ABA Banking Journal - February 2012 - (Page 49)

legal issues | by GreG TayLOr “Disparate impact” on trial The Supreme Court tackles the issue as it relates to the Fair Housing Act If you were to summarize the upcoming Supreme Court session in two words or less, you probably couldn’t do better than to fall back on the injunction to “Question Authority”— a sentiment most often attributed to Benjamin Franklin (and, in a far stranger context, to ’60s counter-culture guru Timothy Leary). One upcoming case in particular—Magner v. Gallagher—has caused ripples through the banking industry. The Court has agreed to entertain arguments on a proposition that many thought to be inviolable: The Fair Housing Act (FHA) permits plaintiffs to bring discrimination claims based upon the alleged “disparate impact” that a facially neutral policy or practice (neutral on the face of it) has upon a protected class. While the Supreme Court has not squarely settled the issue, 11 of 12 federal courts of appeal have assumed the FHA permits disparate impact claims. Potentially reverse 11 courts of appeal? “Question Authority,” indeed. The case’s facts are unusual. The plaintiffs are landlords who sued the city of St. Paul, Minn., over the city’s vigorous enforcement of housing code in low-income areas. The landlords argue that the city’s highly aggressive enforcement has a disparate impact on a protected class: It reduces the amount of affordable housing available to minority renters. The Eighth Circuit ruled that the landlords had stated a cognizable (actionable) claim under the FHA, and allowed the case to proceed. Notably, however, five judges dissented from the appellate court’s decision not to have the case heard by the full court. They pointed out that recent Supreme Court precedent—Smith v. City of Jackson—raised enough questions regarding the proper interpretation of the FHA to reconsider whether the statute does permit disparate impact claims. The Supreme Court granted review, certifying two questions, both of which go to the core of the statute: Are disparate impact claims cognizable under the FHA? And if such claims are cognizable, how should they be analyzed? ABA, along with other trade groups, asserted in a friend-of-the-court brief in Magner that the FHA does not permit disparate-impact claims. If the Supreme Court is willing to question heretofore uniform legal authority on an issue like disparate impact, it could be a sign that at least some justices are troubled by the historically broad interpretation Photo: Gary Blakeley /shutterstock.com of the FHA. While it is difficult to forecast an outcome it is important to remember a few key facts. First, Magner arises under section 3604(a) of the FHA, which prohibits discrimination in the sale or rental of housing. A ruling by the Court could be limited to that portion of the statute, as distinct from section 3605(a), which prohibits discriminatory practices by lenders. Second, even if the Supreme Court concludes disparate impact cases are permitted under the FHA a ruling that rationalizes the manner in which disparate impact claims are analyzed would be only slightly less welcome. n Greg Taylor wrote this column as one of his last jobs as ABA’s associate general counsel. In January, he began work at the Office of the Comptroller of the Currency. february 2012 | ABA BANKING JOURNAL | 49 http://www.SHUTTERSTOCK.COM

Table of Contents for the Digital Edition of ABA Banking Journal - February 2012

ABA Banking Journal - February 2012
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
Picture This
ABA Community Banking
Pass the Aspirin
Tech Topics
Stop Drowning Us
10 Tech Trends to Follow in 2012
Compliance Clinic
Compliance Inbox
Aba Resources
Legal Issues
First Person

ABA Banking Journal - February 2012

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