Academic journal article ABA Banking Journal

"Disparate Impact" on Trial: The Supreme Court Tackles the Issue as It Relates to the Fair Housing Act

Academic journal article ABA Banking Journal

"Disparate Impact" on Trial: The Supreme Court Tackles the Issue as It Relates to the Fair Housing Act

Article excerpt

If you were to summarize the upcoming Supreme Court session in two words or less, you probably couldn't do better than to fall back on the injunction to "Question Authority"-a sentiment most often attributed to Benjamin Franklin (and, in a far stranger context, to '60s counter-culture guru Timothy Leary).

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One upcoming case in particular--Magner v. Gallagher--has caused ripples through the banking industry. The Court has agreed to entertain arguments on a proposition that many thought to be inviolable: The Fair Housing Act (FHA) permits plaintiffs to bring discrimination claims based upon the alleged "disparate impact" that a facially neutral policy or practice (neutral on the face of it) has upon a protected class. While the Supreme Court has not squarely settled the issue, 11 of 12 federal courts of appeal have assumed the FHA permits disparate impact claims.

Potentially reverse 11 courts of appeal? "Question Authority," indeed.

The case's facts are unusual. The plaintiffs are landlords who sued the city of St. Paul, Minn., over the city's vigorous enforcement of housing code in low-income areas. The landlords argue that the city's highly aggressive enforcement has a disparate impact on a protected class: It reduces the amount of affordable housing available to minority renters.

The Eighth Circuit ruled that the landlords had stated a cognizable (actionable) claim under the FHA, and allowed the case to proceed. Notably, however, five judges dissented from the appellate court's decision not to have the case heard by the full court. …

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