State Court to Decide Resident Selection Criteria Case

Facts: A prospective resident with disabilities who relies on Social Security and has no convictions for any violent or drug-related criminal activity applied for a unit. She met the financial eligibility requirements, but was denied admission. The rejection letters stated, “Criminal History unsatisfactory.” Her criminal history report stated “fail to ID fugitive intent to give false info” with a filing date of May 2008. The applicant appealed the denial of admission, but her appeal was denied in February 2012.

     The applicant claimed that the management company’s denial wrongly stated that she had two offenses and also wrongly concluded that she had engaged in conduct that would constitute a threat to the health, safety, or peaceful enjoyment of the site by other residents. The resident alleged that the management “illegally denies applicants with [certain] offenses on their record regardless of how long ago they engaged in the conduct, regardless of the nature of the offense, and regardless of the current ability of the applicant to comply with the lease. The resident selection criteria do not include a ‘failure to identify, giving false information’ charge among the offenses that might constitute grounds to deny an application. The policies specify no time limits with respect to the criminal history period that will be considered.” The applicant asserted that her criminal conduct occurred more than three years before her applications were denied and was neither drug related nor violent, nor would it constitute a threat to the health, safety, or right to the peaceful enjoyment of other residents.

     The applicant sued under a state law that prohibits false, misleading, or deceptive acts or practices in the conduct of any trade or commerce. She claimed that the site’s resident selection criteria don’t comply with federal law and regulations. She asked the court to order the site to revise its selection criteria and require the site owner to offer her a lease to the next available one-bedroom unit.

     The management company moved the case to federal court on the basis that the applicant brought up questions of interpreting federal guidelines for the screening of applicants. But the applicant asked the court to send the case back to state court, arguing that her state-law claims don’t raise a substantial disputed federal question.

Ruling: A Texas district court agreed with the applicant and sent the case back to state court.

Reasoning: The court determined that although there were federal questions raised by the applicant’s complaint, the issues presented weren’t substantial and a federal court deciding this case would intrude on state authority. The case claimed that the management violated state law by making negligent misrepresentations of federal law and regulations. The court held that these types of claims are based in state law and that states’ interests have traditionally been dominant.

• Cardenas v. Apartment Investment and Management Co., November 2012