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Ian Smith on disparate-impact rules, which can lead to veiled racial quotas

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I wrote earlier about the Obama administration’s use of disparate-impact theory to pressure some school districts into adopting veiled racial quotas in discipline, to extract costly settlements from a number of small banks, and to prod banks into making risky loans to some borrowers with poor credit histories. “Disparate impact” is when a colorblind, evenhandedly applied policy nevertheless weeds out more blacks than whites, or more members of a minority group than other groups, like when more blacks than whites fail a standardized test. It is also known as “unintentional” discrimination. I helped file amicus briefs in two Supreme Court cases challenging the use of disparate impact theory under the Fair Housing Act, cases that the Obama administration or its allies managed to make go away by buying off the challengers.

Now, as Ian Smith notes in an insightful commentary he has allowed me to quote below, the “disparate impact” issue may return to the Supreme Court yet again, this time in a pending challenge by the State of Texas, which would probably not be bought off if the Supreme Court agrees to hear its challenge:

One case coming up before the Supreme Court could strike a major blow to proponents of ‘disparate impact’, the controversial legal doctrine that supports charges of discrimination against individuals based on the effects of their conduct, rather than their intent. Using mere statistics to base a claim of discrimination has disrupted employers’ otherwise neutral policies for years, most notably in the case of police and fire departments when their promotion exams are disproportionately passed by white candidates.

Although disparate impact-claims are expressly entrenched in employment law, the Supreme Court hasn’t affirmed whether they’re permitted under other anti-discrimination statutes, such as the Federal Housing Act (FHA). In the upcoming petition of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, a case involving the allegedly discriminatory effects (not the intention) of a low-income housing tax credits program, the Court will have the opportunity to address this question. That the Court could deny an expansion of the doctrine, which most legal analysts predict, has got its proponents very nervous.

The complainant in this case, the Inclusive Communities Project, is a non-profit group that works to place Section 8 tenants in predominately white suburban neighborhoods in Dallas. They allege that the Department of Housing and Community Affairs of Texas violated the civil rights of blacks in that city by distributing too many tax credits to low-income housing developers operating in minority neighborhoods.

Because residents of these low-income projects are disproportionately black, this had the effect, it’s alleged, of keeping low-income housing projects (and in effect black people) away from white neighborhoods. Despite the State agency’s arguments that the allocation of the credits is based on a non-discretionary fixed formula laid out in federal law, the group charges that the effect of the distribution was not evenly proportionate between white and black neighborhoods and therefore was a civil rights violation under disparate impact-doctrine.

The Supreme Court almost had the opportunity to decide this same question before. In 2011 and 2012, the Court granted hearings in Magner v. Gallagher and Town of Mount Holly v. Mount Holly Gardens, respectively, cases which according to critics would have likely struck down the application of disparate impact under the FHA. For this reason, the then-head of Civil Rights at the Justice Department, Tom Perez, successfully intervened to keep these cases from coming before the Court, by, among other things, making a quid pro quo-deal with plaintiffs.

Disparate impact has traditionally only been applied in the employment context. This was achieved in 1990 through an amendment introduced by then-Senator Ted Kennedy to Title VII of the Civil Rights Act. It was expressly provided that, in addition to intentional discrimination, employers would be prohibited from utilizing standards (such as promotion exams) that have the effect of discriminatory results. By contrast, the FHA lacks this ‘effects’ language, a fact that no one disputes.

But this hasn’t curbed the Obama administration’s determination in finding that the FHA permits disparate impact. HUD, which interprets and applies regulations under the FHA, insists that it permits disparate impact claims, despite Congress’s express determination that it doesn’t. In 1988, Congress had the opportunity to amend the FHA and failed to insert language that would have permitted such claims. Further, HUD, under every president since the FHA’s passage nearly 50-years ago, has never treated the act as having this power. This had always been the interpretation of the FHA, until the Obama administration came to power.

Whether the Justice Department is currently trying behind closed doors to influence the parties to settle the case before the Supreme Court decides to take it up is of course unknown. But given the demonstrated commitment of the Obama administration to manipulate the legal process as well as discrimination law, their intentions are loud and clear.

In the earlier Magner case, the Obama administration declined to pursue a fraud claim worth up to $180 million against the City of Saint Paul, Minnesota, to get it to drop its pending Supreme Court challenge to “disparate impact” interpretations of the Fair Housing Act. In doing so, it ignored the objections of career Justice Department lawyers, and may have cost taxpayers tens of millions of dollars in what was described as a case of “particularly egregious” fraud.

I discuss four additional reasons not to allow disparate-impact liability under the Fair Housing Act at this link.

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