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Community Services, Inc. v. Wind Gap Municipal Authority

August 31, 2005


Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. Civil No. 02-cv-08366). District Judge: Honorable Mary A. McLaughlin.

The opinion of the court was delivered by: Rendell, Circuit Judge


Argued January 24, 2005 Before: SCIRICA, Chief Judge, and RENDELL, and FISHER, Circuit Judges.


Community Services, Inc., t/a Community Services Group ("CSG"), a for-profit corporation that provides caretaker services for persons with disabilities, brought this action against the Wind Gap Municipal Authority ("Authority"), the municipal agency that administers sewer services in Wind Gap Borough, alleging violations of the Fair Housing Amendments Act ("FHAA"), 42 U.S.C. § 3601 et seq. CSG claims that the Authority violated the FHAA by charging increased fees to, and imposing additional administrative burdens upon, a house leased and used by CSG to provide caretaker services to three mentally retarded women residing there on the basis that the house was a "personal care home," and hence a "commercial" facility, under the relevant regulations governing sewer service. The District Court granted summary judgment to CSG, principally because it concluded that the Authority's classification of the house as a "personal care home" was a proxy for handicapped status and, therefore, the regulation discriminated on its face based on disability. Because we disagree with the District Court's conclusion that the regulatory classification and treatment of the house constituted disparate treatment "because of" a handicap, we will reverse and remand.

I. Factual Background

The house at issue is a single-story, three-bedroom home located in a residential community at 250 East First Street, Wind Gap Borough, Northampton County, Pennsylvania. The house was built in 1965 by the family of one of its current residents, Cindy A. Both Cindy and her mother lived in the home until 1999.

In 1995, as Cindy's mother's health was declining, the family established a trust for the benefit of Cindy and her three siblings. One of the primary purposes of the trust was to ensure that Cindy, who was born with Down's Syndrome, would be adequately cared for as she and her mother grew older. To this end, the deed to the house was transferred to the trust, and Cindy's sister arranged for in-home services for Cindy and her mother through the Northampton County Mental Health/Mental Retardation Office ("MH/MR Office") and the Northampton County Office of Aging, respectively. By 1997, the in-home services had been increased to include a full-time caretaker. In November 1999, Cindy's mother moved out of the house and into a nursing home.

Cindy continued to live in the house with the assistance of a full-time caretaker funded jointly by her family and the MH/MR Office. The following year, however, when the County and the family determined that they no longer had the resources to continue funding full-time, personal assistance for Cindy, they arranged for two other women in need of similar services, Cassie and Linda, to move into the house permanently in December 2000. All three women, adults in their forties and fifties, have mental retardation and, as the District Court found, although they are substantially limited in their ability to learn, work, communicate, and care for themselves, with the assistance of a caretaker, the women are able to conduct their daily life activities and live together in a family-like manner.

The caretaker services are provided by CSG, which provides both residential and non-residential services to persons with disabilities in several counties in Pennsylvania, including Northampton County. CSG leases the house from the trust and works with the MH/MR Office to meet state and federal requirements, including the documentation incident to the performance of services and obtaining reimbursement from funding sources. CSG's caretakers assist Cindy, Cassie, and Linda with their daily activities, such as bathing, food preparation, housecleaning, and transportation (via a mini-van garaged at the house) to the women's day program and vocational rehabilitation. The women do not require or receive clinical care, therapy, rehabilitation, or other similar services at the home. Typically, there are one or two caretakers at the house when the women are at home and no caretakers in the house when the women are at their programs during the day. One caretaker stays overnight, but does not sleep in the house. Once a month the caretakers have a two-hour meeting with a supervisor at the house.

In September 2000, CSG obtained zoning approval from the Wind Gap Zoning Hearing Board in preparation for Cassie's and Linda's move to the house. Although the house was zoned for use as a single-family dwelling but not a group home, the Board granted a variance, as a reasonable accommodation under the FHAA, for CSG to operate a "Community Living Arrangement" at the house. The Board subsequently notified the Borough of Wind Gap and the Authority of the approval. At meetings of the Authority's board, Cindy's sister and CSG's regional director explained that CSG would provide caretakers to assist the residents, that the house would be used as a family residence, and that there would be no change in the use of the property.

On October 16, 2000, the Authority sent Cindy's sister a letter informing her that it was necessary to apply for a sewer connection permit and submit a feasibility review agreement along with a $500 deposit to determine the use of the home. CSG submitted the feasibility review agreement, applied for a sewer connection permit, and submitted the deposit on November 9, 2000. At the same time, CSG also requested a reasonable accommodation under the FHAA to allow the house to remain classified as residential. As explained in a letter dated November 13, 2000, the Authority returned the uncashed check and declined to consider the application because the documents were not executed by the deed owner, i.e., the trust.*fn1

In December 2000, CSG notified the Authority that Linda and Cassie were moving into the house that month. In January 2001, the Authority changed the house's sewer service classification from "residential" to "commercial" and increased the number of "Sewer Billing Units" ("SBUs") or "Equivalent Dwelling Units" ("EDUs"), the measure by which the Authority charges for sewer service, from one to two. Under the "Rules and Regulations Governing Sewer Services When Obtained from Sewer System of Wind Gap Municipal Authority" ("Regulations") in effect at the time, a "Residential Unit" was defined as "a private dwelling unit, a dwelling unit in a double house or in a row of connecting houses, or a dwelling unit in an apartment building, condominium or in any other multiple dwelling or multiple use structure," and all such units were assessed one (1) SBU. The "Commercial Unit" classification was defined by a schedule assessing a variable number of EDUs to a unit based on whether it was considered, inter alia, a "House, Apartment, or Condominium"; "Trailer"; "Hotel, Nursing Home, Personal Care Home, or Boarding House (without Restaurant or Bar, Dining or other Business)"; "Restaurant and/or Bar or Tavern (without Residence)"; "Restaurant and/or Bar or Tavern (with Residence); "Fitness Center without Showers, Pools, Sauna, Hot Tub"; "Offices and Multi-Use Business Facilities"; "Photo Lab"; or "Car Wash."*fn2

The Authority did not offer an explanation for the reclassification, nor was one requested by the trust or CSG.

In May 2001, the Authority sent a letter to the trust demanding that it pay the $500 deposit and a $2,100 tapping fee. Counsel for CSG responded by requesting that the house be classified as a single-family residence and that the Authority grant a reasonable accommodation. The Authority did not respond. CSG continued to pay the increased quarterly sewage bill under protest. In November 2001, counsel for CSG requested an explanation for the reclassification. The Authority did not respond. On July 3, 2002, the Authority filed a municipal lien for $2,200 against the property for the trust's failure to pay the tapping fee. CSG paid the fee under protest on August 22, 2002 in order to satisfy the lien and CSG's counsel sent a letter to the Authority's solicitor to request an explanation for the reclassification. The solicitor did not respond. On October 7, 2002, CSG's counsel sent a second letter to the solicitor; this letter also went unanswered. The municipal lien on the house was not released until July 16, 2003, subsequent to the filing of the Complaint initiating this action.

II. Procedural History

CSG filed the instant action on November 7, 2002. See Cmty. Servs. Group v. Wind Gap Mun. Auth., Civ. A. No. 02-8366, 2004 U.S. Dist. LEXIS 6689 (E.D. Pa. Apr. 1, 2004). The Complaint generally averred that in providing services to the house the Authority had violated the FHAA by discriminating against plaintiffs on the basis of the house's residents' disabilities. During discovery, the Administrator of the Authority, Robert D. Hahn, explained for the first time that the Authority reclassified the house because the lessee of the property, CSG, was a for-profit company using the house as a "personal care home," a facility that was expressly included in the "commercial" classification under the Regulations. At the completion of discovery, both parties moved for summary judgment, and after a hearing on February 13, 2004, the District Court granted summary judgment to CSG. The Court concluded that the regulation on which the Authority based the reclassification of the house to "commercial" because it was a "personal care home" discriminated against persons who need "personal care," and because such persons are by definition "handicapped" under the FHAA, the regulation violated the Act. Id. at *1-2.

The District Court first noted that CSG had brought three FHAA claims, the first two alleging that the Authority's policies and actions constituted disparate treatment and disparate impact discrimination and the third alleging that the Authority failed to grant a reasonable accommodation. Id. at *16-18. Of these three claims, the Court focused primarily on the disparate treatment claim, and more specifically, on analyzing whether the regulation upon which the Authority reclassified the house was facially discriminatory. Id. at *18-26. The Court noted at the outset that if the regulation made a classification on the basis of "homes for the handicapped," it would clearly violate the FHAA. ...

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