The settlement and Supreme Court’s dismissal of Mount Holly v. Mt. Holly Gardens Citizens in Action, Inc. has increased the potential significance of the lawsuit filed in June 2013 in federal district court in Washington, D.C. challenging HUD’s final rule adopted in February 2013 that formalized HUD’s use of disparate impact liability under the FHA.
The complaint in the D.C. lawsuit, which was filed by two insurance industry trade groups whose members sell homeowners insurance, alleges that, based on the FHA’s plain language, the FHA only prohibits intentional discrimination. However, it also alleges that the HUD rule is invalid as applied to homeowners insurance companies because it conflicts with the federal McCarran-Ferguson Act. That law generally reserves to the states the regulation of the insurance business and provides that federal law cannot be construed to “invalidate, impair or supersede” state insurance laws unless the federal law specifically relates to insurance.
The lawsuit had been stayed pending the outcome of Mt. Holly. On December 20, 2013, the court granted the parties’ joint motion to lift the stay and, on the same day, the plaintiffs filed a motion for summary judgment. As we have previously observed, if the district court were to grant summary judgment on the grounds that based on McCarran-Ferguson the HUD rule is invalid as applied to the plaintiffs, the ruling would be of no consequence to lenders since it would not result in a judicial determination of whether disparate impact claims are permissible under the FHA.
We find it encouraging, however, that that the McCarran-Ferguson grounds is the final argument presented in the plaintiffs’ brief. Plaintiffs’ first three arguments are that the FHA’s text unambiguously prohibits only intentional discrimination, the FHA’s history confirms that it does not permit disparate impact claims, and construing the FHA to permit disparate impact claims would raise constitutional equal protection problems.
On February 3, HUD filed a motion to dismiss, or in the alternative, for summary judgment. HUD argues that the plaintiffs’ claim is not properly before the court because the plaintiffs have failed to demonstrate that their members suffer any concrete and imminent injury as a result of the HUD rule. HUD also argues that the plaintiffs’ claim fails on the merits because the FHA does permit disparate impact claims and HUD’s interpretation is entitled to Chevron deference.
So far, only one amicus brief has been filed in the case. That brief was filed on December 30 by Judicial Watch, Inc. and the Allied Educational Foundation in support of the plaintiffs’ summary judgment motion. The brief urges the court to reject HUD’s interpretation that the FHA permits disparate impact claims.