Supremes take up racial bias case

The Supreme Court has agreed to consider whether housing bias lawsuits must prove an actual intent to discriminate rather than a statistical approach relied on by the Obama administration.

The high court announced Monday it would hear an appeal from the township of Mount Holly, N.J., which is challenging a discriminatory housing lawsuit filed by citizens fighting against efforts to demolish property in a neighborhood that has a large minority population.

That lawsuit is built around the “disparate impact” policy, an approach to challenging discrimination that has been heavily relied on by the Obama administration to obtain hundreds of millions of dollars in settlements from banks. 

{mosads}But the policy has been challenged by affected parties, and now the high court could rule the practice out of bounds. Cases that rely on disparate impact are built around statistical analysis that shows a minority population received more negative treatment than others.

The Department of Housing and Urban Development finalized rules in February applying that approach to the nation’s fair housing laws, and the Consumer Financial Protection Bureau has also employed disparate impact in enforcing fair lending laws.

But the financial industry and others have argued against the practice, contending that it should not be used to make discrimination claims since it does not require explicit proof of discriminatory intent, and can be costly to challenge.

Wells Fargo agreed in July to pay at least $175 million to settle Department of Justice claims it discriminated against thousands of African-American and Hispanic borrowers — claims that were built based on an analysis of loans made from 2004 and 2009 by the bank and its independent brokers. Wells Fargo did not admit to wrongdoing in the settlement and said it was settling simply to avoid costly litigation.

Bank of America agreed to pay $335 million in 2011 to settle discriminatory lending charges filed against Countrywide Financial, which the bank purchased in 2008. There, the government again charged under disparate impact that hundreds of thousands of minority borrowers received loans that had costlier terms than those provided to white borrowers. The settlement was the largest in the history of discriminatory lending cases.

The Supreme Court will hear oral arguments for the Mount Holly case in its next term, which begins in October. The high court had previously agreed to hear a challenge to disparate impact use in a discriminatory housing case in an earlier term. However, that case was scrapped when the city pursuing it, St. Paul, Minn., dropped the case at the urging of the Obama administration.

That decision has now become a central flash point in the nomination of Thomas Perez to be Labor secretary. 

Perez headed the Justice Department’s Civil Rights Division when St. Paul agreed to scuttle the case, and Republicans contend that he brokered an unethical deal to kill the case, in which the Justice Department agreed to not intervene in two whistle-blower cases in exchange for abandoning the case — cases that could have netted the government up to $200 million.

Perez defended his actions before a Senate committee, saying Justice decided not to pursue the whistle-blower cases because they lacked merit, and the decision not to pursue them were made by other officials.

Perez was nominated in March, but his selection is still stalled before the full Senate.