Supreme Court to Decide Fair Housing Act “Disparate Impact” Case with Broader Fair Lending Implications

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On Monday, the U.S. Supreme Court agreed to decide whether “disparate impact” discrimination claims are cognizable under the federal Fair Housing Act (FHA) and, if so, how such claims should be analyzed. The Court’s decision, expected by the end of the Court’s term this spring, could have broad implications for fair lending litigation and enforcement affecting all types of consumer finance products.

The Court granted a petition to review the Eighth Circuit’s decision reversing summary judgment in the defendants’ favor in Gallagher v. Magner, 619 F.3d 823 (8th Cir. 2010), which involved a challenge by owners of rental properties, under various theories of liability, to the City of St. Paul’s alleged “practice” of “aggressively enforcing” its Housing Code. (Click here for copy of the opinion.) The district court granted the defendants’ motion for summary judgment but the Eighth Circuit reversed with respect to the plaintiffs’ “disparate impact” claim under the FHA, 42 U.S.C. § 3604(a)-(b). In so holding, the Eighth Circuit applied a three-part “burden-shifting” approach requiring, first, a prima facie case of disparate impact on protected classes; second, a showing by the defendant that the challenged policy or practice has a “manifest relationship” to a legitimate, non-discriminatory policy objective; and finally a showing by the plaintiffs that there exists “a viable alternative means” to meet the legitimate objective without discriminatory effects. 619 F.3d at 833-34.

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