HUD and the Disparate Impact Rule

Civil Rights Practice Group and Financial Services & E-Commerce Practice Group Teleforum

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On June 25, 2021, President Biden’s newly appointed Housing Secretary Marcia Fudge proposed to rescind a Secretary Carson-era disparate impact rule designed to implement the Fair Housing Act.  In its place, HUD would reinstate the 2013 Discriminatory Effect Standard because the 2013 rule "better states Fair Housing Act jurisprudence and is more consistent with the Fair Housing Act’s remedial purposes."  By the time notice and comment ended on August 24, 2021, over ten thousand public comments had been submitted.  

Critics of Secretary Fudge’s proposed rule, including Ranking Member Senator Pat Toomey, argue that the change not only flouts the Supreme Court’s decision in Texas Department of Housing and Community Affairs v. Inclusive Communities but also ultimately hurt consumers.  Proponents argue that the change will move the housing market towards greater equity. Our panel of experts with a diversity of views discussed the pros and cons in a teleforum on October 11, 2021.

Featuring:

  • Paul Compton, Founding Partner, Compton Jones Dresher
  • Moderator: Devon Westhill, President and General Counsel, Center for Equal Opportunity

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As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.

Event Transcript

[Music]

 

Dean Reuter:  Welcome to Teleforum, a podcast of The Federalist Society's Practice Groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.

 

 

Evelyn Hildebrand:  Welcome to The Federalist Society’s virtual event. This afternoon, October 11, we discuss “HUD and the Disparate Impact Rule.” My name is Evelyn Hildebrand, and I’m an Associate Director of Practice Groups at The Federalist Society. As always, please note that all expressions of opinion are those of the experts on today’s call.

 

      Today, we are fortunate to have Mr. Devon Westhill, who will moderate conversation this afternoon. We were hoping to have two speakers, but Mr. Morgan Williams has been unfortunately unable to join. Mr. Westhill will introduce our speaker, and I will introduce him now briefly.

 

      Devon Westhill is the President and General Counsel of the Center for Equal Opportunity. Immediately prior to his selection as President and General Counsel of CEO, Westhill served as the top civil rights official at the United States Department of Agriculture. He is also a member of our Civil Rights Practice Group Executive Committee, which is sponsoring today’s event.

 

      For our audience, if you have a question, please enter it into the Q&A tab at the bottom of your screen. You can enter questions at any time, and our presenter will take those questions toward the end of the program as time permits. But again, you can enter those questions at any time in the  Q&A tab at the bottom of your screen.

 

      With that, thank you for being with us today. Devon, the floor is yours.

     

Devon Westhill:  Thank you very much, Evelyn, and thanks to the audience for being here. I think this is an important topic, one that hopefully I and the audience will learn a lot about. As Evelyn said, I’m sorry to say one of our presenters, Morgan Williams, who is General Counsel for the National Fair Housing Alliance, couldn’t join us, or hasn’t been able to join us yet. If he does join us, then we’ll try to bring him into the conversation. But instead, this is going to be a little bit of a dialogue, I think, between Paul and me.

 

      Paul may have some introductory remarks that he’s prepared that he’d like to launch into, but other than that, we will go back and forth. I have a set of questions I’m already interested in having Paul -- hearing how Paul responds to. But this is going to be especially important to the audience as well. It’s a good opportunity to engage. There’ll be lots of time for that. But if we don’t get questions, then you’ll get some of your time back, and we’ll release Paul so that he can get back to client matters.

 

      I thank The Federalist Society for holding this. I want to thank Paul for being here, and it’s a real privilege for me to have an opportunity to talk with Paul about this on a Federalist Society program.

 

      What are we talking about? In June, President Biden’s Department of Housing and Urban Development, HUD, proposed to rescind a Trump administration disparate impact rule designed to implement the Fair Housing Act. Now, disparate impact being the concept that a policy that leads to, say, racial imbalances are presumptively illegal, even though the policy or practice is nondiscriminatory itself, a sort of unintentional discrimination.

 

      In place of that rule, HUD wants to reinstate the 2013 Discriminatory Effect Standard because the 2013 rule “better states Fair Housing Act jurisprudence and is more consistent with the Fair Housing Act’s remedial purposes.” I think, legally speaking, the 2013 rule has remained in effect but the way it -- the burden or the concern for disparate impact liability was lessened to a degree under the Trump administration and likely is going to change the way people interact with the new rule.

 

      So let me introduce Paul. Paul, please just launch into any remarks that you’ve had prepared, and then we’ll try to just have a dialogue and tease out some of the important aspects of this movement by HUD.

 

      Paul Compton is a founding partner of Compton Jones Dresher, a law practice based in Birmingham, Alabama, that focuses on transactional and regulatory matters for clients in the real estate, financial services, and community bank industries. Paul’s practice especially involves affordable housing and tax credit supported community development projects. He is currently a member of the Housing Advisory Council of the Bipartisan Policy Center.

 

      From 2018 to 2020, Paul served as General Counsel of the United States Department of Housing and Urban Development in Washington, D.C. In that capacity, he also served on the Federal Housing Administration Mortgagee Review Board and Mortgage Risk Review Council.

 

      Before Paul’s service at HUD, he was a partner and member of the managing board of Bradley Arant Boult Cummings LLP in its Birmingham Office. Paul is a graduate of the University of Virginia School of Law and the University of Alabama. He attended the London School of Economics and Political Science and is a Truman Scholar.

 

      With that being teed up and introducing Paul, let me turn now to you, Paul, if you have any intro remarks you’d like to make.

 

Paul Compton:  Yeah. Well, Devon, I guess perhaps what would be most helpful to our audience is to recount a little bit of the history as to how we got to where we are. And I’ll try to do my best to summarize the 2013 rule, which I had -- Morgan and I talked about it. He was initially going to talk about that, so, frankly, I didn’t focus a lot of my efforts on doing that because Morgan could ably do that.

 

      But let’s go back, take a walk back through memory lane for disparate impact. What we’re talking about here is Title VIII of the Civil Rights Act of 1964. It was adopted a few months after Title VII, which is essentially equal employment opportunity. While the statutes are similar, they’re not exactly the same. In Griggs, a decision in the late 1960s, the Supreme Court held that there was a disparate impact cause of action under Title VII, but until Inclusive Communities in 2015, the Supreme Court had never ruled that there was a disparate impact cause of action under Title VIII of the Fair Housing Act. And so that’s an important backdrop.

 

      And one of the things that you’ll hear me keep coming back to is we really have to take Inclusive Communities as the bedrock of what you try to decide in terms of giving guidance to all the constituencies about what disparate impact means in fair housing. And there is a lot of tendency to analogize to Title VII, and some of that is certainly valid, but I think from my perspective, that’s not the whole story.

 

      So let’s go back again. We have Griggs under Title VII, but various courts held in various contexts that—this is lower courts—that there was disparate impact under Title VIII as well. However, the executive branch had never taken a written position on this. The Reagan administration, at least in court briefs, said there is no disparate impact under Title VIII. And indeed, the language of the two statutes is different enough that there was something of a case to be made that there did not exist, under Title VIII, disparate impact.

 

      So we go forward to the Clinton administration. In 1994, it set up an interagency task force on fair lending, and as part of that, announced a policy position that said there is disparate impact under the Fair Housing Act.

 

      And so that’s where things really rested until we go forward into 2011, at which time there was a case called Magner v. Gallagher. And Magner was out of St. Paul, Minnesota. And as Justice Alito famously said, it was a case about whether landlords had to kill rats. It was a local ordinance that imposed what were perceived to be stringent standards for quality on landlords.

 

      A group of landlords filed suit in Magner saying that these standards caused them to significantly increase rents, and increasing rents had a disparate impact on persons in protected classes, principally African Americans, under the Fair Housing Act, and therefore, the city ordinance requiring, among other things, rats to be killed, had disparate impact. In this case, the Eighth Circuit upheld that disparate impact cause of action, and the case wound its way to the United States Supreme Court.

 

      Well, the Obama administration and HUD were very afraid that this was not a good case for a first impression of disparate impact. But to bolster the case, they proposed what became the 2013 HUD disparate impact rule literally just weeks after the Magner case received cert. But I think it’s crucial -- and one of the things that at least I learned in Washington is don’t pay too much attention to what they say; pay a lot of attention to what they do.

 

      And in this case, everyone is saying, “Yeah, yeah, yeah, there’s disparate impact. It’s always been around. It’s here, it’s here.” What they did, though, was the Department of Justice, under the Assistant Attorney General for Civil Rights, Tom Perez, who is now head of the DNC, or at least recently was head of the DNC, struck a deal with the City of St. Paul, which was the appellant had sought cert, in the Magner case and said, “Well, we’ve got this other case where you may be liable for several hundred million dollars. It’s a qui tam case.”

 

      Don’t really remember what it was all about, but the Department of Justice said, “You drop your Supreme Court appeal in the disparate impact matter, and we’ll make this qui tam go away.” And that’s, in fact, exactly what happened. And so the Magner case was mooted. But the HUD regulation that it spurred was on its own path.

 

      And lo and behold, just two years later, another case concerning disparate impact under Title VIII gets cert called Mount Holly v. Mt. Holly Gardens, or something like that. It’s a township in New Jersey. And what the township had done is there was what it at least said was a blighted neighborhood in a portion of the township, and they wanted to engage in revitalization, going to exercise eminent domain, build new houses.

 

      And at least some members of the local community group said, “We don’t like this.” It was, again, a disproportionately majority minority community, and they filed a lawsuit, among other things, saying this is disparate impact. Once again, goes up. Third Circuit says, “Yes, this is disparate impact.” And so it finds its way to the Supreme Court.

 

      Now, as you might expect, what Mr. Perez had done in the prior administration had been somewhat controversial, been the subject of congressional hearings and other things. However, at the same time, the HUD rule had percolated along and actually got finalized in response to the Mount Holly case. And the Department of Justice, again under the Obama administration, took the position that the HUD rule was dispositive and answered everything that was needed in Mount Holly.

 

      But again, watch what they’re doing, not what they’re saying. That case got dismissed too, this time not through the Department of Justice, but in fact -- I wish Morgan was here. I wouldn’t pick on him behind his back. But the National Fair Housing Alliance and George Soros’s Open Societies Foundation helped, financially and otherwise, reach a settlement. And once again, that disparate impact case was mooted. But by this time, the 2013 rule was, in fact, in place.

 

      Then we go forward to 2015 and Inclusive Communities. And finally, a case sticks, goes to judgement. It was a 5-4 decision, vigorous dissents by Justice Alito and Justice Thomas. Justice Kennedy wrote for the majority. And in it, while he noted the existence of the HUD regulation, the opinion really didn’t either adopt it or say this is not it. In fact, there are certain elements that you could say are consistent, but there certainly was a lot in Inclusive Communities that isn’t present in the 2103 rule.

 

      That’s where we kind of landed. The HUD, under Secretary Carson, we believed that it was necessary to rework the 2013 rule to be consistent with Inclusive Communities, to add safeguards—those were Justice Kennedy’s words—and also to limit the application of disparate impact to the heartland of discrimination or antidiscrimination treatment.

 

      And so we went about that in what we thought was a pretty methodical way. We, in 2018, issued an advanced notice of proposed rulemaking and sought comment broadly. The substantial majority said that, indeed, the 2013 rule did not follow as you would expect for a case that came two years later, that didn’t adopt the rule, that they really weren’t consistent.

 

      To fast-forward, in 2019, HUD proposed a new disparate impact rule that, at least was our intention and my belief, followed very closely Inclusive Communities, fleshed out some concepts in it. And then that went forward and was to be finalized in the fall of 2020.

 

      Just a few days before the rule was to go into effect, a district court in Massachusetts enjoined nationally the application of the rule. And not to be too pejorative, but the court’s opinion was, well, it really liked the 2013 rule better. It didn’t really go to the elements of the Administrative Procedures Act, didn’t suggest that the rules hadn’t been followed, just said don’t really like the rule. And there was a national injunction.

 

      As some of you may recall, six weeks or so later, there happened to be an election. And by the time the appeals were filed, a new administration was in office and dismissed the appeal of the injunction against HUD’s 2020 rule. And so I guess where that leaves us is that there is still a case with a preliminary injunction but no political appetite to do anything about it.

 

      And so in response to that, if we go forward, on the first day in office, President Biden issued executive orders, among other things, seeking equity in various program areas. And that was taken as direction to HUD to reinstate a broader view of disparate impact. And in the summer of 2021, HUD proposed such a rule.

 

      And so that’s where we stand today, and that rule is verbatim simply readopting the 2013 rule, which I guess in some respects, as Devon alluded to, never exactly went away since the court had enjoined the 2020 rule. So when we refer to the 2013 rule, we’re referring to the rule that was the rule in 2013 and is now proposed to be the rule once again in a more formal way, which would undo the two years of rulemaking that went forward in the Trump administration.

 

      Devon, with that, I’ve talked way too long. I told you, I’ve been in federal service. I can talk a long time and say nothing.

 

Devon Westhill:  On the one hand, you’ve been in federal service; on the other, you’re a lawyer. I get it. We like to hear ourselves talk, Paul. I’m going to try not to talk too much, but I want to pick up on something that you said. I think that was a really important primer for discussion.

 

      You mentioned that one of the goals -- there are basically two I thought I heard you say. One of the goals of writing that 2020 -- what ended up being the 2020 rule was that you wanted to limit disparate impact in the 2020 rule. Why would you want to do that?

 

      Proponents of the disparate impact rule or disparate impact in general say, well, look, it drives business innovation, fuels healthy regional markets, critical to ensuring that the Fair Housing Act remains a tool to promote an open and equitable housing market. It can create restraints on problems that can be caused by innovative technological developments like AI machine learning. Why would you want to limit the disparate impact rule? Why was that a goal?

 

Paul Compton:  Well, at the outset, Devon, the point wasn’t to limit the disparate impact rule. The point was to have a rule and guidance that whether you are a mortgage borrower, whether you are a tenant, whether you are a landlord, or anyone else involved in the broad swath of industries that the Fair Housing Act covers is so that people would know what the rules are.

 

      I do find it ironic. I have heard the statement that the new rule is there to encourage innovation. It reminds me a little bit of, yeah, we’re from the government, we’re here to help. Not sure how many times we have seen government policies that increase uncertainty and liability be called drivers of innovation. I think it will certainly be innovative for trial lawyers. So let me leave that part there.

 

      But our purpose was not to limit disparate impact. In appropriate instances under the Court’s guidance, that’s the law of the land. It’s to be applied. I think it’s very interesting, at least as far as I’m aware and through my tenure, HUD had never brought a civil rights action under the Fair Housing Act that was premised solely on disparate impact. Now, disparate impact was frequently tied to disparate treatment, but the department itself, to my knowledge, had not brought a solo case that was only based on disparate impact.

 

      I think the other side of this is when we looked at cases and we looked at research on cases, disparate impact cases that had actually gone to judgement across the United States, only about 20 percent of those were successful. And as a lawyer, you would say people are willing to take things all the way. You really should find something that’s closer to 50/50. Eighty percent of the cases were losing. And one of the things that we said to ourselves is plaintiffs need better guidance on what’s going to be successful because plaintiffs are wasting a lot of time and money bringing cases that aren’t successful. We really wanted to have rules where it was more of a toss-up. If you’ve got good rules, we should see more equitable results in the case.

 

Devon Westhill:  That’s kind of interesting to me, that plaintiffs know what the rules are, that you’re saving them money and time, resources, etc., by not bringing cases that are going to be unsuccessful. On the other side of this, the lenders and -- from what I understand, and I could be wrong about this, to what extent and why are major lenders supporting the 2013 disparate impact rule, the new rule?

 

Paul Compton:  Well, I guess to quote a famous patriot from the Revolution, is that they would prefer to pay tribute rather than protect their own interest. At least, paying tribute is what they view as their own interest. To hearken back to what they say and what they do, I can assure you at least in every case that I’ve seen where a major institution’s been sued for disparate impact, they vigorously defend themselves.

 

      The case in point is Bank of America in the -- I believe it’s the Miami or Miami Gardens decision, which was its own type of disparate impact case, although really focused more on proximate cause, which, by the way, the 2013 rule says absolutely nothing about proximate cause, again, because the jurisprudence that led to that antedated it by a number of years. So, yeah, they say that. But, Devon, if I were to be a cynical person, I would say, well, just none of them want to have a target painted on them as the first defendant in a new disparate impact case.

 

Devon Westhill:  Cynical or just realistic, Paul. Could you go into a little bit of detail about what I understand to be the five-prong test of the 2020 rule? The 2020 rule is basically replacing the three-prong test of the 2013 rule with a five-prong test, right?

 

Paul Compton:  Well, I think that there was some talk that it’s a five-prong test, and I don’t really think that that is the best way of describing it. But before we leave what another institution -- major institutions have done, one of the things that I learned in my time at the HUD is HUD is fundamentally its own very large financial institution. HUD, through the FHA, makes more loans to persons in protected classes than any other lender in America.

 

      And one of the things that I found very ironic is that many of the major institutions who were at least vocally supporting a different view of disparate impact were exactly the same institutions that were refusing to participate in in FHA lending because they said there was too much liability. Again, watch what they do, not what they say. The largest program providing mortgage financing to African Americans and others in protected classes in America, many of those large institutions did not participate in because they said there was too much liability.

 

Devon Westhill:  Gotcha.

 

Paul Compton:  To go to what the 2020 rule was trying to do is that we took really seriously the fact that not once, not twice, but three times, Justice Kennedy, writing for the majority, said that for a business or governmental practice or policy to be subject to a claim for disparate impact, it needed to be artificial, arbitrary, or unnecessary. And we really took that as the touchstone, and one that could, as a qualitative matter, be something that courts and juries could understand, which is, said another way, is what a business is doing that is excluding persons in protected classes, is it really a pretext, or otherwise, is it just stupid?

 

      To take an example, in New Orleans, there was a requirement at one time, you could only live in a neighborhood if you were related by blood to other people who lived there. That’s just kind of stupid. And that would be exactly the sort of thing that I think would be subject to being struck down under the 2020 rule.

 

      And so that’s where we really focused is at that threshold level of asking is it artificial, arbitrary, and unnecessary, and second, placing the burden of demonstrating that on the plaintiff, as it ordinarily is in American jurisprudence, rather than under the 2013 rule, essentially, the defendant is required to prove the negative. That is, there’s nothing else I could have done that would have achieved my ends without causing the disparate statistical information.

 

      And in that respect, the 2013 rule, as compared to the 2020 rule, does not take into effect that that other thing you might do might be much more expensive or much more cumbersome to carry out than what the original policy was. Justice Kennedy went out of his way to talk about the importance of a vibrant and dynamic free enterprise system where essentially courts aren’t second-guessing decisions.

 

      And I think that the real world impact of what disparate impact can do is really look at Mt. Holly Gardens. For ten years, a blight removal project was stuck in the courts because no one knew exactly what the rules are.

 

Devon Westhill:  Well, Paul, you and I have been talking now for about half an hour. We could be putting our audience to sleep. They could be excited about asking us some questions and getting answers to things that they are actually really interested in, so I’m just going to make a call out to the audience to say get your questions in. We’ll take them in the order in which we receive them.

 

      But before we get to any audience questions, if we have them, I wanted to ask another question of you, Paul, and that is --

 

Paul Compton:  -- Devon, when am I going to get to ask you questions?

 

Devon Westhill:  I’m ready.

 

[Laughter]

 

Devon Westhill:  Well, let me ask about one of the fundamental goals of the disparate impact theory in housing, avoiding the perpetuation of segregation. Do efforts to avoid perpetuation of segregation mean that new HUD supported housing should only be permitted in high income areas and gentrification of low income areas should be encouraged? If not, why not?

 

Paul Compton:  Well, I think that that’s -- in government, we should always be sensitive to unintended consequences, or perhaps they are intended. But in that respect, if you look at, frankly, the Inclusive Communities, what the cause of action underlying that was that was a lawsuit by a community group against the Texas Department of Housing and Community Affairs that said it wasn’t putting enough low income housing tax credit apartments in high income areas. That was what the suit was about, and it alleged that if you looked at the statistics, that more LIHTC apartments were put in lower income communities than higher income communities.

 

      And so I think that there’s a possibility of a lot of debate about the wisdom of those things, whether you put them in high income communities or low income communities. But what we see carrying through in other policies such as affirmatively furthering fair housing and HUD’s site and neighborhood standards, which also have this policy goal of putting affordable housing in high income neighborhoods, which I personally believe is a great thing. I think that every community should have the ability to have affordable housing there, and there shouldn’t be arbitrary, artificial, or unnecessary impediments which often come about through zoning laws, the way that building codes are enforced to do that.

 

      But the way that this is currently being administered is what it effectively means is that you can’t put affordable housing in lower income communities. Here, I’ve lived in, except for a few years in Washington, have lived in Birmingham, Alabama, all of my life. Birmingham is divided into a series of neighborhoods, and Birmingham is a majority minority city. It’s had an African American mayor since 1979.

 

      And what we find is that only five percent of the neighborhoods in the City of Birmingham are actually eligible to receive HUD assistance for housing because they’re deemed not to be high opportunity neighborhoods. That’s just wrong to me. That is old-fashioned redlining. We’re once again doing the same thing that happened in 1938. And it was wrong then, and it’s wrong now. Except now, we just have a story about how why that’s a good thing. I don’t think it is.

 

      I think that we need to make affordable housing accessible across the board, and I think that the way that disparate impact and the policies that have their intellectual underpinnings in it, at least as currently described, whether it is Inclusive Communities, or you can go back, that’s the same theory that was in the Mount Holly case. And in some ways, it’s the reverse of Magner. That’s just bad policy, bad for America, and inconsistent with what our values should be.

 

Devon Westhill:  Yeah, I think that goes to the heart of why so many people really do oppose disparate impact theory itself.

 

      Let me turn to a couple of questions I see here in the queue. Not sure when this first question came in because I think we might have gone over this, maybe not clearly enough. I think it’s important to say the names of folks who are asking questions as well. This is Clay Halvorsen. “Please explain what each version of the disparate impact rule says.” What’s the difference, basically, between the two proposed rules? What are the main differences between the two proposed rules?

 

Paul Compton:  Yeah. In that, I would say that a couple of those I have touched on already is that first, we really took seriously Justice Kennedy’s admonition about focusing on policies that are artificial, arbitrary, and unnecessary, and so we really set that out.

 

      Second, the Court encouraged there to be prompt resolution of cases that were not meritorious at an early stage. And so we tried to set up a process by which that could happen, and that was largely in the way in the 2020 rule that the burdens of production and persuasion were established. As I mentioned earlier, in the 2013 rule, on the other hand, it really places the burden ultimately on the defendant to prove that there was just nothing else they could do in the case at hand.

 

      The second thing -- or the third thing, I should say, is the role of statistics. And that really turns on the word predictably. The 2013 rule uses that, whereas the Inclusive Communities court was very clear in saying merely a difference in statistics doesn’t make a case. One of my favorite sayings—which I’m not sure if it was Mark Twain or Disraeli, I’ve heard it attributed to both—but there are lies, damn lies, and statistics. And so I think that we have to be cautious about that. And the 2020 rule tried to reflect that.

 

      Then, as I think I also mentioned, there is the issue of proximate cause. The Inclusive Communities court spoke at some length about the necessity of finding cause. I don’t think they used proximate cause. I think that’s what we would typically refer to that as the link between the complained of policy and the resulting harm.

 

      Then the 2013 rule says nothing about appropriate remedies. The 2020 rule was very express, again following Inclusive Communities, that the remedies really should not be damages or racial targets, but instead should be limited to equitable actions to remove the offending practice. That is, if your policy, to again use the New Orleans example, is to say -- it says that you have to be related by blood to live in the neighborhood, is that that should be struck.

 

      And then, again, as I mentioned, there is the issue about where we place the burdens of persuasion. And our belief is that that really should rest, as it traditionally does, on the plaintiff.

 

Devon Westhill:  Thank you very much, Paul. I have another question here from the audience, but before we get to that, I’m going to take the moderator’s prerogative again and pepper you with another one of my questions. You mentioned statistics on a couple of occasions. So if we’re going to have disparate impacts here, how much discrimination should be permitted under disparate impact regulations? What is the statistical standard for what a disparate impact is? Five percent? Ten percent? Fifty percent?

 

Paul Compton:  No, it’s -- as Justice Stewart said, I know it when I see it. And that’s really a bad way to run a rule. And that is what the 2020 -- excuse me, the 2013 rule simply is silent about that, and it says that, effectively, everything is suspect unless you have a legally sufficient justification. And I would footnote, whatever that means.

 

      We felt in looking at the 2020 rule that a numerical standard was not appropriate and probably would be unconstitutional because it effectively would be creating some sort of quota or ratio. Once again, that’s where we fell back to a qualitative standard of—you’re going to hear those three words again—artificial, arbitrary, or unnecessary. Those really resound with people. Lawyers and judges and members of the jury, you can get that.

 

      If instead you start talking about statistical intervals of confidence, and that this much is okay and that much is not, we’re really arbitrarily drawing lines that have no basis in the law. Remember, we’re extrapolating this out of essentially two words, because of. And what we would find is what I think a lot of us recognize in real life is there’s a lot of randomness to life and other things. And unless you’re really trying hard to get to a specific ratio, you rarely do.

 

      And the one thing, again, the Kennedy Court was perfectly clear about is steering to a ratio is neither what they desired and instead would be constitutionally problematic at best. And so I think that if you even take measures such as credit scores that are meticulously designed to try to avoid having a discriminatory effect, if you take those, I don’t care whether you set a cut line at 780 or 320. At every cut line, if you did something lower, you would have less discriminatory effect.

 

      The answer really is that we’ve got disparate impact all around us in almost every scenario you can think of, and so the question is not whether disparate impact is wrong but what types are wrong. And so it’s not really even what amount, it’s what types. And we come back, at least in the HUD that I worked for Ben Carson, and we said what we want to do is we don’t want people using this as a pretext for discriminating, and we don’t want people doing stupid stuff.

 

Devon Westhill:  Sure, sure. Thanks so much for that, Paul. I appreciate it. I’m going to get to another one of our participant’s questions. This is from Braden Boucek. I think you teed up the question well. “Do you foresee potential for litigation? When is a case ripe, and who can be a plaintiff?” Presumably, it’s suing HUD.

 

Paul Compton:  Through the roof, yeah. I think that under this standard, we’re going to see lots and lots of litigation to drive parties’ policy preferences in a host of areas. And I won’t be surprised if in a few years we don’t see another of these cases trickle back up to the Supreme Court. Obviously, it has, at least as of today, perhaps a different outlook than was present in 2015.

 

Devon Westhill:  Do you have any thoughts on when a case is ripe or who a plaintiff might be?

 

Paul Compton:  Devon, I spend my days trying to get affordable housing financed, so I can’t say too much about plaintiffs and defendants. I know some good litigators.

 

Devon Westhill:  Fair. Okay, good. I think we’ve answered that question. Let me move on to another I see that’s come in for us. And again, I’m posing these to you. You’re the real expert here, but if there’s anything that comes in that I might be able to chime in on, I will. This is from—I hope I’m not butchering this—Batia Zareh. “Is there any administrative guidance on when an application of a claim of disparate impact risks overreaching into the area of a taking?” Is there any administrative guidance on that?

 

Paul Compton:  I think the shortest and most correct answer about administrative guidance is no. I’m not aware of anything that would touch on that point. Obviously, for instance, the Mount Holly case had aspects of both disparate impact and takings. What the township had proposed there was the use of eminent domain. So you can get tangled up in more than one line of jurisprudence.

 

Devon Westhill:  Okay. I don’t see another question now. I’ll make one final ask for questions. We’re getting low on time now with 13 minutes remaining before we have to do a hard stop. We could get out earlier. We’ll see. But we’re not quite done yet because I’m not done with you, Paul. Let me ask one more --

 

Paul Compton:  -- I don’t like it when you smile like that when you say it.

 

Devon Westhill:  [Laughter] Let me ask maybe my final question, and then if we have any additional questions from the audience, I will turn to those as we begin to wrap things up. I’m interested in one of the questions that was asked in terms of litigation and so forth.

 

      There’s been a lot that you could sue over, and people have, with policies and activities of the Biden administration. It’s kind of interesting to me -- I think you touched on this, but I’d like to maybe hear a little bit more about it. Where does the Biden administration’s focus on promoting equity as reflected in Executive Order 13985 fit with disparate impact? There’s this whole of government equity agenda that the Biden administration has. Can you explain a little bit more how that agenda fits in with disparate impact?

 

Paul Compton:  Yeah. Well, obviously, disparate impact, I think, can be the legal tool to try to reduce what are alleged inequities, as I might also cynically say, until we’re all equally poor. It is no surprise that that was a day one policy because particularly in its 2013 form, to hearken back to what I said about Justice Stewart, it means what I mean it to mean. And if I am sitting in the executive branch and have hundreds of lawyers at my disposal who don’t cost me any more to litigate this versus that, and I can pursue a defendant with relatively unlimited resources under a nebulous standard, I can usually exact some, at least to my way of thinking, favorable settlement results.

 

      That’s one of the reasons that we kind of at the end see fairly oddball cases hit the Supreme Court because major players have too much to lose from litigating. And that’s one of the problems with the 2013 rule is all you know if you’re a defendant is that you’re behind the eight ball.

 

Devon Westhill:  Yeah, we see that in a lot of areas. Let me ask what appears to be the final audience question, and it comes from Luke Wake. “Would the 2013 rule call into question single family housing zoning?”

 

Paul Compton:  Yeah. I think that given not a particularly unusual set of facts, that could happen.

 

Devon Westhill:  Well, that’s a good, easy answer there. Paul, I don’t see any other questions from the audience. I’ve really given you a run during this program. I want to give you a softball, and that is, is there anything else that you might want to bring up that we haven’t talked about yet just to sort of round out this conversation, or do you want to recap anything? Last words?

 

Paul Compton:  Well, goodness, Devon, I wish I had known I was going to have a softball. This is --

 

Devon Westhill:  -- Those were tough ones.

 

Paul Compton:  Yeah. I guess what I would say is just in general, and in this area, and many involved in civil rights, is that I think that there needs to be a distinction between what appears to be things that permit justice in a very narrow sense and policies that improve justice in a broader way.

 

      And I am a houser. I believe that we don’t enough housing in some communities, that we don’t have enough quality housing in other communities. And it just really hurts me to see policies that I think make that problem worse and that are supported, or if you question those policies is that you can often get a vituperative response that you’re just an uncaring person. It’s like, no, I believe that those policies are working against more people than they’re working for. And so I would just encourage people to, again, think about the unintended consequences of some of these things.

 

      I’ll just close with this. I had a friend, frankly, and former colleague who is working with a historically black university who was wanting to build some neighborhood housing where professors and other staff of the university can live. And the university is in a lower end neighborhood that needs revitalization. And we’re just dead in the water for doing it because of site and neighborhood standards. And it’s worse than bothersome.

 

Devon Westhill:  Well, sage wisdom and thoughts to close us out. Really appreciate this conversation, Paul. This was a lot of fun. I learned a lot. I hope our audience enjoyed it. I want to thank you again for participating, thank the audience as well for being here, and thank The Federalist Society and Evelyn for helping us put this together.

 

Evelyn Hildebrand:  Thanks very much. Thank you on behalf of The Federalist Society.

 

Paul Compton:  Yeah, thank you, all. Thanks for joining.

 

Evelyn Hildebrand:  Thank you. Thanks to our audience for participating as well. And if you have any comments or questions, please send them in by email at info@fedsoc.org. Thank you to our speaker and our moderator for an excellent presentation. And until next time, we are adjourned. Thank you.

 

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Dean Reuter:  Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s Practice Groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.