PHA May Be Liable for Discrimination, Defamation

Facts: A Section 8 resident sued the local PHA for discrimination and defamation. In May 2015, the resident started a food truck business with a financial partner who agreed to finance the venture. Anticipating the start of his business, the resident inquired at his annual income certification meeting about the proper way to report the food truck to the PHA. According to his senior housing specialist, he would need to report the business only when he started to receive an income from it. Since he hadn’t earned any net income from the business, he never disclosed it to the PHA.

In June 2015, someone alerted a PHA employee that the resident was defrauding the PHA through the food truck. The employee called the resident and asked him to come to the PHA’s office; when he refused, the employee confronted him at his food truck. In front of his customers and neighbors, the employee accused the resident of committing fraud, threatened to have him thrown in jail, and demanded that the resident relinquish his voucher. To end the confrontation, the resident agreed to meet with the employee at the office later that afternoon. At the appointment, the resident claimed that the employee continued to threaten him with jail and demand that he relinquish his housing voucher. Scared of the employee’s threats, the resident complied with her request and agreed to relinquish his voucher.

Two days later, however, the resident had a change of heart and sent the PHA a letter revoking his relinquishment. The PHA responded by sending him a letter informing him that it was terminating his voucher because he “earned income that [he] knowingly did not report to [the housing authority], income” from his food truck. He requested and received an informal hearing to dispute the termination. The hearing officer upheld the termination, and the PHA stopped paying his voucher in September 2015. As a result, he paid the entire amount of his rent for the month of October.

In November 2015, after the resident filed the lawsuit, the PHA’s new executive director informed the resident that the PHA had reinstated his voucher effective Nov. 1. The PHA also scheduled an interim examination to verify his income, but the resident’s attorney arranged for the examination to be rescheduled twice. On Nov. 24, 2015, the PHA informed the resident that his voucher would be suspended effective Dec. 1, 2015, due to his failure to appear for the interim examination. Despite this notice, the PHA continued to pay the resident’s voucher.

The PHA asked the court to dismiss the resident’s claims because the resident already received the relief he requested. The PHA reinstated his voucher and reimbursed him for any rent he paid due to his voucher revocation.

Ruling: The Rhode Island district court denied the PHA’s request and allowed the discrimination and defamation claims to continue to trial.

Reasoning: By continuing to trial, the resident’s complaint states that the court could remedy the resident’s lost September 2015 rent and the uncertain status of his voucher. The resident’s voucher was declared suspended on Dec. 1, 2015, even though the PHA continued to pay the voucher.

The court also decided that the resident’s alleged facts may support his discrimination allegations. The PHA focused on the resident’s allegations that he is black, disabled, and lost his housing voucher because of these characteristics. The PHA correctly argued that if the resident’s complaint ended with these allegations, he would have failed to state a claim upon which relief could be granted. But the court noted that the PHA’s argument overlooked the other facts contained in the resident’s complaint: that the PHA (1) didn’t follow its regulations and procedures when it revoked his voucher; and (2) changed the rules it applied to his voucher when it revoked his voucher for not reporting his food truck business. At this early stage in the lawsuit the court ruled that these additional facts pushed his discrimination claims across the line, from being merely possible to plausible.

Next, the court denied the PHA’s argument that the resident’s defamation claim should be dismissed because he didn’t properly allege that he suffered any damages, an essential element of a slander claim. The defamation claim arose from the employee’s public accusation that the resident was committing fraud. The PHA asserted that this accusation didn’t damage the resident, because he admitted in his complaint that he never made any money from his food truck. However, that his business might have been struggling doesn’t affect whether the employee’s comment drove away business and affected his reputation in the community, allegations contained in the complaint.

The court also noted that even if the resident didn’t plead actual damages, his defamation claim could still proceed. The resident alleged that the PHA accused him of committing fraud, going so far as to threaten him with jail time unless he relinquished his voucher. The resident, thus, alleged that the employee falsely accused him of a crime. State law classifies false statements involving a criminal offense as defamation.

• Brown v. West Warwick Housing Authority, June 2016