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Hayden Lake Recreational Water and Sewer District, A Political Subdivision of the State of Idaho v. Haydenview Cottage

December 20, 2011

HAYDEN LAKE RECREATIONAL WATER AND SEWER DISTRICT, A POLITICAL SUBDIVISION OF THE STATE OF IDAHO, AND PETITIONER,
v.
HAYDENVIEW COTTAGE, LLC, AN IDAHO LIMITED LIABILITY COMPANY; JOSEPH W. SKALA, AN INDIVIDUAL; BY THE LAKE ASSISTED LIVING HOMES, LLC, AN IDAHO LIMITED LIABILITY COMPANY; 356, LLC, A DISSOLVED IDAHO LIMITED LIABILITY COMPANY; AND LAURENCE A. CHMURA AND KATHLEEN M. CHMURA, HUSBAND AND WIFE, RESPONDENTS. INTERMOUNTAIN FAIR HOUSING COUNCIL, INC., PLAINTIFF,
v.
HAYDEN LAKE RECREATIONAL WATER AND SEWER DISTRICT, A POLITICAL SUBDIVISION OF THE STATE OF IDAHO, DEFENDANT.



The opinion of the court was delivered by: Honorable Candy W. Dale Chief United States Magistrate Judge

MEMORANDUM DECISION AND ORDER

INTRODUCTION

Before the Court are three motions for summary judgment filed by the parties in two related cases which were joined for the purpose of proceeding before a single judge on September 7, 2011.*fn1 (Dkt. 14.) In the first case, (2:11-cv-00264-CWD), Hayden Lake Recreational Water and Sewer District (the "District") asks the Court to grant summary judgment on two issues: (1) whether the District may, in accordance with state law, increase sewer fees charged to two assisted care facilities located within its district; and (2) whether the District's attempt to increase the fees of the two assisted living facilities violated the Fair Housing Act. (Pet.'s Mot. for Sum. J., Case No. 2:11-cv-00264, Dkt. 15.)

In the second case, (2:11-cv-00284-CWD), Intermountain Fair Housing Council, Inc., ("IFHC"), a non-profit organization dedicated to advancing equal access to housing, brought an action against the District, alleging that the District's attempted increase in sewer fees charged to the assisted care facilities -- Haydenview Cottage Assisted Living ("Haydenview")*fn2 and By the Lake Assisted Living Homes ("By the Lake")*fn3 -- violated the Fair Housing Act. The District filed a motion for summary judgment regarding IFHC's claims. (Case No. 2:11-cv-00284-CWD, Dkt. 28.) The District's motion is nearly identical to its motion for summary judgment filed in the first case, arguing that the Court should declare as a matter of law that the increase in fees does not violate the Fair Housing Act, and raising the additional argument that IFHC lacks standing. In response, IFHC filed a cross motion for summary judgment, arguing that it is entitled to judgment as a matter of law on its claims against the District. (Case No. 2:11-cv-00284-CWD, Dkt. 27.)

The parties presented oral arguments on the motions for summary judgment on November 17, 2011. Prior to the hearing, the District filed motions to strike in both cases.*fn4 All the motions now have been fully briefed and are ripe for adjudication.

FACTUAL BACKGROUND

The material facts in this case are largely undisputed. The Hayden Lake Recreational Water and Sewer District is a municipal entity created for the purpose of providing water and sewer services to users within the District's geographic boundaries.

In 1989, the District approved Ordinance 89-2, which, among other things, provides for the allocation of operation and maintenance ("O&M") expenses to users and for capitalization fees. Under the Ordinance, a capitalization fee is a one-time fee paid by a user for the fair share of the cost of constructing the infrastructure that supports the District's sewer services. O&M expenses are fees assessed to the District's users on a monthly basis. The Ordinance provides a system for calculating capitalization fees and O&M charges.

The Ordinance uses a unit of measurement known as an "Equivalent Residence," which the Ordinance defines as "[t]he basic unit of measurement utilized by the District to establish relative waste water disposal requirements of various property uses, with one

(1) Equivalent Residence or 'ER' being defined as one (1) typical single-family residence." (Hayden Lake Rec. Water and Sewer Dist. Ordinance No. 89-2, Dkt. 25-1.) The Ordinance also contains a schedule for non-residential users, which seeks to approximate water use by assigning an ER factor to a particular user based on certain factors. The validity of Ordinance 89-2 is not at issue in this case. The District's interpretation and application of the Ordinance is, however, one of the main issues in this case, and the specific provisions of the Ordinance will be discussed in more detail below.

A. By the Lake Assisted Living Homes

By the Lake is a privately-owned for-profit assisted care facility located in Hayden, Idaho, within the geographic boundaries of the District and subject to Ordinance 89-2. The facility is located in a 4,700 square foot single family residence, constructed in 1996, and operated as an assisted care facility for the elderly since 1997. (Aff. of Kathleen Chmura, Case No. 11-cv-284, Dkt. 27-1, ¶ 2.) It appears undisputed that at least some of By the Lake's residents are disabled. The building permit issued for the property by the County in 1996 reflects that the dwelling was built as a group home with an occupancy load of 17 persons. (Id. at 6.) The permit contains a notation that the building will house "8 or fewer residents." (Id.) The District alleges that By the Lake currently houses twelve patients. (Statement of Material Facts in Supp. of Def.'s Mot. for Sum. J., Case No. 11-cv-284, Dkt. 25 at 4.) IFHC alleges that By the Lake "historically has housed on average 8-9 residents who are elderly, disabled adults most of whom suffer from dementia." (Aff. of Kathleen Chmura, Case No. 11-cv-284, Dkt. 27-1, ¶ 3.)

The District began supplying sewer services to the By the Lake property in 1996 pursuant to a permit issued to the prior owner of the property. The permit issued by the District states that it was "good for 1 Equivalent Residence (ER) only, up to 250 gallons per day," and that, "[a]fter 1 year the District will review water meter usage and may charge an additional capitalization fee if water usage exceeds the Districts definition of 1 ER." (Statement of Material Facts in Supp. of Def.'s Mot. for Sum. J., Case No. 11-cv-284, Dkt. 25 at 3-4.) The District concedes that the contemplated follow-up review was not conducted. (Id. at 4.)

B. Haydenview Cottage Assisted Living

Haydenview is a privately-owned for-profit assisted care facility located in Coeur d'Alene, Idaho, within the geographic boundaries of the District and subject to Ordinance 89-2. The Haydenview facility is licensed to hold up to eight patients and IFHC asserts that the facility currently houses seven disabled elderly residents. Haydenview has operated as an assisted care facility for handicapped adults since the mid-1990's and has been assessed sewer fees by the District at a rate of one ER since its inception.

C. Dispute over increased fees

In August of 2008, the District became aware of an assisted care facility (unrelated to the present litigation) that had been assessed one ER and had purportedly underpaid for its share of use of the District's services. Specifically, the District received a notice from the Kootenai County Building and Planning Department that a request had been made by an assisted care facility to increase its occupancy limit from eight to sixteen persons. (Statement of Material Facts in Supp. of Def.'s Mot. for Sum. J., Case No. 11-cv-284, Dkt. 25 at 5.) In response to the information supplied by the County, the District alleges that it began reviewing the ER assessments for other commercial businesses, focusing on the type of business already identified as having underpaid -- assisted care facilities. (Id.) Upon review, the District identified By the Lake and Haydenview as facilities that had not paid the appropriate amount under Ordinance 89-2.

On March 29, 2010, the District sent demand letters to By the Lake and Haydenview, expressing the view that neither facility had paid capitalization fees or monthly O&M charges in accordance with Ordinance 89-2, and demanding back payment. In its letter to By the Lake, the District noted that the facility was licensed for twelve beds and that, under Ordinance 89-2, the facility owed $66,600 in capitalization fees and $7,992 in back-payments for monthly O&M charges. (Aff. of Kathleen Chmura, Case No. 11-cv-284, Dkt. 27-1 at 8-9.) In its letter to Haydenview, the District noted that the facility was licensed for eight beds and that under the Ordinance the facility owed $41,400 in capitalization fees and $6,624 in O&M fees. (Aff. of Rebecca Skala, Case No. 11-cv-284, Dkt. 27-2 at 7-8.) In total, the District demanded $74,592 from By the Lake and $48,024 from Haydenview. The letters threatened legal action if payment was not made within 30 days, including the filing of a lien against the properties and initiating foreclosure proceedings.

In response, on June 8, 2010, By the Lake and Haydenview sent a letter to the District formally requesting an accommodation under § 3604(f)(3)(B) of the Fair Housing Act. (Aff. of Rebecca Skala, Case No. 11-cv-284, Dkt. 27-2 at 9.) The letter requested that the District recognize both facilities "as single-family residences and assessed . . . charges at the rate charged single-family residences, consistent with the provisions of Idaho Code § 67-6531 and Kootenai County Ordinance 401." (Id.) The letter further stated that "[t]he purpose of accommodation is to make housing occupied by the elderly and disabled no more expensive, and thus less desirable, than similar properties occupied by non-disabled persons." (Id.)

On July 6, 2010, the District sent a "Settlement Offer and Proposal for Reasonable Accomodation [sic]" to By the Lake and Haydenview. (Id. at 10.) The District proposed that the facilities be charged based upon their actual usage. In Haydenview's case, the District proposed a back payment of $27,300 (approximately $20,000 less than its original demand). (Id. at 13.) As to By the Lake, the District proposed a back payment of $17,850 (approximately $56,000 less than its original demand). (Id.)

By the Lake and Haydenview rejected the District's proposal, and on September 21, 2010, the District filed a petition for declaratory judgment in Idaho state court against Haydenview, By the Lake, and the individual owners of the two facilities. In its petition, the District sought a judicial determination that it may legally readjust the ER factors attributable to the two facilities under Ordinance 89-2. The District filed a motion for summary judgment on the issue, which the state court denied without analysis, and the District filed an amended petition seeking a declaration that the proposed increased fees did not constitute unlawful discrimination under the Fair Housing Act. (See Order Denying Mot. for Sum. J., Case No. CV 10-8145 (Idaho Dist. Ct., First Dist. Kootenai County, April 11, 2011) attached to Notice of Removal, Case No. 2:11-cv-00264-CWD, Dkt. 1-7 at 22.)

On June 6, 2011, By the Lake and Haydenview removed the case to federal court and the case was assigned to the undersigned magistrate judge. (Notice of Removal, Case No. 2:11-cv-00264-CWD, Dkt. 1.) Then, on June 17, 2011, IFHC filed a verified complaint against the District in federal court, and the case was randomly assigned to United States Magistrate Judge Ronald E. Bush. (Verified Compl. and Demand for Jury Trial, Case No. 2:11-cv-00284-REB, Dkt. 1.) On September 7, 2011, the undersigned partially granted the District's motion to consolidate the two cases, ruling that the cases would proceed before a single judge, but, based upon IFHC's objection, the Court reserved ruling on the question of whether the cases would be joined only for the purposes of hearings and trial (but remain separate cases) under Fed. R. Civ. P. 42(a)(1), or consolidated for all purposes under Rule 42(a)(2). (Order, Case No. 11-cv-264, Dkt. 14.) Following the order of consolidation, the District moved for summary judgment in both cases and IFHC filed a cross motion for summary judgment in the case that was originally assigned to Judge Bush.*fn5

DISCUSSION

1. Legal Standard

Summary judgment is appropriate when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The moving party bears the initial burden of stating the basis for its motion and identifying those portions of the record demonstrating the absence of genuine issues of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323-324 (1986). "If the party moving for summary judgment meets its initial burden of identifying for the court those portions of the material on file that it believes demonstrates the absence of any genuine issues of material fact," the burden of production shifts and "the non moving party must set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Electrical Service, Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting Fed. R. Civ. P. 56(e)).

The opposing party must demonstrate that the fact in contention is material, i.e., a fact that might affect the outcome of the suit under the governing law, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986), and that the dispute is genuine, i.e., the evidence is such that a reasonable jury could return a verdict for the nonmoving party, Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1436 (9th Cir. 1987). Factual disputes whose resolution would not affect the outcome of the suit are irrelevant to the consideration of a motion for summary judgment. Liberty Lobby, Inc., 477 U.S. at 248. On the other hand, "[i]f the determination of the case rests on which competing version of the facts or events is true, the case should be submitted to the trier of fact." Advocacy Center for Persons with Disabilities, Inc. v. Woodlands Estates Assoc. Inc., 192 F. Supp. 2d 1344, 1347 (M.D. Fla. 2002).

Finally, the fact that both parties file motions for summary judgment, as they have in this case, does not alter the analysis under Rule 56; the court must consider each motion separately, with care taken to draw all reasonable inferences in favor of the nonmoving party. Fair Housing Council v. Riverside Two, 249 F.3d 1132, 1136 (9th Cir. 2001).

2. Standing

The District moves for summary judgment on the ground that IFHC lacks standing. (Mem. in Sup. of Def.'s Mot. for Sum. J., Case No. 11-cv-284, Dkt. 22.) The gist of the District's argument is that IFHC should not be allowed to manufacture standing merely by taking a case in which the parties were already represented by counsel, incurring litigation costs, and claiming that the organization's mission was frustrated. For the reasons set forth below, the Court concludes, however, that IFHC has sufficiently demonstrated standing as an organization under the analysis set forth by the United States Court of Appeals for the Ninth Circuit.

To establish standing under Article III of the Constitution, a plaintiff must demonstrate that it has suffered an "injury in fact," defined as "an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent." Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). There also must be a causal connection between the injury and the defendant's conduct, and the injury must be redressable by a favorable decision. Id. at 561.

An organization may establish a sufficient injury in fact if it substantiates by affidavit or other specific evidence that the challenged action frustrates the organization's goals and required the organization "to expend resources in representing clients they otherwise would spend in other ways." Fair housing of Marin v. Combs, 285 F.3d 899, 904-05 (9th Cir. 2002). To establish organizational standing, the plaintiff must established two factors: "(1) frustration of its organizational mission; and (2) diversion of its resources to combat the particular housing discrimination in question." Smith v. Pac. Properties & Dev. Corp., 358 F.3d 1097, 1105 (9th Cir. 2004). Moreover, the Ninth Circuit has made clear that "standing must be established independent of the lawsuit filed by the plaintiff." Walker v. City of Lakewood, 272 F.3d 1114, 1124 n.3 (9th Cir. 2001).

In Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982), the United States Supreme Court addressed organizational standing in the fair housing context. In that case, the Court held that the fair housing organization demonstrated standing because the defendants' discriminatory practices "have perceptibly impaired [the organization's] ability to provide counseling and referral services for low- and moderate-income homeseekers." Id. at 39. The Court further found that "[s]uch concrete and demonstrable injury to the organization's activities--with the consequent drain on the organization's resources--constitutes far more than simply a setback to the organization's abstract social interests." Id.

Here, in its Verified Complaint, IFHC alleges that it "has suffered damages as the result of the Defendant's actions and omissions, including the diversion of the Plaintiff's past and future resources, lost economic opportunity, and the frustration of the Plaintiff's mission." (Verified Compl. and Demand for Jury Trial, Case No. 11-cv-284, Dkt. 1.) The complaint further alleges that IFHC's mission "has been frustrated by the Defendant's practices" and that,

In order to counteract the frustration of the Plaintiff's mission, the Plaintiff has had to devote significant resources to identify, investigate, document and take action to correct the Defendant's violations of the FHA, including but not limited to the incursion of litigation expenses. As a result, the Plaintiff has actually diverted resources from other fair housing-related activities, including fair ...


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