The Anatomy Of A Disparate Impact Claim

Following the U.S. Supreme Court’s recent decision in Texas Department of Housing and Community Affairs v. Inclusive Community Projects, Inc. , it’s pretty clear that disparate impact claims are valid under the Fair Housing Act.  But the question remains:  how exactly does a disparate impact claim work?  And is it as draconian for landlords and property management companies as it seems?  The short answer is that while the threat of a disparate impact claim may give management a bit of heartburn, there are safeguards in place to protect legitimate, nondiscriminatory policies and practices.

As I’ve written about before (The U.S. Supreme Court Upholds “Disparate Impact” Claims Under The Fair Housing Act), a disparate impact claim allows a plaintiff to attack a housing policy that may seem nondiscriminatory on its face, but which has a disparate impact on certain protected classes.  As upheld by the Supreme Court in Texas Department of Housing and Community Affairs, and as originally promulgated by the U.S. Department of Housing and Urban Development, a disparate impact claim encompasses a burden shifting framework.  So what does that mean in plain English?  Well, under the Supreme Court’s guidance, a disparate impact claim works as follows.  First, the plaintiff must make a threshold showing of disparate impact, meaning that the plaintiff must show that a challenged practice or policy has caused, or will cause, a discriminatory effect.  Importantly, pursuant to the Supreme Court’s guidance, there must be a causal relationship between the defendant’s practice or policy and the discriminatory effect—if there is not, then the plaintiff cannot make its required initial showing, and the case is dismissed.  If the plaintiff does make this initial showing, then the burden shifts to the defendant to show that the practice or policy is necessary to achieve one or more substantial, legitimate, non-discriminatory interests.  Presuming that the defendant makes this showing, then the burden shifts back to the plaintiff to prove that the interests offered by the defendant in support of the practice or policy could be achieved by another practice or policy with a less discriminatory effect.

While the above framework may seem complex, the key takeaway is that management is still able to articulate and rely on a valid interest served by the challenged practice or policy as a defense to a disparate impact claim.  Moreover, the causal requirement set out by the Supreme Court—which the Court itself described as needing to be “robust”—is designed to ensure that defendants will not be held liable for disparities that they did not create.  In fact, the Supreme Court has specifically cautioned that courts should examine with care whether a plaintiff has met the threshold requirements to make a disparate impact claim, and that courts should promptly dismiss those cases where the plaintiff’s initial showing is insufficient.

While the above safeguards should provide management with a little peace of mind, it is still instrumental for management to analyze all practices and policies to determine if they might have a discriminatory impact on any protected classes and, if so, to consider whether there are any less discriminatory means that might equally achieve the intended goals of the practice or procedures.

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

Although it was largely overshadowed by more publicized rulings involving the Affordable Care Act and marriage equality, the U.S. Supreme Court also issued a key decision involving the Fair Housing Act last week.  In Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the Supreme Court ruled that parties may bring “disparate impact” claims under the Fair Housing Act (FHA).

So what is a disparate impact claim?  A plaintiff bringing a disparate impact claim must show that a particular policy or practice has a disproportionately adverse effect on members of a class protected under the FHA.  Contrast this from disparate treatment claims, where a plaintiff is alleging that he or she was treated adversely because of the defendant’s discriminatory intent or motive.  Accordingly, a property’s policy or procedure that is facially non-discriminatory, but which has a disproportionately adverse effect on a protected class, may be a violation of the Fair Housing Act under a disparate impact theory—even if the property had absolutely no discriminatory intent or motive in enacting the policy or procedure.

So is this a big deal? Well, kind of.  While this is the first time that the Supreme Court has ruled on this specific issue, every federal court of appeals that has reviewed the issue has upheld the validity of disparate impact claims.  And the Department of Housing and Urban Development (HUD) has taken the position that the FHA encompasses disparate impact claims.  As such, the Supreme Court’s decision does not represent a change in the law—rather, it merely upholds the status quo.  Although it should be noted that the U.S. House of Representatives has introduced an amendment to an appropriations bill that would prohibit the Department of Justice from using funds to prosecute or settle discrimination cases filed under a disparate impact theory.

So how does this impact landlords and management companies?  Hopefully, you have already been scrutinizing your policies and procedures to determine if they might have a disproportionate impact on protected class members.  We have routinely advised our clients over the years to proceed as though disparate impact theories were cognizable under the Fair Housing Act, and to revise their policies and procedures effectively.  If there is any uncertainty as to whether your policies or procedures may have a disparate impact on a protected class, I would recommend that you seek out experienced counsel to help you retool your policies.