The U.S. Supreme Court today agreed to hear a challenge to one of the the Obama administration\u2019s most potent anti-discrimination tools, the statistics-based method known as disparate impact.<\/p>\n
The case, Mt. Holly Gardens Citizens in Action v. Mt. Holly, represents the first direct assault on disparate impact to reach the Supreme Court since the administration was accused of engineering a settlement that squelched another such challenge by the city of St. Paul, Minn.<\/p>\n
By taking up Mt. Holly, the court will be able to pass judgment on the controversial policy, under which governments, lenders and others can be found liable for discrimination even if they had no intent of harming members of minority groups. Critics say the government should use disparate treatment as the standard, which requires some showing of intentional discrimination.<\/p>\n
Mt. Holly \u201cvery much the opportunity that was lost in St. Paul,\u201d said John Culhane, a partner with Ballard Spahr in Philadelphia who is watching Mt. Hollyclosely for its potential impact on clients in the consumer-lending industry. \u201cThe perception is the Supreme Court has taken this case because it feels there is no disparte-impact theory of liability, and is prepared to rule to that effect.\u201d<\/p>\n
In Mt. Holly, residents of a poor neighborhood sued to block the New Jersey town\u2019s redevelopment plan that would replace hundreds of units of inexpensive housing with middle-income homes costing $200,000 or more. A federal court rejected the claim, saying the residents had failed to prove that the plan was discriminatory simply because some black and Latino residents would no longer be able to afford to live in the Mt. Holly Gardens neighborhood.<\/p>\n
The Third Circuit Court of Appeals reversed, rejecting the township\u2019s argument that any redevelopment project in a minority neighborhood would fail a disparate-impact analysis under the Fair Housing Act. \u201cThis is a feature of the FHA\u2019s programming, not a bug,\u201d the appeals court said.<\/p>\n
The Obama administration, in a friend-of-the-court brief, supported the Third Circuit opinion. It cited numerous decisions in lower courts that appear to support disparate-impact analysis. Culhane said the method has never explicitly been upheld in the manner of the Mt. Holly case, however, where the government sought to halt a local government redevelopment plan simply because it had a statistically disproportionate effect on minorities.<\/p>\n