Disparate impact case sparks laughter in Supreme Court

by MPA22 Jan 2015
The U.S. Supreme Court heard oral arguments yesterday on whether disparate impact claims may be brought under the Fair Housing Act. 

The argument over the meaning of two words in a federal lending discrimination statue became a debate over the proper way to address racial disparities and drew laughter in the courtroom, according to Forbes.

The case, Texas Department of Housing and Community Affairs (TDHCA) v. The Inclusive Communities Project Inc., looks at disparate impact, which uses statistical analysis to see whether one demographic fares differently from another. The regulation is aimed at combating alleged discrimination by lenders, insurers, landlords and municipalities.

Texas argued the words “because of” in the statute do not have the same meaning as “adversely affect” in other statutes, which the U.S. Supreme Court long has held allow statistical analysis of discrimination, according to Forbes.

HUD finalized the controversial rule in February 2013. The timing of the implementation is what drew laughter in the court after Justice Samuel Alito asked U.S. Solicitor General Donald Verrilli to explain why the government came out with the new regulation days after the Supreme Court agreed to hear a Minnesota disparate impact case.

The Minnesota case involved Thomas Perez, then head of the Civil Rights Division of the Justice Department and now secretary of labor, who made a deal with the city of St. Paul, Minnesota,  to get the city to dismiss its challenge to a disparate-impact claim in 2012. The town of Mount Holly, New Jersey, also was pressured to settle its challenge shortly before the Supreme Court would have heard oral argument in 2013.

Justice Alito asked if the court should be concerned about an attempt to “manipulate the decisions of this Court” because, after 40 years with no regulation in place, HUD suddenly issued regulations implementing the disparate impact approach shortly after the Supreme Court agreed to hear the St. Paul case, according to The Daily Signal.
Verilli said that HUD’s ability to issue these regulations so quickly “overestimates the efficiency of the government,” and Justice Antonin Scalia raised a laugh in the courtroom when he said “that was very persuasive.”

In the case, plaintiffs claim the TDHCA denied tax credit applications in majority-white and majority-Hispanic neighborhoods. The mortgage industry argues that they should only be liable if they intend to discriminate.

If the justices decide to uphold the rule, lending discrimination could be proved by looking at population data.
“In other words, the CFPB [Consumer Financial Protection Bureau] does not have to prove intent to discriminate,” wrote Rob Chrisman. “If your numbers don't line up with the population, you are guilty, no questions asked.”

In November 2014, a federal judge tossed out the Department of Housing and Urban Development’s (HUD) regulation, which was designed at making filing allegations of housing discrimination easier.

 Judge Richard Leon of the D.C. Circuit Court called the Obama administration-issued rule an “another example of an administrative agency trying desperately to write into law that which Congress never intended to sanction.”

No final decision has been made yet.


Should CFPB have more supervision over credit agencies?