A Bad Week at the Office For the Supreme Court – Part 1

Case name: Texas Department of Housing and Community Affairs, et al v. The Inclusive Communities Project, Inc., et al.

Case number: 13-1371 (link to decision)

Date decided: June 25, 2015

Issue: Interpretation of statute – the Fair Housing Act of 1968 (FHA) [1]

Participants[2]:

The Texas Department of Housing and Community Affairs (Department)

The Inclusive Communities Project (ICP)

Background: Federal tax law makes low-income housing credits available for designated state agencies to distribute to selected developers. Texas (through the Department) awards credits under a scoring system based on criteria such as whether the neighborhood has good schools, whether the developer has a good credit history, and other factors that do not involve the race of the community’s inhabitants.

The ICP is a nonprofit corporation that assists low-income families in obtaining affordable housing. It brought a lawsuit alleging that the Department’s system, while not intentionally race-conscious, had a “disparate impact” on communities with racial minorities. As the Court summarized ICP’s position:

The ICP alleged the Department has caused continued segregated housing patterns by its disproportionate allocation of the tax credits, granting too many credits for housing in predominantly black inner-city areas and too few in predominantly white suburban neighborhoods. The ICP contended that the Department must modify its selection criteria in order to encourage the construction of low-income housing in suburban communities.

[Pages 2-3 of the Court’s opinion.] If it seems counterintuitive that minority neighborhoods are negatively impacted by too many federal benefits, you’re not alone. However, there is more on this that will be addressed later.

Before diving into the opinion, two concepts need to be defined, because they are the heart of the discussion throughout the opinions:

Disparate treatment. This is the type of racism people are most familiar with in the history of the civil rights movement. It involves a conscious attempt by individuals or businesses to actively discriminate based on race (or any other protected class). Nothing in this case involves a charge that the Department was engaging in this form of discrimination.

Disparate impact. This theory of discrimination is more controversial. It says that even if there’s no intent to discriminate, if the end result is that a racial group is disproportionately disadvantaged, and if there are less divisive ways to carry out a policy or practice, the theory says that the policy is nonetheless discrimination that is prohibited.

This case arose out of a question over the rules on how to proceed with a dispute between the Department and the ICP. Under the normal procedures in making a discrimination claim under the FHA, one party has to first establish an appearance on its face (“prima facie case”) that the policy is discriminatory. If that case is made, then the Department would have the burden to prove that less discriminatory alternatives weren’t possible. ICP provided some statistical evidence that the tax credits were awarded disproportionately more in minority communities than in Caucasian areas, and asserted that this makes a prima facie case of a disparate-impact claim. The Department took the position that no such claim is available under the FHA. After a series of procedural rulings among the District and Circuit Court, the Department filed a petition for a writ of certiorari on the question of whether the FHA allows for disparate impact discrimination claims. Whatever the result of this decision, the case will continue under the ruling.

One other note: after this litigation began, the federal Department of Housing and Urban Development (HUD) weighed in on this issue. In 2013, HUD issued a regulation on the procedures “for adjudicating disparate-impact claims”[3], under the assumption that the FHA already allowed such claims.

THE COURT’S OPINION (Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan)

This discussion is going to involve a lot of word-parsing of some statutory language, so it should be helpful to bring in the text at issue. Here is the text of the relevant portions of the Fair Housing Act[4]:

Section 804(a):

[I]t shall be unlawful—

(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

Section 805(a):

It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.

[Page 11 of the Court’s opinion.]

Before discussing this statute, the Court addressed the Court’s handling of similar statutes as background to its interpretation of the FHA.

The Civil Rights Act of 1964 and Griggs

Here is section 703(a)) of the Civil Rights Act of 1964:

It shall be an unlawful employer practice for an employer—

(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or

(2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.” [5]

In Griggs[6], an employer was sued for imposing a requirement upon employees, manual laborers, to obtain a high school diploma and to score high enough on two intelligence tests to qualify for the job. The Griggs Court held that the employment discrimination prohibition should include disparate-impact claims because it “furthered the purpose of the statute”. Also, the “adversely affect” language expanded the scope of discrimination to include the consequences of employment practices, not just the intent , if the employer’s discrimination was not because of a “business necessity”. [Page 8.]

The Age Discrimination in Employment Act (ADEA) and Smith

In Smith[7], a group of older employees filed suit based on the employer’s decision to give higher raises to employees with less than five years of experience. The employees filed suit, citing a violation of the Age Discrimination in Employment Act (ADEA), section 4(a) [8]:

It shall be unlawful for an employer—

(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age;

(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age; or

(3) to reduce the wage rate of any employee in order to comply with this chapter.”

The Smith Court relied on Griggs in holding that these two statutes “contain language ‘prohibit[ing] such actions that deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race or age”. [Italics in the original.]

The Federal Housing Act itself – background and 1988 amendments

With Griggs and Smith as background, the Court states a rule that “antidiscrimination laws must be construed to encompass disparate-impact claims when their text refers to the consequences of actions and not just to the mindset of actors, and where that interpretation is consistent with statutory purpose”. [Page 10.]

Does the FHA meet this rule? In the FHA statute cited above, the Court says that when the statute says it is unlawful to “refuse to sell or rent . . . or otherwise make unavailable” a dwelling, the term “otherwise make unavailable” refers to consequences, not just intent, and therefore allows for disparate-impact discrimination claims. [Page 11.]

The Court gave four bases for its finding:

1. The “otherwise make unavailable” language is similar to that in the statutes in Griggs and Smith. Here is a comparison of the relevant portions of each statute:

Section 703(a):

It shall be an unlawful employer practice for an employer—

[ . . . ]

(2) to limit, segregate, or classify his employees . . . or otherwise adversely affect his status as an employee, because of such individual’s age;

Section 4(a):

It shall be unlawful for an employer—

[ . . . ]

(2) to limit, segregate, or classify his employees . . . or otherwise adversely affect his status as an employee, because of such individual’s age

Section 804(a):

[I]t shall be unlawful—

(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

The Court observed that the phrasing of the “otherwise” language in the three statutes introduced a “results-oriented phrase”, a “catchall” that expanded the category of prohibitions to include not only bad intent, but bad consequences as well. Because the first two statutes had been interpreted to include disparate-impact discrimination claims, the Court looked to the FHA and held that disparate-impact discrimination was forbidden under the FHA as well.

2. Congress implicitly ratified disparate-impact liability when the FHA was amended in 1988. By 1988, all nine Circuit Courts had issued decisions holding that the FHA included disparate-impact claims. The Court said that “[w]hen it amended the FHA, Congress was aware of this unanimous precedent. And with that understanding, it made a considered judgment to retain the relevant statutory text”. [Page 13.]

3. The FHA amendments themselves assume the existence of disparate-impact claims. The relevant 1988 amendments were all specific situations – real estate appraisal, action adverse to someone with a drug-related conviction, and rules on limiting the number of occupants in a dwelling – in which the FHA would not allow a claim. The Court said that these amendments were necessary “because Congress presupposed disparate impact under the FHA as it had been enacted in 1968”. [Page 14.]

4. Recognizing disparate-impact claims is consistent with the FHA’s “central purpose”. Here the Court steps back from the statutory analysis and cited positive benefits that the disparate-impact analysis provide to further the FHA’s goal, things that disparate-treatment litigation alone cannot do. For example, discriminatory zoning laws became easier to prove, and disparate-impact claims made it easier to discover underlying discriminatory intent.

Apparently to calm against the fears that the disparate-impact discrimination becomes a weapon in litigation, the Court declares limits to the use of the disparate-impact claim: by itself, statistical disparity is not enough to make a prima facie case; the causation required to make a prima facie case must be high, and so on.

Ultimately, the Court affirmed the Fifth Circuit opinion stating that disparate-impact claims can be pursued under the FHA, and the case is sent back to continue.

JUSTICE THOMAS’ DISSENT

There are two dissents, one by Justice Thomas. His dissent has three elements:

Griggs was wrongly decided in the employment statute, and that it should not be applied to the housing statute. Thomas contends that the language of the statute in Griggs prohibited a more limited scope of unlawful employment actions:

Each paragraph in §2000e–2(a) is limited to actions taken “because of ” a protected trait, and “the ordinary meaning of ‘because of’ is ‘by reason of’ or ‘on account of,’” . . . . Section 2000e–2(a) thus applies only when a protected characteristic “was the ‘reason’ that the employer decided to act.” . . . . In other words, “to take action against an individual because of ” a protected trait “plainly requires discriminatory intent.”

[Page 2 of Thomas’ dissent.]

This interpretation, had it been applied to any of the two preceding cases or to this case, would invalidate disparate-impact claims from any of these statutes.

Justice Thomas also points out the sketchy history of the disparate-impact theory of discrimination. It began as a position authored by the Equal Employment Opportunity Commission (EEOC) “to defy Title VII’s restrictions and attempt to build a body of case law that would justify [their] focus on effects and [their] disregard of intent.” [Page 5.] The Griggs decision in favor of disparate impact was looked on unfavorably by Justice Thomas as replacing statutory provisions – which is what are passed by legislatures and signed by the executive branch – with “statutory purposes”.

Justice Thomas addresses the practical effects of this theory and a fundamental assumption that the plagues disparate-impact discrimination theory:

Griggs’ disparate-impact doctrine defies not only the statutory text, but reality itself. In their quest to eradicate what they view as institutionalized discrimination, disparate-impact proponents doggedly assume that agiven racial disparity at an institution is a product of that institution rather than a reflection of disparities that exist outside of it.

Moreover, Thomas states, why assume that a disparity is always a bad thing?

The ultimate effect in reality is that this has been counterproductive to its stated mission:

The recent experience of the Houston Housing Authority (HHA) illustrates some of the many costs of disparate-impact liability. HHA, which provides affordable housing developments to low-income residents of Houston, has over 43,000 families on its waiting lists. The overwhelming majority of those families are black. Because Houston is a majority-minority city with minority concentrations in all but the more affluent areas, any HHA developments built outside of those areas will increase the concentration of racial minorities. Unsurprisingly, the threat of disparate-impact suits based on those concentrations has hindered HHA’s efforts to provide affordable housing. State and federal housing agencies have refused to approve all but two of HHA’s eight proposed development projects over the past two years out of fears of disparate-impact liability.

[Pages 11-12.]

JUSTICE ALITO’S DISSENT

Justice Alito’s dissent, joined by Justices Roberts, Scalia, and Thomas, addresses the bulk of the Court’s opinion. Here are the relevant portions of the FHA again:

Section 804(a):

[I]t shall be unlawful—

(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

Section 805(a):

It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin.

[Emphasis added.]

“Because of”

Alito pointed out that the language of the FHA only prohibited those that were done “because of” race, national origin, etc. “Because of”, both in ordinary language and in precedent, the examination of the term linked an action with a reason for an action. [Page 4 of Alito‘s dissent.] This limits, if not contradicts, the Court’s expansive interpretation of “otherwise make unavailable” among the activities that were prohibited.

“Make unavailable”

The Court held that the use of the term “make unavailable” in the FHA involves actions that have the result of making housing or transactions unavailable. Alito, however, states that this term has to be viewed in the context of the entire section:

“Make unavailable” must be viewed together with the rest of the actions covered by §804(a), which applies when a party “refuse[s] to sell or rent” a dwelling, “refuse[s] to negotiate for the sale or rental” of a dwelling, “den[ies] a dwelling to any person,” “or otherwise make[s] unavailable” a dwelling.

[Page 7.]

To summarize, the expansive definition the Court has of “make unavailable” has to be contained by the restrictive interpretation of the words “because of”.

The circumstances of the FHA and the 1988 amendments

When the FHA was enacted in 1968, disparate-impact liability was not an existing legal policy that lawmakers were discussing. This was admitted as such by Justice Ginsburg, as quoted in the dissent.

The 1988 amendments introduced three “safe harbor” provisions (circumstances which, if met, would not violate the statute: real estate appraisers can take into consideration factors other than race, religion, and the other specified groups in the statute; action can be done to take into account an individual’s drug convictions; action can be taken to put a reasonable limit on the number of people who can live in a dwelling. These specific exceptions were the product of a series of Circuit Court decisions that had allowed disparate-impact liability under the statute. The Court interpreted this to mean that by introducing these safe harbor provisions, Congress had assumed that the FHA allowed disparate-impact claims, even if it wasn’t written into the statute.

Alito argues that even though all nine Circuit Courts had interpreted disparate-impact liability into the FHA, the Supreme Court had not yet addressed the question. Also, shortly before the 1988 amendments were enacted, the United States had argued before the Supreme Court that the FHA only applied to intentional discrimination. [Page 12.] The point Alito makes is that the consensus regarding the FHA that the Court invokes, one so strong that the text of the FHA didn’t even have to be rewritten, did not exist, and there was no right to assume disparate-impact liability into the law.

One other point that I would offer: if Congress passed these amendments as a specific reaction to protect against the Circuit Courts’ findings of disparate-impact liability, it would seem to be perverse logic to find that these amendments were somehow proof of implicit affirmation of said disparate-impact liability.

The HUD regulations

The dissent, starting on page 20, describes some unusually aggressive action by HUD regarding the implementation of rules on disparate-impact liability. In 2011, the Court agreed to take up a case involving disparate-impact liability under the FHA:

Here, 43 years after the FHA was enacted and nine days after the Court granted certiorari in Magner (the “rodent infestation” case), HUD proposed “to prohibit housing practices with a discriminatory effect, even where there has been no intent to discriminate.” After Magner settled, the Court called for the views of the Solicitor General in Township of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc., another case raising the same question. Before the Solicitor General filed his brief, however, HUD adopted disparate-impact regulations. The Solicitor General then urged HUD’s rule as a reason to deny certiorari. We granted certiorari anyway, and shortly thereafter Mount Holly also unexpectedly settled. Given this unusual pattern, there is an argument that deference may be unwarranted.

[Citations omitted.]

When interpreting a statute, and where an implementing agency has published an interpretation, the Court will defer to the agency’s interpretation if there is ambiguity in the statute. (This is the Chevron rule.)

(My two cents on the political angle to this: when the Obama administration is accused of being overly aggressive in pushing an agenda, this is one of the ways it does it. Under the Chevron rule, all that’s needed is a finding of ambiguity, whether honestly interpreted or not, and the agency’s version will prevail. While the Court’s decision did not rely on HUD’s regulation, ICP and the Solicitor General did invoke it in their arguments.)

Alito states that discussion of the regulations is unnecessary, because there is no ambiguity in interpreting the FHA.

The Griggs decision

The employer in the Griggs decision required manual laborers to perform at a certain level on academic tests, the effect of which was to cause disproportionately fewer minorities from being hired. The Court interpreted the Griggs decision against the employer as precedent for a disparate-impact claim under the employment anti-discrimination statute.

Alito writes that the Court reads too much into the holding, saying that there were special facts behind the decision. In particular, this employer had engaged in intentional racial discrimination prior to the Civil Rights Act, and it would have been reasonable to infer that these additional requirements were a pretext for disparate treatment . However, when the case was presented before the Supreme Court, the lower court findings of fact in Griggs declined to find any intent to racially discriminate. This left the Griggs Court with a bad set of choices. It could overturn the finding of fact to say that the employer acted with intent, a finding something Alito says the Court does not normally override. The Griggs court could have held in favor of the employer under the statute; or the court could have held against the employer, but without a lower court finding of intentional discrimination.

The Griggs court did the last of the three options, and Alito points out the oddness of how it did so:

Although Griggs involved a question of statutory interpretation, the body of the Court’s opinion—quite remarkably—does not even cite the provision of Title VII on which the plaintiffs’ claims were based. The only reference to§703(a)(2) of the 1964 Civil Rights Act appears in a single footnote that reproduces the statutory text but makes no effort to explain how it encompasses a disparate-impact claim. Instead, the Court based its decision on the “objective” of Title VII, which the Court described as “achiev[ing] equality of employment opportunities and remov[ing] barriers that have operated in the past to favor an identifiable group of white employees over other employees.”

Although lower courts have ruled consistently with Griggs, Alito says that the Supreme Court has never applied Griggs to antidiscrimination statutes.

The Smith decision

Alito’s discussion of Smith requires a section-by-section breakdown of the relevant portion of the ADEA. [Emphasis is mine.]

Subsection 4(a)(1):

It shall be unlawful for an employer

“(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age;

The Smith court unanimously agreed that this did not authorize disparate-impact claims. [Page 24.]

Subsection 4(a)(2)

It shall be unlawful for an employer

[ . . . ]

(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age

On this, the Smith Court split. The majority saw that this language was substantially similar to the statute in Griggs, and thus should be interpreted to allow disparate-impact claims in the same way Griggs does.

The reason for the split is a swing vote by Justice Scalia, who interpreted Subsection (a)(1) as requiring intent, while Subsection (a)(2) prohibited the actions of an employer that adversely affected the employee, or at least was ambiguous enough that he believed that the Court should defer to the Equal Employment Opportunity Commission’s interpretation.

The Smith decision also rested on other language (not cited in the statues cited in this decision) that made it unlawful for to take any action “otherwise prohibited”

Because none of these language distinctions are found in the FHA statute at issue, Alito believes that Smith should not apply in this case.

Consequences

Alito opens his dissent mentioning summarizing one of the disparate-impact cases, in which a landlord, who had made efforts to rid the dwellings of rats and to comply with other housing regulations, was sued under a disparate-impact claim. The theory was that the expenses used to comply would drive up rent, and because minorities were disproportionately low-income earning, the efforts disproportionately impacted based on race.

It’s this kind of flexibility to a fault that makes the disparate-impact liability so dangerous. Alito pointed out that while this case involved a claim of too few credits in higher income areas. A disparate-impact claim could just as easily be filed for too many credits awarded in higher income areas to the detriment of low-income areas. [Page 30.]

The suggested solution to this doesn’t sound comforting, if we are to believe the Solicitor General when asked during the hearing:

The Solicitor General’s answer to such problems is that HUD will come to the rescue. In particular, HUD regulations provide a defense against disparate-impact liability if a defendant can show that its actions serve “substantial, legitimate, nondiscriminatory interests” that “necessar[ily]” cannot be met by “another practice that has a less discriminatory effect.

So the end-result of this appears to be to render the letter of the law unworkable, and leave discretion to the executive branch.

CONCLUDING THOUGHTS

This has been a marathon of a post, so I’ll try to keep this short.

I was impressed by Alito’s dissent. The more I got into the weeds of how the Court was engaging in a sleight-of-hand in wording, expanding the meanings of single words beyond their context, the more I was compelled to break down how the swindle and examine it. I fear, though, that the legacy of the dissent will be limited to Court historians and language enthusiasts.

One other part of this decision struck my attention. There are only a finite number of low-income housing credits for a state agency to give, so any credit allocated to a suburban community is one less credit allocated to the low-income community. This appears to be counterintuitive on the surface. Why export low-income housing to the suburbs, to the detriment of the inner city communities? One answer might be found in a larger plan to bring the suburbs under the control of the urban governments. In 2012, Stanley Kurtz wrote Spreading the Wealth: How Obama is Robbing the Suburbs to Pay for the Cities, an excerpt of which was published at National Review with the title Burn Down the Suburbs?. The end goal is to create a redistribution of income system that takes from the suburban wealthy and gives to the inner city. Kurtz described the plan as three steps:

One approach is to force suburban residents into densely packed cities by blocking development on the outskirts of metropolitan areas, and by discouraging driving with a blizzard of taxes, fees, and regulations. Step two is to move the poor out of cities by imposing low-income-housing quotas on development in middle-class suburbs. Step three is to export the controversial “regional tax-base sharing” scheme currently in place in the Minneapolis–St. Paul area to the rest of the country. Under this program, a portion of suburban tax money flows into a common regional pot, which is then effectively redistributed to urban, and a few less well-off “inner-ring” suburban, municipalities.

By destroying any standard for discrimination in housing and relying on HUD to interpret the FHA, this decision appears to be an effective tool in accomplishing step two. I’d love to be wrong on this, but my bets on cynicism have only paid off in recent years.

ADDENDUM:  I wasn’t wrong on this, unfortunately.  Last week, HUD released its Affirmatively Furthering Fair Housing (AFFH) rule.  Stanley Kurtz at National Review describes its goal:

Obama has downplayed his policy goals in this area and delayed the finalization of AFFH for years, because he understands how politically explosive this rule is. Once the true implications of AFFH are understood, Americans will rebel. The only prospect for successful imposition is a frog-boiling strategy of gradual intensification. The last day the frog will be able to jump is Tuesday, November 8, 2016.

Fundamentally, AFFH is an attempt to achieve economic integration. Race and ethnicity are being used as proxies for class, since these are the only hooks for social engineering provided by the Fair Housing Act of 1968. Like AFFH itself, today’s Washington Post piece blurs the distinction between race and class, conflating the persistence of “concentrated poverty” with housing discrimination by race. Not being able to afford a freestanding house in a bedroom suburb is no proof of racial discrimination. Erstwhile urbanites have been moving to rustic and spacious suburbs since Cicero built his villa outside Rome. Even in a monoracial and mono-ethnic world, suburbanites would zone to set limits on dense development.

And that is why you make a claim for racial discrimination based on too many benefits to minority communities.  To these social engineers, impoverished minorities are just pawns to be manipulated, not individuals in need of opportunity.

______________________________

[1] The Act was codified as Title 42, Sections 3601 and following in the United States Code (U.S.C.). A free link to the Act is here.

[2] There are other participants involved on each side of the case, each similarly situated as the title parties, but for purposes of brevity, these will be the participants of the case.

[3] 78 Fed. Reg. 11460. A link to the regulation is here.

[4] 42 U.S.C. Sections 3604(a), 3605(a).

[5] 42 U. S. C. Section 2000e–2(a).

[6] Griggs v. Duke Power Co., 401 U.S. 424 (1971).

[7] Smith v. City of Jackson, 544 U.S. 228 (2005).

[8] 29 U. S. C. §623(a).

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