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Small v. The Anchorage Homeowners Association, LLC

United States District Court, S.D. Indiana, Indianapolis Division

March 21, 2019




         I. Introduction

         At issue are Defendants' motions to dismiss. [Filing Nos. 38, 40, and 42.] Plaintiffs Art Small, Lynette Small, and Executives, LLC, allege Defendants Trudy and F. Bradford Johnson conspired with Defendant The Anchorage Homeowners Association, LLC, to constructively evict the Smalls. In sum, Plaintiffs allege “[t]he Johnsons, with the active support and participation of [the AHOA], embarked on a campaign of constructive eviction, which included directly and indirectly harassing the Smalls, with the intention of removing the Smalls from [their home]” because the Johnsons “perceived [the Smalls] to be Jewish.” [Filing No. 35, at ECF p. 4, ¶¶ 15, 18.] Plaintiffs contend that in this campaign, the Johnsons and the AHOA violated the Fair Housing Act and committed other wrongs under Indiana law. Specifically, Plaintiffs allege the Johnsons erected a “spite fence, ” tortiously interfered with their quiet enjoyment of the property, and defamed Mr. Small. Plaintiffs further allege that Defendant SGA Enterprises, Inc., as Ms. Johnson's employer, is vicariously liable for her defamatory statements, and that the AHOA failed to turn over records to which the Smalls are entitled.

         Each Defendant asserts Plaintiffs' complaint fails to state a claim upon which relief may be granted. In addition, the AHOA argues Plaintiffs failed to properly serve process on it, so the Court lacks jurisdiction. The Johnsons argue that Plaintiffs fail to meet their pleading burden under any of the four provisions of the FHA on which Plaintiffs base their federal claims, 42 U.S.C. §§ 3604(a), 3604(b), 3604(c), and 3617. The Johnsons contend those FHA provisions generally apply to pre-acquisition discrimination, and only apply to post-acquisition conduct in narrow, extreme circumstances that are not present here. By the Johnsons' reckoning, Plaintiffs are trying to make a federal case out of a simple neighborly quarrel. As for the state law claims, the Johnsons argue Plaintiffs either fail to meet their pleading burdens or fail to establish the existence of the cause of action. SGA's position is that Plaintiffs fail to allege the necessary elements of respondeat superior in order for it to be vicariously liable for Ms. Johnson's alleged actions.

         Though the Court accepts as true all plausibly pleaded facts and draws all reasonable inferences in Plaintiffs' favor, Teamsters Loc. Union No. 705 v. Burlington N. Santa Fe, LLC, 741 F.3d 819, 823 (7th Cir. 2014), the majority of Plaintiffs' claims fail to state grounds on which relief may be granted. SeeFed. R. Civ. P. 12(b)(6). The Court grants the AHOA's motion [Filing No. 42] because the Court lacks personal jurisdiction over it. Likewise, the Court grants SGA's motion [Filing No. 38] because Plaintiffs fail to plead facts that could sustain vicarious liability. However, one claim survives, and the Johnsons' motion [Filing No. 40] is granted in part and denied in part. As explained below, the insufficiently pleaded claims are dismissed without prejudice. If Plaintiffs can do so within the limitations of Rule 11(b), Plaintiffs may file an amended complaint to address the shortcomings outlined below, but they must do so within 14 days.

         II. Background

         Executives, which Ms. Small owns, purchased the property at 10396 Treeline Court, Fishers, Indiana, in May of 2015, and the Smalls moved in. When Executives purchased the 10396 property, it was subject to covenants and restrictions, including the AHOA's rules. The Johnsons are the Small's next-door neighbors. Mr. Johnson is an attorney and Ms. Johnson was a licensed real estate agent when the alleged acts occurred.

         According to Plaintiffs, the Johnsons were rude to the Smalls from the beginning and went out of their way to make the Smalls feel unwelcome because the Johnsons “perceived that the Smalls were renters . . . and that the Smalls are Jewish.” [Filing No. 35, at ECF p. 4, ¶ 14.] Plaintiffs allege the AHOA actively supported and participated in the Johnsons' efforts, which amount to constructive eviction. The alleged campaign began in July 2015, when the Johnsons used stakes to mark the boundary of their property that borders the 10396 property. Later that July, the Johnsons made the demarcation even more unsightly by adding a rope that stretched the entire length of the east side of the Johnson's property. In September, the AHOA notified the Smalls that the Johnsons had complained to the AHOA about some landscaping stone in the yard of the 10396 property. Plaintiffs allege this not only continued the Johnson's campaign, but is also the point at which the AHOA joined it.

         Plaintiffs assert the Johnsons' next effort in their campaign to constructively evict the Smalls was to attempt to amend the covenants and restrictions of the AHOA to prohibit renters. Plaintiffs claim the Johnsons thought the Smalls were renters, so banning renting would force out the Smalls. The amendments were discussed at a special AHOA meeting in December 2015.

         However, Plaintiffs do not allege the AHOA adopted any rental restrictions, and the complaint does not include the result of the discussions at the special AHOA meeting. The Johnsons' next effort, Plaintiffs claim, was to complain to the AHOA that the Smalls had suspicious cars parked at the 10396 property, and Ms. Johnson even complained to the Fishers police. The AHOA's president informed the Smalls of the complaint, exchanging emails with the Smalls in early May of 2016.

         Plaintiffs allege things took an overtly anti-Semitic turn on May 28, 2016. Mr. Small was working in his yard with two African-American friends and potential clients when he attempted to start a friendly conversation with Ms. Johnson. Mr. Small claims Ms. Johnson responded by “accus[ing] him of begin a racist, of engaging in Fair Housing Act violations, and repeatedly called him an extremely offensive anti-[S]em[i]tic slur (‘Jew Face') in front of his friends and potential clients.” [Filing No. 35, at ECF pp. 4-5, ¶ 21.] Mr. Small further claims that, during this exchange, Mr. Johnson physically threatened him. A few days later, the Johnsons installed a “large wooden wall” with the AHOA's approval. [Id. at ECF p. 5, ¶ 22.] The wall obstructs the Smalls' view, which they assert interferes with their enjoyment of the 10396 property. Plaintiffs further contend the AHOA approved the wall despite the fact that it does not comply with AHOA and Hamilton County restrictions.

         Mr. Small claims he contacted the AHOA regarding the proposed renting restriction, the May 28 incident, and the wall. Mr. Small requested the AHOA board look at the wall and provide him with “[a]ll documents, phone logs, emails, faxes, minutes or notes of any meetings and/or discussion, and correspondence of any and all kind between [the AHOA], officers, residen[ts], general public, members, committees, and/or any of [his] family and/or any company [his family is] associated with.” [Id. at ¶ 24.] The AHOA did not provide unredacted copies of the requested information.

         III. Discussion

         a. Jurisdiction

          The Court dismisses Plaintiffs' claims against the AHOA because Plaintiffs failed to properly serve that entity. Federal courts lack personal jurisdiction over defendants that are not properly served with a summons. Mid-Continent Wood Prods., Inc. v. Harris, 936 F.2d 297, 299-300 (7th Cir. 1991). Because the AHOA is an LLC, service of the summons may be completed “by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and-if the agent is one authorized by statute and the statute so requires-by also mailing a copy of each to the defendant.” Fed.R.Civ.P. 4(h)(1)(B). Federal courts also permit service of the summons according to state rules. Fed.R.Civ.P. 4(h)(1)(A) (citing Fed.R.Civ.P. 4(e)(1)). The relevant Indiana rule permits service of an LLC by serving “an executive officer thereof, or if there is an agent appointed or deemed by law to have been appointed to receive service, then upon such agent.” Ind. R. Civ. P. 4.6(A)(1). Plaintiffs failed to serve an officer or authorized service agent of the AHOA. Rather, they served attorney Peggy Little, who is not an executive of the AHOA, not authorized to receive service on the AHOA, and is not a registered service agent of the AHOA.

         Plaintiffs' service on Little is insufficient. Failure to serve a summons cannot be overcome by the defendant's actual knowledge of the suit, the plaintiff's substantial compliance via diligent attempts to serve, or equitable considerations, absent clear examples of evasion. Mid-Continent, 936 F.2d at 300-03. The Seventh Circuit specifically noted in Mid-Continent that serving a defendant's non-agent lawyer does not satisfy Rule 4, even when that attorney participates in out-of-court settlement discussions with the plaintiff. Id. at 301 (discussing facts and affirming outcome of Bennett v. Circus U.S.A., 108 F.R.D. 142, 148 (1985)). Plaintiffs are not saved by the fact that the AHOA obviously knows about this litigation or the fact they merely served the wrong attorney. Little happens to represent the AHOA in some matters, including this one, but she lacks the authority to accept service on behalf of the AHOA.

         The AHOA did not waive its lack of personal jurisdiction defense. Defendants waive personal jurisdiction if they fail to assert the defense in their first responsive pleading or by making substantive arguments without pressing the lack of jurisdiction argument. Blockowicz v. Williams, 630 F.3d 563, 566 (7th Cir. 2010). The AHOA did not file an answer to Plaintiffs' initial complaint, and have not filed one for Plaintiffs' amended complaint. The AHOA asserted the defense that the Court lacks personal jurisdiction in its motion to dismiss following Plaintiffs' initial complaint. [Filing No. 23, at ECF pp. 8, 13-14.] The AHOA's attorney appeared for a pretrial conference, but asserted the appearance served only to assert the lack of personal jurisdiction defense and other Rule 12 defenses, so it was not a waiver. [See Filing No. 43, at ECF p. 8.] In its instant motion to dismiss, the AHOA presented lack of personal jurisdiction as its first argument for dismissal under Rule 12. [Id.] The fact that the AHOA also addressed the merits of Plaintiffs' claims does not operate as a waiver of its lack of personal jurisdiction argument. Compare Fed. R. Civ. P. 12(b) (“No defense or objection is waived by joining it with one or more other defenses or objections in a responsive pleading or in a motion.”) with Blockowicz, 630 F.3d at 566 (finding defendants waived their personal jurisdiction defense by merely asserting it in a footnote and proceeding to address the merits). Without proper service of a summons or a waiver of service by the AHOA, the Court lacks jurisdiction and dismisses Plaintiffs' claims against it.

         b. Fair Housing Act Claims

          Plaintiffs allege the Johnsons and the AHOA waged a campaign of constructive eviction in an effort to force Plaintiffs out of the neighborhood because the Johnsons perceived the Smalls to be Jewish. Plaintiffs bring their claims under subsections (a), (b), and (c) of 42 U.S.C. § 3604 and under 42 U.S.C § 3617 of the FHA. The Johnsons move to dismiss these claims, arguing that Plaintiffs rely on conclusory statements that at best establish a quarrel between neighbors, which is not covered by the FHA.

         i. Section 3604(a)

         Plaintiffs first claim Defendants violated § 3604(a) of the FHA, which makes it unlawful:

To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

         Plaintiffs allege the Johnsons have waged a campaign of constructive eviction against the Smalls, which falls into the “otherwise make unavailable” portion of the statute. The Johnsons argue Plaintiffs fail to state a claim under this subsection because they merely plead attempted constructive eviction, which the Seventh Circuit held is insufficient.

         In Bloch v. Frischolz, 587 F.3d 771, 776 (7th Cir. 2009), the Seventh Circuit explained that § 3604(a) is largely designed to prohibit pre-sale or pre-rental discrimination, but the phrase “or otherwise make unavailable or deny” means the subsection also applies to “post-acquisition discriminatory conduct that makes a dwelling unavailable to the owner or tenant, somewhat like a constructive eviction.” To show constructive eviction, a plaintiff “must show her residence is ‘unfit for occupancy,' often to the point that she is ‘compelled to leave.'” Id. at 778 (quoting Black's Law Dictionary 594 (8th ed. 2004)). The Seventh Circuit noted that “constructive eviction requires surrender of possession by the tenant, ” and “[i]f the tenant fails to vacate within a reasonable time, she waives her claim for constructive eviction.” Id. However, the opinion stopped short of saying that a plaintiff must vacate the premises to establish a claim of post-acquisition discrimination under § 3604(a). Id.

         Nonetheless, the crucial fact that prevented § 3604(a) from applying in Bloch is also present here-Plaintiffs have remained at the 10396 property for years since the conduct that is alleged to have made the property unavailable. In Bloch, the plaintiff gave no reason why she failed to vacate and instead stayed put for over a year. Id. The Seventh Circuit held that, because the plaintiff was able to stay put for that long, there was “no possibility that a reasonable jury could conclude that the defendants' conduct rendered [the property] ‘unavailable' to [the plaintiff.]” Id. Plaintiffs allege discriminatory conduct from July 2015 through May 2016. Plaintiffs did not file this suit until May 2018, and they do not allege they have vacated the 10396 property. Therefore, Plaintiffs fail to plead the 10396 property is unavailable, so the Court grants the Johnsons' motion with respect to Plaintiffs' § 3604(a) claim.

         ii. Section 3604(b)

         In their second count, Plaintiffs allege Defendants violated § 3604(b), which makes it unlawful:

To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, ...

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