Bankruptcy Threatens $500,000 Settlement in Suit Alleging Housing Discrimination Against Former Prisoners in New York City
Formerly incarcerated residents of New York City appeared to land a punch in their fight to secure housing in the city’s notoriously tight real estate market on August 14, 2023, when the Fortune Society, a nonprofit founded in 1967 that provides numerous reentry services—including housing assistance—to former prisoners and other justice-involved individuals in the city, agreed to settle a federal lawsuit for $500,000, plus policy changes to remedy housing discrimination against people with criminal records. However, a bankruptcy filing now threatens that agreement.
Fortune filed suit in 2022 against iAfford NY, LLC, a contractor hired by the city to handle applications for “hundreds, if not thousands” of subsidized housing units across its five boroughs. The company serves as a compliance monitor for the city’s Department of Housing Preservation and Development (HPD), acting as gatekeeper for housing assistance applications.
HPD policy prohibits blanket bans on applicants with past criminal records; rather, a case-by-case assessment is required that takes into account the nature of the offense and evidence of rehabilitation, among other factors. That policy is consistent with guidelines issued by the U.S. Dept. of Housing and Urban Development (HUD) in 2016 and 2022.
After a Fortune client applied for housing and was denied by iAfford due to a criminal conviction, the organization launched an investigation in conjunction with the Fair Housing Justice Center. In three recorded phone calls, iAfford employees stated that people with criminal records—even misdemeanors—were excluded from housing assistance; one discouraged Fortune clients from even applying, saying, “it’s a long process and then at the end, they’re going to be like, aww, I’m rejected. They know all along ... that they are criminals…”. Two of the employees falsely claimed the blanket ban was due to HPD policy.
When Fortune filed suit in 2022 it alleged unlawful discrimination under the Fair Housing Act, 42 U.S.C. §§ 3601 et seq., and New York state laws. The complaint noted that iAfford’s blanket ban on housing assistance to people with criminal records has “a severe disparate impact on Black and Latino individuals,” as those racial groups are “widely known” to have disproportionately higher incarceration rates. Fortune pointed out that 65% of released prisoners nationwide are Black or Latino, a share that balloons to 75% in the state of New York. Around 90% of the organization’s clients are Black or Latino.
Therefore, the complaint continued, iAfford’s policies illegally discriminated against minorities seeking housing assistance. The company’s blanket ban also harmed Fortune’s mission by interfering with its ability to find housing for its clients, as well as requiring the non-profit to expend resources to conduct an investigation and “divert[ing] resources to education and outreach efforts ... aimed at countering iAfford’s discrimination”—including $11,000 spent to create advocacy videos about discriminatory housing bans.
iAfford made an offer to settle the case on August 1, 2023, which Fortune accepted two weeks later. As part of the agreement, reflected in a judgment entered by the federal court for the Eastern District of New York, the company agreed to refrain from “blanket denial of housing applicants with criminal histories” and comply with HPD policies and HUD guidance. It further agreed to provide training and adopt policies to ensure that compliance and submit annual reports on compliance measures for four years. The company also promised to pay $500,000 in damages, costs and attorney fees.
Less than two months later, on October 14, 2023, Fortune was back in the Court to request post-judgment discovery, arguing in a lengthy filing that it had become “apparent that iAfford did not intend to actually pay the $500,000 it offered and has indeed failed to pay any portion of it to date.” To Fortune’s collection attempts, iAfford had responded with “threats of imminent bankruptcy filings to strongarm Plaintiff into abandoning its efforts at execution.” As the nonprofit summarized: “iAfford and its counsel wrongly induced Plaintiff to accept an offer of judgment for $500,000 despite knowing that Defendant could not pay anywhere near that amount, or perhaps anything at all.”
Six days later, on October 20, 2023, iAfford made good on its threat and filed for bankruptcy. Fortune’s motion was denied and its suit stayed pending the outcome of bankruptcy proceedings on November 2, 2023. PLN will update developments in the case as they are available. Fortune is represented by attorneys with Relman Colfax, PLLC in Washington, D.C. See: Fortune Soc., Inc. v. iAfford N.Y., LLC, USDC (E.D.N.Y.), Case No. 1:22-cv-06584; and In re iAfford N.Y., LLC, USBC (E.D.N.Y.), Case No. 1:23-bk-43825.
Additional source: Bronx Times
Related legal cases
In re iAfford N.Y., LLC
| Year | 2023 |
|---|---|
| Cite | In re iAfford N.Y., LLC |
| Level | Bankruptcy Court |
Fortune Soc., Inc. v. iAfford N.Y., LLC
| Year | 2022 |
|---|---|
| Cite | USDC (E.D.N.Y.), Case No. 1:22-cv-06584 |
| Level | District Court |