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Inclusive Communities and the Question of Impact

December 8, 2016

INCLUSIVE COMMUNITIES AND THE QUESTION OF IMPACT: PRO-PLAINTIFF?

By: Lauren Clatch, Volume 101 Staff Member

In the summer of 2015, the Supreme Court ruled in Texas Dep’t of Housing & Community Affairs v. Inclusive Communities Project, Inc. regarding the viability of disparate impact claims under the Fair Housing Act (FHA).[1] Many have heralded the Court’s holding as a pro-plaintiff victory, but it is necessary to look closely at the language of the decision as well as subsequent district court decisions to assess the impact.

I. A BRIEF HISTORY OF DISPARATE IMPACT

In 1971, the Supreme Court interpreted Title VII to allow plaintiffs to assert discrimination based on a theory of disparate impact rather than only disparate treatment.[2] Later, in Watson v. Fort Worth Bank & Trust, the plurality outlined a structure of proof and burden required for plaintiffs’ disparate impact claims.[3] Specifically, the Court found that “the plaintiff’s burden in establishing a prima facie case goes beyond the need to show that there are statistical disparities in the employer’s work force,” emphasizing the need for “isolating and identifying the specific employment practices that are allegedly responsible for any observed statistical disparities” and then further proving causation using “statistical evidence of a kind and degree sufficient to show that the practice in question has caused” the harm.[4] Congress soon after amended Title VII in 1991 to codify disparate impact.[5]

Congress concluded that Supreme Court rulings “ha[ve] weakened the scope and effectiveness of Federal civil rights protections” and this weakening of civil rights protections needed to be addressed.[6] The amendment bolstered disparate impact claims by allowing plaintiffs to point to a decisionmaking process to serve as the challenged employment practice if the plaintiff can first demonstrate that the elements of decisionmaking cannot be separated for analysis.[7] The amendment also required the employer to respond to the plaintiff’s demonstration of causation, the defendant must demonstrate that the employment practice is “required by business necessity.”[8] This affirmative defense can still be countered by the plaintiff’s subsequent demonstration that there is an “alternative employment practice” that does not lead to disparate impact.[9] At issue in Inclusive Communities was whether disparate impact claims were cognizable under the Fair Housing Act (FHA).[10] This question was granted cert twice before Inclusive Communities.[11]

II. SUMMARY OF INCLUSIVE COMMUNITIES

The Fair Housing Act (FHA) allows a claim for discrimination “against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services in connection therewith, because of race, color, religion, sex, familial status, or national origin.”[12] In Inclusive Communities, Inclusive Communities Project (ICP), a Texas-based nonprofit that helps low-income families obtain affordable housing, brought a disparate impact claim against the Department of Housing and Community Affairs (Department). ICP alleged that the Department’s tax credit allocation decisions awarded more tax credits for low-income families in predominantly black inner city neighborhoods than to predominantly white suburban neighborhoods, which perpetuated segregation. The Court listed requirements of a plaintiff’s prima facie burden in an FHA disparate impact case: (1) show statistically-imbalanced lending patterns which adversely impact a protected class; (2) identify a facially-neutral policy used by Defendants; (3) allege that such policy was “artificial, arbitrary, and unnecessary;” and (4) provide factual allegations that link the challenged neutral policy to a specific adverse disparity—the “robust causality requirement.”[13]

III. THE QUESTION OF IMPACT: PRO-PLAINTIFF?

Inclusive Communities has often been understood as a victory for plaintiffs.[14] The basic takeaway does in fact seem pro-plaintiff: plaintiffs are not limited to disparate treatment but also have rightful claims under disparate impact, which does not require evidence of intentionality like disparate treatment claims.[15] In assessing the impact of Inclusive Communities, the most logical first place to look is the decision that the lower court made on remand. In the first line of her opinion, the District Court judge notes the “materially different (and more onerous) prima facie case burden of proof” for plaintiffs based on the Supreme Court’s ruling.[16] The District Court then found that the plaintiffs had not met the more onerous burden because they did not point to a specific and facially neutral policy. Plaintiffs pointed to the different rates of application approvals of predominantly African-American families to minority areas compared to Caucasian tracts,[17] but the application approval decisionmaking process did not qualify. The court also noted that the plaintiffs had not met the “robust” causality requirement in the prima facie burden.[18] The result was an outright dismissal of the case because of the failure to demonstrate a prima facie case; thus, the celebration surrounding Inclusive Communities should be tempered.

In line with a tempered sensibility, some scholars argue that Inclusive Communities is misunderstood as a victory for FHA plaintiffs, and that in fact the decision in Inclusive Communities “will actually curtail disparate-impact liability” because the holding adds nothing for plaintiffs but adds protection for defendants.[19] Pushing this conclusion further, though, the “robust causality requirement” can be understood as part of the “more onerous” burden that plaintiffs are subjected to, which suggests that Inclusive Communities not only adds protection for defendants but also increases the bar of entry to a full judicial process. Specifically, if the plaintiff cannot pass the hurdle of a prima facie case, the case is subject to motions to dismiss, essentially cutting the claim at its knees. A number of cases citing Inclusive Communities have been dismissed for failure to state a claim.[20] On the other hand, a number of cases have successfully passed the motion to dismiss stage.[21] Is it that the cases that have surpassed the hurdle of motion to dismiss are materially different claims than those that fell flat? Some key takeaways include the usefulness of statistical evidence of disparity (especially with expert testimony)[22] as well as the clear articulation of a harm.[23] In a survey of the cases that cite Inclusive Communities, is it notable that courts treat the “robust” causation requirement very differently, some not even citing it as a concern and others citing it as their primary concern that justifies granting defendant’s motion to dismiss.[24] If it is truly a “requirement” of the prima facie case it seems surprising that some courts make no mention of it. On the other hand, if “requirement” is a misnomer, then “robust” causation may continue to be used inconsistently.

In sum, Inclusive Communities did not proliferate an unambiguously pro-plaintiff ruling, nor did it proliferate an unambiguous legal test for district courts to apply. One court properly characterized the vagueness of Inclusive Communities by commenting that the Court “did not squarely address the limits or proper scope of [disparate impact] claims.”[25] There are many issues that still need to be determined before the legal rule regarding plaintiffs’ prima facie burdens is clear. First, what constitutes a specific, and facially neutral policy? Second, what does the plaintiff need to demonstrate (and using what evidence) in order to demonstrate causality between identified policy and disparities? Third, in what way does disparate impact under FHA differ from disparate impact claims in other context (e.g., employment law, allowing plaintiffs to point decisionmaking generally as a policy[26])? District courts may not be able to converge on a single interpretation, which may provoke the need for clarification from the Supreme Court.

  1. 135 S. Ct. 2507 (2015) [hereinafter Inclusive Communities]. ↑
  2. Griggs v. Duke Power Co., 401 U.S. 424, 430 (1971) (“Under [Title VII], practices, procedures, or tests neutral on their face, and even neutral in terms of intent, cannot be maintained if they operate to ‘freeze’ the status quo of prior discriminatory employment practices.”). ↑
  3. 487 U.S. 977 (1988). ↑
  4. Watson, 487 U.S. at 994; see also Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 651 (1989) (reaffirming the plaintiff’s requirements for proving a disparate impact). ↑
  5. 42 U.S.C. § 2000e-2(k) (2012). ↑
  6. The Civil Rights Act of 1991, Pub. L. No. 102–166, 105 Stat. 1071. ↑
  7. 42 U.S.C. § 2000e-2(k)(1)(B)(i) (“[T]he complaining party shall demonstrate that each particular challenged employment practice causes a disparate impact, except that if the complaining party can demonstrate to the court that the elements of a respondent’s decisionmaking process are not capable of separation for analysis, the decisionmaking process may be analyzed as one employment practice.”). ↑
  8. 42 U.S.C. § 2000e-2(k)(1)(B)(ii). ↑
  9. Sandra F. Sperino, Justice Kennedy’s Big New Idea, 96 B.U. L. Rev. 1789, 1796 n.49 (2016). ↑
  10. 135 S. Ct. 2507 (2015). ↑
  11. In 2011, Magner v. Gallagher, 132 S. Ct. 548 (2011), was dismissed by parties before a decision could be reached, and in 2013, Township of Mount Holly v. Mount Holly Gardens Citizens in Action, Inc., 134 S. Ct. 636 (2013), the parties were again dismissed before a decision was made. ↑
  12. 42 U.S.C. § 3604(b). ↑
  13. Inclusive Communities, 135 S. Ct. at 2523–24.  ↑
  14. See Ariane de Vogue, Court Upholds Key Tool to Combat Housing Discrimination, CNN (June 25, 2015), http://www.cnn.com/2015/06/23/politics/fair-housing-act-texas-supreme-court; Dennis Parker, Why Today Was a Battle Won in the War Against Racial Discrimination, ALCU Blog: Speak Freely (June 25, 2015), https://www.aclu.org/blog/speak-freely/why-today-was-battle-won-war-against-racial-discrimination. ↑
  15. See De Reyes v. Waples Mobile Home Park Ltd. P’ship, No. 1:16-CV-563, 2016 WL 4582049, at *2 (E.D. Va. Sept. 1, 2016) (“[T]he threshold for a prima facie case of disparate impact is lower than the threshold for a prima facie case of disparate treatment because in the former the defendant’s intent is not part of the plaintiff’s case.”). ↑
  16. Inclusive Communities Project, Inc. v. Texas Dep’t of Hous. & Cmty. Affairs, No. 3:08-CV-0546-D, 2016 WL 4494322, at *1 (N.D. Tex. Aug. 26, 2016) [hereinafter Inclusive Communities Project]. ↑
  17. Inclusive Communities Project, No. 3:08-CV-0546-D, 2016 WL 4494322, at *5 (“Between 1999 and 2008, applications for 9% tax credits for units located in minority tracts had a 41% approval rate, while applications for units located in Caucasian tracts had a 21% approval rate.”). ↑
  18. Inclusive Communities Project, 2016 WL 4494322, at *8 (“Even assuming arguendo that TDHCA’s use of discretion is a specific, facially neutral policy, ICP has not established that the exercise of that discretion caused the disparity in the location of low-income housing.”). ↑
  19. Elizabeth L. McKeen, Bimal Patel & Ashley Pavel, Robust Causality and Cautionary Standards: Why the Inclusive Communities Decision, Despite Upholding Disparate-Impact Liability, Establishes New Protections for Defendants—Part I, 132 Banking L.J. 553, 557 (2015). ↑
  20. See, e.g., De Reyes, 2016 WL 4582049; Patton v. Hanassab, No. 14CV1489 AJB (WVG), 2016 WL 4507022, at *1 (S.D. Cal. Aug. 29, 2016); Cobb Cty. v. Bank of Am. Corp., No. 1:15-CV-04081-LMM, 2016 WL 2937467, at *1 (N.D. Ga. May 2, 2016); Burbank Apartments Tenant Ass’n v. Kargman, 48 N.E.3d 394, 397 (2016); City of Miami v. Bank of Am. Corp., 171 F. Supp.3d 1314, 1316 (S.D. Fla. 2016). ↑
  21. See, e.g., Winfield v. City of N.Y., No. 15CV5236-LTS-DCF, 2016 WL 6208564, at *1 (S.D.N.Y. Oct. 24, 2016); Long Island Hous. Servs., Inc. v. Nassau Cty. Indus. Dev. Agency, No. 14-CV-3307(ADS) (AKT), 2015 WL 7756122, at *1 (E.D.N.Y. Dec. 1, 2015); Cty. of Cook v. HSBC N. Am. Holdings Inc., 136 F. Supp.3d 952, 955 (N.D. Ill. 2015). ↑
  22. See, e.g., Winfield, 2016 WL 6208564, at *6 (noting higher odds to admit white applicants to nice neighborhoods); Rhode Island Comm’n for Human Rights v. Graul, 120 F. Supp. 3d 110, 125 (D.R.I. 2015) (detailing the expert’s disparity ratios). But see Burbank, 48 N.E.3d at 413 (using the plaintiff’s statistics to point to the presence of more subsidy-tenants than before the defendant’s policy—thus finding no disparate impact). ↑
  23. See City of Joliet, Illinois v. New W., L.P., 825 F.3d 827, 828 (7th Cir. 2016) (arguing that requiring residents to move out of a dilapidated and crime-ridden building, with a promise to obtain housing elsewhere, is not a legally cognizable harm). ↑
  24. The most striking example of this is in Winfield, where the court reasoned that the plaintiff did not need to prove causation at all at to survive a motion to dismiss. 2016 WL 6208564, at *6. ↑
  25. De Reyes, 2016 WL 4582049, at *4. ↑
  26. See 42 U.S.C. § 2000e-2(k)(1)(B)(i). ↑
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