Another Supreme Court disparate impact case?

by Ballard Spahr LLP
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The U.S. Supreme Court could have its third opportunity since 2012 to provide clarity with respect to disparate impact claims under the Fair Housing Act and (by analogy) the Equal Credit Opportunity Act. After losing on appeal to the Fifth Circuit in March, the Texas Department of Housing and Community Affairs (Texas DHCA) recently filed a petition for certiorari with the Supreme Court, asking the Court to again answer the question of whether disparate impact claims are cognizable under the FHA. The two prior cases raising that issue, Twp. Of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc. and Magner v. Gallagher, were both settled before oral argument was held in the Supreme Court.  

The case, Inclusive Communities Project v. Texas Dep’t of Housing, involves a FHA challenge to the allocation of low-income housing tax credits. On appeal, the Fifth Circuit adopted the burden-shifting approach found in HUD’s disparate impact rule adopted in February 2013 that formalized HUD’s use of disparate impact liability under the FHA. In its petition, the Texas DHCA argues that the Supreme Court should grant the petition because the issues before the Court are “indistinguishable from the questions on which this Court granted certiorari in Gallagher and Mount Holly,” that the scope of potential disparate impact liability makes the matter of “exceptional importance,” and that the FHA’s statutory language does not expressly provide for disparate impact.  Briefs in opposition to the petition for certiorari are due by June 16, 2014. For more information on the case, see our legal alert

Another pending case raising the FHA disparate impact issue we have been following is the lawsuit filed in June 2013 in federal district court in Washington, D.C.by two insurance industry trade groups whose members sell homeowners insurance. The lawsuit also involves HUD’s 2013 final disparate impact rule. The complaint 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. As we have previously observed, if the district court were to grant summary judgment on the grounds that based on McCarran-Ferguson the HUD rule is invalid as applied to the plaintiffs, 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.

After the court lifted its stay of the lawsuit pending the outcome of Mt. Holly, the plaintiffs filed a motion for summary judgment and HUD filed a motion to dismiss, or in the alternative, for summary judgment. Those motions are currently pending. We previously reported that an amicus brief in support of the plaintiffs’ motion was filed by Judicial Watch, Inc. and the Allied Educational Foundation.  Additional briefs in support of the plaintiffs’ motion have since been filed by the Chamber of Commerce and jointly by the American Financial Services Association, the Consumer Mortgage Coalition, the Independent Community Bankers of America and the Mortgage Bankers Association.  

Amicus briefs in support of HUD’s motion have been filed jointly by the NAACP Legal Defense & Educational Fund, Inc., the American Civil Liberties Union, the National Consumer Law Center, and the National Community Reinvestment Coalition and jointly by the National Fair Housing Alliance, the Lawyers’ Committee for Civil Rights Under Law, the National Low Income Housing Coalition, the Poverty & Race Research Action Council, the National Housing Law Project and the LatinoJustice PRLDEF.

 

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