An early test of the Supreme Court’s recent disparate impact decision sends positive signals to defendants facing disparate impact claims under the Fair Housing Act. Less than a month after the Court’s ruling, a federal court in California rejected disparate impact claims against Wells Fargo, relying heavily on guidance from Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.
The case, City of Los Angeles v. Wells Fargo, dealt with allegations that certain Wells Fargo lending practices created a disproportionate number of foreclosures for minority borrowers in violation of the Fair Housing Act. In its reasoning, the court found that the City’s disparate impact claims failed to meet the minimum criteria for causality established by the Supreme Court.
The Supreme Court’s decision emphasized that neutrally-applied practices should not fail on disparate impact grounds unless they are “artificial, arbitrary and unnecessary.” In addition, a successful claim may not rely on statistical evidence of impact alone; rather, there needs to be a causal relationship. Citing the Inclusive Communities case, the court held that the plaintiff here was required to identify a “policy or policies that caused the disparity,” which they failed to do.
NMHC/NAA will hold a complimentary webinar on the recent disparate impact rule on July 30.