On June 17, 2013, the Supreme Court agreed to hear Township of Mount Holly v. Mount Holly Gardens Citizens in Action, a case that could drastically change the legal landscape regarding “disparate impact” liability under the Fair Housing Act (FHA) and, by analogy, the federal Equal Credit Opportunity Act (ECOA). The threshold issue on appeal is whether plaintiffs may use disparate impact to allege a violation under the FHA rather than proving liability by demonstrating an actual intent to discriminate, also known as “disparate treatment.” The “disparate impact” theory allows liability to be imposed even where there was no intent to discriminate, but where practices had a discriminatory effect. In the underlying appeal, the Third Circuit agreed with plaintiffs that disparate impact claims are cognizable under the FHA, but now the Supreme Court will review that ruling in what will likely be one of the more anticipated decisions of the Court’s 2013-2014 term.

In 2005, the Supreme Court suggested that the “disparate impact” theory would be available only where the applicable statute contained “effects” language of a type that exists in Title VII of the Civil Rights Act of 1964, but that does not exist within the FHA and ECOA.   In Smith v. City of Jackson, 544 U.S. 228, 125 S.Ct. 1536 (2005), the Supreme Court determined that disparate impact was available under the Age Discrimination in Employment Act precisely because it contained the effects language.  Courts traditionally have followed the guidance of cases brought under Title VII when considering claims under the FHA and ECOA.  But, because the statutory language between Title VII and the FHA and ECOA are not identical—that is, the FHA and ECOA do not include the very language that allowed the City of Jackson court to extend disparate impact to the ADEA—past reliance on Title VII cases may have been misplaced.

In Mount Holly, plaintiffs are disputing a demolition and redevelopment of a predominantly minority neighborhood.  The Township of Mount Holly contends that the plaintiffs may not use “disparate impact” to establish liability because the statutory language under the FHA does not provide for such liability.  If the Supreme Court accepts the argument, plaintiffs would have to show an actual intent to discriminate to prove liability rather than focusing on the effects of certain practices.  Oral arguments will take place in the fall.  In Magner v. Gallagher, the Court agreed to hear the same core question, but petitioner, the City of St. Paul, surprisingly withdrew the suit two weeks before oral argument.  A Congressional committee report concludes that the Justice Department concocted a behind-the-scenes deal with the City of St. Paul, dropping potential False Claims Act charges against the city in an unrelated matter, in order to prevent a likely adverse ruling.  If true, the question now is whether the Justice Department will choose this path again.