'It Takes Hutzpah!': D.C. Federal Judge Issues Stunning Rebuke Of HUD Disparate Impact Rule

On November 3, 2014, Judge Richard J. Leon of the U.S. District Court for the District of Columbia, issued a scathing opinion striking down a regulation promulgated by the U.S. Department of Housing and Urban Development ("HUD") on disparate impact discrimination in housing. The plaintiff in this case, American Insurance Association, Inc., challenged HUD's promulgation of the disparate impact rule, which provides for liability based on disparate impact under the Fair Housing Act ("FHA"). The plaintiff claimed that HUD violated the Administrative Procedures Act ("APA"), 5 U.S.C. § 551 et seq., by exceeding its statutory authority when it expanded the scope of the FHA to recognize not only disparate treatment claims (i.e., intentional discrimination), but also disparate impact claims (i.e., facially neutral practices with discriminatory effects).

HUD's Action Under the Administrative Procedures Act The court reviewed HUD's interpretation of the FHA through the lens of the well-settled Chevron analysis for deference to agency rulemaking. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under the Chevron analysis, if the intent of Congress is clear as to a specific issue, then the court will not consider agency interpretation of the statute, "for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron at 842-843. However, if the court determines that a statute is silent or ambiguous on the specific issue, then the court will consider whether the agency's interpretation is based on a permissible construction of the statute. Chevron at 843.

In determining whether the statute was plain on its face, and therefore without need for HUD's assistance, the court began with the language of the statute. HUD argued that Congress' intent to recognize claims based on disparate impact under the FHA could be found in the language of the statute. In response, the court undertook a pointed analysis of the words Congress used in the FHA, specifically, "refuse," "make," "deny," and "discriminate." The court noted: "The use of these particular verbs is telling, and indicates that the statute is meant to prohibit intentional discrimination only. When Congress intends to expand liability to claims of discrimination based on disparate impact, it uses language focused on the result or effect of particular conduct, rather than the conduct itself." The court found no such...