IN THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Appeal No. 09-1209

THOMAS J. GALLAGHER, ET AL.,

Plaintiffs-Appellants,

v.

STEVE MAGNER, ET AL.,

Defendants-Appellees,

Appeal From United States District Court For the District of Minnesota

Civil No. 05-CV-1348 (JNE/SRN)

PLAINTIFFS-APPELLANTS BRIEF WITH ADDENDUM

Matthew A. Engel, Esq. AASE, ENGEL & KIRSCHER, PLLC 180 East 5th Street, Suite 255 St. Paul, MN 55101 (651) 209-6884 ATTORNEYS FOR PLAINTIFFS-APPELLANTS

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CORPORATE DISCLOSURE STATEMENTS

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and Rule

26.1A of the Local Rules for the Eighth Circuit Court of Appeals, Appellant Dadder’s

Properties, LLC states that it has no parent corporation and no publicly held

corporation owns at least 10% of its stock.

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and Rule

26.1A of the Local Rules for the Eighth Circuit Court of Appeals, Appellant Dadder’s

Holdings, LLC states that its parent company is Dadder’s Properties, LLC and no

publicly held corporation owns at least 10% of its stock.

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and Rule

26.1A of the Local Rules for the Eighth Circuit Court of Appeals, Appellant Dadder’s

Enterprises, LLC states that its parent company is Dadder’s Properties, LLC and

no publicly held corporation owns at least 10% of its stock.

Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure and Rule

26.1A of the Local Rules for the Eighth Circuit Court of Appeals, Appellant Dadder’s

Estates, LLC states that its parent company is Dadder’s Properties, LLC and no

publicly held corporation owns at least 10% of its stock.

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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENTS…………………………………...i

TABLE OF CONTENTS....................................................................................ii

TABLE OF AUTHORITIES...............................................................................iv

JURISDICTIONAL STATEMENT.....................................................................1

STATEMENT OF ISSUES PRESENTED FOR APPEAL ...................................2

MOST APPOSITE CASES……………...............................................................3

REQUEST FOR ORAL ARGUMENT.................................................................3

STATEMENT OF THE CASE ...........................................................................3

FACTS BEFORE THE DISTRICT COURT.........................................................6

INTRODUCTION OF THE DISCRIMINATORY ENVIRONMENT AND ATTITUDE OF ST. PAUL HOUSING CODE ENFORCEMENT…..6

CODE INSPECTOR REACTION TO THE CITY’S DISCRIMINATORY ENVIRONMENT AND ATTITUDE IN HOUSING CODE ENFORCEMENT………………………………………………………….12

THE CITY’S ACKNOWLEDGEMENT OF THE DISPARATE TREATMENT AND DISPARATE IMPACT OF ITS DISCRIMINATORY ENVIRONMENT AND ATTITUDE IN HOUSING CODE ENFORCEMENT………………………………………………….………15

THE CITY’S USE OF HOUSING CODE ENFORCEMENT TO CIRCUMVENT CIVIL RIGHTS AND TO ADDRESS BEHAVIOR ISSUES………………………………………………………………….…17

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INTRODUCTION OF THE CITY’S WORKING RELATIONSHIP AND PREFERRENTIAL TREATMENT OF THE PUBLIC HOUSING AGENCY…………………………………………………………………...21 INTRODUCTION OF THE PLAINTIFFS………………………………...22

SUMMARY OF THE ARGUMENT ................................................................26

ARGUMENT....................................................................................................27

I. Summary Judgment Is Reviewed De Novo................................................27

II. “Reasonable Minds” Standard...................................................................27

III. District Court Erred In Dismissing Plaintiffs’ Claims.................................28

a. Fair Housing Act / Disparate Treatment / Disparate Impact………...28

b. Constitutional Rights / Equal Protection / Substantive Due Process..44

c. Void for Vagueness…………………………………………………..50

d. RICO………………………………………………………………….53

e. State Law Claims…………………………………………………..…56

IV. District Court erred in denying Plaintiffs’ original and renewed motions for sanctions………………………………………….57

V. District Court erred in denying Plaintiffs’ motion to compel………………60

CONCLUSION..................................................................................................63

CERTIFICATION OF COMPLAINCE WITH FRAP AND CERTIFICATION OF WORD PROCESSING PROGRAM ................................65

iv

TABLE OF AUTHORITIES

CASES 2922 Sherman Ave. Tenants’ Ass’n v. District of Columbia,

444 F.3d 673 (D.C. Cir. 2006) 49

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) 27, 28

Barker v. Ceridian Corp., 122 F.3d 628 (8th Cir. 1997) 27

Barstad v. Murray County, 420 F.3d 880, 887 (8th Cir. 2005) 50

Bassett v. City of Minneapolis, 211 F.3d 1097 (8th Cir. 2000) 26

Bouten v. Richard Miller Homes, Inc., 321 N.W.2d 895 (Minn. 1982) 58

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) 27, 28

Costello v. Mitchell Pub. School Dist. 79, 266 F.3d 916 (8th Cir. 2001) 46

Darst-Webbe Tenant Ass’n Bd. v. St. Louis Hous. Auth.,

417 F.3d 898 (8th Cir. 2005) 28

Dirden v. Dep’t of Housing and Urban Dev., 86 F.3d 112 (8th Cir. 1996) 49

E*Trade Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 58 (D.Minn 2005) 59

East-Miller v. Lake County Highway Dept., 421 F.3d 558 (7th Cir. 2005) 39

Ganley v. Minneapolis Park & Recreation Bd., 491 F.3d 743 (8th Cir. 2007) 45

Gilbert v. Des Moines Area Cmty. Coll., 495 F.3d 906 (8th Cir. 2007) 40

Griffith v. City of Des Moines, 387 F.3d 733 (8th Cir. 2004) 39, 40

v

Handeen v. Lemaire, 112 F.3d 1339 (8th Cir. 1997) 54, 55

Harbor Broad., Inc. v. Boundary Waters Broad., Inc.,

636 N.W.2d 560 (Minn. Ct. App. 2001) 58

Int’l Bhd. of Teamsters v. United States, 431 U.S. 324 (1977) 39

Kittler & Hedelson v. Sheehan Props., Inc.,

203 N.W.2d 835, 840 (Minn. 1973) 57

Lewis v. Jacks, 486 F.3d 1025 (8th Cir. 2007) 45

McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973) 39, 40, 43

Peterson v. Scott County, 406 F.3d 515 (8th Cir. 2005) 26

Reinhart v. Lincoln County, 482 F.3d 1225 (10th Cir. 2007) 30, 31

Rozman v. City of Columbia Heights, 268 F.3d 588 (8th Cir. 2001) 47

Shaver v. Indep. Stave Co., 350 F.3d 716 (8th Cir. 2003) 27

Shrum v. Kluck, 249 F.3d 773 (8th Cir. 2001) 45

United States v. Diefold, Inc., 369 U.S. 654 (1962) 27

Vill. of Willowbrook v. Olech, 528 U.S. 562 (2000) 46

West v. Goodyear Tire & Rubber Co., 167 F.3d 776 (2d Cir.1999) 59

Woodis v. Westark Community Coll., 160 F.3d 435 (8th Cir. 1998) 51

Zubulake v. UBS Warburg LLC, 220 F.R.D. 212 (S.D.N.Y.2003) 59

Statutes

vi

18 U.S.C. Section 1961, et seq. 1, 55, 61, 62

18 U.S.C. Section 1962 5, 54

18 U.S.C. Section 1964 (c), 4 1

28 U.S.C. Sections 1331 1

28 U.S.C. Sections 1337 1

28 U.S.C. Sections 1343 1

28 U.S.C. Sections 1367 1

42 U.S.C. Section 1981, 1, 5, 40, 49

42 U.S.C. Section 1982 1, 5, 49, 58

42 U.S.C. Section 1983 1, 5, 45

42 U.S.C. Section 1985 1, 5, 50

42 U.S.C. Sections 3601, et seq 1, 4, 5

42 U.S.C. Section 3604(a)-(b) 28

42 U.S.C. Section 3613 1

Rules

Fed. R. App. P. 3 1

Fed. R. App. P. 4(a)(1)(A) 2

1

JURISDICTIONAL STATEMENT

The District Court had original jurisdiction over Appellants’ claims under:

1. Title IX of the Organized Crime Control Act of 1970, as amended, 18 U.S.C.

Sections 1961, et seq.;

2. Title VIII, the Fair Housing Act of 1968 and the Fair Housing Amendments Act

of 1988, 42 U.S.C. Sections 3601, et seq.;

3. 42 U.S.C. Sections 1981, 1982 and 1985; and

4. 42 U.S.C. Section 1983, for violation of the Fourteenth Amendment to the

Constitution of the United States.

The jurisdiction of this Court is authorized by 18 U.S.C. Section 1964 (c), 42

U.S.C. Section 3613, and 28 U.S.C. Sections 1331, 1337 and 1343. The District

Court had supplemental jurisdiction over the state claims herein pursuant to 28 U.S.C.

Section 1367, as Plaintiffs alleged state claims arising from a common nucleus of

operative facts with Plaintiffs' federal claims. Plaintiffs sought injunctive relief

against Defendants as authorized by 42 U.S.C. Section 3613 and/or 18 U.S.C. 1961, et

seq., and/or 42 U.S.C. Section 1982.

This Court has jurisdiction over Appellants’ appeal as a matter of right, under

Fed. R. App. P. 3. The lower court granted summary judgment in an order dated

December 18, 2008 and entered final judgment on December 19, 2008. Appellants

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filed their Notice of Appeal from the final judgment in the District Court and

servedthe Notice of Appeal on Respondents on January 16, 2009. This appeal is

timely under Fed. R. App. P. 4(a)(1)(A).

This appeal is from a final Judgment of the Court.

STATEMENT OF ISSUES PRESENTED FOR APPEAL

1. Did the District Court err in granting summary judgment to Defendants in

light of evidence creating genuine issues of material fact for trial?

a. Fair Housing Act / Disparate Treatment / Disparate Impact

b. Constitutional Rights Claims / Equal Protection / Substantive Due

Process

c. Void for Vagueness

d. RICO

e. State Law Claims

2. Did the District Court err in denying Plaintiffs’ original and renewed

motions for sanctions?

3. Did the District Court err in denying Plaintiffs’ motion to compel?

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MOST APPOSITE CASES

1. Darst-Webbe Tenant Ass’n Bd. v. St. Louis Hous. Auth., 417 F.3d 898, 902

(8th Cir. 2005);

2. See Griffith v. City of Des Moines, 387 F.3d 733, 736 (8th Cir. 2004);

3. 2922 Sherman Ave. Tenants’ Ass’n v. District of Columbia, 444 F.3d 673

(D.C. Cir. 2006);

4. E*Trade Sec. LLC v. Deutsche Bank AG, 230 F.R.D. 582, 587 (D.Minn 2005).

REQUEST FOR ORAL ARGUMENT

Appellants request oral argument because they appeal from the District Court's

grant of summary judgment. A de novo review of a grant of summary judgment

requires detailed analysis of the facts of the case. Oral argument is critical to a full

understanding of the fact issues presented. Appellants request an oral argument of

thirty minutes.

STATEMENT OF THE CASE

Plaintiffs are or were property owners in the rental business with rental

properties located within the City of St. Paul. Plaintiffs’ tenants were almost

exclusively African-American, Hispanics, Asians, mixed race couples, individuals

with various disabilities, individuals receiving state and federal financial assistance,

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and families with children, who were and are individuals protected under anti-

discrimination laws, hereinafter defined as “protected class.” Plaintiffs provided

housing primarily to low-income, “protected class” tenants in the City of St. Paul and

the majority of the time under the Federal Section 8 funded program. Plaintiffs owned

and managed older rental properties located in the inner-city neighborhoods where

older housing stock was common, where poverty was persistent, and where people of

color had a critical need for safe and decent affordable housing.

Commencing in the Fall of 2002, Defendants, all with the approval and

participation of the City Council, intentionally and maliciously commenced and

continued an illegal policy, custom and practice of discriminatory and predatory code

enforcement that aggressively targeted Plaintiffs and other St. Paul landlords, who

were lawfully renting to, encouraging, and associating with, individuals with protected

rights to housing under Title VIII, Federal Fair Housing Act and Amendments living

within the City of St. Paul. This discriminatory and illegal policy, custom and practice

had a discriminatory impact on the protected class, and the illegal policy, custom and

practice continued at all times thereafter and continues presently in the City of St.

Paul. This intentional, malicious and illegal conduct directly caused Plaintiffs and

other landlords to be damaged in their property or business and caused injury to

tenants.

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As a direct result of the individual Defendants’ wrongful conduct and malicious

discrimination, illegal code enforcement activities, and pattern of racketeering

activity, Plaintiffs and others were forced to incur significant expenses that were

unnecessary and which placed a heavy financial burden on said landlords and forced

them to close their rental units, and sell their rental properties, thereby decreasing the

available rental units for “protected class” members in the City. Further, Plaintiffs

suffered from ruined reputations in the rental business community and great emotional

distress in their family and social relationships.

Plaintiffs brought claims against Defendant City officials and code enforcement

employees, in their individual capacities, under the RICO Act, namely, 18 U.S.C.

Sections 1962 (c) (conducting an enterprise through a pattern of racketeering activity)

and (d) (conspiring to violate subsection (c) of Section 1962); against Defendants

under the Fair Housing Act and amendments, 42 U.S.C. Sections 3601, et seq.; against

Defendants under 42 U.S.C. Sections 1981, 1982, 1985 and 1983; and against

Defendants for various state based claims including abuse of process, interference

with contract, and inference with business expectancy.

The City brought a motion for summary judgment, and the District Court

granted the City’s motion.

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FACTS BEFORE THE DISTRICT COURT

INTRODUCTION OF THE DISCRIMINATORY ENVIRONMENT AND ATTITUDE

OF ST. PAUL HOUSING CODE ENFORCEMENT

“The nature of enforcement, especially at the local level, is that it often involves a significant amount of political pressure to achieve certain outcomes. The Ad Hoc Committee identified that it is absolutely essential for the code enforcement function to be guided by a classified manager so that he or she could have the civil service protection to withstand the pressure to bend the rules to achieve a particular end that is inconsistent with the code and/or past practices.” (emphasis added) ADD. 84. On January 6, 2007, St. Paul’s new director of Neighborhood Housing and

Property Improvement (“NHPI”), Bob Kessler, made the above statement about

“bending the rules to achieve a particular end/certain outcomes” in response to a

committee that discussed the history of the City's management of the Code

Enforcement function and noted that “the function has not had a classified manager

with subject matter expertise for many years.” Id.

Prior to Mr. Kessler’s directorship, NHPI was directed by Mr. Andy Dawkins.

Mr. Dawkins was the Director of NHPI during the time period in which this litigation

is based, 2002-2005. The following are examples of Mr. Dawkins’ attitude toward

code enforcement and the discriminatory environment he created while the director of

NHPI. Mr. Dawkins’ goal was to eliminate rental properties and get rid of the

“bottom tier of tenants” and the “down trodden” through the City’s 1) aggressive code

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enforcement, 2) City initiated lawsuits, 3) a force ownership change strategy, and 4)

eviction strategy.

Mr. Dawkins testified in his deposition as follows:

As to his attitude toward rental property:

Q: So is it better for neighborhoods to have less rental properties? A: I will give you your answer. I think that it’s better to have a neighborhood that has more owner occupied housing in it than has rental property in it for the sake of the neighborhood (emphasis added). ADD. 85, p. 638, lines 18-22. As to the City’s force ownership change and eviction strategies: Q: Back to your notes, I think we can start in the top right corner. A: And then cervantes (sic)[City Attorney] & Mott [District Court Judge], get those meetings going, have an aggressive housing court, lawsuit city initiate city Tenant Remedy actions strategy, the force ownership change strategy, the eviction strategy (emphasis added). ADD. 86, p. 558, lines 7-8, p. 560, lines 5-9.

As to aggressive code enforcement and its affect on affordable housing: Q: Was aggressive code enforcement ever a consideration for you or an issue brought up during your directorship? A: Aggressive code enforcement was the key from the first day that we needed to have a more aggressive consistent stepped-up code enforcement department. That's what everybody told me. That's what was in the city's chronic problem property report. They said, that's your mission, Dawkins, go do it (emphasis added). Q: Was it ever brought up, either by you or within your considerations as a director, that at some point it may have been eliminating affordable housing? A: I told you I read the story where Baltimore went over the tipping point. So I told the Sparrow [SPARL] group and some group of realtors and the chamber of commerce and whoever else I was talking to, listen, I need you to help me by

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eyes and ears and let me know as soon as you think we have stepped up our aggressive, consistent code enforcement to the point that we are forcing abandonment of properties in the city. I want to know about it. (emphasis added). ADD. 87, p. 566, lines 23-25, p. 567, lines 1-21.

As to complaints for applying too much pressure to homeowners: Q: Have you talked with anyone about Steve Magner, applied pressure to homeowners? A: Steve Magner and every inspector in my department applied pressure to homeowners. Q: Have you ever had a complaint about Steve Magner applying too much pressure? A: I had complaints about every inspector in my department applying too much pressure (emphasis added). ADD. 88, p. 575, lines 23-25, p. 576, lines 1-5.

As to political pressure from city council members: Q: Did she [Kathy Lantry] tell you anything specific she wanted you to do? Did she have any ideas on how to do code enforcement? A: Yeah, do code enforcement to the max, do aggressive, consistent stepped-up code enforcement, don't cut down and shorten the time lines for compliance, and a lot of others (emphasis added). Q: You said Benehoff was worst. Why was he worse than Lantry? A: He never let up. He or his aid were on the phone with me every day saying, you're not doing enough (emphasis added). ADD. 89, p. 591, lines 5-11, p. 592, lines 14-18. Mr. Dawkins documented his approach in a flow chart he developed related to

complaints and so called “problem properties.” Dawkins continued the City’s illegal

and discriminatory elimination of low income rental properties by promoting

“targeting of teetering neighborhoods or redeveloping areas,” “force sales,” “or

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eviction” (top right of chart), and “Goal: force sale to responsible owner” (bottom

right of chart)(emphasis added). ADD. 90.

Not only did Dawkins have meetings with Chief Judge Mott and City Attorney

Cervantes to get “buy in” to his aggressive, force ownership change and eviction

strategies, Dawkins goals for 2004 included getting “buy-in” from the Police

Department, City Attorney, and Courts. ADD. 91.

In a police training bulletin about “How to Work with the Code Enforcement

Problem Property Unit,” co-writers Andy Dawkins and Assistant Police Chief T.

Reding discuss “how to eliminate nuisance properties” and use the following

language:

THIS INFORMATION IS ESPECIALLY IMPORTANT IF YOU GET INSIDE THE PREMISES because this will allow Code Enforcement to get an administration search warrant that could lead to condemnation of the property. eviction of the occupants and boarding-up the property. ADD. 92-93. The police training bulletin further emphasizes that “A single nuisance incident,

either a public nuisance incident or criminal nuisance incident, is enough to revoke a

landlord's rental registration certificate; enough to start an eviction; enough to trigger

a §45.04 letter [to] cease and desist or face criminal charges (emphasis added). Id.

Mr. Dawkins sent an email with respect to an apartment in which he referred to

the apartment and the people as a “mecca for lots of the down-trodden:” ADD. 94.

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Bill Cullen, former president of St. Paul Association of Responsible Landlords

(SPARL) testified that Dawkins suggested to landlords that maybe the solution for the

City was to try and increase the quality of properties to the point that the lower tier of

less qualified tenants would not have places to rent. Cullen testified in his deposition

as follows:

A: There were two comments that I recall, one from Leslie and one from Andy. Andy asked me, how would we feel if all those tenants that are at the bottom of the box were no longer in St. Paul (emphasis added). Q: He asked that question of the group? A: Yes. Q: Was there any responses to that? A: I think we were all dumbfounded. I think the question was how are we going to do that. He talked in general terms about improving the city -- now I'm nervous about trying to quote him. I remember him talking about trying to -- the word I would use is gentrify the city. That's what I remember (emphasis added). Q: Gentrification? A: He did not use that word. I'm translating it. That's how I remember it. Let's gentrify the city to the point that none of these individuals with historical behavioral issues would be in the city at all (emphasis added). Q: So was it your understanding what he was suggesting is that try to get rid of the tenants that are at the bottom of the box? A: Very clear, yes. He was very clear about that (emphasis added). ADD. 95, p. 113, lines 1-25. Q: Did Mr. Dawkins ever say that maybe the solution for the city, including the private landlords, was to try to increase the quality of properties to such a point that this lower group of less qualified tenants would not have a place to rent? A: I believe that's what he was implying all along when he asked the question of; how would it be if we just didn't have to deal with the tenants that were at the bottom of this market (emphasis added). Q: I know that. But was he tying that into the system that he had to have a

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higher code enforcement standard so that the properties would be at a higher quality level, therefore, these individuals would not have a place to rent, either because of affordability or too high of cost of the properties, that kind of thing? A: I believe that's exactly what he said (emphasis added). Q: Was that to you concerning that a city official would be voicing that type of a policy or advocating that kind of a policy? A: I remember being shocked by Andy's comments, shocked or surprised. I don't know if concern came to mind as much as, wow, that's surprising (emphasis added). ADD. 96, p. 202, lines 17-25, p. 203, lines 1-16.

Sara Anderson, a housing advocate from Project Hope recalls City Official

Dawkins telling her that City officials and employees “don't want low-income people

renting in the City”. Anderson testified in her deposition as follows:

Q: Again I want to make sure that we've got everything that you know here today. You indicated in your affidavit that City officials and employees have told you that they don't want low-income people renting in the City. Do you remember who would have told you that at any time (emphasis added)? A: Andy Dawkins (emphasis added). Q: Okay. And you mentioned here this morning that you recall him saying that in the initial meeting you had with him, correct? A: Correct. ADD. 97-98, p. 76, lines 20-25, p. 77, lines 1-6. The City and Mr. Dawkins also had financial incentive to implement its

discriminatory environment and attitude in code enforcement – the goal was to bring

in $500,000.00 in inspection fees, which was “theirs to spend” for “a lot of overtime”

and new hires, if the code enforcement officers write-up every property the way the

Mayor [Randy Kelly] told Harold [Robinson] and Mr. Dawkins. APP. 1.

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Mr. Kessler’s statement regarding “the pressure to bend the rules to achieve a

particular end that is inconsistent with the code and/or past practices” is exactly what

Mr. Dawkins’ achieved in eliminating Plaintiffs’ rental properties and their “bottom

tier of tenants” and the “down trodden.” Mr. Dawkins used the City’s discriminatory

attitude and environment of aggressive code enforcement, illegal condemnations and

code compliance certifications, City initiated lawsuits, a force ownership change

strategy, and eviction strategy, even though he knew that his custom and practice

could force abandonment of properties in the City of St. Paul and eliminate affordable

housing, as it did in the Baltimore study he discussed.

CODE INSPECTOR REACTION TO THE CITY’S DISCRIMINATORY ENVIRONMENT AND ATTITUDE IN HOUSING CODE ENFORCEMENT

During the course of discovery, housing code inspectors were asked about the

City and Mr. Dawkins’ discriminatory attitude and environment of aggressive code

enforcement.

Code enforcement inspector John Reardon testified in his deposition as follows:

Q: Look at the smaller block there where it's just below that to the left, where it says, "Goal: for [force] sale to responsible owner." Again, in your work with NHPI when Dawkins was a director, did you ever overhear or were you part of a conversation about that kind of a subject? A: No. In fact, I can't believe it's written down like that. Q: If you go to the top of that same document -- see where it says "Outcomes" in a horizontal square there? A.: Yep.

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Q: Again, it says "If correct physical problems (or force sales)." A: Uh-huh. Q: Same question again, had you ever heard anyone discuss that in the department? A: Never. Q: You're saying never and that would include any time prior to Dawkins being a director, too? A: I have never heard of forcing sales. Q: Was that -- you seemed surprised by that -- that it's written down? A: It seems real discriminatory. I'm not a lawyer, but I can't believe that it's even on paper (emphasis added). APP. 2, p. 157, lines 7-25, p. 158, lines 1-6.

Code enforcement inspector Steve Schiller testified that Mr. Dawkins orders to

write up a certain property was “the lowest thing that has ever happened to me.”

Q: What was the nature of the complaint on the property? A: I was to write up everything. Q: Who told you that? A: Andy Dawkins. Q: Did you go out to the property after you had that conversation? A: Yes. APP. 3, p. 112, lines 6-12. Q: Did Mr. Dawkins tell you to write up the property? A: Correct. Q: To write it up -- did he use the terms "code to the max"? A: Correct. Not that term. He said to do a thorough inspection. Q: What else did he tell you? A: It had to be written up and on the Mayor's desk by that afternoon. APP. 4, p. 114, lines 15-23. Q: Was there anything about the orders to you to write up Ms. Rodriguez that you felt were unfair? A: Only from the standpoint that she was in very poor health. Q: Was she on Social Security or a limited income at all? Any idea?

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A: To the best of my knowledge, yes. Q: She was disabled? A: To the best of my knowledge. Q: Were there other homes in her area that were in similar condition exteriorly? A: Yes. APP. 4, p. 116, lines 12-23. Q: Tell me more of what Andy Dawkins made you do that you didn't agree with? A: Standard procedure when there is a death at the property is to give everyone time and to give the courts time to settle it and time to grieve and all that, that the file is closed. Q: Dawkins came down on which side of that? Don't close it or do close it? A: The Mayor said he couldn't close it. Q: What else? A: That was my major objection. It was the highlight of my career. Q: Explain to me the highlight of your career that -- relating to the death situation? A: Two of my clients died. Q: Two of your clients died and you weren't allowed to close the file? A: Two of my clients died and nobody listened to me to even start it in the first place. Q: What was the result of you not being able to work on that? A: What do you mean? Q: Did the properties end up condemned or vacant? A: They ended up vacant. Q: Both of them? A: There was only one property down on Butternut. Q: Anything else? A: No. Q; So you said, "the highlight of my career," and so the examples are the Butternut property, and then closing a file when there has been a death? A: I could not do that in this case. I mean this was the lowest thing that has ever happened to me (emphasis added). APP. 5, p. 194, lines 22-25, p. 195, lines 1-25, p. 196, lines 1-4.

As another example of inspector reaction to the City and Mr. Dawkins’, code

15

enforcement employee Maureen Mitch wanted to leave the department in October of

2002, after Mr. Dawkins took over as director of NHPI. She stated in an email to her

supervisor, Steve Magner: “If I apply in other division's can I still use you as a

reference? I think I see where this office is going and I don't want to be a part of it”

(emphasis added). APP 6.

These code enforcement employees’ responses to Mr. Dawkins illegal and

discriminatory environment, attitude, custom and practice are key to the analysis of

Plaintiffs’ discrimination claims as well as Defendants’ claims of immunity.

THE CITY’S ACKNOWLEDGEMENT OF THE DISPARATE TREATMENT AND DISPARATE IMPACT

OF ITS DISCRIMINATORY ENVIRONMENT AND ATTITUDE IN HOUSING CODE ENFORCEMENT

There are numerous examples in which the City of St. Paul has acknowledged

or has been put on notice that its aggressive, stepped-up housing code enforcement

with its force ownership change strategy and eviction strategy had an adverse impact

on protected class members and families living in poverty.

In an email from December of 2005, Jane Prince, legislative aide to council

member Jay Benanav, sent an email to a constituent regarding the issue of the City’s

code enforcement system unfairly targeting people of color:

“The issue of how a complaint-based system may unfairly target people of color is a huge one, and I'm not sure what we do to get at it. A new mayor and Toni's

16

and Jay's influence in a new administration can sure help” (emphasis added). APP. 7.

In a memorandum written by Mr. Dawkins to his staff in November of 2004,

Mr. Dawkins discusses the impact that the excessive consumption system has on

people of color:

“Perhaps a disproportionate number of folks getting EC bills are people of color; but if this is so, then maybe it's because a disproportionate number of families living in poverty are people of color” (emphasis added). APP. 8.

On August 11, 2004, housing law attorney Perry DeStefano, on behalf of

Southern Minnesota Regional Legal Services, gave notice to the City about its

discriminatory housing code enforcement by sending a letter to the city council

president, Kathy Lantry, and cautioned the city about its discriminatory environment

and attitude in housing code enforcement: “I was concerned that the City was using

the Building Inspection Department to vacate a building of disabling and minority

people. Every person in this building was a person in a protected class. They were

either minorities or disabled people. Vacating the building by using the inspection

department in this manner did have a disparate impact…I thought you should know

that as a practicing housing law attorney who knows about discrimination law that

there is exposure to a discrimination claim on this matter due to the way it was

handled (emphasis added). “I would hate to lose the opportunity to collaborate

17

together on this case as it does appear that we have got the owner's attention and were

making great progress despite the “hide the ball" tactics that were being played by the

inspector’s office.” APP. 9-11.

In Mr. DeStefano’s deposition, he was questioned about other instances, which

Mr. DeStefano numbered at greater than ten, in which the City displayed its illegal

and discriminatory environment and attitude in housing code enforcement. APP. 12-

13.

This evidence of the City’s illegal and discriminatory environment, attitude,

custom and practice are key to the analysis of Plaintiffs’ claims involving

discrimination as well as Defendants’ claims of immunity.

THE CITY’S USE OF HOUSING CODE ENFORCEMENT

TO CIRCUMVENT CIVIL RIGHTS AND TO ADDRESS BEHAVIOR ISSUES

There are numerous examples in which the City of St. Paul takes action through

housing code enforcement to address behavior issues, effectively circumventing

individual’s civil rights. The City has provided documents stating that the civil laws

are preferable because the burden of proof is less. In addition, the City is very eager

to get inside properties to exercise their illegal and discriminatory housing code

custom and practice. Below are two examples.

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In a police training bulletin about “How to Work with the Code Enforcement

Problem Property Unit,” co-writers Andy Dawkins and Assistant Police Chief T.

Reding discuss “what legal action is possible” and tell the officers “this is civil law, so

we don’t need proof beyond a reasonable doubt.” In the same bulletin, the co-writers

emphasize the importance of “getting inside” the premises in order to further the

City’s discriminatory code enforcement environment because “getting inside” could

lead to “condemnation of the property, eviction of the occupants and boarding-up the

property.” ADD. 92-93.

The City produced through discovery a “Code Enforcement Cheat Sheet” with a

couple of examples of ways to circumvent civil rights. First, it encourages Police

Officers by telling them that “Civil laws are being used and the preponderance of

evidence is lower for proof.” In addition, it encourages the Police Officers to permit

warrantless administrative searches by code enforcement officers in furtherance of the

City’s force ownership change strategy and eviction strategy: “If officers get inside of

a property for whatever reason and see code violations, please call for an inspector.

Sweeps of the exteriors are being done by code enforcement, but we don't get interior

inspections” (emphasis added). APP. 14.

The City also used a very large police officer, Dean Koehnen, to further its

discriminatory environment and attitude in code enforcement. Below are two

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examples.

In an email dated June 30, 2006, code enforcement employee Jackie Girling

complained to Officer Dean Koehnen about exercising his size and influence to strong

arm property owners:

“Dean, please in the future, if you are going out on a property where I have pending orders, I would appreciate a heads up. There was no need for you to go out there other than (what sounds to me like) Pam from crime prevention hoping that you could strong-arm these people with your "size and influence"(emphasis added). APP. 15.

Police Officer Mark Wiegel, who also worked for the housing code department,

sent an email on March 29, 2007, indicating that he would take housing code action on

a property because there were not enough behavior problems for the police to act. The

police officer requesting assistance to “sick you and yours on a property,” stated that

“the problem is more about the conduct at the house and the type of people that visit.”

Officer Weigel sent Dean Koehnen to the property to “get an inspection and have an

impact:”

I need to sick you and yours on a property. 1011 Burn is a single family home/owner occupied by Vickie. I am not sure of her last name. The address has been a problem for well over a year but we haven't been able to do much. It is up off of the street and they do not actually drugs from there. The problem is more about the conduct at the house and the type of people that visit. Vickie is Native American and has had boyfriends arrested off and on. I’m forwarding this to Dean to see if we can get an inspection and have an impact (emphasis added). APP. 16.

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City council president Kathy Lantry made an email request to Officer Mark

Wiegel to take code enforcement action against a property with behavior issues.

When the property didn’t meet the criteria for an excessive consumption violation,

Officer Mark Wiegel again indicated that he would send a message through housing

code enforcement:

I realize that there are too many calls overall to this area but from my jobs perspective I'm stuck. I was even looking for any that could have fallen into excessive consumption for police but none fit that criteria either. I think at least somewhat of a message can be sent through making them register and by code enforcement issuing orders (emphasis added). APP. 17.

As can be seen on the email chain below from August 16, 2004, Officer Wiegel

again sent code enforcement to issue orders on a property, even though it didn’t have

any behavior or code issues, and even though the code enforcement officer questioned

the inspection, but simply because it was requested by council member Dave Thune.

“Can you check 348 W. Winona. No dangerous police issues and no current open code.” “Sure, but why are we checking it then?” “It came from a citizen through Thune's office and has some police issues, but not enormous” (emphasis added). APP. 18.

The misuse of the housing code by the City to address behavior problems lends

the housing code to political pressure and to abuse of the complaint based system and

is further evidence of the City’s “bending the rules of code enforcement to achieve a

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particular outcome inconsistent with the code” which creates the City’s discriminatory

environment and attitude in code enforcement.

INTRODUCTION OF THE CITY’S WORKING RELATIONSHIP AND PREFERRENTIAL TREATMENT OF THE PUBLIC HOUSING AGENCY

The St. Paul Public Housing Agency (PHA) owns and manages 4300 units of

public housing in the City. PHA’s public housing includes high-rise properties, family

town home developments, and 450 scattered site properties, which are single family or

duplex properties located throughout the City. Plaintiffs claim these scattered site

properties are similar to their rental properties. According to PHA documents, the

scattered site properties’ tenant base is about 32% African-American and 58%

Asian/Pacific Islander. ADD. 5-6.

PHA has been chronically underfunded for almost the entire existence of public

housing. PHA admits that it has to prioritize the repairs - life safety and exterior

envelope to keep out the moisture. APP. 19. Hester testified that every year for PHA

staff have to ask how much money they have – have to prioritized the work – in a

general sense there are a lot of needs that are being deferred because of insufficient

funds. APP. 20.

Gutzmann testified that PHA has been in crisis mode due to federal funding

cutbacks and PHA had to sell off on two recent occasions many of its homes, where

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on average those homes needed $40,000 in repairs. PHA conducted an internal

analysis of the costs needed for each of almost 20 homes, with the estimates running

from a low of $13,000 to a high of $199,000. Gutzmann said the average costs to

repair was $40,000. APP. 21. PHA needed to sell these properties to get the money out

of them and to avoid making expensive repairs. APP. 22.

City TISH evaluators conducted city code review prior to PHA sale of those

homes and found that many of PHA’s homes were in fact not compliant with City

Codes. APP 23-105. Further, the City has acknowledged through a TISH report study

conducted in 2005 that “as many as 60% of all properties sold in the city in 2005 had

serious code violations. APP. 107.

The City and PHA admit that at no time has the City designated any PHA home

as vacant, required a “Code Compliance” or condemned any of its homes. Docket,

228, Ex. 304. There has never been a requirement by the City that PHA homes be

substantially renovated. APP. 108.

PHA and the City have long recognized that PHA, while maintaining “high

performer” status under HUD regulations, owns and manages significant numbers of

“problem properties” due to criminal behavior of residents, guests and third parties on

PHA properties. Docket, 224, Exs. 202, 203. Since 1991, the City and PHA have had

a special partnership called “ACOP” whereby a platoon of City police are devoted

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solely to policing PHA family developments. The City police services under ACOP

are above and beyond the “baseline” police services PHA is provided with like any

other resident or business in the City. The City has received over $8 million from

PHA for supplemental police services since 1991. Docket, 224, Exs. 159, 160, 161.

The City and PHA detail the significant criminal activity at PHA properties that

supports their conclusion that PHA owns and manages “problem properties”. Docket,

224, Exs. 155, 156, 157, 158, 162, 163, 193, 199, 201, 202, 203, 204, 205.

In 1994, the City proposed to PHA, its long term partner, that the City’s

Property Maintenance Code (City Code) be substituted for the federally mandated

Housing Quality Standards (HQS) applicable to federally subsidized, Section 8 low

income housing in the City. During this process, the City and PHA discovered that

the City’s code was actually “more stringent” 82% of the time when compared to the

federal code. APP. 109-115.

In 1994, PHA informed City leaders that “local HUD staff feared more stringent

standards would reduce the supply of affordable housing for Sec 8 holders.” Docket,

224, Ex. 172.

INTRODUCTION OF THE PLAINTIFFS

Plaintiffs Thomas Gallagher and Joseph Collins were born and raised in St. Paul

and in 1998 began providing rental housing in the City of St. Paul. Gallagher and

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Collins are co-owners of Dadder’s Properties, LLC. Dadder’s Properties, LLC is the

owner of three subsidiary limited liability companies, Dadder’s Holdings, Dadder’s

Enterprises, and Dadder’s Estates, LLC. Their rental portfolio is diversified among

these subsidiary limited liability companies owned by Dadder’s Properties, LLC. At

the height of their business, they owned 44 investment properties, 29 of which

provided single family and duplex residential housing, and 9 multi-unit buildings,

which in sum consisted of approximately 200 residential rental units. Their tenant base

had a majority of people of color and included Section 8 recipients. During the period

of approximately 2002 through 2005, about Eighty percent (80%) of their tenants

were African-American and mixed race couples. Approximately 10 of the 29 tenants

have or did receive federal rent subsidies under the Section 8 program. In each of

their rental properties that housed Section 8 tenants, they passed the PHA inspection

before being approved for receipt of Section 8 rent subsidies. Approximately 19 of

the 29 tenants were members of a protected class. APP. 117-119.

Plaintiff Troy Allison was born and raised in St. Paul and in February of 2005,

started in the business of providing rental housing in the City of St. Paul. Allison is an

independent business owner, having operated a handyman business and dumpster roll-

off business since 2004. Allison was the owner of seven (7) rental properties within

the City of St. Paul. Four (4) of his seven (7) tenants received Section 8 assistance or

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other assistance. Four (4) of his seven (7) tenants were members of a protected class.

In each of his rental properties that housed Section 8 tenants, he passed the PHA

inspection before being approved for receipt of Section 8 rent subsidies. Due to the

Defendants’ conduct, he lost each of these properties to foreclosure in 2006. APP.

292-294.

Jeff and Sara Kubitschek are residents of White Bear Township. The

Kubitschek’s started in the business of providing rental housing in the City of St. Paul

in 1999. The Kubitschek’s were owners of four (4) rental properties within the City of

St. Paul. Seven (7) of their eight (8) tenants received Section 8 assistance or other

assistance. All eight (8) of their tenants were members of a protected class. In each of

their rental properties that housed Section 8 tenants, they passed the PHA inspection

before being approved for receipt of Section 8 rent subsidies. APP. 343-344.

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SUMMARY OF THE ARGUMENT

The District Court’s Order granting summary judgment to the City on

Appellants’ claims of fair housing, civil rights, racketeering, void for vagueness, and

state law claims blatantly disregards the standard on summary judgment and this

court’s frequent admonition that summary judgment should seldom be granted in

discrimination cases. See Peterson v. Scott County, 406 F.3d 515, 520 (8th Cir. 2005);

Bassett v. City of Minneapolis, 211 F.3d 1097 (8th Cir. 2000).

Throughout, the District Court’s Order openly weighs evidence, declaring there

was no evidence supporting Appellants’ claims when there was supporting evidence,

or that the Court was not persuaded by that evidence or drew conclusions favoring the

City. The granting of summary judgment in the District of Minnesota has become so

routine as to deny individuals their Constitutional right to trial by jury.

The facts, when all inferences are drawn in favor of Plaintiffs, clearly present

evidence from which a reasonable fact finder could conclude that the City’s custom,

policy and practice created a discriminatory environment and attitude in housing code

enforcement. This environment, along with the City’s force ownership change

strategy and eviction strategy, which were known by the City to eliminate affordable

housing, have a disproportionate impact on protected class members and give rise to

claims under fair housing, civil rights, void for vagueness, RICO and state law claims.

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ARGUMENT

I. Summary Judgment Is Reviewed De Novo.

This Court reviews a district court’s summary judgment order de novo. See,

Shaver v. Indep. Stave Co., 350 F.3d 716 (8th Cir. 2003).

II. “Reasonable Minds” Standard.

A Court may not grant summary judgment to a defendant unless there is no

genuine issue of material fact in dispute and the defendant is entitled to judgment as a

matter of law. See, Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see also,

Barker v. Ceridian Corp., 122 F.3d 628, 632 (8th Cir. 1997). The issue of material fact

required to proceed to trial is not required to be resolved conclusively in favor of the

non-moving party; rather, all that is required is that sufficient evidence supporting the

claimed factual dispute be shown to require a jury to resolve the parties’ differing

versions of the truth. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49

(1986).

The United States Supreme Court has many times reiterated that a trial court

may not weigh the evidence and determine the truth of the matter on a motion for

summary judgment; its sole function is to determine whether disputed fact issues exist.

See Anderson, 477 U.S. at 2510-11; United States v. Diefold, Inc., 369 U.S. 654

(1962). In order to grant summary judgment, a court must find a “complete failure of

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proof concerning an essential element of the non-moving party’s case.” Celotex, 477

U.S. at 323. Summary judgment may not be granted if “reasonable minds could differ

as to the import of the evidence.” Anderson, 477 U.S. at 250-251.

III. The District Court Erred in Dismissing Plaintiffs’ Claims.

a. Fair Housing Act.

Section 3604 of the Fair Housing Act (FHA) makes it unlawful to refuse to sell

or rent to any person or discriminate in the terms, conditions, or privileges of sale or

rental of a building on the basis of race, color, religion, sex, familial status, or national

origin. 42 U.S.C. §3604(a)-(b). The FHA also makes it “unlawful to coerce,

intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or on

account of his having exercised or enjoyed, or on account of his having aided or

encouraged any other person in the exercise or enjoyment of, any right granted or

protected by” section 3604. Id. §3617.

Disparate Impact

To succeed on their disparate impact claim, Plaintiffs must show that a facially

neutral policy results in, or can be predicted to result in, a disparate impact on

protected classes compared to a relevant population. See Darst-Webbe Tenant Ass’n

Bd. v. St. Louis Hous. Auth., 417 F.3d 898, 902 (8th Cir. 2005). If Plaintiffs make that

showing, Defendants must demonstrate that the objected-to policy has a “manifest

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relationship” to legitimate, nondiscriminatory policy objectives and “is justifiable on

the ground it is necessary to” the attainment of those objectives. Id. If Defendants

make that showing, the burden shifts back to Plaintiffs to show that a viable

alternative means is available to achieve the legitimate policy objectives without

discriminatory effects. Id. at 902-03.

The City’s discriminatory environment and attitude in code enforcement and

targeting non-PHA low income housing with excessive and illegal code enforcement

results in less choice in housing for the protected-class individuals seeking affordable

housing because it drives private landlords who have affordable rental options out of

the rental market, creates displacement of “protected class” members like Plaintiffs’

tenants, and raises the operating costs for the landlords who do not or cannot get out

of the business.

Plaintiffs as a group had or have a higher percentage of people of color and

disabled “protected class” in their properties. Plaintiffs were targeted – PHA was not.

Plaintiffs have scattered site properties with over two times the number of African-

Americans occupying their privately owned units than African-Americans occupying

the PHA scattered site homes.

The City forcibly requires only the private market to bear the excessive costs of

“code compliance inspections and certifications” with corresponding removal of State

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Building Code grandfathering protections, application of “current codes,” and

resulting increase in costs to the private owners – removing those properties from the

rental market for months in the short term during the “code compliance,” and forcing

many owners into financial crisis, with abandonment, foreclosure, and reduction in

low-income housing stock available for the 10,000 families waiting for housing.

The District Court cites Reinhart v. Lincoln County, 482 F.3d 1225, 1230 (10th

Cir. 2007), as the basis for its analysis: “It is not enough for the [plaintiffs] to show

that (1) a regulation would increase housing costs and (2) members of a protected

group tend to be less wealthy than others. It is essential to be able to compare who

could afford the housing before the new regulations with who could afford it

afterwards.” ADD. 12.

Plaintiffs disagree with the Reinhart holding and the District Court’s conclusion

that Plaintiffs’ argument is insufficient to withstand summary judgment. Plaintiffs

have shown that the City’s housing code is the facially neutral policy, but it is the

discriminatory environment and attitude in the enforcement of its housing code that

results in a disparate impact on protected classes by the elimination of affordable

housing.

An analysis of the difference in rents under an HQS inspection standard of

federally funded Section 8 properties and the application of the City’s housing code to

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private landlords would be nearly impossible. There are far too many variables in the

assessment of rents for publicly owned rental properties subject to HQS and privately

owned rental properties subject to the city housing code. First, Section 8 determines

the amount of rent available for their program. Second, real estate by its nature is

unique, so the assignment of a rent number to a group of properties subject to the city

housing code would be unrealistic. Third, the variables included in determining rent

in the private market include location, square footage, neighborhood, community, lot

size, and market conditions. These factors would make it nearly impossible to

conduct a Reinhart analysis of what rents are under the City’s housing code vs. what

rents would be under the HQS. Further, how could Plaintiffs provide this evidence

when Plaintiffs never operated a program that was subject to HQS? In addition, the

comparisons wouldn’t be valid because HQS runs on subsidies, deferred maintenance,

and other help from the City such as Police services.

It would be reasonable for a fact finder to determine that a larger financial

burden would be placed on a property owner or occupant with an 82% more stringent

housing code. Further, and more specifically, the Plaintiffs’ affidavits in opposition to

summary judgment describe in detail the additional financial burden suffered due to

the City’s discriminatory environment and attitude in housing code enforcement.

Saint Paul has acknowledged that “Fair housing laws provide protection from

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discrimination in housing for certain groups, generally referred to as “protected

classes” and “[t]hese groups have been included in fair housing laws because

individuals have been identified over time as having difficulties in obtaining housing

due to their status as a member of one of these groups.” Docket, 224, Ex. 267.

In April 2003, the City confirmed that, “the lack of affordable housing

opportunities remains a major issue facing many Saint Paul lower income households

[at or below 30% of the AMI], who are also protected class members.” “[T]he lack of

affordable housing realistically limits housing choice for many protected class

members.” “27.6% of Saint Paul’s lower income residents cannot find adequate

affordable housing in the City of Saint Paul.” Docket, 222, Ex. 86.

In a 1995 PHA email from Al Hester to Jon Gutzmann, prior to the completion

of the City’s study comparing the city code to HQS which determined that the city

code was 82% more stringent than HQS, the impact of a more stringent code on

affordable housing was discussed: “I repeated that local HUD staff feared more

stringent standards would reduce the supply of affordable housing for Sec 8 holders.

APP. 116.

The following are examples of the statistical evidence provided to the District

Court used by Plaintiffs in their analysis of the impact of the City’s discriminatory

environment and attitude in housing code enforcement on affordable housing:

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The City has long acknowledged that “people of color” and other “protected

class” persons have a disproportionate need for affordable housing in the City. In

June 2005, the City reported to HUD that 37,000 households had unmet housing

needs. Docket, 224, Ex.268.

The City’s Housing Action Plan 2002 stated “affordability of housing in St.

Paul continues to be a critical issue” and “the need and demand for housing that is

affordable to lower income households(…below 30% of AMI) is severe.” The City’s

Task Force noted “there are not adequate resources currently targeted to address this

situation.” The Task Force was concerned that City data showed over five years a

total of 649 units have been demolished, of which 123 units (the PED/HRA projects)

triggered the local policy. Docket, 222, Ex.103.

In 2005, PHA reported to the City (for inclusion in City’s Consolidated Plan

2005) that 6,219 people were on PHA’s waiting lists with a 2-4 year wait; a

disproportionate number of minority residents were on PHA’ lists – 61 percent were

African-Americans; 2,747 Section 8 applicants, and the list was closed. Docket, 224,

Ex.268.

PHA scattered sites home occupancy revealed: Asians at 60.6%; African-

Americans 28.7%; Whites 9.7%. By December 2005, PHA’s waiting list showed

African-Americans at 57%, Whites at 25% and Asians at 16%, with occupancy at

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PHA overall at African Americans 34.6%, Whites 38.4% and Asians at 13.3%.

Docket, 224, Exs. 181, 182.

HUD’s 2000 Census “CHAS” data for St. Paul showed that among renters in

the City, 37.1 % of White renters had housing problems (cost burdens of greater than

30% of income and/or overcrowding or without complete kitchen or plumbing

facilities) while 53.9% of Blacks had such problems, and Hispanics had 57.5% Black

family households had 59.3% and Hispanics families had 64.9%. Docket, 224, Ex.

262.

The District court criticizes Plaintiffs contention that the City’s affordable

housing shortage supports a conclusion of disparate impact because Jon Gutzmann,

Executive Director of PHA, did not identify the housing code as a contributor, rather a

lack in federal funding. First, the reason that the housing code was not a contributor to

PHA’s affordable housing shortage is because the City does not apply their housing

code equally to PHA and PHA has never been subject to the City’s discriminatory

environment and attitude in housing code enforcement, force ownership change

strategy, eviction strategy, a vacant building registration, condemnation, or code

compliance certification. Second, Gutsmann’s identification of insufficient federal

funding as contributing to the affordable housing shortage is analogous to the

insufficient resources available to Plaintiffs to comply with the City’s illegal and

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discriminatory environment and attitude in housing code enforcement, force

ownership change strategy, eviction strategy, vacant building registration,

condemnation, or code compliance certification. Plaintiffs’ argument regarding the

relationship between the lack of affordable housing and Fair Housing Act violations is

sufficient to withstand summary judgment.

The District Court also criticized Plaintiffs’ putting forth a Vacant Buildings

report prepared by the City as evidence of disparate impact, in which the number of

vacant homes in the City increased from 367 in 2003 to 1466 in 2007, and which

reported that “foreclosed properties are or were disproportionately renter-occupied.

Plaintiffs’ argument stands that the City’s discriminatory environment and attitude in

housing code enforcement, force ownership change strategy, eviction strategy, vacant

building registration, condemnation, or code compliance certification were all

significant factors in the increase in vacant buildings. Further, housing code expert

Don Hedquist’s opinions at summary judgment were unopposed and he opined, based

on the evidence and his vast experience, that the code compliance requirement had

contributed to the large number of vacant buildings.

The District Court’s attempt to weigh this evidence and draw conclusions

misses two significant factors related to the City’s Vacant Buildings report. First, the

items that contributed to the increase in vacant buildings cited by the court, such as

36

equity stripping, predatory lending, unforeseen life events, etc., can reasonably be

attributed to the other percentage of foreclosed properties that were not the

“disproportionate number of the foreclosures that were renter-occupied.” Second, it is

reasonable to assume that the City’s own report will not identify its own housing code

or its discriminatory environment and attitude in enforcing its housing code as a cause

of increased vacancies or foreclosures.

Plaintiffs spent most of their memorandum of law in opposition to summary

judgment providing evidence to the District Court that enforcement of the housing

code was done in an illegal and discriminatory environment and that the aggressive,

force ownership change strategy and eviction strategies employed by the City were

not necessary for achieving their policy objectives. Plaintiffs also provided evidence

of viable alternatives, both employed within the city, to achieve their objectives. In

addition to the less stringent HQS standard applied to PHA properties, Plaintiffs also

discussed the Problem Property 2000 (PP2000) program.

Plaintiffs have always asserted PP2000 as a viable alternative. Plaintiffs

presented evidence showing PP2000 was successful in addressing the interests of the

City, code enforcement officials and inspectors, tenants, landlords and neighbors, and

reduced complaints, improved the housing stock and thereby drastically reduced

condemnations and the adverse impact of displacement that the later heavy

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enforcement policy predictably created. Once again, the District Court fails to

recognize that the enforcement of the housing code was done in a discriminatory

environment and manner and that the aggressive, force ownership change strategy and

eviction strategies employed by the City, even with a facially neutral housing code,

were not necessary for achieving their policy objectives. In fact, it was documented

that their PP2000 program was a great success in achieving their policy objectives,

while reducing the “displacement” of protected class tenants.

In fact, the City Council in January 2001, had found the “Problem Properties

2000” “program” so successful that “There are also other problem properties that

should be included and the program could be expanded to include those.” APP. 417-

421.

Jeff Hawkins, a member of the PP2000 inspector group, stated, “the idea with

PP2000 is that you communicate with the landlords and see what problems they were

having so that you could formulate a better plan for compliance instead of just

constant punishment for it. [W]e wanted to work towards compliance and towards

everybody having a good working relationship instead of the constant enforcement,

enforcement, enforcement. PP2000 inspectors thought the City could obtain better

housing stock with a cooperative relationship with owners. PP2000 had an overall

positive effect. From discussions with the PP2000 landlords, Hawkins observed that

38

there needed to be a balance between the costs of doing repairs on properties in

relation to attempts to keep rents affordable especially with the older rental properties.

Hawkins recalls that owners informed the City that if code enforcement pushed too

hard, there would be abandonment of the low-income properties.” APP. 422-427.

Finally, code enforcement supervisor Dick Lippert wrote a memo dated

10/11/00, re PP 2000 Report, to inspectors Essling, Hawkins, Yannarelly, describing

the success of the PP2000 program. “I am putting a copy of this in your personnel file

so there is a permanent record of your work on this.” APP. 428. The Progress Report

on PP2000 January to September, 2000, provides the successful details of the

program. APP. 429-431.

Plaintiffs were adversely affected by Defendants’ illegal and discriminatory

environment and attitude in the application of the City’s more stringent code,

including from increased City fees, renovation costs, loss of rental income from

wrongful condemnations and illegal code compliance certification requirements and

loss of grandfathering protections of rental properties, and were as a result forced to

sell or abandon their rental properties. Plaintiffs’ “protected class” tenants were

disproportionately affected by Defendants’ application of the City’s code and were

subject to displacement from housing and inability to located replacement housing.

The facts before the District Court show the City’s discriminatory environment

39

and attitude in housing code enforcement. The above evidence shows the lack of

affordable housing that is created by over-aggressive code enforcement, which in turn

leads to a disparate impact on a protected class, a violation of the Fair Housing Act.

This evidence is sufficient to withstand summary judgment.

Disparate Treatment

Plaintiffs make a claim for disparate treatment under the FHA. Disparate

treatment, which occurs when some people are treated less favorably than others

because of their race, color, religion, sex, or national origin, “is the most easily

understood type of discrimination.” Int’l Bhd. of Teamsters v. United States, 431 U.S.

324, 335 n.15 (1977). Proof of discriminatory motive is crucial to a disparate

treatment claim. Id. Plaintiffs may survive summary judgment on their disparate

treatment claims by presenting either “direct evidence” of discrimination or “creating

the requisite inference of unlawful discrimination” under the framework set forth in

McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-03 (1973). See Griffith v. City

of Des Moines, 387 F.3d 733, 736 (8th Cir. 2004); East-Miller v. Lake County

Highway Dept., 421 F.3d 558, 563 (7th Cir. 2005) (distinguishing between “direct

evidence” and McDonnell Douglas framework in FHA context).

A plaintiff with direct evidence that illegal discrimination motivated the adverse

action does not need the three-part McDonnell Douglas analysis to survive summary

40

judgment, even if the strong evidence is circumstantial. See Griffith, 387 F.3d at 736.

A plaintiff who lacks evidence that clearly points to the presence of an illegal motive,

however, can only avoid summary judgment by creating the requisite inference of

unlawful discrimination under the McDonnell Douglas framework. Id. Under the

McDonnell Douglas framework, once the plaintiff establishes a prima facie case of

discrimination, the burden shifts to the defendant to articulate a legitimate,

nondiscriminatory reason for its actions. See Gilbert v. Des Moines Area Cmty. Coll.,

495 F.3d 906, 914 (8th Cir. 2007). If the defendant offers a legitimate,

nondiscriminatory reason, the burden shifts back to the plaintiff to put forth evidence

showing the defendant’s proffered explanation is a pretext for unlawful

discrimination. Id.

Although Plaintiffs did not cite the McDonnell Douglas case until their analysis

under their §1981 analysis, Plaintiffs still provided a three-part McDonnell Douglas

analysis in their discussion of the Fair Housing claims: the City operates with a

discriminatory environment and attitude in housing code enforcement, the City claims

that the actions are legitimate to achieve their policy objectives, and there is a

reasonable alternative in the PP2000 program to achieve those policy objectives

through non-discriminatory means.

In the facts section above, a December 19, 2005 email message from Jane

41

Prince, legislative aide to former council member Jay Benanav, is discussed in which

Ms. Prince states: “the issue of how a complaint based system may unfairly target

people of color is a huge one, and I’m not sure what we do to get at it...they can help

us think through the very real possibility that people color are targeted by the city’s

complaint based system.” APP 7. The reason a complaint based system can possibly

target people of color is because the complaint based system is used for reasons other

than housing code enforcement, “to achieve particular outcomes” as stated by Mr.

Kessler, such as addressing behavior issues better suited for Police.

With respect to PHA, “The parties agree that African-Americans make up a

disproportionate percentage of low income tenants in both private and PHA housing.”

Order p. 12. From at least 1995, the City and PHA have known that the City’s more

stringent code standards are applied to Section 8 and privately owned rental properties

occupied disproportionately by “protected class” members.

Proof of the discriminatory motivation behind the City’s actions is the credible

evidence that Defendants did have less restrictive means available to meet legitimate

policy interests. The highly successful PP2000 program that the City Council was

recommending be continued shortly before Mayor and Dawkins took control and

dramatically shifted policy and practices, and the City’s successful partnership with

PHA on behavior issues related to PHA’s tenants, were alternatives that would not

42

have adversely impacted and displaced “protected class” tenants and their private

market housing providers. The City’s partnership with PHA had existed for decades.

The City worked with the largest provider of low-income housing. The City provides

all types of support to PHA and not once did anything to undermine PHA’s significant

mission, like Plaintiffs, to provide “safe and decent” affordable housing to those less

fortunate. A reasonable fact finder could see that Defendants had a less restrictive

means available in PP2000 to meet legitimate policy interests that were successful and

non-discriminatory, as opposed to the aggressive, force ownership change strategy and

eviction strategies used by the City.

Dawkins own statements to Bill Cullen (getting rid of the bottom of the box

tenants) and Sara Anderson (doesn’t want low income people in the city) are sufficient

evidence at summary judgment to constitute a prima facia case of disparate treatment.

ADD 95-98. A reasonable fact finder could draw a reasonable conclusion about Mr.

Dawkins intent in stating “how would [the landlords] feel if all those tenants that are

at the bottom of the box were no longer in St. Paul” and “he didn’t want low-income

individuals renting in the City.” However, the District court makes a conclusion and

discards the evidence by saying “No evidence suggests that this facially race neutral

statement arose from racial animus on the part of Dawkins.”

Perry DeStefano, a former legal aid attorney in Saint Paul, wrote to the City

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Council in 2004 notifying the City that neighbors were using the city inspections

department to adversely impact protected classes in the city. Because the City used

housing code enforcement and “hide the ball” tactics to vacate a building occupied by

protected class members, DeStefano notified the City that “I thought you should know

that as a practicing housing law attorney who knows about discrimination law that

there is exposure to a discrimination claim on this matter due to the way it was

handled.” APP 9-11.

The District Court ends its disparate treatment analysis again by weighing the

evidence and under the more restrictive analysis without the benefit of the three-part

McDonnell Douglas analysis. Had the District Court viewed the evidence in a light

most favorable to the Plaintiffs, and had the District Court used the three-part

McDonnell Douglas analysis without dismissing all of Plaintiffs’ evidence for failing

to show a specific link between racial animus and any challenged decision, Plaintiffs’

claims for disparate treatment would not have been dismissed.

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b. Constitutional Rights.

§1983

Plaintiffs make claims under 42 U.S.C. §1983 for alleged violations of their

rights under the Fourteenth Amendment to the United States Constitution. Success on

a §1983 claim requires a showing of: “(1) [a] violation of a constitutional right, (2)

committed by a state actor, (3) who acted with the requisite culpability and causation

to violate the constitutional right.” Shrum v. Kluck, 249 F.3d 773, 777 (8th Cir. 2001).

Plaintiffs allege violations of their Fourteenth Amendment right to equal

protection as a result of the City’s code enforcement policies. The Equal Protection

Clause of the Fourteenth Amendment requires state actors to treat similarly situated

people alike and permits state actors to treat dissimilarly situated people dissimilarly.

Ganley v. Minneapolis Park & Recreation Bd., 491 F.3d 743, 747 (8th Cir. 2007). As

a threshold matter, Plaintiffs must establish that Defendants treated them differently

from similarly situated landlords. Id. In addition to unequal treatment, Plaintiffs must

also show intentional or purposeful discrimination. See Lewis v. Jacks, 486 F.3d

1025, 1028 (8th Cir. 2007).

The facts and evidence submitted in support of discriminatory intent to prove

their FHA claims also supports Plaintiffs §1983 claims. The City’s discriminatory

environment and attitude in housing code enforcement, force ownership change

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strategy and eviction strategy were known by the City to eliminate affordable housing

and to have a disproportionate impact on protected class members.

Plaintiffs make a “class of one” equal protection argument based on the City’s

preferential treatment of the St. Paul Public Housing Agency. The purpose of a class-

of-one equal protection claim is “to secure every person within the State’s jurisdiction

against intentional and arbitrary discrimination, whether occasioned by express terms

of a statute or by its improper execution through duly constituted agents.” Vill. of

Willowbrook v. Olech, 528 U.S. 562, 564 (2000). Plaintiffs may prevail on their class-

of-one claim by showing they have been “intentionally treated differently from others

similarly situated and that there is no rational basis for the difference in treatment.”

Id.; see also Costello v. Mitchell Pub. School Dist. 79, 266 F.3d 916, 921 (8th Cir.

2001).

The parties agree that African-Americans make up a disproportionate

percentage of low income tenants in both private and PHA housing. ADD. 12. From

at least 1995, the City and PHA have known that the City’s more stringent code

standards are applied to privately owned rental properties occupied disproportionately

by “protected class” members. The City’s “minimum housing maintenance code” was

actually “more stringent” 82% of the time when compared to the federal mandated

Housing Quality Standards (HQS) applicable to federally subsidized, Section 8 “low

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income” housing in the City. APP 109. The City and PHA privately admitted that

HUD would not approve a City and PHA plan to substitute the City’s higher code for

HQS in Section 8 inspections of privately owned low-income rental housing because

HUD, the City and PHA recognized that application of a higher code standard to City

housing stock would adversely affect availability of affordable housing stock. APP

416.

Substantive Due Process

Plaintiffs contend Defendants’ enforcement of the housing code violated their

substantive due process rights. Plaintiffs must show that a governmental power was

exercised arbitrarily and oppressively to succeed on their substantive due process

claims. See Rozman v. City of Columbia Heights, 268 F.3d 588, 591 (8th Cir. 2001).

The government action must be arbitrary in the constitutional sense. Id. “[T]he theory

of substantive due process is properly reserved for truly egregious and extraordinary

cases.” Id.

Plaintiffs have provided sufficient evidence to withstand summary judgment

because the City’s enforcement of the housing code in a discriminatory environment

and manner is truly egregious - aggressive, force ownership change strategy and

eviction strategies - even with a facially neutral housing code, were not necessary for

achieving their policy objectives. In fact, it was documented that their PP2000

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program was a great success in achieving their policy objectives.

Further, evidence presented to the Court also demonstrates that the Defendants

applied an illegal “code compliance” requirement in violation of State law and

selectively to Plaintiffs and other private owners, but not to PHA who was similarly

situated with problem properties and poor housing stock. The City’s “Code

Compliance Inspection Certification” requirement for older homes to be stripped of

their “grandfathering” protections under the State Building Code and brought to

“present code” is a significant burden to older homes and all other illegal and

retaliatory actions are designed to accomplish that main illegal goal in the City’s

discriminatory environment and attitude in housing code enforcement. Defendants

have no discretion to violate State law, and have no legitimate policies, interests or

objectives that justify the deliberate violation of State law by requiring code

compliance certification and stripping grandfathering protections for older homes.

Portions of the City’s own code recognize the “Building Code under which” a

building was “originally constructed”. For example, City’s 2002-03 Minimum

Property Maintenance Standards for all Structures and Premises, Sections 34.09 (2)

(a) and (b); and 34.10 (2), (3) (“maintained in accordance with the Building Code in

effect when originally constructed”). Don Hedquist’s supplemental report details the

Defendants’ violations of the State Building Code.

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§1981 and §1982

Plaintiffs are required to show discriminatory intent to prevail on their claims

under 42 U.S.C. §§ 1981, 1982. Dirden v. Dep’t of Housing and Urban Dev., 86 F.3d

112, 114 (8th Cir. 1996).

The facts and evidence submitted in support of discriminatory intent to prove

their FHA claims also supports Plaintiffs §1981 and §1982 claims. The City’s

discriminatory environment and attitude in housing code enforcement, force

ownership change strategy and eviction strategy were known by the City to eliminate

affordable housing and to have a disproportionate impact on protected class members.

Plaintiffs cited and the District Court discussed 2922 Sherman Ave. Tenants’

Ass’n v. District of Columbia, 444 F.3d 673 (D.C. Cir. 2006), where the District of

Columbia’s lack of explanation for how it narrowed a list of seventy-five properties

recommended for closure that were evenly distributed across the city down to five

apartment buildings located in neighborhoods having an average Hispanic population

4.4 times that of the city as a whole supported an inference of intentional

discrimination. 444 F.3d at 684.

The District Court isolated Plaintiffs’ maps and failed to consider the evidence

from the FHA analysis - that the City’s discriminatory environment and attitude in

housing code enforcement, force ownership change strategy and eviction strategy

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were known by the City to eliminate affordable housing and to have a

disproportionate impact on protected class members. The discriminatory environment

Plaintiffs refer to includes animus toward rental properties (Andy Dawkins’ own

statements), a complaint based code enforcement system that has a problem with

targeting people of color (Jane Prince’s email and Dawkins’ memo) , and getting rid

of the bottom tier of tenants and low income people in the City (Cullen’s and

Anderson’s testimony).

§1985

To prevail on a §1985 claim, the plaintiffs must show that “(1) the defendants

conspired, (2) with the intent to deprive them, either directly or indirectly, of equal

protection of the laws, or equal privileges and immunities under the laws, (3) an act in

furtherance of the conspiracy, and (4) that they or their property were injured, or they

were deprived of exercising any right or privilege of a citizen of the United States.”

Barstad v. Murray County, 420 F.3d 880, 887 (8th Cir. 2005).

Again, the District Court failed to consider the evidence from the FHA analysis

- that the City’s discriminatory environment and attitude in housing code

enforcement, force ownership change strategy and eviction strategy which were

known by the City to eliminate affordable housing and to have a disproportionate

impact on protected class members. Plaintiffs alleged with particularity and

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specificity the City’s understanding of the impact of their discriminatory environment

and attitude in housing code enforcement, force ownership change strategy and

eviction strategy. Further, this discriminatory environment in housing code

enforcement was “agreed to,” or an “understanding was reached,” when Dawkins had

meetings with Chief Judge Mott and City Attorney Cervantes to get “buy in” to his

aggressive, force ownership change and eviction strategies (Dawkins goals for 2004

included getting “buy-in” from the Police Department, City Attorney, Courts and

Neighborhoods). ADD 91.

c. Void for Vagueness.

Plaintiffs claim that chapters 34, 43, 45 and 51 of the St. Paul Legislative Code

(“City Code”) are void for vagueness because they fail to provide landlords and other

property owners with sufficient notice of their basic obligations under law, thereby

placing unwarranted discretion in the hands of those charged with code enforcement.

The void-for-vagueness doctrine is embodied in the due process clauses of the

fifth and fourteenth amendments. Woodis v. Westark Community Coll., 160 F.3d 435,

438 (8th Cir. 1998). A vague regulation violates the Constitution because it fails (1) to

define the offense with sufficient definiteness that ordinary people can understand

prohibited conduct and (2) to establish standards to permit enforcement of the law in a

non-arbitrary, non-discriminatory manner. Id. “In a facial vagueness challenge, an

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enactment reaching a substantial amount of constitutionally protected conduct may

withstand constitutional scrutiny only if it incorporates a high level of definiteness. An

enactment imposing criminal sanctions or implicating constitutionally protected rights

demands more definiteness than one which regulates the economic behavior of

businesses.” Id.

Plaintiffs Gallagher, Collins, Dadder’s and Kubitschek (as well as Steinhauser

and Harrilal), had properties labeled by the city as “problem properties.” Plaintiffs

Steinhauser, Meysembourg, Johnson, Brisson, Allison, and Kubitschek were all

subject to “code compliance certifications.”

Plaintiffs have not received adequate notice of proscribed conduct, or in other

cases under city code, required conduct, in maintaining their rental properties. For

example, with tenant turnover, Plaintiffs typically clean the property in order to re-rent

the premises. On many occasions, it may take several weeks to several months to re-

let the property, depending on the amount of tenant damage that needs repair and the

rental market.

With Plaintiffs Allison and Dadder’s, 1522\1524 Carroll was designated as

vacant just 23 days after sale of the property. Gallagher provided signed leases and

rent deposit slips on appeal of the vacant building designation, but the appeal was

denied. Defendant Senty declared the building vacant by looking through a second

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story window while standing on the ground. Defendant Senty could not define

“legally occupied.” APP 124.

Dawkins, an attorney, a 15 year servant in the Minnesota House of

Representatives, and as the former 4 year director of the City’s code enforcement

division (NHPI), could not describe the three categories of vacant buildings, could not

define code compliance, and did not know if “legally occupancy” was defined in the

Code as the Code states it should (which it does not). When asked about vacant

buildings, Dawkins stated: “It was always confusing to me, and I’m not sure I can get

it right even today.” APP 432. When asked about code compliance, Dawkins stated,

“That’s always been confusing to me. The best I can tell you is that I attempted to

learn about it when I heard that it became part of the settlement of the first Tenant

Remedy Action”. Id. In his duties as Director of NHPI, Dawkins never had any

discussions with his inspectors between 2002-2005 as to when a code compliance

would be required. Id. When asked about “legal occupancy” in an email from a

resident trying to understand the vacant building code, and whether the term even

appears in the City’s code, Dawkins wrote, “I am not sure it appears anywhere. I

would interpret this to mean not over-occupied and not trespassers.” APP 433.

Code enforcement manager Lippert, former head of the Problem Property 2000

program, could not define a problem property. When asked about problem properties,

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Lippert stated, “I don’t use the term and I don’t have a definition.” APP 434. When

asked why he doesn’t use the term, Lippert states, “That term has been used so often

by so many people, it means so many different things to so many different people that

I don’t think it uniformly defines anything. So there is too much chance of

misunderstanding by using the term, so I don’t use it.” Id.

This Court has seen the facts and evidence behind the City’s discriminatory

environment and attitude in housing code enforcement and the force ownership

change strategy and eviction strategies. Because many of the significant terms used in

the City’s code are insufficiently defined, because the City code lends itself to

arbitrary enforcement by different application, and because Plaintiffs and others are

forced to guess at the code’s prescriptions, the code should be declared

unconstitutionally vague because the housing code is being abused.

d. RICO.

Plaintiffs brought RICO claims against Defendants claiming violations of 18

U.S.C. § 1962(c), (d). A plaintiff who brings suit under 18 U.S.C. § 1962(c) must

prove that the defendant engaged in (1) conduct (2) of an enterprise (3) through a

pattern (4) of racketeering activity. Handeen v. Lemaire, 112 F.3d 1339, 1347 (8th

Cir. 1997).

“Racketeering activity” is defined in 18 U.S.C. § 1961(1). That section lists as

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predicate acts certain state law crimes, conduct that is “indictable” under various

federal provisions, and numerous other offenses. Handeen, 112 F.3d at 1353.

Plaintiffs based their RICO claims in their Complaint on seven predicate acts: mail

fraud, bank fraud, wire fraud, the Hobbs Act, tampering, bribery, and interstate travel

or transportation in aid of racketeering enterprises. In Plaintiffs’ brief, Plaintiffs

added facts obtained through discovery to their RICO claims on alleged false claims

of housing code violations, Defendants’ use of the City’s housing code rather than the

HQS, misrepresentations of code compliance inspections, and extortion.

From the period of 2002 and thereafter, Defendants have, through a joint

enterprise, participated in conduct which qualifies as racketeering activity. Defendant

Magner engaged in excessive code enforcement and targeting properties with the

intent of forcing property owners to sell their properties. In each case, Magner

enforced numerous code violations which required thousands of dollars in

rehabilitation work. Prior to completion of the rehabilitation work, Magner

approached property owners Osterman and Lois Jacobs, offering to arrange for each to

sell their property to either Magner or someone of Magner’s choosing. In both cases,

Magner presented the property with an offer that was grossly below market value.

APP 435-437 (Osterman), 438-442 (Jayasuriya), 443-456 (Hayes), 457-459 (Jacobs).

Magner’s conduct is sufficient to meet the “relatedness” requirement because it

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exhibits a similar purpose, result, type of victim, and method of commission. Not

only did Magner enforce code violations which required excessive repairs, he

attempted to corner each of the above-mentioned property owners into selling their

property at a price below market value. Plaintiffs also contend that Magner has

personally benefited from such behavior by transferring “inside knowledge” to Wally

Nelson who has not only purchased many distressed single family and duplex homes

under Magner’s control, but is also a close friend of Magner’s and has provided

construction services to Mr. Magner’s father at a discounted rate ($10,000.00).

Docket, 213, Ex. 33-35; Docket, 210, Ex. 72. Magner’s clear purpose was to force

these property owners to sell their properties and move out.

The City and PHA knew the City’s minimum maintenance code was more strict

82% of the time when compared to federal HQS and yet fail to disclose this important

fact to public or HUD in their Consolidated Plans – this non-disclosure was a material

misrepresentation to the community, to Plaintiffs and other landlords, and property I

owners, as well as to tenants and other occupants, all of whom HUD considered

beneficiaries of the disclosure requirement in the AI process and annual and five year

updates to HUD.

Further, Plaintiffs made similar claims that Defendants falsified claimed code

violations in order to deprive Plaintiffs of monies through excessive consumption fees

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(Dawkins’ memo regarding raising “a half million” in re-inspection fees), permit fees,

other city fees, and of Plaintiffs investments. Plaintiff Affidavits, APP 284-287 - code

violations for birds nesting, kiddy pools, etc.).

Based upon the foregoing facts and conclusions, this Court should find that

summary judgment as pertaining to RICO is not appropriate and Defendants’ motion

should therefore be denied.

e. State Law Claims.

Plaintiffs make three state law claims: (1) abuse of process, (2) tortious

interference with contract, and (3) tortious interference with Plaintiffs’ business

expectancy.

To succeed on an abuse of process claim, Plaintiffs must show that there was an

ulterior purpose and that Defendants used the process to achieve something not within

the scope of the proceedings. Kittler & Hedelson v. Sheehan Props., Inc., 203 N.W.2d

835, 840 (Minn. 1973).

To prevail on a tortious interference with contract claim, Plaintiffs must show

(1) the existence of a contract; (2) Defendants’ knowledge of the contract; (3)

Defendants’ intentional procurement of its breach; (4) without justification; and (5)

damages resulting therefrom. See Bouten v. Richard Miller Homes, Inc., 321 N.W.2d

895, 900 (Minn. 1982).

57

Success on Plaintiffs’ tortious interference with business expectancy claim

requires a showing of (1) the existence of a reasonable expectation of economic

advantage or benefit belonging to Plaintiffs; (2) that Defendants had knowledge of

that expectation of economic advantage; (3) that Defendants wrongfully and without

justification interfered with Plaintiffs’ reasonable expectation of economic advantage

or benefit; (4) that in the absence of the wrongful acts of Defendants, it is reasonably

probable that Plaintiffs would have realized their economic advantage or benefit; and

(5) that Plaintiffs sustained damages as a result of this activity. See Harbor Broad.,

Inc. v. Boundary Waters Broad., Inc., 636 N.W.2d 560, 569 (Minn. Ct. App. 2001).

The City’s discriminatory environment and attitude in housing code

enforcement, force ownership change strategy and eviction strategy which were

known by the City to eliminate affordable housing and to have a disproportionate

impact on protected class members – this is exactly the type of evidence Plaintiffs rely

on in support of their State Law claims. As the District Court did in its Order,

Plaintiffs did not repeat the facts and analysis of the FHA/disparate treatment and

impact portion of their brief.

IV. The District Court Erred in Denying Plaintiffs’ Original and Renewed Motions for Sanctions.

Spoliation is the intentional destruction of evidence and when it is established,

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the fact finder may draw inference that the evidence destroyed was unfavorable to the

party responsible for its spoliation. See E*Trade Sec. LLC v. Deutsche Bank AG, 230

F.R.D. 582, 587 (D.Minn 2005) (citing Black's Law Dictionary 1401 (6th ed.1990); see

also Zubulake v. UBS Warburg LLC, 220 F.R.D. 212, 216 (S.D.N.Y.2003)(spoliation

of evidence is the destruction or significant alteration of evidence, or the failure to

preserve property for another's use as evidence in pending or reasonable foreseeable

litigation); see also West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d

Cir.1999)).

Defendants had a duty at the commencement of the Steinhauser lawsuit in May

2004, to place a litigation hold on all relevant evidence that might be useful to

Plaintiffs. Defendants failed to do so then or thereafter when they were sued in

Harrilal and Gallagher in 2005. Discovery requests in Steinhauser were served on

Defendants in November of 2004 requesting all inspection reports, records and

“emails” of all officials and City agencies. Defendants continued to destroy e-data/e-

mails and TISH reports thereafter. Defendants failed to place a “litigation hold” on

potentially relevant documents.

At the April 14, 2008, hearing on Plaintiffs renewed motion for sanctions the

Court acknowledged that no showing of “bad faith” was required because the subject

documents had been destroyed by Defendants after litigation was commenced.

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Nevertheless, the Court applied the “bad faith” standard in its Order. Order at 7-10,

13, 14.

Plaintiffs never limited their document request to email communications from

December of 2005 forward, or at any other time waived their right to email

communications for the relevant periods prior to December 2005. Plaintiffs agreed to

limit the number of individuals from whom which they sought emails, not limit the

emails that were produced during litigation. Ms. Seeba’s claim that Plaintiffs had

limited their request for emails for December of 2005 forward is a deliberately false

assertion of the record. Ms. Seeba’s comments at the August 2007 hearing clearly

show that she was requesting a limitation individuals, not a limitation of the time

period for emails. Plaintiffs would not waive their right to emails written during the

course of litigation.

Defendants’ failure to place any litigation hold on e-mails/e-data after the

commencement of litigation in May of 2004 and failure to preserve back-up tapes

prior to December of 2005 allowed Defendants to destroy relevant evidence for the

key time periods prior to December 2005, which created an absence of

communications between and among Defendants and other city officials and

employees and third parties from 1999 through 2005, concerning Plaintiffs claims and

regarding Defendants’ claims of immunity. Given the sampling of emails provided in

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this brief by Plaintiffs’ counsel, it is reasonable to conclude that e-data/e-mails prior to

December 2005 would have produced evidence supportive of Plaintiffs’ claims of

intentional discrimination and relevant to Defendants’ claimed immunity.

V. The District Court Erred in Denying Plaintiffs’ Motion to Compel. Magistrate Nelson denied Plaintiffs’ joint motion to compel the production of

the tax records, banking records and cell phone records of Defendant Steve Magner, a

supervisor of vacant buildings for the Neighborhood Housing and Property

Improvement office (NHPI) of St. Paul and a member of the Problem Property Unit of

NHPI.

Plaintiffs sought these personal records to support claims that Defendant

Magner had committed the predicate acts of “attempted extortion” and “extortion”

under the federal Racketeering Act, 18 U.S.C. Section 1961, et seq. (hereinafter

referred to as “RICO Act”).

Attempted extortion is an illegal predicate act under the RICO Act. 18 U.S.C. §

1961. Under the RICO Act, “Racketeering activity” is defined as, “(A) any act or

threat involving…extortion, or (B) any act which is indictable under any of the

following provisions of title 18, United States Code §1951 (relating to interference

with commerce, robbery, or extortion). 18 U.S.C. §1961 (emphasis added).

During the period of 2002 and thereafter, Mr. Magner was the head inspector in

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charge of all vacant buildings for the City. Gallagher, Collins, the Dadder’s entities,

Allison and Jeff and Sara Kubitschek were subject to the “vacant building”

supervision of Mr. Magner during this period. Mr. Magner testified that as a vacant

building supervisor he was privy to a great deal of personal and financial information

of owners of single family and duplex property owners required at his direction to

undergo expensive certification of Code Compliances. Docket, 213, Ex. 33-35.

Plaintiffs claim that Mr. Magner has personally benefited from his transfer of

“inside” knowledge to Wally Nelson who has purchased a great deal of distressed

single family and duplex homes under Magner’s control. In fact, Mr. Magner has

admitted that Mr. Nelson has purchased a great number of properties that are subject

to Mr. Magner’s control and supervision. Docket, 213, Ex. 33-35. Mr. Magner

admitted that he has known Wally Nelson for many years, that he and Mr. Nelson

have a long standing practice of frequent social contacts, and that Mr. Nelson has

provided construction services to Mr. Magner’s father on his homestead located in

Stillwater, across the road from Steve Magner‘s homestead. Docket, 213, Ex. 33-35.

Mr. Nelson admitted that his business partner had performed new construction

services for Mr. Magner’s father’s new home in Stillwater for $10,000.00. Mr. Nelson

also admitted to having assisted Mr. Magner’s father lay sod at his new house.

Docket, 210, Ex. 72.

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Affidavits and sworn statement from four individuals that were presented to the

Magistrate on Plaintiffs’ Joint Motion to Compel constituted direct evidence of

“attempted extortion” by Defendant Magner in his official position as a supervisor of

code enforcement for Defendant City.

Plaintiffs were seeking Magner’s personal records as further evidence that

Magner had committed the RICO predicate act of “attempted extortion” and for

evidence that he had committed “extortion” under the RICO Act. Magistrate Nelson’s

determination that “Plaintiffs have produced absolutely no evidence that he has

derived any income from the alleged pattern of racketeering” was clearly erroneous

and contrary to law. Plaintiffs are seeking to show evidence Magner “derived

income” from the alleged pattern of racketeering through his bank records and tax

returns. Plaintiffs have already presented evidence of the predicate act of “attempted

extortion.” Because “attempted extortion” is a RICO predicate act, Plaintiffs should

be allowed to examine Magner’s bank records and tax returns to determine if in fact

he has derived any income that would constitute the additional predicate act of

“extortion.”

The fact the Magner was unsuccessful in his attempted extortion, or that he did

not derive income from those individuals, does not mean that an illegal predicate act

was not committed or that discovery of his bank records and tax returns should not be

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allowed. As the Court held in MacLaughlin, “that the extortion effort ultimately failed

can not exonerate Anderson, since Macgall alleged, and the Hobbs Act forbids,

attempted extortion.” See McLaughlin at 194 (citing 18 U.S.C. § 1951(a)).

In sum, given the nature of the claims against Magner, his tax, banking and

personal cell phone records fall within the proper scope of permissible discovery

under the Federal Rules of Civil Procedure and the Court should allow such discovery.

Plaintiffs are agreeable to subjecting Magner’s cell phone records and financial

documents to provisions of a protective order to protect his privacy and financial

security interests. Plaintiffs’ request for such documents is within the scope of

discovery, is relevant, material and likely to lead to the discovery of admissible

evidence under Rule 26 of the Federal Rules of Civil Procedure.

CONCLUSION

The Order of the District Court is replete with examples of the Court ignoring

the standard for summary judgment motions. Repeatedly, the District Court weighed

evidence, stating that the Court was “not persuaded” or that the evidence did not

“show” discrimination, that there was no evidence, or the Court “concluded” that the

evidence was insufficient. This disregard for the summary judgment standard has

become the norm, and this kind of “trial on the paper” violates plaintiffs’

Constitutional right to trial by jury. The facts, when all inferences are drawn in favor

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of Plaintiffs, clearly present evidence from which a reasonable fact finder could

conclude that the City’s custom, policy and practice was a discriminatory environment

and attitude in housing code enforcement, that the force ownership change strategy

and eviction strategy were known by the City to eliminate affordable housing and to

have a disproportionate impact on protected class members. For these reasons,

Plaintiffs ask this Court to reverse the District Court’s grant of summary judgment and

remand the case for trial.

AASE, ENGEL & KIRSCHER, PLLC

Dated: May 5, 2009 By: s/ Matthew A. Engel Matthew A. Engel (Attorney Lic. #315400) 180 East 5th Street, Suite 255 Saint Paul, Minnesota 55101 T: (651) 209-6884

Attorney for Plaintiffs-Appellants Gallagher, et.al.

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CERTIFICATION OF COMPLIANCE WITH FRAP 32

AND CERTIFICATION OF WORD PROCESSING PROGRAM

Counsel for Plaintiffs-Appellants-prepared its brief using Microsoft Word 2007

for its word processing program. This brief contains 13,970 words. Counsel also

certifies that the attached CD has been scanned for computer viruses and there are no

viruses on the CD. The only document contained on this CD is the Appellant’s Brief

in the PDF file format.

Dated: May 5, 2009 By: s/ Matthew A. Engel Matthew A. Engel, Esq.