Alert November 12, 2013

Tentative Settlement Reached in Disparate Impact Theory Suit

A tentative settlement has been reached in the case against a New Jersey township brought by a group of neighborhood residents challenging the township’s redevelopment plans based on the disparate impact theory. The township planned to replace older housing in a low-income, high-crime neighborhood with newer housing. The settlement requires the approval of the town council. However, the scheduled vote was tabled in order to “clean up language in the agreement,” and that the town council is expected to settle the case soon. Settlement talks gained increased urgency after the Supreme Court granted certiorari following a decision by the United States Court of Appeals for the Third Circuit allowing the action to proceed under a disparate impact theory (see June 25, 2013 Alert). The Supreme Court set oral argument for December 4, 2013.

In 2008, residents filed suit in the United States District Court for District of New Jersey alleging that the township’s redevelopment activity violated the Fair Housing Act because of its disparate impact on the township’s minority population. The lower court granted summary judgment in favor of the township, finding neither a prima facie case of discrimination nor any alternative course of action that would have reduced the impact. The Third Circuit, however, reversed the lower court ruling that the residents adequately made a prima facie case that the township violated the FHA under a disparate impact theory.

The case has drawn widespread interest; particularly since the Supreme Court granted certiorari, more than 30 parties have filed amicus curiae briefs. Notably, the Supreme Court granted certiorari only as to the petition’s first question: “Are disparate impact claims cognizable under the Fair Housing Act?” The petition’s second question concerned how, if cognizable, such claims should be analyzed. The case has important implications given the use of the disparate impact doctrine by many federal agencies in addressing alleged discrimination in mortgage lending. Recently, HUD adopted a rule on the disparate impact doctrine (see February 19, 2013 Alert) and the CFPB reaffirmed that the disparate impact doctrine was applicable when the CFPB exercises its supervisory and enforcement authority (see May 1, 2012 Alert).