noah grynberg (sbn 296080) los angeles … grynberg (sbn 296080) ... 2-16-cv-04697-odw-ks first...

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FIRST AMENDED COMPLAINT

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NOAH GRYNBERG (SBN 296080) [email protected] BRENT BOOS (SBN 292808) [email protected] LOS ANGELES CENTER FOR COMMUNITY LAW AND ACTION 1137 North Westmoreland Avenue, #16 Los Angeles, CA 90029 Telephone: (310) 866-7527 Attorneys for Plaintiffs

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA – WESTERN DIVISION

I. NATURE OF THE ACTION

1. It is axiomatic that immigrants should be given the same opportunity as native-born residents to seek rental housing in the United States. Landlords should not adopt policies or practices that prevent a particular class of immigrants from living in an apartment building where such policies or practices have no relationship to any legitimate business purpose. Policies or practices that have the discriminatory effect of displacing large groups of immigrants from their homes

ADELA HERNANDEZ; JOEL HERNANDEZ; JESUS BALTAZAR; and ROBERTO PEREZ, Plaintiffs, v. WINSTAR PROPERTIES, INC; and MANHATTAN MANOR, LLC, Defendants.

CASE NO.: 2-16-cv-04697-ODW-KS FIRST AMENDED COMPLAINT FOR: Violation of the Federal Fair Housing Act DEMAND FOR JURY TRIAL

Case 2:16-cv-04697-ODW-KS Document 10 Filed 07/07/16 of 24 Page ID #:36

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should be scrutinized to ensure that those policies and practices are driven by a valid business necessity. And where such a policy or practice is not tied to a legitimate business purpose, the landlord that adopted the discriminatory policy or practice should be held accountable to the tenants it injured. This case arises because Defendants adopted a policy that resulted in a discriminatory rent increase at Plaintiffs’ apartment building, and Plaintiffs, all Mexican immigrants, face imminent eviction if Defendants’ conduct is not enjoined. A. The Parties

2. Plaintiffs are individuals and tenants who live in three separate residential apartment units in the same building in Los Angeles County, California. The building is located at 4330 City Terrace Drive, Los Angeles, California, 90063 (the “Property”). Each of the Plaintiffs is an immigrant to the United States from Mexico. The Plaintiffs have lived in their respective units for between 2 and 24 years. Plaintiff Roberto Perez, the shortest-tenured Plaintiff at the Property, moved into his unit in 2014. Plaintiff Jesus Baltazar, the Plaintiff with the longest tenure at the Property, moved into his unit in 1992.

3. Defendants Winstar Properties, LLC (“Winstar”) and Manhattan Manor, LLC (“Manhattan Manor”) are California corporations with their principal places of business in Los Angeles County, California. Upon information and belief, Manhattan Manor is the alter ego of Winstar. They share the same corporate headquarters and many of the same officers and principals. Upon information and belief, Winstar is the management company for properties owned by Manhattan Manor. B. Summary of the Wrongful Conduct of Defendants

4. Los Angeles County is in the midst of a debilitating housing crisis. The supply of housing in the County is insufficient to meet the demand, and the price of rental housing has increased exponentially as a result. Predictably, the poorest tenants have borne the brunt of a brutal housing market. A 2014 report by


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the California Housing Partnership Corporation revealed that 91% of very low-income renters in Los Angeles County devote more than 30% of their incomes to rent; that the region is short by nearly 500,000 affordable homes necessary to cover the needs of very low-income renters; and that although median rents increased in the region by 25% between 2000 and 2012, median income declined by 9%.1 A UCLA economic forecast released in September 2015 predicted that housing in California will become even less affordable over the next two years.

5. Defendants are investors and property managers in the Los Angeles County housing market. Defendant Winstar manages approximately 1,700 properties in Los Angeles County alone. Most of these properties are comprised exclusively of residential housing units.

6. Upon information and belief, Defendants purchased the Property in January 2016. The Property is a residential apartment building with eight (8) apartment units.

7. Approximately two weeks after the purchase, on January 29, 2016, Defendants served Plaintiffs with notices of rent increase (the “Notice” or “Notices”) stating that Defendants would be increasing Plaintiffs’ monthly rent from $1,250.00 to $2,000.00, effective April 1, 2016. Plaintiffs are tenants at unit numbers 1 through 3 at the Property.

8. Defendants also provided similar Notices to four additional units at the Property, which are numbered Units 4, 5, 6, and 8. These additional units were occupied by tenants other than Plaintiffs. Upon information and belief, the head of household in three of the additional units was an immigrant to the United States from Mexico. The head of household in the remaining additional unit was a first-generation American whose parents immigrated to the United States from Mexico.

1 How California’s Housing Market is Failiing to Meet the Needs of Low-Income Families, California Housing Partnership Corporation, available at http://www.chpc.net/dnld/CHPCHousingNeedReport020814FINAL.pdf (February 2014).


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9. Defendants did not provide a notice of rent increase to the unit at the Property numbered Unit 7 (“Unit 7”). Unit 7 was the only unit at the Property that did not receive a notice of rent increase. Upon information and belief, Unit 7 is occupied by two tenants, both of whom were born in the United States.

10. The nearly building-wide rent increase at the Property was the result of a facially neutral policy at Winstar and Manhattan Manor to evaluate all Winstar and Manhattan Manor residential apartment units for eligibility for a rent increase at the end of every month. The policy instructs Defendants’ underwriters to peg units at particular rental values. Upon information and belief, the policy gives Defendants’ underwriters wide discretion to peg units at inflated rental values even where the value an underwriter associates with a unit does not reflect the value of the unit on the rental market. If a unit is deemed eligible for a rent increase and the unit’s pegged value is higher than the rent the unit currently generates, the unit receives a notice of rent increase corresponding to the higher associated rent. At the end of January 2016, this review revealed that every unit at the Property was eligible for a rent increase except for Unit 7.

11. After the Notices were served, the tenants in Units 5, 6, and 8 vacated their apartment units because they could not afford the nearly 63% rent increase that Defendants demanded. Plaintiffs, who are tenants in Units 1 through 3, and the tenants in Unit 4 remained in their units, even though they were also unable to afford the rent increase.

12. On April 1, 2016, the rent increase went into effect. Plaintiffs did not pay Defendants the increased rental amount of $2,000 on the first of the month. Defendants subsequently initiated unlawful detainer proceedings against Plaintiffs and against the occupants of Unit 4 in Los Angeles Superior Court, ostensibly for non-payment of rent.


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II. PARTIES 13. Plaintiffs are individuals residing, at all times material hereto, in Los

Angeles County in the State of California. 14. Defendant Winstar Properties, Inc. (“Winstar”) is a California

corporation with its headquarters in Los Angeles County in the State of California. 15. Defendant Manhattan Manor, LLC (Manhattan Manor”) is a

California corporation with its headquarters in Los Angeles County in the State of California.

16. Upon information and belief, Manhattan Manor is the alter ego of Winstar. The two entities share the same corporate headquarters and many of the same officers and principals. Upon information and belief, Winstar is the management company for properties owned by Manhattan Manor.

17. Upon information and belief, at all times material hereto, each of Defendants was acting as the agent of the other and was acting within the course and scope of its agency, and/or the alleged acts or omissions of each Defendant as agent were subsequently ratified and adopted by each agent as principal. Each Defendant, in acting or omitting to act as alleged in this Complaint, was acting through its agents, and is liable on the basis of the acts and omissions of its agents.

III. JURISDICTION AND VENUE 18. This Court has jurisdiction over this matter pursuant to 42 U.S.C. §

3613, and pursuant to 28 U.S.C. §§ 1331 and 1343 because the claims alleged herein arise under the laws of the United States.

19. Venue is proper in this District under 28 U.S.C. § 1391(b) because Defendants conduct business in this District and a substantial part of the events and omissions giving rise to the claims herein occurred in this District.

IV. GENERAL ALLEGATIONS A. Defendants Increased Plaintiffs’ Rent by 63% Two Weeks After

Defendants Purchased the Property.


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20. Plaintiffs are residential tenants at the Property. Plaintiff Jesus Baltazar moved into the Property in approximately 1992. Plaintiffs Joel Hernandez, and Adela Hernandez moved into the Property in 2009. Plaintiff Roberto Perez moved into the Property in 2014.

21. Plaintiff Jesus Baltazar signed a 12-month lease agreement with a former owner of the Property in approximately 1992. The lease agreement called for monthly rent payments of $485. In or about 2013, after a series of increases over the years, Plaintiff Jesus Baltazar’s monthly rent was increased to $1,250.

22. Plaintiffs Joel Hernandez and Adela Hernandez signed 12-month term lease agreements with a former owner of the Property in 2009. Plaintiff Roberto Perez signed a 12-month term lease agreement with a former owner of the Property in 2014. The lease agreements called for monthly rent payments of between approximately $995 and $1,100 per unit. Plaintiffs Joel Hernandez and Adela Hernandez are partners and occupy the same unit. In 2014, the former owner increased the monthly rent at Plaintiff Roberto Perez’s unit to $1,250. In 2015, the former owner increased the monthly rent for Plaintiffs Joel Hernandez and Adela Hernandez to $1,250.

23. In or about September 2015, two new tenants moved into Unit 7 at the Property. The tenants signed a 12-month term lease agreement with the former owner to lease Unit 7 in exchange for monthly rent payments of $1,350.

24. Upon information and belief, Unit 7 is substantially similar to the other residential units at the Property. Each unit has two bedrooms and one bathroom and is approximately the same size. Upon information and belief, Unit 7 was more recently renovated than Plaintiffs’ units, and features newer fixtures and appliances.

25. On or about January 15, 2016, Defendants purchased the Property. Defendant Manhattan Manor became the owner of record, and Defendant Winstar became the property manager.


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26. Approximately two weeks after the purchase, on or about January 29, 2016, Defendants served the tenants at the Property living in Units 1, 2, 3, 4, 5, 6, and 8 with notices of rent increase (the “Notice” or “Notices”). Except for identifying information related to the particular unit served, each Notice was identical. The Notices stated that rent for each unit would be increased to $2,000 per month effective April 1, 2016. The proposed rent hike increased Plaintiffs’ monthly rent payments by approximately 63%.

27. Defendants did not serve a Notice on Unit 7 when they served Notices on the other units at the Property on January 29, 2016.

28. Upon information and belief, neither of the tenants in Unit 7 is an immigrant. Both tenants were born and raised in the United States. B. Defendants Have a Well-Established Rent-Increase Policy That

Governs All Residential Rental Units They Own and Manage. 29. Defendants own and manage approximately 1,700 rental properties in

Los Angeles County. 30. Rachel Teller is the Chief Operating Officer (“COO”) of Defendant

Winstar. Ms. Teller testified in a related case filed by Defendant Manhattan Manor in Los Angeles Superior Court that Defendant Winstar has a specific policy in place to determine whether to serve tenants at any of the properties it manages with a notice of rent increase. Winstar loads information regarding each of the residential units located in each of the properties it manages into a software system called AppFolio. At the end of each calendar month, AppFolio automatically determines which of these units is eligible for a rent increase. AppFolio determines a unit’s eligibility for a rent increase on the basis of a combination of factors. These factors include whether the particular unit is governed by municipal rent increase restrictions and whether the unit is governed by a term lease agreement that establishes the rent for the unit during the lease term.


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31. Winstar also directs its underwriters to associate rental values with each unit that Winstar uploads onto AppFolio. The rental values are represented by proposed monthly rent payments. If the rental value an underwriter has associated with a unit is higher than the current rent paid by the tenants at the unit, and if the unit is otherwise eligible for a rent increase, Winstar’s rent-increase policy dictates that Winstar will serve the unit with a notice of rent increase to bring the unit’s rent up to the unit’s associated rental value.

32. Winstar’s COO Rachel Teller testified in connection with a separate proceeding in Los Angeles Superior Court that the rent-increase policy described herein was applied at the Property to increase the rent at Plaintiffs’ units.

33. Upon information and belief, the rental values Winstar associates with each unit are not necessarily based on the unit’s value in the rental market. Winstar may establish a rental value for a unit that is higher than the value of the unit on the rental market and serve a notice of rent increase on the tenants in that unit even though the rent sought in the rent increase notice is far higher than the amount a reasonable tenant in the rental market would pay for the unit. For instance, following service of the Notices in this case, Defendants’ agent Alejandra Macedonio told Plaintiff Adela Hernandez that, even if Plaintiffs were able to afford $2,000 in monthly rent on April 1, 2016, Defendants would continue to increase the rent at each of Plaintiffs’ units until Plaintiffs were unable to afford the rent demanded.

34. Upon information and belief, Winstar associates inflated values with its rental units because Winstar’s rent-increase policy encourages Winstar’s underwriters to peg new units at artificially high rental values. The policy gives Winstar’s underwriters wide discretion to determine the rental value of a particular unit even where the ultimate value an underwriter pegs to the unit is far higher than what the market would bear. The result is that many units are pegged at values that do not reflect the price for the unit on the market, existing tenants are served with


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rent increase notices that they either cannot or will not pay for their units, and those tenants are forced out.

35. Upon information and belief, the rent-increase policy described herein was created, adopted, and applied by both Defendants as agents and/or alter egos of one another. C. Defendants’ Rent Increase Policy Has a Disparate Impact on Latino

Immigrants. 1. Defendants’ rent increase policy has a disparate impact on Latino

immigrants at the Property. 36. Defendants’ rent increase policy had a disparate impact on households

at the Property that are headed by immigrants to the United States from Mexico. 37. Seven units at the Property received identical Notices in January

2016. The heads of household in six of those seven units were immigrants from Mexico. The head of household in the seventh unit that received a Notice was a first-generation American whose parents immigrated to the United States from Mexico.

38. Unit 7 was the only unit at the Property that did not receive a Notice in January 2016. Upon information and belief, the tenants in Unit 7 were both born in the United States.

39. After the Notices were served, the tenants in Units 5, 6, and 8 vacated their units because they could not afford to pay the rent demanded in the Notices. The tenants in Units 1 through 4 remained in their units but did not pay rent in the amount of $2,000 on April 1, 2016, the effective date of the rent increase, because they could not afford to pay the rent demanded. The tenants in each of Units 1 through 4 was subsequently served with an eviction complaint in Los Angeles Superior Court for nonpayment of the rent demanded in the Notices. The eviction complaints filed against Plaintiffs are still pending.


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40. The householder in six of the eight units, or 75% of the households, at the Property was a Mexican immigrant on the date the Notices were served. Of the seven households at the Property that were either displaced or that face imminent displacement as a result of the Notices, nearly 86% are headed by Mexican immigrants. Each of the households at the Property headed by a Mexican immigrant was either displaced or faces displacement as a result of the Notice.

2. Defendants’ rent increase policy has a disparate impact on Latino immigrants in Los Angeles County. a. Defendants’ rent-increase policy has a disproportionate

impact on Latino immigrants because the policy reduces the number of affordable housing units in Los Angeles County. i. Los Angeles County has a shortage of affordable

housing. 41. A 2014 report by the California Housing Partnership Corporation

revealed that 91% of very low-income renters in Los Angeles County devote more than 30% of their incomes to rent; that the region is short by nearly 500,000 affordable homes necessary to cover the needs of very low-income renters; and that although median rents increased in the region by 25% between 2000 and 2012, median income declined by 9%.2 A UCLA economic forecast released in September 2015 predicted that housing in California will become even less affordable over the next two years.

ii. Latino immigrants make up a disproportionate percentage of lower-income Los Angeles County residents that rely on affordable rental housing.

42. According to a March 2016 report from the Migration Policy Institute, Mexican immigrants have significantly lower incomes on average than members of 2 How California’s Housing Market is Failiing to Meet the Needs of Low-Income Families, California Housing Partnership Corporation, available at http://www.chpc.net/dnld/CHPCHousingNeedReport020814FINAL.pdf (February 2014).


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other immigrant and native-born populations in the United States. In 2014, the median household income among Mexican immigrants was $37,390. By contrast, other immigrant populations, when viewed as a single group, reported a median income of $49,487, and native-born populations reported a median income of $54,565.3 Mexican immigrants were also more likely to live in poverty than other immigrant and native-born populations. In 2014, 28% of Mexican immigrant families in the United States lived in poverty, compared to 18% of families that immigrated to the United States from countries other than Mexico and 10% of families that qualified as native born.4

43. The numbers from Los Angeles County track the national data. Mexican immigrants in Los Angeles County report lower incomes on average than native-born residents. Data from the United States Census Bureau’s 2014 American Community Survey (“ACS”) one-year estimates revealed that the median annual income for households in Los Angeles County with a householder who immigrated to the United States from Mexico was $39,371.5 By comparison, the median household income for Los Angeles County overall was $55,746.6 The median income for households with a native-born householder was $64,596.7 The median income for households with a Latino householder, not controlling for the

3 Mexican Immigrants in the United States, Migration Policy Institute, available at http://www.migrationpolicy.org/article/mexican-immigrants-united-states (last accessed June 27, 2016). 4 Id. 5 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~717 (last accessed June 27, 2016). 6 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S1901/0500000US06037 ((last accessed June 27, 2016). 7 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~600 (last accessed June 27, 2016).


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householder’s country of origin, was $45,203.8 And the median income for households with a White householder was $61,386.9

44. The same ACS dataset revealed that Mexican immigrants in Los Angeles County reported a poverty rate of 25.6%.10 Overall, residents of Los Angeles County reported a poverty rate of 18.7%.11 For white, non-Latino residents of Los Angeles County, the rate dropped to 11.1%.12

45. The data also suggest that Latino immigrants13 in general have lower median incomes than both native-born and other immigrant populations. Residents of Los Angeles County who immigrated to the United States from Latin America reported a median household income of $39,770 and a poverty rate of 24.1%.14 For comparison, residents of Los Angeles County who immigrated to the United States from Asia reported a median household income of $60,385.15 Residents of Los Angeles County who immigrated to the United States from Europe reported a

8 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S1903/0500000US06037 (last accessed June 27, 2016). 9 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S1903/0500000US06037 (last accessed June 27, 2016). 10 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~717 (last accessed June 27, 2016). 11 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S1701/0500000US06037 (last accessed June 27, 2016). 12 Id. 13 For the purposes of this Complaint, the term “Latino immigrant” includes an immigrant to the United States from a country commonly referred to as Latin America, namely, Central and South America. 14 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~687 (last accessed June 27, 2016). 15 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0505/0500000US06037 (last accessed June 27, 2016).


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median household income of $63,266.16 The median household income for households with a foreign-born householder without controlling for country of origin was $46,589.17

46. A report from the Pew Hispanic Center found that in 2011, the Latino immigrant population in the Los Angeles-Long Beach metropolitan area had a lower median income than both native-born Latinos and non-Latino Whites: Latino immigrants reported a median income of $39,000, compared to $55,500 for native-born Latinos and $70,390 for non-Latino Whites.18

47. Latino immigrants in the Los Angeles region are also especially likely to be renters. Latino immigrants in the region reported a home ownership rate of 35.7% in 2011, compared to 43.2% for native-born Latinos and 59.3% for Whites.19 Nearly 64% of Latino immigrants in the region reported living in renter-occupied homes, compared to nearly 57% of native-born Latinos and less than 41% of Whites.20

48. In Los Angeles County overall, the data also reveal that Latino immigrants are more likely than other populations to be renters. According to the ACS’s 2014 one-year estimates, 64.9% of immigrants from Latin America in the County were renters.21 For all foreign-born populations in the County, not

16 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0503/0500000US06037 (last accessed June 27, 2016). 17 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0501/0500000US06037 (last accessed June 27, 2016). 18 Characteristics of the Population, by Race, Ethnicity and Nativity: 2011, available at http://www.pewhispanic.org/files/states/pdf/los-angeles_11.pdf (last accessed June 27, 2016). 19 Id. 20 Id. 21 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~687 (last accessed June 27, 2016).


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controlling for country of origin, the figure was 58.4%.22 For native-born populations, the figure was 50%.23

49. Latino immigrants who are tenants in Los Angeles County also devote a higher percentage of their incomes to rent than other populations. The ACS 2014 one-year estimates reported that 68% of Latin American immigrant households in Los Angeles County devoted 30% or more of their incomes to monthly rent payments.24 By contrast, only 45.3% of households in Los Angeles County overall devoted 30% or more of their incomes to rent.25 63.4% of Latino households in the County, not accounting for country of origin, devoted 30% or more of their incomes to rent.26 And only 55.7% of native-born populations in the County devoted 30% or more of their incomes to rent.

50. The combination of lower median incomes, higher rental rates, and a higher percentage of monthly income devoted to rent payments among the Latino immigrant population in Los Angeles County make Latino immigrants in the County more dependant than other populations on affordable rental housing, and more vulnerable than other populations to the loss of affordable housing from the rental market. 22 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_5YR/S0501/0500000US06037 (last accessed June 27, 2016). 23 Id. 24 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~687 (last accessed June 27, 2016). 25 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~687 (last accessed June 27, 2016). 26 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/S0201/0500000US06037/popgroup~400 (last accessed June 27, 2016).


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iii. Defendants’ rent-increase policy reduces the number of affordable rental units in Los Angeles County, and particularly in unincorporated East Los Angeles.

51. Defendants’ rent increase policy caused rent increases of nearly 63% at each of Plaintiffs’ apartment units on April 1, 2016. By contrast, the Los Angeles Rent Stabilization Ordinance (“LARSO”), which does not govern the Property but which is designed in part to maintain affordable housing in the City of Los Angeles, permitted an annual rent increase of 3% for the 2016 calendar year.27 LARSO permits annual percentage rent increases between 3% and 8% in any single calendar year.

52. In absolute terms, Defendants’ rent increase policy caused Plaintiffs’ rent to increase from $1,250 per month to $2,000 per month. None of Plaintiffs was able to afford this rent increase.

53. The United States Census Bureau’s ACS 2014 one-year estimates pegged the median rent in unincorporated East Los Angeles at $958.28 The same dataset reported the median rent for Los Angeles County to be $1,239.29 Defendants’ policy therefore increased the rent at Plaintiffs’ units to more than twice the estimated median rent in the region of Los Angeles County where the Property is located, and to nearly 62% more than the median rent in Los Angeles County overall. Upon information and belief, the policy as applied to additional rental units elsewhere in East Los Angeles will have a similar effect.

27 See Allowable Rent Increases Under the RSO, Los Angeles Housing and Community Investment Department, available at http://hcidla.lacity.org/allowable-rent-increases-under-rso (last accessed June 27, 2016). 28 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/B25064/1600000US0620802 (last accessed June 27, 2016). 29 ACS 2014 1-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_1YR/B25064/0500000US06037 (last accessed June 27, 2016).


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54. The California Housing Partnership Corporation’s 2014 report finding a 25% increase in median rents in Los Angeles County between 2000 and 2012 and a corresponding 9% decrease in median income over the same period suggests that Defendants’ rent-increase policy will do severe harm to an already inadequate affordable rental housing market. The policy has caused Plaintiffs’ rent to increase so substantially that Plaintiffs’ monthly rent jumped by a far higher percentage in 2 months than did the median rent in Los Angeles County over 12 years. The result of Defendants’ rent-increase policy is to remove broad swaths of housing from the affordable rental housing market.

b. Defendants’ rent-increase policy has a disproportionate impact on properties where Latino immigrants are more likely to live.

i. Defendants’ rent-increase policy disproportionately impacts properties Defendants own and manage in unincorporated East Los Angeles, in Los Angeles County.

55. Upon information and belief, the vast majority of the properties that Defendants own and manage are located in Los Angeles County, California. Defendants’ COO Rachel Teller testified in connection with three companion state court unlawful detainer actions that Defendant Winstar manages approximately 1,700 properties in Los Angeles County, the vast majority of which are occupied by residential tenants.

56. On June 21, 2016, Defendant Winstar advertised on a webpage it manages that it had approximately 56 residential units available for rent, including the seven units at the Property whose rent was increased to $2,000 per month in April 2016.30 Each of these units was located in Los Angeles County.

30 Rental Listings, Winstar Properties, available at https://winstarproperties.appfolio.com/listings (last accessed June 26, 2016).


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Approximately 14 of the advertised units were located in unincorporated East Los Angeles.

57. Defendants’ rent increase policy caused rents at the approximately 14 advertised units located in unincorporated East Los Angeles to be more expensive than rents at all but approximately four of the advertised units located elsewhere in Los Angeles County, and all but one of the advertised units located outside of East Los Angeles and the adjacent Eastside neighborhood of Lincoln Heights. For example, Plaintiffs’ units were made more expensive by the policy than two separate two-bedroom, 1.5-bathroom units located in Pasadena, a two-bedroom, two-bathroom unit located in Rampart Village, two separate two-bedroom, two-bathroom units located at the Villa Regency Apartments near the University of Southern California (“USC”), and another two-bedroom, one-bathroom unit, also located at the Villa Regency Apartments near USC.

58. The only advertised unit that was more expensive than the East Los Angeles and Lincoln Heights units was a two-bedroom, two-bathroom unit located in Pasadena and listed at $2,500 per month.

59. Based on the units advertised for rent by Defendant Winstar, Defendants’ rent increase policy causes more expensive average rents at properties Defendants own and manage in unincorporated East Los Angeles than at properties Defendants own and manage elsewhere in Los Angeles County, even though Defendant Winstar’s advertised properties in East Los Angeles constituted only about 25% of the total properties Winstar listed for rent.

ii. Latino immigrants are disproportionately represented in unincorporated East Los Angeles.

60. Latino immigrants are disproportionately concentrated in unincorporated East Los Angeles. A 2008-2010 survey revealed that 21% of Los


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Angeles County residents were classified as Latino immigrants.31 In unincorporated East Los Angeles, that figure is almost doubled: in 2010, approximately 49% of East Los Angeles residents were foreign born, and almost 91% of foreign-born East Los Angeles residents immigrated to the United States from Mexico.32

61. Almost 68% of immigrants in East Los Angeles live in renter-occupied housing units, according to the ACS 2010-2014 five-year estimates.33 For the native-born population in East Los Angeles, that figure was 61.3%. For Los Angeles County overall, the figure was 53.6%.34 And whereas only 49.3% of native-born households in East Los Angeles devote 30% or more of their incomes to rent, 62.6% of foreign-born households, the vast majority of which immigrated to the United States from Mexico, devote 30% or more of their incomes to rent every month.35

62. As a result, Defendants’ rent increase policy has a disproportionate impact on Latino immigrants. The policy causes higher average rents at Defendants’ properties in unincorporated East Los Angeles than at Defendants’ properties elsewhere. Latino immigrants, especially immigrants from Mexico like Plaintiffs, are disproportionately represented in East Los Angeles. Latino

31 Dornsife, University of Southern California, available at http://dornsife.usc.edu/assets/sites/731/docs/LOSANGELES_web.pdf (last accessed June 27, 2016). 32 Mapping L.A., Los Angeles Times, available at http://maps.latimes.com/neighborhoods/neighborhood/east-los-angeles/ (last accessed June 27, 2016). Almost 4% of foreign-born East Los Angeles residents immigrated from El Salvador. 33 ACS 2010-2014 5-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_5YR/S0501/1600000US0620802 (last accessed June 27, 2016). 34 ACS 2010-2014 5-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_5YR/S0501/0500000US06037 (last accessed June 27, 2016). 35 ACS 2010-2014 5-Year Estimates, United States Census Bureau, available at http://factfinder.census.gov/bkmk/table/1.0/en/ACS/14_5YR/S0501/1600000US0620802 (last accessed June 27, 2016).


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immigrants in East Los Angeles are also more likely to be renters than the native-born population. Latino immigrants therefore bear a disproportionate burden of Defendants’ most expensive rents as compared to non-Latino immigrants and native-born residents.36 D. Defendants’ Rent Increase Policy is Not Justified by a Legitimate, Non-

Discriminatory Business Necessity. 63. In approximately August 2015, Defendants’ predecessor in interest

advertised Unit 7 at the Property for rent. The advertisement listed a monthly rent of $1,395.

64. In approximately September 2015, the current tenants of Unit 7 agreed to rent their unit at a rate of $1,350 per month.

65. Upon information and belief, Unit 7 was recently renovated when it was rented to its current tenants in or about September 2015.

66. None of Plaintiffs’ units has ever been renovated by Defendants or by Defendants’ predecessors in interest since Plaintiffs moved into their units. Plaintiff Jesus Baltazar moved into his unit in 1992. The rest of Plaintiffs moved into their units between 2009 and 2014.

67. On June 26, 2016, the online real estate marketplace Zillow.com listed nine residential units for rent in the City Terrace neighborhood of unincorporated East Los Angeles, where the Property is located. Eight of the nine units advertised a monthly rent below $2,000. A two-bedroom, one-bathroom, 800 square foot apartment located approximately one block from California State University, Los

36 At the end of June 2016, Winstar advertised approximately four units outside of unincoporated East Los Angles for rent at prices comparable to or higher than the rents advertised at Winstar’s East Los Angeles properties. Three of those four units were located in the Eastside neighborhood of Lincoln Heights. Approximately 70.7% of the residents of Lincoln Heights are Latino, according to data aggregated by the Los Angeles Times. Approximately 55.8% of the neighborhood is foreign-born, and of those residents who are foreign-born, 57% were born in Mexico. Mapping L.A., Los Angeles Times, available at http://maps.latimes.com/neighborhoods/neighborhood/lincoln-heights/ (last accessed July 7, 2016).


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Angeles, and near the Property, was listed for $1,450 per month. Another two-bedroom, one-bathroom, 800 square foot unit located approximately 2 miles from East Los Angeles College was listed for $1,300 per month. Every other unit was listed at between $925 and $1,531 per month, except for one four-bedroom, two-bathroom, 1,450 square foot duplex listed at $2,500 per month.37

68. Based on the fair market value of comparable rental units in the neighborhood where the Property is located, Plaintiffs’ units are not worth a monthly rental value of $2,000. Each of Plaintiffs’ units is approximately 700-800 square feet and features 2 bedrooms and 1 bathroom. None of Plaintiffs’ units has been remodeled or renovated by the Property owner since the date Plaintiffs moved in. A recently renovated unit in the Property, Unit 7, was rented out less than a year ago at a monthly rental rate of $1,350. Upon information and belief, Unit 7 is substantially similar to each of Plaintiffs’ units in all material respects, including square footage and the number of bedrooms and bathrooms in the unit. Upon information and belief, the only significant difference between Unit 7 and Plaintiffs’ units is that Unit 7 was renovated more recently and features more expensive fixtures and appliances.

69. Even if Defendants could increase the market value of Plaintiffs’ units as a result of renovation, Plaintiffs’ units were not worth a rental value of $2,000 per month on the date the Notices were served or on the date the rent increase went into effect. Plaintiffs’ units have not been renovated in years: even if a renovated unit at the Property might generate the rent Defendants have sought, and it cannot, the condition of Plaintiffs’ units underscores that Defendants’ desired rent is absurdly inflated.

70. Defendants’ rent-increase policy ostensibly depends on establishing a fair market value for each of the rental units Defendants own and manage. In 37 Zillow.com, available at http://www.zillow.com/homes/for_rent/East-Los-Angeles-CA/condo,apartment_duplex_type/17882_rid/34.068942,-118.096934,33.995821,-118.249712_rect/12_zm/ (last accessed June 26, 2016).


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practice, Defendants’ policy unnecessarily inflates the rental values associated with a portion of Defendants’ properties, including the Property where Plaintiffs’ units are located.

71. Defendants could achieve the same business result they allegedly desired when they applied their rent-increase policy to the Property by associating fair market rental values with Plaintiffs’ units, in light of the condition of the units and of the rental values of comparable units on the market.

72. Instead, Defendants’ rent-increase policy is to give Defendants’ underwriters wide discretion to associate inflated rental values with units including those leased by Plaintiffs, thereby increasing the associated rents at each of the units to unaffordable levels and disproportionately displacing Latino immigrant-tenants.

V. CLAIMS FOR RELIEF FIRST CLAIM FOR RELIEF

(Violation of the Federal Fair Housing Act, 42 U.S.C. §§ 3601, et seq.) 73. Plaintiffs repeat and incorporate by reference all allegations contained

in the preceding paragraphs as if fully set forth herein. 74. Defendants’ acts, policies, and practices as described herein have had

an adverse and disproportionate impact on Latino immigrants and on neighborhoods disproportionately represented by Latino, and particularly Mexican, immigrants in Los Angeles County. This adverse and disproportionate impact is the direct result of Defendants’ rent increase policy, which, upon information and belief, gives Defendants’ underwriters wide discretion to associate inflated rental values that do no accurately reflect the rental market with rental units that Defendants own and manage. Following a determination by an underwriter of a unit’s value, Defendants’ policy relies on the software system AppFolio to determine which of Defendants’ rental units are eligible for rent increases. Units that AppFolio determines are eligible for a rent increase are served with rent


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increase notices demanding the rent at which the underwriter has valued the unit. The policy therefore has the effect of increasing the rent at many of Defendants’ units to levels far exceeding what the market will bear. The policy also causes rent increases at units where the existing tenants are unable to afford the new rents Defendants have demanded. These existing tenants are displaced from their apartment units as a result of Defendants’ rent-increase policy. The policy has a disproportionate impact on Latino immigrants, both because Latino immigrants in Los Angeles County are especially dependent on affordable rental housing and because Defendants’ rent increase policy has a disproportionately severe impact on neighborhoods in Los Angeles County where Latino immigrants are concentrated. The policy has resulted in a loss of affordable rental housing in Los Angeles County and in especially extreme rent hikes at the properties Defendants own and manage in Los Angeles County where Latino immigrants are disproportionately represented.

75. Defendants’ rent-increase related acts, policies, and practices violate the federal Fair Housing Act as:

(a) Discrimination on the basis of national origin in making available a dwelling, in violation of 42 U.S.C. § 3604(a); and

(b) Discrimination on the basis of national origin in the terms and conditions of the rental of a dwelling, in violation of 42 U.S.C. § 3604(b).

76. Plaintiffs are Latino immigrants from Mexico and are therefore members of the protected class that has been disproportionately and adversely impacted by Defendants’ policy.

77. Defendants’ policies and practices are not justified by business necessity or legitimate business interests.

78. Defendants’ policies and practices are continuing.


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79. Plaintiffs’ damages include but are not limited to lost time spent consulting with an attorney to defend eviction actions that Defendants brought in state court as a result of the rent increase; lost time spent searching for alternative housing in the face of an imminent eviction; lost present and future opportunities to rent alternative housing where a rental application for the desired alternative housing inquires as to whether the applicant had ever been sued for eviction; and severe emotional distress. These damages were a foreseeable consequence of Defendants’ acts, policies, and practices.

DEMAND FOR JURY TRIAL Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiffs demand a trial by jury on all issues so triable.

PRAYER FOR RELIEF WHEREFORE, Plaintiffs respectfully pray that the Court grant them the following relief:

A. Enter a declaratory judgment that the foregoing acts, policies, and practices of Defendants violate 42 U.S.C. § 3604.

B. Enter a permanent injunction enjoining Defendants and their directors, officers, agents, and employees from continuing the discriminatory conduct described herein, and directing Defendants and their directors, officers, agents, and employees to take all affirmative steps necessary to remedy the effects of the discriminatory conduct described herein, and to prevent additional instances of such conduct or similar conduct from occurring in the future, pursuant to 42 U.S.C. § 3613(c)(1);

C. Enter a permanent injunction enjoining Defendants and their directors, officers, agents, and employees from increasing Plaintiffs’ rent pursuant to the Notices and from taking any action to remove Plaintiffs from the Property where such action arises out of Plaintiffs’ refusal to pay the rent demanded in the Notices;


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D. Award actual, consequential, incidental, and statutory damages to Plaintiffs in an amount to be determined by the jury that would fully compensate Plaintiffs for their injuries caused by the conduct of Defendants alleged herein, pursuant to 42 U.S.C. § 3613(c)(1);

E. Award Plaintiffs punitive damages in an amount to be determined by the jury that would punish Defendants for the reckless conduct described herein, and that would effectively deter similar conduct in the future, pursuant to 42 U.S.C. § 3613(c)(1);

F. Award Plaintiffs their reasonable attorney’s fees and costs, pursuant to 42 U.S.C. § 3613(c)(2);

G. Require payment of pre-judgment interest on monetary damages; H. Award extraordinary, equitable, and/or injunctive relief as permitted

by law, equity, and the statutes alleged herein; and I. Order such other relief as this Court deems just and proper.

DATED: July 7, 2016 By: /s/ Noah Grynberg Noah Grynberg (SBN 296080) Los Angeles Center for Community Law and Action 1137 N. Westmoreland Ave., #16 Los Angeles, CA 90029 Telephone: (310) 866-7527 [email protected]

Attorneys for Plaintiffs


noah grynberg (sbn 296080) los angeles … grynberg (sbn 296080) ... 2-16-cv-04697-odw-ks first...

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