November 14, 2013

Settlement in disparate impact case means more government discrimination

By Settlement in disparate impact case means more government discrimination

Proponents of racial preferences and race-conscious decision making must be breathing easier today after reports surfaced about the approved settlement in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action.

The case concerns controversial redevelopment efforts by the Township of Mount Holly, and efforts to turn that dispute into a discrimination claim.  Except no court, state or federal, has ever found that the Township’s contentious decision to redevelop was motivated by discriminatory intent.  So the plaintiffs resorted to a theory of disparate impact, alleging that the Township was liable for discrimination because its nondiscriminatory race-neutral decision to redevelop would have an adverse disproportionate effect on residents of a certain race.  That, they argued, violated the Fair Housing Act.

The federal district court ruled that plaintiffs could not make out such a claim given the facts, but the court of appeals reversed and held the case could proceed.  The Township asked the Supreme Court to review that decision.  The Court agreed, but limited the issue to one narrow question: Are disparate impact claims even cognizable under the Fair Housing Act?

The Court’s decision to accept review must have been an easy one.  Just over a years ago the Court was set to hear oral argument on the same exact issue in a case called Magner v. Gallagher.  But in that case, just like in the Mount Holly case, the parties reached a settlement just before oral argument.  And just like here, there were reports that the settlement was reached as a result of pressure from the Obama Administration.

Clearly, the Court wants to resolve the issue of whether the Fair Housing Act prohibits policies that result in a disproportionate impact.  After all, the Act applies to almost every aspect of real estate transactions, from appraisals, to how a property is listed, and even to mortgage loans.  Lending decisions based on credit ratings could result in a disparate impact, so banks could be sued (and are) simply for following good business practices.  And some members of the Court have recognized that the theory of disparate impact raises constitutional concerns by forcing the government and private actors to make decisions based on race.  PLF joins in those concerns, and filed a brief in the Supreme Court arguing against the expansion of disparate impact theory.

The Court may not have to wait long for another case to present the same issue as Magner and Mount Holly.  A new case was filed in federal district court this summer by two insurance industry trade groups challenging the dispate impact regulations pertaining to the Fair Housing Act.  PLF attorneys will be following that case closely.

What to read next