Posted by: Patricia Salkin | February 14, 2016

United States Supreme Court Upholds Use of Disparate Impact Claim in Texas Housing Case

Editor’s Note: Thanks to Portland, OR attorney Edward Sullivan for this post.         

Texas Department of Housing Affairs v. Inclusive Communities, Inc. (No. 13-1371, June 25, 2015), involved Plaintiff IPC’s challenge to the allocation of tax credits by Defendant Housing Department to fund low income housing in Dallas and its suburbs, alleging unlawful use of such credits effectively furthering racial discrimination. IPC did not allege intentional discrimination, but rather brought about a situation in which minority applicants were unable to secure the benefit of those credits throughout the Dallas metropolitan area.  The issue before the court was whether IPC’s proposed “disparate impact” (’DI’) claim alone, rather than intentional discrimination, would be sufficient to show a violation of the federal Fair Housing Act (FHA), 42 U.S.C., sec. 3601 et seq. The Department allocates these credits under the Act and is prohibited from discriminating in that exercise.  The trial court used the DI analysis to find discrimination and ordered relief that included a requirement that the Department show there were no less discriminatory alternatives to meet its housing interests.

While the Department’s appeal was pending, the US Department of Housing and Urban Development (HUD) adopted its own DI framework for dealing with discrimination complaints that did not involve intent, including placement of the burden on a complainant to show a challenged practice “caused, or predictably will cause, a discriminatory effect.” If that prima facie showing is made, the burden shifts to the defendant to show that the practice is necessary to achieve one or more legitimate, non-discriminatory interests; thereafter, a complainant will prevail if those interests could be served by another practice with a less discriminatory effect.  78 Fed. Reg. 11460 (2013).  This test is similar to those used in employment discrimination cases.  The Fifth Circuit found that a DI test claim was cognizable under the FHA, but remanded the matter to the trial court on the issue of relief.  The Supreme Court granted certiorari to determine whether a DI claim was cognizable under the FHA.

Justice Kennedy, writing for the Court, noted that while de jure racial segregation in housing has been unlawful for over a century, de facto segregation remains, so that Congress passed the Civil Rights Act of 1968 and amendments to the Fair Housing Act in 1988 (the Fair Housing Amendments Act or FHAA), both of which bear on the instant case.  However, two other legal milestones were relevant to that case as well.  Title VII of the Civil Rights Act of 1964, which banned many acts of housing discrimination, was interpreted to uphold a DI analysis in Griggs v. Duke Power Co., 401 US 424 (1971).  In Griggs, the employer imposed a requirement for manual laborers to have a high school education and pass an intelligence test.  No intentional discrimination was shown, but the Court held the test fostered fair employment practices.  The other milestone was the Age Discrimination in Employment Act (ADEA) of 1967, in which a DI test was adopted by administrative rule, upheld by a plurality in Smith v. City of Jackson, 544 US 228 (2005).  The Court concluded:

Together, Griggs holds and the plurality in Smith instructs that antidiscrimination laws must be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose.  * * *

ICP relied on the general prohibition in the FHA in making housing unavailable “because of race” (and other similar characteristics).  The Court found “strong support” for the use of DI in Griggs and Smith, construing the statutory language “because of race” to focus on results, rather than the intent of the actor.  In addition, both Title VII and the ADEA use broad catchall language “otherwise adversely affect” persons because of race, which also looks to effects, rather than intent.  The Court was also impressed by the fact that, when Congress considered the FHAA Amendments of 1988, all nine of the circuits that had considered the issue, used the DI test, which Congress chose to pass over and, in fact, adopted three exemptions from FHA liability that could only make sense if DI did apply.  By its terms, the FHA and its amendments were enacted to provide for fair housing and tdo prohibit unfair discriminatory housing practices.  The Court added:

These unlawful practices include zoning laws and other housing restrictions that function unfairly to exclude minorities from certain neighbourhoods without any sufficient justification. Suits targeting such practices reside at the heartland of disparate-impact liability.  * * * The availability of disparate-impact liability, furthermore, has allowed private developers to vindicate the FHA’s objectives and to protect their property rights by stopping municipalities from enforcing arbitrary and, in practice, discriminatory ordinances barring the construction of certain types of housing units.  * * * Recognition of disparate-impact liability under the FHA also plays a role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.  In this way disparate-impact liability may prevent segregated housing patterns that might otherwise result from covert and illicit stereotyping.

 

The Court emphasized at some length that the DI test was not formulaic and must be applied flexibly and specifically expressed concern over the use of racial quotas.  The test must require a “causal link” in  a case such as the one before it, between the Department’s policy and discrimination so as to remove “artificial, arbitrary and unnecessary barriers” to housing.  The Court concluded:

Much progress remains to be made in our Nation’s continuing struggle against racial isolation. In striving achieve our “historic commitment to creating an integrated society,” * * * we must remain wary of policies that reduce homeowners to nothing more than their race.  But since the passage of the Fair Housing Act in 1968 and against the backdrop of disparate-impact liability in nearly every jurisdiction, many cities have become ore diverse.  The FHA must play an important part in avoiding the Kerner Commission’s grim prophecy that “[o]ur nation is moving toward two societies, one black, one white – separate and unequal.”  Kerner Commission Report 1.  The Court acknowledges the Fair Housing Act’s continuing role in moving the Nation toward a more integrated society.

Justice Thomas dissented, noting that he disagreed with the Griggs decision and would not extend its reach and finding the administrative rules relied on in Smith to be inconsistent Congressional authorization.  In his view, Justice Thomas believed that only intent or motive mattered and read the statutory language “because of race” consistent with that view.

Justice Alito also dissented, joined by the Chief Justice and Justices Thomas and Scalia, also finding DI claims not authorized by the FHA, and conduct not based on intent was not prohibited, brushing aside any suggestion of significance of Congressional inaction in the face of the use of DI when the FHAA was considered and stressing the differences between the words used in various employment discrimination statutes and the FHA.  However, Justice Alito did concede that evidence of intent may be inferred from disparate impact and noting that federal courts are experts in ferreting out pretext.  Nevertheless, he found motive and intent are the only touchstones for FHA liability.

This case construes the broad terms of the Fair Housing Act, as amended, to allow for a claim based on disparate impact, as well as intent, in dealing with discrimination claims in housing matters.  HUD has now adopted rules to provide structure for DI claims and additional rules to “affirmatively favor fair housing” are in the offing.  While the pace has been slow, this case may provide a boost to efforts to carry out our national goals on fair housing.

Texas Department of Housing Affairs v. Inclusive Communities, Inc. (No. 13-1371, June 25, 2015).


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