Lori Molloy, Supreme Court Upholds Disparate Impact Cases under the Fair Housing Act in a Case of First Impression, North Penn Legal Services, July 9, 2015. Available at: http://bit.ly/1KlAxF6

Supreme Court Upholds Disparate Impact Cases under the Fair Housing Act in a Case of First Impression

Posted by Lori Molloy, NPLS Managing Attorney on July 9, 2015

Last week, the United States Supreme Court ruled that the Fair Housing Act, 42 USCS § 3601 et seq., allows claims based upon a theory of disparate impact upon protected classes. Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc., 576 U.S. ___ (2015). This is a long awaited ruling, as over the past forty years, the Circuit Courts of Appeals had addressed the issue and found that fair housing cases were not limited to cases where the plaintiff could prove intentional discrimination (disparate treatment).  However, the Supreme Court had never addressed the issue with respect to the Fair Housing Act.

There were two cases headed to the Supreme Court in the past several years, both raising this very issue, but those cases settled before the Supreme Court could decide the case finally. While the ruling of the Circuit Courts of Appeals is legal precedent for each circuit, the Supreme Court has the final authority to interpret the statute. Cory Andrews, Symposium: Supreme Court’s victory for disparate impact includes a cautionary tale, SCOTUSblog, Jun. 25, 2015, http://www.scotusblog.com/2015/06/symposium-supreme-courts-victory-for-disparate

Disparate impact cases are asserted when a policy or practice has a disproportionate impact upon a person of protected class. Protected classes under the Fair Housing Act include race, color, national origin, religion, gender, handicap and familial status. The current case involves low-income housing tax credits, which are made available to developers of subsidized housing. Inclusive Communities Project, the Plaintiff in the case below, argued that the formula used by the Texas Department of Housing and Community Affairs had a disparate impact on minorities because it caused more such housing to be concentrated in areas of high minority population. This allowed more segregation, because fewer housing opportunities were available to minorities in the predominantly white suburbs.  

Inclusive Communities Project was successful at the District Court level, but upon appeal to the Fifth Circuit Court of Appeals, the Fifth Circuit remanded the case to the District Court to determine the standard to apply to the Texas Department of Housing’s defense, given regulations that had been recently issued by the federal Department of Housing and Urban Development (HUD) regarding disparate impact analysis. The Texas Department of Housing appealed to the Supreme Court to challenge whether the District Court and Fifth Circuit Court of Appeals should have allowed the disparate impact claim under the Fair Housing Act.

In a 5-4 decision, the Supreme Court held that disparate impact claims are allowed under the Fair Housing Act, because Congress included language that referred not just to what was in the mind of the housing providers, but the consequences of their actions. Justice Anthony Kennedy wrote the decision for the majority. The Court looked at its interpretations of prior decisions regarding other laws, including Title VII of the Civil Right Act of 1964, 42 USCS § 2000e-2, and the Age Discrimination In Employment Act of 1967 (ADEA), 81 Stat. 602 et seq., both with similar language, and a similar conclusion had been reached.  Writing in dissent, Justice Clarence Thomas asserts that those decisions were not “legitimate” and “built upon sand”.  (Dissent of Justice Thomas, Slip Opinion 1).

The majority, however, found that allowing claims based upon a disparate impact upon the protected classes of the Fair Housing Act serves a purpose in uncovering discriminatory intent. The court stated: “It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.” (Slip opinion 17.) “But disparate-impact liability has always been properly limited in key respects that avoid the serious constitutional questions that might arise under the FHA, for instance, if such liability were imposed based solely on a showing of statistical disparity. Disparate-impact liability mandates the ‘removal of artificial, arbitrary and unnecessary barriers,” not the displacement of valid governmental policies. (Sl. op. 17.)

The Court further stated that if a remedial order was required, it should address the elimination of the “offending practice” and provide remedies that are race neutral. (Sl. op. 22.) The Court remanded the case to the District Court and noted that the case was based upon novel theory and that it is possible the Department of Housing would be offered an opportunity to show that the policy was necessary to achieve a valid public interest. (Sl. op. 24.)

Both the White House and HUD secretary Julian Castro praised the decision, noting that the decision is a step forward for equal opportunity and an acknowledgment that discrimination does not always operate in the open, “but in more hidden forms.” Emily Badger, Supreme Court upholds key tool fighting discrimination in the housing market, WonkBlog, June 25, 2015. http://www.washingtonpost.com/blogs/wonkblog/wp/2015/06/25/supreme-court-upholds-a-key-tool-fighting-discrimination-in-the-housing-market/.