Supreme Court Threatens Dubious Housing Bias Theory

By Paul Sperry, FOR INVESTOR'S BUSINESS DAILY

Posted 06/17/2013


The Supreme Court said Monday that it will review the case of low-income minority families in Mount Holly, N.J., who claim the township's plan to... View Enlarged Image

In what could neutralize a key Obama administration weapon to sue home lenders for discrimination, the Supreme Court agreed Monday to hear a case challenging the use of a questionable civil-rights theory.

The bench's conservative majority has been spoiling to strike down so-called disparate impact liability claims in housing and lending bias cases, legal experts say. It was poised to do so last year, but administration officials pressured a petitioner into dropping the case just weeks before the court was scheduled to hear oral arguments.

In the case now before the court — Mt. Holly v. Mt. Holly Gardens Citizens in Action — a New Jersey town argues it was unfairly sued for discrimination under a disparate impact claim, which carries a low standard of proof. Activists representing blacks and Latinos claim a town plan to redevelop a high-crime neighborhood is racist simply because it impacts more minorities than whites, regardless of any intent to discriminate. They say it's a violation of the Fair Housing Act.

No Statutory Basis

However, unlike other anti-discrimination laws, the FHA does not explicitly cover disparate impact claims. Nor does the Equal Credit Opportunity Act.
Yet the administration has cited both acts in bringing a record number of disparate-impact claims against mortgage lenders. Since 2009, the Justice Department and HUD have extracted $600 million in settlements, including loan set-asides and cash payouts for minority borrowers.

The agencies are now coordinating disparate-impact investigations with the new Consumer Financial Protection Bureau — which has launched an aggressive anti-discrimination campaign against auto lenders as well.

"If the Supreme Court holds that disparate impact claims cannot be pursued, that legal avenue will no longer be available to private and governmental litigants," Ballard Spahr, a Washington law firm helping represent Mt. Holly in the case, said in a statement.

"A Supreme Court ruling that disparate impact claims are not available under the Fair Housing Act because of a lack of plain-language support would carry serious implications for disparate impact claims under the Equal Credit Opportunity Act," it explained. "Like the Fair Housing Act, ECOA does not explicitly permit disparate impact claims."

In the earlier Minnesota case that the administration killed, Magner v. Gallagher, senior HUD official Sara Pratt admitted that "we were afraid we might lose disparate impact in the Supreme Court because there wasn't a regulation."

As the Mount Holly case moved forward, HUD earlier this year rushed to add such a regulation, asserting that disparate impact claims can be brought under FHA and ECOA. In a brief to the court, the administration argued justices should defer to its new regulation.

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