The Texas Supreme Court recently held that courts are permitted to factor in future sales price and costs associated with reselling foreclosed-upon homes in determining the fair market value of the property. The District of Columbia Council extended the Nationwide Mortgage Licensing System Conformity Act of 2014.
After the borrower defaulted on a note, the bank foreclosed its contractual deed of trust lien on property securing the note. The bank was the highest bidder at the foreclosure sale and bought the property for less than the secured debt. The borrower sued the bank, asserting, in part, that the property’s fair market value on the date of foreclosure was in excess of the foreclosure sales price, and Texas Property Code § 51.003 required the bank to offset the excess against the borrower’s debt.
(a) If the price at which real property is sold at a foreclosure sale is less than the unpaid balance of the indebtedness secured by the real property, resulting in a deficiency, any action brought to recover the deficiency must be brought within two years of the foreclosure sale.
(b) Any person against whom such a recovery is sought by motion may request that the court in which the action is pending determine the fair market value of the real property as of the date of the foreclosure sale. The fair market value will be determined by the finder of fact after the introduction by the parties of competent evidence of the value. Competent evidence of value may include, but is not limited to, the following: (1) expert opinion testimony; (2) comparable sales; (3) anticipated marketing time and holding costs; (4) cost of sale; and (5) the necessity and amount of any discount to be applied to the future sales price or the cash flow generated by the property to arrive at a current fair market value.
(c) If the court determines that the fair market value is greater than the sales price of the real property at the foreclosure sale, the persons against whom recovery of the deficiency is sought are entitled to an offset against the deficiency in the amount by which the fair market value, less the amount of any claim, indebtedness, or obligation of any kind that is secured by a lien or encumbrance on the real property that was not extinguished by the foreclosure, exceeds the sales price. If no party requests the determination of fair market value or if such a request is made and no competent evidence of fair market value is introduced, the sales price at the foreclosure sale will be used to compute the deficiency.
The trial court determined that § 51.003 did not apply and rendered judgment for the bank on its counterclaim for damages and attorney’s fees. The court of appeals reversed and remanded to the trial court. The court of appeals held that (1) § 51.003 applied, (2) the term “fair market value” as used in § 51.003 is the historical willing-seller/willing-buyer definition of fair market value, and (3) although legally insufficient evidence supported the trial court’s findings as to the bank’s damages, the borrower did not conclusively prove his affirmative defense, leaving a factual question unsettled. The appeals court remanded the case to the trial court for further proceedings.
The two issues before the Supreme Court were (1) whether § 51.003 applies, and if so, (2) whether the statute contemplates the use of a post-foreclosure sales price and actual post-foreclosure costs as competent evidence of fair market value.
The Supreme Court began its opinion with a discussion of § 51.003. The Court provided that § 51.003 adds balance to the borrower-lender relationship regarding deficiency judgments. It does so by defining lenders’ rights to seek deficiency judgments and specifying rights that borrowers have regarding alleged deficiencies. Section 51.003 substantively provides that when realty is foreclosed on pursuant to a contract lien and the foreclosure sales price is less than the debt secured, a suit brought against the borrower for the unpaid balance of the indebtedness secured by the real property is a suit for a deficiency judgment. The borrower in such a suit may request that the trial court make a finding as to the fair market value of the realty as of the date of the foreclosure sale. If the trial court finds the fair market value to be in excess of the foreclosure sales price, then the borrower is entitled to an offset against the deficiency in the amount of the excess (less the amount of any obligations secured by a lien on the property but not extinguished by the foreclosure).
After its explanation of § 51.003, the Supreme Court agreed with the court of appeals that § 51.003 applies to the borrower’s claim against the bank. The Court next discussed the meaning of the term “fair market value” under the statute.
The Supreme Court next provided an analysis of statutory construction. When a statute uses a word or phrase without defining it, courts presume that the Legislature intended the common meaning of the word or phrase to apply. However, when a statute provides a definition for or uses a word or phrase in a particular manner, then courts must apply that definition or manner of use when interpreting the statute. Similarly, courts presume that the words in a statute are selected with care and interpret them in a manner that gives meaning to all of them without disregarding some as having no meaning.
The Legislature used the phrase “fair market value” in § 51.003 without defining it, so courts would ordinarily presume the common meaning of the term applies, as did the court of appeals. However, the statute enumerates categories of evidence and clearly specifies that they may be considered by trial courts in determining fair market value. For example, § 51.003(b)(5) specifies that a trial court, when calculating the fair market value as of the date of the foreclosure sale, may consider evidence of “the necessity and amount of any discount to be applied to the future sales price.” This factor is forward looking, allowing the trial court to consider the price for which the lender eventually sells the property and to apply a discount, if appropriate, to determine a value as of the foreclosure sale date.
The Court provided that it may seem odd to make the price for which the property sold after foreclosure an integral component of competent evidence of the property’s fair market value on the foreclosure sale date, but that is clearly what the Legislature intended. If it were not, then the relevant part of § 51.003(b)(5) would be nonsensical because an unknown fair market value, which is the value being sought, cannot mathematically be determined by applying a discount to an unknown future sales price, nor could either a prospective buyer or the seller know what the future sales price will be in order to factor it into their decision to buy or sell, regardless of whether a discount factor is applied. The Court did not attribute to the Legislature an intent to enact nonsensical statutes. Further, if the Court were to rule the future sales price competent evidence, but only upon a showing of comparable market conditions between the foreclosure sale and the future sale, the Court would be adding words to § 51.003. The Court refused to do that in the absence of clear legislative intent to reach a different result from that reached by applying the plain language of the statute, or to prevent the statute from yielding an absurd or nonsensical result.
Accordingly, the enumerated factors in § 51.003(b) supported a fair market value finding under the statute even though that type of evidence might not otherwise be competent in the common or historical fair market value construct. That being so, the term “fair market value” in § 51.003 is not precisely equivalent to the common, or historical, definition. Rather, it means the historical definition as modified by evidence § 51.003(b) authorizes the trial court to consider in its discretion, to the extent such evidence is not subsumed in the historical definition.
An offset under § 51.003 operates as an affirmative defense to a deficiency claim. Borrowers are entitled to an offset only if they request, prove, and obtain a finding of the property’s § 51.003 fair market value as of the date of the foreclosure sale and that value exceeds the foreclosure sales price. Consequently, in order to receive an offset, the borrower bore the burden of proving and obtaining a § 51.003 fair market value finding, that exceeded the foreclosure sale price. After analyzing the values of the property against the actual costs, the Court concluded that the trial court did not abuse its discretion by the calculating the property’s fair market value using the future sales price, and the evidence was legally sufficient to support the trial court’s finding of the fair market value of the property on the date of the foreclosure sale.
The Supreme Court reversed the judgment of the court of appeals and remanded the case to that court for further proceedings. Two Supreme Court justices dissented. The dissenting justices agreed that § 51.003 applied but disagreed with how the Court calculated the offset.
Our July 24, 2014 Compliance Memorandum discussed District of Columbia B20-0845, effective July 10, 2014, in which the Council of the District of Columbia (the “Council”) adopted an emergency act entitled the Nationwide Mortgage Licensing System Conformity Emergency Act of 2014 (the “Emergency Act”) pertaining to standardized licensing through the NMLS. The Emergency Act expired on October 8, 2014. Our December 29, 2014 Compliance Memorandum discussed the Council’s enactment of the Nationwide Mortgage Licensing System Conformity Temporary Act of 2014 (the “Temporary Act”), which extended the provisions of the Emergency Act until July 28, 2015. The Council recently enacted permanent legislation, which supersedes the Temporary Act, entitled the Nationwide Mortgage Licensing System Conformity Act of 2014 (the “Conformity Act”), which was effective March 7, 2015. The Conformity Act will remain in effect until March 7, 2017.


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Where a prior assignee of a claim against Mexico gave no information of the assignment until a subsequent assignee had prosecuted the claim before the commissioners and obtained an award in his favor, the equities of these parties were equal, and the possessor of the legal title ought to retain the fund.
The award was not conclusive amongst the claimants. The decision of a former court upon this point again affirmed.
The cases examined respecting the relative equities of prior and subsequent assignees of a chose in action.
Judson brought this suit in equity to recover $6,000 from William W. Corcoran, in whose favor a decree had been made for about $15,000, by the board of commissioners acting according to the 15th article of our treaty with Mexico of 1848.
and Joseph H. Lord, who were owners of the cargo of the ship Henry Thompson, and which was unlawfully seized and confiscated by the authorities of Mexico.
The claim having been presented to the mixed commission under the convention between the United States and Mexico of April, 1839, the American members of that board made a report in favor of the claim, but the Mexican commissioners not concurring in the opinion of their colleagues, the case was referred to the umpire and was returned by him without a decision. It therefore constituted one of that class of cases embraced in the 5th article of the unratified convention of the 20th November, 1843, and which is referred to and incorporated into the 15th article of the Treaty of Peace of Guadaloupe Hidalgo, and having been modified in some of its provisions, the ratifications were exchanged on 30 May, 1848.
"whose duty it shall be to receive and examine all claims of citizens of the United States upon the Republic of Mexico which are provided for by the treaty and to decide thereon according to the provisions of the treaty."
On the 11th of June, 1845, Bradford B. Williams assigned one-half of his interest in the claim in dispute to E. H. Warner. August 15, 1845, Warner assigned the same interest to William B. Hart. October 15, 1846, Williams assigned to Hart the residue of his interest. October 3, 1846, Joseph H. Lord assigned to Hart all his interest in the claim. June 18, 1847, Hart assigned the whole claim to William W. Corcoran.
"By these several assignments, says the late board, the whole became vested in the said William W. Corcoran, and the award was therefore made in his favor."
On the first day of January, 1845, Bradford B. Williams had assigned to William Judson, the complainant, an interest of $6,000, of the amount of the suspended claim pronounced valid by our commissioners, in 1842, with interest from the date of the assignment.
From January, 1845, to June, 1847, about two years and a half, Judson held his assignment without filing any notice of its existence at the Department of State, so that others might have notice of his interest, nor did he set up any pretension until the assignee, Corcoran, had prosecuted the claim to a final award, and was adjudged by the board of commissioners to be the legal owner of the amount awarded; and as legal owner Corcoran is sued.
may be remarked that we have no doubt the district court had authority to hear and determine the equities of the parties, notwithstanding the judgment in Corcoran's favor by the board of commissioners. The question that an award like the present is not conclusive among adverse claimants, was settled in the case of Comegys v. Vasse, 1 Pet. 193, in 1828, and has not since been open.
And as respects the validity of assignments of claims like the one here presented, no question can be raised at this day, as such assignments have been recognized by the various boards of commissioners and the courts of justice for many years. The case of Comegys v. Vasse also adjudged this point.
The contest here depends on the merits. Judson had the earliest assignment of part of the amount declared to be due to Williams, by the two United States commissioners, in 1842, to the extent of $6,000, and the claim assigned being a right depending on an equity against the government of Mexico, and assuming that both sets of assignments are alike fair, and originally stood on the same bona fide footing, the rule of necessity is that the assignor having parted with his interest by the first assignment, the second assignee could take nothing, and as he represents his assignor, is bound by the equities imposed on the latter; 1 White and Tudor's Eq.Cas. 236; and hence has arisen the maxim in such cases that he who is first in time is best in right. But this general rule has exceptions, and the case before us was obviously decided in the court below on an exception to the general rule.
Judson took his assignment in January, 1845, which he first produced in May, 1851, when this bill was filed. In the meantime, Corcoran had got his assignment, and immediately gave written notice of it to the Department of State, and August 17, 1847, received an answer from the Secretary recognizing the fact of notice having been received, and that it was filed with the documents of the postponed claim of Williams and Lord appertaining to the unfinished award.
Corcoran's assignment was fair and accepted on his part without knowledge of Judson's; nor is the contrary alleged in the bill. And assuming Judson's to be fair also, and that no negligence could be imputed to him, then the case is one where an equity was successively assigned in a chose in action to two innocent persons, whose equities are equal according to the moral rule governing a court of chancery. Here, Corcoran has drawn to his equity a legal title to the fund, which legal title Judson seeks to set aside and asks an affirmative decree in his favor to that effect.
Now nothing is better settled than that this cannot be done. The equities being equal, the law must prevail.
There are other objections to the case made by the appellant growing out of negligence on his part in not presenting his assignment and claim of property to the state department so as to notify others of the fact. The assignment was held up and operated as a latent and lurking transaction, calculated to circumvent subsequent assignees, and such would be its effect on Corcoran, were priority accorded to it by our decree. It is certainly true as a general rule as above stated that a purchaser of a chose in action or of an equitable title must abide by the case of the person from whom he buys, and will only be entitled to the remedies of the seller; and yet there may be cases in which a purchaser, by sustaining the character of a bona fide assignee, will be in a better situation than the person was of whom he bought -- as for instance where the purchaser, who alone had made inquiry and given notice to the debtor or to a trustee holding the fund, as in this instance, would be preferred over the prior purchaser, who neglected to give notice of his assignment and warn others not to buy.
The cases of Dearle v. Hall and Loveridge v. Cooper, 3 Russell 1, 60, established the doctrine to the foregoing effect in England; they were followed in the case of Mangles v. Dixon, McNaughten & Gordon 437. And the same principle of protecting subsequent bona fide purchasers of choses in action &c., against latent outstanding equities of which they had no notice was maintained in this Court in the case of Bayley v. Greenleaf, 7 Wheat. 46. That was an outstanding vendor's lien, set up to defeat a deed made to trustees for the benefit of the vendees' creditors. The court held it to be a secret trust, and although to be preferred to any other subsequent equity unconnected with a legal advantage, or equitable advantage, which gives a superior claim to the legal title, still, it must be postponed to a subsequent equal equity connected with such advantage.
The rule was distinctly asserted by Chancellor Kent in 1817 in Murray v. Lylburn, 2 Johns.C.C. 442, before the question was settled in England, and before this Court discussed it, which was in 1822. And the same principle was applied by the Court of Appeals of Virginia in the case of Moore v. Holcombe, 3 Leigh 597, in 1832.
Secondly. There is no satisfactory evidence, as we apprehend, to establish the fact that a sufficient consideration was paid by Judson to Williams for the assignment on which the bill is founded, to authorize Judson to set it up, and thereby to postpone Corcoran, who paid a full price, as did those under whom he claims; yet as these objections depend on facts peculiar to this cause, we deem it useless to critically investigate them, as the decree below dismissing the bill was clearly proper on the first and merely legal ground.
It is ordered that the decree be affirmed.

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Most vehicles are now equipped with event data recorders (“EDR’s”), or as they are commonly referred to, Black Boxes. These recorders contain information such as the speed before impact, if the brakes were applied, or if the seat belts were in use.
As yet, no Court has excluded data down loaded from a Sensing and Diagnostic Module (“SDM”) or EDR. There are two reasons for this. First, the party offering the data went to great pains to establish the reliability of the data. Also, in most of these cases, the data was supported by other evidence. In Bachman v. General Motors Corp., 332 Ill.App.3d 760 (4th District, 2002), a case involving a claimed inadvertent deployment of the air bag, the plaintiff moved, in limine, to exclude data downloaded from the subject vehicles SDM which indicated that the air bag had deployed properly. At the Fry hearing GM produced evidence from a senior project engineer from its supplier, Delphi, which was responsible for designing and developing SDMs, a systems engineer from Delphi who was involved in implementing the system in the specific vehicle the plaintiff was operating, the GM supervisor of diagnostic software activities who released the data to Vetronix so it could develop a crash data retrieval system, a GM staff development engineer who had worked with NHTSA on EDR technology, and another staff engineer who had co-authored a paper with a NHTSA employee entitled “Recording Automotive Crash Event Data. These employees dealt with every possible issue that could be raised to attack the admissibility of the data.
Bachman is a “must read” case for anyone addressing the admissibility of SDM data. This is true, whether it is in a product liability case, any other civil trial or a criminal case where the data contained within the SDM is important to either side. It contains the most extensive discussion of EDRs generally and SDMs particularly that one will find outside of an engineering text.
Another important lesson from Bachman is that, in any serious products liability case or any other case of serious injury or death, we need to ascertain and recover the applicable EDR data as soon as we can. In Bachman, the plaintiff sustained serious injuries when her air bag inadvertently deployed causing her to lose control of her vehicle. The vehicle, a Chevrolet Cavalier, had been the subject of a recall as a result of low speed deployments of the air bag. The plaintiff offered testimony of other people who had actually experienced low speed deployments in Cavaliers, but, still the jury found for GM. It appears that, despite credible evidence to the contrary, the jury went with the data.
It is not clear whether the plaintiff had and independent analysis the SDM data. It is possible they did and their own expert could not find fault with the data. In any case it is clear that the data that comes from the SDM or other form of SDM is going to have a significant impact on the outcome of any case in which the information contained in the data is at issue.
As if these cases were not expensive enough, it is clear that this is another battle that must be fought. The data from the vehicle’s EDR will have to be a factor considered, up front, when deciding whether or not to get involved in any case. It can become an issue. This is possibility in every automobile collision.
There have been several criminal cases where SDM data was introduced by the prosecution. People v. Christmann, 3 Misc.3d 309, 776 N.Y.S.2d 437 (2004) addresses both “Fry” (New York also does not follow Daubert) and a “search and seizure” issues raised by SDM data. As with the other cases, the SDM data did not stand on its own. It was used as a “tool” by the New York State Trooper who did the reconstruction work for the event at issue. While the court discussed the Trooper’s testimony regarding the data and its reliability, it relies, almost exclusively, on Bachman to decide the “Fry” issue.
The bottom line is, the data is going into evidence, assuming a proper foundation is laid. It is quite clear that courts are not going to require the “overkill” GM used in Bachman to get it in.
It is clear that, to date, no court has held that EDR or SDM data is “conclusive proof.” There are several cases where courts have reversed the granting of summary judgment based on SDM or similar data.
Certainly this is strong evidence, if it is shown that the DERM itself is functioning properly, but it is not irrefutable evidence that conclusively establishes a fact as a matter of law in the face of other contradictory evidence. Our judicial system has never accepted computers or DERMs to decide ultimate issues in lieu of courts and juries. Id. 153.
In Nielsen v. American Honda Motor Co., 989 P.3d 264 (Hawai.App. 1999), also an airbag failure to deploy case, the Hawaii Appellate Court reversed summary judgment entered in Honda’s favor based on testimony that computer checks indicated the airbag was functioning properly. The Court cited the Sipes case for the proposition that merely because the tests did not show a defect in the airbag, that was not dispositive on the issue. While this case did not involve SDM data, the principles are the same.
In Harris v. General Motors Corporation, 201 F.3d 800 (6th CA 2000) GM took a different tact. It argued, successfully, before the trial court that the data in the DERM came under the “physical facts” rule. The “physical facts” rule states that testimony of a witness which is opposed to the laws of nature or is clearly in conflict with principles of science is of no probative value. Id. @ 803. Harris was an inadvertent deployment case. The plaintiff was in a relatively minor collision and she contended the when she reached her with her right hand to turn off the ignition, the airbag fired. GM filed the affidavits of a biomechanic to say that the plaintiff was in the process of making a left turn and that was how her right arm was injured and the affidavit of a GM engineer who said he determined by data from the DERM that the airbag function as designed. The District court fund that this testimony – the DERM data – established the undisputable fact the airbag deployed properly during the impact. While the 6th Circuit reversed the trial court, it did so because the engineer’s affidavit concluded “…merely that the DERM data suggests that the airbag deployed properly…” Id. @ 804. It could be suggested that a change in the way the affidavit was drafted would have changed the result.
Batiste v. General Motors Corporation, 802 So. 2d 686 (La.App. 2001) is a failure to deploy case where affirming summary judgment. In that case GM filed the affidavit a certified automobile mechanic who, based on the data downloaded stated he found no fault codes when he downloaded the data in the SDM. His affidavit further stated that if there were any malfunction of the system the SDM would have recorded it. An important distinction between the Batiste case and the Sipes and Nielsen cases is that Texas and Hawaii required “conclusive proof” for the granting of summary judgment. Louisiana, as do most jurisdictions, require a party opposing summary judgment to present their own experts in rebuttal, or the opinions expressed in the moving party’s affidavits will be considered conclusive. The plaintiffs in Batiste did not offer any rebuttal affidavits.
Indiana addressed this issue in Cansler v. Mills, 765 N.E.2d 698 (Ind.App. 2002). It is also is also a failure to deploy case. In this case the SDM issue came up in a different context – an argument as to whether or not the plaintiff had sufficient evidence to rebut the resumption, under Indiana law, that the vehicle was not defective because it complied with federal motor vehicle standards. In that case, the plaintiff was the driver of a 1994 Corvette that rear ended a vehicle that was knocked in front of him by a collision in another lane on the interstate. He sued the other drivers and GM. GM filed its motion for summary judgment based on the presumption. It included with its certificate that the vehicle had complied with FMVSS 208, a print out from the DERM showing the airbag functioned properly. The plaintiff’s only opposition was affidavit of a mechanic who examined this vehicle and opined that he had worked on a bunch of Corvettes over the years and that the damage to this vehicle was substantial and that the speed at impact was 45 to 50 mph. While I consider this a risky approach on the part of the plaintiff, the court of appeals allowed the testimony and found that it created an issue of fact. The Court was clearly more interested in what someone who had real world experience with crashed Corvettes had so say versus a computer print out.
Who Owns the Data and Who Can Assess It?
There has been no case which has specifically addressed ownership of the data, but the clear consensus is that who ever owns the vehicle owns the SDM or EDR and the data in it. As I indicated earlier, the other “must read” on EDR is: “Privacy in the private sector: Use of the automotive industry’s ‘Event Data Recorder’ and Cable industry’s ‘Interactive Television’ in Collecting personal Data.” 29 Rutgers Computer & Tech. L.J. 163 ( 2003). It is an excellent, understandable discussion of the technology, what it is and how it can be used.
The owner of the subject vehicle owns the data from the EDR. In order to gain access to the data NHTSA must obtain a release for the data from the owner of the vehicle.
Any information derived from the crash investigation, including an EDR, that would lead to personal identifiable information may not be disclosed pursuant to the Privacy Act. Id. @ 172.
The Federal Highway Administration (FHWA), the Federal Motor carrier Safety Administration (FMCSA), the Department of Transportation (DOT) and the American Trucking Association (ATA) all take similar positions on ownership. Id.
Generally, do not allow anyone to download the data without having your own expert present. There are some automakers who have not licensed the software to download the data to anyone other themselves. This makes it impossible to get the data without the manufacturer’s participation. Once the data is recorded, the recorder is frequently wiped clean and the actual data can be lost like any other electronic evidence.
For additional information and a free initial consultation, contact attorneys George Bellas (847.823.9030 Ext: 219 or george@bellas-wachowski.com) or Peter Wachowski (847.823.9030 Ext: 214 or peter@bellas-wachowski.com).

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BANK OF AMERICA, N.A. vs. CEFERINO S. ROSA (and three consolidated cases [Note 1]).
Mortgage, Foreclosure. Summary Process. Housing Court, Jurisdiction. Practice, Civil, Summary process, Affirmative defense, Counterclaim and cross-claim. Jurisdiction, Summary process, Housing Court, Equitable. Uniform Summary Process Rules. Rules of Civil Procedure. Statute, Construction.
SUMMARY PROCESS. Complaints filed in the Northeast Division of the Housing Court Department, two on February 6, 2012, and one each on January 20, 2012, and April 2, 2012, respectively.
Motions to strike and to dismiss affirmative defenses and counterclaims were heard by David D. Kerman, J.
Proceedings for interlocutory review were heard in the Appeals Court by Mary T. Sullivan, J., and the cases were consolidated and reported by her to the Appeals Court. The Supreme Judicial Court granted an application for direct appellate review.
Phoebe N. Coddington, of North Carolina (Jennifer E. Greaney & Stephen C. Reilly with her) for Bank of America, N.A., & another.
Thomas J. Santolucito (Rachel B. Meisterman with him) for Federal Home Loan Mortgage Corporation.
Richard M.W. Bauer (Eloise P. Lawrence with him) for Ceferino S. Rosa & others.
Marylyn E. Flores (David S. Flores with her) for Gerard J. Cioffi.
Benjamin O. Adeyinka, for Real Estate Bar Association of Massachusetts, Inc., & another, amici curiae, submitted a brief.
Arielle Cohen & Charles Delbaum, for National Consumer Law Center, amicus curiae, submitted a brief.
1. Background. The defendant former homeowners' mortgages were foreclosed by exercise of the power of sale in their respective mortgages. Each plaintiff bank acquired title to a defendant's home by foreclosure deed following a public foreclosure sale of the mortgaged premises. The banks then commenced these summary process actions in the Housing Court. Each complaint alleged that the former homeowner was holding over and occupying the "premises following a public foreclosure auction and beyond the time provided in the [n]otice to [q]uit." No party alleges the existence of, or bases any claim, defense, or counterclaim on the existence of, a landlord-tenant relationship.
raised only by way of affirmative defense include (1) allegations that the bank did not acquire title strictly according to the power of sale provided in the mortgage, see Wayne Inv. Corp. v. Abbott, supra; New England Mut. Life Ins. Co. v. Wing, supra; and (2) allegations of discrimination based on a failure to make the requested accommodation of a handicap. [Note 5] Matters raised only by way of counterclaim include (1) allegations of improper foreclosure and violations of G. L. c. 93A for which reinstatement of the mortgage is sought; and (2) allegations of improper foreclosure and violations of G. L. c. 93A for which damages for negligent and intentional infliction of emotional distress are sought. Matters raised by way of both affirmative defense and counterclaim include (1) allegations that a bank improperly failed to modify the mortgage loan pursuant to the Federal Home Affordable Modification Program, 12 U.S.C. §§ 5219 & 5219a (2012), and that such failure constitutes a violation of G. L. c. 93A for which damages and reinstatement of the mortgage are sought; (2) allegations of discrimination based on national origin; [Note 6] (3) allegations that a bank violated G. L. c. 93A by offering to lease the house to the former homeowner but then never responded to the former homeowner's attempts to pursue the bank's offer; and (4) allegations of violations of the implied warranty of habitability, and breach of the covenant of quiet enjoyment.
The judge dismissed in general language the defendants' affirmative defenses and counterclaims that were based on violations of the implied warranty of habitability, breach of the covenant of quiet enjoyment, theories of rent withholding, and other landlord tenant laws. He did not specify precisely which other defenses and counterclaims were included. He reasoned that those defenses and counterclaims did not apply in these cases because the former homeowners never claimed they had rented or leased the premises. No party challenges the correctness of this ruling.
arising out of the banks' assertions of title through foreclosure sale. In a lengthy and comprehensive decision in the case of Wells Fargo Bank vs. Amero, Northeast Hous. Ct., No. 12-SP-0870 (Aug. 31, 2012), that he made applicable to these cases by reference, the judge reasoned that a series of legislative enactments since 1974 that added and expanded the equitable jurisdiction of the District, Municipal, and Housing Courts in summary process cases, together with the adoption of the Massachusetts Rules of Civil Procedure in 1974 that produced a unified procedural system for legal and equitable causes of action, allow those courts to hear challenges to title of a postforeclosure summary process plaintiff on grounds other than strict compliance with the terms of the power of sale, as had been the law under Wayne Inv. Corp. v. Abbott, supra, and New England Mut. Life Ins. Co. v. Wing, supra. He concluded that such challenges may now be raised in affirmative defenses and counterclaims for affirmative relief in a postforeclosure summary process action, and that a separate action in equity to set aside a foreclosure is no longer necessary.
(1950), where the court said "[s]ummary process is a purely statutory procedure and can be maintained only in the instances specifically provided for in the statute," and on Fafard v. Lincoln Pharmacy of Milford, Inc., supra, quoting Commonwealth v. McLeod, 437 Mass. 286 , 294 (2002), where we said that a court may "not add words to [the] statute that the Legislature did not put there, either by inadvertent omission or by design." They argue that the Housing Court judge impermissibly rewrote § 8A to effectively state that it applies in summary process actions "to recover possession of any premises rented or leased [or mortgaged] for dwelling purposes."
Cummings, supra, does not exactly support the position of the banks. The issue in that case was whether a summary process action could even be instituted by the lessee of one joint owner of premises against the other joint owner, who was in possession of the premises. Id. at 243. The court held that because the circumstances did not reflect any of the enumerated instances for which summary process has been authorized by G. L. c. 239, § 1, the summary process action could not be maintained. Id. The case did not address defenses and counterclaims, or § 8A, whose predecessor first appeared in 1965, fifteen years after Cummings was decided. See St. 1965, c. 888.
Fafard, supra at 513, involved a summary process action commenced after termination of a commercial lease for nonpayment of rent. The tenant responded with an answer and counterclaim contending that the plaintiff, who had purchased the property from the prior landlord, owed the tenant money for improvements to the property and other payments made pursuant to a purchase and sale agreement between the tenant and the former owner. Id. at 513-514. We rejected the tenant's argument that nothing in the statutory scheme prohibited reliance on G. L.
c. 239, § 8A, as authority for bringing counterclaims in a commercial summary process action. Id. at 514. We said, "[b]ecause a tenant's right to bring a counterclaim is explicitly limited in § 8A to premises 'rented or leased for dwelling purposes,' it is clear that [§ 8A] applies only to summary process actions in residential cases" (emphasis added). Id. at 515. We declined to look beyond § 8A for authority of a commercial tenant to raise counterclaims in a summary process action because we concluded that by not including commercial tenancies in § 8A, "the Legislature meant to reject the right [to counterclaim] in commercial proceedings." Id.
Fafard does not support the banks' argument that § 8A governs defenses and counterclaims in all actions for summary process, and that if a defense or counterclaim is not expressly mentioned in § 8A, its omission should be deemed intentional. The focus of the court in Fafard was on "tenant counterclaims," not counterclaims generally. See id. The holding was narrow, namely, that G. L. c. 239, § 8A, does not authorize counterclaims in summary process actions to recover possession of premises rented or leased for commercial premises. Fafard, supra.
The plain language of § 8A does not suggest a limitation on affirmative defenses and counterclaims in all summary process actions. It defines the scope of available claims and counterclaims only in that category of summary process actions that involves recovery of possession of "rented or leased" premises. Its legislative history suggests that it was intended to provide a defensive remedy (rent withholding) that complemented the affirmative remedy of enforcement of the State sanitary code, G. L. c. 111, §§ 127C-127F, 127H (approved on same day as § 8A -- January 7, 1966), "especially [for] poor tenants, [who] would not avail themselves of a remedy which required them to sue their landlords." Boston Hous. Auth. v. Hemingway, 363 Mass. 184 , 192-193 & n.7 (1973).
do so would frustrate the general beneficial purposes of the legislation, see Brady v. Brady, 380 Mass. 480 , 484 (1980), quoting Harborview Residents' Comm., Inc. v. Quincy Hous. Auth., 368 Mass. 425 , 432 (1975), or if its application would lead to an illogical result. See Suffolk Constr. Co., Inc. v. Division of Capital Asset Mgt., 449 Mass. 444 , 458, 459 & n.19 (2007). The argument of the banks is undermined by several illustrations. First, the long-recognized defense, acknowledged by the banks, that a postforeclosure summary process action can be defeated if a plaintiff is unable to show that it acquired title strictly according to the power of sale provided in the defendant's mortgage, see Bank of N.Y. v. Bailey, 460 Mass. 327 , 333 (2011), is mentioned nowhere in G. L. c. 239, much less in § 8A. Second, in Boston Hous. Auth. v. Hemingway, supra at 199-203, this court held that defenses and counterclaims under common law for breach of the implied warranty of habitability were available to a tenant in a summary process action apart from any defenses and counterclaims available under § 8A.
("Even if equitable defenses, when complete, may be set up in a court of common law, all the powers of a court of equity are not imported into its proceedings"). Like the defense of failure to comply strictly with the power of sale in the mortgage, the defense of payment challenges the title of the summary process plaintiff and its right to possession.
Finally, it is highly unlikely that the Legislature intended to permit a tenant about to be evicted from his or her apartment to assert a wide range of defenses and counterclaims under § 8A in the Housing Court, but intended to significantly constrict the range of available defenses and counterclaims that a former homeowner about to be evicted from his or her home may assert in summary process, simply because the homeowner had a mortgage rather than a lease. For these reasons we conclude that § 8A is not the exclusive authority for defenses and counterclaims in summary process in the Housing Court.
We turn to the question whether claims that historically were required to be raised in a separate action in equity may be raised by counterclaim in the Housing Court. As discussed above, there is no question that the former homeowners can challenge the title of the banks in these summary process actions, and that they can require the banks to establish that title was acquired strictly according to the power of sale provided in the mortgage. It also is undisputed that a foreclosure sale may be set aside for other reasons in a separate action filed in a court of equity. Wayne Inv. Corp. v. Abbott, 350 Mass. 775 , 775 (1966); New England Mut. Life Ins. Co. v. Wing, 191 Mass. 192 , 196 (1906). Such an action challenges the title of one claiming ownership under a foreclosure deed, and if successful, a former homeowner could preclude or defeat an eviction. Since Abbott and Wing were decided there have been many changes in the jurisdiction of courts hearing summary process cases, including the Housing Court.
action" could be entered in the Superior Court pursuant to its general equity jurisdiction, see G. L. c. 214, § 1, the action nevertheless had to be separate from the summary process action even if both were filed in the Superior Court. The reason for this is that an action at law, including summary process, generally could not be joined with an action in equity. The "law" side of the court was separate and apart from the "equity" side of the court -- they had separate docketing systems and separate rules of procedure. See J.R. Nolan & L.J. Sartorio, Equitable Remedies § 2.1, at 15-16 (3d ed. 2007); J.W. Smith and H.B. Zobel, Rules Practice §§ 2.1 & 2.2, at 36-37 (2d ed. 2006). Moreover, an equitable action generally could not be maintained by a petitioner who had an adequate remedy at law. See Bancroft Trust Co. v. Canane, 271 Mass. 191 , 197-199 (1930). See also Jones v. Newhall, 115 Mass. 244 , 247 (1874).
This changed with the adoption of the Massachusetts Rules of Civil Procedure in 1974, which unified the law and equity systems and created a single "civil action" in which legal and equitable remedies could be sought simultaneously. See Mass. R. Civ. P. 2, 365 Mass. 733 (1974). See also Reporters' Notes to Rule 2, Mass. Ann. Laws Court Rules, Rules of Civil Procedure, at 11 (LexisNexis 2012-2013); Smith & Zobel, supra. The impact of Rule 2 is that separation of legal and equitable actions no longer is necessary if the court has both legal and equitable jurisdiction. Rule 13 of the Massachusetts Rules of Civil Procedure, as amended, 423 Mass. 1405 (1996), contemplates equitable counterclaims in actions formerly characterized as actions at law. Thus, since 1974, an equitable counterclaim to set aside a foreclosure for any legally recognized reason could have been filed in a postforeclosure summary process action in the Superior Court to challenge the plaintiff's title.
with the health, safety, or welfare, of any occupant of any place used, or intended for use, as a place of human habitation and the possession [thereof]."
G. L. c. 185C, § 3, first par. Summary process actions under G. L. c. 239 are "civil actions," Nalbandian v. Patruzzi, 369 Mass. 477 , 477-478 (1976), and this quoted portion from c. 185C, § 3, is broad enough to include the power to consider equitable defenses under G. L. c. 231, § 31, as a supplement to the jurisdiction of the Housing Court in all summary process actions in which a plaintiff seeks to evict someone from a place of habitation.
"[i]n all matters within her jurisdiction, . . . all the powers of the superior court department including the power to grant temporary restraining orders and preliminary injunctions as justice and equity may require" (emphasis added).
As noted above, summary process actions are "civil actions." See Nalbandian v. Patruzzi, supra. Unlike most other types of civil actions, summary process actions are governed by a distinct set of rules: the Uniform Summary Process Rules. Although such actions are not governed by the Massachusetts Rules of Civil Procedure, see Mass. R. Civ. P. 81 (a) (1) (7), as amended, 450 Mass. 1405 (2008), procedures in actions for summary process "that are not prescribed by [the Uniform Summary Process Rules] shall be governed by the Massachusetts Rules of Civil Procedure insofar as the latter are not inconsistent with these rules, with applicable statutory law or with the jurisdiction of the particular court in which they would be applied." Rule 1 of the Uniform Summary Process Rules (2012). Where the Housing Court has equitable power to afford affirmative equitable relief formerly available only in the Superior Court with respect to reopening foreclosure actions or enjoining foreclosure, and where Mass. R. Civ. P. 13 provides for counterclaims, it makes no sense to require a former owner to file a separate action to challenge a postforeclosure summary process plaintiff's title when such relief should be available by way of counterclaim that is governed by the rules of civil procedure. This is consistent with the language of G. L. c. 185C, § 3, second par., which says the Housing Court has "all the powers of the superior court" in "all matters within their jurisdiction."
"civil actions . . . under . . . so much of [G. L. c. 93A] . . . as is concerned directly or indirectly with the health, safety, or welfare, of any occupant of any place used, or intended for use, as a place of human habitation and the possession [thereof]."
such a claim could not be presented to the Housing Court in a counterclaim in a postforeclosure summary process action.
The extent to which the rules of civil procedure are applied to a summary process action must not be inconsistent with the Uniform Summary Process Rules. The guiding principle, as stated in rule 1 of the Uniform Summary Process Rules, is that the rules of civil procedure "shall be construed and applied to secure the just, speedy, and inexpensive determination of every summary process action." Judges in the Housing Court have considerable discretion to tailor the rules of civil procedure to this objective of summary process. Rules permitting pretrial motions and limited discovery with respect to summary process counterclaims seeking equitable relief and damages under G. L. c. 239, § 8A, can easily be applied to the kinds of counterclaims discussed here. See Rules 6 & 7 of the Uniform Summary Process Rules. The plaintiff banks' fear of protracted litigation is not supported by any evidence that appreciably more time will be required to litigate defenses and counterclaims in a postforeclosure summary process action than is required to litigate similar defenses and counterclaims that regularly arise under G. L. c. 239, § 8A, in a landlord-tenant summary process action, including those that seek equitable relief and damages under G. L. cc. 93A and 151B. This approach was anticipated in the recent case of Bank of N.Y. v. Bailey, 460 Mass. 327 , 334 (2011), and it is consistent with desirable considerations of judicial economy. We conclude that the Housing Court has jurisdiction to hear defenses and counterclaims that challenge the title of a postforeclosure summary process plaintiff, which previously only could have been the subject of an independent equity action in the Superior Court, and that the Housing Court has authority to award damages in conjunction with such counterclaims.
The decisions of the Housing Court are affirmed, and the cases are remanded for further proceedings consistent with this opinion.
[Note 1] The Bank of New York Mellon, trustee, vs. Gerard J. Cioffi; The Bank of New York Mellon, trustee, vs. Dora Bautista; and Federal Home Loan Mortgage Corporation vs. William A. Ogbemudia.
[Note 2] Wells Fargo Bank vs. Amero, Northeast Hous. Ct., No. 12-SP-0870 (Aug. 31, 2012).
[Note 3] We acknowledge the amicus brief filed by the Real Estate Bar Association for Massachusetts, Inc., and Abstract Club in support of the plaintiffs; and the amicus brief filed by National Consumer Law Center in support of the defendants.
[Note 4] Rosa, Ogbemudia, and Bautista each filed a preprinted answer form provided by the Housing Court that contains an extensive but nonexhaustive menu of common defenses and counterclaims. The form allows for a minimal amount of individualization, and thus it is difficult to ascertain the precise nature of some of the counterclaims. Defendant Cioffi filed his own typewritten answer with defenses and counterclaims.
[Note 5] It is not clear from the sparse pleading accommodated by the answer form whether the foreclosure is being challenged, or if some other relief is sought. Contrast Andover Hous. Auth. v. Shkolnik, 443 Mass. 300 , 301 (2005).
[Note 6] See note 5, supra.
[Note 7] General Laws c. 239, § 1, states in relevant part: "If a forcible entry into land or tenements has been made, if a peaceful entry has been made and the possession is unlawfully held by force, if the lessee of land or tenements or a person holding under him holds possession without right after the determination of a lease by its own limitation or by notice to quit or otherwise, or if a mortgage of land has been foreclosed by a sale under a power therein contained or otherwise, or if a person has acquired title to land or tenements by purchase, and the seller or any person holding under him refuses to surrender possession thereof to the buyer, or if a tax title has been foreclosed by decree of the land court, or if a purchaser, under a written agreement to purchase, is in possession of land or tenements beyond the date of the agreement without taking title to said land as called for by said agreement, the person entitled to the land or tenements may recover possession thereof under this chapter."
[Note 8] The power to grant affirmative equitable relief includes the power to award damages in certain instances for harm incidental to the harm for which equitable relief was obtained. See, e.g., Fenton v. Quaboag Country Club, Inc., 353 Mass. 534 , 539 (1968) (distress and discomfort, and loss in rental value); Tehan v. Security Nat'l Bank of Springfield, 340 Mass. 176 , 187-188 (1959) (diminished use of passageway due to congestion).
[Note 9] The District Court and the Boston Municipal Court have been granted similar powers in conjunction with their jurisdiction in summary process actions. See G. L. c. 218, § 19, as amended through St. 1988, c. 199, §§ 40, 50. See also G. L. c. 218, § 19C, as amended by St. 2004, c. 252, § 8 (power to issue declaratory judgments).
[Note 10] However, because the Housing Court does not have general equity jurisdiction, it is without authority to hear an original action to set aside a foreclosure. See G. L. c. 214, § 1. It obtains equity jurisdiction to set aside a foreclosure indirectly, from its jurisdiction over actions of summary process. See G. L. c. 185C, § 3.
[Note 11] General Laws c. 93A, § 9 (1), states: "Any person . . . who has been injured by another person's use or employment of any method, act or practice declared to be unlawful by section two or any rule or regulation issued thereunder . . . may bring an action . . . in the housing court as provided in [G. L. c. 185C, § 3,] whether by way of original complaint, counterclaim, cross-claim or third party action, for damages and such equitable relief, including an injunction, as the court deems to be necessary and proper" (emphases added). Attorney's fees and costs may be awarded under G. L. c. 93A, § 9 (4).


"(i) has a physical . . . impairment which substantially limits one or more of [his] major life activities, (ii) has a record of such an impairment, or (iii) is regarded as having such an impairment."
Department of Health and Human Services (HHS) regulations define "physical impairment" to mean, inter alia, any physiological disorder affecting the respiratory system, and define "major life activities" to include working. Respondent was hospitalized for tuberculosis in 1957. The disease went into remission for the next 20 years, during which time respondent began teaching elementary school in Florida. In 1977, March, 1978, and November, 1978, respondent had relapses, after the latter two of which she was suspended with pay for the rest of the school year. At the end of the 1978-1979 school year, petitioners discharged her after a hearing because of the continued recurrence of tuberculosis. After she was denied relief in state administrative proceedings, she brought suit in Federal District Court, alleging a violation of § 504. The District Court held that she was not a "handicapped person" under the Act, but that, even assuming she were, she was not "qualified" to teach elementary school. The Court of Appeals reversed, holding that persons with contagious diseases are within § 504's coverage, and remanded for further findings as to whether respondent was "otherwise qualified" for her job.
1. A person afflicted with the contagious disease of tuberculosis may be a "handicapped individual" within the meaning of § 504. Pp. 480 U. S. 280-286.
(a) Respondent is a "handicapped individual" as defined in § 706 (7)(B) and the HHS regulations. Her hospitalization in 1957 for a disease that affected her respiratory system and that substantially limited "one or more of [her] major life activities" establishes that she has a "record of . . . impairment." Pp. 480 U. S. 280-281.
(b) The fact that a person with a record of impairment is also contagious does not remove that person from § 504's coverage. To allow an employer to justify discrimination by distinguishing between a disease's contagious effects on others and its physical effects on a patient would be unfair, would be contrary to § 706(7)(B)(iii) and the legislative history, which demonstrate Congress' concern about an impairment's effect on others, and would be inconsistent with § 504's basic purpose to ensure that handicapped individuals are not denied jobs because of the prejudice or ignorance of others. The Act replaces such fearful, reflexive reactions with actions based on reasoned and medically sound judgments as to whether contagious handicapped persons are "otherwise qualified" to do the job. Pp. 480 U. S. 281-286.
2. In most cases, in order to determine whether a person handicapped by contagious disease is "otherwise qualified" under § 504, the district court must conduct an individualized inquiry and make appropriate findings of fact, based on reasonable medical judgments given the state of medical knowledge, about (a) the nature of the risk (e.g., how the disease is transmitted), (b) the duration of the risk (how long is the carrier infectious), (c) the severity of the risk (what is the potential harm to third parties), and (d) the probabilities the disease will be transmitted and will cause varying degrees of harm. In making these findings, courts normally should defer to the reasonable medical judgments of public health officials. Courts must then determine, in light of these findings, whether any "reasonable accommodation" can be made by the employer under the established standards for that inquiry. Pp. 480 U. S. 287-288.
3. Because the District Court did not make appropriate findings, it is impossible for this Court to determine whether respondent is "otherwise qualified" for the job of elementary school teacher, and the case is remanded for additional findings of fact. Pp. 480 U. S. 288-289.
BRENNAN, J delivered the opinion of the Court, in which WHITE, MARSHALL, BLACKMUN, POWELL, STEVENS, and O'CONNOR, JJ., joined. REHNQUIST, C.J., filed a dissenting opinion, in which SCALIA, J., joined, post, p. 480 U. S. 289.
Section 504 of the Rehabilitation Act of 1973, 87 Stat. 394, as amended, 29 U.S.C. § 794 (Act), prohibits a federally funded state program from discriminating against a handicapped individual solely by reason of his or her handicap. This case presents the questions whether a person afflicted with tuberculosis, a contagious disease, may be considered a "handicapped individual" within the meaning of § 504 of the Act, and, if so, whether such an individual is "otherwise qualified" to teach elementary school.
A trial was held in the District Court, at which the principal medical evidence was provided by Marianne McEuen, M.D., an assistant director of the Community Tuberculosis Control Service of the Florida Department of Health and Rehabilitative Services. According to the medical records reviewed by Dr. McEuen, Arline was hospitalized for tuberculosis in 1957. App. 11-12. For the next 20 years, Arline's disease was in remission. Id. at 32. Then, in 1977, a culture revealed that tuberculosis was again active in her system; cultures taken in March, 1978, and in November, 1978, were also positive. Id. at 12.
The superintendent of schools for Nassau County, Craig Marsh, then testified as to the school board's response to Arline's medical reports. After both her second relapse, in the spring of 1978 and her third relapse in November 1978, the school board suspended Arline with pay for the remainder of the school year. Id. at 49-51. At the end of the 1978-1979 school year, the school board held a hearing, after which it discharged Arline, "not because she had done anything wrong," but because of the "continued reoccurence [sic] of tuberculosis." Id. at 49-52.
Plaintiff as a 'handicapped person,' it is clear that she was dismissed solely as a result of her handicap in violation of Section 504."
Record 119. The District Court held, however, that, although there was "[n]o question that she suffers a handicap," Arline was nevertheless not "a handicapped person under the terms of that statute." App. to Pet. for Cert. C-2. The court found it "difficult . . . to conceive that Congress intended contagious diseases to be included within the definition of a handicapped person." The court then went on to state that, "even assuming" that a person with a contagious disease could be deemed a handicapped person, Arline was not "qualified" to teach elementary school. Id. at C-2-C-3.
"for further findings as to whether the risks of infection precluded Mrs. Arline from being 'otherwise qualified' for her job and, if so, whether it was possible to make some reasonable accommodation for her in that teaching position"
or in some other position. Id. at 765 (footnote omitted). We granted certiorari, 475 U. S. 1118 (1986), and now affirm.
"to share with handicapped Americans the opportunities for an education, transportation, housing, health care, and jobs that other Americans take for granted."
"No otherwise qualified handicapped individual in the United States, as defined in section 706(7) of this title, shall, solely by reason of his handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance. . . ."
"[A]ny person who (i) has a physical or mental impairment which substantially limits one or more of such person's major life activities, (ii) has a record of such an impairment, or (iii) is regarded as having such an impairment."
"the fact that the American people are simply unfamiliar with and insensitive to the difficulties confront[ing] individuals with handicaps."
"[A]ny physiological disorder or condition, cosmetic disfigurement, or anatomical loss affecting one or more of the following body systems: neurological; musculoskeletal; special sense organs; respiratory, including speech organs; cardiovascular; reproductive, digestive, genitourinary; hemic and lymphatic; skin; and endocrine."
"functions such as caring for one's self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working."
Within this statutory and regulatory framework, then, we must consider whether Arline can be considered a handicapped individual. According to the testimony of Dr.
McEuen, Arline suffered tuberculosis "in an acute form in such a degree that it affected her respiratory system," and was hospitalized for this condition. App. 11. Arline thus had a physical impairment as that term is defined by the regulations, since she had a "physiological disorder or condition . . . affecting [her] . . . respiratory [system]." 45 CFR § 84.3(j)(2)(i) (1985). This impairment was serious enough to require hospitalization, a fact more than sufficient to establish that one or more of her major life activities were substantially limited by her impairment. Thus, Arline's hospitalization for tuberculosis in 1957 suffices to establish that she has a "record of . . . impairment" within the meaning of 29 U.S.C. § 706(7)(B)(ii), and is therefore a handicapped individual.
"[findings of] facts, based on reasonable medical judgments given the state of medical knowledge, about (a) the nature of the risk (how the disease is transmitted), (b) the duration of the risk (how long is the carrier infectious), (c) the severity of the risk (what is the potential harm to third parties) and (d) the probabilities the disease will be transmitted and will cause varying degrees of harm."
Brief for American Medical Association as Amicus Curiae 19. In making these findings, courts normally should defer to the reasonable medical judgments of public health officials. [Footnote 18] The next step in the "otherwise-qualified" inquiry is for the court to evaluate, in light of these medical findings, whether the employer could reasonably accommodate the employee under the established standards for that inquiry. See n 17, supra.
have reasonably accommodated her. [Footnote 19] Accordingly, the resolution of whether Arline was otherwise qualified requires further findings of fact.
Respondent also sought relief under 42 U.S.C. § 1983, alleging that the board denied her due process of law. Both the District Court and the Court of Appeals rejected this argument, and respondent did not present the issue to this Court.
Congress' decision to pattern § 504 after Title VI is evident in the language of the statute, compare 29 U.S.C. § 794 with 42 U.S.C. § 2000d, and in the legislative history of § 504, see, e.g., S.Rep. No. 93-1297, pp. 39-40 (1974); S.Rep. No. 95-890, p. 19 (1978). Cf. Tensroek & Matson, The Disabled and the Law of Welfare, 54 Cal.L.Rev. 809, 814-815, and nn. 21-22 (1966) (discussing theory and evidence that "negative attitudes and practices toward the disabled resemble those commonly attached to underprivileged ethnic and religious minority groups'"). The range of programs subject to § 504's prohibition is broader, however, than that covered by Title VI, because § 504 covers employment discrimination even in programs that receive federal aid with a primary objective other than the promotion of employment. See Consolidated Rail Corporation v. Darrone, 465 U. S. 624 (1984); Note, Accommodating the Handicapped: Rehabilitating Section 504 after Southeastern, 80 Colum.L.Rev. 171, 174-175, and n. 21 (1980).
The primary focus of the 1973 Act was to increase federal support for vocational rehabilitation; the Act's original definition of the term "handicapped individual" reflected this focus by including only those whose disability limited their employability, and those who could be expected to benefit from vocational rehabilitation. After reviewing the Department of Health, Education, and Welfare's subsequent attempt to devise regulations to implement the Act, however, Congress concluded that the definition of "handicapped individual," while appropriate for the vocational rehabilitation provisions in Titles I and III of the Act, was too narrow to deal with the range of discriminatory practices in housing, education, and health care programs which stemmed from stereotypical attitudes and ignorance about the handicapped. S.Rep. No. 93-1297, at 16, 37-38, 50.
See id. at 39 ("This subsection includes within the protection of sections 503 and 504 those persons who do not in fact have the condition which they are perceived as having, as well as those persons whose mental or physical condition does not substantially limit their life activities, and who thus are not technically within clause (A) in the new definition. Members of both of these groups may be subjected to discrimination on the basis of their being regarded as handicapped"); id. at 37-39, 63-64; see also 120 Cong.Rec. 30531 (1974) (statement of Sen. Cranston).
"set forth a list of specific diseases and conditions that constitute physical or mental impairments because of the difficulty of ensuring the comprehensiveness of any such list."
"such diseases and conditions as orthopedic, visual, speech, and hearing impairments, cerebral palsy, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, mental retardation, [and] emotional illness"
"that a physical or mental impairment does not constitute a handicap for purposes of section 504 unless its severity is such that it results in a substantial limitation of one or more major life activities."
Ibid. Although many of the comments on the regulations when first proposed suggested that the definition was unreasonably broad, the Department found that a broad definition, one not limited to so-called "traditional handicaps," is inherent in the statutory definition. Ibid.
See Brief for Petitioners 15-16 (Act covers conditions that leave individuals with "diminished physical or mental capabilities," but not conditions that could "impair the health of others"); Pet. for Cert. 13-14 ("[T]he concept of a handicap' [should be limited] to physical and mental conditions which result in either a real or perceived diminution of an individual's capabilities. . . . [A]n individual suffering from a contagious disease may not necessarily suffer from any physical or mental impairments affecting his ability to perform the job in question. In other words, an employer's reluctance to hire such an individual is not due to any real or perceived inability on the individual's part, but rather because of the employer's reluctance to expose its other employees and its clientele to the threat of infection").
The United States argues that it is possible for a person to be simply a carrier of a disease, that is, to be capable of spreading a disease without having a "physical impairment" or suffering from any other symptoms associated with the disease. The United States contends that this is true in the case of some carriers of the Acquired Immune Deficiency Syndrome (AIDS) virus. From this premise, the United States concludes that discrimination solely on the basis of contagiousness is never discrimination on the basis of a handicap. The argument is misplaced in this case, because the handicap here, tuberculosis, gave rise both to a physical impairment and to contagiousness. This case does not present, and we therefore do not reach, the questions whether a carrier of a contagious disease such as AIDS could be considered to have a physical impairment, or whether such a person could be considered, solely on the basis of contagiousness, a handicapped person as defined by the Act.
"a court ruled that a cerebral palsied child, who was not a physical threat and was academically competitive, should be excluded from public school, because his teacher claimed his physical appearance 'produced a nauseating effect' on his classmates."
117 Cong.Rec. 45974 (1971). See also 118 Cong.Rec. 36761 (1972) (remarks of Sen. Mondale) (a woman "crippled by arthritis" was denied a job not because she could not do the work but because "college trustees [thought] normal students shouldn't see her'"); id. at 525 (remarks of Sen. Humphrey); cf. Macgregor, Some Psycho-Social Problems Associated with Facial Deformities, 16 Am. Sociological Rev. 629 (1961).
The Department of Health and Human Services regulations, which include among the conditions illustrative of physical impairments covered by the Act "cosmetic disfigurement," lend further support to Arline's position that the effects of one's impairment on others is as relevant to a determination of whether one is handicapped as is the physical effect of one's handicap on oneself. 45 CFR § 84.3(j)(2)(i)(A) (1985). At oral argument, the United States took the position that a condition such as cosmetic disfigurement could not substantially limit a major life activity within the meaning of the statute, because the only major life activity that it would affect would be the ability to work. The United States recognized that "working" was one of the major life activities listed in the regulations, but said that to argue that a condition that impaired only the ability to work was a handicapping condition was to make "a totally circular argument which lifts itself by its bootstraps." Tr. of Oral Arg. 15-16. The argument is not circular, however, but direct. Congress plainly intended the Act to cover persons with a physical or mental impairment (whether actual, past, or perceived) that substantially limited one's ability to work. "[T]he primary goal of the Act is to increase employment of the handicapped." Consolidated Rail Corporation v. Darrone, 465 U.S. at 465 U. S. 633, n. 13; see also id. at 465 U. S. 632 ("Indeed, enhancing employment of the handicapped was so much the focus of the 1973 legislation that Congress the next year felt it necessary to amend the statute to clarify whether § 504 was intended to prohibit other types of discrimination as well").
S.Rep. No. 93-1297 at 50; see n 4, supra. See generally Tensroek & Matson, 54 Cal.L.Rev. at 814; Strauss, Chronic Illness, in The Sociology of Health and Illness 138, 146-147 (P. Conrad & R. Kern eds. 1981).
The isolation of the chronically ill and of those perceived to be ill or contagious appears across cultures and centuries, as does the development of complex and often pernicious mythologies about the nature, cause, and transmission of illness. Tuberculosis is no exception. See R. Dubos & J. Dubos, The White Plague (1952); S. Sontag, Illness as Metaphor (1978).
Senator Humphrey noted the "irrational fears or prejudice on the part of employers or fellow workers" that make it difficult for former cancer patients to secure employment. 123 Cong.Rec. 13515 (1977). See also Feldman, Wellness and Work, in Psychosocial Stress and Cancer 173-200 (C. Cooper ed. 1984) (documenting job discrimination against recovered cancer patients); S. Sontag, supra, at 6 ("Any disease that is treated as a mystery and acutely enough feared will be felt to be morally, if not literally, contagious. Thus, a surprisingly large number of people with cancer find themselves being shunned by relatives and friends . . . as if cancer, like TB, were an infectious disease"); Dell, Social Dimensions of Epilepsy: Stigma and Response, in Psychopathology in Epilepsy: Social Dimensions 185-210 (S. Whitman & B. Hermann eds. 1986) (reviewing range of discrimination affecting epileptics); Brief for Epilepsy Foundation of America as Amicus Curiae 6-14 ("A review of the history of epilepsy provides a salient example that fear, rather than the handicap itself, is the major impetus for discrimination against persons with handicaps").
"whose current use of alcohol or drugs prevents such individual from performing the duties of the job in question or whose employment . . . would constitute a direct threat to property or the safety of others."
29 U.S.C. § 706(7)(B). See 124 Cong.Rec. 30322 (1978); Brief for Senator Cranston et al. as Amici Curiae 35-36; 43 Op. Atty. Gen. No. 12 (1977).
This approach is also consistent with that taken by courts that have addressed the question whether the Act covers persons suffering from conditions other than contagious diseases that render them a threat to the safety of others. See, e.g., Strathie v. Department of Transportation, 716 F.2d 227, 232-234 (CA3 1983); Doe v. New York University, 666 F.2d 761, 775 (CA2 1981).
The dissent implies that our holding rests only on our "own sense of fairness and implied support from the Act," post at 480 U. S. 289, and that this holding is inconsistent with Pennhurst State School and Hospital v. Halderman, 451 U. S. 1 (1981). It is evident, however, that our holding is premised on the plain language of the Act, and on the detailed regulations that implement it, neither of which the dissent discusses and both of which support the conclusion that those with a contagious disease such as tuberculosis may be considered "handicapped" under the Act. We also find much support in the legislative history, while the dissent is unable to find any evidence to support its view. Accordingly, the dissent's construction of the Act to exclude those afflicted with a contagious disease is not only arbitrary (and therefore unfair) but unfaithful to basic canons of statutory construction.
Nothing in Pennhurst requires such infidelity. The statutory provision at issue there was held to be "simply a general statement of findings,'" and to express "no more than . . . a congressional preference for certain kinds of treatment." Id. at 451 U. S. 19. See Wright v. Roanoke Redevelopment and Housing Auth., 479 U. S. 418, 479 U. S. 423 (1987) ("In Pennhurst . . . the statutory provisions were thought to be only statements of `findings,' indicating no more than a congressional preference -- at most a `nudge in the preferred directio[n]'"). The contrast between the congressional preference at issue in Pennhurst and the antidiscrimination mandate of § 504 could not be more stark.
"inclusion of communicable diseases within the ambit of Section 504 does not reorder the priorities of state regulatory agencies . . . [and] would not alter the balance between state and federal authority."
Brief for State of California et al. 30.
A person who poses a significant risk of communicating an infectious disease to others in the workplace will not be otherwise qualified for his or her job if reasonable accommodation will not eliminate that risk. The Act would not require a school board to place a teacher with active, contagious tuberculosis in a classroom with elementary schoolchildren. Respondent conceded as much at oral argument. Tr. of Oral Arg. 45.
"An otherwise qualified person is one who is able to meet all of a program's requirements in spite of his handicap." Southeastern Community College v. Davis, 442 U. S. 397, 442 U. S. 406 (1979). In the employment context, an otherwise qualified person is one who can perform "the essential functions" of the job in question. 45 CFR § 84.3(k) (1985). When a handicapped person is not able to perform the essential functions of the job, the court must also consider whether any "reasonable accommodation" by the employer would enable the handicapped person to perform those functions. Ibid. Accommodation is not reasonable if it either imposes "undue financial and administrative burdens" on a grantee, Southeastern Community College v. Davis, 442 U.S. at 442 U. S. 412, or requires "a fundamental alteration in the nature of [the] program," id. at 442 U. S. 410. See 45 CFR § 84.12(c) (1985) (listing factors to consider in determining whether accommodation would cause undue hardship); 45 CFR pt. 84, Appendix A, p. 315 (1985) ("[W]here reasonable accommodation does not overcome the effects of a person's handicap, or where reasonable accommodation causes undue hardship to the employer, failure to hire or promote the handicapped person will not be considered discrimination"); Davis, supra, at 442 U. S. 410-413; Alexander v. Choate, 469 U.S. at 469 U. S. 299-301, and n. 19; Strathie v. Department of Transportation, 718 F.2d at 231.
This case does not present, and we do not address, the question whether courts should also defer to the reasonable medical judgments of private physicians on which an employer has relied.
Employers have an affirmative obligation to make a reasonable accommodation for a handicapped employee. Although they are not required to find another job for an employee who is not qualified for the job he or she was doing, they cannot deny an employee alternative employment opportunities reasonably available under the employer's existing policies. See n. 17, supra, 45 CFR § 84.12 and Appendix A, pp. 315-316 (1985).
CHIEF JUSTICE REHNQUIST, with whom JUSTICE SCALIA joins, dissenting.
In Pennhurst State School and Hospital v. Halderman, 451 U. S. 1 (1981), this Court made clear that, where Congress intends to impose a condition on the grant of federal funds, "it must do so unambiguously." Id. at 451 U. S. 17. This principle applies with full force to § 504 of the Rehabilitation Act, which Congress limited in scope to "those who actually receive' federal financial assistance." United States Department of Transportation v. Paralyzed Veterans of America, 477 U. S. 597, 477 U. S. 605 (1986). Yet, the Court today ignores this principle, resting its holding on its own sense of fairness and implied support from the Act. Ante at 480 U. S. 282-286. Such an approach, I believe, is foreclosed not only by Pennhurst, but also by our prior decisions interpreting the Rehabilitation Act.
"'Congress apparently determined it would require . . . grantees to bear the costs of providing employment for the handicapped as a quid pro quo for the receipt of federal funds.'"
United States Department of Transportation v. Paralyzed Veterans of America, supra, at 477 U. S. 605, quoting Consolidated Rail Corporation v. Darrone, 465 U. S. 624, 465 U. S. 633, n. 13 (1984). The legitimacy of this quid pro quo rests on whether recipients of federal funds voluntarily and knowingly accept the terms of the exchange. Pennhurst, supra, at 451 U. S. 17. There can be no knowing acceptance unless Congress speaks "with a clear voice" in identifying the conditions attached to the receipt of funds. 451 U.S. at 451 U. S. 17.
with such extensive regulation, this Court has declined to read the Rehabilitation Act expansively. See Bowen v. American Hospital Assn., 476 U. S. 610, 476 U. S. 642-647 (1986); Alexander v. Choate, 469 U. S. 287, 469 U. S. 303, 469 U. S. 307 (1985). Absent an expression of intent to the contrary, "Congress . . . will not be deemed to have significantly changed the federal-state balance.'" Bowen v. American Hospital Assn., supra, at 476 U. S. 644, quoting United States v. Bass, 404 U. S. 336, 404 U. S. 349 (1971).
silent on this issue, [Footnote 2/4] the principles outlined above compel the conclusion that contagiousness is not a handicap within the meaning of § 504. It is therefore clear that the protections of the Act do not extend to individuals such as Arline.
In reaching a contrary conclusion, the Court never questions that Arline was discharged because of the threat her condition posed to others. Instead, it posits that the contagious effects of a disease cannot be "meaningfully" distinguished from the disease's effect on a claimant under the Act. Ante at 480 U. S. 282. To support this position, the Court observes that Congress intended to extend the Act's protections to individuals who have a condition that does not impair their mental and physical capabilities, but limits their major life activities because of the adverse reactions of others. This congressional recognition of a handicap resulting from the reactions of others, we are told, reveals that Congress intended the Rehabilitation Act to regulate discrimination on the basis of contagiousness. Ante at 480 U. S. 284.
the Act solely by reason of the reactions of others in no way demonstrates that, for the purposes of interpreting the Act, the reactions of others to the condition cannot be considered separately from the effect of the condition on the claimant. In addition, the Court provides no basis for extending the Act's generalized coverage of individuals suffering discrimination as a result of the reactions of others to coverage of individuals with contagious diseases. Although citing examples of handicapped individuals described in the regulations and legislative history, the Court points to nothing in these materials suggesting that Congress contemplated that a person with a condition posing a threat to the health of others may be considered handicapped under the Act. [Footnote 2/5] Even in an ordinary case of statutory construction, such meager proof of congressional intent would not be determinative. The Court's evidence, therefore, could not possibly provide the basis for "knowing acceptance" by such entities as the Nassau County School Board that their receipt of federal funds is conditioned on Rehabilitation Act regulation of public health issues. Pennhurst, 451 U.S. at 451 U. S. 17.
"[a]ny interpretation of § 504 must . . . be responsive to two powerful but countervailing considerations -- the need to give effect to the statutory objectives and the desire to keep § 504 within manageable bounds."
The Court has wholly disregarded this admonition here.
See, e.g., 42 U.S.C. §§ 243, 264; Act of May 27, 1796, ch. 31, 1 Stat. 474; see generally Morgenstern, The Role of the Federal Government in Protecting Citizens from Communicable Diseases, 47 U.Cin.L.Rev. 537 (1978).
The coverage of state statutes regulating contagious diseases is broad, addressing, inter alia, reporting requirements, quarantines, denial of marriage licenses based on the presence of certain diseases, compulsory immunization, and certification and medical testing requirements for school employees. See, e.g., Ariz.Rev.Stat.Ann. § 36.621 et seq. (1986) (reporting requirements); Conn.Gen.Stat. §§ 19a-207, 19a-221 (1985) (quarantines); Fla.Stat. §§ 741.051-741.055 (1985) (marriage licenses); Mass.Gen.Laws § 71:55B (1984) (certification requirements for school employees); Miss.Code Ann. § 37-7-301(i) (Supp. 1986) (compulsory immunization of school students); W.Va.Code § 16-3-4a (1985) (medical testing).
"I felt like that, for the benefit of the total student population and . . . personnel in Nassau County and the public benefit, that it would be best if -- not to continue or offer Mrs. Arline any employment."
"I am charged, and so is the school board, with the responsibility for the protecting, the safety, health and welfare of students, every student in Nassau County. And the record clearly states that, you know, after all -- after the third time that I had knowledge of Mrs. Arline's recurring condition, which was infectious at the time of each reoccurrence, that I felt like it [was] in the best interest of the school system of Nassau County that she be dismissed from the classroom."
Before Arline's termination, Marsh consulted with Dr. Marianne McEuen, who testified that she recommended the termination because of the threat that Arline's condition posed to the health of the small children with whom Arline was in constant contact. Id. at 12-17.
See, e.g., 29 U.S.C. § 701 et seq.; 45 CFR pt. 84 (1985); H.R.Rep. No. 95-1149 (1978); S.Rep. No. 95-890 (1978); S.Rep. No. 93-1297 (1974); H.R.Rep. No. 93-244 (1973); S.Rep. No. 93-318 (1973).
""a cerebral palsied child, who was not a physical threat and was academically competitive, should be excluded from public school because his teacher claimed his physical appearance produced a nauseating effect' on his classmates.""
Ante at 480 U. S. 283, n. 9, quoting 117 Cong.Rec. 45974 (1971) (emphasis added).