Inclusive Communities Project v. Lincoln Property , 920 F.3d 890 ( 2019 )

Case: 17-10943 Document: 00514909026 Page: 1 Date Filed: 04/09/2019
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
April 9, 2019
No. 17-10943
Lyle W. Cayce
Clerk
THE INCLUSIVE COMMUNITIES PROJECT, INCORPORATED,
Plaintiff - Appellant
v.
LINCOLN PROPERTY COMPANY; LEGACY MULTIFAMILY NORTH III,
L.L.C.; CPF PC RIVERWALK, L.L.C.; HLI WHITE ROCK, L.L.C.; BRICK
ROW APARTMENTS, L.L.C.,
Defendants - Appellees
Appeal from the United States District Court
for the Northern District of Texas
Before DAVIS, JONES, and ENGELHARDT, Circuit Judges.
KURT D. ENGELHARDT, Circuit Judge:
With this appeal, we review the district court’s dismissal with prejudice,
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, of Fair
Housing Act claims – including claims of “disparate treatment” and “disparate
impact” – asserted against the owners and management company of apartment
complexes in the greater Dallas, Texas area that decline to participate in the
federal “Section 8” Housing Choice Voucher Program. For the reasons stated
herein, we affirm.
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I.
The plaintiff, The Inclusive Communities Project (“ICP”), “is a fair
housing focused nonprofit organization working with households seeking
access to housing in predominately non-minority locations in the Dallas area.” 1
In furtherance of its mission, ICP provides “counseling, financial assistance,
and other services to Black or African American households participating in
the [federal] Section 8 Housing Choice Voucher (HCV or voucher) Program
administered by the Dallas Housing Authority (DHA).” According to ICP, its
voucher clients seek assistance in finding and obtaining “dwelling units in safe
and secure communities with higher median incomes, good schools, low
poverty rates, and adequate public and private serve and facilities (high
opportunity areas).”
The financial assistance offered by ICP may include the payment of
landlord incentives or bonus payments (to encourage leasing to voucher
participant households), application fees, and security deposits. ICP also offers
landlords in higher opportunity areas the option of a contract with ICP as a
guarantor for voucher households or with ICP as the sub-lessor for voucher
1 Paragraphs 7 and 13 of ICP’s complaint additionally state, in pertinent part:
7. ICP is organized to work for the creation and maintenance of thriving
racially and economically inclusive communities, expansion of fair and
affordable housing opportunities for low-income families, and redress for
policies and practices that perpetuate the harmful effects of discrimination and
segregation. ICP operates to create and obtain affordable housing in
nonminority concentrated areas within the Dallas metropolitan area for
persons eligible for low income housing including voucher households. This
includes, among other means, providing the counseling and other forms of
assistance to voucher households seeking to utilize their housing choice
voucher to move into those areas.
13. ICP’s mission is directly connected to the provision of racially
integrated housing opportunities and the elimination of racial segregation.
2
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households. ICP alleges that it proposed these alternative contractual
arrangements in response to reasons stated by landlords and landlord
associations for refusing to negotiate with or rent to voucher households.
ICP identifies Defendants-Appellees Legacy Multifamily North III, LLC
(“Legacy”), CPF PC Riverwalk, L.L.C. (“Riverwalk”); HLI White Rock, L.L.C.
(“White Rock”); and Brick Row Apartments, L.L.C. (“Brick Row”) (collectively,
Owners”) as owners of apartment complexes in the “higher opportunity” or
“high opportunity” areas identified by ICP. Defendant-Appellee Lincoln
Property Company (Lincoln) manages these complexes in addition to
managing or owning and operating numerous other properties in “the Dallas
metropolitan area.” 2
ICP contends “its ability to assist its voucher clients in obtaining
dwellings in high opportunity areas is obstructed by Defendants’
discriminatory housing practices.” ICP alleges that Lincoln has a general
policy that it will not negotiate with, rent to, or otherwise make units available
in “White non-Hispanic areas” to voucher households; moreover, Lincoln’s
written advertisements state that housing vouchers, Section 8 vouchers, and
any government-subsidized rent programs are not accepted. According to ICP,
the only apartment complexes for which Lincoln will negotiate with and rent
to voucher households are those in predominately minority locations. These
2 In providing demographic statistics, ICP’s complaint and the parties’ briefs
reference a veritable smorgasbord of geographical areas, including the “Dallas-Plano-Irving
Metropolitan Division,” “the Dallas metropolitan area,” the “Dallas metro area” the “Dallas
area,” the “Dallas area suburban cities” the Dallas Housing Market, the City of Dallas, the
City of Richardson, “census tracts,” “census tract block groups,” “neighborhoods,” and
Defendant-Appellees’ apartment complexes. The complaint identifies the “Dallas
metropolitan area” as referring to Collin, Dallas, Denton and Rockwall counties.
Additionally, we understand a “metropolitan division” to be a United States Census Bureau
term used to refer to a county or group of counties that has a population core of at least 2.5
million.
3
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apartment complexes include complexes required by law or contract to not
discriminate against voucher households based on their status as voucher
program participants.
Lincoln’s general “no vouchers” policy is applied at approximately 43
apartment complexes, located in majority white census tracts, that have at
least some units available at rents payable under the voucher program. These
complexes include the units owned by the Owners. ICP further contends that
it has black voucher clients who are otherwise eligible under Lincoln’s
application criteria, and with whom ICP would have entered into subleases,
but for Lincoln’s policy against voucher tenants.
ICP alleges that it has attempted, on several occasions, to negotiate with
Lincoln on behalf of voucher clients seeking rental units in properties that
Lincoln manages and/or owns in majority white areas. The most recent
requests, ICP reports, were letters that ICP sent to Lincoln, in 2015 and 2016,
asking that it “reconsider” its policy of not accepting voucher families as
tenants at the aforementioned apartment complexes. 3 According to ICP,
neither Lincoln nor the Owners responded to ICP’s request to negotiate and
rent under the sublease/guarantor proposal. At least one Defendant-Appellee
notes, however, that ICP alleges its transmittal of the letters but not their
receipt. Nor is it clear when the Owners, as opposed to Lincoln, the manager,
became aware of the letters and/or ICP’s requests to discuss the “no vouchers”
policy.
ICP asserts that the “no vouchers” policy forces voucher households in
the Dallas metro area to seek housing in areas where vouchers are accepted,
3 ICP identifies McKinney Uptown Park, Park Central at Flower Mound, Parkside at
Legacy, White Rock Lake Apartment Villas, and the Brick Row Urban Village as the Lincoln-
managed properties to whom it offered to negotiate for units.
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which are “racially concentrated [predominately minority] areas of high
poverty that are marked by substantially unequal conditions.” Further, ICP
contends, Lincoln’s refusal to negotiate with or rent to voucher holders
disparately impacts black households in the Dallas area. In short, ICP
maintains that landlords who accept vouchers are disproportionately located
in minority areas of Dallas, and property management companies located in
non-minority areas disproportionately refuse vouchers. The waiting lists for
the area voucher programs also are disproportionately black.
To support its disparate impact contentions, ICP references the most
recent United States Department of Housing and Urban Development (HUD)
“Picture of Subsidized Housing” reporting a total of 30,745 voucher
households in the Dallas-Irving-Plano Metropolitan Division. According to
ICP, 90% of those households are minorities, with the total breakdown being
81% black, 6% Hispanic, and 10% white non-Hispanic (white). Approximately
17,000 of the 30,745 voucher households in the Dallas-Irving-Plano
Metropolitan Division participate in the program through the DHA, which
has a voucher population that is 86% black and 6% white. The voucher
households in the City of Dallas are 87% Black and 94% minority.
ICP likewise characterizes the voucher program in the Dallas metro
area as racially segregated into predominantly minority census tracts. On
average, voucher households in the Dallas metro area are located in 74%
minority census tracts; voucher households in the City of Dallas are located
in 88% minority and 33% poverty census tracts.
ICP also alleges the following facts regarding individual apartment
complexes that the Defendants-Appellees own or manage:
• Park Central at Flower Mound Complex
o No Black renters in the “small census tract block group”
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containing this complex;
o 307 units in the complex; and
o Zero voucher households in the census tract containing this
complex.
• McKinney Uptown Complex
o No Black renters in the “small census tract block group”
containing this complex;
o 144 units in the complex; and
o No voucher households in the census tract containing this
complex.
• Parkside at Legacy Complex
o Black renters are 14% of the 630 renter-occupied units in the
“small census tract block group” containing this complex;
o 293 units in the complex; and
o No voucher households in the census tract containing this
complex.
• White Rock Lake Apartment Villas
o Black renters are 11% of the 1,022 renter-occupied units in the
“small census tract block group” containing this complex;
o 296 units in the complex; and
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o No voucher household in the census tract containing this
complex.
• Brick Row Apartments, LLC
o Black renters are 11% of the 532 renter-occupied units in the
“small census tract block group” containing this complex;
o 500 units in the complex;
o 45 voucher households in the census tract containing this
complex; and
o Majority of the voucher households in the census tract live in
single family or semi-detached structures.
Finally, ICP attaches city maps to its complaint showing that voucher
households are concentrated in parts of Dallas where minorities live, with few
voucher households in the parts of Dallas where non-minorities live.
Alleging it received no responses from Lincoln or the Owners to its latest
letters, ICP filed a complaint on January 23, 2017, seeking declaratory and
injunctive relief from the district court. Specifically, ICP seeks a declaration
that Lincoln and the Owners have violated 42 U.S.C. § 3604(a) and 42 U.S.C.
§ 1982 by declining to participate in the federal “Section 8” Housing Choice
Voucher Program. ICP also seeks a permanent injunction compelling Lincoln
and the Owners to accept Section 8 vouchers and requiring them to negotiate
and contract with ICP under ICP’s sublease/guarantor program.
In its complaint, ICP alleges a total of four claims. Two claims –
disparate impact and disparate treatment – are asserted against all
Defendants-Appellees (Lincoln and the Owners). Relative to disparate impact,
ICP alleges that Defendants-Appellees’ policy of declining to negotiate with or
rent to voucher holders disparately impacts black households as evidenced by
statistics establishing that more than 80% of the voucher holders in the Dallas
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area are black. 4 Relative to disparate treatment, ICP alleges that Defendants-
Appellees’ refusal to negotiate with or rent to ICP, pursuant to ICP’s guarantor
or sublease proposals, constitutes disparate treatment based on race and color,
because ICP’s voucher clients are predominantly black.
ICP also alleges two claims solely against Lincoln. The first concerns
Lincoln’s publication of its policy of refusing to “negotiate with or rent to
voucher households” by including the following statements in advertisements
placed with apartment locator services:
Our community is not authorized to accept housing vouchers.
Our community is not authorized to accept Section 8 housing.
Our community is not authorized to accept ANY government
subsidized rent programs.
ICP maintain these advertisements “appeal to the stereotype that because
voucher holders are Black, voucher tenants are undesirable as tenants . . .”
and, thus, perpetuate racial stereotypes in violation of 42 U.S.C. § 3604(c).
The second claim against only Lincoln is for disparate treatment
liability based on Lincoln’s alleged refusal to negotiate with or rent to
otherwise qualified voucher households in predominately white areas while,
at the same time, negotiating with and renting to voucher holders in
predominately minority areas. ICP argues Lincoln’s conduct violates the
disparate treatment standard of liability because the differing policies
regarding vouchers are based on the race and color of the voucher holders.
In response to ICP’s claims, Lincoln and the Owners filed motions to
dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for
failure to state claims upon which relief can be granted. The district court
4 See supra, page 5.
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granted the motions in two orders dated July 13, 2017 (Brick Row’s motion)
and August 16, 2017 (the remaining motions). The district court entered final
judgment on August 16, 2017. This appeal followed.
II.
Appellate courts conduct a de novo review of a district court’s dismissal
of a complaint under Federal Rule of Civil Procedure 12(b)(6). See Clyce v.
Butler, 876 F.3d 145, 148 (5th Cir. 2017). We may affirm the district court’s
dismissal on any basis supported by the record. See, e.g., Torch Liquidating
Tr. ex rel. Bridge Assocs., L.L.C. v. Stockstill, 561 F.3d 377, 384 (5th Cir.
2009).
Rule 12(b)(6) authorizes the filing of motions to dismiss asserting, as a
defense, a plaintiff's “failure to state a claim upon which relief can be
granted.” See Fed. R. Civ. P. 12(b)(6). Thus, claims may be dismissed under
Rule 12(b)(6) “on the basis of a dispositive issue of law.” Neitzke v. Williams,
490 U.S. 319, 326 (1989). Dismissal under Rule 12(b)(6) also is warranted if
the complaint does not contain sufficient factual matter, accepted as true, to
“state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Where the well-pleaded facts of a complaint do not permit a court to infer
more than the mere possibility of misconduct, the complaint has alleged – but
it has not ‘show[n]’ – “that the pleader is entitled to relief.” Iqbal, 556 U.S. at
678 (quoting Fed. Rule Civ. P. 8(a)(2)). Thus, a complaint's allegations “must
make relief plausible, not merely conceivable, when taken as true.” United
States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 186 (5th Cir. 2009); see also
Twombly, 550 U.S. at 555 (“Factual allegations must be enough to raise a
right to relief above the speculative level . . . on the assumption that all the
allegations in the complaint are true (even if doubtful in fact).”).
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“The plausibility standard is not akin to a ‘probability requirement,’ but
it asks for more than a sheer possibility that a defendant has acted unlawfully.”
Id. Factual allegations that are “merely consistent with a defendant's liability,
stop short of the line between possibility and plausibility of entitlement to
relief,” and thus are inadequate. Id. (internal quotations omitted).
Accordingly, the requisite facial plausibility exists “when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. (emphasis added).
“Determining whether a complaint states a plausible claim for relief” is “a
context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Iqbal, 556 U.S. at 679 (internal citations
omitted). See also Robbins v. Oklahoma, 519 F.3d 1242, 1248 (10th Cir. 2008)
(degree of required specificity depends on context, i.e., the type of claim at
issue).
In evaluating motions to dismiss filed under Rule 12(b)(6), the court
“must accept all well-pleaded facts as true, and . . . view them in the light most
favorable to the plaintiff.” Campbell v. Wells Fargo Bank, N.A., 781 F.2d 440,
442 (5th. Cir.), cert. denied, 476 U.S. 1159 (1986). Further, “[a]ll questions of
fact and any ambiguities in the controlling substantive law must be resolved
in the plaintiff's favor.” Lewis v. Fresne, 252 F.3d 352, 357 (5th Cir. 2001). On
the other hand, courts “are not bound to accept as true a legal conclusion
couched as a factual allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986);
see also Iqbal, 556 U.S. at 678 (“tenet that a court must accept as true all of
the allegations contained in a complaint is inapplicable to legal conclusions”).
“Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further
factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at
557); see also Christopher v. Harbury, 536 U.S. 403, 416 (2002) (elements of a
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plaintiff's claim(s) “must be addressed by allegations in the complaint
sufficient to give fair notice to a defendant”).
In determining whether a plaintiff's claims survive a Rule 12(b)(6)
motion to dismiss, the factual information to which the court addresses its
inquiry is limited to (1) the facts set forth in the complaint, (2) documents
attached to the complaint, and (3) matters of which judicial notice may be
taken under Federal Rule of Evidence 201. See Norris v. Hurst Trust, 500 F.3d
454, 461 n. 9 (5th Cir. 2007); R2 Invs. LDC v. Phillips, 401 F.3d 638, 640 n. 2
(5th Cir. 2005). When a defendant attaches documents to its motion that are
referenced in the complaint and are central to the plaintiff's claims, however,
the court can also properly consider those documents. Causey v. Sewell
Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004); In re Katrina Canal
Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007). “In so attaching, the
defendant merely assists the plaintiff in establishing the basis of the suit, and
the court in making the elementary determination of whether a claim has been
stated.” Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 499 (5th Cir.
2000).
III.
The federal Housing Choice Voucher Program pays rental subsidies to
“aid[ ] low-income families in obtaining a decent place to live” and to
“promot[e] economically mixed housing.” 42 U.S.C. § 1437f(a). The voucher
program is funded by HUD and administered by state and local public
housing authorities (PHA’s) in accordance with regulations promulgated by
HUD. When a rent payment exceeds a specified percentage of a family’s
monthly income, the federal program pays the balance.
Landlord participation in the voucher program is voluntary under both
federal and Texas state law. See 42 U.S.C. §1437f; 24 C.F.R. §§ 982.301(b)(11),
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982.302(a), 982.307; TEX. LOCAL GOV’T CODE § 250.007(a); TEX. GOV’T CODE.
§ 2306.269; Knapp v. Eagle Prop. Mgmt. Corp., 54 F.3d 1272, 1280 (7th Cir.
1995) (“Owner participation in the section 8 program is voluntary and non-
participating owners routinely reject section 8 voucher holders.”); Salute v.
Stratford Greens Garden Apartments, 136 F.3d 293, 300 (2d Cir. 1998) (“We
think that the voluntariness provision of Section 8 reflects a congressional
intent that the burdens of Section 8 participation are substantial enough that
participation should not be forced on landlords, either as an accommodation
to handicap or otherwise.”).
Once admitted to the voucher program, program participants are
responsible for finding a landlord in the private rental market willing to rent
to them. 24 C.F.R. § 982.302(a). Landlords who participate in the program
are responsible for screening prospective tenants and reject them if screening
reveals red flags in terms of paying rent and utility bills, caring for rental
housing, respecting neighbors, criminal activity, and the like. Id. at §
982.307(a).
The Fair Housing Act (FHA), Title III of the Civil Rights Act of 1968,
42 U.S.C. § 3601, et seq., prohibits discrimination in the rental or sale of a
dwelling based on certain protected characteristics, including race. See 42
U.S.C. § 3604(a). That statute reflects “the policy of the United States to
provide within constitutional limitations, for fair housing throughout the
United States.” 42 U.S.C. § 3604. Thus, the voluntary nature of landlord
participation in the voucher program does not render it immune from liability
if actionable discrimination under the FHA is established.
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Pertinent here, § 3604(a) provides:
[I]t shall be unlawful to refuse to sell or rent after the
making of a bona fide offer, or to refuse to negotiate for the sale or
rental of, or otherwise make unavailable or deny, a dwelling to any
person because of race, color, religion, sex, familial status, or
national origin.
42 U.S.C. § 3604(a). ICP’s advertisement liability claim against Lincoln is
governed by 42 U.S.C. § 3604(c), which provides:
[I]t shall be unlawful to make, print, or publish, or cause to
be made, printed, or published any notice, statement or
advertisements, with respect to the sale or rental of a dwelling that
indicates any preference, limitation, or discrimination based on
race, color, religion, sex, handicap, familial status, or national
origin, or an intention to make any such preference, limitation, or
discrimination.
A. Disparate Impact Liability
In Texas Department of Housing & Community Affairs v. Inclusive
Communities Project, Inc., 135 S. Ct. 2507 (2015) (“ICP”), the Supreme Court,
construing 42 U.S.C. §§ 3604(a) and 3605(a), determined that both disparate
treatment claims (claims asserting “discriminatory intent or motive”) and
disparate impact claims (“claims asserting an unjustified, disproportionally
adverse effect on minorities”) are cognizable under the FHA. ICP, 135 S. Ct.
2507, 2513, 2518. 5 In recognizing the viability of disparate impact FHA
claims, the Supreme Court emphasized, inter alia, the inclusion of the
5 Section 3605(a) provides:
It shall be unlawful for any person or other entity whose business
includes engaging in real estate-related transactions to discriminate against
any person in making available such a transaction, or in the terms or
conditions of such a transaction, because of race, color, religion, sex, handicap,
familial status, or national origin.
42 U.S.C. § 3605(a).
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“results-oriented” phrase – “or otherwise make unavailable or deny” – in
§3604(a), reasoning that it “refers to the consequences of action rather than
the actor’s intent.” Id. at 2518, 2525. The Court also found “[r]ecognition of
disparate-impact claims [to be] consistent with the FHA’s central purpose . .
. [of] eradicat[ing] discriminatory practices within a sector of our Nation’s
economy.” Id. at 2521.
1. FHA Disparate Impact Liability: ICP’s Test
To properly evaluate ICP’s claims, we must first address, as a threshold
matter, the applicable test for determining disparate impact claims asserted
under the FHA. When ICP previously was before this court, we adopted
HUD’s burden-shifting approach for deciding disparate impact claims under
the FHA. See 24 C.F.R. § 100.500; The Inclusive Communities Project, Inc. v.
Texas Dep’t of Hous. and Cmty. Affairs, 747 F.3d 275, 282 (5th Cir. 2014),
aff’d, 135 S. Ct. 2507 (2015). Under the HUD regulation, a plaintiff must first
prove a prima facie case of discrimination by showing that the challenged
practice causes a discriminatory effect. 24 C.F.R. § 100.500(c)(1). If the
plaintiff makes a prima facie case, the defendant must then prove that the
challenged practice is necessary to achieve one or more of the defendant’s
substantial, legitimate, nondiscriminatory interests. Id. at §100.500(c)(2). If
the defendant meets its burden, the plaintiff must then show that the
defendant’s interests “could be served by another practice that has a less
discriminatory effect.” Id. at §100.500(c)(3).
Although it affirmed our decision, the Supreme Court never explicitly
stated that it adopted the HUD regulation’s framework. Because of this lack
of clarity, debate exists regarding whether, in ICP, the Supreme Court adopted
the regulation’s approach or modified it. The Fourth Circuit has noted that
“[t]he HUD regulation is similar to the framework the Supreme Court
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ultimately adopted in [ICP], and indeed, some courts believe the Supreme
Court implicitly adopted the HUD framework altogether.” Reyes v. Waples
Mobile Home Park Ltd. P’ship, 903 F.3d 415, 424 n.4 (4th Cir. 2018) (citing
Mhany Mgmt., Inc. v. Cty. of Nassau, 819 F.3d 581, 618 (2d Cir. 2016) (“The
Supreme Court implicitly adopted HUD’s approach. . . .”). The Fourth Circuit
concluded, “[w]ithout deciding whether there are meaningful differences
between the frameworks, . . . the standard announced in [ICP], rather than the
HUD regulation[,] controls our inquiry.” Id.
We read the Supreme Court’s opinion in ICP to undoubtedly announce a
more demanding test than that set forth in the HUD regulation. As noted by
a Minnesota district court: “the Supreme Court announced several ‘safeguards’
to incorporate into the burden-shifting framework to ensure that disparate
impact liability does not ‘displace valid governmental and private priorities.’”
Crossroads Residents Organized for Stable & Secure Residencies v. MSP
Crossroads Apartments LLC, No. 16-233, 2016 WL 3661146, at *6 (D. Minn.
2016). “Those safeguards include a ‘robust causality requirement’ at the prima
facie stage, and, after the burden shifts to the defendant, ‘leeway to state and
explain the valid interest served by [the defendant’s] policies.’” Id. (quoting
ICP, 135 S. Ct. at 2522-23). In contrast, the HUD regulation contains no
“robust causation” requirement; rather it requires only a showing that “a
challenged practice caused or predictably will cause a discriminatory effect.”
24 C.F.R. § 100.500(c)(1).
A careful review of the Supreme Court’s analysis in ICP, moreover,
reveals its modification of HUD’s test to be both purposeful and significant.
Indeed, the Court emphasizes:
[D]isparate-impact liability has always been properly
limited in key respects that avoid the serious constitutional
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questions that might arise under the FHA, for instance, if such
liability were imposed based solely on a showing of a statistical
disparity.
***
[A] disparate-impact claim that relies on a statistical
disparity must fail if the plaintiff cannot point to a defendant's
policy or policies causing that disparity. A robust causality
requirement ensures that “[r]acial imbalance . . . does not, without
more, establish a prima facie case of disparate impact” and thus
protects defendants from being held liable for racial disparities
they did not create. Wards Cove Packing Co. v. Atonio, 490 U.S.
642, 653 (1989), superseded by statute on other grounds, 42 U.S.C.
§ 2000e–2(k). Without adequate safeguards at the prima facie
stage, disparate-impact liability might cause race to be used and
considered in a pervasive way and would almost inexorably lead
governmental or private entities to use numerical quotas and
serious constitutional questions then could arise.
***
Courts must therefore examine with care whether a plaintiff
has made out a prima facie case of disparate impact and prompt
resolution of these cases is important. A plaintiff who fails to allege
facts at the pleading stage or produce statistical evidence
demonstrating a causal connection cannot make out a prima facie
case of disparate impact.
ICP, 135 S. Ct. at 2522–23 (internal quotation marks omitted) (emphasis
added).
Other statements by the Court, regarding a defendant’s competing
interests, dispel any remaining doubt as to the limited nature of the disparate
impact claim that exists under the FHA. Indeed, citing HUD’s then recent
rulemaking, the Court emphasized that disparate-impact liability “does not
mandate that affordable housing be located in neighborhoods with any
particular characteristic.” ICP, 135 S. Ct. at 2523 (citing 78 Fed. Reg. 11476)
(emphasis added). Likewise,“[t]he FHA does not decree a particular vision of
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urban development.” Id. (emphasis added). Rather, “entrepreneurs must be
given latitude to consider market factors.” Id. The Court additionally cautions:
[A] plaintiff bringing a disparate-impact claim challenges
practices that have a “disproportionately adverse effect on
minorities” and are otherwise unjustified by a legitimate rationale.
Ricci v. DeStefano, 557 U.S. 557, 577 (2009) (internal quotation
marks omitted).
***
An important and appropriate means of ensuring that
disparate-impact liability is properly limited is to give housing
authorities and private developers leeway to state and explain the
valid interest served by their policies. Just as an employer may
maintain a workplace requirement that causes a disparate impact
if that requirement is a reasonable measurement of job
performance, . . . so too must housing authorities and private
developers be allowed to maintain a policy if they can prove it is
necessary to achieve a valid interest.
***
Governmental or private policies are not contrary to the
disparate impact requirement, unless they are “artificial, arbitrary
and unnecessary barriers.” Difficult questions might arise if
disparate-impact liability under the FHA caused race to be used
and considered in a pervasive and explicit manner to justify
governmental or private actions that, in fact, tend to perpetuate
race-based considerations rather than move beyond them. Courts
should avoid interpreting disparate-impact liability to be so
expansive as to inject racial considerations into every housing
decision.
Id. at 2513, 2522–24 (quoting Griggs v. Duke Power Co., 401 U.S. 424, 431
(1971)).
Given the foregoing, we are convinced the Supreme Court’s language in
ICP is stricter than the regulation itself. Accordingly, as noted by the Fourth
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Circuit, we are bound to apply the stricter version of the burden-shifting
analysis. Reyes, 2018 WL 4344682, at *5 n.4. 6
2. Disparate Impact: Four Views of “Robust Causation”
Although the Supreme Court’s opinion in ICP established “robust
causation” as a key element of the plaintiff’s prima facie burden in a disparate
impact case, the Court did not clearly delineate its meaning or requirements.
Nor are we aware of any post-ICP Supreme Court or Fifth Circuit decisions
clarifying the standard. However, decisions from three other circuits – the
Fourth, Eighth and Eleventh – have considered its application, yielding
opinions reflecting varying views of the prerequisites.
The first view is provided by Ellis v. City of Minneapolis, in which the
Eighth Circuit construed ICP to require that a plaintiff’s allegations point to
an ‘artificial, arbitrary, and unnecessary’ policy causing the problematic
disparity,” in order to establish a prima facie disparate impact case. Ellis v.
City of Minneapolis, 860 F.3d 1106, 1114 (8th Cir. 2017) (quoting ICP,
135 S. Ct. at 2524). In Ellis, the plaintiffs, low-income housing landlords,
alleged that the city was targeting their properties with inspections, issuing
citations for code violations that did not exist, and threatening to revoke their
rental licenses. Id. at 1108–09. As a result, the plaintiffs argued, the city’s
actions displaced hundreds of FHA-protected individuals from their homes.
Id. at 1109. In denying the claim, the Eighth Circuit explained that the
plaintiffs’ complaint “must still allege facts plausibly demonstrating that the
housing-code standards complained of are arbitrary and unnecessary under
6The Supreme Court’s modification of the HUD standard is further evidenced by its
omission of any discussion of deference, pursuant to Chevron, U.S.A., Inc. v. Nat. Res. Def.
Council, Inc., 467 U.S. 837 (1984), and its failure to explicitly adopt the HUD regulation.
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the FHA.” Id. at 1112. The Ellis complaint fell short, however, because it
“suggest[ed] no more than disagreement between the [plaintiffs] and the City
on the extent of deficiencies based on reasonable housing-code provisions.” Id.
at 1113. Furthermore, “[t]o the extent their complaint mentions specific
housing-code provisions” it lacked “factually supported allegations that those
provisions are arbitrary or unnecessary to health and safety.” Id. at 1112.
The second view is provided by the Fourth Circuit’s majority opinion in
Reyes, in which “understanding [the] robust causality requirement [was] at
the crux of th[e] appeal.” Reyes, 903 F.3d at 425. In Reyes, a mobile home
park began enforcing a previously unenforced policy requiring all adult
occupants to provide documentation showing that they were legally present
in the United States in order to renew their leases, or face eviction. Id. at
419–20, 428. 7 The plaintiffs alleged that this policy disproportionately
affected Latino families because Latinos comprised 64.6% of the
undocumented immigrant population in Virginia and are “ten times more
likely than non-Latinos to be adversely affected by the Policy, as
undocumented immigrants constitute 36.4% of the Latino population
compared with only 3.6% of the non-Latino population.” Id. at 428.
Noting “statistical disparities must be sufficiently substantial that they
raise [the necessary] inference of causation,” the Fourth Circuit majority
concluded the plaintiffs had properly stated a prima facie disparate impact
case by alleging that the defendant’s first-time enforcement of a previously
unenforced policy (except as to the leaseholder) “caused a disproportionate
number of Latinos to face eviction from the Park compared to the number of
7 Prior to mid-2015, the requirement was enforced only against the leaseholder. In
mid-2015, the defendant began requiring all occupants over the age of eighteen to provide
the necessary documentation. Reyes, 903 F.3d at 419–20.
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non-Latinos who faced eviction.” Id. at 425, 428–29 (quoting Watson v. Fort
Worth Bank & Tr., 487 U.S. 977, 994–95 (1988)). The majority concluded the
statistical evidence that the plaintiffs provided “satisfied the robust causality
requirement” when considered in the context of the newly enforced policy.
The third construction of “robust causation” is provided by Judge
Keenan’s dissenting opinion in Reyes. In Judge Keenan’s view, the plaintiffs
had not met this requirement. Id. at *434–35. Rather, Judge Keenan
reasoned:
In my view, the plaintiffs have not adequately alleged that
the defendants’ policy caused the statistical disparity that they
challenge. The plaintiffs rest their claim of causality on statistics
showing that Latinos constitute the majority of undocumented
aliens in the geographic area of the park, and thus that Latinos
are disproportionately impacted by a policy targeting
undocumented aliens. Despite this statistical imbalance, however,
all occupants of the park must comply with the policy addressing
their immigration status, irrespective whether they are Latino.
Not all Latinos are impacted negatively by the policy, nor are
Latino undocumented aliens impacted more harshly than non-
Latino undocumented aliens. Accordingly, I would conclude that
the defendants’ policy disproportionately impacts Latinos not
because they are Latino, but because Latinos are the predominant
sub-group of undocumented aliens in a specific geographical area.
Although Latinos constitute the majority of the
undocumented population in the park, at different times and in
different locales, the disparate impact might have been on
immigrant populations from many other parts of the world. Such
geographical happenstance cannot give rise to liability against an
entity not responsible for the geographical distribution. Nor does
linking disparate impact liability to the coincidental location of
certain undocumented aliens further the aim of the FHA to avoid
“perpetuating segregation.” Inclusive Cmtys., 135 S. Ct. at 2522.
Thus, because the defendants’ policy has not caused Latinos to be
the dominant group of undocumented aliens in the park, the policy
has not “caused” a disparate impact on Latinos.
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Reyes, 903 F.3d at 434–35 (Keenan, J., dissenting)(emphasis added).
Thus, in the Reyes majority’s view, that the policy impacted Latinos
more than non-Latinos was enough to show robust causation. In Judge
Keenan’s dissenting view, however, robust causation was not satisfied by pre-
existing conditions (Latinos status as the predominant sub-group of
undocumented aliens) not brought about by the challenged policy.
The fourth view of robust causation is provided by the Eleventh’s
Circuit’s unpublished per curiam opinion in Oviedo Town Ctr, II, L.L.P. v. City
of Oviedo, Florida, –– Fed. Appx. ––, No. 17-14254, 2018 WL 6822693, *4 (Dec.
28, 2018), which describes ICP as “promulgat[ing] detailed causation
requirements as a means of cabining disparate impact liability.” (Emphasis
added.) Specifically, citing the Supreme Court’s instruction to “avoid
interpreting disparate impact liability to be so expansive to inject racial
considerations into every housing decisions,” the Eleventh Circuit concluded:
“The Supreme Court’s solution was to impose ‘[a] robust causality
requirement ensur[ing] that [r]acial imbalance . . . does not, without more,
establish a prima facie disparate impact.’” Id. (quoting ICP, 135 S. Ct. at 2523)
(internal citations omitted). Otherwise, “[i]f a disparate impact claim could
be found on nothing more than a showing that a policy impacted more
members of a protected class that nonmembers of protected classes, disparate
impact liability undeniably would overburden cities and developers.” Id. In
Oviedo, no prima facie case was established, the court of appeals reasoned,
because the submitted data “[did] not establish a disparate impact let alone
any causal connection” with the policy at issue. Id. at *5.
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3. FHA Disparate Impact Liability: Application
In the instant matter, the district court found ICP had not adequately
alleged facts demonstrating the necessary causation. Although
acknowledging that ICP had shown "a possible statistical imbalance with the
amount of voucher households in the census tract," the district court
concluded that ICP had not provided facts linking the “no vouchers” policy to
the “possible statistical disparity." Further, the court found ICP’s statistical
information and arguments “conclusory rather than descriptive of how [the
defendants’] policy actually caused a disparate impact."
The district court additionally determined that "[e]ven if Plaintiff ICP
met its burden to establish a prima facie showing of disparate impact,
Plaintiff ICP does not establish a disparate impact claim" because of the
burden-shifting framework. Specifically, the district court identified business
concerns referenced in ICP’s complaint, such as increased costs,
administrative delays, and other financial risks, as legitimate business
reasons for not participating in the voucher program. 8
Proceeding to the third step of the burden-shifting framework, the
district court rejected the less discriminatory alternatives proposed by ICP,
such as "the incentive payments, Sublease Program, and Third Party
Guarantor Program to alleviate Defendants' anticipated business concerns.”
The court reasoned: "ICP's proposals, while laudable, do not show how or if
the proposed programs have performed, or if Plaintiff ICP can financially
support the programs.” Thus, if ICP's programs were not successfully
executed, Lincoln and the Owners “could experience financial harm."
8 The district court also cited requirements of pertinent HUD regulations, as well as
federal and state statutes. See 24 C.F.R. §§ 982.401, 982.405; 42 U.S.C. § 1437f; TEX. LOCAL
GOV’T CODE § 250.007.
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Considering the instant record, we find no error in the district court’s
determination that the allegations of ICP’s complaint regarding Lincoln’s and
the Owners’ “no vouchers” policies fail to allege facts sufficient to provide the
robust causation necessary for an actionable disparate impact claim.
Moreover, we find this conclusion to be warranted under any of the analyses of
robust causation discussed above, i.e. that of the Eighth Circuit in Ellis, the
Fourth Circuit majority in Reyes, Judge Keenan’s dissent in Reyes, or the
Eleventh Circuit’s per curiam in Oviedo.
Focusing first on the Reyes majority, we note the opinion arguably could
be understood to support a finding of robust causation any time that a
defendant’s policy impacts a protected class more than others. Nevertheless,
absent a contrary ruling by the Fourth Circuit, we believe a narrower
construction of the opinion is warranted, given the stringent framework
outlined by the Supreme Court in ICP for evaluating disparate impact claims.
Thus, we find it significant that the disproportionate impact upon Latinos that
the Reyes majority held satisfied robust causation was the consequence of a
change in the defendant’s enforcement of its policy that increased the number
of Latinos facing eviction from the park than before. And, as previously stated,
the Reyes dissent reasons that “geographical happenstance cannot give rise to
liability against an entity not responsible for the geographical distribution.”
903 F.3d at 434. Thus, because the park’s policy had not caused Latinos to be
the dominant group of undocumented aliens in the park, Judge Keenan,
dissenting, found robust causation lacking in Reyes.
The logic of both the majority and dissenting opinions in Reyes, as well
as the Eleventh Circuit’s per curiam in Oviedo, likewise applies here. Neither
the aforementioned “city-level data” nor the “census-level data” cited by ICP
supports an inference that the implementation of Defendants-Appellees’
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blanket “no vouchers” policy, or any change therein, caused black persons to
be the dominant group of voucher holders in the Dallas metro area (or any of
the other census areas discussed by ICP). Similarly, ICP alleges no facts
supporting a reasonable inference that Defendants-Appellees bear any
responsibility for the geographic distribution of minorities throughout the
Dallas area prior to the implementation of the “no vouchers” policy. Indeed,
ICP pleads no facts showing Dallas’s racial composition before the Defendants-
Appellees implemented their “no vouchers” policy or how that composition has
changed, if at all, since the policy was implemented.
Thus, as the district court noted, none of these factual allegations “show
or infer that Defendants-Appellees’ policy diminished the amount of rental
opportunities for African American or Black prospective tenants previously
available before Defendants’ policy was implemented.” (Emphasis added.)
Accordingly, it is entirely speculative whether the “no vouchers” policy, as
opposed to some other factor, not attributable to Defendants-Appellees, caused
there to be less minority habitation in individual census tracts after the policy
was implemented. Without that information, any landlord who did not accept
vouchers would be vulnerable to a disparate impact challenge any time a less
than statistically proportionate minority population lived in that landlord’s
census tract. 9 Because “disparate-impact liability has always been properly
limited,” see ICP, 135 S. Ct. at 2522, that cannot be the correct result.
9 As discussed in note 2, the parties’ submissions reference a medley of geographical
areas and rental markets in the Dallas area. According to Brick Row, ICP “cherry-picked” its
statistical data by “mixing census data based on various sample sizes” from differing
locations to achieve the desired result. For purposes of our discussion, we assume arguendo
that ICP has identified relevant communities for comparison. Nevertheless, to the extent
that ICP’s complaint relies on "census tracts," it is highly questionable whether such
statistically pragmatic units have any relation to actual housing patterns. Census tracts are
constructed by the United States Census Bureau to accumulate population data, not
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Finally, in the Eighth Circuit’s view, the “no vouchers” policy, even if
causing a “problematic disparity,” does not state an actionable FHA disparate
treatment claim unless the policy is “artificial, arbitrary, and unnecessary.”
Ellis, 860 F.3d at 1112-1114. A private entity’s choice to opt out of participation
in a government program that is voluntary under both federal and Texas law
cannot be artificial, arbitrary, and unnecessary absent the existence of
pertinent, contrary factual allegations sufficiently rendering a plaintiff’s
claimed entitlement to disparate impact relief plausible, rather than merely
conceivable or speculative. As we have explained, on the record before us, we
find none.
The dissenting opinion objects to our treatment of “robust causation,”
contending that, in ICP, the Supreme Court simply “made clear that the
plaintiff must identify an offending policy in order to establish a prima facie
case” and, as evidenced by its citation to Wards Cove, confirmed that
standards for disparate impact employment discrimination claims likewise
apply to FHA disparate impact claims. We respectfully disagree.
To the contrary, in ICP, the Supreme Court stressed the need for both
a policy attributable to the defendant and the requisite causal connection,
clarifying that a robust causality requirement “protects defendants from
being held liable for racial disparities they did not create.” ICP, 135 S. Ct.
2523 (emphasis added) (quoting Wards Cove, 490 U.S. at 653). Indeed, the
Court specifically stated: “If a statistical discrepancy is caused by factors
other than the defendant’s policy, a plaintiff cannot establish a prima facie
necessarily to measure neighborhood or community cohesiveness or boundaries. Census
tracts are not political subdivisions, nor do they comprise neighborhoods, communities, school
districts, gated subdivisions or any other potential boundary markers useful in determining
housing patterns.
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case, and there is no liability.” ICP, 135 S. Ct. at 2514 (emphasis added). The
Supreme Court’s previous analysis in Wards Cove, moreover, further
supports this point:
[A plaintiff] will also have to demonstrate that the disparity [at
issue] is the result of one or more of the employment practices
[under attack], specifically showing that each challenged practice
has a significantly disparate impact on employment opportunities
for whites and nonwhites. To hold otherwise would result in [a
defendant] being held liable for the “myriad of innocent causes that
may lead to statistical imbalances in the composition of their work
force.”
Wards Cove, 490 U.S. at 657 (quoting Watson v. Fort Worth Bank & Trust, 487
U.S. 977, 992 (1988) (emphasis added.
Lastly, the dissent looks to the Second Circuit’s opinion in Huntington
Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2nd Cir. 1988), to
support its contrary position regarding ICP’s disparate impact claim,
essentially arguing that we and the district court overlooked ICP’s assertions
of harm to the community by perpetuation of segregation. Huntington Branch,
however, is materially distinguishable. Importantly, like the other decisions
characterized by the Supreme Court as “resid[ing] at the heartland of
disparate-impact liability,” see ICP, 135 S. Ct. at 2522, 10 Huntington Branch
addressed a public defendant’s prohibitory enforcement of a facially neutral
zoning ordinance in such a manner that restricted multi-family housing to a
small predominantly minority area of the city. Thus, the Second Circuit simply
employed the FHA to remove indefensible government policies that operated
to perpetuate segregation by unreasonably restricting private construction of
The Court described these cases as involving “unlawful practices includ[ing] zoning
10
laws and other housing restrictions that function unfairly to exclude minorities from certain
neighborhoods without any sufficient justification.” ICP, 135 S. Ct. at 2521—22.
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multi-family housing that would increase affordable housing options for
minorities. Significantly, Huntington Branch did not impose affirmative
housing obligations on private actors. 11
To adopt the dissent’s position would effectively mandate a landlord’s
participation in the voucher program any time the racial makeup of multi-
family rental complex does not match the demographics of a nearby
metropolitan area. That result, however, would be contrary to the cautionary
standards that the Supreme Court has declared to be necessary both in
evaluating a prima facie case and in ordering any remedial action:
Were standards for proceeding with disparate-impact suits
not to incorporate at least the safeguards discussed here, then
disparate-impact liability might displace valid governmental and
private priorities, rather than solely “remov[ing] . . . artificial,
arbitrary, and unnecessary barriers.” Griggs, 401 U.S., at 431, 91
S. Ct. 849. And that, in turn, would set our Nation back in its quest
to reduce the salience of race in our social and economic system.
***
Remedial orders in disparate-impact cases should
concentrate on the elimination of the offending practice that
“arbitrar[ily] . . . operate[s] invidiously to discriminate on the basis
of rac[e].” If additional measures are adopted, courts should strive
11 Although the Supreme Court affirmed the Second Circuit’s judgment in
Huntington, it did so “[w]ithout endorsing [its] precise analysis.” See Town of Huntington v.
Huntington Branch, NAACP, 488 U.S. 15 (1988). Notably, however, albeit in the context of
addressing (and ultimately rejecting) the town’s defense, rather than evaluating a plaintiff’s
prima facie case, the Second Circuit itself distinguishes suits in which a plaintiff sues to
compel a governmental defendant to build housing versus suits in which a plaintiff merely
seeks to eliminate some governmental obstacle to housing that the plaintiff would build. With
the latter type, the “[the government] defendant would normally have to establish a
somewhat more substantial justification for its adverse action” than it would be required if
it were [merely] defending its decision not to build.” 844 F.2d at 936. Considered in the
context of this case, and having the benefit of the Supreme Court’s interim decision in ICP,
we think similar logic imposes a heavier pleading burden on ICP’s efforts to require private
defendants to take similar affirmative action.
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to design them to eliminate racial disparities through race-neutral
means. Remedial orders that impose racial targets or quotas might
raise more difficult constitutional questions.
ICP, 135 S. Ct. at 2524 (internal citations omitted). In any event, if such a
burdensome and extreme mandate were to be attempted, it should be expressly
legislated by Congress, not this court. Accordingly, we affirm the district
court’s rejection of ICP’s disparate impact claim–whether it is viewed as one
alleging an adverse impact on a particular minority group or, as discussed in
Huntington Branch, one asserting “harm to the community generally by the
perpetuation of segregation.” 844 F.2d at 937.
B. Disparate Treatment Liability: Lincoln and Owners
The district court concluded ICP’s disparate treatment claims asserted
against all Defendants-Appellees were essentially “mislabeled” disparate
impact claims that likewise should be dismissed. Specifically, the district
court stated:
Defendants refuse[d] to rent to or negotiate with Section 8
voucher holders 12 regardless of race or color. There are no
allegations made against Defendants' subjective application of
their policy to Section 8 voucher holders. Plaintiff ICP's issue is
with the existence of Defendants' policy, which is indicative of
disparate impact rather than disparate treatment.
Accordingly, having rejected ICP’s disparate impact claims, the district court
likewise dismissed ICP’s disparate treatment claims.
“Disparate treatment” is “deliberate discrimination.” Munoz v. Orr, 200
F.3d 291, 299 (5th Cir. 2000). It refers to treating some people “less favorably
12The district court issued two Memorandum Opinion and Orders. The first deals only
with Defendant Brick Row's motion to dismiss; the second addresses the claims asserted
against the other defendants. Because the district court's analysis is nearly identical
regarding this issue in both opinions, the opinions are referenced interchangeably.
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than others because of a protected trait.” Ricci v. DeStefano, 557 U.S. 557, 577
(2009) (internal citations omitted). Such discrimination is shown by evidence
of discriminatory action or by inferences from the fact of differences in
treatment. L & F Homes & Dev., L.L.C. v. City of Gulfport, Miss., 538 F. App'x
395, 401 (5th Cir. 2013) (unpub.) (internal citations omitted). With
discriminatory treatment claims, there can be no liability without a finding
that the protected trait (e.g., race) motivated the challenged action. Greater
New Orleans Fair Hous. Action Ctr., Inc. v. Hotard, 275 F. Supp. 3d 776, 786
(E.D. La. 2017) (citing Simms v. First Gibraltar Bank, 83 F.3d 1546, 1556 (5th
Cir. 1996) (evidence must create reasonable inference race was significant
motivating factor); Woods–Drake v. Lundy, 667 F.2d 1198, 1202 (5th Cir.
1982) (“Plaintiff need only prove that race must have been a significant factor
in defendant's dealings)).
Although we find dismissal of the disparate treatment claims asserted
collectively against Defendants-Appellees to have been warranted, the district
court’s finding that they were “mislabeled” was not, given ICP’s contention
that the true rationale for the facially neutral “no vouchers” policies is the race
of the voucher tenants, not the means (vouchers) by which rent is paid. As
argued by the amicus curiae, the Lawyers’ Committee for Civil Rights Under
Law, so long as the requisite discriminatory intent is present, a seemingly
race-neutral policy can give rise to actionable disparate treatment. See, e.g.,
ICP, 135 S. Ct. at 2513, 2518 (distinguishing between the discriminatory
intent or motive required for disparate treatment liability and the
discriminatory effect or consequence required for a disparate impact liability);
Greater New Orleans Fair Housing Action Center v. St. Bernard Parish, 641
F. Supp. 2d 563 (E.D.La.2009) (parish council’s moratorium against
construction of multi-family housing gave rise to both disparate intent and
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impact FHA discrimination violations). Such is often the case in employment
discrimination cases where the proffered (neutral) rationale for an adverse
employment action allegedly is pretext for discrimination.
Further, that certain facts may be cited in support of both a disparate
treatment and disparate impact claim does not automatically cause one claim
to supersede the other. Cf. Vill. of Arlington Heights v. Metro. Hous. Dev.
Corp., 429 U.S. 252, 265 (1977) (Disproportionate impact of facially neutral
legislation is not the “sole touchstone” of racially discriminatory purpose but
“is not irrelevant” and “may provide an important starting point”). In fact, in
ICP, the Supreme Court notes: “Recognition of disparate-impact liability
under the FHA also plays a role in uncovering discriminatory intent: It
permits plaintiffs to counteract unconscious prejudices and disguised animus
that escape easy classification as disparate treatment.” 135 S. Ct. at 2513.
In the absence of direct evidence, claims of disparate treatment are
evaluated utilizing the burden-shifting evidentiary standard established for
discrimination cases based on circumstantial evidence. Petrello v. Prucka, 484
Fed. Appx. 939, 942 (5th Cir. 2012) ((citing Lindsay v. Yates, 498 F.3d 434,
438–39 (6th Cir. 2007)); Mitchell v. Shane, 350 F.3d 39, 47 (2d Cir. 2003); Cox
v. Phase III, Invs. No. CIV.A. H-12-3500, 2013 WL 3110218, at *8 (S.D. Tex.
June 14, 2013). Thus, to state a claim for disparate treatment under
§3604(a), the plaintiff must allege facts supporting a prima facie case of (1)
membership in protected class, (2) that the plaintiff applied and was qualified
to rent or purchase housing; (3) that the plaintiff was rejected, and (4) that
the housing thereafter remained open to similarly situated applicants after
the plaintiff was rejected. Petrello, 484 Fed. Appx. at 942; Graoch Assocs. #33,
LP v. Louisville/Jefferson Cty. Metro, 508 F.3d 366, 371 (6th Cir. 1996). If a
prima facie case is alleged, a defendant may offer a legitimate, non-
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discriminatory reason for the rejection. The burden then shifts back to the
plaintiff to rebut the reason offered by the defendant by showing it is a pretext
for discrimination.
In this instance, the vague and conclusory allegations of disparate
treatment that ICP asserts collectively against Defendants-Appellees are
legally insufficient to support a reasonable inference of intentional race
discrimination. In short, ICP essentially asks the panel to automatically view
a “no voucher tenants” policy as synonymous with a “no black tenants” policy
without providing adequate (well-pleaded) factual support for that linkage (as
opposed to conclusory statements and assertions based on speculation,
assumptions, and stereotypes). Defendants-Appellees’ presumed awareness
that the voucher population in the Dallas metro area is disproportionately
black cannot alone be enough.
The same is true of Defendants-Appellees’ alleged failure to respond to
ICP’s proposed financial incentive (one month’s rent) and use of sublease and
guarantor provisions purportedly sometimes utilized under other
circumstances, e.g., students subsidized by parents, first-time renters, and
renters with low credit scores, and corporations subleasing to employees. Such
conclusory allegations are at most “merely consistent with [] liability,” and
lack the factual support necessary to support a reasonable, rather than
speculative, inference of intentional discrimination. For instance, ICP
includes no facts supporting the claimed general existence of an otherwise
qualified pool of voucher recipient applicants for Defendants-Appellees’
properties. Nor is it plausible, based solely on ICP’s conclusory assertions,
that the proposed subleases and guarantees render ICP and its government
voucher beneficiaries sufficiently similarly situated to business entities
subleasing rental units to their employees, and credit-worthy parents serving
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as guarantors for students, such that Defendants-Appellees’ lack of response
is indicative of intentional race discrimination.
C. Disparate Treatment Liability: Lincoln
The disparate treatment asserted only against Lincoln differs from that
asserted collectively against all Defendants-Appellees. Specifically, ICP
contends Lincoln’s alleged refusal to negotiate with or rent to otherwise
qualified voucher households in majority white areas while, at the same time,
negotiating with and renting to voucher holders in majority minority areas,
evidences intentional race discrimination for purposes of the disparate
treatment standard of liability under 42 U.S.C. § 3604(a) and 42 U.S.C. §
1982. 13
Although ICP’s complaint and briefs arguably intimate that Lincoln
accepts vouchers at certain other properties located in predominately
minority areas (as opposed to majority white areas), the pertinent allegations
are insufficiently clear to provide the necessary certainty. Even after oral
argument, it is unclear whether Lincoln’s acceptance of vouchers is alleged to
occur at properties in minority areas other than those for which voucher
acceptance is mandated by law (e.g., in exchange for low-income tax credits)
or contract, and thus is not the subject of Lincoln’s discretion. On such a bare
showing, we find no error in the district court’s dismissal of the claim.
D. Advertising Liability: Lincoln
As its fourth claim under the FHA, ICP alleges Lincoln’s
advertisements violate 42 U.S.C. § 3604(c), which "prohibits advertisements
for rental dwellings that show preference or discriminate based on race or
13 Section 1982 provides “All citizens of the United States shall have the same right,
in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase,
lease, sell, hold, and convey real and personal property.” 42 U.S.C. § 1982.
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color." 42 U.S.C. § 3604(c). Specifically, ICP contends Lincoln’s statements of
its “no vouchers” policy in the advertisements “appeal to the stereotype that
because voucher tenants are Black, voucher tenants are undesirable as
tenants and that the exclusion of voucher households makes the complex a
more desirable place for White non-Hispanic tenants to live.” Additionally,
ICP contends “[t]he advertising injures ICP by perpetuating the stereotype
that Black voucher households are inferior and undesirable.” The
advertisements about which ICP complains include the following three
statements:
Our community is not authorized to accept housing vouchers.
Our community is not authorized to accept Section 8 housing.
Our community is not authorized to accept ANY government
subsidized rent programs.
The district court rejected this claim, finding that Lincoln’s
advertisements "do not involve race or show any sort of racial preference." In
making this determination, the district court concluded the advertisements
do not “suggest[] to an ‘ordinary reader’ that a particular race is preferred or
not preferred,” and “[o]ne race is not synonymous with the words ‘Section 8
housing’, ‘government subsidized rent program,’ or ‘housing voucher.’” Citing
Miami Valley Fair Housing Center, Inc. v. Connor Group., 725 F.3d 571, 577
(6th Cir. 2013) for the proposition that “‘[a]n ordinary reader’ is neither the
most suspicious nor the most insensitive person in our society,” the district
court concluded ICP had failed to convince it that “an ordinary reader would
automatically equate Section 8 housing with [black] applicants.”
On appeal, ICP emphasizes that Lincoln utilizes these advertisements
only in majority white census tracts, and questions the necessity of using
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three different statements to state what ICP considers to be the same single
message, i.e. that vouchers are not accepted in the rental community. The
advertisement, however, contains no explicit reference to race; rather, it
simply states Lincoln’s policies regarding the acceptance of vouchers or other
government rent subsidies. And, while an ordinary reader might think one
“no acceptance” statement is adequate, or question whether all three
statements are necessary, the supposition that that an ordinary reader would
infer a racial preference from them is entirely speculative and unwarranted.
Indeed, including all three explicit statements likely lessens confusion and
streamlines the rental process for prospective tenants and landlords.
Furthermore, it is entirely logical that these advertisements would be utilized
only where vouchers are not accepted. Accordingly, on the record before us,
we likewise find no error in the district court’s dismissal of this claim.
IV.
Based on the foregoing, we find the district court properly concluded that
ICP’s allegations fail to state claims upon which relief legally can be granted.
Accordingly, the district court’s judgment of DISMISSAL WITH PREJUDICE
is AFFIRMED.
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W. EUGENE DAVIS, Circuit Judge, concurring in part and dissenting in part:
While I concur in the majority’s decision to affirm the dismissal of ICP’s
disparate-treatment and discriminatory advertising claims, I strongly dissent
from the majority’s decision to affirm the dismissal of ICP’s disparate-impact
claim. The question presented is whether ICP has alleged a plausible
disparate-impact claim under the Fair Housing Act (“FHA”). Before that
question can be answered, the type of disparate-impact claim asserted must be
identified. As ICP contends, and as explained below, there are two different
types of disparate-impact claims that may be asserted under the FHA,
requiring different elements for a prima facie case. The first type of disparate-
impact claim is like that recognized traditionally in the employment
discrimination context; i.e., the defendant’s facially-neutral policy or practice
has a disproportionately adverse effect on a protected group. The second type
of disparate-impact claim, not found in the employment discrimination
context, is that the defendant’s policy or practice harms the community in
general by perpetuating segregation.
ICP asserts both types of disparate-impact claims in its complaint. In
analyzing those claims under Rule 12(b)(6), however, the district court erred
by failing to distinguish these two claims, mixing up their prima facie
elements, and examining the alleged statistical information under its distorted
framework. The majority compounds the district court’s error by not only
failing to differentiate the claims and their prima facie elements, but also, in
defining “robust causation,” creating new prima facie elements simply not
found in any controlling precedent. Moreover, the majority’s interpretation of
“robust causation” threatens to eviscerate disparate-impact claims under the
FHA altogether.
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In my view, and for the following reasons, ICP has set forth a plausible
disparate-impact claim under the FHA in this case. The district court’s
decision dismissing the claim pursuant to Rule 12(b)(6) should be reversed, and
ICP should be allowed to proceed.
I.
ICP asserts that Defendants’ facially neutral “no vouchers” policy
excludes a disproportionately Black population from housing at Defendants’
properties, in violation of the FHA. As support for its disparate-impact claim,
ICP alleged that the renter population in the Dallas area is such that
Defendants’ “no vouchers” policy has a greater adverse impact on the Black
renter population than the White renter population. Specifically, ICP offered
statistical information indicating that the group of renter households that the
policy excludes from Defendants’ apartment complexes (voucher households in
the Dallas area) is predominantly Black, and the group of renter households
that the policy does not exclude (non-voucher households in the Dallas area) is
predominantly White. This statistical information, accepted as true at the
Rule 12(b)(6) stage, 1 makes plausible that, while neutral on its face,
Defendants’ “no vouchers” policy operates to exclude more Black renters from
housing at Defendants’ properties than White renters and, thus, has a
discriminatory effect in violation of the FHA.
ICP also asserts that Defendants’ “no vouchers” policy has the
discriminatory effect of perpetuating racial segregation in the Dallas area by
excluding predominantly Black voucher households from predominantly White
1 See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)) (“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’”).
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census tracts. However, because ICP’s traditional disparate-impact claim is
more straightforward, and its segregative-effect claim is based on census-tract
data the majority finds problematic, the analysis that follows is limited to ICP’s
traditional disparate-impact claim, which alone provides a basis for reversing
the district court’s Rule 12(b)(6) dismissal. The majority’s decision today
reflects a fundamental misunderstanding of disparate-impact liability under
the FHA, rendering it unable to discern the significance of the statistical data
ICP alleged in support of its traditional disparate-impact claim. Discussion of
the development of disparate-impact liability under Supreme Court
jurisprudence, therefore, is in order. Moreover, analysis of the Supreme
Court’s precedents regarding disparate-impact liability is key to
understanding what the Supreme Court meant by “robust causation” in its
decision in Texas Department of Housing & Community Affairs v. Inclusive
Communities Project, Inc., 135 S. Ct. 2507 (2015) (ICP), which governs this
case.
II.
A. Overview of Disparate-Impact Liability Under Supreme
Court Jurisprudence.
“[A] plaintiff bringing a disparate-impact claim challenges practices that
have a ‘disproportionately adverse effect on minorities’ and are otherwise
unjustified by a legitimate rationale.” ICP, 135 S. Ct. at 2513 (citation
omitted). In ICP, the Supreme Court determined, as a matter of first
impression, that disparate-impact claims are cognizable under the FHA. In
doing so, the Court relied on its prior precedents recognizing that such claims
could be asserted in the employment discrimination context.
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1. Griggs v. Duke Power
As described in ICP, the Supreme Court first addressed disparate-impact
liability in Griggs v. Duke Power Co., 401 U.S. 424 (1971), where the plaintiffs
asserted claims of racial discrimination in employment under Title VII of the
Civil Rights Act of 1964. See ICP, 135 S. Ct. at 2516–20. In Griggs, the
defendant-employer, a North Carolina power company, adopted a policy
requiring a high school education or the passing of a standardized general
intelligence test as a condition of employment in the company. 401 U.S. at
426–28. However, the evidence showed that White people “register[ed] far
better on [these] requirements than” Black people. Id. at 430 (citation
omitted). In discussing the reasons why Whites fared better, the Supreme
Court noted: “In North Carolina, 1960 census statistics show[ed] that, while
34% of [W]hite males had completed high school, only 12% of [Black] males had
done so.” Id. at 430 n.6. Moreover, with respect to the standardized tests
required by the defendant-employer, the Court noted evidence that “58% of
[W]hites pass[ed] the tests, as compared with only 6% of [B]lacks.” Id.
The plaintiffs in Griggs argued that “because the two requirements
operated to render ineligible a markedly disproportionate number of [Black
people], they were unlawful under Title VII unless shown to be job related.”
Id. at 429. The Court agreed with the plaintiffs and determined that Title VII
“proscribe[d] not only overt discrimination but also practices that are fair in
form, but discriminatory in operation. The touchstone is business necessity.”
Id. at 431. Emphasizing that Title VII condemned discriminatory preference
for any group, whether minority or majority, the Court stated: “What is
required by Congress is the removal of artificial, arbitrary, and unnecessary
barriers to employment when the barriers operate invidiously to discriminate
on the basis of racial or other impermissible classification.” Id. The Court held
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that “[i]f an employment practice which operates to exclude [Black people]
cannot be shown to be related to job performance, the practice is prohibited.”
Id. Because the defendant-employer was unable to show that its requirements
of a high school education and the passing of standardized intelligence tests
were related to job performance, the Court held that the requirements were
unlawful under Title VII. Id. at 433–35.
2. Wards Cove v. Atonio
Approximately eighteen years after deciding Griggs, the Supreme Court
issued another important decision regarding disparate-impact employment
discrimination claims. In Wards Cove Packing Co. v. Atonio, 490 U.S. 642
(1989) (Wards Cove), the plaintiffs were employees of a company that operated
salmon canneries in Alaska. The plaintiffs sued their employer under Title VII
based on statistics showing that a high percentage of the skilled positions
(noncannery jobs), which garnered higher pay, were filled by predominantly
White employees, while the unskilled positions (cannery positions) with lower
pay were filled by predominantly minority employees. Wards Cove, 490 U.S.
at 647. The plaintiffs alleged that a variety of the employer’s hiring and
promotion practices, such as “nepotism, a rehiring preference, lack of objective
hiring criteria, separate hiring channels, and a practice of not promoting
within,” caused the racial stratification of the work force. Id. at 647–48. The
Ninth Circuit determined that the plaintiffs “had made out a prima facie case
of disparate impact . . . rel[ying] solely on respondents’ statistics showing a
high percentage of [minority] workers in the cannery jobs and a low percentage
of such workers in the noncannery positions.” Id. at 650 (footnote omitted).
The Supreme Court reversed. It held that the Ninth Circuit’s ruling
“misapprehend[ed] [the Court’s] precedents and the purposes of Title VII.” Id.
As the Court explained, under the Ninth Circuit’s theory, “simply because
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[minorities] comprised 52% of the cannery workers at the cannery in question,
[plaintiffs] would be successful in establishing a prima facie case of racial
discrimination under Title VII.” Id. at 652 (citation omitted). The Court
further stated that the Ninth Circuit’s “theory, at the very least, would mean
that any employer who had a segment of his work force that was—for some
reason—racially imbalanced could be haled into court and forced to . . . defend[]
the ‘business necessity’ of the methods used to select the other members of his
work force.” Id. The Court noted that such a theory would leave employers
little choice but to adopt racial quotas, which was “far from the intent of Title
VII.” Id. (citation omitted).
The Court then turned to “the question of causation in a disparate-
impact case” and the “plaintiff’s burden in establishing a prima facie case.” Id.
at 656. The Court noted that, as stated in its prior cases, the first step in
establishing a prima facie case of disparate impact is that the plaintiff must
“identify[] the specific employment practice that is challenged.” Id. at 655
(quoting Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 994 (1988)).
Second, the plaintiff “must demonstrate that it is the application of a specific
or particular employment practice that has created the disparate impact under
attack.” Id. at 657. In proving such causation, “the plaintiff must offer
statistical evidence of a kind and degree sufficient to show that the practice in
question has caused the exclusion of applicants for jobs or promotions because
of their membership in a protected group.” Watson, 487 U.S. at 994. The
“statistical disparities must be sufficiently substantial that they raise such an
inference of causation.” Id. at 995.
As set forth above, Griggs and Wards Cove explained that disparate-
impact claims under Title VII involve challenges to facially neutral policies or
practices that, in operation, have discriminatory effects on minorities with
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respect to employment. The cases also provided the standards for establishing
a prima facie case of disparate impact. Specifically, a plaintiff must first
identify the policy or practice being challenged, and next prove through
statistical evidence that application of the policy or practice causes a
disproportionate adverse effect on minorities with respect to employment. As
detailed below, the ICP Court relied on these precedents in holding that the
FHA encompasses disparate-impact claims and in indicating the standards
that should apply to such claims.
B. Development of Disparate-Impact Claims under the FHA in
the Courts of Appeals.
Although the Supreme Court had not held disparate-impact claims
cognizable under the FHA prior to its 2015 decision in ICP, all of the Courts of
Appeals to have addressed the question—including this court—had concluded
that the FHA encompassed such claims. See ICP, 135 S. Ct. at 2519 (listing
appellate court decisions). The Courts of Appeals determined that the FHA
encompassed not only disparate-impact claims of the kind traditionally
recognized in employment discrimination cases, but also “segregative-effect”
claims. As stated above, ICP asserts both types of claims in its complaint
herein. Understanding the difference between these claims and the type of
statistical evidence used to support them is key to determining whether ICP
has alleged a plausible disparate-impact claim under the FHA in this case.
One of the most significant appellate court cases, described by the ICP
Court as “resid[ing] at the heartland of disparate-impact liability [under the
FHA],” ICP, 135 S. Ct. at 2522, is the Second Circuit’s decision in Huntington
Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d Cir. 1988). In that
case, the plaintiffs sued the Town of Huntington and members of its board to
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challenge a zoning ordinance that restricted private construction of multi-
family housing to a small urban renewal area that was 52% minority. Id. at
928. The plaintiffs sought to construct an integrated, multi-family subsidized
apartment complex in a part of the town that was virtually all White. Id.
When the town refused to rezone the area where plaintiffs wished to build the
property, the plaintiffs sued under the FHA to compel the town to amend its
ordinance and rezone the area to permit construction. Id.
In a matter of first impression, the Second Circuit held that disparate-
impact claims were cognizable under the FHA. The court stated: “[J]ust as the
Supreme Court held that Title VII is violated by a showing of discriminatory
effect, we hold that a [FHA] violation can be established without proof of
discriminatory intent.” Id. at 935 (citing Griggs, 401 U.S. at 429–36).
Furthermore, the court determined that the FHA allowed for two types of
discriminatory effect claims: (1) “adverse impact on a particular minority
group,” akin to the disparate-impact claims traditionally recognized in the
employment discrimination context, and (2) “harm to the community generally
by perpetuation of segregation,” also known as “segregative-effect” claims. Id.
at 937 (citation omitted). The court stated that “recognizing this second form
of effect advance[d] the principal purpose of [the FHA] to promote open,
integrated residential housing patterns.” Id. (citations omitted).
The plaintiffs in Huntington Branch asserted both types of claims under
the FHA. As to their traditional disparate-impact claim, the plaintiffs argued
that the town’s refusal to amend its restrictive zoning ordinance to permit
construction of low-cost housing on the desired site had a substantial adverse
impact on minorities with respect to the availability of housing. Id. at 938. In
support of their claim, the plaintiffs submitted the following statistical
information: (1) minorities constituted a far greater percentage of the current
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occupants of subsidized rental projects compared to their percentage in the
town’s population; (2) 60% of Section 8 voucher holders consisted of minorities;
(3) 61% of those on the waiting list for Section 8 vouchers consisted of
minorities; and (4) 7% of all Huntington families needed subsidized housing,
while 24% of Black families needed such housing. Id. Based on these statistics,
the court concluded that the town’s failure to amend its restrictive ordinance
and rezone the land to permit the construction of subsidized housing “had a
substantial adverse impact on minorities.” Id. (footnote omitted).
As to their segregative-effect claim, the plaintiffs asserted that allowing
for construction of subsidized housing, which had a goal of housing 25%
minorities, “would begin desegregating a neighborhood which [was at that
time] 98% [W]hite.” Id. at 937. Moreover, by refusing to permit construction
of the project outside the urban renewal area, which already had a high
concentration of minorities, the town “reinforced racial segregation in
housing.” Id. The evidence relating to the plaintiffs’ segregative-effect claim
included the following census-tract data: (1) 43% of the total Black population
lived in four census tracts in one neighborhood; (2) 27% of the total black
population lived in two census tracts; (3) outside of those two neighborhoods,
the town’s population was overwhelmingly White; and (4) of the forty-eight
census tracts in the town, thirty contained Black populations of less than 1%.
Id. at 929. Based on these statistics, the court determined the plaintiffs proved
that the town “significantly perpetuated segregation” by refusing to amend its
ordinance to permit construction of subsidized housing. Id. at 938. 2
2The Supreme Court, in a per curiam opinion, affirmed the Second Circuit’s decision.
Town of Huntington v. Huntington Branch, NAACP, 488 U.S. 15 (1988). However, the
Supreme Court did not reach the question whether the “the disparate-impact test for
evaluating the zoning ordinance under [the FHA]” was appropriate because the appellants
conceded the applicability of the test. Id. at 18. “Without endorsing the precise analysis of
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Thus, Huntington Branch established that the FHA encompasses two
types of discriminatory effect claims: (1) claims alleging a disparate impact on
minorities with respect to the availability of housing and (2) claims alleging
perpetuation of segregation. Huntington Branch also detailed the types of
statistical data that can be used to prove a prima facie case of traditional
disparate impact under the FHA and a prima facie case of segregative effect
under the FHA. Specifically, the data for a disparate-impact claim should
indicate that the group affected adversely by the challenged policy is
predominantly comprised of minorities, while the group unaffected is
predominantly White. The data for a segregative-effect claim, which may
include census-tract data, should indicate the existing locations of the
predominantly White and predominantly minority areas of the town or city
and how the policy or ordinance being challenged will continue the existing
segregation.
C. The Supreme Court’s Decision in ICP.
In ICP, the Supreme Court held that disparate-impact claims are
cognizable under the FHA. The Court determined that its prior precedents in
the employment discrimination arena “instruct[ed] that antidiscrimination
laws must be construed to encompass disparate-impact claims when their text
refers to the consequences of actions and not just to the mindset of actors, and
where that interpretation is consistent with statutory purpose.” ICP, 135
S. Ct. at 2518. The Court determined that the FHA contained “results-oriented
language counsel[ing] in favor of recognizing disparate-impact liability.” Id.
(citation omitted). It also concluded that such liability was “supported by
the Court of Appeals,” the Court was “satisfied on this record that disparate impact was
shown, and that the sole justification proffered to rebut the prima facie case was inadequate.”
Id.
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amendments to the FHA that Congress enacted in 1988,” which indicated that
“Congress [had] accepted and ratified the unanimous holdings of the Courts of
Appeals finding disparate-impact liability [under the FHA].” Id. at 2519.
The Court additionally determined that disparate-impact claims are
consistent with the FHA’s central purpose, which like Title VII and the Age
Discrimination in Employment Act, “was enacted to eradicate discriminatory
practices within a sector of our Nation’s economy.” Id. at 2521 (citations
omitted). The Court explained that “[t]hese unlawful practices include zoning
laws and other housing restrictions that function unfairly to exclude minorities
from certain neighborhoods without any sufficient justification.” Id. at 2521–
22. The Court further stated that “[s]uits targeting such practices reside at
the heartland of disparate-impact liability.” Id. at 2522 (citing, inter alia,
Huntington, 488 U.S. at 16–18).
Although the Court held that disparate-impact claims are cognizable
under the FHA, it noted that “disparate-impact liability has always been
properly limited.” Id. The Court explained, echoing the principles set forth in
Griggs and Wards Cove, that such liability is not “imposed based solely on a
showing of a statistical disparity” and that it “mandates the ‘removal of
artificial, arbitrary, and unnecessary barriers.’” Id. (quoting Griggs, 401 U.S.
at 431). In a nod to the appellate court decisions recognizing segregative-effect
claims, the Court noted that the FHA aims to ensure that the priorities of
housing authorities, private developers, and landlords “can be achieved
without arbitrarily creating discriminatory effects or perpetuating
segregation.” Id.
Furthermore, the Court emphasized that the plaintiff asserting a
disparate-impact claim under the FHA must be able, as part of the prima facie
case, to “point to a defendant’s policy or policies causing” the disparity alleged.
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Id. at 2523. Citing Wards Cove, the Court described this causality requirement
as “robust” and explained that such a requirement “protect[ed] defendants
from being held liable for racial disparities they did not create.” Id. (citing
Wards Cove, 490 U.S. at 653). The Court stated that such “safeguards at the
prima facie stage” were needed to prevent governmental or private entities
from believing numerical quotas were required, which could raise “serious
constitutional issues.” Id. (citations omitted).
Turning to the specific allegations of the complaint in that case, however,
the Court noted that ICP’s disparate-impact claim was based on a “novel theory
of liability.” Id. at 2522 (citing Stacey E. Seicshnaydre, Is Disparate Impact
Having Any Impact? An Appellate Analysis of Forty Years of Disparate Impact
Claims Under the Fair Housing Act, 63 AM. U. L. REV. 357, 360–63 (2013)).
Specifically, ICP alleged that the Texas Department of Housing and
Community Affairs (“Department”) “caused continued segregated housing
patterns by its disproportionate allocation of [low-income housing] tax credits.”
Id. at 2514. ICP contended that the Department “grant[ed] too many credits
for housing in predominantly [B]lack inner-city areas and too few in
predominantly [W]hite suburban neighborhoods.” Id.
In support of its assertions, ICP submitted statistical evidence showing
the location of low-income housing throughout the city of Dallas. 3 Id.
3 ICP submitted statistical evidence showing that from 1999 to 2008, the Department
approved tax credits for 49.7% of proposed non-elderly units in 0% to 9.9% White areas, but
only approved 37.4% of proposed non-elderly units in 90% to 100% White areas. In addition,
ICP analyzed data produced by defendants in discovery that indicated that 92.29% of low-
income housing tax credit units in Dallas were located in census tracts with less than 50%
White residents. Inclusive Cmtys. Project, Inc. v. Texas Dep’t of Hous. & Cmty. Affairs, 749
F. Supp. 2d 486, 499 (N.D. Tex. 2010).
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However, much like the plaintiffs in Wards Cove, ICP did not identify a specific
Department policy or practice causing the segregated housing patterns.
Foretelling the district court’s ultimate decision on remand, the Court noted
that ICP’s claim “on remand, may be seen simply as an attempt to second-guess
which of two reasonable approaches a housing authority should follow in the
sound exercise of its discretion in allocating tax credits for low-income
housing.” ICP, 135 S. Ct. at 2522.
On remand, the district court determined, as predicted by the Supreme
Court, that ICP had failed to identify a specific, facially neutral policy that
caused the disparity in the location of low-income housing. See Inclusive
Cmtys. Project, Inc. v. Tex. Dep’t of Hous. & Cmty. Affairs, No. 3:08-CV-0546-
D, 2016 WL 4494322, *6 (N.D. Tex. Aug. 26, 2016). Instead, ICP relied simply
on the “cumulative effects” of the Department’s decision-making process over
a multi-year period. Id. The district court held that ICP could not rely on this
generalized policy of discretion to prove disparate impact under the FHA and
determined that ICP, consequently, failed to prove a prima facie case of
disparate impact under the FHA. Id. at *7–8.
III.
Unlike its disparate-impact claim in ICP, in the instant matter, ICP
clearly challenges a policy—Defendants’ policy of not renting to voucher
holders—and asserts that this policy causes a disparate impact on Black
persons with respect to housing. Specifically, ICP contends that Defendants’
policy causes the exclusion of the predominantly Black voucher population in
the Dallas area from Defendants’ apartment complexes, while the
disproportionately White population without vouchers is not excluded by the
policy.
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ICP alleges that the voucher population in the Dallas area, the group
affected by Defendants’ policy, is over 80% Black and 10% or less White. The
non-voucher population in the Dallas area, the group unaffected by
Defendants’ policy, is alleged to be 19% Black and 53% White. Therefore, ICP
contends that when Defendants apply their “no vouchers” policy, the Black
renter population is disproportionately and adversely affected in violation of
the FHA. The statistical information alleged by ICP is similar to the evidence
offered by the plaintiffs in Huntington Branch, which evidence indicated, inter
alia, that 60% of the Section 8 voucher holders consisted of minorities. In this
matter, the percentage is alleged to be even higher—over 80% of the voucher
holders are Black.
Moreover, district court cases addressing similar challenges to landlords’
“no vouchers” policies with similar statistical evidence have determined that
such claims demonstrate a disproportionate impact on Black persons in
violation of the FHA. See, e.g., Nat’l Fair Hous. All. v. Travelers Indem. Co.,
261 F. Supp. 3d 20 (D.D.C. 2017) (holding that plaintiffs showed “robust
causation” under ICP in disparate-impact challenge to insurance company’s
policy of refusing to provide habitational insurance policies to landlords who
rent to Section 8 tenants, where voucher population was 92% Black and 81.5%
women); Bronson v. Crestwood Lake Section 1 Holding Corp., 724 F. Supp. 148,
154 (S.D.N.Y. 1989) (finding that disparate impact of landlord’s “no Section 8”
policy on minority persons in comparison to White applicants was “not
surprising,” given that 82.6% of Section 8 voucher holders in the City of
Yonkers were minority persons). 4
4 ICP has not alleged all of the data necessary to calculate the exact statistical
disparity, as was done in Bronson, resulting from the defendants’ “no vouchers” policy. See
724 F. Supp. at 154 (noting, based on affidavit of expert, that “the odds of being excluded
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Here, as ICP contends, the alleged causal connection between
Defendants’ policy and the resulting disparate impact on the Black renter
population is direct and robust. 5 Specifically, Defendants’ “no vouchers” policy
causes the total exclusion of voucher households from Defendants’ apartment
complexes. Taking ICP’s statistical information as true under Rule 12,
because the voucher households in the Dallas area are disproportionately
Black and the non-voucher households are disproportionately White, ICP’s
claim that application of Defendants’ “no vouchers” policy results in a
prohibited discriminatory effect under the FHA is plausible.
IV.
In determining that ICP failed to state a disparate-impact claim, the
district court did not distinguish ICP’s traditional disparate-impact claim from
its segregative-effect claim. Furthermore, the district court mixed up the
prima facie elements of the different claims and examined the alleged
statistical information under its distorted framework. For example, the
from [defendant’s apartment complex] on the basis of the Section 8 policy [was] over 25 times
greater for minority persons than for non-minorities”). However, the district court in Bronson
was deciding the merits of the plaintiffs’ motion for preliminary injunction after having
conducted a hearing. See 724 F. Supp. at 152. ICP’s complaint contains enough factual
allegations to make its disparate-impact claim plausible and to permit an inference that ICP
will ultimately be able to show the exact disparity resulting from the Defendants’ policy
through statistical analysis of additional data. See Twombly, 127 S. Ct. at 1965 (stating that
plausibility standard “calls for enough fact to raise a reasonable expectation that discovery
will reveal evidence” supporting the plaintiff’s claim).
5 Professor Robert G. Schwemm, author of the treatise “Housing Discrimination Law
and Litigation,” has even described the causal connection between application of a “no Section
8” policy and the resulting discriminatory effect on minorities as “obvious.” See Robert G.
Schwemm, Proving Disparate Impact in Fair Housing Cases After Inclusive Communities, 19
N.Y.U. J. LEGIS. & PUB. POL’Y 685, 695 (2016) (noting that “causation is obvious when a
landlord denies a unit to the plaintiff based on its policy of refusing to rent to tenants who,
say, use government vouchers”).
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district court imposed the burden on ICP to show that the challenged policy
caused the segregation existing in the census-tract data. However, as detailed
above, a segregative-effect claim does not require the plaintiff to prove that the
challenged policy caused the initial segregation, but that the policy will
perpetuate it. Moreover, the district court also imposed the burden on ICP to
show that Defendants’ “no vouchers” policy “diminished the amount of rental
opportunities for African American or Black prospective tenants previously
available before Defendants’ policy was implemented.” The prima facie
elements of a traditional disparate-impact claim under the FHA do not require
ICP to prove a “before-and-after” effect of the policy.
The majority, however, somehow affirms the district court through its
strained reading of what the Supreme Court meant by “robust causation” in
ICP. Tellingly, in its quest to find the meaning of ICP’s “robust causation”
requirement, the majority does not delve into the actual ICP decision, which
provides the answer. As discussed above, the Supreme Court’s discussion of
“robust causation” was prompted by ICP’s failure in that case to identify a
policy or practice causing the alleged disparate impact on minorities. See ICP,
135 S. Ct. at 2523. The Court’s discussion made clear that the plaintiff first
must identify an offending policy in order to establish a prima facie case in an
FHA disparate-impact claim.
If there were any doubt as to what the Supreme Court meant by “robust
causation,” its citation to Wards Cove clarified that the Supreme Court was
indicating that the standards it had previously set forth for disparate-impact
claims in the employment discrimination context should be applied equally to
the newly-recognized disparate-impact claims under the FHA. See id. In fact,
in Reyes v. Waples Mobile Home Park Ltd. Partnership, upon which the
majority relies, the Fourth Circuit similarly recognized that the Supreme
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Court in “Inclusive Communities cited to Wards Cove in explaining the robust
causality requirement.” 903 F.3d 415, 426 n.6 (4th Cir. 2018). The Supreme
Court made no indication that, by describing the causation needed for a
disparate-impact claim as “robust,” it was ushering in a new requirement for
disparate-impact claims under the FHA not required for disparate-impact
claims in the employment discrimination context.
The majority, instead, interprets “robust causation” to require the
plaintiff in a disparate-impact claim under the FHA to establish that the
challenged policy was previously unenforced or that the challenged policy
caused a “pre-existing condition.” There is no precedent requiring such
elements as part of the plaintiff’s prima facie case in either type of disparate-
impact claim under the FHA. The majority’s belief that “robust causation”
requires a previously unenforced policy is based on its admitted “narrower
construction” of the Fourth Circuit’s decision in Reyes, which decision nowhere
mentions such a requirement as part of the plaintiff’s prima facie case. 6 See
903 F.3d at 415–33. Moreover, the Reyes decision supports ICP’s traditional
disparate-impact claim here. The Fourth Circuit determined that the plaintiffs
“satisfied the robust causality requirement” by offering statistical evidence
that the challenged policy “was likely to cause Latino tenants at [defendant’s
property] to be disproportionately subject to eviction compared to non-Latinos
at [defendant’s property].” Id. at 429. In this matter, ICP has offered
statistical information making plausible that Defendants’ “no vouchers” policy
6 Furthermore, the majority does not explain why enforcement of a previously
unenforced policy is different from enforcement of a new policy in establishing the first
element of the plaintiff’s prima facie case, which is to identify a specific, facially neutral policy
that, when applied, causes a disproportionate adverse effect on minorities. See ICP, 135 S.
Ct. at 2523; Wards Cove, 490 U.S. at 655–57.
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excludes more Black renters from housing at Defendants’ properties than
White renters.
The majority’s application of a “pre-existing condition” requirement is
taken from the dissenting opinion in Reyes. The majority applies this
requirement to ICP’s segregative-effect claim. See ante at p. 23. In doing so,
like the district court, the majority fails to recognize that a segregative-effect
claim requires a plaintiff to show existing patterns of segregation and that the
challenged policy will perpetuate that segregation. Such a claim does not
require that the policy caused the initial segregation. See Huntington Branch,
844 F.2d at 938. The majority goes even further and applies the same flawed
reasoning to ICP’s traditional disparate-impact claim—the majority imposes
the burden on ICP to show that Defendants’ “blanket ‘no vouchers’ policy, or
any change therein, caused black persons to be the dominant group of voucher
holders in the Dallas area.” See ante at p. 23. Imposing the burden on ICP to
make such a showing is akin to requiring the plaintiffs in Griggs to show that
their employer’s policy caused Black persons not to have a high school
education. Such a requirement turns disparate-impact liability on its head
because it would compel the plaintiff to establish that the offending policy not
only had a disparate impact on a protected group, but that somehow the policy
also created the characteristics making the protected group susceptible to the
disparate impact.
Furthermore, the fact that the Section 8 program is a voluntary
government program does not foreclose a finding that Defendants’ “no
vouchers” policy is an “artificial, arbitrary, and unnecessary” barrier to
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housing under the FHA. 7 Contrary to the majority’s suggestion, the Eighth
Circuit’s decision in Ellis v. City of Minneapolis, 860 F.3d 1106 (8th Cir. 2017),
does not support dismissal of ICP’s disparate-impact claim on this basis. In
Ellis, the plaintiffs alleged that the City’s heightened enforcement of its
housing code at for-profit, low-income rental housing had a disparate impact
on the availability of housing for individuals protected by the FHA. 860 F.3d
at 1107. However, the plaintiffs “mount[ed] no serious challenge to the housing
code itself.” Id. at 1112. Additionally, the plaintiffs alleged that the City had
“adopted a policy to discourage rental housing and effected such a policy
through deliberate or negligent misapplication of the housing code.” Id. But,
the plaintiffs did “not plead[] sufficient facts to plausibly support the existence
of such a policy.” Id. at 1114. In contrast, in this matter, the existence of
Defendants’ “no vouchers” policy is undisputed—in fact, as described above,
the policy is advertised. Furthermore, ICP specifically alleges in its complaint
that Defendants’ policy is an “artificial, arbitrary, and unnecessary barrier” to
housing that does not achieve any legitimate interest. ICP contends that
although landlord trade associations and other landlords have asserted various
interests or concerns upon which their refusal to negotiate with or rent to
voucher holders is allegedly based, those interests or concerns do not require
the “no vouchers” policy. In sum, the inadequacies of the plaintiffs’ alleged
disparate-impact claim in Ellis are not present in this matter.
7 Moreover, it is arguable that the Supreme Court’s decision in ICP implicitly
overruled the appellate court cases mentioned by the majority that allowed for a
“voluntariness” defense to disparate-impact claims challenging “no vouchers” policies. See
Maia Hutt, This House Is Not Your Home: Litigating Landlord Rejections of Housing Choice
Vouchers Under the Fair Housing Act, 51 COLUM. J.L. & SOC. PROBS. 391, 416–17 (2018)
(noting that after ICP, “Knapp and Salute’s conclusion that the disparate impact burden-
shifting framework is selectively applicable and linked to the concept of ‘voluntariness’ is no
longer good law”).
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The Eleventh Circuit’s unpublished, per curiam opinion in Oviedo Town
Center II, L.L.L.P. v. City of Oviedo, Florida ___ F. App’x ___, No. 17-14254,
2018 WL 6822693 (11th Cir. Dec. 28, 2018) (Oviedo), similarly involved
inadequacies in an alleged disparate-impact claim. However, the legal
principles discussed in Oviedo actually support ICP’s disparate-impact claim.
In that case, several real estate developers alleged that rate increases in water
and sewage services adopted by the City of Oviedo caused a disparate impact
on minorities, in violation of the FHA. Id. at *1. The district court dismissed
the claim on summary judgment; the Eleventh Circuit affirmed, determining
that the appellants “failed to establish a prima facie case of disparate impact
under the [FHA].” Id. The court noted the Supreme Court’s decision in ICP,
and stated that even before the ICP decision, it “had arrived at similar
conclusions . . . about the need for a relevant statistical showing in order to
support a disparate-impact claim under the FHA.” Id. at *4 (citing Schwarz v.
City of Treasure Island, 544 F.3d 1201 (11th Cir. 2008)).
Specifically, the Eleventh Circuit had previously held in Schwarz that
“in order to show disparate impact, the plaintiff must provide evidence
comparing members of the protected class affected by the [policy] with non-
members affected by the [policy].” Id. (citing Schwarz, 544 F.3d at 1217). The
court explained: “If the percentage of members of the protected class . . .
affected was higher than the percentage of nonmembers impacted, this
disproportionality could form the basis for a prima facie case of disparate
impact.” Id. However, in Schwarz, the plaintiff presented “no comparative
data at all,” and consequently the plaintiff failed to establish a prima facie case.
Id. (citing Schwarz, 544 F.3d at 1217-18). The court determined that the
plaintiffs’ claim in Oviedo was similarly deficient. The only statistical data
submitted by the plaintiffs showed that more racial minorities lived in the
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plaintiffs’ low-income housing complex than lived in the rest of the City of
Oviedo. Id. at *5. The court determined that such information “[did] not
establish a disparate impact, let alone any causal connection between the
[policy] and the disparate impact.” Id. The court further stated that relying
on such inadequate statistical data “to make a prima facie showing” was
“precisely the circumstances the [Supreme] Court sought to avoid in Inclusive
Communities.” 8 Id.
In this case, the statistical data submitted by ICP would satisfy the
standards set forth by the Eleventh Circuit in Oviedo and Schwarz.
Specifically, ICP included comparative data regarding the makeup of voucher
households in the Dallas area (the group which is excluded by Defendants’ “no
vouchers” policy) versus non-voucher households (the group unaffected by the
policy) in the Dallas area. As explained above, this statistical information
makes plausible that Defendants’ “no vouchers” policy operates to exclude
more Black renters from housing at Defendants’ properties than White renters.
Under the Eleventh Circuit’s jurisprudence, this disproportionality forms the
basis for a prima facie case of disparate impact. Thus, in actuality, Oviedo
shows that the majority’s analysis of ICP’s claim is misguided.
Finally, the majority submits that the relief ICP seeks—elimination of
Defendants’ “no vouchers” policy—would impose a “burdensome and extreme
mandate” on Defendants that only Congress could grant through express
legislation. However, Congress has had the opportunity to exempt landlords
8 The Eleventh Circuit’s jurisprudence would require dismissal of ICP’s complaint if
the only statistical data ICP submitted was that found on pages five and six of the majority
opinion, which information shows that Defendants’ apartment complexes are occupied by
zero to 14% Black renters. ICP, however, submitted much more statistical information
specifically addressing how Defendants’ “no vouchers” policy operates to exclude more Black
renters than White renters from housing at Defendants’ properties.
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from disparate-impact liability under the FHA for discriminating against
potential tenants based on their status as voucher holders, but Congress has
not done so. As described in ICP, the FHA contains some exemptions from
disparate-impact liability. 135 S. Ct. at 2520–21. For instance, the FHA does
not prohibit discrimination against a person “because such person has been
convicted by any court of competent jurisdiction of the illegal manufacture or
distribution of a controlled substance.” See 42 U.S.C. § 3607(b)(4). And a
landlord may impose reasonable restrictions regarding the maximum number
of occupants permitted to occupy a dwelling. See id. § 3607(b)(1). A landlord’s
refusal to negotiate or rent to a tenant based on his or her status as a voucher
holder, however, is not listed as an exemption. Therefore, under ICP, if such
a policy results in a disparate impact on a protected group, then the policy may
be subject to challenge under the FHA. 9 The majority cannot carve out this
exemption on Congress’ behalf.
* * *
Despite ICP’s clear allegations that, based on statistical evidence, Black
persons are disproportionately and adversely impacted by Defendants’ “no
vouchers” policy, the majority says the complaint fails to state a claim. This
conclusion is based on the majority’s view of the pleading and proof necessary
to establish “robust causation” between Defendants’ policy and the effect of
that policy.
To sum up, the majority offers two primary reasons for its position. First,
based on the dissent in the Fourth Circuit’s Reyes opinion, the majority
concludes that robust causation is not alleged because ICP failed to state that
9This does not mean that ICP is automatically entitled to the relief it seeks. What it
does mean, however, is that ICP’s complaint cannot be dismissed under 12(b)(6) solely
because it challenges a “no vouchers” policy.
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Defendants were responsible for the fact that Black renters in Dallas hold a
disproportionate number of vouchers for low-income housing. Since obtaining
a voucher requires a showing of limited financial resources, presumably the
majority would require ICP to show why a disproportionate number of Black
renters in Dallas had more limited financial resources than White renters and
that defendants were responsible for this fact. The majority states: “Neither
the aforementioned ‘city-level data’ nor the ‘census-level data’ cited by ICP
supports an inference that the implementation of Defendants-Appellees’
blanket ‘no vouchers’ policy, or any change therein, caused black persons to be
the dominant group of voucher holders in the Dallas metro area (or any of the
other census areas discussed by ICP).”
To require such proof for a plaintiff to establish causation would render
disparate-impact liability under the FHA a dead letter. This was certainly not
the model of a disparate-impact case adopted by the Supreme Court in Griggs
under Title VII. The Court in that case held that the employer’s policy of
requiring an applicant for employment to have a high school education and to
pass a standardized general intelligence test had an adverse impact on Black
applicants. The Court did not require proof that the employer was responsible
for the disproportionately lower educational levels and test scores for Blacks
as compared to Whites.
Second, the majority contends that ICP is required to show that
Defendants’ “no vouchers” policy was “previously unenforced” or “ newly
enforced.” In doing so, the majority misconstrues the carefully reasoned Reyes
opinion. The Fourth Circuit in Reyes held that the plaintiffs stated a claim for
disparate impact under the FHA when they alleged that the landlord’s policy
requiring all adult occupants to provide documentation evidencing legal status
in the United States in order to renew their leases had an adverse impact on
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Latinos. This policy was challenged after the landlord began enforcing it not
only against the leaseholder, but also against all occupants over the age of
eighteen. The majority contends that the fact that this was a “change” in
enforcement of a policy distinguishes it from today’s case, where the challenged
policy had always been enforced. No explanation is given why the
consequences of a changed discriminatory policy should be viewed differently
from a discriminatory policy implemented from the outset. Enforcement of a
policy is always required in a disparate-impact claim; if a policy is not enforced,
it has no impact.
For these reasons, I respectfully dissent.
58