CASE # 3424

A country club, in order to maintain religious diversity, maintained a “balanced membership policy,” whereby it sought to ensure that 50% of its members were Jewish and 50% Christian. To this end, the club admitted applicants to membership only when a space opened up for a person of his or her religion, which resulted in an otherwise acceptable applicant waiting as long as five or six years for membership. Held: (1) The club’s practice of enforcing a religious quota system for applicants violated the N.Y. Human Rights Law. (2) Although the complaining club member was not himself denied membership, he had standing to challenge the religious quota system for a number of reasons: (i) he was deprived of the associational benefit of interacting with at least two potential members who were placed on the waiting list because there were no available openings for members of their religion; (ii) placing otherwise acceptable applicants on the waiting list deprived the club of revenues, potentially necessitating assessments on members such as the complainant to close revenue gaps; and (iii) the policy of labeling applicants and members based upon their religion embarrassed and humiliated the complainant. (3) Under the facts, the country club was not a “distinctly private” organization exempt from the provisions of the state’s Human Rights Law. (4) The order by the Commissioner of the N.Y. State Division of Human Rights (SDHR) that the club evaluate applicants for membership without discrimination on the basis of creed and grant membership to all persons without regard to creed did not violate the First Amendment rights of existing club members to private and expressive association. (5) Said order was not rendered academic by virtue of changes in the club’s policies bringing the club within the ambit of a “distinctly private” accommodation exempt from the Human Rights Law. The changes in club policy were implemented after the administrative hearing before the SDHR. Since these alleged policy changes were implemented after the administrative hearing, they were dehors (beyond; outside of) the record and there was no assurance that they were genuine.— Mill River Club, Inc. v. New York State Division of Human Rights, 59 A.D.3d 549, 873 N.Y.S.2d 167 (N.Y. App. Div. 2d Dept. 2009), No. 2007-06583. Dated February 10, 2009. Opinion by JJ. William F. Mastro, Daniel D. Angiolillo, Edward D. Carni, and Randall T. Eng. Subsequent History: Appeal dismissed, 12 N.Y.3d 871, 882 N.Y.S.2d 679, 910 N.E.2d 428 (2009), motion for leave to appeal denied, 13 N.Y.3d 705, 887 N.Y.S.2d 2, 915 N.E.2d 1180 (2009).

Note: Unless stated otherwise, what follows is a digest, not a word for word reproduction, of the court’s opinion.

The Mill River Club – a not-for-profit corporation which operated a country club in Oyster Bay, New York –offered its members various amenities, including a golf course, swimming pool, tennis courts, and a club house for dining and hosting social functions. Since its founding in 1964, the club maintained a “balanced membership policy,” whereby it sought to ensure that half of its members were of the Jewish faith, and half were Christians. To this end, the club admitted applicants to membership only when a space opened up for a person of his or her religion, which resulted in an otherwise acceptable applicant waiting as long as five or six years for membership.

Club member Joseph Pezza filed a complaint with the New York State Division of Human Rights (SDHR), alleging that the club’s practice of enforcing a religious quota system for applicants violated the N.Y. Human Rights Law, N.Y. Executive Law art 15, which, inter alia, prohibited discrimination by a place of public accommodation “because of . . . creed.” N.Y. Executive Law § 296(2)(a).

At an administrative hearing, Pezza testified that, in accordance with the club’s membership policy, every member of the club was labeled as “J” for Jewish, “C” for Christian, “M” if part of a couple of mixed religious faith, or “O” for other. Those labeled “M” or “O” were counted as Christians for purposes of determining the religious composition of the club’s membership. In order to maintain a 50% Jewish and 50% Christian membership, applicants would have to wait for a space to open up for a person of his or her religious denomination, which could result in being placed on a waiting list for a significant period of time. The club also sought to maintain its balanced membership by lowering the initiation fee for one group or the other in order to attract members of the sought-after religious community. Pezza further testified that the religious quota system also applied to individuals who were “house members” and wanted to upgrade to full membership in the club, and that one such member had complained of initiation fees increasing while he waited for full membership slots to open up for those of his religious denomination. According to Pezza, placing prospective members on a waiting list harmed all members financially, because it delayed payment of initiation fees and membership dues which would provide the club with revenue, and lower or eliminate the need to assess existing members to close revenue gaps. Pezza also testified that the club’s policy embarrassed him because “it puts unnecessary labels on people.”

N.Y. Executive Law § 292(9) provided in part that the term “place of public accommodation, resort or amusement” “shall not include . . . any institution, club or place of accommodation which proves that it is in its nature distinctly private.” The club claimed that it was not subject to the provisions of the N.Y. Human Rights Law because it was a “distinctly private” organization within the meaning of Executive Law § 292(9). A number of club members gave testimony relevant to this issue. The testimony of these witnesses indicated that the club had between 300 and 400 members in various membership categories. In order to join the club, an applicant had, inter alia, be sponsored by an existing member, undergo a background check, have dinner with a member of the Admissions Committee, and be interviewed by members of the full Admissions Committee. Members of the club were permitted to invite nonmembers to use its dining and recreational facilities as guests, and could sponsor events for nonmembers. Members had sponsored a variety of social events for nonmembers, including weddings, birthday parties, anniversary parties, and bridal or baby showers. Members had also sponsored golf and tennis outings to raise money for a variety of nonmember institutions, including the Girl Scouts, the Coalition Against Child Abuse and Neglect, and the State University of New York at Farmingdale. On one occasion, a former club president sponsored a fund-raiser for a local politician. Nonmembers paid the club directly for the cost of these events, and the club provided services such as food, alcohol, and wait-staff. The club earned the sum of $ 264,043.07 in revenue from nonmember events in 2002, $ 265,854.17 in 2003, and $ 196,885.78 in 2004.

The evidence presented at the hearing also revealed that the club employed golf and tennis professionals to give lessons, and that both members and nonmembers were permitted to take lessons from these individuals. In addition, the club earned revenue from golf and tennis shops on its premises which sold equipment and clothing, and were open to members and nonmembers alike.

In his findings of fact and a recommendation, the administrative law judge (ALJ) found that although Pezza did not have standing to file a discrimination complaint against the club, since he had not been denied membership, the SDHR had standing to commence the proceeding on its own behalf since it had been granted broad police powers to protect against unlawful discrimination. The ALJ also found that the club was a place of public accommodation subject to the Human Rights Law, and that its balanced membership policy constituted a violation of that statute.

In a final order, the Commissioner of the SDHR rejected the ALJ’s finding that Pezza did not have standing, concluding that Pezza did indeed have standing because he had been subjected to a discriminatory policy of being labeled on the basis of creed. The Commissioner also concluded that the club was a place of public accommodation as defined by the Human Rights Law, and was not a “distinctly private” organization exempt from the anti-discrimination provisions of the statute. The Commissioner further noted that, although the club’s goal was to create an environment free from religious prejudice, its balanced membership policy violated the Human Rights Law since it excluded some potential members, favored other members, and offered discounted fees based solely upon an applicant’s creed. The Commissioner ordered the club to evaluate applicants for membership without discrimination on the basis of creed, and to grant membership to all persons without regard to creed.

On judicial review, the Appellate Division confirmed the Commissioner’s determination, finding that it was the determination is supported by substantial evidence. [Judicial review of an administrative determination made after a hearing required by law, and at which evidence was taken, is limited to whether the determination is supported by substantial evidence. See 300 Gramatan Ave. Assoc. v. State Div. of Human Rights, 45 N.Y.2d 176, 179, 408 N.Y.S.2d 54, 379 N.E.2d 1183 (1978); Matter of Venditti v. New York State Dept. of Envtl. Conservation, 57 A.D.3d 685, 868 N.Y.S.2d 764 (N.Y. App. Div. 2d Dept. 2008); Matter of Genovese Drug Stores, Inc. v. Harper, 49 A.D.3d 735, 854 N.Y.S.2d 191 (N.Y. App. Div. 2d Dept. 2008); Matter of Sauer v. Donaldson, 49 A.D.3d 656, 853 N.Y.S.2d 610 (N.Y. App. Div. 2d Dept. 2008).]

Although Pezza was not himself denied membership in the club based upon his religion he had standing to challenge the religious quota system. An individual has standing to seek administrative or legal redress for a statutory violation where he or she has suffered an injury, and falls within a zone of interest that the statute protects. See Matter of Town of Riverhead v. New York State Dept. of Envtl. Conservation, 50 A.D.3d 811, 813, 858 N.Y.S.2d 183 (N.Y. App. Div. 2d Dept. 2008); Dunn v. Fishbein, 123 A.D.2d 659, 660, 507 N.Y.S.2d 29 (N.Y. App. Div. 2d Dept. 1986). Although Pezza was not himself denied membership in the club based upon his religion, his testimony demonstrated that he was deprived of the associational benefit of interacting with at least two potential members who were placed on the waiting list because there were no available openings for members of their religion. Pezza also testified that placing otherwise acceptable applicants on the waiting list deprived the club of revenues, potentially necessitating assessments to close revenue gaps, and that the policy of labeling applicants and members based upon their religion embarrassed and humiliated him. This evidence was sufficient to demonstrate that Pezza suffered cognizable harm as a result of a discriminatory admissions policy, which was within the zone of interest protected by the Human Rights Law. See United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 689 n 14, 93 S. Ct. 2405, 37 L. Ed. 2d 254 (1973); Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 93 S. Ct. 364, 34 L. Ed. 2d 415 (1972); Estate of Morris v Dapolito, 297 F. Supp. 2d 680, 690 (S.D.N.Y. 2004); Puglisi v. Underhill Park Taxpayers Assoc., 947 F Supp 673, 688 (S.D.N.Y. 1996), affd, 125 F.3d 844 (2d Cir. 1997); Dunn .v Fishbein, 123 A.D.2d at 660.

The finding that the club was a place of public accommodation, and did not fall within the “distinctly private” exception to the Human Rights Law, as articulated in Executive Law § 292(9), was supported by substantial evidence. The Human Rights Law defined a place of public accommodation to include facilities operated by the club, such as golf courses, swimming pools, and restaurants. See Executive Law § 296(2)(a). The term “place of public accommodation, resort or amusement” did “not include . . . any institution, club or place of accommodation which proves that it is in its nature distinctly private.” Executive Law § 292(9). As amended in 1994, § 292(9) also provided that:

In no event shall an institution, club, or place of public accommodation be considered distinctly private in its nature if it has more than one hundred members, provides regular meal service and regularly receives payment . . . directly or indirectly from or on behalf of a non-member for the furtherance of trade or business.

The evidence clearly demonstrated that the club had more than 100 members, and provided regular meal service; that nonmember individuals and institutions paid the club directly for use of its facilities, and that the club was essentially providing commercial catering services in hosting nonmember events, which generated significant revenue. In addition, the club allowed its recreational facilities to be used by nonmembers who purchased golf and tennis instruction, and nonmembers were free to purchase goods from its pro golf and tennis shops. Moreover, the social events and charitable and political fund-raisers held by nonmembers could be viewed as furthering trade or business since such events at a country club allow “personal contacts valuable for business purposes, employment and professional advancement” to be formed. See New York State Club Assoc., Inc. v. City of New York, 487 U.S. 1, 6, 108 S. Ct. 2225, 101 L. Ed. 2d 1 (1988).

Furthermore, it was clear from the legislative history underlying the 1994 amendment of Executive Law § 292(9) that the three identified characteristics precluding a club from being accorded “distinctly private” status were intended to be illustrative rather than exhaustive. The legislative history revealed an intent that clubs not be permitted “to evade prosecution under anti-discrimination laws by hiding behind a ‘private club’ label” where they “earn revenues by allowing nonmembers to partially utilize their clubs through such activities as weddings, business outings, etc.,” and regularly received funds from nonmembers for use of their facilities. See Sponsor’s Mem, Bill Jacket, L 1994, ch. 262, at 10. Despite the fact that the club exercised selectivity in choosing its members and required member sponsorship of nonmember events, it nevertheless regularly allowed nonmembers to utilize its facilities and generated revenue thereby. Given the extent to which the club generated revenue from providing services to nonmembers, it would have been inconsistent with the purpose and intent of the Human Rights Law to afford it “distinctly private” status and exempt it from the anti-discrimination provisions of the statute.

Substantial evidence supported the Commissioner’s determination that the club violated the Human Rights Law by using a religious quota system to admit new members. While the club’s goal in implementing its quota system was to promote diversity, the admissions policy had a discriminatory impact because it resulted in the denial of membership benefits to individuals who were placed on the waiting for substantial periods of time based solely upon their religion. See United States v. Starrett City Assoc., 840 F.2d 1096 (2d Cir. 1988), cert denied, 488 U.S. 946, 109 S. Ct. 376, 102 L. Ed. 2d 365 (1988).

There was no merit to the club’s contention that the remedy directed by the Commissioner violated the First Amendment rights of its existing members to private association and expressive association. Even if one were to accept the club’s position that it was a “private association” and “expressive association” in which its members joined to express their belief in promoting religious diversity, the Commissioner’s remedy did not violate these rights to associational freedom because it was narrowly tailored to serve a compelling state interest in preventing discrimination on the basis of religion. See Roberts v. United States Jaycees, 468 U.S. 609, 623, 104 S. Ct. 3244, 82 L. Ed. 2d 462 (1984). The remedy ordered by the Commissioner required the club to evaluate applicants for membership without discrimination on the basis of creed, and to grant membership to all persons without regard to creed. This remedy did not violate the rights of existing club members to private association because it did not prevent the club from excluding applicants who did not subscribe to its goal of religious diversity in its membership, or to expressive association because it did not prohibit the club from advocating its viewpoint that a religiously diverse membership was vital. Although the Commissioner’s remedy compelled access to the benefit of membership without reference to religion, it did not trespass on the organization’s message of religious diversity itself. See Hurley v. Irish-American Gay, Lesbian & Bisexual Group of Boston, 515 U.S. 557, 580, 115 S. Ct. 2338, 132 L. Ed. 2d 487 (1995); New York State Club Assoc., Inc. v City of New York, 487 U.S. at 12-13.

Finally, the Court rejected the club’s contention that the remedy directed by the Commissioner has been rendered academic by virtue of changes in its policies that it implemented after the hearing to bring it within the ambit of a “distinctly private” accommodation exempt from the Human Rights Law. Since these alleged policy changes were implemented after the hearing, they were dehors (beyond; outside of) the record and there was no assurance that they were genuine. See Matter of United States Power Squadrons v. State Human Rights Appeal Bd., 84 A.D.2d 318, 330, 445 N.Y.S.2d 565 (N.Y. App. Div. 2d Dept. 1981), affd, 59 N.Y.2d 401, 465 N.Y.S.2d 871, 452 N.E.2d 1199 (1983).

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