Supreme Court Case on Disparate Impact Voluntarily Dismissed – Parties in Magner v. Gallagher Say Never Mind

By: Melissa S. Malpass

In a rare and unexpected move, the City of St. Paul last Friday agreed to dismiss its appeal to the U.S. Supreme Court challenging whether a violation under the Fair Housing Act may be proved under a disparate impact legal theory, or whether proof of intentional discrimination is required. As we posted previously, the Supreme Court on November 7, 2011 granted certiorari in Magner v. Gallagher to determine that issue. All briefs in the matter had been submitted, and oral argument was set for later this month.

The City has not indicated publicly the reasons for its late move. Many are surmising that the Petitioner, the City of St. Paul, may have received considerable pressure from branches of federal government to abandon the appeal, given that the disparate impact theory has become the most powerful tool in the arsenal of fair lending enforcement. Others believe that the City may not have expected to face such backlash from conspicuous civil rights groups like the NAACP and ACLU, or that the City may not have considered the disparate impact theory’s reach into lending and other areas. Yet, realistically, it is unlikely that the municipality felt strongly enough to take the issue all the way to the highest Court but did not do its homework on the consequences of the potential decision.

For now, lenders must learn to live with a substantial number of appellate court decisions that are quick to rely upon Title VII jurisprudence in permitting the application of the disparate impact theory to the Fair Housing Act. Of course, HUD may choose to finalize its proposed disparate impact regulation soon, giving lenders something concrete to gripe about.

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