Court Opinion

ID: 4676840
Source: CourtListenerOpinion
Date Created: 2021-04-13 18:00:30.92189+00
Date Added: 2024-06-11T08:03:34.831277
License: Public Domain

Case: 20-50185     Document: 00515819781          Page: 1    Date Filed: 04/13/2021

              United States Court of Appeals
                   for the Fifth Circuit                              United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                         April 13, 2021
                                   No. 20-50185                         Lyle W. Cayce
                                                                             Clerk

   Harmony Haus Westlake, L.L.C.; Ling Zhou,

                                          Plaintiffs—Appellees Cross-Appellants,

                                       versus

   Parkstone Property Owners Association, Incorporated,

                         Defendant-Counter Plaintiff—Appellant Cross-Appellee,

                                       versus

   Fenglin Du,

                                                  Counter Defendant—Appellee.

                  Appeal from the United States District Court
                       for the Western District of Texas
                            USDC No. 1:19-CV-1034

   Before Barksdale, Southwick, and Graves, Circuit Judges.
   Per Curiam:*

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-50185      Document: 00515819781          Page: 2    Date Filed: 04/13/2021

                                    No. 20-50185

          Primarily at issue is whether Parkstone Property Owners Association,
   Inc. (Parkstone), the homeowners association (HOA) governing the
   Parkstone gated community in Austin, Texas, violated the Fair Housing Act
   (FHA), 42 U.S.C. § 3601, et seq., by denying Harmony Haus Westlake,
   L.L.C.’s (Harmony Haus), request to operate a sober-living home with 12
   residents. Also at issue is whether the district court erred in: ruling
   Parkstone waived its breach-of-contract counterclaim; and denying Harmony
   Haus attorney’s fees.      VACATED in part; AFFIRMED in part;
   REVERSED in part; and REMANDED.
                                          I.
          The City of Austin granted Harmony Haus a reasonable
   accommodation under the FHA, 42 U.S.C. § 3604(f), issuing a license to
   operate a rooming house at 2105 Real Catorce Drive (the Catorce house) in
   the Parkstone subdivision as a sober-living home for up to 12 individuals
   recovering from alcoholism and drug-addiction. (The City of Austin requires
   a license to operate a “rooming house”, defined as: “A structure, other than
   a hotel, where lodging for more than six unrelated persons is provided
   without meals in return for compensation.” Austin City Code § 25-12-213,
   202.1 and 1303(A). Rooming houses for individuals recovering from drug-
   addiction or alcoholism are often referred to as “group homes”, “sober-
   living facilities”, or “halfway houses”. We refer to the Catorce house as a
   “sober-living home”.)
          The Catorce house, which has six bedrooms, is subject to the deed
   restrictions contained in Parkstone’s declaration of covenants (the
   declaration), including for: single-family residential use (“[a]ll Lots shall be
   . . . used solely for single family residential use”); noise and nuisance (“[n]o
   noise or other nuisance shall be permitted to exist or operate upon any
   portion of the Property so as to be offensive or detrimental to any other

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   portion of the Property or its occupants”); and vehicles (“vehicles . . . shall
   not be parked or left on any portion of the Property other than . . . [the] garage
   or driveway for longer than twelve . . . hours at a time”).
          Lessee Harmony Haus requested Parkstone exempt the Catorce
   house from “any applicable HOA covenant, rule, or regulation relating to any
   restriction that would otherwise impede its operation so that its residents can
   be provided an equal opportunity to use and enjoy their housing”. In that
   regard, Harmony Haus requested Parkstone waive the singe-family-
   residential-use and parking restrictions to allow 12 unrelated residents (with
   their eight vehicles) to live at the Catorce house. Parkstone denied this
   request, but offered to waive the single-family-residential-use restriction and
   permit Harmony Haus to operate with up to six residents.
          As a result, Harmony Haus (together with an owner and lessor of the
   Catorce house, Ling Zhou) filed this action, claiming Parkstone’s refusal to
   accommodate more than six residents violates the FHA. Harmony Haus
   sought, inter alia, injunctive relief and attorney’s fees.         In response,
   Parkstone, inter alia, sought a declaratory judgment that it had not violated
   the FHA; sought an injunction against Harmony Haus’ using the Catorce
   house in violation of the declaration, except as permitted by the reasonable
   accommodation offered by Parkstone, i.e., that no more than six adults be
   allowed to reside in the Catorce house; presented a breach-of-contract
   counterclaim that Harmony Haus “violated or will violate the deed
   restrictions” as to residential use, noise, and parking; and presented a
   counterclaim that Harmony Haus violated Chapter 202 of the Texas
   Property Code, seeking civil damages of up to $200 per day for failure to
   obtain exceptions to the single-family-residential-use restriction, potential
   noise violations, and parking outside of the garage or driveway longer than 12
   hours at a time.

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                                    No. 20-50185

          Following a two-day bench trial, the district court: enjoined Parkstone
   from enforcing the declaration against Harmony Haus with respect to the
   single-family-residential-use restriction; denied Harmony Haus’ claim for
   attorney’s fees and costs; denied Parkstone’s application for an injunction;
   ruled that the declaration’s restrictions regarding noise, nuisance, and
   parking remain in effect, and that Parkstone may enforce those restrictions,
   so long as such enforcement is applied in an evenhanded manner that treats
   handicapped and non-handicapped residents alike, see 42 U.S.C.
   § 3604(f)(2)–(3) (prohibiting discrimination in privileges of renting a
   dwelling against any renter because of a handicap of a person residing, or
   intending to reside, in that dwelling); and ruled that Parkstone’s
   counterclaims for breach of contract and violation of the Texas Property
   Code were waived because they were not raised at trial.
                                         II.
          “The standard of review for a bench trial is well established: findings
   of fact are reviewed for clear error and legal issues are reviewed de novo.”
   Luwisch v. Am. Marine Corp., 956 F.3d 320, 326 (5th Cir. 2020) (citations
   omitted). The primary issue is whether Parkstone violated the FHA by
   failing to make a reasonable accommodation when it denied Harmony Haus’
   request to allow 12 residents to live at the Catorce house.
          This issue involves three questions:       whether the residents are
   “handicapped” under the FHA; whether a 12-resident home is necessary to
   afford the residents an equal housing opportunity; and whether the requested
   accommodations were reasonable. Also at issue is whether the court erred
   in: ruling Parkstone waived its breach-of-contract counterclaim; and denying
   Harmony Haus attorney’s fees.

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                                     No. 20-50185

                                          A.
          Regarding whether Parkstone violated the FHA by failing to provide a
   reasonable accommodation, it is unlawful “[t]o discriminate in the sale or
   rental, or to otherwise make unavailable or deny, a dwelling to any buyer or
   renter because of a handicap of . . . a person residing in or intending to reside
   in that dwelling”. 42 U.S.C. § 3604(f)(1)(B). Discrimination includes “a
   refusal to make reasonable accommodations in rules [or] policies . . . when
   such accommodations may be necessary to afford such person equal
   opportunity to use and enjoy a dwelling”.          42 U.S.C. § 3604(f)(3)(B)
   (emphasis added). The Catorce house is a dwelling under the FHA. See 42
   U.S.C. § 3602(b) and (c) (“dwelling” is “any building . . . occupied as . . . a
   residence by one or more [individuals]”); see also City of Edmonds v. Oxford
   House, Inc., 514 U.S. 725, 729 (1995).
          The district court concluded, inter alia: Harmony Haus’ residents are
   handicapped under the FHA; and its requested accommodation (permitting
   12 unrelated residents) was reasonable and necessary. Accordingly, the court
   granted Harmony Haus injunctive relief under § 3613(c) of the FHA. We
   hold: the residents are handicapped; but the requested accommodation is not
   necessary (therefore we need not reach whether it was reasonable).
                                            1.
          The court did not err in concluding current and future Harmony Haus
   residents are handicapped under the FHA. Under the FHA, a handicap is
   “a physical or mental impairment which substantially limits one or more of
   [a] person’s major life activities”. 42 U.S.C. § 3602(h)(1). A physical or
   mental impairment includes “[a]ny physiological disorder or condition . . .
   affecting one or more of the [enumerated] body systems”. 24 C.F.R.
   § 100.201(a)(1). Alcoholism and drug-addiction are “impairments”, see, e.g.,
   Regional Economic Community Action Program, Inc. v. City of Middletown, 294

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   F.3d 35, 46 (2d Cir. 2002); but, the FHA “does not include current, illegal
   use of or addiction to a controlled substance”, 42 U.S.C. §3602(h).
   Therefore, a recovering alcoholic, or an individual recovering from drug-
   addiction, i.e., not currently using illegal drugs, may be handicapped under
   the FHA if his alcoholism or addiction substantially limits one or more of his
   major life activities.
          “Major life activities means functions such as caring for one’s self,
   performing manual tasks, walking, seeing, hearing, speaking, breathing,
   learning and working.” 24 C.F.R. § 100.201(b) (emphasis added). Three
   Harmony Haus residents testified that their addictions rendered them unable
   to live alone and care for themselves: K.S. “stopped eating”, “wasn’t taking
   care of [himself] hygienically”, and “had been hospitalized more than once”;
   D.J. was hospitalized several times and had “several medical issues that were
   caused by alcohol”; and Harris, a resident and the house manager, “couldn’t
   function” or take care of himself because of his addiction. The court
   concluded the residents’ “inability to live independently [without suffering
   a relapse] constitutes a substantial limitation on . . . the major life activity of
   caring for one’s self”. Additionally, each of the three residents testified that
   their alcoholism or addiction substantially limited their ability to work: K.S.
   “couldn’t even focus enough to get to work let alone be very productive when
   [he] was there”; D.J.’s “work suffered a lot” and he quit his job because his
   alcohol-use affected his focus and concentration; and Harris lost his job
   because he “couldn’t show up to work”.
          Parkstone maintains neither the current nor future residents are
   handicapped. The former are addressed first.
                                           a.
          According to Parkstone, Harmony Haus’ current residents are not
   handicapped because their major life activities are only substantially limited

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                                    No. 20-50185

   when they are abusing alcohol or drugs or in a treatment center, and not while
   living at the Catorce house. The residents testified that, although they are
   recovering, their alcoholism or drug-addiction renders them unable to be
   alone for extended periods of time without relapsing. Residents at Harmony
   Haus “typically come directly from an inpatient treatment center”. (Some
   residents come to Harmony Haus from other sober-living homes they
   transitioned to after completing an inpatient treatment program.) Evidence
   at trial was that transitioning from a treatment center to a sober-living home
   helps those with alcoholism and drug-addiction recover, rather than relapse.
   See Oxford House, Inc. v. Browning, 266 F. Supp. 3d 896, 901, 916 (M.D. La.
   2017) (“[E]mpircal evidence establishes the effectiveness of the Oxford
   House model at preventing an individual’s relapse into alcohol and drug
   use”.) (citing Leonard A. Jason et al., The Need for Substance Abuse After-
   Care: Longitudinal Analysis of Oxford House, 32 Addictive Behavs. 803
   (2007)); see also Oxford House, Inc. v. City of Baton Rouge, 932 F. Supp. 2d
   683, 693–94 (M.D. La. 2013).
          As the court concluded, the risk of relapse “constitutes a substantial
   limitation on [the residents’] ability to care for themselves”. Their ability to
   care for themselves while living at the Catorce house does not eliminate their
   “handicapped” status and protection under the FHA. Cf. Summers v.
   Altarum Inst., Corp., 740 F.3d 325, 331 (4th Cir. 2014) (“If the fact that a
   person could work with the help of a wheelchair meant he was not disabled
   under the [Americans with Disabilities] Act, the ADA would be
   eviscerated.”).
                                          b.
          Parkstone also asserts Harmony Haus must prove each of its future
   residents are handicapped. Because future residents are unknown, we look
   to the current residents as a representative sample and to Harmony Haus’

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   criteria for residents at the Catorce house. See Browning, 266 F. Supp. 3d at
   911 (“Because of the nature of the necessary criteria that an applicant must
   meet in order to reside at [the sober-living home], all of the residents are
   recovering from alcoholism or drug addiction, and the experiences of [two
   residents] during the times of their addictions therefore are representative of
   the residents’ experiences generally.”); see also Kearins v. Vill. Creek of
   Eldorado Home Owners’ Ass’n, Inc., No. 4:17-cv-00769, 2019 WL 2266635, at
   *4 (E.D. Tex. 5 Mar. 2019) (noting that, because issue was “handicapped
   status of the residents a facility aims to serve”, “criteria for admission to the
   facility at issue is an important factor”); Reg’l Econ. Cmty. Action Program,
   294 F.3d at 47 (holding residents of halfway house were handicapped after
   considering admissions criteria).
          The residents who testified are representative of the current and
   future residents, as they were selected to live at the Catorce house based on
   Harmony Haus’ criteria. The court concluded that the “admissions criteria
   . . . is sufficient evidence of handicapped status in this type of group home”.
   The typical Harmony Haus resident, the court found, “come[s] directly from
   an in-patient treatment center”, and “the treatment center from which the
   resident comes is the most important factor in selecting residents”. Because
   future residents must be admitted to, and complete, an in-patient treatment
   program, they will be considered handicapped under the FHA. See City of
   Edmonds v. Wash. State Bldg. Code Council, 18 F.3d 802, 804 (9th Cir. 1994),
   aff’d, 514 U.S. 725 (1995) (“Participation in a supervised drug rehabilitation
   program, coupled with non-use, meets the definition of handicapped [under
   the FHA].”).
                                          2.
          As noted, the Catorce house has six bedrooms. Harmony Haus has
   failed to show, as required by 42 U.S.C. § 3604(f)(3)(B), that allowing 12

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   residents to live at the Catorce house is necessary to provide its residents an
   equal opportunity to use and enjoy the home. See Elderhaven, Inc. v. City of
   Lubbock, 98 F.3d 175, 178 (5th Cir. 1996) (“[P]laintiff bears the burden of
   proving a violation of [the FHA]”.). “Reasonable accommodation claims
   under the FHA . . . require that a reasonable accommodation be provided to
   the plaintiffs if necessary to allow the plaintiffs to have usage and enjoyment
   in a facility equivalent to individuals who are not disabled.” Providence Behav.
   Health v. Grant Rd. Pub. Util. Dist., 902 F.3d 448, 459 (5th Cir. 2018)
   (emphasis added); see also Hollis v. Chestnut Bend Homeowners Ass’n, 760
   F.3d 531, 541 (6th Cir. 2014) (“[A]n FHA reasonable-accommodation . . .
   plaintiff must show that, but for the requested accommodation or
   modification, he likely will be denied an equal opportunity to enjoy the
   housing of his choice”.) (internal quotation marks and citation omitted).
          Necessary means “indispensable, requisite, essential, needful; that
   cannot be done without”. Vorchheimer v. Philadelphian Owners Ass’n, 903
   F.3d 100, 105 (3d Cir. 2018) (quoting 10 Oxford English Dictionary 275–76
   (2d ed. 1989)). When assessing an FHA reasonable-accommodation request,
   necessity must be considered in the light of “proposed alternatives”. Id.
   Merely being preferable to an alternative is not sufficient; it must be essential.
   See id; see also Bryant Woods Inn, Inc. v. Howard Cnty., 124 F.3d 597, 605 (4th
   Cir. 1997) (holding 15-, rather than eight-, resident group home not necessary
   to accommodate handicapped individuals). For “groups of handicapped
   persons who seek to live together . . . for mutual support”, such as in a sober-
   living home, “some minimum size may be essential to the success of the
   venture”. Brandt v. Vill. of Chebanse, 82 F.3d 172, 174 (7th Cir. 1996). To
   prove a certain minimum size is essential, plaintiff may show that number of
   residents is necessary for a sober-living home to be “therapeutically
   meaningful” or “financially viable”. Bryant Woods, 124 F.3d at 605.

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                                    No. 20-50185

          Parkstone’s proposed alternative was allowing six residents to live at
   the Catorce house. Harmony Haus asserts 12 are necessary for a sober-living
   home to work (at trial, its expert opined “less than 12 to 14 to 16” is
   unethical); but Parkstone presented evidence of effective sober-living homes
   with six to eight residents, including some operating in Austin. See, e.g.,
   Browning, 266 F. Supp. 3d at 916 (finding “at least six otherwise unrelated
   individuals”, not 12 to 14 to 16, “who are recovering from alcoholism or drug
   addiction must reside together in a dwelling in order to achieve [the]
   ameliorative effects” of recovering from alcoholism or addiction).
                                         a.
          First addressed is whether Harmony Haus has shown therapeutic
   necessity. Harmony Haus claims 12 residents are necessary for its model of
   sober-living to be effective. A “critical mass” of 12 residents is necessary,
   Harmony Haus contends, “to ensure that its phasing system functions,
   whereby more established residents mentor newer ones and where each
   resident has a roommate to help ensure accountability and avoid feelings of
   isolation”. The district court found this “phasing system is necessary to
   Harmony Haus’s        model    of   recovery”. But         the FHA requires
   accommodations that “may be necessary to afford [handicapped individuals]
   equal opportunity to use and enjoy a dwelling”. 42 U.S.C. § 3604(f)(3)(B).
   Showing that an accommodation is necessary for a sober-living home
   operator’s chosen model is not sufficient. Rather, an FHA reasonable-
   accommodation plaintiff “must show that, but for the accommodation,
   [handicapped individuals] likely will be denied an equal opportunity to enjoy
   the housing of their choice”. Smith & Lee Assocs., Inc. v. City of Taylor, 102
   F.3d 781, 795 (6th Cir. 1996). Harmony Haus has not shown that a phasing
   system using 12 residents is necessary to accommodate its handicapped
   residents.

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          The court also found that having a “greater number of residents” is
   “important in that it helps ensure that any particular resident is not home
   alone, thereby risking isolation and relapse”. But Harmony Haus has not met
   is burden to show that it needs 12 residents to prevent isolation. One resident
   testified that having a roommate—i.e., having two occupants per bedroom—
   would be helpful to him in avoiding isolation.           Twelve residents are
   necessary, Harmony Haus contends, because with any less, each of the six
   bedrooms will not have two occupants. But Harmony Haus did not present
   evidence showing it is necessary to use all six bedrooms, rather than using
   three with two residents in each. See Bryant Woods, 124 F.3d at 605 (“If
   [plaintiff]’s position were taken to its limit, it would be entitled to construct
   a 10–story building housing 75 residents, on the rationale that the residents
   had handicaps.”). At time of trial, Harmony Haus was operating with six
   residents. Two of them testified that living at the Catorce house was helping
   them recover and stay sober.
                                          b.
          Next addressed is whether Harmony Haus has shown financial
   necessity. Parkstone counters that Harmony Haus waived this issue by not
   cross-appealing the district court’s ruling that it failed to show 12 residents
   are necessary for financial viability. “[E]ven without filing a cross-appeal, an
   appellee can still present an issue on appeal that does not seek to modify the
   judgment; in other words, he must cross-appeal only when he seeks to alter
   it”. Castellano v. Fragozo, 352 F.3d 939, 965 (5th Cir. 2003) (en banc)
   (Barksdale, J., concurring in part and dissenting in part) (citing Kelly v. Foti,
   77 F.3d 819, 822 (5th Cir. 1996)). Harmony Haus does not seek to alter the
   judgment; instead, it seeks to affirm the judgment that its requested
   accommodation was necessary. The issue of financial necessity, therefore, is
   not waived for failure to cross-appeal.

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          The district court noted that an FHA reasonable-accommodation
   plaintiff may also prove necessity based upon financial viability.          See
   Elderhaven, 98 F.3d at 179 (“We recognize that the economics of group living
   arrangements often require a critical mass of residents in order to make
   feasible the type of alternative living arrangements that the Fair Housing Act
   was designed to encourage.”). The court found: the Catorce house “would
   have to close if it were limited to six residents”; but because “this does not,
   without more, show that Harmony Haus requires twelve residents to remain
   financially viable”, the court concluded “Harmony Haus has not shown that
   twelve residents are necessary for its financial viability”. (Emphasis in
   original.)
          Only in a single paragraph, Harmony Haus reasserts the court’s
   finding that six residents would not be financially viable. But, it does not
   challenge the court’s conclusion that 12 residents are not necessary.
          Arguably, this issue is waived because of inadequate briefing. See
   N.W. Enters. Inc. v. City of Houston, 352 F.3d 162, 185 (5th Cir. 2003).
   Assuming, arguendo, the issue is not waived, we uphold the district court’s
   conclusion, because a finding that Harmony Haus is not financially viable
   with six residents is not sufficient to show that 12 residents are necessary for
   it to be financially viable.
          In sum, Harmony Haus has not shown having 12 residents at the
   Catorce house is a necessary accommodation under the FHA. (Because
   allowing 12 residents is not necessary, we need not reach the request for eight
   vehicles.)
                                          3.
          As noted, because Harmony Haus has not shown that an
   accommodation allowing 12 residents is necessary, we need not reach
   whether the requested accommodations were reasonable.             Instead, the

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   reasonable accommodation Parkstone offered—allowing six residents to live
   at the Catorce house—should be enforced.
                                         B.
          Next at issue is whether Parkstone waived its breach-of-contract
   counterclaim. To preserve a claim, a party must raise it “to such a degree
   that the district court has an opportunity to rule on it”. Burell v. Prudential
   Ins. Co. of Am., 820 F.3d 132, 140 (5th Cir. 2016) (citation omitted).
          Parkstone presented some evidence at trial regarding Harmony Haus’
   breaching the declaration’s parking and noise-and-nuisance restrictions and
   reasserted the breach-of-contract claim in its post-trial brief, requesting
   injunctive relief. That claim, therefore, is not waived. See Stanford v.
   Comm’r., 152 F.3d 450, 462 n.18 (5th Cir. 1998) (holding issue not waived
   because plaintiffs “rais[ed] it in their pleadings and introduc[ed] relevant
   evidence at trial”).
          Accordingly, our remand to the district court includes for it to rule on
   Parkstone’s request for attorney’s fees under Texas Property Code § 5.006
   for violations of the declaration. See Tex. Prop. Code § 5.006(a) (“In an
   action based on breach of a restrictive covenant pertaining to real property,
   the court shall allow to a prevailing party who asserted the action reasonable
   attorney’s fees in addition to the party’s costs and claim.”).
                                         C.
          Finally, because we hold Harmony Haus has not demonstrated its
   requested accommodation was necessary under the FHA, Harmony Haus is
   not a prevailing party and, therefore, not entitled to attorney’s fees. See 42
   U.S.C. § 3613(c)(2). Therefore, Harmony Haus’ cross-appeal on the issue
   of attorney’s fees fails.

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                                      III.
          For the foregoing reasons, the injunction by the district court is
   VACATED; those parts of the judgment denying Harmony Haus
   attorney’s fees and court costs are AFFIRMED; the district court’s ruling
   that   Parkstone’s   breach-of-contract   counterclaim     is   waived   is
   REVERSED; and this case is REMANDED for further proceedings
   consistent with this opinion, including the district court’s enjoining
   Harmony Haus from violating the declaration.

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