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Consumer Financial Services Watch News and developments related to consumer financial products and services

Supreme Court Takes Mount Holly Disparate Impact Case

Posted in Fair Lending/Anti-Discrimination, Litigation & Enforcement Actions, Mortgage Lending, Mortgage Servicing, Other Federal Agencies & GSEs

By: Stephanie C. Robinson

Today, the Supreme Court granted certiorari in the appeal titled Township of Mount Holly, New Jersey v. Mt. Holly Gardens Citizens in Action, Inc., et al., No. 11-1507, agreeing to consider whether the Fair Housing Act allows claims under the disparate impact theory of discrimination. The disparate impact doctrine imposes liability on defendants for actions undertaken without discriminatory intent but which nonetheless have an allegedly disproportionately harmful effect on protected classes of persons.

In its petition for certiorari, the Township of Mount Holly posed two main questions: (1) Are disparate impact claims cognizable under the Fair Housing Act?, and (2) If such claims are cognizable, should they be analyzed under the burden shifting approach used by three circuits, under the balancing test used by four circuits, under a hybrid approach used by two circuits, or by some other test? In granting certiorari, the Supreme Court decided that it will consider only the first question, i.e., the availability of disparate impact under the Fair Housing Act. The justices did not grant review on the standard and burden of proof for disparate impact claims.

As we noted in a previous blog post, federal courts of appeals are in general agreement that disparate impact claims are viable under the Fair Housing Act. If the Supreme Court disagrees, HUD’s discriminatory effects rule would be invalidated. A Supreme Court ruling that disparate impact claims are not cognizable under the Fair Housing Act could also have potential implications for the CFPB’s position that disparate impact claims may be brought under the Equal Credit Opportunity Act.