Supreme Court Takes Up Landmark Disparate Impact Case, Again, Over U.S. Objections

On June 17, 2013, the Supreme Court granted certiorari in Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., No. 11-1507, to decide whether disparate impact claims are cognizable under the Fair Housing Act ("FHA"). It did so over the U.S. government's strenuous objection that HUD's new rule interpreting the FHA is "dispositive." Of interest, the Court simultaneously declined to grant cert. on the question of the appropriate standard for evaluating disparate impact claims if the FHA is deemed to allow them. The repercussions of the Supreme Court's decision will be far-reaching, assuming a settlement does not prevent the Court from reaching the issue.

THE LONG LEAD UP

In 2002, the Township of Mount Holly ("Township") proposed a redevelopment project in the predominately African-American and Hispanic low-income neighborhood of Mount Holly Gardens, a subdivision of Mount Holly, New Jersey known as the "Gardens." The Township declared the Gardens blighted and proceeded with a plan to acquire all of the houses there through exercise of its powers of eminent domain, and replace them. In 2008, current and former Gardens residents filed suit in the District of New Jersey. They alleged, among other things, disparate-impact and intentional discrimination in violation of the FHA. The case proceeded slowly through dispositive briefing until, in January 2011, the District Court granted the Township's motion for summary judgment. It held that respondents had not established either intentional discrimination or a prima facie case of disparate impact. Plaintiffs appealed. The Third Circuit reversed, holding that the FHA permits disparate impact claims and that plaintiffs had established a prima facie case of disparate impact.1

While this was unfolding, the Supreme Court was poised to decide whether the FHA permits disparate impact claims in Magner v. Gallagher. But, the Court never rendered a decision, as the plaintiff in Magner (the City of Saint Paul) dismissed the appeal in February 2012, in a much-criticized settlement engineered by the Justice Department to avoid Supreme Court review of the disparate impact question.2

In June 2012, the Township of Mount Holly petitioned for a writ of certiorari. The questions presented were, "(1) Whether disparate impact claims are cognizable under the Fair Housing Act; and (2) whether, if such claims are cognizable, they should be analyzed under the burden shifting approach used by three circuits, under the balancing test used by four circuits, under a hybrid approach used by two circuits, or by some other test." The Court invited the Solicitor General to offer the...