Keeping Tabs on the Ninth Circuit
February 25, 2021 - This Week at the Ninth

This Week at the Ninth: Arbitration and Accommodation

This Week at The Ninth:  Dr. Seuss and Constitutional Cures

This week, we take a look at one Ninth Circuit decision exploring the enforceability of an arbitration clause precluding a party from acting as a “private attorney general,” and another addressing whether the Fair Housing Amendments Act imposes liability for a landlord’s failure to engage in an interactive process with a disabled tenant.

The Court holds that an arbitration provision prohibiting the plaintiff from acting as a “private attorney general” is enforceable because the provision does not entirely preclude the plaintiff from seeking injunctive relief on behalf of others. 

The panel:  Judges Bea, Thapar (CA6), and Collins, with Judge Thapar writing the opinion.

Key highlight:  “If any doubt remains, consider this. Only an interpretation that public injunctive relief remains available will render the arbitration provision ‘lawful’ and ‘capable of being carried into effect.’ Cal. Civ. Code § 1643. And only this interpretation facilitates arbitration. Mitsubishi, 473 U.S. at 626. So both California law and the FAA tell us what to do next—construe the Agreement to abide by McGill and allow arbitration.”

Background:  Plaintiff Marggieh DiCarlo took out a $500 loan through MoneyLion Plus, a program designed to help individuals build a positive credit history.  She signed an agreement providing for the arbitration of any disputes.  That provision expressly prohibited a plaintiff from “acting as a private attorney general,” but also authorized the arbitrator to “award all injunctive remedies available in an individual lawsuit.”  The contract also contained “poison-pill” language that rendered the arbitration clause void if any aspect of it was unenforceable.   

Within a few months, DiCarlo found herself unable to pay MoneyLion’s fees but precluded from cancelling her enrollment in the program.  She brought suit, alleging that MoneyLion had violated California law by creating a “high-tech debt trap.”  The district court granted MoneyLion’s motion to compel arbitration and dismissed the case.

Result:  The Ninth Circuit affirmed.  The Court began by explaining that if the arbitration provision prohibited all “public injunctive relief”—that is, any injunctive relief that would benefit individuals other than the plaintiff—it violated California law prohibiting such a waiver (a rule that the Ninth Circuit had previously held escaped preemption under the Federal Arbitration Act).  Thus, the central question was whether by prohibiting DiCarlo from acting as a “private attorney general” and limiting her remedies to those available in an “individual lawsuit,” the arbitration provision ran afoul of California law by prohibiting “public injunctive relief.”

The Court concluded that the arbitration provision did not have that effect.  First, the Court construed the contract’s use of the term “individual lawsuit” to mean that DiCarlo could not bring a class action, derivative action, or join with other plaintiffs.  The phrase did not, however, limit the remedy that a plaintiff might seek in such an “individual lawsuit.” 

Next, the Court turned to the somewhat more difficult question of what the contract meant by prohibiting DCarlo from acting as a “private attorney general.”  That phrase, Ninth Circuit explained, generally referred to two related concepts:  (1) factually injured plaintiffs granted a statutory right to sue to challenge an action that did not violate their legal rights; and (2) plaintiffs entitled to attorneys’ fees (whether by statute or as a matter of equity) if their suit vindicates a public interest. 

Armed with that understanding, the Court concluded that the contract, by prohibiting “private attorney general” actions, did not prohibit DiCarlo from seeking all “public injunctive relief.”  To the contrary, the California laws DiCarlo invoked prohibited her from bringing suit “on behalf of the general public”—which the Court deemed to be the equivalent of the first type of “private attorney general” action—but nevertheless permitted her to seek injunctive relief that might benefit others.  And, the Court continued, the second, fee-shifting understanding of “private attorney general,” was not relevant, because DiCarlo did not seek fees, and public injunctive relief could be sought in cases where such fees were unavailable.  The Court determined that the surrounding terms of the contract—including the express authorization for injunctive relief—confirmed this narrower understanding of the “private attorney general” phrase.  While the Court acknowledged the “appealing symmetry of DiCarlo’s theory between the rights vindicated and the relief sought,” it concluded it was bound to follow California law holding that “an individual requesting relief for the entire public is suing only on her own behalf.”  And because that reading rendered the arbitration provision enforceable, the Ninth Circuit held that it should be accepted. 

The Court holds that plaintiffs failed to establish a causal link between a medical condition and requested accommodation as required for a discrimination claim under the Fair Housing Amendments Act (FHAA), and that the FHAA does not impose standalone liability for a landlord’s failure to interact with a tenant.

Panel: Judges Ikuta, Bennett, and Woodlock (D. Mass.), with Judge Bennett writing the opinion.

Key Highlight: “The interactions between the tenant and landlord are, of course, relevant—reasonableness and ‘accommodation’ cannot be determined in a vacuum. But, at its heart, the FHAA does not forbid a landlord from failing to engage with a tenant requesting an accommodation that has no basis in law or fact.”

Background: Glenn Howard, his wife Gale, and his daughter Christine rented a home in L.A. from HMK Holdings.  The lease provided for a one-year term, followed by a month-to-month tenancy terminable by either party. In January 2017, HMK proposed a new one-year lease with increased rent.  The Howards didn’t respond.  HMK sent the proposed lease again, and told the Howards that if they didn’t answer, HMK would terminate the lease.  Receiving no response, HMK sent a 60-day Notice to Quit.

A few weeks later, Gale requested a two-month extension of the lease termination as a reasonable accommodation of Glenn’s disability—he had brain damage and suffered from seizures. Gale explained that Glenn’s “neurologist is trying a new treatment right now that [the family] believe[s] will make it possible for him to move in July 2017.” HMK agreed, but said it would not grant another extension.  In late June, Gale asked for another extension “until his medical condition for his disability is safely stabilized after which the landlord will be notified.” The request included a letter from Dr. Sung-Min Park, stating that Glenn “has a medical condition that requires optimization before he can safely embark on a long trip,” and that the landlord would be notified when Glenn “is appropriately stabilized for long travel.”  HMK denied the request, describing it as an “open ended accommodation” that “does not appear to be reasonable.”  Gale then submitted another extension request, enclosing a letter from Dr. Kolar Murthy, stating that Glenn’s medical condition “needs to be optimized before he can safely embark on a long trip.”  HMK didn’t respond to that request or a subsequent one, instead filing a state action to recover possession of the property. 

The Howards filed suit, alleging that HMK violated 42 U.S.C. § 3604(f)(3)(B), which prohibits discrimination in the form of “a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford [a] person equal opportunity to use and enjoy a dwelling.”  The district court granted summary judgment for HMK, concluding that the Howards failed to show that extending their tenancy was necessary because of Glenn’s medical condition, and that the FHAA does not impose independent liability for a landlord’s failure to interact with a tenant.

Result: The Ninth Circuit affirmed.  The Court began by laying out the elements of a § 3604(f)(3)(B) discrimination claim, focusing on the requirement that “an accommodation in rules, policies, practices, or services was necessary to afford Glenn an opportunity, equal to a nondisabled person, ‘to use and enjoy’ the house.”  Because it was undisputed that the Howards declined a new lease for increased rent, and their reason for doing so was unrelated to Glenn’s disability, the Court reasoned that the relevant question was whether “the Howards’ request that HMK make an accommodation in its lease termination policy so that the Howards could remain in the home until January 22, 2018, was necessary to accommodate Glenn’s disability.”  That “inquiry is causal one that ‘examines whether the requested accommodation . . . would redress injuries that otherwise would prevent a disabled resident from receiving the same enjoyment from the property as a non-disabled person would receive.’”  The Court concluded that no causal link existed here because there was no evidence that relocating Glenn to another residence in L.A. would have jeopardized Glenn’s health or safety—the doctors’ letters only addressed long-distance travel.  The stress and inconvenience of moving was not enough to render the accommodation “necessary” within the meaning of the statute. 

The Court also rejected the Howards’ argument that the FHAA imposed “standalone liability on a landlord when it fails to engage in an interactive process with a disabled tenant, even if the tenant cannot show that an accommodation was necessary.”  Noting that it was an issue of first impression in the Ninth Circuit, the Court reasoned that the text and implementing regulations of the FHAA make no mention of an “interactive process” between landlord and tenant.  Although interactions between tenant and landlord were relevant to determining whether an accommodation was reasonable, “at its heart, the FHAA does not forbid a landlord from failing to engage with a tenant requesting an accommodation that has no basis in law or fact.”  Because “[t]he statute makes clear when liability attaches,” the Court “lack[ed] the authority to expand the bases for liability adopted by Congress.”   No court, the Ninth Circuit said, had “fashion[ed] an independent basis for liability out of the landlords’ failure to inquire.” Finally, the Court rejected any reliance on the Americans with Disabilities Act or Rehabilitation Act. Those statutes, the Court reasoned, were not directly relevant, and even if they were, liability would “depend[] on whether a reasonable accommodation was possible, not merely on the failure to engage the interactive process.”