U.S. Supreme Court Upholds Disparate Impact Claims Under Fair Housing Act

This morning the United States Supreme Court upheld disparate impact claims under the Fair Housing Act. The opinion, Texas Department of Housing and Community Affairs, et al. v. Inclusive Communities Project, Inc., was the result of a 5-4 decision with two dissenting opinions (See the clueintexas.com January 2015 blog entry for further background information on the facts of the case). Basing its holding in part upon similar statutes, the Court held: “disparate-impact claims are cognizable under the Fair Housing Act upon considering its results-oriented language, the Court’s interpretation of similar language in Title VII [of the Civil Rights Act of 1964] and the ADEA [Age Discrimination in Employment Act], Congress’ ratification of disparate-impact claims in 1988 against the backdrop of the unanimous view of nine Courts of Appeals, and the statutory purpose (“to eradicate discriminatory practices within a sector of our Nation’s economy”).”


The Court, however, cautioned against expansive liability: “disparate- impact liability must be limited so . . . regulated entities are able to make the practical business choices and profit-related decisions that sustain a vibrant and dynamic free-enterprise system. And before rejecting a business justification—or, in the case of a governmental entity, an analogous public interest—a court must determine that a plaintiff has shown that there is ‘an available alternative . . . practice that has less disparate impact and serves the [entity’s] legitimate needs.’” Noting further a “business necessity” defense to liability, the Court stated: “An important and appropriate means of ensuring that disparate-impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest served by their policies.” The Court pointed out: “The limitations on disparate-impact liability discussed here are also necessary to protect potential defendants against abusive disparate-impact claims. If the specter of disparate-impact litigation causes private developers to no longer construct or renovate housing units for low-income individuals, then the FHA would have undermined its own purpose as well as the free-market system.”