Housing-discrimination lawsuits backed by US Supreme Court

June 25, 2015

The Supreme Court of the United States said people who file housing-discrimination lawsuits don’t have to show they were victims of intentional bias, in a blow to lenders and insurers and a surprise legal victory for the Obama administration.

The 5-4 ruling upholds a category of U.S. Fair Housing Act lawsuits that civil rights groups said are especially important – and business groups consider particularly onerous. The court said plaintiffs can base their suits on statistical evidence that a disputed policy has a “disparate impact” on a minority group.

The Obama administration has relied on the disparate-impact approach to get hundreds of millions of dollars in fair-lending settlements with Bank of America Corp., Wells Fargo & Co. and other financial companies.

“Recognition of disparate impact claims is consistent with FHA’s central purpose,” Justice Anthony Kennedy wrote for the court. The law was “enacted to eradicate discriminatory practices within a sector of our nation’s economy.”

Kennedy said those sued under the law would have an opportunity to argue that their policies served valid interests.

The ruling defied expectations. The court under Chief Justice John Roberts had eliminated decades-old protections for racial minorities in other contexts, and the justices had given every indication that disparate-impact suits were next.

Aggressive approach

The court took an aggressive approach toward the issue, agreeing to consider abolishing disparate-impact suits even though federal appeals courts were unified in allowing them. The court had to grant review in three cases before having a chance to rule. Two other cases accepted earlier were scuttled when civil rights groups engineered settlements.

The ruling may also apply to the Equal Credit Opportunity Act, a second law invoked by the Obama administration against Bank of America and Wells Fargo.

The Consumer Financial Protection Bureau has relied on the disparate-impact doctrine in enforcing that law, which contains language similar to that in the Fair Housing Act. ECOA, as the law is known, covers auto lending as well as mortgages.

In the case before the court, Texas was fighting a lawsuit by the Inclusive Communities Project, a Dallas-based group that advocates for racially integrated housing. The organization accused state officials of thwarting integration by allocating a disproportionate number of federal low-income housing tax credits to minority neighborhoods.

A federal appeals court had said the lawsuit could go forward.

The case is Texas Department of Housing v. Inclusive Communities Project, 13-1371.


Recent Articles by Bloomberg News