ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil No. 74-1689)
Before Aldisert and Higginbotham, Circuit Judges, and Teitelbaum, District Judge*fn*
The matter sub judice is an appeal from the decision of the District Court of New Jersey finding illegal racial discrimination in housing and awarding relief. The trial court, in the non-jury proceeding below, determined that the plaintiffs-appellees had impermissibly been denied the enjoyment of certain rental housing because of their race and awarded compensatory and punitive damages as well as attorney's fees. The defendants-appellants do not challenge the finding of liability, but rather have urged that the award was too high a price to pay for discriminating. A careful review of appellants' claims convinces us that the trial court committed no error. We affirm the judgment for the reasons set forth below.
In August of 1973, Irmtrud Miller, a white woman, visited the offices of Apartment and Homes of New Jersey, Inc. (hereinafter Apartments and Homes), the rental agent for apartments owned by James Nuckel and/or CIB International, Inc., (hereinafter CIB) a corporation owned by Mr. Nuckel. There Mrs. Miller met Peter Ronay, a broker employed by Apartments and Homes. They went to the Florence Apartments in Little Ferry, New Jersey. The resident superintendent gave Mr. Ronay a key for a vacant apartment, apartment sixty-seven. Mr. Ronay told Mrs. Miller the apartment was available. Mrs. Miller agreed to rent the apartment for herself and her husband, left a deposit for the apartment, and completed an application to rent the premises. She was advised that pending the results of a credit check, she could occupy the premises beginning on September 10, 1973.
On September 5, 1973, the Millers met Mr. Ronay to sign the lease. When Mr. Ronay saw that Mr. Miller was black, "there was a perceptible change in (his) attitude," according to the findings of the district court. The court did not specify what change occurred. In any event, Mr. Ronay and the Millers executed a formal lease for apartment sixty-seven. Mr. Ronay told the Millers that the key would be available at the office of the resident superintendent on September 7, 1973. Mr. Miller went to the resident superintendent's office on the evening of September 7 and asked for the key to his apartment. He did not state which apartment he had rented, and the superintendent did not ask. Instead, the superintendent stated that he had no knowledge of Mr. Miller's rental of any apartment and asked him to wait outside while he checked further. After waiting about fifteen minutes Mr. Miller again knocked at the door and was told to wait. After another half hour, the superintendent advised Mr. Miller that he had no knowledge of the rental. Mr. Miller asked if he could look at the apartment, but again he did not specify the apartment number. The superintendent reiterated that he had no knowledge of Mr. Miller's lease, but he took Mr. Miller directly to apartment sixty-seven without ever asking Mr. Miller which apartment he had rented. Mr. Miller specifically requested the keys to apartment sixty-seven and was refused. Mr. Miller described the superintendent's attitude throughout the encounter as "cold" and testified that the superintendent looked "through" him and not at him. He testified also that he felt humiliated and downgraded, like a "village idiot," by being made to wait outside the superintendent's office for approximately forty-five minutes. The next day the Millers went to the rental offices of CIB. Mr. Lacetola, in charge of the CIB office falsely told the Millers that the apartment had been previously rented.*fn1 He suggested that they see Mr. Ronay about another apartment.
The Millers returned to Apartments and Homes to find alternative accommodations. Mr. Ronay was sympathetic to their plight, and made some modest, but unsuccessful effort to find another apartment for them. Upon reflection the Millers decided they were entitled to apartment sixty-seven and telephoned Mr. Lacetola to inform him of their position. He agreed that they were entitled to the apartment and indicated that he would have the key on September 10, 1973. On that day, having arranged to vacate their prior residence, the Millers, with all their possessions in a moving van, arrived at the CIB rental office to obtain the key as prearranged. Mrs. Miller's request for the key was refused, again ostensibly because the apartment had been previously rented. Mr. Lacetola, although he had access to an extensive list of vacant apartments owned by Mr. Nuckel and/or CIB, remained indifferent to the Miller's plight. After a brief stay with relatives, the Millers by their own efforts were fortunate enough to lease a different apartment. By coincidence it was owned and operated by the appellants, Nuckel and CIB, but the Millers did not deal with Mr. Ronay or the CIB rental office in learning of it. Unfortunately this substitute apartment was at a higher rental, and required the Millers to expend greater sums than they would have paid in apartment sixty-seven for equivalent necessary utility services.
On October 30, 1973, the Millers instituted this action against Apartments and Homes, Mr. Ronay, CIB, Mr. Lacetola and Mr. Nuckel.*fn2 Near the end of 1975, the plaintiffs agreed to settle their claim against Apartments and Homes and Mr. Ronay for $1,821.00. The action against the remaining defendants proceeded to trial before the court, sitting without a jury. In addition to determining the aforementioned facts, the district court also noted that Mr. Nuckel and CIB had been the subjects of remedial court orders to cease discrimination. Despite those orders, statements made by Mr. Nuckel at his deposition (introduced into evidence at trial) showed his utter disregard for his obligations to promulgate and implement a policy of non-discrimination. The court found Mr. Nuckel was interested only in building and money, and not in people; people who contributed to Mr. Nuckel's and/or CIB's monthly gross rental income of $400,000.00. The court also found that Mr. Nuckel and CIB disobeyed the prior remedial order by failing to instruct employees not to discriminate on the basis of race, and by falsifying required records showing the number of minority tenants.
In addition to these findings, the district court was also obliged to determine the appropriate amount of damages. The damages disputed in this appeal represent a portion of the compensatory damages, specifically, the sum awarded as the difference in rent and utility payments between what the Millers were required to pay and the amount that would have been required for apartment sixty-seven, an amount of $4,451.00; and the award of punitive damages of $25,000 assessed against Mr. Nuckel and CIB.*fn3 Additionally, the court below held that the defendants were entitled to only a pro tanto reduction for the amounts previously paid by Mr. Ronay and Apartments and Homes in the settlement. Finally, an award of $21,845.00 was made for attorneys' fees.
As we previously noted, this is not an appeal alleging an error in the finding of liability, but rather a plea that the size of the total award was too great. While the trial court committed no error, several interesting issues have been raised which demand this Court's attention. We turn now to those issues.
The appellants claim that the district court erred on its ruling on the effect of a settlement upon the liability of the remaining defendants. The district court held that the award of compensatory damages against the appellants should be reduced by $1,821.00, the amount of appellees' settlement with defendants Mr. Ronay and Apartments and Homes. The appellants argue that instead of this pro tanto reduction for the settlement, the court should have granted them a pro rata reduction of liability.*fn4 They maintain that since there were essentially two groups of defendants in the case Apartments and Homes and its employees, and Mr. Nuckel, his employees and subordinates that the settlement with one group extinguished half of the Millers' claim.*fn5
This the Millers deny. They insist that federal common law should govern with respect to the effect of settlements upon the liability of joint violators of federal civil rights statutes. They further insist that the federal rule relating to settlements should be the rule of pro tanto rather than pro rata reduction.
This case therefore appears to require the Court to decide whether state or federal law applies to such questions under the civil rights statutes, and what the pertinent rule should be. The general problem of whether state law or federal common law should apply to various subordinate issues relating to federal statutory rights is a familiar one. It derives from what Professor Hart called the "interstitial character" of federal law. The general problem extends to questions such as statutes of limitation and tolling rules, mental capacity, right to jury trial of designated issues, defenses in commercial paper law, and implied rights of action under federal statutes as well as to contribution rules. Professor Wright has said:
Whether state law or federal law controls on matters not covered by the Constitution or an Act of Congress is a very complicated question which yields to no simple answer in terms of the parties to the suit, the basis of jurisdiction, or the source of the right which is to be enforced.
C. Wright, Handbook of the Law of Federal Courts 247 (2d ed. 1970). The question is examined in all its complexity by Professor Wright, id. at 247-53, and by Professor Wechsler and his colleagues in Hart and Wechsler's The Federal Courts and the Federal System at ...