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Do Federal Civil Rights Laws Guarantee Equal Outcomes? The Supreme Court will Decide


What if mortgage lenders had to give equal outcomes to borrowers of different ethnic groups?

This photo taken Friday, Oct. 3, 2014, shows the U.S. Supreme Court in Washington. (AP Photo/Susan Walsh)

Commmentary by Todd Gaziano, the Executive Director of Pacific Legal Foundation’s D.C. Center and a former Commissioner of U.S. Commission on Civil Rights. He can be reached on Twitter @ToddGaziano.


For over 40 years, two concepts of equality have been in tension in federal civil rights laws. The Supreme Court will hear a case on Wednesday that renews the debate over whether statutes that prohibit discrimination on the basis of race (which guarantee equal treatment) can also require uniform outcomes across racial groups (equality of results).

The decision this spring in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project will likely not resolve that question completely, but it should provide an important sign of which direction the Court is headed.

The Texas Department of Housing case asks whether the federal Fair Housing Act, which prohibits discrimination in housing, lending, and related matters “because of” race, gender, and similar factors can also be read to require states, lenders, and others to guarantee equal racial, gender, and ethnic outcomes for all of their policies and actions.

For example, mortgage companies evaluate loan applications based on financial criteria that correlate with the borrower’s ability to repay the loan, including the applicant’s income and assets compared to the size of the prospective loan. But average incomes are not the same for all racial and ethnic groups, in part because the average age of some ethnic groups is younger than others. Would different loan approval rates based on income violate the Housing Act? What if Asian applicants in certain areas have a smaller net worth, on average, because many of them emigrated from poorer countries?

If recent regulations issued by the Department of Housing and Urban Development are upheld, an imbalance in loan approval rates between racial or ethnic groups could create Housing Act liability, even if everyone agrees that such outcome was unintended. The Texas Department of Housing litigation involves tax credits for developers who build low-income housing, but HUD’s legal theory would apply equally to home lenders, insurers, and all other transactions in the housing industry.

This photo taken Friday, Oct. 3, 2014, shows the U.S. Supreme Court in Washington. A Supreme Court term that is starting Monday, Oct. 6, 2014, with a lack of headline-grabbing cases may end with a blockbuster that helps define the legacy of the court under Chief Justice John Roberts. That's because the justices appear likely to take on the issue of same-sex marriage and decide once and for all whether gay and lesbian couples have a constitutional right to marry. (AP Photo/Susan Walsh) AP Photo/Susan Walsh This photo taken Friday, Oct. 3, 2014, shows the U.S. Supreme Court in Washington. AP Photo/Susan Walsh 

Under HUD’s logic, home lenders and mortgage insurers (many insurers are currently prohibited by state law from even asking about race and ethnicity of applicants) would have to ensure that the results of their lending or insurance activities were symmetrical across racial and ethnic groups. That means they would have to either significantly weaken financial criteria for everyone, which would be economically disastrous, or give race-conscious preferences to achieve equal racial outcomes. Yet such race-conscious preferences constitute intentional discrimination “because of” race that the Fair Housing Act unquestionably forbids.

Similar questions arose under Title VII’s ban on employment discrimination, but that statute is written very differently. Congress augmented the basic prohibition against intentional discrimination in Title VII by also expressly forbidding hiring criteria that “tend to deprive . . . or otherwise adversely affect” anyone because of their race or similar characteristic. The Supreme Court held in 1971 that this additional language prohibits actions that have a “disparate” (or negative) impact on members of discrete racial groups, even if unintended, unless employers can meet a stringent “business necessity” test.

In more recent years, several justices have questioned whether an “effects” provision and the corresponding efforts necessary to prevent racially “disparate impacts” violate the equal protection provisions of the U.S. Constitution—and have warned of the “evil day” (Justice Antonin Scalia’s words) when the High Court will have to confront that issue head on. The amicus brief filed by the Pacific Legal Foundation, for ourselves and several other public interest groups, argues that any disparate impact provision that requires race-conscious discrimination violates constitutional equal protection.

As our brief also explains, there is an easy way out for the Supreme Court in the Texas Department of Housing case to avoid the constitutional reckoning. The Housing Act has no “effects,” “tends to affect,” or similar language. In such cases, the Supreme Court has refused to twist similar prohibitions against discrimination “because of” race into their opposite: a requirement to discriminate on the basis of race to guarantee symmetrical outcomes across racial lines.

Even without such judicial precedent, the text of the Housing Act unambiguously precludes disparate impact (or unintended effects) liability for a few reasons. One is that any non-racial, financial criterion (when it is not intended to have a racial impact) may discriminate between people of different means, but does not do so “because of” race. The legislative history strongly supports this reading of the Housing Act.

Nevertheless, HUD and various housing advocates have taken one phrase out of context and argue that it is at least ambiguous, and thus, that the courts should defer to HUD’s disparate impact interpretation of the Housing Act. Even if the phrase creates an ambiguity (and it does not if you read the rest of the sentence), no weight should be given to HUD’s current interpretation. Different administrations have disagreed about the Housing Act's reach since 1968, and the Obama administration has gamed the Supreme Court’s docket to settle two prior cases before the Court could rule on them in order to issue the questionable regulations. And those regulations have been vacated by a district court as unreasonable, so they are not in effect.

More importantly, the Supreme Court has properly “rejected agency interpretations to which [it] would otherwise defer where they raise serious constitutional questions.” Since the Court wrote those words in 1988, it has explained that its deference in appropriate cases to an agency’s interpretation of a statute (which is a court-created practice of recent vintage) is trumped by its more venerable rule to interpret statutes to avoid contested constitutional rulings, whenever such interpretation of the statute is reasonably possible. Congress can force a constitutional ruling by amending the statute to make the potential conflict unavoidable, but the courts should avoid such momentous rulings when Congress’s intent is unclear.

The “constitutional avoidance” rule was first articulated by Chief Justice John Marshall in 1833. It is both a sound canon of construction and an exercise of comity between the branches because: (1) it is logical for courts to presume that Congress intended the meaning of a statute that avoids constitutional doubt since Congress legislates with constitutional limits in mind, and (2) it is deferential for the courts not to pursue a course that may strike down a statute unless Congress leaves the courts no choice.

It is not only reasonably possible to interpret the Housing Act to prohibit only intentional discrimination and preclude disparate impact liability, but that is the only logical and textually compelling interpretation. It would also avoid intractable practical problems in applying the Housing Act if it both mandated racially conscious discrimination to get outcomes right that it also prohibits. Indeed, HUD’s answer to that dilemma is both dangerously subjective and utterly unworkable.

For all these reasons, it is easier than usual to predict the restrained ruling the Court is likely to make to interpret the Housing Act to preclude disparate impact liability. But since the “disparate impact” approach has been increasingly pushed by the Obama administration in a number of other statutes and contexts, how the Supreme Court analyzes the serious constitutional issues that it is avoiding may be highly instructive to the larger debate over whether any unintended “disparate impact” liability is constitutional.

Justice Scalia quipped in his Ricci concurrence in 2009 that “the war between disparate impact and equal protection will be waged sooner or later, and it behooves [the Court] to begin thinking about how—and on what terms—to make peace between them.” The oral argument on Wednesday and the decision expected this June in the Housing Act case will give us a good idea how that might be done.

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