Castillo Condo. Ass'n v. U.S. Dep't of Hous. & Urban Dev.

821 F.3d 92

CASTILLO CONDOMINIUM ASSOCIATION, Petitioner

v.UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, Office of the Secretary, on behalf of Carlo Giménez Bianco, Respondent.

United States Department of Housing and Urban Development, Office of the Secretary, on behalf of Carlo Giménez Bianco, Petitioner

v.Castillo Condominium Association, Respondent.

No. 14–2139

No. 15–1223

United States Court of Appeals, First Circuit.

May 2, 2016.

Sigfredo A. Irizarry–Semidei for Castillo Condominium Association.

Christopher Chen–Hsin Wang, Attorney, United States Department of Justice, Civil Rights Division, with whom Vanita Gupta, Principal Deputy Assistant Attorney General, and Sharon M. McGowan, Attorney, were on brief, for Secretary of the United States Department of Housing and Urban Development.

Before HOWARD, Chief Judge, TORRUELLA and SELYA, Circuit Judges.

SELYA, Circuit Judge.

This case involves a man, his dog, and a condominium association's “no pets” rule. Like so many cases, it turns chiefly on the standard of review. After delineating that standard (a matter of first impression in this circuit), inspecting the record through that lens, and applying the applicable law, we deny the condominium association's petition for judicial review of a final order of the Secretary of the United States Department of Housing and Urban Development (HUD). We simultaneously grant the Secretary's cross-petition for enforcement of his order.

I. THE STATUTORY SCHEME

This case rests on a statutory foundation: the Fair Housing Act (the Act), 42 U.S.C. §§ 3601 –3619. As relevant here, the Act proscribes discrimination in housing and housing-related matters based on a person's disability.¹ See id. § 3604(f). Under the Act, a cognizable disability is “(1) a physical or mental impairment which substantially limits one or more of [a] person's major life activities, (2) a record of having such an impairment, or (3) being regarded as having such an impairment.” Id. § 3602(h).

Pertinently, the Act outlaws discrimination in connection with the terms, conditions, or privileges of housing. See id. § 3604(f)(2). Discrimination includes, among other things, the “refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” Id. § 3604(f)(3)(B).

II. PRIOR PROCEEDINGS

In 2010, the Castillo Condominium Association (the Association) learned that Carlo Giménez Bianco (Giménez), a condominium resident, was keeping a dog on the premises and warned him by letter that it would fine him unless he removed the dog from his unit. In response, Giménez, an individual who suffers from anxiety and depression, promptly advised the board of directors, in writing, that he planned to keep his emotional support dog in his condominium unit and that he was entitled to do so under federal law. Although Giménez accompanied this letter with a note from his treating psychiatrist, the Association did not relax its “no pets” bylaw. As a result of the conflict (as the Secretary found), Giménez was eventually forced to vacate and sell the unit that had been his home for some 15 years.

Giménez lodged a complaint of disability discrimination with HUD. Following an investigation and an agency determination of reasonable cause, HUD filed a charge of discrimination against the Association.² See id. § 3610(a)(1)(B)(iv), (g)(1)-(2). The charge alleged that the Association had unlawfully discriminated against Giménez, a disabled person, by denying him a reasonable accommodation and thus making housing unavailable to him. See id. § 3604(f)(1), (f)(2), and (f)(3)(B).

A four-day evidentiary hearing ensued before an administrative law judge (ALJ). Giménez, his treating psychiatrist (Dr. Pedro Fernández), and his primary-care physician (Dr. Roberto Unda Gómez) all testified that Giménez suffered from a disability—an anxiety disorder and chronic depression—and that his symptoms were ameliorated by the presence of an emotional support dog. The Association presented both lay and expert evidence in opposition. On July 17, 2014, the ALJ issued a recommended decision concluding that the Association had not violated the Act because Giménez had failed to prove by a preponderance of the evidence that he had a mental impairment warranting a reasonable accommodation in the form of a companion animal.

Under the regulatory regime, the ALJ's recommended decision could be appealed to the Secretary. See id. § 3612(h). That happened here. On further review, the Secretary set aside the ALJ's recommended decision. The Secretary explained that the ALJ had erred both in discounting Giménez's testimony about his lengthy history of anxiety and depression and in declining to credit the testimony of Dr. Fernández and Dr. Unda. In the end, the Secretary found that Giménez suffered from a cognizable disability, that the Association knew or should have known that Giménez had such a disability, that Giménez had informed the Association of his need for a reasonable accommodation in the form of an emotional support dog, that the Association had improvidently denied the accommodation, and that the Association had failed to engage in the required interactive process.³

Having found the Association liable for discrimination, the Secretary remanded the case to the ALJ for an initial determination of damages and civil penalties. See id. § 3612(g)(3); 24 C.F.R. § 180.675(a), (b)(3). In due course, the ALJ issued another recommended decision; this decision proposed to award Giménez $3,000 in emotional distress damages and to assess a $2,000 civil penalty against the Association. The ALJ noted, inter alia, that since the Association's culpable acts and omissions apparently “were fueled by ignorance of the law,” those acts and omissions did not amount to “willful, malicious conduct that demands a maximum penalty.” Additionally, the ALJ recommended ancillary relief, including fair housing training for the Association's officers and the implementation by the Association of a reasonable accommodation policy.

This second recommended decision met the same fate as the first: it inspired another petition for Secretarial review. The Secretary concluded that the ALJ had undervalued the emotional distress that Giménez had experienced and, therefore, increased the proposed award of emotional distress damages to $20,000. Similarly, the Secretary concluded that the ALJ had underestimated the Association's blameworthiness for its “egregious and intentional” conduct. Unlike the ALJ, the Secretary counted the Association's ignorance of the law as an aggravating factor, not a mitigating factor, and upped the civil penalty to $16,000 (the maximum available penalty amount). Finally, the Secretary reworked and strengthened the ALJ's proposals for ancillary relief.

Displeased by virtually every aspect of the Secretary's final order, the Association filed a timely petition for judicial review. See 42 U.S.C. § 3612(i)(1). The Secretary countered by cross-petitioning for enforcement of his order. We consolidated these petitions for briefing and oral argument.

III. STANDARD OF REVIEW

Under the Administrative Procedure Act (APA), a reviewing court may set aside a final agency order if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). In line with this statutory imperative, a reviewing court is bound by an agency's factual findings “as long as they are supported by substantial evidence in the record as a whole.” Astralis Condo. Ass'n v. Sec'y of HUD, 620 F.3d 62, 66 (1st Cir.2010).

“Substantial evidence ‘is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Id. (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 95 L.Ed. 456 (1951) ). Of course, substantial evidence does not mean either uncontradicted evidence or overwhelming evidence. Rather, this benchmark may be met “even if the record arguably could justify a different conclusion.” Rodriguez Pagan v. Sec'y of HHS, 819 F.2d 1, 3 (1st Cir.1987) (per curiam); see also Felisky v. Bowen, 35 F.3d 1027, 1035 (6th Cir.1994) (“The Secretary's findings are not subject to reversal merely because substantial evidence exists in the record to support a different conclusion.”).

This familiar standard has a twist, however, in cases in which the hearing officer and the ultimate decisionmaker have differing views of the material facts. This case is emblematic of such a situation: though the ALJ was the initial decisionmaker and the one who actually saw and heard the witnesses, the Secretary is the ultimate decisionmaker. As such, the Secretary is empowered to “affirm, modify or set aside, in whole or in part, the initial decision, or remand the initial decision for further proceedings.” 24 C.F.R. § 180.675(a) ; see 42 U.S.C. § 3612(h), 24 C.F.R. § 180.675(b). But common sense suggests that, in such circumstances, some weight should be given to the ALJ's factual findings.

Although this court has not had occasion to speak to the ramifications of such a paradigm, the case law elsewhere indicates that a more granular level of scrutiny should apply. We agree that such a nuanced approach is desirable—and we adopt it.

We hold that where, as here, the Secretary rejects the factual findings of an ALJ, a reviewing court must first make certain that the Secretary has adequately articulated his reasons for overturning the ALJ's findings. See Aylett v. Sec'y of HUD, 54 F.3d 1560, 1561, 1567 (10th Cir.1995). The court must then proceed to ask whether those articulated reasons derive adequate support from the administrative record. See id. at 1561. Although this heightened level of scrutiny does not alter the substantial evidence standard of review in any fundamental respect, it requires us to apply that standard with special...