Update on the U.S. Supreme Court’s Inclusive Communities Decision

by Dorsey & Whitney LLP
Contact

Introduction

As previously reported on this blog, the U.S. Supreme Court’s decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015) adopted a burden-shifting approach to assessing claims that housing policies cause disparate impact on minority populations in violation of the Fair Housing Act (“FHA”) (42 U.S.C. § 3601).[1]  By adopting that approach, the Court confirmed the availability of this form of lawsuit against government entities that implement housing policies.

In the months since Inclusive Communities, the U.S. Courts of Appeals have applied that landmark ruling in several cases.  Those cases confirm the far-reaching consequences of the Supreme Court’s decision.   This article presents a survey of those cases.

Survey of Decisions by the Courts of Appeals

D.C. Circuit:

In 2014, the U.S. District Court for the District of Columbia vacated a final rule promulgated by the U.S. Department of Housing and Urban Development (“HUD”) to impose disparate impact liability under the FHA.  American Insurance Association v. U.S. Department of Housing and Urban Development, 74 F. Supp.3d 30 (D.D.C. 2014).  Citing the legislative text of the FHA and statutory scheme, the district court held that Congress did not intend to provide for disparate impact liability.  Although the district court noted the fact that the U.S. Supreme Court was about to decide this issue in Inclusive Communities, the district court decided to vacate HUD’s final rule on the grounds that it was inconsistent with legislative authority.  On appeal, the D.C. Circuit summarily vacated and remanded the case, ordering the district court to reconsider its decision in light of the U.S. Supreme Court decision.  American Insurance Association, No. 14-5321, 2015 U.S. App. LEXIS 16894 (Sept. 23, 2015).

First Circuit:

In a case brought by former employees of the Federal Emergency Management Administration (“FEMA”) who worked at FEMA’s facilities in Puerto Rico, the employees alleged disparate impact discrimination by FEMA in violation of Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e).  Abril-Rivera v. Johnson, 806 F.3d 599 (1st Cir. 2015).  The employees alleged that FEMA’s decisions to reduce the employees’ work hours and the agency’s decision to close its Puerto Rico facilities were discriminatory on the basis of the employee’s Puerto Rican origin, and also retaliatory because they had complained about being paid less than FEMA employees on the mainland.  The district court granted summary judgment to FEMA, finding that the agency had legitimate, nondiscriminatory reasons for the decisions.

On appeal, the First Circuit affirmed the summary judgment in favor of FEMA.  The court focused on the Supreme Court’s admonition that “disparate-impact liability must be limited so employers and other regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system,” and the Court’s warning against broad application of disparate impact theory to government agency decision-making.  The First Circuit held that once an employer presents a legitimate business rationale for the policies, Inclusive Communities requires the plaintiff to show that there is an alternative that has less disparate impact and which still satisfies the employer’s legitimate needs. The First Circuit further cited the fear that if “judgments are subject to challenge without adequate safeguards, then there is a danger that potential defendants may adopt racial quotas—a circumstance that … raises serious constitutional concerns.”

Noting that FEMA presented evidence of environmental hazards at the Puerto Rico facilities which required amelioration, and hence reduction of work hours, as well as anticipated costs which justified the outright closure of the facilities, the First Circuit found that the agency presented legitimate, nondiscriminatory rationale for its decisions.  At the same time, the court found that the employees failed to rebut the cost-saving rationale behind FEMA’s decisions. The court’s assessment was not unanimous, however, as Judge Torruella would have sent the case to trial, because FEMA’s rationales suddenly appeared after controversy arose regarding the pay gap between Puerto Rican employees and FEMA employees on the mainland.[2]

In Anderson Group, LLC v. City of Saratoga Springs, 805 F.3d 34 (2d Cir. 2015), the Second Circuit reversed a district court decision that granted a new trial in a case alleging that a zoning law had a disparate impact against minorities because it prevented the construction of low-income housing.  In rendering its decision, the court noted that Second Circuit precedents, which recognized the existence of disparate impact claims under the Fair Housing Act, were confirmed by the Supreme Court’s Inclusive Communities decision.

The Second Circuit recently upheld a decision by the U.S. Department of Housing and Urban Development (“HUD”) to deny federal funds to Westchester County, New York.  County of Westchester v. U.S. Department of Housing and Urban Development, 802 F.3d 413 (2d Cir. 2015).  Citing Inclusive Communities for the proposition that racially exclusive zoning laws and other housing restrictions “reside at the heartland of disparate-impact … liability,” the court held that HUD properly rejected the County’s request for funds on the basis that the County did not provide sufficient analysis of the effect of its municipal zoning laws on minorities.

Third Circuit:

The Third Circuit reversed a district court’s dismissal of a complaint that alleged discriminatory practices by a home mortgage lender in violation of the FHA, Real Estate Settlement Procedures Act, Truth In Lending Act (“TILA”), and the Equal Credit Opportunity Act (“ECOA”).  Shahin v. PNC Bank, 625 Fed. App’x 68 (3d Cir. 2015).  Although the court remanded the case for the district court to examine whether plaintiffs should have an opportunity to amend their complaint with respect to the TILA claim, the court determined that plaintiffs failed to allege any facts that would indicate the existence of a bank policy that had a disproportionate adverse impact on minorities under the FHA.

Fifth Circuit:

In a case challenging voter’s identification requirements in Texas, the Fifth Circuit affirmed, in part, a district court decision holding that the state law had a disparate impact on minority voters in Texas in violation of the Voting Rights Act.  Veasey v. Abbott, 796 F.3d 487 (5th Cir. 2015).  Noting that Inclusive Communities held that “a disparate impact claim that relies on a statistical disparity must fail if the plaintiff cannot point to a defendant’s policy or policies causing that disparity,” the Fifth Circuit found that the district court properly considered how the identification requirement worked in concert with Texas’ history of state-sponsored discrimination led to a racial disparity between those who have identification and those who do not.

Eleventh Circuit:

The Eleventh Circuit recently reversed a district court decision that rejected a lawsuit brought by the City of Miami against Bank of America, alleging disparate impact in lending practices that violated the FHA.  City of Miami v. Bank of America Corp., 800 F.3d 1262 (11th Cir. 2015).  However, the court noted that the recently-decided Inclusive Communities case contained admonitions that defendants should be permitted to “explain the valid interest served by their [challenged] policies,” and “that courts should insist on a ‘robust causality requirement’” in establishing racial disparity.”  Thus the court ordered the trial court to consider these admonitions on remand.

Endnotes

[1] See B. Ylvisaker, The Burden-Shifting Framework in Disparate Impact Cases: The Inclusive Communities Decision and HUD’s Disparate Impact Regulation (July 16, 2015), available at http://consumerfinancialserviceslaw.us/the-burden-shifting-framework-in-disparate-impact-cases-the-inclusive-communities-decision-and-huds-disparate-impact-regulation/.

[2] Incidentally, Judge Torruella is of Puerto Rican origin.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dorsey & Whitney LLP | Attorney Advertising

Written by:

Dorsey & Whitney LLP
Contact
more
less

Dorsey & Whitney LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.