Yet another Fair Housing Act disparate impact case may find its way to the U.S. Supreme Court. After losing on appeal at the Fifth Circuit in March, the Texas Department of Housing and Community Affairs (Texas DHCA) recently filed a petition for writ of certiorari with the Supreme Court, asking the Court to again answer the question of whether disparate impact claims are cognizable under the Fair Housing Act. If the Court grants certiorari and agrees to hear the case, it would be the third Fair Housing Act disparate impact case before the Court since 2012. The prior two cases, Twp. Of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc. and Magner v. Gallagher, were both settled before the Court could answer the question.

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 statutory language of the Fair Housing Act does not expressly provide for disparate impact, as do Title VII and the ADEA.

The case, Inclusive Communities Project v. Texas Dep’t of Housing, involves a Fair Housing Act challenge to the allocation of low-income housing tax credits. Plaintiff, a group that assists low-income families eligible for Section 8 vouchers, argued at the trial court that the Texas DHCA disproportionately approved tax credits for non-elderly affordable housing developments in predominantly minority neighborhoods while it disproportionately denied tax credits for the similar affordable housing developments in predominantly white neighborhoods. After a bench trial, the district court determined that a disparate impact on minorities had in fact existed based on plaintiff's statistics. The court also concluded that the Texas DHCA had a legitimate interest in its review process but failed to produce any evidence that there were no less-discriminatory alternatives.

On appeal, the Fifth Circuit adopted the burden-shifting approach found in HUD’s new disparate impact rule. Specifically, the Fifth Circuit instructed the trial court to reassess the case and to use HUD’s new regulation—namely, that plaintiff must first prove discrimination by showing that a challenged practice causes a discriminatory effect (typically done through statistics); second, the defendant must prove that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests; and third, the plaintiff must then show that the defendant’s interests could be served by another practice that has a less discriminatory effect.

Briefs in opposition to the petition for certiorari are due on Monday, June 16, 2014. Once any briefs in opposition have been submitted, the Court will decide whether to hear the case. In the event that the Court decides to hear the case, it is likely that the United States, through the Solicitor General's office, will file an amicus curiae brief, as was done in both Gallagher and Mount Holly. Ballard Spahr will continue to monitor and report on any developments in this case and similar disparate impact cases.

Ballard Spahr's Housing Group is nationally recognized for its leadership in the development and financing of housing, community development, energy, public/private partnerships, and transportation projects. The firm's Consumer Financial Services Group has created a Fair Lending Task Force that brings together regulatory attorneys who deal with fair lending law compliance (including the preparation of fair lending assessments in advance of Consumer Financial Protection Bureau examinations), litigators who defend against claims of fair lending violations, and attorneys who understand the statistical analyses that underlie fair lending assessments and discrimination claims.

For more information, please contact Michael W. Skojec at 410.528.5541 or skojecm@ballardspahr.com, Bryan J. Harrison at 410.528.5687 or harrisonbj@ballardspahr.com, Fair Lending Task Force Leader Christopher J. Willis at 678.420.9436 or willisc@ballardspahr.com, or John L. Culhane, Jr., at 215.864.8535 or culhane@ballardspahr.com.


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