Hack, et al. v. The President and Fellows of Yale College, et al.
United States District Court for the District of Connecticut
IN THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
ELISHA D. HACK, JEREMY A. HERSHMAN, BATSHEVA GREER, and LISA B. FRIEDMAN,
THE PRESIDENT AND FELLOWS OF YALE COLLEGE d/b/a/ YALE CORPORATION and YALE
UNIVERSITY, RICHARD H. BRODHEAD, and BETTY TRACHTENBERG,
On Appeal from the United States District Court for the District of Connecticut
BRIEF FOR THE PLAINTIFFS-APPELLANTS
RICHARD W. GARNETT IV
MILLER, CASSIDY, LARROCA & LEWIN, L.L.P.
2555 M Street, N.W.
Washington, D.C. 20037
Attorneys for Plaintiffs-Appellants
This is an appeal from a final judgment entered on August 5, 1998, by District
Judge Alfred V. Covello pursuant to his July 31, 1998 ruling (hereinafter "Op.")
on the defendants-appellants' motion to dismiss. The District Court's opinion
is reported at 16 F. Supp. 2d 183 (D. Conn. 1998).
The plaintiffs-appellants' Amended Complaint alleged violations of federal
civil-rights laws, 42 U.S.C. § 1983; the Fair Housing Act, 42 U.S.C. §
3604; and the Sherman Act, 15 U.S.C. §§ 1, 2. The District Court had
jurisdiction over these claims pursuant to 28 U.S.C. §§ 1331, 1337.
The plaintiffs also presented state-law claims for breach of contract and unjust
enrichment. The District Court had supplemental jurisdiction over these claims
under 28 U.S.C. § 1367.
The District Court dismissed the entire Amended Complaint on the ground that it
failed to state a claim. Fed. R. Civ. P. 12(b)(6). A timely notice of appeal
was filed on August 13, 1998. This Court has jurisdiction. 28 U.S.C. § 1291.
- Whether Yale's history and current relationship with the State of Connecticut renders it a state actor or instrumentality for purposes of the constitutional protection against religious discrimination and other fundamental rights.
- Whether the plaintiffs' allegations that Yale's conduct is state action should have been dismissed before the plaintiffs were given any opportunity to discover and present facts relevant to those allegations.
- Whether the plaintiffs lacked standing to invoke the protections of the Fair Housing Act, 42 U.S.C. § 3604.
- Whether the Amended Complaint alleged a valid monopolization claim under the Sherman Act, 15 U.S.C. § 2.
- Whether the Amended Complaint alleged a valid "illegal tying" claim under the Sherman Act, 15 U.S.C. § 1.
STATEMENT OF THE CASE
Elisha D. Hack, Jeremy A. Hershman, Batsheva Greer, and Lisa B. Friedman are
students at Yale College, one of our Nation's oldest and most prestigious
educational institutions. When they filed this lawsuit, they were freshmen and
sophomores. The students are also devout Orthodox Jews who seek to enjoy the
richness, diversity, challenges, and rewards of a Yale education while remaining
faithful to their religious traditions and obligations. Amended Complaint ¶¶
11-14, 58, 63-65 (Joint Appendix (hereinafter "JA") 13-14, 23, 25-26).
Yale has a rule that it purports to apply inflexibly: Yale requires all of its
college freshmen and sophomores to reside in co-educational dormitories. The
plaintiffs cannot reside in these dormitories, however, because to do so
would conflict with their religious convictions and duties.
The plaintiffs contend -- and believe they could prove at trial -- that Yale's
refusal either to exempt them from its purportedly across-the-board residence rule
or to accommodate their religious beliefs within the dormitories is illegal because
the rule is discriminatorily enforced against students who have religious
objections to co-educational housing. Yale excuses everyone who is over 21 years
of age from the residence rule, as well as anyone who is married -- whether or not
the student lives off campus with his or her spouse. And, until very recently, any
Yale student whose family lived in New Haven was also exempted.
Yale contends, and the District Court agreed, that Yale is free to discriminate
against students with religious objections to co-educational housing because it
is a "private" college. This argument, if sustained, would enable Yale to
exclude all students of the Jewish faith from Yale College simply because
they are Jewish, or to prohibit the practice of Catholicism or Islam on campus.
We acknowledge that the United States Constitution does not apply to religious
discrimination by schools that are truly private. But the Constitution does forbid
an institution like Yale -- a perpetual fixture of Connecticut's educational
landscape that is enshrined in Connecticut's Constitution; a school with a long
history of close relations and entanglement with, and financing by, the governments
of the State of Connecticut, the City of New Haven, and the United States; and an
institution that is governed by a board on which the Governor and Lieutenant Governor
of Connecticut sit ex officio -- to engage in religious discrimination or to
administer rules that deny to religious observers the same consideration given
This is not, therefore, a case that challenges the housing policies of all private
universities or that seeks to forge new constitutional principles affecting
non-public entities. Rather, the plaintiffs' five civil-rights claims rest on the
legal proposition that Yale -- uniquely and distinctively -- has sufficient marks
of a governmental institution so that, for the specific purpose of protecting the
students' constitutional rights, Yale must be treated as a state actor or
These students are not, as Yale has suggested, separatist or divisive. These four
students seek an opportunity to live and learn with students from diverse
backgrounds and traditions, and to contribute, through their example as devoutly
religious and therefore "counter-cultural" students, to the educational experiences
of others. That is why they applied to Yale, are still attending its classes,
and participate in its extra-curricular activities. But this openness to diversity
does not mean that they can or should surrender or compromise their own religious
principles. The plaintiffs are challenging only Yale's intolerant, illiberal, and
dismissive attitude toward their religious obligations, and its embracing of what
Rabbi Marc Gellman recently called "the last acceptable prejudice in America . . .
the prejudice against those who take their faith seriously." M. Gellman, "Civil
Rights and the Sacred Truth," Civil Rights Journal 11, 14 (Fall 1997). The
students do not acquiesce in current trends in popular culture and morality or in
Yale's decision that these trends should override conscientious convictions based
on religious beliefs and laws more than three thousand years old.
2. The Colonial Legislature Establishes Yale.
On October 9, 1701, during its first meeting in New Haven, Connecticut's colonial
General Assembly approved "An Act for Liberty to Erect a Collegiate School."
Brooks Mather Kelley, Yale: A History 6 (1974) (hereinafter "Yale
History"). The founding Act described the new College as a place "wherein
Youth may be instructed in the Arts and Sciences who through the blessing of
Almighty God may be fitted for Publick employment both in Church and Civil State."
Plaintiffs-Appellants' Addendum Exhibit (hereinafter "Ex.") 1. To promote and
safeguard the school's public mission, the legislators who drafted and approved
the Act took it upon themselves to name the trustees, prescribe their number,
define their duties, and to direct that public funds be expended both initially
and on an annual basis to support and encourage the newly created college. Id.
This governmental wardship continued throughout the first century of Yale's
existence, as the colonial and local public authorities supported the college and
its civic mission directly and indirectly, financially and otherwise. Amended
Complaint ¶¶ 18-35 (JA 14-17).
3. The State of Connecticut Continues the Partnership.
After Independence and the creation of the State of Connecticut, the General
Assembly in 1791 appointed a committee to inquire into the progress and conditions
of Yale. Yale History, at 103. The result of this committee's work was
the 1792 Act of Union, which provided for continued substantial financial assistance
from the State and prescribed that the Governor, the Lieutenant Governor, and six
senior assistants in the Connecticut Council were to serve as ex officio
members of the Yale Corporation. See Ex. 2. "The revision of the charter by the
Act of Union of 1792 . . . recognized the importance of the state to the college
and of the college to the state. It confirmed what had long been true but not
officially recognized: that the state was a partner in this great enterprise.
It was certainly . . . one of the most important events in the entire history of
Yale." Yale History, at 103; see Amended Complaint ¶¶ 30-32 (JA 17).
4. Yale Is Enshrined in the Connecticut Constitution.
Connecticut's Constitution became effective on October 12, 1818. It confirmed --
and still confirms, in Article 8, § 3 -- the charter of Yale College. Amended
Complaint ¶¶ 36-37 (JA 18); Ex. 4. Public financial and other support of,
and government involvement with, Yale -- by state, local, and federal authorities --
continued throughout the Nineteenth Century, and they are important features of
Yale's existence today. From collaboration in urban-revitalization projects to
policing New Haven with its state-authorized police force, Yale continues to serve
the people of Connecticut in a distinctly public fashion and, in turn, to receive
millions of dollars in state and federal funding. See Amended Complaint ¶¶
39-52 (JA 18-22). Yale and Connecticut remain "partners" to this day, and that
partnership is confirmed in Connecticut's Constitution and laws and also in three
centuries of cooperation.
5. Yale Creates Residential Colleges.
In 1925 -- over two hundred years after Yale's founding -- University President
James Rowland Angell proposed the construction of "residential quadrangles of the
Oxford-Cambridge type" at Yale. Yale History, at 373. Five years later,
Edward S. Harkness -- flush with Standard Oil money -- promised nearly $16 million
to re-make Yale according to the residential-college model. Id., at 374,
376. The first seven colleges opened in September 1933, resulting in the "greatest
alteration in college life" of that time. Id., at 387-388. The network of
residential colleges, and the role it plays in undergraduate education, has since
become one of Yale's most distinguishing features.
Today, Yale's housing regulations generally require sophomores and freshmen to
live on-campus, in one of the twelve residential colleges, all of
which (Mr. Harkness would no doubt be surprised to learn) are completely and
pervasively co-educational and none of which is regulated by parietal
rules. Amended Complaint ¶¶ 53-54 (JA 22). Before the 1995-1996
academic year, this rule applied only to freshmen, and it did not apply to students
whose families lived in New Haven. Ibid; Ex. 6. In recent years, however,
for a variety of reasons, Yale students have increasingly sought out rental housing
in nearby New Haven neighborhoods rather than in the residential colleges,
prompting Yale's decision to expand the reach of the requirement as a way of
keeping the dormitories full. Amended Complaint ¶¶ 54-55 (JA 22-23).
6. The Students Request an Exemption.
The plaintiffs are devout and observant Orthodox Jews. In contrast to the "ceremonial
deism" that pervades much of contemporary American life, theirs is a demanding
faith: "Orthodox Judaism regulates the details of daily life according to religious
law and tradition. Among other things, Orthodox Judaism requires strict adherence to
a code of sexual modesty. This code forbids, for example, touching members of the
opposite sex other than one's immediate relatives or spouse. It also forbids living
in a situation in which a person would have regular or repeated exposure to members
of the opposite sex undressed or dressed immodestly." Amended Complaint ¶
57 (JA 23). To the students, Jewish law is not merely advisory or precatory; it
imposes binding obligations.
Given these obligations, the students simply cannot live in Yale's co-educational
residential colleges as they are presently administered. See, e.g., Amended
Complaint ¶ 72 (JA 28). The common areas of Yale's residential colleges,
including the bathrooms, are easily accessible to members of both sexes. Amended
Complaint ¶ 53 (JA 22). Yale has no "parietal rules" against room visits --
at any time of the day or night -- by members of the opposite sex or against sexual
activity and immodesty in its dormitories. Ibid.
Each of the students, after he or she was admitted by Yale but before enrolling,
requested an exemption from the mandatory housing policy. Amended Complaint ¶¶
59, 63-65 (JA 23, 25-26). Each student informed Yale of his or her religious
obligations as an Orthodox Jew and of the fact that, given the sexual activity and
immodesty prevalent in Yale's co-educational dormitories, he or she could not,
consistent with Orthodox Judaism, live in those dormitories. Amended
Complaint ¶¶ 57, 59-60, 63-65 (JA 23-26). Given Yale's liberal tradition,
its published assurances that it did not discriminate on the basis of religion (Amended
Complaint ¶¶ 130-131; JA 44), and the fact that students in the past had
been granted exemptions from the housing policy and permitted to live in housing
other than the co-educational residence-hall dormitories for other reasons, the
students had reason to believe, at the time they accepted Yale's offer of admission,
that their religious beliefs would be respected.
7. Yale Refuses To Permit the Students To Live Off Campus.
The students' requests were denied by Yale, and they were directed to live in the
co-educational residence halls. Op. at 4 (JA 90); Amended Complaint ¶¶
61, 63-65 (JA 24-26). The students refused to disregard their religious obligations.
Instead, they arranged for off-campus housing "that provides . . . an appropriate
environment in which to practice [their] faith." Op. at 5 (internal quotation
marks omitted)(JA 91); Amended Complaint ¶¶ 62-65 (JA 24-26). Under
threat of expulsion, the students have paid for on-campus housing, and their
dormitory rooms have remained vacant. Ibid.
For several months during the summer and fall of 1997, counsel for the students
and various other third parties urged Yale to exempt the students from the on-campus
requirement or to provide appropriate single-sex housing, either in the Residential
Colleges or in other Yale-owned facilities. Amended Complaint ¶¶
67-68 (JA 27-28). "[T]hese attempts [were] unsuccessful. [Yale] insisted that
living in a Residential College is 'integral' to a Yale education, notwithstanding
the relative newness of the housing requirement, the exemptions Yale grants to
married students and students over the age of 21, and the requirement's inapplicability
to College juniors and seniors." Amended Complaint ¶ 67 (JA 27).
8. The Students File Suit.
Faced with Yale's intransigence, the students filed this lawsuit in the United States
District Court for the District of Connecticut on October 15, 1997. On December 2,
1997, the students filed an Amended Complaint, alleging violations of federal
civil-rights and other statutes. The students contended that (1) Yale is liable
under 42 U.S.C. § 1983 for violating the students' constitutional rights to
religious freedom, freedom of association, privacy, due process, and equal
protection (Amended Complaint ¶¶ 4, 69-96, 133-138; JA 11, 28-35,
45-46); (2) Yale has discriminated on the basis of religion in the provision of
housing, in violation of the Fair Housing Act, 42 U.S.C. § 3604 (Amended
Complaint ¶¶ 5, 97-99; JA 11-12, 36); and (3) Yale's housing policy
constitutes illegal monopolization and is an unlawful "tying" arrangement under
the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2 (Amended Complaint ¶¶
7, 107-128; JA 12, 38-44)).
9. The District Court Decides.
Yale filed a motion to dismiss the students' Amended Complaint on December 15,
1997 (JA 49-52). The students opposed the motion, and requested oral argument.
Meanwhile, Yale refused the students' request for voluntary discovery and, on
January 15, 1998, moved to prevent the students from conducting any discovery
pending resolution of the motion to dismiss (JA 53-62). No discovery was conducted
pending the District Court's decision on that motion. Almost six months after
it was filed, the District Court denied Yale's motion to stay discovery (JA 86).
The parties then negotiated and submitted the required discovery plan pursuant to
Fed. R. Civ. P. 26(f), which was approved on July 23, 1998. Just eight days
later, the District Court, without hearing oral argument, dismissed the students'
Amended Complaint in its entirety (JA 87-120, 121).
SUMMARY OF ARGUMENT
Four students at Yale College claim that, in administering its dormitory-residence
rules, Yale has discriminatorily refused to give their religious obligations the
same deference it gives to secular considerations raised by other students. If
Yale were subject to the constraints of the United States Constitution, the students'
civil-rights claims could not have been dismissed. The District Court would have
had to evaluate the claims on their merits and weighed the impact of the discriminatory
treatment against any justifications offered by Yale for treating the plaintiffs'
religious convictions differently than other claims for exemption from the co-educational
housing requirement. The legal precedent is clear: the only reported decision
that has considered a claim like these plaintiffs' has held that the policy followed
here by Yale is unlawful when implemented by a government-operated university.
Rader v. Johnston, 924 F. Supp. 1540 (D. Neb. 1996).
The District Court, however, never evaluated the students' constitutional claims
because it determined, without the aid of information that would have emerged in
discovery, that "Yale is not a state actor" and "Yale's housing policy decisions
may not be treated as state action." Op. at 18 (JA 104). This precipitous determination
regarding Yale's "private" status frees Yale from any and all constitutional limitations.
It means that Yale could, as a "private" entity, engage in flagrant and open religious
discrimination in admissions, dormitory assignment, and all phases of University
But, in fact, Yale "has never been wholly a private institution." Yale History,
at 11. The leading history of Yale describes the State of Connecticut as "a partner
in this great enterprise." Id., at 103. Yale is, we submit, a unique institution
that merges governmental and private control and functions. It therefore cannot
totally escape the requirements of the United States Constitution simply by professing
to be "private." Its origins, history, development, and current privileged status
within the State of Connecticut and the City of New Haven subject Yale to fundamental
obligations imposed by the Constitution.
The District Court erroneously believed that the Supreme Court has mandated a single
"test" by which Yale's claim to a legal right to discriminate on the basis of religion
may be evaluated, and it simply asserted -- without the benefit of any discovery --
that the students' claims failed to satisfy that "test." This conclusion was an
erroneous decision on an important question of constitutional law.
The District Court's conclusion was also based on an error of federal civil procedure.
By dismissing the students' complaint before permitting them to obtain any discovery
on factual issues relating to their civil-rights claims, the District Court violated
established principles governing cases of this kind. Dismissal of a Section 1983
action under Federal Rule Civ. Proc. 12(b)(6) is not permissible if the plaintiff
is seeking to discover facts that support a claim that the defendant is, for civil-rights
purposes, a state actor or instrumentality. See Weise v. Syracuse Univ.,
522 F.2d 397, 407 (2d Cir. 1975).
We turn next to the students' statutory claims. Contrary to the conclusion of
the District Court, the plaintiffs have Article III "standing" to assert a claim
under the Fair Housing Act, 42 U.S.C. § 3604, because they have been forced
to pay for housing that they cannot, as Orthodox Jews, occupy while other students,
who have non-religious grounds for modifying Yale's dormitory rules, have been
accommodated by Yale. In addition, Yale's mandatory co-educational housing policy
has the clear effect of excluding the students from housing on the basis of their
religion. These are prima facie violations of the Fair Housing Act.
Finally, the students' Amended Complaint alleges valid "monopolization" and "tying"
claims under the federal antitrust laws. Yale's compulsory dormitory-residence
requirements violate the long-standing prohibitions against monopolization and
unreasonable restraints of trade. Yale is seeking to monopolize the market for
student housing in New Haven. By requiring all freshmen and sophomores to live
in the dormitories, Yale eliminates its competitors in that market. And by requiring
all who want a unique Yale education to pay for housing in its dormitories, Yale
is using its market power to force students to purchase an unwanted "tied" product.
YALE MERGES GOVERNMENT AND PRIVATE CONTROL IN A MANNER THAT SUBJECTS IT TO FUNDAMENTAL
FEDERAL CONSTITUTIONAL OBLIGATIONS
To determine whether an educational institution is subject to the constitutional
limitations imposed on government, a court must consider both (1) the characteristics
of the particular educational institution and (2) the nature of the constitutional
claim being asserted. A small college or other private school that is funded and
supported entirely by private contributions, and that receives no governmental
financing or state endorsement of any kind, is obviously different for constitutional
purposes from a nominally "private" school that is, in fact, created, supported,
and promoted by state law and that is controlled by a group including government
agencies and/or government officers.
By the same token, not all "state action" claims are the same. An employee who
claims, for example, that a university has disciplined him without the full panoply
of required procedural safeguards is making a significantly different claim than
a student who has been expelled from, or denied admission to, a school on account
of his race or religion. A college that is not a "state actor" for purposes of
detailed hiring and discharge procedures may be a "state actor" for purposes of
vindicating the more fundamental right to be free from racial or religious discrimination.
This Court has observed that the state-action inquiry varies with the nature of
the constitutional right asserted. Weise, 522 F.2d at 406; Wahba v.
New York Univ., 492 F.2d 96, 100 (2d Cir. 1974) ("We do not find decisions
dealing with one form of state involvement and a particular provision of the Bill
of Rights at all determinative in passing upon claims concerning different forms
of government involvement and other constitutional guarantees."). Judge Friendly
once noted that courts are more likely to find state action when conduct that is
particularly offensive to constitutional norms -- such as discrimination on the
basis of race, religion, or sex -- is alleged. Grafton v. Brooklyn Law School,
478 F.2d 1137, 1142 (2d Cir. 1973); see Weise, 522 F.2d at 405-407;
Coleman v. Wagner College, 429 F.2d 1120, 1127 (2d Cir. 1970) (Friendly, J.,
concurring); Jackson v. Statler Foundation, 496 F.2d 623, 635 (2d Cir. 1974).
This case concerns an educational institution that many describe as "private" because
it is not directly administered by a governmental agency, as are the hundreds of
public state and local educational institutions in this country. But the students
have alleged and believe they could prove that Yale is not truly a "private" institution.
Its unmatched reputation and prestige are in large part due to nearly three hundred
years of extraordinary government endorsements, financial support, and other assistance
from the State of Connecticut and to the fact that Yale's charter and mission continue
to bear the official imprimatur of Connecticut and of the City of New Haven.
Not only does this case involve a unique institution, but the constitutional liberty
at issue here is perhaps the most fundamental right guaranteed by the Bill of Rights --
the liberty to practice one's faith. Yale is not being asked to acknowledge some
arcane procedural right that emerged from obscure litigation. It is being asked
to respect what every modern society is expected to respect -- the call of conscience
and religious conviction.
A. The Undisputed Historical Facts Establish That Yale Is an Agency or Instrumentality
of the State of Connecticut for Purposes of Racial or Religious Discrimination.
In Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995), eight
Supreme Court Justices held that Amtrak -- a corporation created to operate railroads
on a for-profit basis -- "is an agency or instrumentality of the United States
for the purpose of individual rights guaranteed against the Government by the Constitution."
513 U.S. at 394. In so holding, the Lebron Court overrode an explicit statutory
provision declaring Amtrak a private entity, not a government agency: "The Corporation
will not be an agency or establishment of the United States Government." The Court
held, in light of "the long history of corporations created and participated in
by the United States for the achievement of governmental objectives" (513 U.S.
at 386), that Amtrak must be classified as a government agency "for purposes of
determining the constitutional rights of citizens affected by its actions." 513
U.S. at 392.
Yale is, for the specific and limited purpose of vindicating constitutional rights,
as much an instrumentality of Connecticut as Amtrak is an instrumentality of the
United States. The Court's rationale in Lebron leads, by parallel reasoning,
to the conclusion that Yale is also subject to the limitations imposed on government
with respect to "the constitutional rights of citizens affected by its actions."
513 U.S. at 392.
(1) Yale was created by Connecticut statute.
The Lebron Court placed great emphasis on the fact that Amtrak was created
by a federal statute. It reviewed at length the history of corporations "created
and participated in by the United States." 513 U.S. at 386. Just as the corporations
surveyed by the Supreme Court were "created" by federal statutes, Yale was "created"
by a 1701 enactment of the General Assembly of Connecticut. Amended Complaint ¶¶
18, 19 (JA 14-15); Ex. 1. Over the next 20 years, additional laws were enacted
to assist the government-created institution financially and in other ways. Amended
Complaint ¶¶ 20-24 (JA 15-16); Ex. 7. Laws enacted by the Connecticut
General Assembly in 1723 and 1745 (Amended Complaint ¶¶ 25, 26; JA 16,
Ex. 8-9) reaffirmed the initial creation of Yale by statute, further refined Yale's
"powers and privileges," and specified how it was to be governed. Additional financial
assistance from the public treasury was provided by laws enacted in 1747, 1749,
and 1770. Amended Complaint ¶¶ 27-29 (JA 16-17); Ex. 10.
The statutory creation, charter, and public mission of Yale were re-confirmed after
the American Revolution in the 1792 Act of Union, which specified that the College
was to be run by the governor, lieutenant-governor, and six senior assistants in
the Connecticut Council, all of whom were to serve ex officio. Amended
Complaint ¶¶ 30-32 (JA 17); Ex. 2. This requirement was modified in
1819 to provide that six senior senators were to join the governor and
lieutenant-governor on Yale's board. Amended Complaint ¶ 39 (JA 18); Ex. 11.
The history of legislative involvement and "participation" in the creation of Yale
is far more extensive and long-standing than the history on which the Court relied
in Lebron. It establishes beyond any doubt that Yale was and is the creature
of the Connecticut government. As Professor Kelley said in his monumental history
of Yale: "The revision of the charter by the Act of Union of 1792 . . . recognized
the importance of the state to the college and of the college to the state. It
confirmed what had long been true but not officially recognized -- that the state
was a partner in this great enterprise." Yale History, at 103.
(2) Yale's charter has been enshrined in the Connecticut Constitution.
Yale was not only created by Connecticut law -- as the many government corporations
discussed in Lebron were created by federal law -- it has also been elevated
to a constitutional status that places it beyond legislative repeal. The Connecticut
Constitution, adopted in 1818, declares:
The charter of Yale College, as modified by agreement with the corporation thereof,
in pursuance of an act of the general assembly, passed in May, 1792, is hereby confirmed.
Conn. Const. Art. VIII, § 3; Ex. 4. Thus, even if the Connecticut Legislature
wished to repeal Yale's charter, it is constitutionally unable to do so. Unlike
truly private institutions in the State of Connecticut, Yale is constitutionally
identified as a permanent fixture in and permanent resource for the State.
This level of government endorsement far exceeds that of the governmental instrumentalities
that were described in Lebron. 513 U.S. at 386-394. There would surely
have been no doubt of Amtrak's governmental status, regardless of the intricate
details of its management structure, if it had not only been created by federal
law but were also named and eternalized in the United States Constitution. Indeed,
we know of no entity named in the United States Constitution that is not, ipso facto,
an agency or instrumentality of government.
(3) Yale was created to further public, governmental objectives.
Laws adopted by both the Connecticut colonial and state legislatures often expressed
the public purpose behind the creation and continued support of Yale. Yale was
created to provide a valuable public service that was thought to be essential to
the future of Connecticut. Yale's public function has been affirmed and perpetuated
not only by its explicit designation in the Connecticut Constitution but also by
the great degree of financial and other assistance provided to Yale by the New
Haven, Connecticut, and United States governments. Amended Complaint ¶¶
45-49 (JA 19-20).
The Supreme Court in Lebron viewed Amtrak as designed to serve governmental
objectives even though Congress explicitly disavowed government status for Amtrak
and clearly contemplated that Amtrak would produce a profit for private shareholders.
513 U.S. at 385-386. Although the operation of railroads had always been a function
that was and still is carried out by private entities, Congress' action in 1970
was viewed by the Court as transforming that traditionally private task into a
governmental function. The existence of truly private colleges in Connecticut
does not, by the same token, diminish Yale's status as a creature of Connecticut
government, established for governmental purposes.
(4) Connecticut's Governor and Lieutenant Governor are ex officio members of Yale's
The participation of government officials in the governance and administration
of the entity alleged to be a public instrumentality was another important consideration
in Lebron. The Court noted, for instance, that five of the 25 directors
of the second Bank of the United States were appointed by the President. 513 U.S.
at 386-87. Similarly, the Union Pacific Railroad was "chartered in 1862 with the
specification that two of its directors would be appointed by the President of
the United States." 513 U.S. at 387.
None of the enabling legislation for the governmental corporations enumerated in
Lebron specified that the President and Vice-President were themselves to
be ex officio board members. Such a statutory designation might well have
been sufficient, in and of itself, to render a federally created corporation a
government instrumentality, regardless of how many directors came from the private
sector. After all, when the Chief Executive and the second highest-ranking official
of government are named ex officio to a board, it stands to reason
that their participation carries more weight than that of a number, or even a majority,
of the Chief Executive's designees. An opinion expressed by the Chief Executive
at a board meeting has far more influence than the views of any or all of the anonymous
bureaucrats he or she selects. And the public naturally views a policy decision
made by a board that includes a President or Governor as more "official" than a
similar decision made by a group of private individuals -- even if all these individuals
have been designated by the President or Governor.
Moreover, the Supreme Court noted in Lebron that the Amtrak board members
appointed by the President are not removable by the President or impeachable by
Congress once they take office. 513 U.S. at 398. This restriction reduces drastically
their accountability to the Executive Branch and the likelihood that their policy
decisions could be controlled by government officials. The Lebron Court
also noted that most of the President's nominees to Amtrak's nine-member board
must be selected from the private sector, from lists of candidates recommended
by private railway interests. 513 U.S. at 385-86. This limitation even further
reduces the influence of elected government officials on Amtrak policy.
In contrast, the Governor and Lieutenant-Governor of Connecticut, wearing their
government hats, are required by state law to serve as members (not
merely to approve private citizens' board-member selections) of Yale's governing
board. This official designation to the Yale board of the State's highest-ranking
officials gives the Connecticut government an influential role in Yale's policy
decisions. The Tenth Circuit put the matter well in Gilmore v. Salt Lake City
Community Action Program, 710 F.2d 632, 637-638 n. 12 (10th Cir. 1983):
When public officials serve on a governing board of an institution, there is always
some risk that the officials may advance government objectives through the institution.
When the officials serve on the board to offer service and assistance qua
governmental officials, when their presence on the board is a requirement for federal
funding, and when the decisions of the board often involve issues of public interest,
there exists a substantial risk that governmental objectives can influence institutional
action. Accordingly, the institution becomes a state actor even if, as here, the
public officials maintain only a minority representation on the governing board.
The potential for government influence cannot be directly calibrated to the number
of officials on the board; the officials, by virtue of the requirement of their
position, can exercise influence far in excess of their proportional representation.
All in all, the designation of the two highest state-government officials as Yale
board members is, we submit, at least as effective and meaningful an involvement
of government in the policy of Yale as is the Presidential power to appoint --
but never thereafter to control -- a majority of Amtrak's board from specific lists
of recommended private-sector nominees.
This is particularly true when the practice that is being challenged is so significant
as racial or religious discrimination. A board that includes a Governor and
Lieutenant-Governor -- like a board that includes a President and Vice-President --
cannot shield racial or religious discrimination behind the façade of "private
action." See, e.g., Shelley v. Kraemer, 334 U.S. 1, 20 (1947); Ex
part Virginia, 100 U.S. (10 Otto) 339 (1879).
(5) Yale must report its budget to the Connecticut Legislature.
Finally, the Supreme Court noted in its Lebron opinion that Amtrak is required
to submit regular reports to the President and to Congress. 513 U.S. at 386.
This was another factor that the Court found to be relevant in determining that
Amtrak is a federal instrumentality. Similarly, Yale must submit its budget and
financial report to the Connecticut Legislature. Amended Complaint ¶ 35 (JA
17); Ex. 3. This requirement demonstrates that, unlike truly private institutions,
Yale is an educational institution that operates in partnership with the Connecticut
General Assembly and state government and that therefore must respect the constitutional
rights of those who are affected by its actions.
B. The Fact That Less Than a Majority of Yale's Board Consists of Connecticut Officials
or Government Appointees Does Not Permit Yale To Violate the Constitution.
The District Court relied on only one distinction between this case and Lebron
to justify its conclusion that Yale, unlike Amtrak, may engage in what -- as the
Rader case demonstrates, supra -- would otherwise be unconstitutional
religious discrimination. It held that Lebron applies only if government
retains "the authority to appoint a majority of directors." Op. at 10 (JA
96) (emphasis in original).
The District Court read Lebron as if it articulated a "three-pronged analytical
test" (Op. at 8; JA 94), the third prong of which is the power of government --
be it federal or state -- to "control" a majority of the board of directors through
executive appointment. The Lebron Court did not, however, suggest that
the considerations enumerated in its opinion formed the "prongs" of a "test."
In this "era rich in three-part tests" (Steel Company v. Citizens for a Better
Environment, 118 S.Ct. 1003, 1017 n. 5(1998)), the Supreme Court does not keep
it a secret when it promulgates yet another such test.
THE STUDENTS ARE ENTITLED TO DISCOVER FACTS RELATING TO THE INTERRELATIONSHIP BETWEEN
YALE AND THE GOVERNMENTS OF CONNECTICUT AND NEW HAVEN
The undisputed historical facts establish, we believe, that Yale is an instrumentality
of the State of Connecticut for the specific purpose of vindicating constitutional
guarantees. The Federal Rules, however, did not require the plaintiffs to convince
the District Court of this fact in order to defeat Yale's motion to dismiss.
The District Court lost sight of the basic rule that "[t]he issue [on a motion
to dismiss] is not whether a plaintiff will ultimately prevail but whether the
claimant is entitled to offer evidence to support the claims. Indeed it may appear
on the face of the pleadings that a recovery is very remote and unlikely but that
is not the test." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). A plaintiff
need only state his claims and the basis for them with sufficient specificity to
provide the defendants with fair notice. See, e.g., Cohen v. Litt,
906 F. Supp. 957, 961 (S.D.N.Y. 1995) (quoting Conley v. Gibson, 355 U.S.
41, 47 (1957)).
There are, in this case, two alternative related legal theories under which Yale's
residence policy may be found, for civil-rights purposes, to be government action.
The first -- that Yale is an instrumentality of the State of Connecticut -- may
be supported with additional facts that could emerge during discovery. These include,
but are not limited to, the degree to which the State is currently involved in
policy-making decisions of the Yale board, the historical role of the board's ex
officio board members in such decisions, the extent to which Yale is financially
supported by state and federal funds, the amount of oversight the Connecticut legislature
exercises over Yale's budgetary and other decisions.
In addition, even if Yale is not an "instrumentality" of Connecticut government
within the meaning of Lebron, its discriminatory residence policies may
nonetheless constitute state action. The Supreme Court has emphasized that the
formulation of "infallible test[s]" in this difficult area is an "impossible task"
(Reitman v. Mulkey, 387 U.S. 369, 378 (1967)) and, not surprisingly, "has
not developed a unitary test" for state action. Instead, the "facts of each case
determine the test." Imperiale v. Hahnemann Univ., 776 F. Supp. 189, 195
(E.D. Pa. 1991); Yeo v. Town of Lexington, 131 F.3d 241, 249 (1st Cir. 1997)
("The modern state action decisions of the Supreme Court do not rely on a single
analytical model."), cert. denied, 118 S.Ct. 2060 (1998).
There is no single "test," but the question ultimately to be resolved in Section
1983 cases is whether "the alleged infringement of federal rights [is] fairly attributable
to the State?" Barrios-Velazquez v. AEELA, 84 F.3d 487, 491 (1st Cir. 1996)
(quoting Rendell-Baker v. Kohn, 457 U.S. 830, 838 (1982)); Humpherys
v. Nager, 962 F. Supp. 347, 351 (E.D.N.Y. 1997). This inquiry requires a complicated,
fact-specific, and context-sensitive inquiry because it is "[o]nly by sifting facts
and weighing circumstances [that] the nonobvious involvement of the State in private
conduct be attributed its true significance." Burton v. Wilmington Parking
Authority, 365 U.S. 715, 722, 726 (1961); Grijalva v. Shalala, 152 F.3d
1115, 1119-1120 (9th Cir. 1998) ("A detailed inquiry into the facts of the particular
case may be necessary to determine whether there is state or federal action.");
Logan v. Bennington College Corp., 72 F.3d 1017, 1027-28 (2d Cir. 1995).
Because the students' Section 1983 claims are inherently factbound and context-sensitive,
their claims should not have been dismissed before they had the opportunity to
discover and introduce supporting evidence.
Judge Higginbotham provided a helpful illustration of the factbound and context-sensitive
analysis that is required for state-action claims against seemingly private educational
institutions in Isaacs v. Board of Trustees of Temple Univ., 385 F. Supp.
473 (E.D.Pa. 1974). In that case, two former faculty members sued the University
under Section 1983 and the University responded, as Yale has done here, by insisting
that it was a "purely private" institution. 385 F. Supp. at 474. After a detailed
analysis of prior case-law, Judge Higginbotham concluded that "[o]n the basis of
my reading of the extensive record in this case, I have concluded that the Commonwealth
of Pennsylvania has so significantly involved itself in the affairs of Temple University
that the latter's activities satisfy the requirements of 'state action' and action
'under color of' state law as set forth in Burton v. Wilmington Parking
Authority, . . . , and its progeny." 385 F. Supp. at 495.
Courts have agreed that it is inappropriate to dismiss a Section 1983 claim against
an ostensibly private school or university simply because the particular allegations
in the complaint are not by themselves sufficient conclusively to establish state
action. In Weise, supra, for example, this Court held that the District
Court had erred in dismissing a former instructor's Section 1983 complaint against
a private university. The Court emphasized that the plaintiffs' allegations concerning
the relationship between the university and the state presented complicated questions
that could not be properly resolved without a hearing and the presentation of evidence.
522 F.2d at 407. The Court of Appeals for the Third Circuit recently applied this
same basic principle in Lake v. Arnold, 112 F.3d 682 (3d Cir. 1997). After
quoting Scheuer v. Rhodes, supra, the Third Circuit observed that
"state action" determinations should not be made on a motion to dismiss or on the
basis of an "undeveloped record." 112 F.3d at 689. The court added, "[a]nalysis
of the law must attend development of the facts." Ibid.
In this case, the students have been given no opportunity to discover and develop
facts that are exclusively within Yale's control. Whether or not Yale is a "state
actor" could depend on the degree to which it is currently assisted, encouraged,
and influenced by agencies and officials of Connecticut state government and by
agencies of the City of New Haven. Moreover, the degree to which Yale's dormitory
residence rules are intertwined with government policies or with government funding
may affect the finding whether it is "state action."
It is well established that the presumptions against dismissal of a complaint under
Rule 12(b)(6) "run particularly strongly in favor of a non-movant alleging a violating
of her civil rights." Cohen v. Litt, 906 F. Supp. at 962 (citing Dwyer
v. Regan, 777 F.2d 825, 829 (2d Cir. 1985)). Given the serious nature of their
religious-discrimination claims, the students must be given an opportunity to develop
probative facts by the discovery process and to present them to the District Court.
YALE'S REFUSAL TO EXEMPT RELIGIOUS OBSERVERS FROM CO-EDUCATIONAL HOUSING VIOLATES
THE FAIR HOUSING ACT
The students alleged that Yale's mandatory co-educational residence rules violate
the Fair Housing Act. The District Court, however, asserted that the students
lacked Article III "standing to bring their fair-housing claims" because "[t]he
plaintiffs were not denied housing or discriminated against by the terms or conditions
of Yale's housing policy." Op. at 21 (JA 107). This holding confused the question
of "standing" with the merits of the plaintiffs' claims, which the District Court
A. The Amended Complaint Alleges Violations of the Fair Housing Act.
The Fair Housing Act provides that "it shall be unlawful to refuse to sell or rent . . .
or otherwise make unavailable or deny, a dwelling to any person because of . . .
religion." 42 U.S.C. § 3604(a). The Act also prohibits discrimination "in
the terms, conditions, or privileges of sale or rental of a dwelling, or in the
provision of services or facilities in connection therewith, because of . . . religion."
42 U.S.C. § 3604(b). The students have alleged that by refusing to honor
their religion-based requests for single-sex housing Yale has in effect refused
to make a dwelling available and has discriminated against the plaintiffs "because
of . . . religion," thereby violating these two sections of the Fair Housing Act.
Amended Complaint ¶ 99 (JA 36).
Section 3604(a) "reaches every practice which has the effect of making
housing more difficult to obtain on prohibited grounds." United States v. City
of Parma, Ohio, 494 F. Supp. 1049, 1053 (N.D. Ohio 1980) (emphasis added).
This Court observed, in LeBlanc-Sternberg v. Fletcher, 67 F.3d 412, 424 (2d
Cir. 1995), that "[t]he phrase, 'otherwise make unavailable' has been interpreted
to reach a wide variety of discriminatory housing practices." In that case, plaintiffs
sued the Village of Airmont under the Fair Housing Act, alleging that the Village
"discriminated against Orthodox Jews on the basis of their religion through the
adoption of zoning policies limiting the use of Orthodox rabbis' homes for prayer
services." 67 F.3d at 416. There was, as in this case, no allegation in LeBlanc
that Jews were not permitted to buy property or to live in Airmont. However, it
was established that it was "important for Orthodox Jews to be able to gather for
worship in congregations large enough to ensure the presence of a minyan,
and close enough to the congregants' homes to allow them to walk to services."
67 F.3d at 417. The Village of Airmont's zoning regulations made it more difficult
for Orthodox Jews to comply with their obligations and therefore had the effect
of excluding Orthodox Jews from the community. 67 F.3d at 418. This Court held
that the District Court in LeBlanc erred in setting aside the jury's verdict
against the Village, because "the evidence was sufficient to establish that Airmont
violated the private plaintiffs' rights under the Fair Housing Act." 67 F.3d at 424.
Yale's insistence that it will only provide housing that it knows the students
cannot occupy, and its refusal to make available to the students housing that the
students can occupy (despite the fact that such housing exists and that Yale does
provide it to other students), has, like the zoning regulations enacted by the
Village of Airmont, "made unavailable" and constructively denied housing to the
students because of religion. If, for example, a dormitory rule made it impermissible
for all students to wear a yarmulke in a dormitory room, or prohibited all
students from keeping a prayer shawl ("tallit"), phylacteries ("tefillin"),
or a prayerbook ("siddur") in his (or her) room, such regulations would,
in practical effect, exclude Orthodox Jews from the dormitories. The current rules
(or, more precisely, the current absence of any traditional, reasonable parietal
rules) have the same effect on the plaintiffs. This discrimination is actionable
under Section 3604(a).
Section 3604(b) makes it "unlawful to discriminate against any person in the terms,
conditions, or privileges of sale or rental of a dwelling, or in the provision
of services or facilities in connection therewith, . . . because of religion."
Providing only co-educational housing facilities, which were and are known to be
unacceptable to these students because of their religious beliefs and obligations,
is a "term" or "condition" of the rental of a dwelling, and is an aspect of the
"provision of services or facilities in connection [with a dwelling]," under the
Act. Therefore, Yale's policy of granting ad hoc and other exemptions and
accommodations for secular reasons, but not for religious reasons, is also actionable
under Section 3604(b).
The United States Supreme Court has made clear that it is discrimination to treat
religion-based requests for exemptions differently than other requests: "[W]here
the State has in place a system of individual exemptions, it may not refuse to
extend that system to cases of 'religious hardship' without compelling reason."
Employment Div. v. Smith, 494 U.S. 872, 884 (1990) (citing Bowen v.
Roy, 476 U.S. 693, 708 (1986)); see also Church of Lukumi Babalu Aye, Inc.
v. Hialeah, 508 U.S. 520, 536-38, 542-546 (1993); Rader, 924 F. Supp.
at 1552 n. 23 ("[W]hen government grants exemptions to a general rule on an individualized
basis and refuses to extend an exemption to a religious observer, strict scrutiny
Yale will likely insist that its on-campus housing requirement is both neutral
and generally applicable and that it has not discriminated against the students
either on paper or in practice. But this is certainly a disputed question of fact
that should not have been resolved by the District Court on a motion to dismiss.
See, e.g., Sassower v. Field, 752 F. Supp. 1182, 1189 (S.D.N.Y. 1990)
(plaintiffs created triable issue of fact in Fair Housing Act case where they claimed
that defendants failed to comply with their own internal guidelines in denying
purchase application); Rader, 924 F. Supp. at 1543 & n.2, 1546-47 (court
held a bench trial and made detailed findings regarding University's practice of
granting non-religion-based exemptions to parietal rule).
In sum, the students' allegations are sufficient to state a claim for relief under
the Fair Housing Act, especially given that the United States Supreme Court has
called for a "generous construction" of the Act in light of its important purposes.
Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 211-212 (1972).
B. The District Court's "Standing" Rationale Is Erroneous.
The District Court dismissed the plaintiffs' Fair Housing claim because, it said,
the plaintiffs lacked "standing" to sue. The Court asserted that the Amended Complaint
had "set forth no factual allegations that satisfy the injury-in-fact element"
(Op. at 21; JA 107) because, in the District Court's opinion, the dormitory rooms
remain open for the students to occupy. Op. at 5 (JA 91). This conclusion plainly
misapprehends the plaintiffs' claims. The plaintiffs are not arguing that
they have been barred from occupying the rooms assigned to them. But they do contend
that, by reason of Yale's dormitory policies, the rooms are effectively unavailable
to them. Yale's dormitory policies have the effect of excluding these devoutly
observant Orthodox Jews because of their religion. The law is clear that a plaintiff
can establish illegal discrimination under the Fair Housing Act by proving either
disparate treatment or disparate impact. See, e.g., United States
v. Incorporated Village of Island Park, 888 F. Supp. 419, 445 (E.D.N.Y. 1995);
Huntington Branch NAACP v. Town of Huntington, 844 F.2d 926, 934 (2d Cir.
1988), aff'd, 488 U.S. 15 (1988).
The District Court ruled erroneously that the plaintiffs lacked standing because
their claims lacked merit. A party's standing to bring a claim in federal court
does not depend on the merits of his claims. The question under Article III is
not whether a plaintiff can prevail, but whether that plaintiff has the "requisite . . .
interest that is, or is threatened to be, injured by the [challenged] conduct."
Doremus v. Board of Education, 342 U.S. 429, 435 (1952).
The Fair Housing Act reflects "a congressional intention to define standing as
broadly as is permitted by Article III of the Constitution." Trafficante,
409 U.S. at 209; Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91,
109 (1979); Havens Realty Corp. v. Coleman, 455 U.S. 363, 380 (1982);
LeBlanc-Sternberg, 67 F.3d at 424-425; Comer v. Cisneros, 37 F.3d 775,
788-789 (2d Cir. 1994). As the Trafficante Court noted, the Act's language
is "broad and inclusive" (409 U.S. at 209), it promotes a "policy that Congress
considered to be of the highest priority" (409 U.S. at 211), and Congress' aims
can only be achieved by a "generous construction" of the statute (409 U.S. at 212).
Therefore, "the sole requirement for standing to sue under [the Fair Housing Act]
is the Article III minima of injury in fact." Havens, 455 U.S. at 372.
Any "aggrieved person" may commence a civil action in an appropriate court under
the Fair Housing Act. 42 U.S.C. § 3613(a)(1)(A). An "aggrieved person" is
defined broadly in Section 3602(i)(1) as anyone who "claims to have been injured
by a discriminatory housing practice."
The students have suffered concrete economic injury as a result of Yale's Fair
Housing Act violations. They have been forced to pay for on-campus housing that
they have not used, cannot use, never will use, and that Yale knows is useless
to them. Amended Complaint ¶¶ 62-65, 101-104 (JA 24-26, 36-37). This
kind of tangible and concrete financial harm -- in addition to less tangible but
no-less-real harm they have suffered by being denied the chance to participate
fully in undergraduate life -- is routinely found sufficient to confer standing
in Fair Housing Act cases. See, e.g., Simovits v. Chanticleer Condominium
Assoc., 933 F. Supp. 1394, 1400 (N.D. Ill. 1996) (financial strain from additional
mortgage payments and lost opportunities to sell condominium created standing under
YALE'S MANDATORY ON-CAMPUS HOUSING REQUIREMENT VIOLATES THE FEDERAL ANTITRUST LAWS
The students alleged two federal antitrust claims that were precipitously and erroneously
dismissed by the District Court. The first claim was that Yale's requirement that
freshmen and sophomores reside in the dormitories was an attempt by Yale to monopolize
the New Haven student-housing market. Amended Complaint ¶¶ 109, 110,
112 (JA 38-39). The second antitrust claim was that the requirement was an illegal
"tying arrangement" because the provision of a Yale education was made conditional
on the purchase by the students of "unrelated housing services." Amended Complaint
¶ 121 (JA 42).
A. The Students' Monopolization Claim Defined a Relevant Market Within Which Yale
Has Monopoly Power.
The District Court faulted the plaintiffs' complaint for failing to meet their
"burden of defining the relevant market." Op. at 29 (JA 115) (quoting Queen
City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 436 (3d Cir. 1997),
cert. denied, 118 S.Ct. 1385 (1998)) (internal quotations omitted). Relying
on Rohlfing v. Manor Care, Inc., 172 F.R.D. 330 (N.D. Ill. 1997), the District
Court erroneously concluded that the students' "allegation that the relevant market
is housing for Yale students fails to include all interchangeable substitutes."
Op. at 32 (JA 118).
The plaintiffs recognized, however, that a monopolization claim must define a relevant
market "with reference to the rule of reasonable interchangeability and cross elasticity
of demand." Queen City, 124 F.3d at 436; Pepsico, Inc. v. The Coca-Cola
Co., Inc., 1998 WL 547088, *5 (S.D.N.Y. Aug. 27, 1998). And their proposed
market -- student housing in New Haven -- did "encompass all interchangeable
substitute products." Queen City, 124 F.3d at 436; see also Eastman
Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 482 (1992); Brown
Shoe Co., 370 U.S. 294, 325 (1962).
The "relevant market" alleged in this case includes interchangeable substitute
products. It is a fact of life that not all dwelling space in New Haven
is interchangeable with "student housing." If prices drop for 19th Century farmhouses
in Milford, New Haven students will not flock from town to country. See Amended
Complaint ¶ 113 (JA 39-40) ("There is no cross-elasticity of demand between
housing for Yale students and any other housing in the area."). Similarly, were
the rent for traditional student housing -- on campus and off -- to drop precipitously,
there would be no rush for dingy academic digs by the Connecticut gentry. "Student
housing" -- the relevant market identified by the plaintiffs -- does include
interchangeable products, such as apartments, group houses, and dormitories, --
and it does not exclude any reasonably substitutable commodity.
Because of Yale's monopolistic policy, many consumers are prevented from responding
to price changes within the relevant market. An unmarried Yale sophomore is not
permitted to "substitute" a third-floor apartment on Orange Street in New Haven
for a dormitory room, even if the former is available at a much better price.
Despite the fact that these two goods are interchangeable and are part of the same
"relevant market," consumers' rational behavior is thwarted. See Amended Complaint
¶ 111 (JA 39) ("By requiring freshmen and sophomores to live on campus, Yale
has reduced the supply of housing available to those Yale students and eliminated
competition from other potential landlords in the New Haven area."). This is precisely
the vice of monopoly that the Sherman Act was intended to remedy. See Hamilton
Chapter of Alpha Delta Phi, Inc. v. Hamilton College, 128 F.3d 59, 67 (2d Cir.
This Court's recent decision in Hamilton Chapter highlights two important
errors in the District Court's opinion in this case. First, the District
Court erred by requiring the students to prove their case, without any discovery,
in order to withstand a motion to dismiss under Fed. R. Civ. P. 12(b)(6). It is
well established that "market definition is most often a factual inquiry."
Pepsico, Inc., 1998 WL 547088, *6, *11; International Audiotext Network,
Inc. v. American Tel. & Tel. Co., 893 F. Supp. 1207, 1214 (S.D.N.Y. 1994),
aff'd, 62 F.3d 69 (2d Cir. 1995). For this reason, a "generous approach to
pleading applies in the antitrust context." Hamilton, 128 F.3d at 63.
The issue is not whether a plaintiff will or might ultimately prevail on her claim,
but whether she is entitled to offer evidence in support of the allegations in
the complaint. Indeed it may appear on the face of the pleadings that a recovery
is very remote and unlikely but that is not the test. A dismissal is warranted
under Rule 12(b)(6) only if it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to relief. 128
F.3d at 62-63 (citations and internal quotations omitted).
Second, the District Court asserted that "the amended complaint's allegation that
the relevant market is housing for Yale students fails to include all interchangeable
substitutes. The plaintiffs could have opted to attend a different college or
university if they were not satisfied with Yale's housing policy." Op. at 32
(JA 118). This conclusion is similar to the argument advanced by the defendant
in Hamilton, 128 F.3d at 62 (defendants argued that "the relevant product
market was not the market for room and board for Hamilton students, as alleged
in the complaint, but the market for highly selective liberal arts colleges in
which Hamilton competes for students with more than 100 colleges"). In Hamilton,
however, several fraternities had alleged that Hamilton College's residential policy,
which requires all of its students to live in college housing and participate in
a college meal plan, "unlawfully monopolizes the market for residential services
in Clinton, New York." 128 F.3d at 61. Neither the District Court in Hamilton
nor this Court suggested that the relevant-market definition in Hamilton
was defective. By the same token, the students' definition of the relevant market
as the market for student housing in New Haven was sufficient to withstand Yale's
motion to dismiss.
B. The Students' "Tying Arrangement" Claim Alleged That the Tying Product Is Unique.
The District Court dismissed the students' "tying" claim on the ground that the
Amended Complaint failed to allege "that Yale is unique beyond the colloquial meaning
of the word." Op. at 27 (JA 113). The District Court arrived at this result on
the basis of its understanding of the First Circuit's decision in Lee v. Life
Ins. Co. of North America, 23 F.3d 14 (1st Cir. 1994). Op. at 25-26 (JA 111-112).
The court in Lee rejected a Sherman Act challenge to the University of Rhode
Island's policy of tying its degree program to the purchase of health services
from the University's on-campus clinic. 23 F.3d at 15. In one paragraph of its
opinion, the First Circuit observed that the plaintiffs could not colorably claim
"market power" because (23 F.3d at 17):
Although URI obviously is "unique" in the colloquial sense, appellants cannot claim
that other institutions of higher education do not or cannot provide "functionally
similar" educational offerings to potential URI applicants.
The Amended Complaint in this case did, however, allege "market power":
Yale has sufficient economic power in the educational market to compel acceptance
of the tied product, that is, to coerce students to purchase housing that they
would not otherwise buy.
Amended Complaint ¶ 124 (JA 42-43). This is because, the plaintiffs' contended:
[Yale's] economic power is based on the fact that a Yale degree has unique attributes
that make it without substitute or equal. It is of incomparable value to potential
employers and graduate schools. Only a Yale degree allows access to certain important
advantages, such as the worldwide network of Yale alumni.
Amended Complaint ¶ 124 (JA 42-43). Thus, emphasizing Yale's unmatched traditions,
the students have alleged that there are no universities functionally equivalent
to Yale College and that a Yale degree has advantages that no other universities
in the educational market can provide.
"Uniqueness" -- and therefore market power -- may be based on factors that prevent
others from offering the same product -- or "barriers to entry." See Fortner
Enterprises, Inc. v. U.S. Steel Corp., 394 U.S. 495, 505 n. 2 (1969) (Fortner
I). One obvious and important barrier is the time it takes to develop a reputation.
It has taken centuries for Yale to establish itself as one of the world's elite
institutions, to build an enviable endowment, and to solidify its claim on the
brightest young students. A would-be competitor could not possibly hope to build
a comparable institution anytime soon. This fact confers upon Yale an "advantage
not shared by [its] competitors in the market for the tying product." U.S. Steel
Corp. v. Fortner Enterprises, 429 U.S. 610, 620 (1977) ("Fortner II").
Moreover, Lee cannot justify the District Court's dismissal of the students'
claim because the plaintiffs in Lee were permitted at least "minimal discovery."
23 F.3d at 15. In this case, because of the District Court's delay in ruling on
Yale's motion to stay discovery, the students have been permitted no discovery
whatever. The District Court apparently believed that the students would be unable
to prove that Yale in fact exercises "sufficient economic power in the tying
product market to coerce purchaser acceptance of the tied product." This was not
the students' burden. A Sherman Act plaintiff need only give a "short plain statement
of a claim for relief which gives notice to the opposing party." George C.
Frey Ready-Mix Concrete, Inc., v. Pine Hill Concrete Mix Corp., 554 F.2d 551,
554 (2d. Cir. 1977) (reversing grant of motion to dismiss where plaintiff alleged
simple elements of monopolization). "The discovery process is designed to provide
whatever additional sharpening of the issues may be necessary." Id.
A plaintiff making a tying-arrangement claim need not prove full-blown monopoly
power; he must only allege that the tying product is unique. Fortner II,
429 U.S. at 620-21. Whether a tying product is sufficiently "unique" to satisfy
the market-power element of a tying claim is a question of fact and one which should
not be resolved before trial, let alone before discovery has commenced. See,
e.g., Fortner I, 394 U.S. at 506; Hill v. A-T-O, Inc., 535
F.2d 1349, 1354 (2d. Cir. 1976). Because the students have alleged that a Yale
education is unique (Amended Complaint ¶ 124; JA 42-43), they have sufficiently
stated their tying claim.
The District Court erred in dismissing the students' Amended Complaint and, for
all the foregoing reasons, the judgment of the District Court should be reversed
and this case remanded for discovery and trial.
DATED: November 9, 1998
RICHARD W. GARNETT IV
MILLER, CASSIDY, LARROCA & LEWIN, L.L.P.
2555 M Street, N.W.
Washington, D.C. 20037
Attorneys for Plaintiffs-Appellants