District Court Dismisses Disparate Impact Suit Against Treasury Dept.

A U.S. District Court in Texas recently dismissed a lawsuit by Inclusive Communities Project Inc. against the U.S. Department of Treasury and the Office of the Comptroller of the Currency (OCC). The Treasury Department oversees the LIHTC program, and the OCC oversees the banks that make a significant percent of LIHTC investments.              

The lawsuit alleged that the LIHTC program perpetuates racial segregation in Dallas. In dismissing the claim, the court pointed to Inclusive Communities Project’s lack of standing and the claim’s lack of merits. In law, “standing” is the term for the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged to support that party's participation in the case.

In 2015, the U.S. Supreme Court held in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. that a state’s Qualified Allocation Plan (QAP) implemented by an allocating agency violates the Fair Housing Act (FHA) if it “disparately impacts” a protected minority even though the allocating agency did not intend to discriminate. The 5-4 decision allowed complaints to be brought under the FHA based on “disparate impact,” when a policy that appears to be neutral, or have no intent to discriminate, has an adverse effect or impact on a protected class. Justice Anthony Kennedy wrote the opinion, and was joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

Under a disparate impact theory of liability, a person or entity may be held liable for discriminatory conduct under the FHA without any showing of actual intent to discriminate. To make out a basic case, all that is necessary is statistical evidence that a policy or practice had a harsher effect–a “disparate impact”–on a class protected by the FHA.