By motion to dismiss this action for failure to state a claim upon which relief may be granted, defendant Society of Real Estate Appraisers (hereinafter the Society) seeks to terminate, before the first witness is heard or the first exhibit received in evidence, a suit by the Attorney General to restrain practices which, in our view, bear a historically significant share of the responsibility for the racial residential segregation common to most or all of the major metropolitan areas of the United States. We believe that the allegations of the complaint, if proved, establish conduct by four influential nationwide organizations which is directly antithetical to the goals of the Fair Housing Act of 1968. Accordingly, we oppose the motion.

In United States v. City of Black Jack, 408 F.2d 1179, 1186 (8th Cir. 1974), cert. den. 422 U.S. 1024 (1975), the Court described the St. Louis metropolitan area as having the racial shape of‘a donut, with whites occupying the ring and blacks living in the hole. Chief Judge */ Battisti has used similar language about the Cleveland, Ohio area, and we think that the Court may take judicial notice of similar circumstances in Chicago, and throughout the country. This situation did not come about by chance. Until only too recently, the federal government and the private sector were united in upholding racially segregated occupancy patterns. FHA Appraisal Manuals encouraged or required the exclusion of "inharmonious racial groups," and FHA even prepared noxious racially restrictive covenants. See Bradley v. School Board of City of Richmond, 338 F. Supp. 67, 215 et seq., (E.D. Va. 1972), rev'd on other grounds 462 F.2d 1058 (4th Cir. 1972), aff'd mem. by an equally divided court 412 U.S. 92 (1974). The Canons of Ethics of the National Association of Real Estate Boards forbade the introduction into neighborhoods of members of any "race or nationality" which would tend to lower property values an effective prohibition against the crossing of racial lines. See Zuch v. Hussey, 394 F. Supp. 1028, 1055 (E.D. Mich. 1975), United States v. School District of Omaha, Neb., 521 F.2d 530, 534 (8th Cir. 1972). The 1975 printing of McMichael's Appraisal Manual, which is

*/ Mahaley v. Cuyahoga Municipal Housing Authority, 355 F. Supp. 1257, 1260 (N.D. Ohio 1973), rev'd on other grounds 500 F.2d 1087 (6th Cir. 1974) cert. den. 419 U.S. 1108 (1975).

**/ Clark v. Universal Builders, 501 F.2d 324 (7th Cir. 1974) cert. den. 419 U.S. 1070 (1974).

described on its jacket as "The Standard Field landbook for Real

Estate Men," repeats as still pertinent today the following discussion, perhaps extreme today but characteristic of real estate thought not

"It is maintained that almost always values decline
when a white district is colonized by Negroes
Most large cities now have their rapidly expanding Negro
neighborhoods. Heretofore, efforts have been made to
retain them within restricted limits, but since the
decision of the Supreme Court annulling restrictive
covenants, they have spread out in all directions."

It is difficult to evaluate the desirability of the different types of foreign-born groups in their relation to changes brought about in these districts. Homer Hoyt, in his excellent book, One Hundred Years of Land Values in Chicago, reports the results of a somewhat compreheusive survey of the infiltration of foreigners into that city

McMichael then lists a "ranking of race and nationalities" with respect to their adverse or beneficial affect on land values. The ranking, in hierarchical order is as follows:

1. English, Germans, Scotch, Irish, Scandinavian

*/ This book was published by Prentice Hall. Plaintiff does not ascribe authorship of this work to the Society or any of its codefendants.

9. Negroes

*/

10. Mexicans

It is the assumption that integration lowers property values which explains most of the practices which the courts have found to violate the Fair Housing Act. A resident manager instructed her subordinates not to rent to blacks because she feared that white tenants would flee if blacks moved in. United States v. Reddoch, 467 F.2d 897 (5th Cir. 1972). Real estate agents preyed on white homeowners and sought listings, using unscrupulous blockbusting tactics, and warning residents that the value of their property would go down, because blacks were moving in. United States v. Bob Lawrence Realty Co., 474 F.2d 115 (5th Cir. 1973), cert. den. 414 U.S. 826 (1973). Whites were "steered" away from integrated areas, on the pretext that values there were declining. Zuch v. Hussey, supra. The citizens of a white residential area sought to exclude an integrated project from their part of the county claiming that it would imperil property values, and eventually went so far as to incorporate a new municipality and rezone the property just to "protect," as they saw it, the value of their homes. United States v. City of Black Jack, supra. A lender allegedly refused to make home loans in integrated areas, for the presence of blacks allegedly decreased the value of his security. Laufman v. Oakley Building & Loan Co., 408 F. Supp. 489 (S.D. Ohio 1976). These cases have one thing in common the violation resulted from the self-fulfilling prophecy that property values will go down if blacks and whites live

* Id at 114-116

together, or if other heterogeneous groups are mixed.

As we show in greater detail below, the Fair Housing Act of

1968 was intended to "replace the ghettos by truly integrated and

balanced living patterns."

Trafficante v. Metropolitan Life Ins., Co.,

409 U.S. 205, 211 (1972), quoting 114 Cong. Rec. 3422 (Senator Mondale). The proponents of the Act recognized that stereotyped assumptions about blacks and property values were no better than a myth, see pp. 23 et seq. infra, and, as the quotation from Trafficante reflects, intended the Act to promote racially integrated neighborhoods, and thus to eliminate the numerous evils which residential segregation brings about. See, e.g., Crow v. Brown, 332 F. Supp. 382, 392 (N.D. Ga. 1971), aff'd per curiam 457 F.2d 788 (5th Cir. 1972).

*/

Although its record is admittedly still imperfect, the federal government is now committed to equal opportunity. Congress had directed federal agencies to support fair housing in an affirmative manner. 42 U.S.C. §3608. The Department of Justice has brought more than 250 suits pursuant to 42 U.S.C. $3613 to promote the "full enjoyment" of equal housing. opportunity. The present case, with its nationwide reach and potential consequences to the industry, is perhaps, the most important such case to date.

The complaint alleges that the four defendants have promulgated standards and practices for their members, which standards and practices perpetuate the assumption that integration lowers property values. We

*See Shannon v. HUD, 436 F.2d 809 (3rd Cir. 1970); Hills v. Gautreaux, 44 U.S.L.W. 4480 (1976).

U.S.