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The Inclusive Communities Project, Inc. v. Lincoln Property Company

United States Court of Appeals, Fifth Circuit

July 16, 2019

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 fr the Northern District of Texas

         ON PETITION FOR REHEARING EN BANC (Opinion 04/09/2019, 5 Cir., 920 F.3d 890)

          Before DAVIS, JONES, and ENGELHARDT, Circuit Judges.

          PER CURIAM:

() Treating the Petition for Rehearing En Banc as a Petition for Panel Rehearing, the Petition for Panel Rehearing is DENIED. No member of the panel nor judge in regular active service of the court having requested that the court be polled on Rehearing En Banc (FED. R. APP. P. and 5TH CIR. R. 35), the Petition for Rehearing En Banc is DENIED.
(√) Treating the Petition for Rehearing En Banc as a Petition for Panel Rehearing, the Petition for Panel Rehearing is DENIED. The court having been polled at the request of one of the members of the court and a majority of the judges who are in regular active service and not disqualified not having voted in favor (FED. R. APP. P. and 5' Cm. R. 35), the Petition for Rehearing En Banc is DENIED. In the poll, 7 judges voted in favor of rehearing (Chief Judge Stewart and Judges Dennis, Southwick, Haynes, Graves, Higginson, and Costa) and 9 judges voted against rehearing (Judges Jones, Smith, Owen, Elrod, Willett, Ho, Duncan, Engelhardt, and Oldham).

          HAYNES, Circuit Judge, joined by STEWART, Chief Judge, and DAVIS, DENNIS, SOUTHWICK, GRAVES, and HIGGINSON, Circuit Judges, dissenting from the denial of rehearing en banc:

         Our court previously determined that the Fair Housing Act ("FHA") allows for disparate impact claims.[1] Inclusive Cmtys. Proj., Inc. v. Tex. Dep't of Hous. & Cmty. Affairs, 747 F.3d 275 (5th Cir. 2014) (Texas v. ICP I). The Supreme Court affirmed. Tex. Dep't of Hous. & Cmty. Affairs v. Inclusive Communities Proj., Inc., 135 S.Ct. 2507, 2515-16 (2015) (Texas v. ICPII). Yet the panel majority opinion now renders that decision almost meaningless by crafting an impossible pleading standard, Inclusive Cmtys. Proj. v. Lincoln Prop. Co., 920 F.3d 890 (5th Cir. 2019) (Lincoln). This case involves an important statute in a large city within a circuit full of large cities that contain numerous locations housing large, minority populations. The case is thus worthy of rehearing en banc. Unfortunately, a majority of our court disagrees, so en banc rehearing of this important, incorrectly-decided case has been denied. From that denial, I respectfully dissent.

         It is unnecessary to repeat the excellent dissenting opinion. Lincoln, 920 F.3d at 912-25. I write to highlight a few points. The majority opinion incorrectly affirmed the district court's Rule 12(b)(6) dismissal of Plaintiffs disparate impact claim under the FHA. I have two main concerns with the majority opinion. First, it expands and overstates the Supreme Court's requirement of "robust causation," as set forth in its decision in Texas v. ICP II. Second, it makes a plaintiffs burden nearly insurmountable at the initial pleading stage in litigation by requiring immutable proof rather than plausible allegations. See Bell Ail. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

         The FHA prohibits refusing "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 . . ." 42 U.S.C. § 3604(a). The federal Housing Choice Voucher program, known as Section 8, pays rental subsidies to assist "low-income families in obtaining a decent place to live" in order to promote "economically mixed housing." 42 U.S.C. § 1437f(a). Landlord participation in the voucher program is voluntary under both federal and Texas state law. Id.; see also 24 C.F.R. § 982.301(b)(11). The majority opinion provides a detailed description of the allegations set forth in Plaintiffs complaint. See Lincoln, 920 F.3d at 895-99. Briefly, ICP describes itself as a "fair housing focused nonprofit organization working with households seeking access to housing in predominately non-minority locations in the Dallas area." ICP's mission includes "counseling, financial assistance, and other services to Black or African American households participating in the Section 8 Housing Choice Voucher Program administered by the Dallas Housing Authority (DHA)." ICP's housing mobility assistance to its DHA voucher clients is part of the relief recommended by this court to remedy the intentional segregation of public housing by the federal government, the City of Dallas, and the DHA, as described in Walker v. City of Mesquite, 169 F.3d 973, 984-88 (5th Cir. 1999). ICP pleaded that it had been "providing housing mobility services to its DHA voucher clients since 2005."

         ICP provides guarantor services to facilitate the voucher program. But, contrary to the goals of the FHA, landlords in predominantly white areas often refuse vouchers. Specifically here, ICP identifies various high-opportunity apartment complexes managed by Defendant Lincoln Property Company[2] in the Dallas metropolitan area and alleges Lincoln has a policy that it will not negotiate with, rent to, or otherwise make units available in predominantly white, non-Hispanic areas to voucher households.[3] Lincoln's policy applies to apartment complexes located in majority white census tracts that have units available at rents payable under the voucher program, ICP notes that it attempted to negotiate with Lincoln on behalf of voucher clients to no avail. ICP asserts that Lincoln's policy, which Lincoln advertises, causes voucher households in the Dallas area to live in racially concentrated and predominantly minority areas of high poverty that are marked by substantially unequal conditions. ICP thus alleged that this policy disparately impacts African-American households in the Dallas area and perpetuates segregation-ICP asserts the group affected by Lincoln's policy is over 80% African-American and 10% or less white, while the non-voucher population, the group unaffected by Defendants' policy, is allegedly 19% African-American and 53% white.

         ICP alleged that its ability to assist its voucher clients in obtaining housing in high-opportunity areas is "obstructed by Defendants' discriminatory housing practices." ICP argued that this "no vouchers" policy violates the disparate impact standard of liability under the FHA, 42 U.S.C. § 3604(a), in two ways: (1) by causing the perpetuation of segregation (segregative-effect claim) and (2) by causing disproportionate harm to African-American households (traditional disparate impact claim).

         With this factual summary in mind, we turn to the law. Both the majority and dissenting opinions agree that the key case to be applied here is Texas v. ICP II, where the Supreme Court interpreted § 3604 of the FHA to include disparate impact claims. It defined such claims as asserting an unjustified and disproportionately adverse effect on minorities in the context of claims against a Texas governmental entity. Texas v. ICP II, 135 S.Ct. at 2513 ("The underlying dispute in this case concerns where housing for low-income persons should be constructed in Dallas, Texas-that is, whether the housing should be built in the inner city or in the suburbs."). It is worth emphasizing that the only issue before the Supreme Court in Texas v. ICP II was "whether disparate impact claims are cognizable under the Fair Housing Act ..." Id. Notably, the procedural posture was quite different from the current case: the district court had granted the plaintiff a partial summary judgment and the remainder of the case had been tried. Texas v. ICP I, 747 F.3d at 278-80.

         Texas v. ICP II described the HUD standard[4] for assessing disparate impact liability, which our circuit had adopted in the underlying case. 135 S.Ct. at 2514. It affirmed our decision, which had applied the HUD standard. Id. at 2526. Nonetheless, our sister circuits (now joined by our circuit in the majority opinion) disagree on the applicability of the HUD standard. Compare Mhany Mgmt., Inc. v. Cty. of Nassau,819 F.3d 581, 618 (2d Cir. 2016), with Reyes v. Waples Mobile Home Park L.P.,903 F.3d 415, 424 n.4 (4th Cir. 2018). After considering disparate impact cases under Title VII and the ADEA, the Court found that recognizing disparate impact claims under the FHA is consistent with the FHA's central purpose: "to eradicate discriminatory practices within a sector of our Nation's economy." Texas v. ICPII, ...


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