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HISPANICS UNITED OF DUPAGE COUNTY v. VILLAGE OF AD

December 22, 1997

HISPANICS UNITED OF DUPAGE COUNTY, et al., Plaintiffs,
v.
VILLAGE OF ADDISON, ILLINOIS, Defendant. UNITED STATES OF AMERICA, Plaintiff, v. VILLAGE OF ADDISON, ILLINOIS, Defendant.



The opinion of the court was delivered by: CASTILLO

 TABLE OF CONTENTS

 I. BACKGROUND

 
A. Relevant Procedural History
 
B. Relevant Facts
 
1. Addison, Green Oaks and Michael Lane
 
2. The Camiros Study
 
3. Village Action Affecting Green Oaks and Michael Lane Before 1994
 
4. Kane McKenna's Findings
 
5. Racial Composition of the TIF Districts
 
6. The TIF Adoption Process and Village's Course of Action
 
(a.) The Army Trail/Mill Road TIF
 
(b.) The Michael Lane TIF
 
7. Evidence on Conditions in Green Oaks and Michael Lane
 
(a.) Housing Code Violations
 
(b.) Lack of Property Maintenance
 
(c.) Density/Lack of Green Space
 
8. Village Awareness of Green Oaks and Michael Lane's Racial Composition

 II. THE PROPOSED CONSENT DECREE

 
A. Ban on Housing Discrimination by the Village of Addison
 
B. Redevelopment Plan
 
C. Monetary And Other Compensation
 
D. Relocation Assistance
 
E. Fair Housing Education
 
F. Time Period and Enforcement of Consent Decree

 III. THE STANDARDS FOR JUDICIAL APPROVAL OF CLASS ACTION SETTLEMENTS

 
A. The Strength of Plaintiffs' Case
 
1. Legal Standards Applicable to Fair Housing Act Claims
 
2. The Parties' Arguments on Discriminatory Impact
 
3. Applying the Arlington Heights II Factors
 
(a.) Discriminatory Effect
 
(b.) Evidence of Discriminatory Intent
 
(i.) TIF Boundaries and Activities
 
(ii.) Legislative History of and Events Surrounding Adoption of the Army Trail/Mill Road TIF
 
(iii.) Village Knowledge of Green Oaks and Michael Lane Demography
 
(c.) The Village's Interest in Taking the Actions Producing Discriminatory Effect
 
(i.) Burden of Proof
 
(ii.) The Village's Interests In Its Actions
 
(d.) Relief Requested
 
4. Balancing the Arlington Heights II Factors
 
B. Comparison of Uncertain Litigation Results to Consent Decree
 
C. The Village of Addison's Ability To Pay
 
D. Complexity, Length and Expense of Further Litigation
 
E. Amount of Opposition To The Settlement/Class Members' Reactions
 
F. Presence of Collusion in Reaching A Settlement
 
G. Adequacy of Compensatory Damages
 
H. Opinion Of Competent Counsel
 
I. Stage Of the Proceedings And The Amount Of Discovery Completed

 CONCLUSION

 The hallmark of a great society--a true racially and ethnically integrated community--is an elusive goal that unfortunately still has not been achieved in most urban and suburban communities. The consolidated lawsuits pending before this Court involve one suburban community's struggle with the issue of racial and ethnic diversity. In 1994, the Village of Addison began purchasing and demolishing multifamily residential structures in two of the Village's largest Hispanic neighborhoods. Claiming that these areas and their surrounding environment were "blighted," the Village implemented the powers of acquisition and condemnation granted it by Illinois' Tax Increment Allocation Redevelopment Act, a tool for financing municipal redevelopment projects. Residents and property owners in these two districts, along with organizations working to eliminate housing discrimination against Hispanics, promptly sued the Village alleging, inter alia, that the Village's prior and planned acquisition and demolition had a disparate impact on Hispanic residents and constituted intentional discrimination in violation of the Fair Housing Act, 42 U.S.C. § 3601 et seq.

 This three-year-old, hotly contested housing discrimination case is presently before the Court on the parties' joint motion for final approval of a proposed settlement for the plaintiff class. Pursuant to the Court's preliminary approval of the proposed Consent Decree ("the Decree"), appropriate notice was given in both the English and Spanish languages to all class members via both publication and direct mail notice. Thereafter, on October 30, 1997 at 7:00 p.m., this Court held a class fairness hearing in Addison, Illinois. The Court departed from the normal practice of holding this hearing during normal working hours in the downtown federal courthouse because it wanted to ensure that all interested persons could easily testify at this hearing. This was especially important because the Decree directly affects only residents of the Addison, Illinois community. This Court also inspected the neighborhoods affected by the litigation and the Decree with the attorneys for the parties on the afternoon of October 30, 1997, in preparation for the fairness hearing.

 Before proceeding to describe the proposed settlement, it is important to set the context by reviewing the relevant procedural history and facts that surround this litigation.

 A. Relevant Procedural History

 On October 6, 1994, the lawsuit entitled Hispanics United of DuPage County, et al. v. Village of Addison, et al., No. 94 C 6075, was filed and assigned to this Court. Thereafter, the defendants agreed to a "stand still/status quo" order that would prevent any demolition of buildings in Addison without approval of this Court. On April 21, 1995, this Court granted the plaintiffs' motion for class certification. See Hispanics United of DuPage County v. Village of Addison, 160 F.R.D. 681 (N.D. Ill. 1995).

 On July 7, 1995, the Department of Justice filed its related lawsuit, United States of America v. Village of Addison, No. 95 C 3926, and this action was consolidated with the Hispanics United suit. From early 1995 to the present, the parties have concentrated on two principal activities: (1) preparing the consolidated lawsuits for trial and (2) determining whether any settlement could be achieved. The Court set two different firm trial dates in this case. The first firm trial date of April 22, 1996 was vacated on April 11, 1996 based on a tentative settlement accord, which in essence created the foundation for the current proposed settlement before this Court. This preliminary April 1996 accord was achieved on the eve of the first firm trial date, only after the conclusion of all pretrial discovery, the filing of a final pretrial order, and the Court's ruling on various motions in limine regarding contested evidentiary matters. During this time period, numerous settlement conferences were held. The Court received assistance in this process, and wishes expressly to commend former federal Judge Nicholas J. Bua for his fine mediation efforts in this case in his capacity as Special Master. The Court also wishes to commend Magistrate Judge Rebecca C. Pallmeyer for her outstanding efforts in supervising the preparation of an appropriate final pretrial order in this difficult and complex case.

 The parties were unable to finalize their settlement during the remainder of 1996, forcing this Court to set a new firm trial date of May 27, 1997. Prior to this date, the parties again prepared for trial and the Court ruled on various new pretrial motions, including the defendant's motion for partial summary judgment, which principally addressed standing. See Hispanics United of DuPage v. Village of Addison, 958 F. Supp. 1320 (N.D. Ill. 1997) (motion granted in part and denied in part). In April of 1997, this Court issued further evidentiary rulings concerning several new motions in limine in final preparation for trial. During that month, the plaintiffs also filed a motion for partial summary judgment on liability for disparate impact discrimination. This motion was fully briefed and awaiting ruling by the Court when the parties reached a settlement.

 On May 21, 1997, a mere six days before the start of trial, the Court granted the parties' oral motion for preliminary approval of the Decree presently before the Court. Following are the facts as they stood on the eve of trial.

 B. Relevant Facts1

 1. Addison, Green Oaks and Michael Lane

 Prior to 1994, the two neighborhoods furnished nearly a quarter of the Village's rented housing, most of it accessible to moderate- and low-income families. These two neighborhoods were first developed in the 1960s, and were approved by the Village at that time. Pls.' Facts P 17. All the buildings in Green Oaks and Michael Lane are low-rise structures less than thirty-five years old and of an average age for multi-family residential units in Addison. Pls.' Facts PP 18-19; Def.'s Facts P 18. Located on the northeast side of the Village, Michael Lane has 109 buildings divided into 619 units; Green Oaks, on the southwest side, consisted of 35 buildings containing 208 units before the Village began acquisitions and demolition in 1994. Def.'s Add'l Facts PP 98-99. The total number of rental units in Addison lies somewhere between 3258 and 3902. Pls.' Facts P 23; Def.'s Facts P 23. Residential vacancy rates in Green Oaks and Michael Lane hover between 2 and 4%, compared to the Village-wide rate of 2.7%. Pls.' Facts PP 20, 25. As of 1990, the apartments in Michael Lane and Green Oaks rented for an average of $ 568 a month, affordable housing by DuPage County standards. Pls.' Facts P 21; Def.'s Facts P 21. A majority of the neighborhoods' residents earn moderate or low incomes: in 1991, a survey of Michael Lane households reported that 66% had annual incomes of less than $ 25,100 and that 54% earned less than $ 21,700; in 1992, 63.49% of Green Oaks residents were classified as "very low income" and 76.19% as low- and moderate-income persons. Pls.' Facts P 22.

 2. The Camiros Study

 In 1988, the Village hired a planner, Camiros Ltd., to examine the Michael Lane area and recommend ways in which it could be improved. Def.'s Add'l Facts P 103. Green Oaks was not included in the study. Camiros' preliminary investigation suggested that Michael Lane would meet the statutory requirements for redevelopment under the Illinois Tax Increment Allocation Redevelopment Act, 65 ILCS 5/1174.4-1 et seq. Def.'s Add'l Facts P 104. This statute, passed in 1977, permits municipalities to use a device called "tax increment financing" ("TIF") in order to fund redevelopment projects. Def.'s Add'l Facts P 122; Pls.' Facts P 46. Regions that meet the statute's definition of a "blighted" area may be incorporated into TIF districts, where the municipality is then authorized to acquire property in the district, by contract or condemnation, and demolish it. Pls.' Facts P 47; see 65 ILCS 5/11-74.4-3(a), § 74.4-4(c), (d). *fn3" In support of its suggestion that Michael Lane exhibited characteristics of blight, Camiros observed that Michael Lane residential property values were stagnant or declining, and that the area reflected "crowded living conditions" and "overall poor property maintenance." Def.'s Ex. 28 at Bates # 400006. It noted that the buildings stood closer together than would be permitted under the Village's current standards and did not include enough space for off-street parking. Id.

  As requested, Camiros recommended steps for enhancing Michael Lane's appearance and living conditions. It suggested making street and gutter improvements and continuing housing inspections, and explained in detail ways in which to improve both private and public areas in the neighborhood. Def.'s Add'l Facts P 104; Pls.' Supp. Ex. 31. This undertaking, Camiros stressed, had to be the product of "an agreed-upon strategy that brings the public and private sectors together into a partnership venture." Def.'s Ex. 29 at Bates # 4000012. It is undisputed that Village officials held a meeting attended by several Michael Lane building owners, and discussed at least some of the Camiros study findings. June 29, 1995 Block Dep. at 22; January 11, 1996 Block Dep. at 335. The Village maintained, based on the testimony of one the trustees who ran the meeting, that it tried to implement Camiros' suggestions, but the building owners showed no interest. Def.'s Add'l Facts P 107. Plaintiffs, on the other hand, claimed that the Village did not tell the property owners about all the options posed by Camiros, for example, creating a subsidized low-interest loan program for improvement and rehabilitation. See Pls.' Supp. Ex. 32. Plaintiffs also pointed to the testimony of Barbara Berlin, the Camiros employee in charge of the Michael Lane study, that the Village was less than enthusiastic about pursuing a number of Camiros' recommendations. April 24, 1997 Berlin Dep. at 72-77. Berlin also told the Village Finance and Policy Committee that "there seems to be some interest in participating in a program" on the part of Michael Lane building owners. Pls.' Supp. Ex. 33 at Bates # 030329.

 3. Village Action Affecting Green Oaks and Michael Lane Before 1994

 Following the Camiros study, the Village took a number of actions affecting Michael Lane and Green Oaks. In November 1988, the Village began to enforce in these areas its ban on overnight street parking. Pls.' Facts P 43. Although the ordinance had long been on the books, and applied Village-wide, this was the first time that the Village had enforced it in Green Oaks and Michael Lane. Id. The Village notified residents by letter that it was going to start enforcing the ban. Pls.' Facts PP 44-45. On November 10, 1988, Village Trustee Raman Thakker sent letters to Green Oaks property owners requesting a meeting to discuss alternate parking solutions for the area. Def.'s Add'l Facts P 108. One of the Village's suggested remedies for alleviating the ban's effects was to have building owners rent additional spaces in a nearby shopping center parking lot. Def.'s Add'l Facts P 120.

 In the early 1990s, the Village applied for financial assistance from DuPage County to help fund street, common area, and sewer improvement projects in the Green Oaks and Michael Lane neighborhoods. The funding source was DuPage County's Community Development Block Grant ("CDBG") Program. In 1991, the Village requested CDBG funding to improve the Green Oaks neighborhood street and drainage system, creek channel, and parking alley. Def.'s Add'l Facts P 114. The same year, the Village applied for CDBG assistance to resurface the streets, remove and replace curbs, improve drainage, upgrade common parking facilities, and bury overhead utility wires in Michael Lane. Def.'s Add'l Facts P 115. In 1992, the Village spent $ 119,403.03 on Green Oaks Court improvements, including storm sewer, curb and gutter replacements. Pls.' Resp. Add'l Facts P 116. Although its source of funding is unclear, a 1992 storm sewer construction project in Michael Lane cost $ 75,684. Def.'s Add'l Facts P 117.

 4. Kane McKenna's Findings

 The sequence of events in 1993 and 1994 led directly to the adoption of TIF districts containing the Green Oaks and Michael Lane neighborhoods. In 1993, the Village hired Kane McKenna, a municipal finance consulting firm that has qualified nearly 100 TIF districts, to evaluate a proposed TIF district in Addison. Pls.' Facts P 56; Def.'s Add'l Facts P 127. Termed the "Army Trail/Mill Road TIF," the proposed district included Green Oaks, as well as the Army Trail Plaza Shopping Center, vacant land owned by the Moody Bible Institute, and the Addison (a.k.a. LaLonde) Courts Apartments. Def.'s Add'l Facts P 129. In January 1994, Kane McKenna made a preliminary determination that the Army Trail/Mill Road area satisfied over five "blighting" factors delineated in the TIF statute and, consequently, qualified for TIF status. Def.'s Add'l Facts P 128. As a whole, the area was reported to exhibit blight in terms of age, depreciation of physical maintenance, deleterious land use, inadequate utilities, code violations, and lack of effective community planning. Def.'s Add'l Facts P 128; Pls.' Resp. Add'l Facts P 128. As mandated by statute, the report found these characteristics present to a "meaningful extent" throughout the area; however, the report's primary focus was on the area's commercial property, specifically, the Army Trail shopping center. See Def.'s Ex. 48. On March 21, 1994, the Village enacted an ordinance establishing the Army Trail/Mill Road TIF district, which encompassed Green Oaks and the other areas studied by Kane McKenna. Pls.' Facts P 4; Def.'s Add'l Facts P 129.

 After adopting the Army Trail/Mill Road TIF, the Village expressed interest in having Kane McKenna investigate another proposed district. June 2, 1995 Murphy Dep. at 257. In May 1994, the Village sent Kane McKenna the Camiros study on Michael Lane, which helped describe the area that the Village wished to include in the district. Def.'s Add'l Facts P 133. Kane McKenna prepared a draft report for the "Proposed Michael Lane Area Redevelopment Project" in July 1994, which determined that, like the Army Trail/Mill Road district, the Michael Lane area qualified for TIF treatment. Def.'s Ex. 57. Included in the study area were Michael Lane, two retail centers, and some vacant land. See Def.'s Ex. 57. The report determined that the region contained the following blighting factors: depreciation of physical maintenance, excessive land coverage, lack of community planning, presence of structures below minimum code standards, deleterious land use and/or layout, inadequate utilities, and age. Id. These factors were found present to a "meaningful extent" throughout the area. Id. On October 3, 1994, the Village passed ordinances establishing the Michael Lane TIF district. Def.'s Add'l Facts P 136.

 5. Racial Composition of the TIF Districts

 The Army Trail/Mill Road and Michael Lane districts are the only TIFs that the Village adopted; within their boundaries resides 43.7% of the Village's total Hispanic population. Pls.' Facts P 9. Compared to a Village-wide population of 13.4%, Hispanics comprise 49.4% of the TIF districts. Pls.' Facts PP 3, 10. In fact, the TIFs encompass the two largest Hispanic neighborhoods -- and contain the two highest concentrations of Hispanics -- in the Village. Pls.' Facts PP 8-9. The TIFs' Hispanic resident population is mirrored in building ownership -- 42.9% of the buildings in Green Oaks and 34.9% of the buildings in Michael Lane are Hispanic-owned. Pls.' Facts P 16. In contrast, the areas surrounding the TIF districts are predominantly white. Pls.' Facts P 14. The map prepared by the Village showing Hispanic population distribution throughout the Village (Pls.' Ex. F), viewed in conjunction with the map outlining the TIF districts (Pls.' Ex. BBB), reveals a stark contrast between the concentration of Hispanics within the TIF districts and the surrounding majority white areas.

 6. The TIF Adoption Process and Village's Course of Action

 (a.) The Army Trail/Mill Road TIF

 Following Kane McKenna's recommendation in January 1994 that the Army Trail/Mill Road area qualified for TIF status, but before passing the ordinance establishing the area as a TIF district, the Village held a public hearing on March 7, 1994. Trustee (now Mayor) Lorenz Hartwig presided as President Pro Tem. *fn4" He assured residents at the meeting that "no plans have been made at this time" for properties within the Army Trail/Mill Road area, that the Village wanted to do the least possible to accomplish its goals, that it was "not anxious" to use its TIF condemnation powers, that the Trustees "wanted public input all along the way," and that "all decisions have to be made at public hearings." Pls.' Facts P 52; Pls.' Ex. F), at Bates # 001589-001612. Two weeks later, on March 21, the Village Board of Trustees approved the ordinance creating the Army Trail/Mill Road TIF district. Def.'s Facts P 53.

 After approving the TIF district, the Village began purchasing buildings in Green Oaks and filing condemnation suits against owners who refused to sell their buildings. Pls.' Facts P 60. On March 28, 1994, the Trustees held an Executive Session Meeting, during which they authorized the Village Manager, Joe Block, to begin acquiring buildings in Green Oaks. Pls.' Facts P 54. Village President Anthony Russotto stated that "he would like to buy the center core first, we can buy and demolish more buildings this way." Pls.' Ex. N. Block told the Board that "he [could] probably accomplish the purchase and demolition and get started now." Id. In response to this statement, Trustee Chrysogelos asked about "the displacement of the Hispanic tenants that total approximately 50% in the area." Id. No reply is recorded in the minutes. By April of 1994, the Village had performed appraisals on each of the 28 four-flat buildings in Green Oaks. Pls.' Facts P 58. Between the time the TIF was passed on March 24, 1994 and October 6, 1994, the date plaintiffs filed this lawsuit, the Village acquired and demolished eight buildings, acquired, vacated and boarded up three more for demolition, had nine buildings pending in condemnation actions, and two others under contract to purchase -- all in Green Oaks. Pls.' Facts P 62; Pls.' Ex. E. Activities ceased when the parties entered a standstill agreement. Pls.' Facts P 63.

 Green Oaks neighborhood is the only part of the Army Trail/Mill Road TIF where the Village, in pursuing TIF redevelopment, acquired and demolished property and initiated condemnation proceedings against building owners. Pls.' Facts P 64. No public planning process open to all Village residents preceded the acquisitions and demolition, Trustee Hartwig's assessment was that the Village was receiving overwhelming informal support for its actions. Pls.' Facts P 55; Def.'s Facts P 55. Other than two vacant buildings in the LaLonde apartment complex, which were demolished for reasons unrelated to TIF redevelopment, the Village did not redevelop either the apartments in the majority white neighborhood on the south end of the TIF, or the vacant commercial buildings in the Army Trail Plaza Shopping Center. Pls.' Facts PP 15, 65; Def.'s Facts P 65. Trustee Thakker explained that the Village had not pursued redevelopment in the commercial TIF areas because no developer had committed to the project. Thakker Dep. at 456-60.

 The Village did not retain a developer or formulate a specific redevelopment plan before it undertook demolition in Greek Oaks. Pls' Facts PP 57, 66. It did, however, retain a land use planning consultant for the Army Trail/Mill Road area on July 5, 1994. Def.'s Add'l Facts P 130. In addition, the Village sponsored a developers' conference in July 1994 to solicit developers interested in the TIF area. Def.'s Add'l Facts P 131.

 As a result of the Village's actions in Green Oaks, 44 units were demolished and 150 people displaced from their homes. Pls.' Facts PP 67, 68. Of those residents, 73, or about 50%, were Hispanic. Id. Although the Village considered offering financial assistance to owners and residents displaced from Green Oaks, it ultimately declined to do so. Pls.' Facts P 68; Def.'s Facts P 68. The Village made an affirmative choice not to include relocation assistance as a lineitem budget for either the Army Trail/Mill Road or Michael Lane TIFs, against the recommendations of its TIF consultants. Pls.' Facts P 68. In addition, the Village provided no oral or written communications in Spanish about the TIF districts to anyone ...


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