Latoni vs. Sherman Square Realty Corp.

May a co-op board apply a different standard for approving single applicants to purchase apartments than it does for married couples? The answer was a clear “no” in Latoni vs. Sherman Square Realty Corp., where the court refused to dismiss a complaint that a co-op discriminated against single individuals in favor of married couples.

In this case, plaintiffs Lisa Latoni and Andrew Jorgensen were heterosexual, cohabiting, and unmarried. They jointly signed a contract to purchase a cooperative apartment at Sherman Square and jointly sought and received a mortgage commitment from their bank. After reviewing their application, the co-op board informed them that Latoni would be allowed to purchase the shares and become a lessee, but that the couple would not be allowed to purchase the shares jointly, because Jorgensen was not qualified.

Latoni and Jorgensen claimed – and this was not disputed by the co-op – that it was the building’s policy to consider an application from a married couple as an application from a single economic unit, and to approve such applications when the “unit” was financially qualified, even when one of the spouses had no income and would not be financially qualified as an individual applicant. Conversely, board policy considered an application from two unmarried individuals living together as an application from two separate economic units; when one of those individuals was financially qualified and the other individual was not, only the financially qualified individual would be approved.

The dispute was whether these policies and practices constituted discrimination, and/or disparately affected the plaintiffs. The complaint set forth four causes of action. The first two alleged that Sherman Square’s policies and practices had a disparate impact on unmarried individuals, to the detriment of Latoni and Jorgensen, and violated the New York City Human Rights Law. The third and fourth alleged that the co-op had discriminated against Latoni and Jorgensen, respectively, in violation of the city and state human rights laws. Latoni and Jorgensen sought: (1) a declaration that the defendants’ actions violated both the human rights law, as well as the executive law; (2) compensatory damages in an amount to be determined after trial; (3) punitive damages; and (4) costs and attorney’s fees.

In the court’s view, it was obvious and conceded that the board’s policies and practices were to treat applicants differently based on whether they were married or not. That is, married partners were treated as a single economic unit and unmarried partners were not. In our contemporary social environment, the court said that it might be natural to conclude that policies and practices treating married couples differently from others, while reflected in many forms of federal, state, and local laws (such as taxes, inheritances and others), were not only antiquated, but were discriminatory. The court noted that both the New York City and State human rights laws prohibited discrimination on the basis of marital status in the sale, rental, or leasing of housing accommodations, including any of the accommodations, advantages, facilities, or privileges that accompanied them. The city human rights law specifically prohibited facially neutral policies that have a disparate impact.

According to the court, Latoni and Jorgensen’s discrimination claim stood upon a different footing. They did not allege that Jorgensen suffered discrimination as a result of a denial of a benefit to Latoni, but rather, as a result of a denial of a benefit to him. Jorgensen would have been financially qualified had the co-op applied the same policies and practices to him that it currently applied to married individuals; Jorgensen lost a significant benefit solely because he was single. The court said that this was sufficient to make a prima facie case of discrimination, on the basis of marital status, in “the terms, conditions, or privileges of the sale, rental or lease of any, housing accommodation.” The court added that the property’s practices and policies did not favor families, but favored married persons.

The co-op maintained that they had rejected Jorgensen because he was financially unqualified, not because he was single. That was patently untrue. While a spouse with less or no income would be qualified based on Sherman Square’s policies and practices, the board maintained that its policies and practices were based on the fact that such a spouse would be entitled to financial protections under the Equitable Distribution Law and inheritance laws. To the extent that the co-op raised a defense to a prima facie case of discrimination (i.e., a legitimate business reason), the court said that this defense could not be considered on a motion to dismiss the complaint.

The president of the co-op, who was also a defendant, separately argued that the complaint should be dismissed against him because it did not allege that he alone had the authority, to sell, rent, or lease the apartment as required by the human rights laws. The complaint alleged that the president supported, encouraged, and implemented the alleged discriminatory policies. He was not dismissed from the action at this time. However, the court said that it would revisit the issue on a motion for summary judgment, if made, after the completion of discovery.