For the second time in two years, a negotiated settlement will prevent the U.S. Supreme Court from deciding the validity of disparate impact claims under the Federal Fair Housing Act.  The governing body of Mount Holly Township, New Jersey, voted November 13 to approve an out-of-court settlement in the case of Township of Mount Holly v. Mount Holly Gardens Citizens in Action.  The settlement ensures that, for the time being, disparate impact claims remain cognizable under the FHA.

Mount Holly, previously set for oral argument on December 4, was to decide whether the FHA could be violated by neutral policies or actions—including those of private landowners as well as local government regulations—impacting certain groups more than others.  The FHA prohibits discrimination among and against certain “protected classes,” including race, religion, sex, national origin, familial status, or disability.  All eleven federal courts of appeals have determined that FHA violations can occur by facial or intentional discrimination, or by policies or actions which—although facially neutral as to protected classes—may negatively affect protected classes.  The dispute over the availability of disparate impact analysis in FHA claims arises because of language differences between the FHA and other civil rights laws which more clearly permit disparate impact analysis.

The Mount Holly settlement means that disparate impact claims will remain available to plaintiffs under the FHA.  Private landowners and local governments should therefore remain vigilant about maintaining rules, ordinances, or policies that differentially impact certain racial, ethnic, gender, religious or disability groups.  Courts analyzing disparate impact weigh the actual impact on a protected class against the defendant’s interest in the policy or action.  If disparate impact claims had been invalidated in Mount Holly, the avenues for plaintiffs to show FHA violations—and perhaps violations of other federal laws, including those related to lending discrimination—would be limited to cases of facial or intentional discrimination, both of which can be difficult for plaintiffs to prove.

The Mount Holly litigation, which has been ongoing for nearly ten years, stems from the township government’s designation of blight and implementation of a redevelopment plan for the Gardens neighborhood, populated primarily by low-income and minority residents.  Under the redevelopment plan, the township is acquiring and demolishing existing homes to make way for new market-rate homes and commercial uses. 

The Mount Holly settlement comes only one year after an out-of-court settlement in the case of Magner v. Gallagher, which precluded the Supreme Court from hearing arguments on the same issue presented in Mount Holly.  Fair housing advocates, including the Obama administration, have sought to prevent the FHA disparate impact issue from reaching the Supreme Court due to predictions that the Court’s conservative majority would treat disparate impact review unfavorably, which would also potentially affect fair lending laws.