D.C. Cir: Deny Injunction due to insufficient evidence of disparate impact

The DC Circuit Court of Appeals held that African-American homeowners and fair housing organizations failed to prove the likelihood of success on the merits of their claim that a post-Hurricane Katrina home reconstruction grant program had a disparate impact on African-Americans.

The court denied injunctive relief under the Fair Housing Act, because the evidence did not establish that the grant program had a disparate impact.  Greater New Orleans Fair Housing Action Center v. HUD, — F.3d —-, 2011 WL 1327713 (C.A.D.C. Apr. 11, 2011). Judge Williams (nominated by Reagan) wrote the opinion joined by Judge Kavanaugh (Bush II).  Judge Rogers (nominated by Clinton) concurred in part and concurred in the judgment.  The NAACP Legal Defense and Education Fund represented the plaintiffs.

After Hurricanes Katrina and Rita devastated the Gulf States, Louisiana created a program using federal money to assist affected homeowners. One part of the program provided grants to homeowners to rebuild and return to their homes. The size of each grant was based, for some homeowners, on the pre-storm value of their homes. Then in October 2009, Louisiana, with the consent of the US Dept. of Housing and Urban Development (“HUD”), changed the formula for low-income homeowners who applied in the future to no longer base the grant on the pre-storm value of the home.

In 2010, plaintiffs filed suit on behalf of all African-American homeowners who participated in the grant program and whose grant amounts were based on the pre-storm value of their homes. They argued, relying on a 2008 study, that by basing the grants on the pre-storm value of the house, the government’s program had a disparate impact on African-American homeowners. Since African-Americans tended to live in areas with lower property values, their grants would accordingly be lower. Section 3604(a) of the Fair Housing Act prohibits denial of a dwelling to individuals on the basis of race. The plaintiffs argued that Section 3604(a) bars policies with a disparate impact on African-Americans’ access to the reconstruction grants.

The plaintiffs asked for a TRO and preliminary injunction to block the director of the grant program from distributing the grant funds or making any new obligations about how to distribute funds in the future. The district court rejected the motions because the injunction would amount to an award of damages. While the relief was ostensibly prospective, it sought to hold on to existing funds for the purpose of recalculating prior grant awards.  Therefore, the district court held, the requested relief sought damages for a past breach of a duty which is not permitted under Edelman v. Jordan, 415 U.S. 651 (1974).

Next the plaintiffs asked to preliminarily enjoin the program from using the pre-storm values in any future calculations of grant awards.  The District Court granted this TRO and preliminary injunction. Both parties filed appeals. While HUD was a defendant, it took no part in the appeal.

The Court of Appeals briefly considered the defendants’ argument that sovereign immunity barred the plaintiffs’ claims. The court noted that the funds expended were federal funds, and therefore the question of the validity of the state’s immunity from the first requested injunction was “extremely complex.”  Yet, the second requested injunction was clearly not barred by sovereign immunity.  Because the plaintiffs could definitely obtain some relief that would not be barred by the Eleventh Amendment, there was a sufficient jurisdictional basis to proceed to the merits.

The court held that plaintiffs had not established a likelihood of success on the merits.  First, the court noted that the D.C. Circuit had not yet decided whether Section 3604(a) of the Fair Housing Act covers disparate impact claims at all. However the court declined to decide the issue because of the faults it found with the plaintiffs’ evidence of disparate impact.

The court found that the plaintiffs’ evidence failed to show there was a disparate impact. The court asserted that in a state where “African-American and white homeowners have significantly different economic profiles,” litigants would be able to parse almost any formula and find a disparate impact on some community.

Furthermore, the measure of impact that the plaintiffs relied on was both outdated and inappropriate. The measure was outdated because the policies had changed since the data was collected. The measure was inappropriate, according to the court, because it was arbitrary and other logical measures actually showed that African-American households received more than other households. Because the court found the evidence of disparate impact to be insufficient, the court denied injunctive relief.

The court next explained that it did not have to address the plaintiffs’ standing to bring the claim for the second injunction because the claim would fail anyway based on the merits.

Concurring, Judge Rogers asserted that the Eleventh Amendment should not bar claims for retrospective relief when the money the state would have to pay is in fact federal money. She agreed with the majority’s conclusion that there was insufficient evidence of a disparate impact and that the requests for relief must therefore fail. However, she criticized parts of the majority’s analysis of the problems with the plaintiffs’ data. Some of the issues the majority considered, including disparate impact theory and speculations about what benchmarks are appropriate were not briefed by the parties or necessary to the majority’s final decision. Judge Rogers speculated, “One might well wonder what purpose these meanderings have other than to posit hurdles for future disparate impact claims.”

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