Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs
| Decision Date | 26 August 2016 |
| Docket Number | Civil Action No. 3:08-CV-0546-D |
| Parties | THE INCLUSIVE COMMUNITIES PROJECT, INC., Plaintiff, v. THE TEXAS DEPARTMENT OF HOUSING AND COMMUNITY AFFAIRS, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
On remand from the Supreme Court and the Fifth Circuit, and applying a materially different (and more onerous) prima facie case burden of proof than the one applied originally, the court must decide as trier of fact whether plaintiff The Inclusive Communities Project, Inc. ("ICP") has proved a prima facie case and may therefore proceed to the next sequential step of its disparate impact claim under the Fair Housing Act, 42 U.S.C. § 3601, et seq. ("FHA"). For the reasons that follow,1 the court finds that ICP has not proved a prima faciecase, and it dismisses ICP's disparate impact claim.
This is an action by ICP against defendants Texas Department of Housing and Community Affairs and its Executive Director and board members in their official capacities (collectively, "TDHCA") challenging TDHCA's allocation of Low Income Housing Tax Credits ("LIHTC") in the Dallas metropolitan area.2 ICP sought relief for intentional discrimination based on race, in violation of the Equal Protection Clause of Fourteenth Amendment (actionable under 42 U.S.C. § 1983) and 42 U.S.C. § 1982. Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 860 F.Supp.2d 312, 313 (N.D. Tex. 2012) (Fitzwater, C.J.) ("ICP III"), rev'd, 747 F.3d 275 (5th Cir. 2014), aff'd and , ___ U.S. ___, 135 S.Ct. 2507 (2015). ICP also alleged that TDHCA was liable under §§ 3604(a) and 3605(a) of the FHA on a disparate impact theory. Id. Following the entry of partial summary judgment in ICP's favor, and a bench trial, the court found in favor of ICP on its FHA-based disparate impact claim and against ICP on all other claims. Id. at 314.
At the time the court first decided this case on the merits, the Fifth Circuit had not "determined the legal standards that should be applied in disparate impact housing discrimination cases." Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 747 F.3d 275, 280-81 (5th Cir. 2014) ("ICP V"), aff'd and , ___ U.S. ___, 135 S.Ct. 2507 (2015). Absent controlling precedent from the Supreme Court or the FifthCircuit, this court essentially followed the approach of the Second Circuit in Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 939 (2d Cir.), aff'd in part, 488 U.S. 15 (1988), but without engaging in a process of balancing the factors identified in Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283 (7th Cir. 1977). ICP III, 860 F.Supp.2d at 322 n.17. Before trial, the court granted partial summary judgment holding that ICP had made a prima facie showing that TDHCA had violated the FHA based on ICP's disparate impact theory. Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 749 F.Supp.2d 486, 499-500 (N.D. Tex. 2010) (Fitzwater, C.J.) ("ICP II"). At trial, the court decided ICP's disparate impact claim on the merits using as a starting point its summary judgment ruling that ICP had established a prima facie case.
In ICP II the court held that ICP was entitled to summary judgment establishing that it had made a prima facie showing of disparate impact. . . . Because ICP has made this showing, the burden has shifted to defendants to prove by a preponderance of the evidence that their actions were in furtherance of a legitimate governmental interest.
ICP III, 860 F.Supp.2d at 322. But as the court explains below, the court's conclusion that ICP had established a prima facie case beyond peradventure was reached without the benefit of the Supreme Court's decision in this case, and rested on understandings such as that TDHCA "essentially [did] not contest ICP's prima facie cases," ICP II, 749 F.Supp.2d at 498, that "ICP's prima facie burden [was] not a heavy one," id. at 499, and that "ICP ha[d] adduced evidence that [was] uncontested," id. at 500.
On appeal, the Fifth Circuit reversed and remanded. ICP V, 747 F.3d 275. It held that this court had "correctly noted [that a] violation of the FHA can be shown either by proof of intentional discrimination or by proof of disparate impact." Id. at 280. But the Fifth Circuit also noted that it had "not previously determined the legal standards that should be applied in disparate impact housing discrimination cases," id. at 280-81; that other circuits "have applied multiple different legal standards to similar claims under the FHA," id. at 281; and that "after [this] court's decision in this case, [the U.S. Department of Housing and Urban Development ("HUD")] issued regulations regarding disparate impact claims under the FHA," id. at 282. The panel adopted the burden-shifting approach of the new HUD regulations for disparate impact claims brought under the FHA, id. at 282, and it remanded the case for this court "to apply this legal standard to the facts in the first instance," id. at 283.3
The Supreme Court then granted certiorari to decide whether disparate impact claims are cognizable under the FHA. Affirming the judgment of the Fifth Circuit, the Supreme Court held that disparate impact claims are cognizable. Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., ___ U.S. ___, 135 S.Ct. 2507 (2015) ("ICP VI"). Following the Supreme Court's remand to the Fifth Circuit, the panel then "remand[ed] this case . . . for further proceeding consistent with [its] opinion and the opinion of the Supreme Court."Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 795 F.3d 509 (5th Cir. 2015) (per curiam).
This court, in turn, requested that the parties propose how the case should proceed on remand. Inclusive Cmtys. Project, Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 2015 WL 5916220, at *1 (N.D. Tex. Oct. 8, 2015) (Fitzwater, J.). ICP maintained that the briefing should commence at step two of the three-part burden-shifting approach—that TDHCA4 should be required to address the justification element, followed by ICP's addressing the less discriminatory alternative element. Id. at *3. ICP "posit[ed] that the court should adhere to its summary judgment decision that ICP ha[d] established the first element (prima facie case)." Id. TDHCA and intervenor Frazier Revitalization Inc. contended that "the court should reconsider whether ICP ha[d] pleaded and proved a prima facie case," and that "TDHCA should not be required to address the justification prong unless ICP meets its obligation to plead and prove a prima facie case." Id.
The court concluded "that the interests of justice and fundamental fairness require[d] that [the court] first consider on the current (or a supplemented) trial record whether ICP ha[d] established a prima facie case." Id. This was so because, although the court had granted partial summary judgment in ICP II holding that ICP had established a prima facie case on its disparate impact claim, it had done so without the benefit of the Supreme Court's opinion; it had not given the prima facie requirement the same emphasis that the SupremeCourt had given it—for example, the court had stated that ICP's prima facie burden was not a heavy one, and it had concluded that ICP need only provide evidence that raised an inference of discrimination; and the court arguably had "not analyze[d] ICP's evidence through the prism of the 'robust causality requirement' envisioned by the Supreme Court." Id.
The court also reasoned that TDHCA had not had the benefit of the Supreme Court's decision, and, therefore, "a pellucid sense of its importance in the equation of proving FHA disparate impact liability." Id. at *4. In ICP II the court pointed out that, in opposing ICP's summary judgment motion, defendants essentially had not contested ICP's prima facie cases, and ICP had established a prima facie case based on evidence that was "uncontested." Id. (quoting ICP II, 749 F.Supp.2d at 500). The court reasoned that TDHCA should therefore be permitted to challenge ICP's prima facie showing "based on a clearer understanding of the requirements and consequences of ICP's establishing a prima facie case." Id.
Finally, the court concluded:
The parties have submitted their prima facie case briefing and have supplemented the record, and the court has heard oral argument.
ICP is a non-profit organization that seeks racial and socioeconomic integration in the Dallas metropolitan area. To that end, ICP assists low-income, predominantly African-American families who are eligible for the Dallas Housing Authority's Section 8 Housing Choice Voucher program ("Section 8") in finding affordable housing in predominately Caucasian, suburban neighborhoods. Because under the LIHTC program a development that receives tax credits cannot refuse housing solely because a person is using a Section 8 voucher, it is important to ICP where the developments are located in the Dallas metropolitan area.
Under § 42 of the Internal Revenue Code ("I.R.C."), the government provides tax credits (here, LIHTC) that a state (here, Texas) distributes to developers through a designated state agency (here, TDHCA). See Tex. Gov't Code Ann. § 2306.053(b)(10) (West 2008). Developers apply to TDHCA for tax credits, which can be sold to finance construction of a housing project. ICP alleges that TDHCA's allocation of LIHTC in the Dallas metropolitan area has a disparate impact on the location of low-income housing in the area. ICP complains of TDHCA's allocation of two different types of tax credits:...
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