Arneda L. Hamilton v. Stephen Svatik and Eleanor Svatik
1985 U.S. App. LEXIS 25595, 779 F.2d 383 (1985)
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Rule of Law:
A principal is liable for compensatory damages for an agent's discriminatory acts in housing, but is only liable for punitive damages if the principal knew of or ratified the agent's wanton and willful conduct.
Facts:
- Arneda Hamilton, a 29-year-old black woman, responded to a newspaper advertisement for an apartment owned by Eleanor Svatik and managed by her brother, Stephen Svatik.
- After a phone call, Hamilton arrived to see the apartment, at which point Stephen Svatik saw her, refused to show her the unit, and told her it was his 'prerogative' to be prejudiced before driving away.
- Hamilton then enlisted Jack Woltjen, a white man from the Leadership Council, to act as a 'tester.'
- Stephen Svatik showed the apartment to Woltjen and offered it to him.
- When Woltjen revealed he was there on behalf of Hamilton, Svatik became angry, called Woltjen a 'troublemaker,' stated he did not have to rent to 'them,' and falsely claimed Hamilton could not afford the apartment.
- Despite Hamilton confirming she earned $20,000 annually, Svatik still refused to rent to her, stating he only rented to old women and single men.
- Eleanor Svatik was the sole owner of the building, her brother Stephen managed it as her agent, and they maintained a joint bank account into which rent checks were deposited.
Procedural Posture:
- Arneda Hamilton filed a complaint in the U.S. District Court for the Northern District of Illinois, alleging housing discrimination against Stephen Svatik.
- A temporary restraining order was entered, prohibiting the defendants from renting the apartment.
- Hamilton later amended her complaint to add the property owner, Eleanor Svatik, as a defendant.
- After a trial, the jury returned a verdict in favor of Hamilton, awarding compensatory damages against both defendants, and punitive damages against each defendant individually.
- The defendants, Stephen and Eleanor Svatik, appealed the judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Is a property owner (principal) liable for punitive damages for the willful and wanton discriminatory acts of her agent if the owner did not know of or ratify the agent's actions?
Opinions:
Majority - Cudahy, J.
No. A principal is not liable for punitive damages for the discriminatory acts of her agent unless she knew of or ratified those acts. The court affirmed the finding of liability for discrimination, holding that the jury had a reasonable basis to believe Hamilton's testimony and disbelieve Stephen Svatik's pretextual business reasons. The court upheld Eleanor Svatik's liability for compensatory damages under the principle of agency, as her brother Stephen acted as her agent in managing the property. However, the court reversed the punitive damages award against Eleanor because there was no evidence that she knew of or ratified Stephen's wanton and willful discriminatory actions. Punitive damages are meant to punish and deter malicious conduct, and liability cannot be assessed against a principal merely because of her ownership status. The punitive award against Stephen was affirmed as his actions were clearly wanton and willful.
Analysis:
This decision clarifies the scope of vicarious liability in housing discrimination cases under the Fair Housing Act and § 1982, particularly concerning punitive damages. It establishes a critical distinction between liability for compensatory damages, which attaches to a principal for an agent's acts, and liability for punitive damages, which requires a showing of the principal's own culpability through knowledge or ratification. This holding protects passive property owners from punitive awards based solely on an agent's malicious conduct, while still holding them responsible for making the victim whole. The case reinforces that punitive damages are intended to punish the wrongdoer's specific malicious intent, not just the agency relationship.
