Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-13-16159/USCOURTS-ca9-13-16159-0/pdf.json

Parties Involved:
Avenue 6E Investments, LLC
Appellant
City of Yuma
Appellee
Saguaro Desert Land, Inc.
Appellant

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

AVENUE 6E INVESTMENTS, LLC, an

Arizona limited liability company;

SAGUARO DESERT LAND, INC., an

Arizona corporation,

Plaintiffs-Appellants,

v.

CITY OF YUMA, Arizona, a municipal

corporation,

Defendant-Appellee.

No. 13-16159

D.C. No.

2:09-cv-00297-

JWS

OPINION

Appeal from the United States District Court

for the District of Arizona

John W. Sedwick, District Judge, Presiding

Argued and Submitted

August 13, 2015—San Francisco, California

Filed March 25, 2016

Before: Stephen Reinhardt, A. Wallace Tashima,

and Consuelo M. Callahan, Circuit Judges.

Opinion by Judge Reinhardt

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2 AVENUE 6E INVESTMENTS V. CITY OF YUMA

SUMMARY*

Civil Rights

The panel reversed the district court’s dismissal of a

complaint for failure to state a claim, reversed the district

court’s summary judgment in favor of defendant, and

remanded in an action brought by two real estate developers

who asserted that the City of Yuma’s refusal to rezone land

to permit higher-density development violated, among other

things, the Equal Protection Clause and the federal Fair

Housing Act. 

Plaintiffs asserted that the City’s refusal stemmed from

intentional discrimination against Hispanics and created a

disparate impact because the denial disproportionately

deprived Hispanic residents of housing opportunities and

perpetuated segregation. 

Taking the factual allegations in the complaint as true, the

panel first held that plaintiffs presented plausible claims for

relief for disparate treatment under the Fair Housing Act and

under the Equal Protection Clause. The panel noted that the

City Council denied plaintiffs’ request for rezoning despite

the advice of its own experts to the contrary and in the

context of what a reasonable jury could interpret as racially

charged opposition by Yuma residents. Given these

circumstances, the panel determined that the complaint

passed the plausibility bar. The panel remanded to the

district court on these claims.

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 3

The panel reversed the district court’s grant of summary

judgment in favor of the City on plaintiffs’ disparate-impact

claim and vacated the district court’s denial of the City’s

second summary judgment motion as moot. The panel

rejected the district court’s view that other similarly-priced

and similarly-modelled housing available elsewhere

necessarily precluded a finding that there was a disparate

impact. The panel remanded for the district court to address

the City’s second motion for summary judgment in the first

instance.

COUNSEL

Elizabeth Brancart (argued) and Christopher Brancart,

Brancart & Brancart, Pescadero, California, for PlaintiffsAppellants.

Andrew M. Jacobs (argued), Snell & Wilmer L.L.P., Tucson,

Arizona; Vaughn A. Crawford, Martha E. Gibbs, and

Benjamin M. Mitsuda, Snell & Wilmer L.L.P., Phoenix,

Arizona, for Defendant-Appellee.

OPINION

REINHARDT, Circuit Judge:

The Fair Housing Act (FHA) is one of the most important

pieces of legislation to be enacted by the Congress in the past

60 years. It strikes at the heart of the persistent racism that so

deeply troubles our Nation. Here, we deal with one aspect of

that law: zoning or rezoning of land as it affects the

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4 AVENUE 6E INVESTMENTS V. CITY OF YUMA

construction of housing that may be affordable by significant

numbers of members of minority groups.

Plaintiffs, two real estate developers (“Developers”),

bring this case against the City of Yuma, contending that the

City’s refusal to rezone land to permit higher-density

development violated, among other things, the Equal

Protection Clause of the United States Constitution and the

federal Fair Housing Act (FHA). In particular, Developers

maintain that the City’s refusal stemmed from intentional

discrimination against Hispanics and created a disparate

impact because the denial disproportionately deprives

Hispanic residents of housing opportunities and perpetuates

segregation. The district court first dismissed Developers’

Equal Protection and FHA disparate-treatment claims under

Rule 12(b)(6) for failure to state a claim and denied

Developers’ motion for leave to file a Second Amended

Complaint. It then granted summary judgment in favor of the

City on Developers’ disparate-impact claim, rejecting both

theories on which Developers relied.

Taking the factual allegations in the complaint as true, we

first hold that Developers presented plausible claims for relief

for disparate treatment under the FHA and under the Equal

Protection Clause. The City Council denied Developers’

request for rezoning despite the advice of its own experts to

the contrary and in the context of what a reasonable jury

could interpret as racially charged opposition by Yuma

residents. This was the only request for rezoning that the City

had denied in the last three years or of the last 76

applications. We reverse the district court because it failed to

give sufficient weight to the City Council’s alleged

capitulation to the animus of the development’s opponents, in

the face of the City’s own expert’s recommendation to

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 5

approve the request and its practice of generally granting

these requests. Given these circumstances, the complaint

passes the plausibility bar. We remand to the district court on

these claims.

We also reverse and remand the district court’s grant of

summary judgment in favor of the City on Developers’

disparate-impact claim and vacate its denial of the second

summary judgment motion as moot. We reject the district

court’s view that other similarly-priced and similarlymodelled housing available elsewhere necessarily precluded

a finding that there was a disparate impact. We remand for

the district court to address the City’s second motion for

summary judgment in the first instance.1

JURISDICTION

The district court had jurisdiction over Developers’

§ 1983 claims under 28 U.S.C. §§ 1331 and 1343 and over

Developers’ FHA claims under 28 U.S.C. § 1331. See

Munger v. City of Glasgow Police Dep’t, 227 F.3d 1082,

1085 (9th Cir. 2000). We have jurisdiction over Developers’

appeal under 28 U.S.C. § 1291. See Budnick v. Town of

Carefree, 518 F.3d 1109, 1113 (9th Cir. 2008).

LEGAL STANDARDS

Dismissal of a complaint under Rule 12(b)(6) is

inappropriate unless the complaint fails to “state a claim to

relief that is plausible on its face.” Bell Atl. Corp. v.

1

In that motion, the City contends that Developers have failed to proffer

statistical evidence demonstrating a substantial disparate impact resulting

from the zoning denial.

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6 AVENUE 6E INVESTMENTS V. CITY OF YUMA

Twombly, 550 U.S. 544, 570 (2007). “When the district court

denies leave to amend [a complaint] because of futility of

amendment, we will uphold such denial if it is clear, upon de

novo review, that the complaint would not be saved by any

amendment.” Carvalho v. Equifax Info. Servs., LLC,

629 F.3d 876, 893 (9th Cir. 2010). A district court’s grant of

summary judgment is also reviewed de novo. Pac. Shores

Props., LLC v. City of Newport Beach, 730 F.3d 1142, 1156

(9th Cir. 2013).

FACTUAL BACKGROUND

According to the complaint, Plaintiffs, Avenue 6E

Investments, LLC and Saguaro Desert Land, Inc. are business

entities owned by members of the Hall family, who develop

housing in Yuma, Arizona. Through Developers and other

affiliated companies, members of the Hall family have

developed various affordable and moderately priced housing

projects in Yuma. Thus, Developers are sometimes referred

to as “Hall” or “Hall Construction.” Developers allege that

even though the Hall family’s affiliated companies build a

full range of housing products, they nevertheless have a

reputation as a developer of Hispanic neighborhoods based

upon their development ofseveral affordable housing projects

in Yuma in which the majority of homes were sold to

Hispanics.

Avenue 6E owned 42 acres of undeveloped land in

southeastern Yuma (the “Property”), and granted Saguaro an

option to purchase the Property for the purpose of developing

a “moderately priced” housing project. As Developers state

in their opening brief on appeal, their references to their

proposed development as “affordable” and “moderately

priced” are descriptive only and do not imply that such

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 7

projects are considered “affordable” as defined by the United

States Department of Housing and Urban Development. 

Developers allege that the City denied a requested zoning

change in September 2008 in response to animus by

neighbors of the proposed development who wished to

prevent the development of a heavily Hispanic neighborhood

adjacent to their subdivisions, in which 75% of the population

was White.

Between 2002 and 2010, the City performed two

analyses—specifically, the Consolidated Plan and Analysis

of Impediments to Fair Housing Choice for 2002, as well as

a 2007 version by the same name (respectively, the “2002

Analysis of Impediments” and the “2007 Analysis of

Impediments”)—each showing that the Hispanic population

in Yuma was concentrated in several areas in the northern,

western, and central portions of the City. The analyses show

that substantially all of the available low- to moderate-income

housing was located in those areas, and that more than 75%

of the households in that housing were Hispanic. The reports

found that, by contrast, Whites were concentrated in separate

areas in the northwest and southeast of Yuma in which they

comprised more than 75% of the population. The Property is

on the western boundary of what was, at that time, one of the

White-majority areas in the Southeast portion of Yuma.

The City’s General Plan prohibits actions promoting

racial segregation, and its 2002 Analysis of Impediments

recognizes the need to encourage the development of more

affordable housing choices to low- and moderate-income

citizens outside the areas with high concentrations of

Hispanic households. The 2002 Analysis warned, however,

that residents had used “NIMBY” (not-in-my-backyard)

arguments to block or delay several affordable housing

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8 AVENUE 6E INVESTMENTS V. CITY OF YUMA

developments; the Analysis thus recommended an

educational campaign to promote acceptance of affordable

housing,lower-income neighborhoods, and cultural diversity. 

The General Plan acknowledges that large-lot zoning raises

housing costs and impairs the availability of housing

affordable to low- and moderate-income purchasers, and

identifies higher-density zoning as a means for the City to

encourage desegregation. The 2002 General Plan noted

wealth disparities within Yuma, stating that “Hispanic,

African American and Native American households are more

likely to have lower income and live below the poverty line.”

The City’s General Plan designates the Property for use

as “Low DensityResidential.” This designation encompasses

two permissible zoning designations: “R-1-6” zoning, which

allows development of a residential subdivision of houses

placed on 6,000 square foot lots, and “R-1-8” zoning, which

requires the use of at least 8,000 square foot lots. In 2006,

Developers purchased the Property from KDC of Yuma, LLC

(“KDC”), another housing developer, which had previously

rezoned the Property from agricultural use to R-1-8. The

Property is bordered on the south by the 38-acre “Belleza

Subdivision,” which consists of homes on lots exceeding

9,000 square feet; on the north by the “Country Roads”

recreational village, consisting of 2,500 square foot lots

limited to persons age 55 and over; on the west by the 80-acre

“Terra Bella Subdivision” owned by Perricone Development

Group II (“Perricone”), a developer of luxury homes; and to

the east by a parcel the City intends to use to expand a

wastewater facility and a municipal park.

In 2008, Developers determined that development of the

Propertywith R-1-8 zoning was no longer financially feasible

due to the collapse of the housing market and a corresponding

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 9

difficulty in selling 8,000 square foot lots. They determined,

however, that there existed a need in Yuma for more

affordable housing, and designed a higher-density,

moderately priced housing project for the Property consistent

with the City’s General Plan and consisting of 6,000 square

foot lots. Developers subsequently applied to rezone the

Property from R-1-8 to R-1-6. The City’s staff and in-house

planning experts both recommended approval of the zoning

request.

Subsequently, the City Planning and ZoningCommission

held a public hearing on Developers’ zoning application. 

Several homeowners from the Belleza Subdivision wrote

letters or spoke at the hearing objecting that Developers

“catered” to low- to moderate-income families. They

complained that the people living in “the Hall

neighborhoods” tended to have large households, use singlefamily homes as multi-family dwellings, allow unattended

children to roam the streets, own numerous vehicles which

they parked in the streets and in their yards, lack pride of

ownership, and fail to maintain their residences. These

characteristics, Developers allege, coincide with a

stereotypical description of Yuma’s Hispanic neighborhoods. 

The Commission voted unanimously to approve the rezoning

request, noting that many subdivisions with small-sized lots

had previously been built adjacent to large-sized lot

subdivisions without incident. The rezoning request was then

forwarded to the City Council with the recommendations of

the Planning Staff and the Planning and Zoning Commission

that the request be granted.

Prior to rendering its decision, the City Council received

complaints from landowners near the Property commenting

on the fact that Developers build affordable housing and

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10 AVENUE 6E INVESTMENTS V. CITY OF YUMA

criticizing the proposed development in terms Developers

allege are well-known in Yuma as descriptive of Hispanic

neighborhoods. One landowner complained that Developers’

proposal would create “a low cost, high crime neighborhood.” 

The City Council held a public hearing. Several landowners

attending the hearing brought photographs of Developers’

Trail Estate Subdivision, in which 77% of homebuyers were

Hispanic, which they identified as an “affordable housing

project.” One Belleza homeowner sent the following letter

asking the City Council to deny Developers’ rezoning

request:

We as well as many other families are very

aware of the type of ‘homes’ and

‘neighborhoods’ the ‘Hall Construction’

company has built in the past. If any of the

council members are unaware of what I am

referring to, I urge them to please drive

through the many ‘Hall’ neighborhoods in

particular the ones with the comparable price

and square footage that the Halls have

proposed to build next to us. After doing so I

ask council members to please ask themselves

if they would want to live around these areas

after having paid such a significant amount

for their home. . . . From my first hand

experience in comparing these Hall

subdivisions with our subdivisions

particularly Kerley subdivision, it is evident

that the Hall subdivision has a higher rate of

unattended juveniles roaming the streets, as

well as domestic violence, theft, burglaries,

and criminal damage/vandalism to properties.

It was my experience that many owners of

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 11

these homes left juveniles unattended as well

as many of these homes were not single

family dwellings like they were designated to

be and instead turned into multifamily

dwellings which in turn led to more

unattended juveniles and crime. . . . We find it

very disappointing that we have worked very

hard to keep out children out of areas like this,

as well as worked very hard to come up with

the funds in order to buy the home that we

live in. Now we are faced with the possibility

that once again the Hall Construction

company wants to add another one of these

‘subdivisions’ in Yuma.

Another landowner sent a letter to the Council stating that:

According to the US Department of Justice,

households with incomes of less than $75,000

account for 91% of all crimes nationally as

well as 91% of all rape, murder, assault,

armed robbery, etc. The type of lots and

houses that Hall Construction is considering

will be catering to this group of people. What

will this cost the city and county of Yuma to

patrol this area and how many innocent

victims from Belleza, Terra Bella and Tillman

Estates will fall victim to a predator in this

91% demographic?

A third landowner complained that graffiti is a problem in

small-home subdivisions. One Councilmember described the

Hall Companies’ subdivisions as having cars parked on the

streets and in yards, and asked whether the garages

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12 AVENUE 6E INVESTMENTS V. CITY OF YUMA

envisioned for the Property would be large enough to

accommodate pickup trucks.

Developers proposed creating a “buffer” zone of 8,000

square foot lots separating the Property from the Belleza and

Terra Bella subdivisions, with 6,000 square foot lots placed

between the buffer zone and the Country Roads RV park. 

One landowner commented that Developers’ proposal would

create a smooth transition in terms of lot size, but not of

“ownership demographics.” Reacting to the criticism of

Developers’ proposal, a City Council member stated that

subdivisions of different densities will inevitably abut each

other, and voiced his concern that denying Developers’

application on the basis of the community’s concerns would

create an “unsustainable precedent” for future zoning

decisions.2 At the conclusion of the hearing, the CityCouncil

denied Developers’ rezoning request.3 This rezoning request

was the only one of 76 applications considered by the City

Council over the preceding three years that it had rejected.

PROCEDURAL BACKGROUND

Developers commenced this action in February 2009,

alleging a claim under 42 U.S.C. § 1983 for violation of the

Equal Protection Clause of the Fourteenth Amendment and

2 Although the Second Amended Complaint identifies the speaker as the

Yuma Mayor, Developers state in their OpeningBrief that the speaker was

in fact a member of the City Council.

3 Although not relevant to the complaint (or motion to dismiss), the City

disputes Developers’ account and maintains that it denied the zoning

request because property owners had relied upon the pre-existing R-1-8

zoning designation and because Developers, rather than the City, rejected

a compromise buffer-zone plan.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 13

claims of disparate impact and disparate treatment under the

Fair Housing Act (FHA), 42 U.S.C. § 3601 et seq. In early

2010, the district court granted the City’s motion to dismiss

Developers’ disparate-treatment claims under the Equal

Protection Clause and the FHA,4but denied the City’s motion

as to Developers’ disparate-impact claim under the FHA.

5

Later that year, Developers filed a motion for leave to file a

Second Amended Complaint, which attempted, inter alia, to

add additional facts, including the fact that the Developers’

rezoning request was the only one rejected out of 76 in the

preceding three years. The district court denied this motion

to amend on the ground that amendment would be futile.

After completing discovery on Developers’ remaining

claim, the disparate-impact claim, the City filed two motions

for summary judgment regarding that claim. The first motion

contended that Developers could not prove disparate impact

because there was an adequate supply of similarly priced and

modelled housing in the Southeast quadrant of Yuma and that

“on this separate and distinct basis alone” summary judgment

should be granted. In that motion, the City proffered no other

reason for the grant of summary judgment. Four days later,

the City filed the second motion, in which it contended that

(1) Developers’ had failed to show a disparate impact on

Hispanics resulting from the denial of the rezoning

4 We refer to both the claim for intentional discrimination under the

Equal Protection Clause and the disparate-treatment claim under the FHA

as “disparate-treatment claims” for ease of analysis.

5 The district court also dismissed Developers’ substantive due process

claims under the Federal and Arizona Constitutions as well as a claim

under Arizona Revised Statute § 9-452-01(F), which requires that

rezoning ordinances conform to the adopted general plan of the

municipality. Developers do not appeal the dismissal of these claims.

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14 AVENUE 6E INVESTMENTS V. CITY OF YUMA

application, and (2) the City denied the rezoning application

for legally sufficient reasons. The district court granted the

City’s first summary judgment motion,6expressly stating that

it did not reach the issues raised by the second motion, and

then denied the second motion as moot.7It entered judgment,

holding that the adequate supply of similarly-priced and

modelled housing in Southeast Yuma foreclosed any finding

of disparate impact. Ave. 6E, 2013 WL 2455928, at *2, *7. 

The district court also rejected Developers’ perpetuation-ofsegregation theory for its disparate-impact claim. It held that

undisputed statistics showed that “the integrative effect of

that development . . . would not have been significant enough

to support a disparate impact claim” based on the

perpetuation-of-segregation theory. Id. at *7. Developers

timely appealed.

ANALYSIS

Developers challenge the district court’s dismissal of their

disparate-treatment claims and grant of the City’s first motion

for summary judgment on the disparate-impact claim. We

first outline the avenues for relief available under the FHA

and then turn to the issues presented by this appeal.

I.

Enacted in the late 1960s following the assassination of

Dr. Martin Luther King Jr., the Fair Housing Act came at a

6 Ave. 6E Invs., LLC v. City of Yuma, 2013 WL 2455928 (D. Ariz.

2013).

 

7 Order and Opinion on Motion for Summary Judgment, Ave. 6E Invs.,

LLC v. City of Yuma, No. 09-00297 (D. Ariz. June 5, 2013), ECF No. 190.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 15

time of “considerable social unrest.” Tex. Dep’t of Hous. &

Cmty. Affairs v. Inclusive Cmties. Project, Inc., 135 S. Ct.

2507, 2516 (2015). By the mid-1960s, Congress had

addressed discrimination in public accommodations and

voting through major legislation; yet, it had failed to tackle

discrimination in housing, the area that determined millions

of citizens’ daily life experiences, as well as who their

neighbors would be, which schools their children would

attend, and the general social environment in which they

would grow up or live. Combined with the advent of

Levittown-like suburban developments across the country,

“various practices . . . , sometimes with governmental

support, . . . encourage[d] and maintain[ed] the separation of

the races,” including racially restrictive covenants,

blockbusting, and redlining. Id. at 2515. Government policy,

which promised not to change a neighborhood’s composition

when constructing affordable housing, exacerbated the stark

segregation in America’s cities. Brief for Housing Scholars

as Amici Curiae Supporting Respondents, Texas Dep’t of

Hous. (No. 13-1371), 9–16. Altogether, as the Kerner

Commission warned, the nation was “moving towards two

societies, one black, one white—separate and unequal.” 

Texas Dep’t of Hous., 135 S. Ct. at 2516 (quoting Report of

the National Advisory Commission on Civil Disorders 1

(Kerner Commission)). It took this “grim prophecy,” and the

social unrest that gripped the country following the murder of

Dr. King, for Congress to act and pass the FHA. Id. at 2516,

2525.

The FHA declares that “it is the policy of the United

States to provide, within constitutional limitations, for fair

housing throughout the United States.” 42 U.S.C. § 3601. To

achieve this goal, the FHA renders it unlawful to, among

other things, “make unavailable or deny, a dwelling to any

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16 AVENUE 6E INVESTMENTS V. CITY OF YUMA

person because of race, color, religion, sex, familial status, or

national origin.” 42 U.S.C. § 3604(a). As relevant to this

case, it provides several tools to do so.

First, and most obvious, it prohibits intentional

discrimination—that is, disparate treatment. A private

developer or governmental body cannot refuse to sell or rent

housing to someone because of that person’s race, religion,

gender, or other protected characteristic, nor can a

government zone land or refuse to zone land out of concern

that minorities would enter a neighborhood. See Pac. Shores

Props., 730 F.3d at 1157 (noting that the FHA prohibits

discriminatory zoning practices). If a governmental actor

engages in this discrimination, such conduct also violates the

Equal Protection Clause. Arlington Heights v. Metro. Hous.

Corp., 429 U.S. 252, 265–66 (1977) (noting, in the context of

a zoning challenge, that “[w]hen there is a proof that a

discriminatory purpose has been a motivating factor” in a

government decision, judicial deference to that decision is not

justified under the Equal Protection Clause).

Given the long history and dire consequences of

continuing housing discrimination and segregation, Congress

did not stop at prohibiting disparate treatment alone. Indeed,

in enacting the FHA, Congress sought “to eradicate

discriminatory practices within a sector of our Nation’s

economy.” Tex. Dep’t of Hous., 135 S. Ct. at 2522. To this

end, as the Supreme Court recently reaffirmed, the FHA also

encompasses a second distinct claim of discrimination,

disparate impact, that forbids actions by private or

governmental bodies that create a discriminatory effect upon

a protected class or perpetuate housing segregation without

any concomitant legitimate reason. Id. at 2522. Disparate

impact provides a remedy in two situations that disparate

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 17

treatment may not reach. First, “[i]t permits plaintiffs to

counteract unconscious prejudices and disguised animus that

escape easy classification.” Id.; see also Huntington Branch,

N.A.A.C.P. v. Huntington, 844 F.2d 926, 935 (2d Cir. 1988)

(noting that “clever men may easily conceal their

motivations” and that disparate-impact analysis is needed

because “[o]ften, such [facially neutral] rules bear no relation

to discrimination upon passage, but develop into powerful

discriminatory mechanisms when applied”). Second,

disparate impact not only serves to uncover unconscious or

consciously hidden biases, but also targets “artificial,

arbitrary, and unnecessary barriers” to minority housing and

integration that can occur through unthinking, even if not

malignant, policies of developers and governmental entities. 

Tex. Dep’t of Hous., 135 S. Ct. at 2522. In this way, disparate

impact “recognize[s] that the arbitrary quality of

thoughtlessness can be as disastrous and unfair to private

rights and the public interest as the perversity of a willful

scheme.” United States v. City of Black Jack, Mo., 508 F.2d

1179, 1185 (8th Cir. 1974).

Today, the policy to provide fair housing nationwide

announced in the FHA remains as important as ever. 

42 U.S.C. § 3601. While “many cities have become more

diverse” after “the passage of the [FHA] and against the

backdrop of disparate-impact liability in nearly every

jurisdiction,” Texas Dep’t of Hous., 135 S. Ct. at 2525,

housing segregation both perpetuates and reflects this

country’s basic problems regarding race relations:

educational disparities, police-community relations, crime

levels, wealth inequality, and even access to basic needs such

as clean water and clean air. In this country, the

neighborhood in which a person is born or lives will still far

too often determine his or her opportunity for success. As the

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18 AVENUE 6E INVESTMENTS V. CITY OF YUMA

Supreme Court recognized, the FHA must play a “continuing

role in moving the Nation toward a more integrated society”

and a more just one. Id.

Given this context, we now turn to Developers’ claims in

this case.

II. Disparate-Treatment Claims

Developers first bring disparate-treatment claims under

the FHA and the Equal Protection Clause, alleging that the

City refused their request to rezone the Property because of

discrimination or animus against Hispanics. The district

court dismissed these claims and found the request for leave

to amend futile, holding that Developers did not allege

plausible claims for relief in the first or seconded amended

complaints. Although Developers appeal both the dismissal

of their first amended complaint and the district court’s denial

of their motion for leave to file a second amended complaint,

we address only whether the second amended complaint

stated a plausible claim for relief because the first and second

amended complaints were both rejected based on plausibility

and because the second amended complaint would have

“supersede[d] the original” if allowed. See Ramirez v. Cnty.

of San Bernardino, 806 F.3d 1002, 1008 (9th Cir. 2015); see

also Dorf v. Bjorklund, 531 F. App’x 836, 837 (10th Cir.

2013) (ruling only on motion for leave to amend when the

plaintiffs appealed the dismissal of the first amended

complaint and the denial for leave to file a second amended

complaint on the basis of futility). Because the second

amended complaint contains sufficient allegations that the

City’s decision was driven by animus to state a plausible

claim for relief, we hold that the amendment was not futile

and reverse the dismissal of the disparate-treatment claims.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 19

Arlington Heights governs our inquiry whether it is

plausible that, in violation of the FHA and the Equal

Protection Clause, an “invidious discriminatory purpose was

a motivating factor” behind the City’s decision to deny the

zoning application. Arlington Heights, 429 U.S. at 266. 

Under Arlington Heights, a plaintiff must “‘simply produce

direct or circumstantial evidence demonstrating that a

discriminatory reason more likely that not motivated’ the

defendant and that the defendant’s actions adversely affected

the plaintiff in some way.” Pac. Shores Props., 730 F.3d at

1158 (quoting McGinest v. GTE Serv. Corp., 360 F.3d 1103,

1122 (9th Cir. 2004)). “A plaintiff does not have to prove

that the discriminatory purpose was the sole purpose of the

challenged action, but only that it was a ‘motivating factor.’”

Arce v. Douglas, 793 F.3d 968, 977 (9th Cir. 2015) (quoting

Arlington Heights, 429 U.S. at 266). The court analyzes

whether a discriminatory purpose motivated the defendant by

examining the events leading up to the challenged decision

and the legislative history behind it, the defendant’s departure

from normal procedures or substantive conclusions, and the

historical background of the decision and whether it creates

a disparate impact. Id. (citing Arlington Heights, 429 U.S. at

266–68, and Pac. Shores Props., 730 F.3d at at 1158–59). 

These elements are non-exhaustive, Arlington Heights,

429 U.S. at 268; Pac. Shores Props., 730 F.3d at 1159, and a

plaintiff need not establish any particular element in order to

prevail, see Pac. Shores Props., 730 F.3d at 1156 (stating

that, for the purpose of summary judgment, “any indication

of discriminatory motive may suffice to raise a question that

can only be resolved by a factfinder”). We examine each in

turn.

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20 AVENUE 6E INVESTMENTS V. CITY OF YUMA

A. Sequence of Events Leading Up to the Challenged

Decision and the Legislative History

The gravamen of Developers’ disparate-treatment claims

is that the City discriminated against them by denying their

application in order to appease its constituents, despite

knowing that opposition to the application was based largely

on racial animus, and despite the recommendations of its

zoning commission and planning staff and its regular

practice. Here, the allegations in the complaint are sufficient

to raise these claims.

The presence of community animus can support a finding

of discriminatorymotives by government officials, even if the

officials do not personally hold such views. Innovative

Health Sys., Inc. v. City of White Plains, 117 F.3d 37, 49 (2d

Cir. 1997), superseded on other grounds as recognized in

Zervos v. Verizon N.Y., Inc., 252 F.3d 163 (2d Cir. 2001);

LeBlanc-Sternberg v. Fletcher, 67 F.3d 412, 425 (2d Cir.

1995) (plaintiff alleging a disparate-treatment claim under the

FHA “can establish a prima facie case by showing that

animus against the protected group was a significant factor in

the position taken by the municipal decision-makers

themselves or by those to whom the decision-makers were

knowingly responsive.” (internal quotation marks omitted)). 

This standard “recognize[s] the reality of such controversial

proposals in the urban setting,” United States v. City of New

Orleans, 2012 WL 6085081, at *9 (E.D. La. Dec. 6, 2012), 

in which council members may vote based on constituents

concerns about “an influx of undesirables” into the

neighborhood. Smith v. Town of Clarkton, 682 F.2d 1055,

1066 (4th Cir. 1982).

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 21

Neither Budnick nor Arlington Heights, which the City

cites to support its position, holds otherwise. In Budnick, the

plaintiff sought a special use permit to build a continuing-care

retirement community and, only after the Town Council

denied his application, raised for the first time the contention

that the planned facility would serve disabled residents;

plaintiff in his prior declarations had asserted that residents

would be limited to “healthy, active, independent seniors.” 

Budnick, 518 F.3d at 1112–13. This alone undercut any

finding of discriminatory intent by the Town Council, as the

plaintiff failed to explain how the Town could have

discriminated against residents it did not know would be

housed at the facility. Here, by contrast, Developers allege

that their reputation as developers of subdivisions favored by

Hispanics, and the general demographic trends suggesting

that the higher-density development they proposed would

attract a greater number of Hispanic homebuyers, were

known prior to the denial of their application. Accordingly,

here, unlike in Budnick, community members’ opposition to

Developers’ application, using language indicating animus

toward a protected class, provides circumstantial evidence of

discriminatory intent by the City.

The facts of Arlington Heights likewise do not support

defendant’s argument. In that case, the Supreme Court

affirmed the district court’s finding following a trial that,

although some opponents of plaintiffs’ requested zoning

change might have been motivated by opposition to minority

groups, the evidence did not warrant the conclusion that this

motivated defendants. 429 U.S. at 269–70. Unlike this case,

the Supreme Court in Arlington Heights was required to

review the district court’s factual finding for clear error after

a trial, while here we must accept Developers’ allegations as

true and review the district court’s order de novo. See

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22 AVENUE 6E INVESTMENTS V. CITY OF YUMA

Anderson v. City of Bessemer City, 470 U.S. 564, 566 (1985);

Newark Branch, N.A.A.C.P. v. City of Bayonne, N.J.,

134 F.3d 113, 119–20 (3d Cir. 1998). Moreover, other facts

not similar to any before the district court on the present

motion to dismiss supported the district court’s factual

finding in Arlington Heights. For example, as the Supreme

Court noted, the area surrounding the site of the desired

zoning change to permit high-density zoning had been zoned

for single-family homes for more than a decade, and the

zoning change would have been contrary to a “buffer policy”

consistently applied in prior instances. 429 U.S. at 269. 

Here, by contrast, the R-1-6 zoning sought by Developers

was entirely consistent with the City’s General Plan.

Although the relevant cases clearly hold that a city’s

denial of a zoning change following discriminatory

statements by members of the public supports a claim of

discriminatory intent, the question remains whether the

statements alleged in Developers’ Second Amended

Complaint actually constituted animus. None of the alleged

statements expressly refers to race or national origin; rather,

they raise various concerns about issues including large

families, unattended children, parking, and crime. We have

held, however, that the use of “code words” may demonstrate

discriminatory intent. Galdamez v. Potter, 415 F.3d 1015,

1024 n.6 (9th Cir. 2005) (citing McGinest, 360 F.3d at 1117). 

In McGinest, we adopted the reasoning of the Third Circuit’s

opinion in Aman v. Cort Furniture Rental Corp., 85 F.3d

1074, 1083 (3d Cir. 1996). Considering comments that

plaintiff, an African American, was a “drug dealer,” we

quoted Aman at length:

[A] reasonable jury could conclude that the

intent to discriminate is implicit in these

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 23

comments. There are no talismanic

expressions which must be invoked as a

condition-precedent to the application of laws

designed to protect against discrimination.

The words themselves are only relevant for

what they reveal–the intent of the speaker. A

reasonable jury could find that statements like

the ones allegedly made in this case send a

clear message and carry the distinct tone of

racial motivations and implications. They

could be seen as conveying the message that

members of a particular race are disfavored

and that members of that race are, therefore,

not full and equal members of the workplace.

McGinest, 360 F.3d at 1117 (quoting Aman, 85 F.3d at 1083)

(alteration in original). The McGinest court then held that

“[t]he reference to [plaintiff, an African-American] as a ‘drug

dealer’ might certainly be deemed to be a code word or

phrase” demonstrating animus. Id.; see also Guimaraes v.

SuperValu, Inc., 674 F.3d 962, 974 (8th Cir. 2012)

(“[R]acially charged code words may provide evidence of

discriminatory intent by sending a clear message and carrying

the distinct tone of racial motivations and implications.”)

(quotation marks omitted) (alteration in original); Jenkins v.

Methodist Hosps. of Dallas, 478 F.3d 255, 265 (5th Cir.

2007) (citing Aman, 85 F.3d at 1083). Whether a code word

evidences racial animus may depend upon factors including

local custom and historical usage. Ash v. Tyson Foods, Inc.,

546 U.S. 454, 456 (2006). Although these cases involve

employment rather than housing discrimination, these lessons

are equally applicable to both types of cases. See Texas Dep’t

of Hous., 135 S. Ct. at 2522–23.

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24 AVENUE 6E INVESTMENTS V. CITY OF YUMA

Here, construing the allegations in the complaint in favor

of plaintiffs as well as drawing all inferences in their favor,

the alleged statements by the neighborhood opposition

submitted to city officials contained such code words

consisting of stereotypes of Hispanics that would be wellunderstood in Yuma. Neighbors expressed concern that the

type of people living in “the Hall neighborhoods” had large

households and used single-family homes as multi-family

dwellings. These people, neighbors complained, own

numerous vehicles which they park in the streets and yards,

fail to maintain their residences, and lack pride of ownership. 

They also allow unattended children to roam the streets (what

some may call letting children play in the neighborhood). 

Several landowners attending the public hearing even brought

pictures of another Hall subdivision, in which 77% of the

homebuyers are Hispanic, to exemplify the complaints they

had about the potential new development. See Greater New

Orleans Fair Hous. Action Ctr. v. St. Bernard Parish, 641 F.

Supp. 2d 563, 571–72 (E.D. La. 2009) (repeated references to

Village Square, where Village Square was a local complex

with a significant black population, demonstrated racial

animus). After Developers presented their compromise plan

to transition from the 8,000-foot lots down to 6,000-foot lots

near the RV park, another landowner noted that it would be

a smooth transition in terms of lot size, but not ownership

demographics, suggesting—at least to a reasonable juror—a

change in racial composition. In sum, landowners worried

that the type of people who live in “Hall neighborhoods”

create a “low cost, high crime neighborhood” that these

landowners had worked hard “to keep our children out of.” 

See id. (finding references to crime were “racially-loaded”);

Atkins v. Robinson, 545 F. Supp. 852, 874 (E.D. Va. 1982)

(reference to “an abundance of crime” “may be interpreted as

[a] veiled reference[] to race”).

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 25

Taken together, these allegations, along with the

allegation that Developers are known to many as a developer

of Hispanic neighborhoods on the basis of their housing

projects in Yuma, provide plausible circumstantial evidence

that community opposition to Developers’ proposed

development was motivated in part by animus, and that the

City Council was fully aware of these concerns when it took

the highly unusual step of acceding to the opposition and

overruling the recommendations of its zoning commission

and planning staff.

B. City’s Departure from its Normal Procedures or

Substantive Conclusions

Developers also plausibly allege that the denial of their

zoning application departed from the City’s normal

procedures. In denying the rezoning, the City Council’s

decision ran contrary to the unanimous recommendation

provided by the City’s Planning and Zoning Commission, as

well as the recommendation of City planning staff. A city’s

decision to disregard the zoning advice of its own experts can

provide evidence of discriminatory intent, particularly when,

as here, that recommendation is consonant with the

municipality’s general zoning requirements and plaintiffs

proffer additional evidence of animus. See Innovative Health

Sys., 117 F.3d at 49 (affirming grant of preliminary injunction

and stating that city’s zoning body “ignored the requirements

of the ‘hospital or sanitaria’ classification and did not explain

why it declined to follow the Corporation Counsel’s

straightforward analysis”); Sunrise Dev., Inc. v. Town of

Huntington, N.Y., 62 F. Supp. 2d 762, 775, 776 (E.D.N.Y.

1999) (concluding that Town’s disregard of its Citizen’s

Advisory Committee’s recommendation suggested that

“defendants likely were swayed by the anti-disabled animus

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26 AVENUE 6E INVESTMENTS V. CITY OF YUMA

present in the community”); Dews v. Town of Sunnyvale,

Tex., 109 F. Supp. 2d 526, 572 (N.D. Tex. 2000)

(“[Defendant’s] history of ignoring the recommendations of

its planners and proceeding in the face of sound legal and

planning advice” weighed towards finding of discriminatory

intent); MHANY Mgmt. Inc. v. Cnty. of Nassau, 843 F. Supp.

2d 287, 321–22 (E.D.N.Y. 2012) (city’s decision to disregard

its own consultant’s zoning recommendation and the

County’s desires supported finding of discriminatory intent);

but cf. Hallmark Developers, 466 F.3d at 1285 (finding

County Board’s decision to ignore recommendations of

approval from its staff and planning bodies was not suspect

because no larger context demonstrated racial animus). 

Developers’ allegation that the City’s prior zoning decisions

permitted “many examples in Yuma where large lot

expensive subdivisions had been built next to moderately

priced small lot housing subdivisions without problems”

further underscores the inference that the decision to deny

Developers’ application was contrary to normal procedures. 

Finally, this zoning request was the only request the City

Council denied of the 76 considered over the three years

preceding the Council’s decision. Drawing all reasonable

inferences in Developers’ favor, the City’s singling out of

their zoning request for denial supports Developers’

contention that the City had a discriminatory intent.

C. Disparate Impact and the Historical Background of

the Decision

The complaint’s statistics on the disparate impact caused

by the decision and the historical background of the decision

also tend to make the disparate-treatment claims plausible.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 27

Developers allege specific facts demonstrating city

officials’ awareness that the effect of their denial of

Developers’ application would “bear[] more heavily on one

race than another” in light of historical patterns of segregation

by race and class.8 Specifically, they allege facts

demonstrating that distinct areas of the city historically have

been populated, respectively, by lower class Hispanics and

more affluent Whites. They point to the 2002 and 2007

Analyses of Impediments, each of which shows that

“substantially all of the available low- to moderate-income

housing” in Yuma has historically been concentrated in three

areas of the city in which more than 75% of the households

are Hispanic, whereas Whites have been concentrated in two

other areas in which the White population has been more than

75%.9 They also allege facts contained in the City’s General

Plan and the U.S. Census identifying a direct relationship

between housing density and costs, and demonstrating a

8 Even though the proposed development would not have qualified as

“affordable” under HUD regulations, alleged facts regarding the

distribution of affordable housing inYuma’sHispanic neighborhoods help

demonstrate general income stratification supporting the inference that

Hispanics in Yuma are generally less affluent than Whites and would be

more likely to purchase homes built on the smaller lots proposed by

Developers.

9 Although not relevant to our consideration of the district court’s

dismissal of the disparate-treatment claim pursuant to Rule 12(b)(6), new

data developed during the summary judgment phase showed that this

percentage has changed in Southeast Yuma as a whole, though not

necessarily in any particular part of that quadrant of the City. While the

City’s 2002 and 2007 Analysis ofImpediments noted that Southeast Yuma

had a White population of 75%, the 2012 version of the same report shows

that the White population in that area as a whole decreased to between

48% and 65% (meaning that the Hispanic population was likely between

30% and 47%, with 5% being other).

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28 AVENUE 6E INVESTMENTS V. CITY OF YUMA

significant disparity (29%) between the median income of

Yuma households headed by Hispanics and Whites.

Based upon these facts, Developers assert that the City’s

denial of their application to build moderately priced housing

will have a disproportionate effect on Hispanics. Developers’

allegations, accepted as true, support the inference that “the

[City’s] decision does arguably bear more heavily on racial

minorities.” Arlington Heights, 429 U.S. at 269. Drawing all

inferences in Developers’ favor, these allegations

demonstrate a historical background of stratification by race

and class, indicating the City’s denial of Developers’

application to build moderately priced housing will have a

disparate impact on Hispanics by denying them affordable

opportunities to move into communities long dominated by

more affluent Whites.

Developers also allege facts suggesting a prior history of

animus in Yuma housing developments. Specifically, they

allege facts reported in the 2002 Analysis of Impediments

demonstrating a history of NIMBY opposition to the

development of affordable housing developments and

appearing to link such opposition at least in part to animus,

because the reports’ authors include among their

recommendations that the City collaborate on community

events celebrating cultural diversity. This further supports

Developers’ claims that animus helped motivate the

community opposition leading to the City Council’s decision

to deny their zoning application.

Citing the Seventh Circuit’s decision on remand in

Arlington Heights and the Second Circuit’s decision in

Huntington Branch, N.A.A.C.P., the City argues that the facts

before us fail to demonstrate an intent to discriminate because

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 29

they fall short of the facts in cases finding an intent to

discriminate in municipalities with a long history of

completely barring certain types of housing or restricting its

development to only certain locations. See Metro. Hous. Dev.

Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1294 (7th

Cir. 1977); Huntington Branch, N.A.A.C.P. v. Huntington,

844 F.2d 926, 928 (2d Cir. 1988). That the facts alleged here

are not as egregious as the facts in other cases in which

plaintiffs prevailed is of no consequence. Developers need

not demonstrate a complete absence of desired housing for

Hispanics to prevail; discriminatory zoning practices violate

the FHA even if they only “contribute to ‘mak[ing]

unavailable or deny[ing] housing’” to protected individuals. 

Pac. Shores Props., 730 F.3d at 1157 (quoting City of

Edmonds v. Wash. State Bldg. Code Council, 18 F.3d 802,

805 (9th Cir. 1994) (alterations in original) (emphasis

added)). Moreover, at this stage of the proceedings all

inferences must be drawn in the plaintiffs’ favor and those

inferences alone are sufficient to preclude dismissal of the

claims regarding disparate treatment.

D. Conclusion

After public hearings filled with what a reasonable jury

could interpret to be racially tinged code words, the City

Council denied Developers’ rezoning request, overriding the

unanimous vote of the planning commission and denying a

rezoning request for the first time in three years. For the

reasons explained above, we hold that Developers’ complaint

sufficiently alleges claims of disparate treatment under the

FHA and Equal Protection Clause. We hold that the claims

of disparate treatment are, on the basis of the complaint

before us, plausible and therefore reverse the district court’s

dismissal of these claims.

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30 AVENUE 6E INVESTMENTS V. CITY OF YUMA

III. Disparate-Impact Claim

Developers next assert that the district court erred in

granting the City’s first summary judgment motion as to the

claim that the denial of the zoning request caused a disparate

impact on Hispanics. The motion was granted on the sole

ground raised by the City: similarly-priced housing was

available elsewhere in Southeast Yuma; therefore, no

disparate impact could be established.10 We reject that

ground and hold that when a developer seeks to rezone land

to permit the construction of housing that is more affordable,

a city cannot defeat a showing of disparate impact on a

minority group by simply stating that other similarly-priced

and similarly-modelled housing is available in the general

area.11

A.

Developers presented a request to the City to change the

zoning of their land from lower-density to higher-density

housing. They did so mainly for financial reasons—lowerdensity housing was not selling after a recession, and they

10 Alternative housing elsewhere in the area was the only ground on

which the district court relied in granting summary judgment on this

claim. The Developers, however, had an additional claim of disparate

impact based on a perpetuation-of-segregation theory. As discussed

below, the district court granted summary judgment on the perpetuationof-segregation claim for the reason that undisputed statistics showed that

the denial of the zoning application would not have a significant

segregative effect on the neighborhood. We affirm that ruling, infra at 38.

11 We do not address arguments in the second summary judgment

motion, including the City’s contention that Developers have failed to

proffer statistical evidence demonstrating a substantial disparate impact

resulting from the zoning denial.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 31

believed that higher-density units might sell more easily. The

City argued in its first summary judgment motion only that

the availability of similarly-priced and modelled housing in

other parts of Southeast Yuma necessitated summary

judgment in its favor. Developers’ statistics demonstrating

that Hispanics would be more likely to buy homes in the

zoned area if the proposed higher-density zoning were

approved were not at issue. The City, therefore, had a choice

of two alternatives, each of which was permissible under its

General Plan; one would enable more minority group

members to purchase homes in an area with a white majority

population than would the other. It chose the other.

As noted above, in the 1960s and earlier, national, state,

and local governments had explicit or implicit policies that

prevented integration even when developers had an economic

rationale for wanting to build more dense or more affordable

housing. In Texas Department of Housing, the Supreme

Court emphasized that disparate-impact liability was

designed to reverse this pattern by allowing “private

developers to vindicate the FHA’s objectives and to protect

their property rights by stopping municipalities from

enforcing arbitraryand, in practice, discriminatoryordinances

barring the construction of certain types of housing units.” 

135 S. Ct. at 2522. Indeed, the wisdom of disparate-impact

liability under the FHA is that it addresses local government’s

(as well as other government’s) historical racism and the

continuing persistence of housing segregation not by

interjecting racial quotas as the end goal of municipal zoning

decisions, but rather by ensuring that municipalities making

such decisions will base them on legitimate objectives rather

than on discriminatory reasons, conscious or otherwise. 

Moreover, when such decisions may still cause a disparate

impact, the municipality and the developer are instructed to

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32 AVENUE 6E INVESTMENTS V. CITY OF YUMA

attempt to minimize that impact bydetermining whether there

is an alternative that accommodates both the city’s legitimate

objective and the developer’s legitimate goals. See 24 C.F.R.

§ 100.500 (describing this process under the FHA). Such a

thoughtful consideration, under disparate-impact analysis, of

how a city’s legitimate rationales may be reconciled with the

desires of developers to build higher-density affordable

housing has helped to change the old patterns prevalent in the

1960s and will continue to help produce a fairer and more just

society.

B.

Adopting the district court’s holding, which it arrived at

without the benefit of the Supreme Court’s decision in Texas

Department of Housing, would prematurely cut short the

carefully constructed mode of analysis that the Court just

recently established. Relying on Hallmark Developers, Inc.

v. Fulton County, 466 F.3d 1276 (11th Cir. 2006), a case

decided almost ten years before Texas Department of

Housing, the district court held that an adequate supply of

comparable housing in a quadrant of the City in which the

zone is located negated the possibility of any disparate impact

from the City’s denial of Developers’ application.12

In Hallmark, a Georgia county denied the developer’s

application to rezone land to build a mixed-use development

including affordable housing, and the developer sued. 

12 We assume that the Eleventh Circuit, like the district court, would

reach a different decision than it did in Hallmark with the benefit of the

Supreme Court’s recent Texas Department of Housing decision. In fact,

we are not aware of any Eleventh Circuit case that has relied on

Hallmark’s rule on alternative housing since that decision.

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 33

466 F.3d at 1279, 1282. The developer’s expert testified that

the denial of zoning that would have allowed the construction

of lower-cost housing had a disparate impact on minorities

based on data of local home ownership and apartment rentals. 

Id. at 1282. Despite these statistics, the Eleventh Circuit held

that the developer had failed to establish a disparate impact

because there was an oversupply of homes in the developer’s

projected price range in the southern part of the county. Id.

at 1287; see also Hallmark Developers, Inc. v. Fulton Cty.,

Ga., 386 F. Supp. 2d 1369, 1378 (N.D. Ga. 2005) (describing

the “South Fulton County” area). The court reasoned that

“[i]f there is a glut in the market of homes in Hallmark’s

projected price range, the lack of Hallmark’s particular

development is not likely to have an impact on anyone, let

alone adversely affect one group disproportionately.” Id.

The district court adopted Hallmark’s reasoning, finding

that “it is undisputed there was a supply of R-1-6 lots and

affordable to moderately priced homes available in the

southeast portion of Yuma at the time of the zoning denial

and a couple year[s] thereafter,” including some lots within

two miles of the proposed development in the same price

range and featuring the same type of homes. Citing

Hallmark, the district court concluded that an adequate

supply of comparably-priced and similarly-modelled homes

in the area—that is, Southeast Yuma—foreclosed the

possibility of any adverse impact resulting from the City’s

denial of Developers’ zoning application, thereby precluding

Developers from pursuing a disparate-impact claim.

We disagree. The availability of similar housing well

outside of the zoned property does not affect the analysis

whether a city’s rejection of a zoning request caused a

disparate impact by preventing a higher percentage of

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34 AVENUE 6E INVESTMENTS V. CITY OF YUMA

minority group members from purchasing homes. See Texas

Dep’t of Hous., 135 S. Ct. at 2522. In fact, the Hallmark

reasoning would threaten the very purpose of the FHA. A

local government could deny a developer’s request to

construct higher-density housing that more members of

minority groups could purchase, as long as there was other

similarly-priced and modelled housing anywhere within a

quadrant of a city or the southern or northern part of a county. 

Indeed, there is no necessary limit to the Hallmark theory that

similarly-priced and modelled housing located elsewhere

would preclude a finding that zoning decisions had an

adverse impact on members of minority groups. It would

permit cities to block legitimate housing projects that have

the by-product of increasing integration simply by scouring

large swaths of a city for housing in another part of town that

is largely populated by minority residents, that does not

compare in any number of respects to the neighborhood in

which the developer has sought rezoning, or that is, in fact,

far less desirable in general. The Hallmark rule ignores the

fact that neighborhoods change from mile to mile, if not from

block to block, and thereby overlooks the potential for the

purposeful creation of majority areas from which minorities

may be excluded or of minority areas with few, if any, white

homeowners. Such segregated areas, when based on

consciously or unconsciously biased decisions that

disproportionately, and needlessly, adversely affect

minorities, are the antithesis of what the Fair Housing Act

stands for. See Texas Dep’t of Hous., 135 S. Ct. at 2522.

Similar to the Eleventh Circuit’s designation of the entire

southern part of a county as the relevant unit for determining

whether comparable housing existed, the district court here

also considered far too broad an area—an area covering an

entire quadrant of the city of Yuma—when determining

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 35

whether comparable housing exists. For any family,

including those of potential purchasers of homes in the

proposed housing development, housing that is a fair distance

away from where the family would otherwise choose to live

cannot in all likelihood be described as comparable.13In

other words, minority families that might want to purchase

homes in the zoned area would almost certainly be adversely

affected by the denial of the zoning application if the

existence of available housing in a distant neighborhood were

deemed dispositive.

Our rejection of the Hallmark rule does not mean that the

existence of available housing in close proximity is irrelevant

to determining whether a plaintiff proves a disparate impact. 

Indeed, if a city shows that truly comparable housing is

available in close proximity to a proposed development, such

a showing would be a relevant factor in deciding whether its

zoning decision had a disparate impact in that circumstance. 

Truly comparable housing, however, is not simply a question

of price and model, but also of the factors that determine the

desirability of particular locations—factors such as similarly

or better performing schools, comparable infrastructure,

convenience of public transportation, availabilityof amenities

13 The City contended at oral argument that such a rule is permissible

because Developers conceded that any housing at the same price as the

proposed development in the whole Southeast quadrant of Yuma would

be “similar housing.” Not so. Although Developers’ complaint and

summary judgment briefing noted that Southeast Yuma had been

historically segregated, Developers do not assert that all housing in the

same price range in Southeast Yuma would be equivalent. In fact,

Developers spent several pages of their summary judgment brief

emphasizing that other available housing in Southeast Yuma that the

district court cited was, for example, in a “different, less desirable part of

Yuma.”

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36 AVENUE 6E INVESTMENTS V. CITY OF YUMA

such as public parks and community athletic facilities, access

to grocery or drug stores, as well as equal or lower crime

levels. See Clark v. Universal Builders, Inc., 501 F.2d 324,

335 (7th Cir. 1974) (finding homes comparable that “were

located in close geographical proximity to plaintiffs’ homes

and had similar communal amenities such as transportation,

schools, churches, and quality of neighborhood”). Thus, in

order to determine whether housing outside of the zoned area

is comparable, we must determine not only the close

proximity of such housing to that area but also the principal

characteristics of the neighborhood that affect families’

everyday lives.

Rejecting the Eleventh Circuit’s and the district court’s

approach does not, as the district court contended,

“effectively place an affirmative duty on governing bodies to

approve all re-zoning applications wherein a developer

sought to build housing within a particular price range.” In

addition to mischaracterizing the Developers’ contention, this

statement misapprehends the applicable law. First, it may be

that Developers have, in fact, failed to show a disparate

impact on minorities resulting from denial of the rezoning

application—as noted, we remand to the district court to

assess the arguments advanced by the City in the second

motion for summary judgment. Second, a developer’s ability

to show disparate impact does not impose a duty on a

municipality to approve all zoning applications in a particular

price range. Instead, as the Supreme Court made clear in

Texas Department of Housing, such a showing merely

requires the city to demonstrate that the action that creates an

adverse effect on minorities is supported by adequate

justification. 135 S. Ct. at 2522 (“An important and

appropriate means of ensuring that disparate-impact liability

is properly limited is to give housing authorities and private

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 37

developers leeway to state and explain the valid interest

served by their policies.”); see also 24 C.F.R. § 100.500(c)

(setting forth burden-shifting framework for disparate-impact

claims under the FHA).

Indeed, municipalities that have good cause for denying

zoning changes may do so, unless motivated by conscious or

unconscious racial bias. When the developer shows by

statistical data that a zoning denial will have a disparate

impact on minorities, the city’s obligation is to establish a

legitimate and credible basis for its decision. This is not an

unreasonable burden. In fact it is

a feature of the FHA’s programming, not a

bug. . . . We need not be concerned that this

approach is too expansive because the

establishment of a prima facie case, by itself,

is not enough to establish liability under the

FHA. It simply results in a more searching

inquiry into the defendant’s motivations—

precisely the sort of inquiry required to ensure

that the government does not deprive people

of housing “because of race.”

Mt. Holly Gardens Citizens in Action, Inc. v. Twp. of Mount

Holly, 658 F.3d 375, 385 (3d Cir. 2011); see also Graoch

Assocs. # 33, L.P. v. Louisville/Jefferson Cty. Metro Human

Rel. Comm’n, 508 F.3d 366, 374 (6th Cir. 2007) (“Of course,

not every housing practice that has a disparate impact is

illegal.”); Metro. Hous. Dev. Corp., 558 F.2d at 1290. In

some cases, nonetheless, an adjustment or accommodation

can still be made that will allow both interests to be satisfied. 

Cf. 24 C.F.R. § 100.500(c)(3).

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38 AVENUE 6E INVESTMENTS V. CITY OF YUMA

In sum, we decline to follow Hallmark and reject the

district court’s determination that the availabilityof similarlypriced and modelled housing in the same quadrant of the City

as the zoned property prevents Developers from showing a

disparate impact. We therefore reverse in part the district

court’s grant of the City’s first motion for summary judgment

and vacate its decision that the second motion is moot. On

remand, the district court may consider the second motion. 

The parties may, of course, amend their claims as to this

motion so as to take into account this opinion and the

Supreme Court’s opinion in Texas Department of Housing as

well as any statistical data or other law that may be relevant,

including additional data regarding comparable housing in

close proximity to the proposed development.

Finally,Developers also raised a separate perpetuation-ofsegregation claim of disparate impact. We agree with the

district court that they failed to set forth sufficient facts for

any such claim. The district court need not address it on

remand.

CONCLUSION

For the foregoing reasons, we reverse the district court’s

dismissal oftheDevelopers’ disparate-treatment claims under

the FHA and the Equal Protection Clause and its grant of the

City’s first summary judgment motion on the disparateimpact on Hispanics claim. We remand the case to the

district court for further proceedings consistent with this

opinion, including its consideration in the first instance of the

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AVENUE 6E INVESTMENTS V. CITY OF YUMA 39

arguments the City presents in its second summary judgment

motion, as that motion may be amended.

REVERSED IN PART, VACATED IN PART, AND

REMANDED.

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