Last night, the Mount Holly town council met to discuss the tentative settlement in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc. We understand that due to issues concerning the language of the proposed settlement agreement, the council did not vote on the settlement. It is expected that these issues will be resolved in the next few days and the settlement will be approved by the council. A settlement means the U.S. Supreme Court will lose its second opportunity to decide whether plaintiffs suing under the Fair Housing Act can bring disparate impact claims.

As we have reported, a settlement in Mount Holly also increases the potential significance of the lawsuit filed this past June in federal district court in Washington, D.C. challenging HUD’s final rule adopted in February 2013 that formalized HUD’s use of disparate impact liability under the FHA. The complaint, which was filed by two insurance industry trade groups whose members sell homeowners insurance, alleges that, based on the FHA’s plain language, the FHA only prohibits intentional discrimination. However, it also alleges that the HUD rule is invalid as applied to homeowners insurance companies because it conflicts with the federal McCarran-Ferguson Act. That law generally reserves to the states the regulation of the insurance business and provides that federal law cannot be construed to “invalidate, impair or supersede” state insurance laws unless the federal law specifically relates to insurance.

We have observed that if the district court were to invalidate the HUD rule as applied to the plaintiffs based on McCarran-Ferguson, the ruling would be of no consequence to lenders since it would not result in a judicial determination of whether disparate impact claims are permissible under the FHA. Deepak Gupta, in a blog post yesterday about Mount Holly, made a similar observation.