Sidney Clark and Julia Clark v. Universal Builders, Inc.
501 F.2d 324 (1974)
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Rule of Law:
A seller violates 42 U.S.C. § 1982 when, taking advantage of a dual housing market created by racial residential segregation, the seller demands from Black buyers prices and terms that are unreasonably in excess of the prices and terms available to white citizens for comparable housing.
Facts:
- From 1958 to 1968, a class of Black citizens, the plaintiffs, purchased newly constructed houses in Chicago from the defendants, a group of building contractors and land companies.
- Due to widespread racial discrimination in the Chicago metropolitan area, there existed a dual housing market: one for white citizens and a separate, geographically confined one for Black citizens.
- The supply of housing available to Black citizens was far less than the demand, creating a shortage in the Black housing market.
- Defendants constructed homes in or adjacent to the segregated Black areas and sold them to the plaintiffs.
- Defendants sold these homes to plaintiffs at prices and on terms that were substantially higher and more onerous than those for comparable homes available to white buyers in white neighborhoods.
- Defendants exclusively used land installment contracts for sales to plaintiffs, refusing to sell via a deed and mortgage arrangement even when buyers made substantial down payments and could have otherwise qualified for a mortgage.
Procedural Posture:
- Plaintiffs, a class of Black citizens, filed a lawsuit against defendant builders and land companies in the U.S. District Court for the Northern District of Illinois.
- The defendants filed a motion to dismiss, which District Judge Will denied, holding that the plaintiffs' 'exploitation theory' stated a valid claim for relief under § 1982.
- The case proceeded to a jury trial before a different district judge, Judge Perry.
- At the conclusion of the plaintiffs' case, Judge Perry granted the defendants' motion for a directed verdict, ruling that the plaintiffs had failed to present evidence of racial discrimination.
- Plaintiffs (appellants) appealed the grant of the directed verdict to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does a seller violate Section 1982 of the Civil Rights Act of 1866 by exploiting a racially segregated housing market to charge Black homebuyers prices and impose terms far in excess of those available to white buyers for comparable housing, even if the seller would have charged the same high prices to any white person willing to buy in the segregated market?
Opinions:
Majority - Swygert, Chief Judge
Yes. A seller violates Section 1982 by exploiting a racially segregated housing market to charge Black buyers unreasonable prices and terms, as this practice denies them the 'same right' to purchase property as is enjoyed by white citizens. The court rejected the defendants' argument that § 1982 only prohibits 'traditional' discrimination, such as refusing to sell to a person based on race. Citing the Supreme Court's decision in Jones v. Mayer Co., the court emphasized that § 1982 must be given a 'sweep as broad as its language' and was intended 'to assure that a dollar in the hands of a Negro will purchase the same thing as a dollar in the hands of a white man.' The court found the defendants' claim that they would have sold to whites on the same exorbitant terms to be a 'subterfuge,' as this ignores the reality that whites had access to a fair market and were not subjected to the same discriminatory constraints. A seller cannot escape liability under § 1982 by profiting from a discriminatory situation created by others, as doing so perpetuates racial segregation and its harmful effects. The court held that such exploitation violates the statute because it results in Black citizens paying more for housing, which is a clear denial of the 'same right' enjoyed by white citizens.
Analysis:
This decision significantly broadens the scope of liability under 42 U.S.C. § 1982 beyond traditional acts of discrimination, such as outright refusal to sell. It establishes the 'exploitation theory' of liability, holding that one can violate the statute by taking advantage of a market distorted by racial discrimination, even without direct animus toward the buyer. This precedent shifts the focus from the seller’s subjective intent to the objective effect of their pricing practices within a segregated system. The ruling creates a new framework for proving housing discrimination in segregated markets and makes it more difficult for sellers to hide discriminatory pricing behind neutral-sounding business justifications.
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