WASHINGTON (CN) - Housing regulators overstepped their authority by prosecuting cases in which facially neutral practices had discriminatory effects, a federal judge ruled.
The Monday decision by U.S. District Judge Richard Leon comes in a complaint that the American Insurance Association and the National Association of Mutual Insurance Companies brought against the U.S. Department of Housing and Urban Development and Secretary Julian Castro last year under the Administrative Procedure Act.
They claimed that the Fair Housing Act provides protection only for intentional discrimination, but that HUD prosecutions widened the circumstances under which homeowner's insurance companies could face housing discrimination charges.
"After due consideration of the parties' pleadings, the arguments of counsel, the relevant law, and the entire record in this case, the court agrees with plaintiffs that the FHA prohibits disparate treatment only, and that the defendants, therefore, exceeded their authority under the APA," Leon wrote.
Picking apart the government's defense in his 32-page ruling, Leon concluded that Congress intended for the government to focus on intentional-discrimination cases.
"Defendants contend that previous holdings of other federal circuit courts that recognized disparate-impact liability under the FHA, preclude this court from finding that the FHA unambiguously prohibits disparate treatment only," Leon wrote. "Please! The Supreme Court itself has made clear that a statute is not ambiguous simply because there is a lack of judicial consensus as to its proper meaning ... and 'judges cannot cause a clear text to become ambiguous by ignoring it.'"
Indeed, HUD enacted the policy as a final rule in February 2013 despite public comment against the rule from insurance companies and others, the court found.
"The Disparate-Impact Rule employs a burden-shifting framework for assessing disparate-impact liability under the FHA," Leon wrote. "Initially, 'the charging party ... has the burden of proving that a challenged practice caused or predictably will cause a discriminatory effect.'"
The rule expressly applies to companies providing homeowners insurance, putting facially neutral practices that could cause discrimination as risk of violation.
Judge Leon vacated the rule, returning FHA housing-discrimination cases back to intentional acts.
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