Mount Holly v. Mt. Holly Garden Citizens in Action, Inc.

Facts

Congress passed the Civil Rights Act of 1968, which includes the Fair Housing Act (“FHA”), to secure equal housing opportunities regardless of race, creed, or national origin. This same period of history also saw the enactment of the Civil Rights Act of 1964 (“Civil Rights Act”) and the Age Discrimination in Employment Act of 1967 (“ADEA”). The Supreme Court has approved a disparate impact standard for Title VII of the Civil Rights Act and for the ADEA, both of which apply to employment discrimination. While eleven federal circuits have held that the FHA allows disparate impact suits, the Court has yet to issue an opinion squarely addressing the question.

Mt. Holly Gardens (“Gardens”) is a thirty-acre neighborhood in Burlington County, New Jersey. Comprised of housing built in the post-WWII period, the Gardens is a community of predominately African-American and Latino residents, with statistically lower incomes than the area’s median. Gardens residents sought to fix various problems in the community, including overcrowding, drainage issues, and higher-than-average crime rates. In 2000, Petitioner Township of Mount Holly (“the Township”) launched a study to determine whether to redevelop the Gardens; the Township ultimately concluded that the neighborhood’s blight warranted significant intervention. Later that year, the Township started to purchase properties in the Gardens and commissioned redevelopment plans. From 2003 to 2008, the Township considered several plans, culminating with a 2008 plan to construct up to 520 new homes. The plan did not, however, include improvements to existing housing.

Although residents voiced concerns over the implications of the redevelopment plan, work forged ahead. The Township offered to purchase homes in the Gardens in the price range of $32,000 to $49,000; the new houses that Township intended to build would sell at an estimated price of $200,000 to $275,000 – a price unaffordable to a large percentage of the Township’s residents. Because the redevelopment displaced many Gardens residents, many residents who were forced to vacate the Township faced increased rents. Although some residents who rented their homes were eligible forup to $7,500 in relocation fees, the Township did not subsidize their return to the Gardens.

Respondent Citizens in Action (“Residents”), a coalition of the Gardens’ residents, first sued the Township in 2003, and the New Jersey Superior Court dismissed some counts and granted summary judgment in favor of the Township on the remaining counts. In 2008, the Residents filed a new suit in the United States District Court for the District of New Jersey, seeking relief under the FHA and the Equal Protection Clause of the Fourteenth Amendment. The Residents sought to stop the redevelopment plan, as well as compensation for Gardens residents to secure housing in the Township. The District Court denied the Residents’ request for injunctive relief and concluded that (1) they failed to establish a prima facie case of discrimination under the FHA and that (2) even if they had, they failed to show that there was an available alternative that would have had a lesser impact.

The Residents appealed to the Third Circuit, which reversed the District Court’s decision, concluding that the Residents presented sufficient evidence to establish a prima facie case of discrimination. The Third Circuit further held that the District Court erred in applying a discriminatory intentstandard to the FHA claim when, in fact, the Court should have applied a disparate impact standard. The Third Circuit remanded the case, vacating the District Court’s grant of summary judgment to the Township.

The Township petitioned for a writ of certiorari on June 11, 2012, which the Supreme Court granted on June 17, 2013. On November 13, 2013, the parties settled, and on November 15, the Supreme Court dismissed the case.

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Discussion

This case would have presented the Court with the opportunity to determine whether parties may bring disparate impacts claims under the FHA. The Residents urged the Court to maintain the disparate impacts standard, while the Township contended that the FHA only proscribes housing practices motivated by discriminatory intent.

IMPACT ON LENDERS AND LOAN SEEKERS

Several supporters of the Township contend that allowing disparate impact claims under the FHA will disrupt the American financial and loan system. The American Financial Services Association (“AFSA”) maintains that if the Court had adopted the Residents’ reading of the FHA, lenders would lose their ability to sensibly assess financial risk when determining whether to make loans. The AFSA argues that, while lenders examine individual financial characteristics on a case-by-case basis, the economic difference based on race leads to different loan practices when a racial group is examined as a whole. . Thus, amici argue, if the Court had adopted Residents’ disparate impact reading of the FHA, lenders would be forced to offer riskier loans for fear that denying unqualified minority loan applicants could trigger lawsuits. The National Leased Housing Association (“NLHA”) further argues that the recent economic crisis has led to increased regulations over the financial industry, forcing lenders to adopt stricter standards when assessing the risks inherent in approving a loan. According to the AFSA and the NLHA Housing, the inability to guard against risk in lending will preclude lenders from issuing loans. If lenders do choose to offer riskier loans, they will come at a higher cost, which will be passed onto consumers.

The NAACP Legal Defense & Educational Fund (“NAACP”) and the National Fair Housing Alliance (“NFHA”) refuted these contentions in their briefs. According to the NFHA, the historical and still-entrenched patterns of racial segregation in housing significantly contribute to wealth inequality among minority groups in America. Thus, according to amici in support of the Residents, minority groups’ inability to obtain fair loans perpetuates segregated housing and leads to the economic disparities cited by the AFSA as reasons to deny loans. Therefore, the NAACP argued, allowing disparate impact claims under the FHA is essential to redress the lingering impacts of legal segregation and work towards greater economic and social equality. Further, the NAACP argued that the recent financial crisis elucidated persistent discriminatory practices that detrimentally target African-American and Latino loan seekers. Supporting this proposition, the ACLU argued that bankers targeted borrowers of color to receive the toxic subprime loans that undergirded the economic collapse. The ACLU contends that a disparate impact standard under the FHA is therefore necessary to ensure that minority borrowers enjoy full recovery from the housing market collapse by ensuring lenders do not repeat the implicitly discriminatory practices employed in the years before the 2008 housing crisis.

IMPACT ON RENTAL HOUSING

Supporters of the Township argued that allowing disparate impact claims under the FHA would negatively impact those who provide rental housing. The Consumer Data Industry Association (“CDIA”) warns that maintaining the disparate impacts standard will limit landlords’ ability to screen tenants for risk factors. For instance, the CDIA claims that landlords would be blocked from examining financial information, eviction records, and criminal backgrounds when determining whether to rent to a potential tenant. The NLHA further contends that housing providers could face lawsuits for any legitimate screening policy (such as ensuring a tenant’s ability to pay rent or maintaining safe housing by considering an applicant’s criminal record) if that policy unintentionally affected protected classes at a disproportionate rate.

Supporters of the Residents counter that the disparate impact inquiry in FHA claims is essential to protect vulnerable groups of renters, particularly survivors of domestic and sexual violence. They contend that screening policies allow landlords to wrongfully exclude and evict survivors of violence from housing. According to the ACLU and Legal Momentum, because such policies are facially-neutral, disparate impact claims, which allow redress in the fact of exclusion or eviction, are essential to protect these at-risk groups–who are overwhelmingly women and children. For instance, Legal Momentum asserted in its brief, domestic violence survivors are frequently low-income women to whom landlords could easily deny housing opportunities based on a poor credit background. As such, amici contend that zero-tolerance policies that trigger eviction if any member of a household engages in criminal activity often force survivors of violence out of their homes because of the actions of an abuser. Legal Momentum warns that denying survivors the ability to pursue disparate impact claims would deter survivors from seeking police intervention for fear of eviction and would force many women to stay with a violent abuser or face homelessness.

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Analysis

This case asked the Court to decide whether disparate impact claims are cognizable under Section 804(a) of the FHA. In its brief, The Township argues that the plain language of the statute, which includes words such as “refuse,” “make,” and “deny,” requires an intentional discriminatory purpose and does not permit disparate treatment alone. Further, the Township argues that permitting disparate-impact claims under the statute would raise serious constitutional concerns, including violations of the Equal Protection Clause of the Fourteenth Amendment and the Tenth Amendment. To the contrary, the Residents in their brief argue that the statute’s plain meaning prohibits both intentional housing discrimination as well as acts that cause unjustified discriminatory effects. Moreover, the Residents argue that acknowledging disparate-impact claims under the statute does not raise any federalism concerns and would in fact further equal protection across the board.

DOES SECTION 804(a) CONTAIN A DISCRIMINATORY INTENT REQUIREMENT?

The Township argues that the statute does not authorize disparate impact claims alone but requires an underlying discriminatory intent because it forbids the discriminatory action based on one’s particular individual trait such as race. In particular, the Township argues that the statute encompasses words that describe discriminatory “actions” and “motivation” as opposed to the natural “effects” resulting from any enacted policies. The Township relies on the dictionary meaning of the words “refuse,” “make,” “deny,” and “because of” to claim that this section requires a discriminatory purpose. The Township contends that the word “refuse” means “to show or express a positive unwillingness to do or comply” with something, thereby entailing some type of purposeful willful act. Further, it claims that the meaning of the word “deny” is to “refuse to recognize or acknowledge.” Moreover, it argues that the meaning of “make” is “to produce as a result an action, effort, or behavior,” also requiring some type of discriminatory motive. Lastly, the Township argues that the meaning of the words “because of” mean something “by reason of” or “on account of.” According to the Township, that phrase suggests that an actor has made a conscious decision to discriminate on the basis of someone’s protected trait, which requires proof of purposefully discriminatory intent. The Township further supports its position by comparing and contrasting this section of the statute with two other anti-discrimination statutes—Title VII of the Civil Rights Act of 1964 (“Title VII”) and the Age Discrimination in Employment Act of 1967 (“ADEA”). Basically, the Township argues that these two statutes focus on the “effects” of an employer’s actions rather than “motivation” and are therefore not applicable to the housing context.

To the contrary, the Residents argue that the FHA claims do not require discriminatory intent; rather, the FHA forbids housing practices that result in discriminatory effects. The Residents rely on the phrase “otherwise make unavailable,” to suggest that the FHA targets policies that result in disparate impacts, but otherwise does not require a showing of intent. The Residents also claim that the dictionary meaning of “make” entails no intent requirement but merely means “to cause to happen to or be experienced by someone.” Accordingly, the Residents argue, the act of “making” housing “unavailable” means to cause it to become “inaccessible or unattainable.” The Residents claim that the crucial point is the statutory language’s focus on causation—between the landlord’s action and the resulting unavailability of housing—and not the landlord’s intent behind the resulting practice. Further, like the Township, the Residents compare the FHA to similar provisions in Title VII and ADEA, claiming that both statutes authorize disparate-impact claims despite the fact that they forbid actions taken “because of” a person’s personal trait. More specifically, the Residents argue that in all three statutes, Congress lists the specific actions that are prohibited and then follows with the word “otherwise,” which purportedly shows that Congress intended the statutes to encompass broad discriminatory effects.

DO DISPARATE IMPACT CLAIMS UNDER SECTION 804(a) VIOLATE THE EQUAL PROTECTION CLAUSE?

The Township contends that permitting disparate impact claims under Section 804(a) violates the Equal Protection Clause of the Fourteenth Amendment. According to the Township, authorizing such claims requires local government officials to treat people differently solely on the basis of their race and allocate benefits and burdens based on their personal traits when adopting any redevelopment plan as a means of addressing racial imbalances in housing patterns. As such, the Township claims that ultimately, local governments end up providing relief only to racial minorities who are relocated from their homes whereas the same relief would not be available to non-minority citizens whose financial means are also limited. The Township argues that the Equal Protection Clause forbids such race-based treatments despite any valuable social benefit that may result from such a housing policy.

On the other hand, the Residents argue that permitting disparate impact claims under § 804(a) does not violate the Equal Protection Clause. The Residents contend that the Township need not engage in any classification based solely on race, but rather, they can eliminate the current redevelopment plan or revise it to provide existing residents with access to affordable alternative housing. In fact, according to the Residents, protecting the members of a disadvantaged group from discriminatory effects strengthens, rather than weakens, equal protection because the government is not forced to treat members of a group unfavorably because of their race. Furthermore, the Residents argue that mere “race consciousness” does not raise equal-protection concerns, and thus, the fact that a disparate-impact standard involves acknowledging a housing practice’s effects on members of disadvantaged groups does not implicate any constitutional concerns.

The Township also argues that authorizing disparate impact claims in the housing context gives rise to Tenth Amendment violations. According to the Township, the power to regulate land use—including the adoption of redevelopment plans for blighted properties—has always been classified as a state power. The Township claims that the text of § 804(a) is silent as to whether Congress intended for local governments to consciously consider race as a factor when enacting housing policies. In fact, the Township argues that the Supreme Court has always required a “clear and manifest intent” from Congress before reading in any such effect into a federal statute. Accordingly, the Township argues that neither Congress nor the courts should remove the state’s traditional authority over land use unless the statute clearly says to do so.

In response, the Residents claim that § 804(a) was not enacted exclusively to regulate local land-use decisions. Instead, the Residents argue that the FHA prohibits discrimination in the general interstate housing market, which has always been an area of federal regulation, not state regulation. In fact, according to the Residents, this prohibition only incidentally affects the ability of local governments to make local land-use decisions. The Residents further argue that the Supreme Court has long held the position that local governments “possess no sovereign immunity against federal laws”; this principle, the Residents argue, also applies to federal laws that cover areas traditionally regulated by the state. Moreover, the Residents contend that such federal oversight advances the basic constitutional principle of “safeguarding against excessive, unpredictable, or unfair use of the government’s eminent domain power,” especially against homeowners who lack the power to “protect themselves in the political process against the majority’s will.”

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Conclusion

Before this case settled on November 13, 2013, the Court had the opportunity to decide whether disparate impact claims are cognizable under the FHA. Since the case settled, the law in the Third Circuit now mirrors the law of most others in that the disparate impact standard applies. If the Court had struck down the disparate impact standard, however, it would have gutted a key provision from a landmark civil rights statute, effectively creating an insurmountable barrier to relief for plaintiffs claiming discriminatory housing practices under the FHA. Although some argue that limiting FHA claims creates a more efficient and productive housing and loan market, others counter that disregarding the disparate impact standard would serve to perpetuate and deepen historically entrenched patterns of segregation and economic inequality.

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