Question III

Discuss the following three Subquestions in the context of the facts below, noting the strengths and weaknesses of each position. Each Subquestion will be weighted roughly equally, so allot your time and space accordingly. Use the relevant letter to indicate you are starting a new Subquestion, but do not begin it on a new page nor repeat the Subquestion itself.

(A) Are the time share interests marketed by Mountain Manors (MM) “dwellings” within the meaning of 42 U.S.C. §3602(b)?

(B) Did MM’s rejection of the Pandolfis constitute disparate treatment because of “familial status” in violation of 42 U.S.C. §3604(a)? For the purposes of Subquestion (B), assume the answer to Subquestion (A) is “yes.”

(C) Assuming California’s Unruh Act applies to MM’s time share transactions, would it be “arbitrary discrimination” within the meaning of Marina Point for MM to favor families at least one member of whom attends or attended one of the EEE schools?

Mountain Manors (MM) owns several buildings near popular ski slopes in various locations across the U.S. Each building (which MM calls a “resort”) contains between 40 and 60 large furnished living suites as well as common areas such as pools, small gyms, computer rooms, and cafeterias. Each living suite has a kitchen, a dining area, a large living room, four or five bedrooms, and two or three full bathrooms. The suites would be appropriate either as condominiums or as well-appointed hotel rooms.

MM sells time-share interests in its buildings that operate as follows:

  • Purchasers obtain interests in MM known as “shares”; the purchasers are called shareholders. Each share entitles the shareholder to occupy a living suite at an MM resort for one week a year.
  • In addition to the cost of the shares, shareholders pay annual dues to MM. From the purchase price and dues, MM pays for maintenance and real estate taxes. In addition, MM rents out suites that are unoccupied to non-shareholders, which is an additional source of revenue. Potential purchasers typically rent a suite in this manner before finalizing the transaction.
  • Initially, purchasers must obtain at least three shares and must choose a “base”, meaning a particular suite at a particular resort for a particular set of weeks each year (e.g., Vail, Colorado for the first three weeks in February).
  • MM operates an online “market”, which enables shareholders to trade one or more of their “bases” for a different week at the same or at another resort. Many shareholders use their bases nearly every year; many others frequently (or always) trade them for other times and locations.

A few years after MM went into business, its management became aware that a significant number of its shareholder families had connections to one or more of a group of expensive private high schools collectively known as the Easy Entry Eleven (EEE).[1] Over time, largely at the behest of these families, MM starting giving preference to families applying to purchase time shares if one or more family members had attended, or were currently attending, an EEE school. MM’s management thought that this was a sensible policy because it believed that:

  • Applicants with experiences in common with existing shareholder families are more likely to fit in socially and to be more agreeable residents when present in MM buildings.
  • Families with children at EEE schools tend to be relatively wealthy, to have strong credit, and to be unusually willing to make long-term financial commitments.
  • Children attending EEE schools tend to be more sophisticated and well-traveled than their peers and, therefore, less likely to cause problems while staying in MM buildings.

Early in 2011, Garrett and Tiffany Pandolfi decided to look into purchasing a time-share from MM, intending to use as their base the MM Resort at Nettleton, Nevada. The Pandolfis have two sets of twin children: 10-year old Nick and Natalie and 7-year old Josh and Julia.

Late in February,while visiting relatives who live in the area, Tiffany initially toured the Nettleton resort by herself. Tiffany, a Real Estate lawyer, was very impressed with the facilities and with the legal arrangements MM had created. She and Lindsay Levine, the manager who showed her around, got along extremely well. Lindsay, who does not particularly like children, never thought to ask about Tiffany’s kids. Before she left, Tiffany filled out a purchase application on behalf of her family, requesting as their base a four-bedroom suite for one week in February and two weeks in August.

Following her normal procedure, Lindsay initially didn’t look at the application herself, but rather turned it over to Ameer, one of MM’s accountants, to do preliminary screening. Ameer determined that the Pandolfis’ assets and credit rating were slightly above the minimum that MM required for the purchase in question. All their references checked out except Garrett’s prior employer, who didn’t return Ameer’s phone calls over a two-week period. Ameer marked the application “Tentative Approval; EEE Unclear” and returned it to Lindsay.

Still without looking at the application, Lindsay called Tiffany to congratulate her on the tentative approval and to see if the Pandolfis wanted to arrange a further visit. She also told Tiffany of MM’s preference regarding EEE schools. Tiffany indicated that neither she nor Garrett had attended one of the EEE schools, and added that “the twins are still a little young.”

“How old are they?”

“One set is ten and one set is seven.”

After a long pause during which Lindsay absorbed the news that there were two sets of twins, she arranged that the Pandolfis would visit as a family in early June. Before hanging up, she added, “You understand that the approval is tentative. Your financial status is not as strong as it might be, and we still haven’t been able to contact one of your husband’s references.”

When it came time for the June visit, Tiffany was tied up with work, so Garrett and the children went without her. During the visit, Garrett let both sets of twins wander around by themselves. Although this was not a violation of any rules, and the children were very well-behaved, Lindsay repeatedly ran into them and became increasingly annoyed.

On the day the Pandolfis were leaving, Lindsay again asked about the children and EEE schools. Garrett, clearly annoyed by the whole concept, said, “Public schools were good enough for us and they’ll be good enough for our kids. We don’t want to turn them into stuck-up little snots.” Another shareholder who overheard this conversation later strongly suggested to Lindsay that she not allow the Pandolfis to purchase shares.

Lindsay put the Pandolfis’ application on hold. Two weeks after the visit, Lindsay received and accepted an application from a wealthier family with only one child (who was attending an EEE school). She then rejected the Pandolfis’ application, telling Tiffany (truthfully) that she had met her goal for the number of shares to be sold for the year.

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[1] “Easy Entry” does not refer to the ease of attending the schools themselves, but rather to their reputation for making it easy for their students to get admitted to prestigious universities.