune from personal liability for the actions of the corporation, the public policy concerns of the Act and the non-delegability of the Act's requirement override those protections in this instance. The Broker appealed this ruling.

In a unanimous decision, the Supreme Court of the United States reversed the appellate court. The Court stated that a lawsuit under the Act was essentially a tort action, and the rule that courts follow when Congress creates a new tort action is that the traditional principles of law are assumed to apply to the new tort, unless Congress has indicated otherwise. Under traditional principles of the vicarious liability doctrine, an employer or principal is liable for the actions of an employee or agent so long as the employee or agent is acting within the scope of employment. When the corporation is the employer or principal, then the corporation is liable for the agent or employee's actions. A corporation's owner or officers will not be personally liable for the employee's actions, unless there is a special showing that a court should "pierce the corporate veil" and hold the owner or officer personally liable for the actions of the corporation's employees.

Looking at the legislative history of the Act, the Court found no indication that Congress intended the Act to vary the traditional vicarious liability standards. The Court also looked at the regulations enacted by the Department of Housing and Urban Development ("HUD") in order to enforce the Act's principles, and the Court found that those regulations also specified that the ordinary rules of vicarious liability should apply to lawsuits brought pursuant to the Act. The Court disagreed with the appellate court's interpretation of HUD's regulations and also its application of other cases, which the court found did not support the appellate court's decision. Since the Court found no support for the appellate court's decision to vary the traditional principles of vicarious liability, the Court reversed the appellate court's decision, ruling that the traditional principles of tort law applied to lawsuits brought under the Act. The Court sent the case back to the appellate court so that it could consider, applying traditional principles of vicarious liability, the other arguments made by the Buyers on why the Broker should be personally liable for Crank's alleged violations of the Act.

Meyer v. Holley, 537 U.S. 280, 123 S. Ct. 824 (U.S. 2003).

Editor's Note: NAR and the California Association of REALTORS® each submitted amicus curiae briefs in support of the Broker.

Notice: The information on this page may not be current. The archive is a collection of content previously published on one or more NAR web properties. Archive pages are not updated and may no longer be accurate. Users must independently verify the accuracy and currency of the information found here. The National Association of REALTORS® disclaims all liability for any loss or injury resulting from the use of the information or data found on this page.

Advertisement