United States District Court District of Massachusetts (Springfield) CIVIL DOCKET FOR CASE #: 3:20-cv-11765-MGM

Create an Alert for This Case on RECAP

Massachusetts Fair Housing Center and Housing Works Date Filed: 09/28/2020

Inc., v. United States Department of Housing and Urban Jury Demand: None

Development and Ben Carson

Nature of Suit: 899 Other Statutes:

Assigned to: Judge Mark G. Mastroianni

Administrative Procedures

Cause: 05:551 Administrative Procedure Act

Act/Review or Appeal of Agency

Decision

Jurisdiction: U.S. Government

Defendant

Plaintiff
Massachusetts Fair Housing Center

represented by Annie Lee Anderson & Kreiger LLP Suite 2100 50 Milk Street Boston, MA 02109 617-621-6582 Email: alee@andersonkreiger.com ATTORNEY TO BE NOTICED

Lauren A. Sampson Lawyers' Committee for Civil Rights and Economic Justic 61 Batterymarch Street, 5th Flr. Boston, MA 02110 617-988-0609 Email: lasampson418@gmail.com ATTORNEY TO BE NOTICED

Mina S. Makarious Anderson & Kreiger LLP Suite 2100 50 Milk Street Boston, MA 02109 617-621-6525 Fax: 617-621-6625 Email: mmakarious@andersonkreiger.com ATTORNEY TO BE NOTICED

Plaintiff Housing Works, Inc.
V. Defendant

Oren M. Sellstrom Lawyers' Committee for Civil Rights and Economic Justic 61 Batterymarch Street, 5th Flr. Boston, MA 02110 617-988-0608 Email: osellstrom@lawyerscom.org ATTORNEY TO BE NOTICED
Scott P. Lewis Anderson & Kreiger LLP Suite 2100 50 Milk Street Boston, MA 02109 617-621-6560 Email: slewis@andersonkreiger.com ATTORNEY TO BE NOTICED
represented by Mina S. Makarious (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Annie Lee (See above for address) ATTORNEY TO BE NOTICED
Lauren A. Sampson (See above for address) ATTORNEY TO BE NOTICED
Oren M. Sellstrom (See above for address) ATTORNEY TO BE NOTICED
Scott P. Lewis (See above for address) ATTORNEY TO BE NOTICED

United States Department of Housing and Urban Development
Defendant Secretary Ben Carson
Amicus National Housing Law Project

represented by James D. Todd , Jr United States Department of Justice Civil Division 901 E Street, N.W., Room 1030 P.O.Box 883 Washington, DC 20044 202-514-3378 Email: james.todd@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED
Vinita B. Andrapalliyal United States Department of Justice P.O. Box 883, Benjamin Franklin Station Washington, DC 20530 (202) 305-0845 Email: vinita.b.andrapalliyal@usdoj.gov ATTORNEY TO BE NOTICED
represented by James D. Todd , Jr (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Vinita B. Andrapalliyal (See above for address) ATTORNEY TO BE NOTICED
represented by Katherine Walz National Housing Law Poject 1663 Mission Street, Suite 460 San Francisco, CA 60603 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Renee M. Williams National Housing Law Project 1663 Mission Street, Suite 460 San Francisco, CA 94103 LEAD ATTORNEY

Amicus Shriver Center on Poverty Law
Amicus Kansas Appleseed

PRO HAC VICE ATTORNEY TO BE NOTICED
Joshua M. Daniels The Law Office of Joshua M. Daniels P.O. Box 300765 Jamaica Plain, MA 02130 617-942-2190 Email: jdaniels@danielsappeals.com ATTORNEY TO BE NOTICED
represented by Clayton Pasley Shriver Center on Poverty Law 67 E. Madison St., Suite 2000 Chicago, IL 60603 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Eric Sirota Shriver Center on Poverty Law 67 E. Madison St., Suite 2000 Chicago, IL 60603 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Marie Claire Tran-Leung Shriver Center on Poverty Law 67 E. Madison St., Suite 2000 Chicago, IL 60603 LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Joshua M. Daniels (See above for address) ATTORNEY TO BE NOTICED
represented by Joshua M. Daniels (See above for address) ATTORNEY TO BE NOTICED

Amicus Nebraska Appleseed
Amicus Public Justice Center
Amicus National Consumer Law Center

represented by Joshua M. Daniels (See above for address) ATTORNEY TO BE NOTICED
represented by Joshua M. Daniels (See above for address) ATTORNEY TO BE NOTICED
represented by Stuart T. Rossman National Consumer Law Center 7 Winthrop Square 4th Floor Boston, MA 02110 617-542-8010 Fax: 617-542-8028 Email: srossman@nclc.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Date Filed # 09/28/2020
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Docket Text
COMPLAINT against United States Department of Housing and Urban Development, Ben Carson Filing fee: $ 400, receipt number 0101-8437693 (Fee Status: Filing Fee paid), filed by Housing Works, Inc., Massachusetts Fair Housing Center. (Attachments: # 1 Civil Category Sheet, # 2 Civil Cover Sheet, # 3 Exhibit A to Complaint, # 4 Exhibit B to Complaint)(Makarious, Mina) Modified docket text on 9/28/2020 (Pacho, Arnold). (Entered: 09/28/2020)
Case transferred to Western Division (Springfield). (Pacho, Arnold) (Entered: 09/28/2020)
ELECTRONIC NOTICE of Case Assignment. Judge Mark G. Mastroianni assigned to case. If the trial Judge issues an Order of Reference of any matter in this case to a Magistrate Judge, the matter will be transmitted to Magistrate Judge Katherine A. Robertson. (Healy, Bethaney) (Entered: 09/28/2020)
Summons Issued as to All Defendants. Counsel receiving this notice electronically should download this summons, complete

09/29/2020 5 09/29/2020 6 09/29/2020 7 09/29/2020 8 09/29/2020 9 09/29/2020 10 10/06/2020 11
10/06/2020 12

one for each defendant and serve it in accordance with Fed.R.Civ.P. 4 and LR 4.1. Summons will be mailed to plaintiff(s) not receiving notice electronically for completion of service. (Healy, Bethaney) (Entered: 09/28/2020)
NOTICE of Appearance by Scott P. Lewis on behalf of Housing Works, Inc., Massachusetts Fair Housing Center (Lewis, Scott) (Entered: 09/29/2020)
NOTICE of Appearance by Annie Lee on behalf of Housing Works, Inc., Massachusetts Fair Housing Center (Lee, Annie) (Entered: 09/29/2020)
NOTICE of Appearance by Lauren A. Sampson on behalf of Housing Works, Inc., Massachusetts Fair Housing Center (Sampson, Lauren) (Entered: 09/29/2020)
CORPORATE DISCLOSURE STATEMENT by Massachusetts Fair Housing Center. (Makarious, Mina) (Entered: 09/29/2020)
CORPORATE DISCLOSURE STATEMENT by Housing Works, Inc.. (Makarious, Mina) (Entered: 09/29/2020)
NOTICE of Appearance by Oren M. Sellstrom on behalf of Housing Works, Inc., Massachusetts Fair Housing Center (Sellstrom, Oren) (Entered: 09/29/2020)
MOTION for Preliminary Injunction Under 5 U.S.C. Sec. 705 to Postpone Effective Date of HUD's Unlawful New Rule by Housing Works, Inc., Massachusetts Fair Housing Center.(Makarious, Mina) (Entered: 10/06/2020)
MEMORANDUM in Support re 11 MOTION for Preliminary Injunction Under 5 U.S.C. Sec. 705 to Postpone Effective Date of HUD's Unlawful New Rule filed by Housing Works, Inc., Massachusetts Fair Housing Center. (Attachments: # 1 Exhibit Declaration of Meris Bergquist, # 2 Exhibit Declaration of Armen Merjian, # 3 Exhibit Declaration of Jo-Ann Barbour, # 4 Exhibit Declaration of William Berman, # 5 Exhibit Declaration of Andrew DeFranza, # 6 Exhibit Declaration of Jane Edmonstone, # 7 Exhibit Declaration of Lewis Finfer, # 8 Exhibit Declaration of Lisa Guisbond, # 9 Exhibit Declaration of Joseph Michalakes, # 10 Exhibit Declaration of Lisa Owens, # 11 Exhibit Declaration of Dinanyili Paulino, # 12 Exhibit Declaration of Brenda Torpy, # 13 Exhibit Declaration of Dwaign Tyndal, # 14 Exhibit Declaration of Ted Wimpey, # 15 Exhibit Declaration of John Woods)(Makarious, Mina) (Attachment 9 replaced on

10/06/2020 13 10/06/2020 14
10/13/2020 15 10/13/2020 16

10/6/2020)PDF Attachment for Exhibit 9 had an error upon uploading Modified on 10/6/2020 (Zamorski, Michael). (Entered: 10/06/2020)
Judge Mark G. Mastroianni: ELECTRONIC ORDER entered re: 11 Motion for Preliminary Injunction. Defendant shall file any opposition to Plaintiffs' Motion for Preliminary Injunction by October 14, 2020. The court intends to hold a hearing on October 16, 2020; notice of the hearing will issue separately. Plaintiff shall serve Defendant with this order as soon as possible. (Figueroa, Tamara) (Entered: 10/06/2020)
ELECTRONIC NOTICE of Motion Hearing.
This hearing will be conducted by video conference. Counsel of record will receive a video conference invite at the email registered in CM/ECF. If you have technical or compatibility issues with the technology, please notify the session's courtroom deputy as soon as possible.
Access to the hearing will be made available to the media and public. In order to gain access to the hearing, you must sign up at the following address: https://forms.mad.uscourts.gov/courtlist.html.
For questions regarding access to hearings, you may refer to the Court's general orders and public notices available on www.mad.uscourts.gov or contact media@mad.uscourts.gov.
Motion Hearing set for 10/16/2020 at 10:15 AM in Remote Proceeding : Springfield before Judge Mark G. Mastroianni. (Figueroa, Tamara) (Entered: 10/06/2020)
NOTICE of Appearance by James D. Todd, Jr on behalf of Ben Carson, United States Department of Housing and Urban Development (Todd, James) (Entered: 10/13/2020)
Consent MOTION for Leave to File Excess Pages for Defendants' Brief in Opposition to Plaintiffs' Motion for a Preliminary Injunction and a Stay Under 5 U.S.C. 705 by Ben Carson, United States Department of Housing and Urban Development. (Attachments: # 1 Text of Proposed Order)(Todd, James) (Entered: 10/13/2020)

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10/14/2020 24

NOTICE of Appearance by Vinita B. Andrapalliyal on behalf of Ben Carson, United States Department of Housing and Urban Development (Andrapalliyal, Vinita) (Entered: 10/13/2020)
NOTICE of Appearance by Joshua M. Daniels on behalf of National Housing Law Project, Shriver Center on Poverty Law, Kansas Appleseed, Nebraska Appleseed, Public Justice Center (Daniels, Joshua) (Entered: 10/13/2020)
MOTION for Leave to Appear Pro Hac Vice for admission of Eric Sirota, Marie Claire Tran-Leung, Clayton Pasley, Katherine Walz, Renee M. Williams Filing fee: $ 500, receipt number 0101-8460921 by National Housing Law Project, Shriver Center on Poverty Law. (Attachments: # 1 Exhibit Exhibit A - Declarations of Eric Sirota, Marie Claire Tran-Leung, Clayton Pasley, Katherine Walz, and Renee M. Williams in Support of Motion for Admission Pro Hac Vice)(Daniels, Joshua) (Entered: 10/13/2020)
Assented to MOTION for Leave to File Amicus Brief in Support of Plaintiffs by Kansas Appleseed, National Housing Law Project, Nebraska Appleseed, Public Justice Center, Shriver Center on Poverty Law. (Attachments: # 1 Exhibit Brief of Amicus Curiae)(Daniels, Joshua) (Entered: 10/13/2020)
NOTICE of Appearance by Stuart T. Rossman on behalf of National Consumer Law Center (Rossman, Stuart) (Entered: 10/13/2020)
Assented to MOTION for Leave to File Amicus Brief by National Consumer Law Center. (Attachments: # 1 Exhibit Attachment A Proposed Amicus Brief)(Rossman, Stuart) (Entered: 10/13/2020)
Judge Mark G. Mastroianni: ELECTRONIC ORDER entered granting 16 Consent Motion for Leave to File Excess Pages, 20 Assented to Motion for Leave to File Amicus Brief in Support of Plaintiffs, and 22 Assented to Motion for Leave to File Amicus Brief. In addition, the parties will be limited to 25 minutes each for oral argument. (Lindsay, Maurice) (Entered: 10/14/2020)
MEMORANDUM in Opposition re 11 MOTION for Preliminary Injunction Under 5 U.S.C. Sec. 705 to Postpone Effective Date of HUD's Unlawful New Rule filed by Ben Carson, United States Department of Housing and Urban Development. (Attachments: # 1 Exhibit A: Plaintiff Mass. Fair Hous. Ctr.'s 2018 Comment, # 2 Exhibit B: Plaintiff Mass. Fair Hous. Ctr.'s 2019 Comment)(Todd, James) (Entered: 10/14/2020)

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10/16/2020 28
10/25/2020 29

MOTION for Leave to File Reply Brief and Supplemental Declarations in Support of Plaintiffs' Motion Under 5 U.S.C. Section705 to Postpone the Effective Date of HUD's Unlawful New Rule by Housing Works, Inc., Massachusetts Fair Housing Center. (Attachments: # 1 Exhibit Exhibit A, # 2 Exhibit Exhibit B, # 3 Exhibit Exhibit C)(Makarious, Mina) (Entered: 10/15/2020)
MEMORANDUM in Opposition re 25 MOTION for Leave to File Reply Brief and Supplemental Declarations in Support of Plaintiffs' Motion Under 5 U.S.C. Section705 to Postpone the Effective Date of HUD's Unlawful New Rule filed by Ben Carson, United States Department of Housing and Urban Development. (Andrapalliyal, Vinita) (Entered: 10/15/2020)
Judge Mark G. Mastroianni: ELECTRONIC ORDER entered granting in part and denying in part 25 Motion for Leave to File Reply Brief and Supplemental Declarations. The court allows Plaintiffs' motion to the extent it seeks leave to file a reply brief, but denies the motion as to the request to file supplemental declarations. As the government argues, the supplemental declarations come too late for purposes of the preliminary injunction, especially given that the factual assertions could have been raised in Plaintiffs' original filings in support of the injunction request. The court will, however, consider the legal arguments raised in the reply brief. (Figueroa, Tamara) (Entered: 10/16/2020)
Electronic Clerk's Notes for proceedings held before Judge Mark G. Mastroianni: Counsel appear for Motion Hearing held on 10/16/2020 re 11 MOTION for Preliminary Injunction Under 5 U.S.C. Sec. 705 to Postpone Effective Date of HUD's Unlawful New Rule filed by Housing Works, Inc., Massachusetts Fair Housing Center. Arguments heard. Matter taken under advisement. (Court Reporter: Alice Moran alice.moran@verizon.net.)(Attorneys present: Lewis, Makarious, Lee, Sampton, Todd) (Healy, Bethaney) (Entered: 10/16/2020)
Judge Mark G. Mastroianni: ORDER entered: PRELIMINARY INJUNCTION. For the reasons stated in Memorandum and Order, the court ALLOWS Plaintiffs Motion for a Preliminary Injunction Under 5 U.S.C. § 705 to Postpone the Effective Date of HUDs Unlawful New Rule (Dkt. No. 11). It is so Ordered. See attached Memorandum and Order. (Rivera, Christina) (Main Document 29 replaced on 10/27/2020) (Lindsay, Maurice). (Entered: 10/25/2020)

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Consent MOTION for Extension of Time to File Answer re 1
Complaint, by Ben Carson, United States Department of
Housing and Urban Development. (Attachments: # 1 Text of Proposed Order)(Todd, James) (Entered: 11/20/2020)
Judge Mark G. Mastroianni: ELECTRONIC ORDER entered
granting 30 Consent MOTION for Extension of Time to 30 days for defendant HUD to File Answer to plaintiff's 1
Complaint. (Lindsay, Maurice) (Entered: 11/23/2020)
Judge Mark G. Mastroianni: ELECTRONIC ORDER entered granting 19 Motion for Leave to Appear Pro Hac Vice. ALLOWED. Added Clayton Pasley, Katherine Walz, Renee M. Williams, Marie Claire Tran-Leung, and Eric Sirota. Attorneys admitted Pro Hac Vice must register for electronic filing if the attorney does not already have an ECF account in this district. To register go to the Court website at www.mad.uscourts.gov. Select Case Information, then Electronic Filing (CM/ECF) and go to the CM/ECF Registration Form. (Lindsay, Maurice) (Entered: 11/23/2020)

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 Case 3:20-cv-11765-MGM Document 1 Filed 09/28/20 Page 1 of 25

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

MASSACHUSETTS FAIR HOUSING CENTER and HOUSING WORKS, INC.,
Plaintiffs,
v.
UNITED STATES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT and BEN CARSON, Secretary of the Department of Housing and Urban Development,
Defendants.

)

)

)

)

)

) )

Civil Action No.

) ) )

COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF

)

)

)

)

)

)

INTRODUCTION

1. Plaintiffs Massachusetts Fair Housing Center (“MFHC”) and Housing Works, Inc.

(“Housing Works”) seek a declaratory judgment and injunctive relief vacating a new rule

promulgated by the Department of Housing and Urban Development (“HUD”), Implementation

of the Fair Housing Act’s Disparate Impact Standard, 85 Fed. Reg. 60288 (September 24, 2020)

(the “2020 Rule”). The 2020 Rule, as it would be codified in 24 C.F.R. §§ 100.5 and 100.500 on

October 26, 2020 (when the 2020 Rule is set to take effect), is attached as Exhibit A.

2. The 2020 Rule undermines the ability of victims of housing and mortgage lending

discrimination to pursue disparate impact claims under the Fair Housing Act, 42 U.S.C. §§ 3601

et seq. (the “FHA”), by introducing novel pleading and proof requirements that will be virtually

impossible to meet, and creating broad new defenses to liability, contrary to the language and

intent of the FHA and decades of practice, both at HUD and in the courts.

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3. The ability to bring disparate impact claims to root out and eliminate subtle, disguised or ignorant discrimination on the basis of race, color, religion, sex, disability, familial status or national origin is central to the FHA’s structure and purpose to eradicate systemic housing discrimination and create inclusive communities.
4. If the 2020 Rule is allowed to take effect, the vitally important remedial purposes of the FHA will be seriously undermined. Victims of housing and lending discrimination will face unreasonably high barriers, erected by HUD to deter the pursuit of valid disparate housing claims, and fair housing advocates such as the Plaintiffs will be stripped of an essential tool they have relied on for decades in the continuing fight against segregated housing.
5. By making it nearly impossible for a victim of housing or lending discrimination to plead and prove their case, the 2020 Rule will allow perpetrators of housing and lending discrimination to act with impunity, defeating the central goal of the FHA.
6. The Court should issue a preliminary injunction, extending the effective date of the 2020 Rule during the pendency of this review proceeding, and then declare the 2020 Rule to be unlawful, and set it aside under the Administrative Procedure Act (the “APA”), to prevent irreparable harm and provide complete, uniform and fair protection to the Plaintiffs and similar organizations, and the victims of housing and lending discrimination they represent.
PARTIES Plaintiffs Massachusetts Fair Housing Center 7. Massachusetts Fair Housing Center is a non-profit, charitable corporation organized under the laws of the Commonwealth of Massachusetts with a principal place of business at 57 Suffolk Street, Fourth Floor, Holyoke, Massachusetts.
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8. MFHC is a full-service fair housing organization dedicated to eliminating systemic housing discrimination and creating inclusive communities in the Commonwealth of Massachusetts. Founded in 1989, MFHC has been continuously operating for over thirty years, with a service area that includes Worcester, Franklin, Hampshire, Hampden and Berkshire Counties.
9. MFHC provides free legal services, conducts housing discrimination testing, and accepts housing discrimination complaints based on race, national origin, color, ancestry, religion, sex, disability, presence of minor children, sexual orientation, gender identity and expression, age, marital status, military or veteran status, receipt of public assistance, including Section 8 housing assistance, receipt of housing subsidies, or rental assistance, and genetic information.
10. MFHC accepts over 300 housing discrimination complaints per year, and has recovered hundreds of thousands of dollars in damages and extensive injunctive relief for victims of housing discrimination.
11. In addition to its legal work, MFHC provides extensive education and outreach services on issues of fair housing and fair lending.
12. MFHC provides training in fair housing to community groups, healthcare providers, tenants, landlords, property managers, realtors, first-time home buyers, and others. MFHC’s trainings focus largely on educating the public about their rights under the FHA and state anti-discrimination law and educating housing professionals about their obligations under these laws. MFHC has expended resources in preparing training materials and training its own staff in the legal standards applicable to FHA cases in order to provide this education.
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13. MFHC also advocates for local, state and federal policy changes to end systemic discrimination and promote housing choice.
14. MFHC’s legal, education, and advocacy efforts have resulted in changes in behavior in the landlord and realtor communities in Massachusetts.
15. HUD has for many years recognized that as an organization with experience providing quality fair housing enforcement activities, MFHC is eligible under HUD’s Fair Housing Initiatives Program (“FHIP”) for grants to carry out testing and enforcement activities to prevent or eliminate discriminatory housing practices.
16. HUD has also consistently acknowledged MFHC's standing to bring charges of discriminatory housing practices under the FHA, most recently in MFHC v. Kamins of Amherst, Inc., et al., FHEO No. 01-19-2559-8 (September 11, 2020), and MFHC v. Bernashe Realty, Inc., et al., FHEO No. 01-18-8950-8 (August 7, 2018). In both of these cases, HUD recognized MFHC as an “aggrieved person” within the meaning of the FHA and HUD’s regulations. 42 U.S.C. § 3602(i); 24 C.F.R. § 100.20. Housing Works, Inc.
17. Housing Works, Inc. is a not-for-profit corporation organized under the laws of the State of New York with a principal place of business at 57 Willoughby St., Brooklyn, New York.
18. Housing Works is a healing community of people living with and affected by HIV/AIDS whose mission is to end the dual crises of homelessness and AIDS. Housing Works is deeply committed to ensuring fair and affordable housing for marginalized, indigent, and lowincome communities. Founded in 1990, Housing Works provides a comprehensive array of services to more than 30,000 homeless and low-income New Yorkers living with and affected by HIV/AIDS.
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19. Housing Works provides advocacy and comprehensive services to forward its mission, including legal services to help clients obtain housing and challenge discriminatory housing policies and practices.
20. Through its advocacy offices in New York City, Albany, New York, Washington, D.C., Puerto Rico and Haiti, Housing Works fights for funding and legislation to ensure that all people living with HIV/AIDS have access to quality housing, healthcare, HIV prevention information and other life-sustaining services, as well as legal protections from discrimination.
21. Housing Works also provides supportive services including housing, healthcare, meals and nutritional counseling, mental health and substance use treatment, job training, and legal assistance.
22. As part of its housing services, Housing Works operates twelve residences to provide housing to eligible individuals living with HIV; people of transgender experience living with HIV; single men and women with active substance abuse issues; HIV-positive single women recently released from a correctional setting; HIV-positive unstably housed LGBTQ youth; and families where the head-of-household is living with HIV.
23. Housing Works also provides free legal services to help clients obtain housing, through the Housing Works Legal Department and the HIV Law Project.
24. For over two decades, Housing Works’ Legal Department has successfully prosecuted impact litigation on issues involving HIV/AIDS, homelessness, public benefits, and disability, housing and gender discrimination. Housing Works has been at the forefront of challenging source of income and disability discrimination in New York City’s housing market.
25. Prosecuting disparate impact claims under the FHA, Housing Works has secured seminal legal decisions and successfully settled numerous cases against some of the largest
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landlords in New York and around the country on behalf of New Yorkers living with HIV/AIDS who rely upon public subsidies to secure and maintain their housing. The 2020 Rule’s Impact on the Plaintiffs
26. The 2020 Rule will frustrate the Plaintiffs’ ability to fulfill their missions of eradicating systemic housing discrimination and creating inclusive communities because the 2020 Rule arbitrarily raises the pleading standards and proof requirements plaintiffs must meet to bring disparate impact claims, a critical tool for providing legal relief and redress to victims of housing and lending discrimination.
27. The 2020 Rule’s heightened pleading and proof requirements, as well as the novel defenses it creates, are intended to, and will, deter victims of housing or lending discrimination from working with the Plaintiffs to bring cases based on disparate impacts because of the vast amount of information victims must seek to gather at the outset of a case in order to meet the new pleading standards, including information that is likely to be in the exclusive possession of potential defendants who may not be subject to pretrial discovery or public records laws.
28. The 2020 Rule will require the Plaintiffs to divert resources from their existing programs to provide the assistance needed to meet the 2020 Rule’s improperly heightened pleading and proof requirements.
29. The 2020 Rule will require the Plaintiffs to abandon cases and claims in development, on which the Plaintiffs had already expended time and resources, which would have previously been viable under the 2013 Rule, but are now made prohibitively more challenging by the new 2020 Rule.
30. The 2020 Rule undermines the important remedial purpose of recognizing disparate impact liability and will thwart the Plaintiffs’ ability to advocate that property owners,
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local land use officials, and lenders adhere to nondiscriminatory practices because they may no longer fear liability—or even scrutiny—under the FHA.
31. The 2020 Rule will undermine the Plaintiffs’ ability to pursue disparate impact claims not only to address individual cases of housing discrimination, but also to change patterns of behavior that lead to disparate impacts on many members of protected classes.
32. The 2020 Rule will require the Plaintiffs to expend significant resources to reeducate victims of housing and lending discrimination on their rights under the FHA, and to assure them that they are still protected under the FHA, notwithstanding the 2020 Rule’s heightened pleading and proof standards which are designed to deter them from vindicating their rights.
33. The 2020 Rule will require the Plaintiffs to expend significant time and resources to train staff members and prepare new training materials for public outreach. The Plaintiffs will have to divert resources and time that would otherwise have been available for other criticallyimportant programming, all in the middle of a pandemic that already strains the resources of organizations at the frontlines of fighting housing insecurity.
34. The 2020 Rule will increase the demand for the Plaintiffs’ services, because the 2020 Rule will dilute the FHA’s deterrent effect on discriminatory behavior in housing and lending, but at the same time the 2020 Rule will make it far more difficult for the Plaintiffs to provide relief to the clients they serve.
Defendants 35. Defendant U.S. Department of Housing and Urban Development is a department of the Executive Branch of the United States Government. HUD published the 2020 Rule in the Federal Register on September 24, 2020.
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36. Defendant Ben Carson is the Secretary of HUD and is responsible for overseeing all HUD operations, including the promulgation of regulations, the development and implementation of programs, and compliance with and enforcement of governing statutes, including the FHA. Secretary Carson is sued in his official capacity.
37. HUD and Secretary Carson have a statutory obligation to affirmatively further fair housing. 42 U.S.C. §§ 3608(d) & (e)(5).
JURISDICTION AND VENUE 38. This Court has jurisdiction over this matter under 28 U.S.C. § 1331, 5 U.S.C. §§ 702 & 703, and 28 U.S.C. § 2201. 39. Venue is proper in this Court under 28 U.S.C. § 1391 because Plaintiff MFHC has its principal place of business in Holyoke, Massachusetts.
FACTS The Pursuit of Disparate Impact Claims is Essential to Fulfilling the Goals of the FHA
40. Passed in 1968, seven days after the assassination of Dr. Martin Luther King, Jr., the purpose of the FHA is to prohibit and eradicate entrenched racial segregation and exclusion in housing and related services such as mortgage lending.
41. The FHA is a fitting tribute to Dr. King, who devoted the final years of his life to ending segregation in housing. In March 1965, approximately one year before the FHA was signed into law, Dr. King gave a speech on the steps of the Alabama State Capitol at the end of the march from Selma to Montgomery, calling for an end to segregated housing “until every ghetto or social and economic depression dissolves, and Negroes and whites live side by side in decent, safe, and sanitary housing.”1

1

Dr. Martin Luther King, Jr., Address at the Conclusion of the Selma to Montgomery March (Mar. 25,

1965), https://kinginstitute.stanford.edu/king-papers/documents/address-conclusion-selma-montgomery-march.

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42. Dr. King was not alone in his efforts. One month prior to the enactment of the FHA, a commission chaired by Illinois Governor Otto Kerner, Jr. released a report documenting the cause of protests that had swept the country in the prior summer (the “Kerner Report”).2 The Kerner Report sounded the alarm that America was moving toward two “separate and unequal societies”—one Black and one white.3 The report found that white racism was “essentially responsible for the explosive mixture which has been accumulating in our cities since the end of World War II.”4 The “ingredients of this mixture” included “pervasive discrimination and segregation” in housing, which the report found had “resulted in the continuing exclusion of great numbers of Negroes from the benefits of economic progress.”5 The Kerner Report concluded with a recommendation that Congress pass a “comprehensive and enforceable open housing law” to address the problem.6
43. Courts have understood and enforced the FHA in light of its historical roots. As the United States District Court for the District of Columbia recently observed, the FHA “was, in large part, a response to the heightened racial tensions and riots erupting in the United States throughout the 1960s, and the FHA’s passage reflected an understanding that ‘fair housing legislation’ was ‘the best way for Congress’ at that time ‘to start on the true road to integration.’” National Fair Housing All. v. Carson, 330 F. Supp. 2d 14, 24 (D.D.C. 2018).

2

NAT’L ADVISORY COMM’N OF CIVIL DISORDERS, REPORT OF THE U.S. NAT’L ADVISORY COMMISSION ON

CIVIL DISORDERS (1968), https://www.ncjrs.gov/pdffiles1/Digitization/8073NCJRS.pdf.

3

Id. at 5.

4

Id.

5

Id.

6

Id. at 13.

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44. As a remedial statute, the FHA is designed to provide broad and powerful protections from housing discrimination on the basis of race, color, religion, sex, disability, familial status, or national origin, and to provide ready access to and redress at HUD and in the courts when discrimination does occur.
45. The FHA makes it the policy of the United States to support the development and maintenance of diverse and inclusive neighborhoods by guaranteeing fair housing for all.
46. Until very recently, HUD understood and acknowledged its long-standing statutory mandate under the FHA to “affirmatively further fair housing” by “taking meaningful actions, in addition to combating discrimination, that . . . foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics.” Affirmatively Furthering Fair Housing, 80 Fed. Reg. 42272, 42353 (July 16, 2015) (defining “affirmatively further fair housing” in 24 C.F.R. § 5.152, rescinded in its entirety by HUD effective August 7, 2020).
47. By 1998, when Congress revisited and strengthened the FHA through the Fair Housing Amendments Act of 1988 (the “FHAA”), every federal Court of Appeals that had considered the issue had concluded that a plaintiff may prevail on a housing or lending discrimination claim under the FHA by demonstrating discriminatory intent or, alternatively, by showing that the challenged practice actually or predictably results in racial discrimination — in other words, that it has a discriminatory effect or “disparate impact.”
48. By that time, courts had arrived at a consistent understanding as to the pleading standards and shifting burdens of proof in disparate impact cases, drawing upon their experience adjudicating claims under Title VII of the Civil Rights Act (“Title VII”), 42 U.S.C. §§ 2000e et seq., the FHA’s sister statute in employment.
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49. When it enacted the FHAA in 1988, Congress accepted and ratified the approach HUD and the courts had taken in disparate impact cases under the FHA and expressly rejected a proposed amendment that would have eliminated disparate impact liability for certain zoning decisions.
50. In 2015, the Supreme Court unequivocally affirmed that the FHA prohibits both intentional discrimination and acts with unjustified disparate impacts that create “separate and unequal” conditions. Texas Department of Housing and Community Affairs v. Inclusive Communities Project, 576 U.S. 519, 546 (2015) (“Inclusive Communities”). The Supreme Court underscored that “[r]ecognition of disparate-impact claims is consistent with the FHA’s central purpose” and that disparate impact liability is necessary to “counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.” Id. at 521. The Court based its analysis on the text of the FHA, overwhelming appellate court precedent endorsing such an interpretation, and the 1988 enactment of the Fair Housing Amendments Act, which strengthened the FHA and ratified this understanding. Id. at 534.
51. The Supreme Court explained the central role disparate impact cases play in FHA enforcement, noting that, all too often, “zoning laws and other housing restrictions . . . function unfairly to exclude minorities from certain neighborhoods without any sufficient justification,” and that suits “targeting such practices reside at the heartland of disparate-impact liability.” Id. at 540.
52. As the Supreme Court also pointedly noted, although many decades have passed since the initial passage of the FHA, “much progress remains to be made in our Nation’s continuing struggle against racial isolation.” Id. at 546.
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53. Just as it did in 1968, when the FHA was enacted, where one lives continues today to dictate almost every aspect of an individual’s life in America, perhaps most importantly, access to a good education. The re-segregation of school districts is fueled by factors including “pervasive housing discrimination (to include steering families of color into specific neighborhoods)” and “school zoning practices that intensify racial isolation.”7
54. The adverse impacts on children who attend racially concentrated schools cannot be overstated. One educational nonprofit reported that, nationwide, “predominantly White school districts get $23 billion more than their non-White peers, despite serving a similar number of children,” a financial windfall that translates into less crowded classrooms, newer textbooks, fields trips, advanced courses, and access to green space and outdoor recreation.8 To that end, an individual family’s income is less determinative of their child’s access to educational resources than their residence in a majority-white school district.
55. Segregated communities of color are also far more likely to be exposed to pollution and its attendant environmental health impacts, with a community’s racial composition the strongest predictor of whether an environmental hazard, such as a hazardous waste facility, would be sited there.9
56. Discrimination in lending, including the denial of conventional mortgage loans to families of color, exacerbates this problem.

7

John Kucsera and Gary Orfield, New York State’s Extreme School Segregation: Inequality, Inaction and a

Damaged Future, The UCLA Civil Rights Project (Mar. 2014), at 113.

8

EdBuild, $23 Billion, https://edbuild.org/content/23-billion (last accessed Sep. 26, 2020).

9

Commission for Racial Justice, United Church of Christ, Toxic Wastes and Race in the United States: A

National Report on the Racial and Socio-Economic Characteristics of Communities with Hazardous Waste Sites xiii

(1987); U.S. Comm’n on Civil Rights, Environmental Justice: Examining the Environmental Protection Agency’s

Compliance and Enforcement of Title VI and Executive Order 12,898, at 7-8 (2016) (“Both historical and current

housing segregation amplifies the burden of toxic industrial waste on communities of color.”).

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Case 3:20-cv-11765-MGM Document 1 Filed 09/28/20 Page 13 of 25
57. In denying mortgages to Black and Latinx applicants, private lenders prevent communities of color from accessing an important source of wealth, thereby entrenching and perpetuating generational poverty.
58. Today, emerging forms of discrimination, such as the use of data analysis and algorithms in decision-making, contribute to the perpetuation of segregated housing and discrimination in residential lending and insurance.
59. A range of advanced digital techniques, ranging from profiling to data mining, now exist to analyze enormous datasets composed of individual decisions and activities in order to decipher patterns and make predictions. Decisions to accept or deny a loan or to target who will see a housing opportunity when browsing social media, are strongly influenced by machines and algorithms.10
60. Although these models appear facially neutral, they rely on data inputs to make future predictions, and if the inputs involve flawed or incomplete information that reflects historical inequality, the models can replicate and even amplify human biases affecting protected groups.11
61. All of these developments underscore the continued importance of disparate impact liability.

10

Maddalena Favaretto et al., Big Data and Discrimination: Perils, Promises and Solutions. A Systematic

Review, 6:12 Journal of Big Data 2, 3 (2019); Latanya Sweeney, Discrimination in Online Ad Delivery, Data

Privacy Lab (Jan. 28, 2013).

11

Nicol Turner Lee et al, Algorithmic Bias Detection and Mitigation: Best Practices and Policies to Reduce

Consumer Harms, Brookings (May 22, 2019).

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HUD’s 2013 Rule Properly Codified Well-Established Practice in Disparate Impact Cases 62. Congress vested the authority and responsibility for administering the FHA in
HUD and authorized the Secretary to issue regulations interpreting the FHA. 42 U.S.C. § 3608. 63. In 2013, HUD promulgated a new rule setting forth how liability can be
established under the FHA based on proof of discriminatory effects rather than discriminatory intent. Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11460 (Feb. 15, 2013) (the “2013 Rule”). The 2013 Rule, as it currently appears in 24 C.F.R. § 100.500, is attached as Exhibit B.
64. The 2013 Rule reflected decades of accumulated experience in the adjudication of disparate impact claims, both at HUD and in the courts. The 2013 Rule defined an unlawful “discriminatory effect”; set forth what could be recognized as a “legally sufficient justification”; and codified the familiar three-part burden shifting framework. Unlike the 2020 Rule, the 2013 Rule did not alter existing law or purport to change applicable procedures for the adjudication of disparate impact claims.
65. The 2013 Rule was silent with respect to pleading requirements. 66. Under the 2013 Rule, a victim of housing or lending discrimination has the initial burden of proving that a policy or practice causes or predictably will cause a discriminatory effect, with a disproportionate impact on protected individuals, or that it will create, increase, reinforce or perpetuate “segregated housing patterns.” 24 C.F.R. § 100.500(c)(1). 67. Under the 2013 Rule, if the plaintiff is able to meet their burden, the defendant may then justify its actions by providing evidence that the policy or practice is necessary to achieve “substantial, legitimate, nondiscriminatory interests.” 24 C.F.R. § 100.500(c)(2). 68. Finally, under the 2013 Rule, even if the defendant proves a valid interest, the plaintiff can still prevail by proving that “the substantial, legitimate, nondiscriminatory interests
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supporting the challenged practice could be served by another practice that has a less discriminatory effect.” 24 C.F.R. § 100.500(c)(3).
69. The 2013 Rule codified decades of well-accepted judicial interpretation and agency practice. HUD and the courts have continued to follow the approach codified by the 2013 Rule since its promulgation.
The 2020 Rule Is Inconsistent with the Language and Intent of the FHA and Decades of Federal Practice under the Statute
70. On August 19, 2019, HUD published a Proposed Rule to replace the 2013 Rule. The Proposed Rule altered HUD’s definition of “discriminatory effect,” introduced novel pleading requirements, created new defenses and overhauled the well-accepted burden-shifting rules. HUD’s Implementation of the Fair Housing Act’s Disparate Impact Standard, 84 Fed. Reg. 42854, 42854 (the “Proposed Rule”).
71. HUD issued the final 2020 Rule on September 24, 2020. 85 Fed. Reg. 60288. 72. The 2020 Rule strikes the perpetuation of “segregated housing patterns” from the definition of “discriminatory effect,” as it appears in the 2013 Rule. 85 Fed. Reg. at 60306, 60332 (24 C.F.R. § 100.500(a)). HUD’s decision to remove references to segregated housing patterns from its new disparate impact rule highlights the agency’s disregard for the core purpose of the FHA and is not justified by, or even consistent with, Inclusive Communities. 73. The 2020 Rule dilutes the protections afforded by the FHA by requiring claimants to anticipate defenses and plead facts they may have no ability to discover before filing their claim; giving defendants a wide variety of new defenses that cannot be reconciled with the purpose of the FHA; and discarding the well-established burden-shifting framework that has been used for decades not only in housing discrimination cases, but in a wide variety of other kinds of civil rights actions such as those under Title VII. The 2020 Rule deviates from the
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Proposed Rule, however, by announcing a new “outcome prediction” defense that was never subject to notice or comment.
74. Consistent with its overreaching intent to tilt the scales in favor of property owners and mortgage lenders, the 2020 Rule also signals to potential defendants that they should not collect data that might reveal the disparate impacts of their practices or policies, and eliminates the availability of exemplary damages in administrative cases.
75. HUD asserts that the 2020 Rule does not create new standards for liability under the FHA, but merely brings the 2013 Rule into alignment with the Supreme Court’s decision in Inclusive Communities and provides clarity to members of the public seeking to comply with the FHA or to bring a claim for disparate impact that meets the requirements outlined in Inclusive Communities.
76. Contrary to HUD’s assertions, the 2020 Rule is directly contrary to Inclusive Communities; introduces novel pleading and proof requirements, and new defenses, which upset accepted practice and undermine enforcement of the FHA; and will inevitably confuse members of the public seeking to understand their rights and obligations under the FHA. The 2020 Rule Imposes Prohibitive New Pleading Requirements
77. Under the 2020 Rule, a plaintiff is not only required to plead that “a specific, identifiable policy or practice has a discriminatory effect”; a plaintiff must also “sufficiently plead facts” to support each of five new elements:
(1) That the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law; (2) That the challenged policy or practice has a disproportionately adverse effect on members of a protected class;
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(3) That there is a robust causal link between the challenged policy or practice and the adverse effect on members of a protected class, meaning that the specific policy or practice is the direct cause of the discriminatory effect; (4) That the alleged disparity caused by the policy or practice is significant; and (5) That there is a direct relation between the injury asserted and the injurious conduct alleged. 2020 Rule, 24 C.F.R. § 100.500(b). 78. The 2020 Rule then permits a defendant, again at the “pleading stage,” to “establish” that the plaintiff failed to make out a case by “showing” that a plaintiff has failed to sufficiently plead facts to establish any of the required elements of a prima facie case. 2020 Rule, 24 C.F.R. § 100.500(d)(1). In effect, this requires a plaintiff, without the benefit of discovery, not only to meet the overwhelming demands of the 2020 Rule’s new five-part pleading requirements, but also to anticipate in their complaint every practical, profit-oriented, policy consideration or requirement of law a defendant might invoke in defense of its discriminatory policy or practice. 79. By imposing these onerous requirements at the pleading stage, the 2020 Rule will deter the filing of complaints and prevent victims of housing or lending discrimination from engaging in pretrial discovery and obtaining a full and fair adjudication of their claims. 80. None of the new elements a plaintiff must allege under the 2020 Rule’s pleading provisions is required by or consistent with the FHA or Inclusive Communities. To the contrary, they undermine the ability of victims of housing and lending discrimination to pursue the disparate impact liability Inclusive Communities described as central to the FHA’s statutory scheme.
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81. HUD acknowledges that it lacks the authority to dictate pleadings standards to the federal courts and can, at most, set forth the required elements of a disparate impact claim under the FHA. 85 Fed. Reg. at 60307-60308. The 2020 Rule itself is silent as to whether the new pleading requirements it imposes apply only in administrative proceedings at HUD or also in the courts. HUD implies throughout the preamble to the 2020 Rule, however, and in its response to submitted comments that the new rule is intended to apply both at HUD and in the courts. The 2020 Rule Invents Broad and Unjustifiable New Defenses
82. While the 2020 Rule piles up the burdensome requirements plaintiffs must meet to bring and sustain their case, it eases the burdens of proof on defendants, and arms them with a slew of new defenses to escape liability.
83. The 2020 Rule gives a defendant the opportunity to rebut a victim’s allegation that the challenged policy or practice is “arbitrary, artificial and unnecessary” simply by producing evidence showing that the challenged policy or practice “advances a valid interest,” 2020 Rule, 24 C.F.R. § 100.500(c)(2), rather than by showing that the interest be “substantial, legitimate, [and] non-discriminatory,” as required by the 2013 Rule. 24 C.F.R. § `100.500(c)(2).
84. Even if a plaintiff survives a motion to dismiss at the pleading stage, the 2020 Rule provides that a defendant may still escape liability by demonstrating that the discriminatory policy or practice “is intended to predict an occurrence of an outcome, the prediction represents a valid interest, and the outcome predicted by the policy or practices does not or would not have a disparate impact on protected classes compared to similarly situated individuals not part of the protected class.” 2020 Rule, 24 C.F.R. § `100.500(c)(2)(i).
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The 2020 Rule Imposes New Burdens of Proof That Unreasonably Favor Business Interests 85. Whereas under the 2013 Rule a plaintiff could still succeed on a disparate impact
claim, even if the defendant offered a nondiscriminatory justification, by “proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect,” 2013 Rule, 24 C.F.R. § 100.500(c)(3), the 2020 Rule improperly and unjustifiably raises this ultimate burden of proof, requiring a plaintiff to prove not only that a practice with less discriminatory effects exists, but also that the alternative practice serves the defendants’ identified interest “in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant.” 2020 Rule, § 100.500(c)(3).
86. Requiring a victim to identify an alternative that is least costly or burdensome to defendants introduces a profit defense to justify discriminatory practices—a result completely at odds with the language and history of the FHA and civil rights law in general.
87. By allowing a profit defense, HUD endorses the commodification of exclusion, permitting discrimination to continue to preserve profits—a result that neither Congress nor the courts have never condoned.
88. HUD has not offered adequate jurisdiction to drastically rewrite the 2013 Rule and create these heightened burdens of proof, which are inconsistent with decades of HUD’s own policies, guidance and decisions.
89. Nowhere in the Proposed Rule nor the 2020 Rule does HUD meaningfully consider the adverse impact of the new 2020 Rule on access to fair housing, an inexcusable failure given HUD’s statutory mandate to eradicate, not perpetuate, housing discrimination.
90. In sum, the 2020 Rule’s extraordinary new pleading requirements, available defenses, and burdens of proof will deter and prevent victims of housing and lending
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discrimination from seeking and obtaining relief under the FHA, contravening HUD’s statutory obligation to affirmatively further fair housing.
91. The 2020 Rule is contrary to the text and purpose of the FHA because it undermines, rather than furthers, the goal of fair housing; stands in the way of efforts to combat discrimination; and will make it much harder to foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics.
92. The 2020 Rule is an arbitrary and capricious departure from 2013 Rule. 93. If the Court does not set it aside, the 2020 Rule will leave victims short of the promise of fair housing that Dr. King and other civil rights leaders called for and that Congress sought to achieve through the FHA. 94. The Plaintiffs will suffer irreparable harm if the 2020 Rule is permitted to take effect.
CLAIMS Count I: Violation of the APA – Contrary to Law 95. Plaintiffs adopt by reference the allegations of ¶¶ 1-94 of this Complaint. 96. HUD’s 2020 Rule is final agency action reviewable in this court under 5 U.S.C. § 704. 97. The APA empowers federal courts to “hold unlawful and set aside agency actions,” such as the 2020 Rule, that are “not in accordance with law.” 5 U.S.C. § 706(2)(A). 98. Congress declared in 42 U.S.C. § 3601: “It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.” 99. To implement this national policy, in 42 U.S.C. § 3608(e)(5) Congress commanded the Secretary of HUD “to administer the programs and activities relating to housing
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and urban development in a manner affirmatively to further the policies” of preventing and eliminating discriminatory housing practices.
100. In promulgating the 2020 Rule, Secretary Carson and HUD have violated the clear statutory command of the FHA to affirmatively further fair housing and have, instead, chosen to protect the financial interests of property owners and lenders who engage in discriminatory practices.
101. The novel pleading rules, defenses and burden shifting provisions of the 2020 Rule erect unreasonable barriers to the pursuit of disparate impact claims.
102. The Court should vacate the 2020 Rule under 5 U.S.C. § 706(2)(A) because the 2020 Rule is inconsistent with the text of the FHA, undermines its core purposes, and is thus not in accordance with law.
Count II: Violation of the APA – Arbitrary and Capricious 103. Plaintiffs adopt by reference the allegations of ¶¶ 1-102 of this Complaint. 104. The APA empowers federal courts to “hold unlawful and set aside agency actions,” such as the 2020 Rule, that are “arbitrary” or “capricious.” 5 U.S.C. § 706(2)(A). 105. HUD has not provided reasoned justification for its decisions to abandon its 2013 Rule, which codified well-accepted interpretations of the FHA and burden-shifting rules, and to replace it with the 2020 Rule, which undermines the purposes of the FHA; introduces new pleading requirements and creates novel defenses that cannot be reconciled with the FHA; and discards long-standing burden-shifting rules in favor of a new framework that puts profits ahead of fairness. 106. HUD’s purported reliance on Inclusive Communities as the basis for its radical departure from the 2013 Rule is a pretext; Inclusive Communities did not require, or even
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encourage, the adoption of HUD’s new Rule. The 2020 Rule is inconsistent with Inclusive Communities.
107. HUD relied on factors Congress did not intend the agency to consider when HUD invented the new defenses introduced in the 2020 Rule and altered the well-established burdenshifting framework.
108. HUD’s distinction between “single events” and “policies and practices” is artificial, unexplained and inconsistent with the purposes of the FHA.
109. HUD’s new pleading rules are internally inconsistent and of uncertain application. 110. HUD did not take adequate account of the differences between the new pleading rules established by the 2020 Rule and the Federal Rules of Civil Procedure. 111. HUD did not take adequate account of the adverse impact its 2020 Rule would have on the ability of aggrieved parties to prosecute valid housing and lending discrimination claims. 112. The Court should vacate the 2020 Rule under 5 U.S.C. § 706(2)(A) because the 2020 Rule is arbitrary and capricious.
Count III: Violation of the APA – Notice and Comment 113. Plaintiffs adopt by reference the allegations of ¶¶ 1-112 of this Complaint. 114. The APA directs federal courts to hold unlawful and set aside federal agency action that is “without observance of procedure required by law.” 5 U.S.C. § 706(2)(D). 115. HUD was required both by the FHA, 42 U.S.C. § 3614a, and the APA, 5 U.S.C. § 553, to provide adequate notice and opportunity for comment before promulgating the 2020 Rule. 116. In its 2019 Proposed Rule, HUD introduced an “algorithmic model” defense that sought to shield defendants from liability for policies or practices which utilized algorithms that
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were (a) based on “neutral inputs” that were not substitutes for protected characteristics such that the model was not predictive of risk or other valid objectives; (b) considered “industry standard,” used for the intended purpose of the third party, and the responsibility of the third party; or (c) analyzed by a neutral third party who determined the model was empirically derived, that its inputs were not substitutes for a protected characteristic, the model was predictive or risk or other valid objective, and was a demonstrably and statistically sound algorithm. 84 Fed. Reg. at 42862.
117. In the 2020 Rule, HUD discarded the “algorithmic model” approach and inserted an opaque, new provision allowing a defendant to avoid liability by demonstrating that the policy or practice being challenged “is intended to predict the occurrence of an outcome, the prediction represents a valid interest, and the outcome predicted by the policy or practice does not or would not have a disparate impact on protected classes compared to similarly situated individuals not part of the protected class.” 85 Fed. Reg. at 6033, 2020 Rule, 24 C.F.R. § 100.500(d)(2)(i).
118. HUD never gave the public notice of, or any opportunity to comment on, the “outcome prediction” defense that was first announced when the 2020 Rule was published.
119. The “outcome prediction” defense in the 2020 Rule is not the same as the “algorithmic model” defense in the Proposed Rule. It is a new and entirely different defense than what HUD made available for notice and comment when it published the Proposed Rule.
120. Under both the FHA and the APA, HUD was required to give notice of its proposed “outcome prediction” defense and provide an opportunity for comment before adopting the 2020 Rule, but HUD did not do so.
121. The Court should vacate the 2020 Rule under 5 U.S.C. § 706(2)(A) because the 2020 Rule was adopted without adequate notice and comment.
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Count IV: Violation of the APA – Without Lawful Authority 122. Plaintiffs adopt by reference the allegations of ¶¶ 1-121 of this Complaint. 123. The APA directs federal courts to hold unlawful and set aside federal agency action that is “in excess or statutory jurisdiction [or] authority.” 5 U.S.C. § 706(2)(C). 124. The 2020 Rule purports to create new pleading requirements, motion practice and burden-shifting rules for all disparate impact complaints, whether they are brought to the FHA by charging parties under 42 U.S.C. § 3610 or brought by plaintiffs in federal or state court. 125. HUD has no statutory power to alter pleading, motion or trial practice in the federal or state courts. 126. HUD has no authority to promulgate retroactive rules under the FHA. 127. Even if it were valid, the 2020 Rule cannot lawfully be applied to pending claims at HUD or in the courts.
PRAYERS FOR RELIEF Wherefore, the Plaintiffs respectfully request that the Court grant the following relief: 1. Upon motion, issue a preliminary injunction under 5 U.S.C. § 705 postponing the effective date of the 2020 Rule pending conclusion of this review proceeding. 2. Declare that HUD’s 2020 Rule violates the Administrative Procedures Act and the Fair Housing Act. 3. Vacate the 2020 Rule and set it aside under 5 U.S.C. § 706. 4. Award Plaintiffs reasonable attorneys’ fees and costs under the Equal Access to Justice Act or as otherwise authorized by law. 5. Such other relief as justice may warrant.
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September 28, 2020

By their attorneys,
/s/ Lauren Sampson Lauren Sampson (BBO # 704319) Oren Sellstrom (BBO # 569045) LAWYERS FOR CIVIL RIGHTS 61 Batterymarch Street, 5th Floor Boston, Massachusetts 02210 (617) 482-1145
Scott P. Lewis (BBO # 298740) Mina S. Makarious (BBO # 675779) Annie E. Lee (BBO # 705568) ANDERSON & KREIGER LLP 50 Milk Street, 21st Floor Boston, Massachusetts 02109 (617) 621-6525

25

 
 Case 3:20-cv-11765-MGM Document 29 Filed 10/25/20 Page 1 of 14

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

MASSACHUSETTS FAIR HOUSING CENTER, *

and HOUSING WORKS, INC.

*

*

Plaintiffs,

*

*

v.

*

* Civil Action No. 20-11765-MGM

UNITED STATES DEPARTMENT

*

OF HOUSING AND URBAN

*

DEVELOPMENT, and BEN CARSON, *

Department of Housing and Urban

*

Development

*

*

Defendants.

*

MEMORANDUM AND ORDER REGARDING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION UNDER 5 U.S.C. § 705 TO POSTPONE THE EFFECTIVE DATE
OF HUD’S UNLAWFUL NEW RULE (Dkt. No. 11)
October 25, 2020

MASTROIANNI, U.S.D.J.

I. INTRODUCTION Presently before the court is a motion, filed by Plaintiffs Massachusetts Fair Housing Center (“MFHC”) and Housing Works, Inc., seeking a preliminary injunction and stay of the effective date of a new Department of Housing and Urban Development (“HUD”) rule, HUD’s Implementation of the Fair Housing Act’s Disparate Treatment Standard, 85 Fed. Reg. 60288 (Sept. 24, 2020) (“2020 Rule”), under the Administrative Procedure Act (“APA”), 5 U.S.C. § 705. For the following reasons, the court will grant Plaintiffs’ motion.

Case 3:20-cv-11765-MGM Document 29 Filed 10/25/20 Page 2 of 14
II. BACKGROUND
HUD has long recognized so-called “disparate impact” liability under the Fair Housing Act.
Unlike disparate treatment liability, which requires discriminatory intent, disparate impact liability is
based on the discriminatory impact of a policy or practice and the absence of an adequate
justification. See Texas Dep't of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519,
524 (2015) (recognizing disparate impact liability under the Fair Housing Act). In 2013, HUD issued
a rule setting forth its interpretation of the standards for such disparate impact claims under the Fair
Housing Act: Implementation of the Fair Housing Act’s Discriminatory Effects Standard, 78 Fed. Reg. 11560
(Feb. 15, 2013) (“2013 Rule”). The 2013 Rule, codified at 24 C.F.R. § 100.500, provides a relatively
straight-forward burden-shifting framework. Specifically, it states:
Liability may be established under the Fair Housing Act based on a practice's discriminatory effect, as defined in paragraph (a) of this section, even if the practice was not motivated by a discriminatory intent. The practice may still be lawful if supported by a legally sufficient justification, as defined in paragraph (b) of this section. The burdens of proof for establishing a violation under this subpart are set forth in paragraph (c) of this section.
(a) Discriminatory effect. A practice has a discriminatory effect where it actually or predictably results in a disparate impact on a group of persons or creates, increases, reinforces, or perpetuates segregated housing patterns because of race, color, religion, sex, handicap, familial status, or national origin.
(b) Legally sufficient justification.
(1) A legally sufficient justification exists where the challenged practice:
(i) Is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent, with respect to claims brought under 42 U.S.C. 3612, or defendant, with respect to claims brought under 42 U.S.C. 3613 or 3614; and
(ii) Those interests could not be served by another practice that has a less discriminatory effect.
(2) A legally sufficient justification must be supported by evidence and may not be hypothetical or speculative. The burdens of proof for establishing each of the two elements of a legally sufficient justification are set forth in paragraphs (c)(2) and (c)(3) of this section.
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(c) Burdens of proof in discriminatory effects cases.
(1) The charging party, with respect to a claim brought under 42 U.S.C. 3612, or the plaintiff, with respect to a claim brought under 42 U.S.C. 3613 or 3614, has the burden of proving that a challenged practice caused or predictably will cause a discriminatory effect.
(2) Once the charging party or plaintiff satisfies the burden of proof set forth in paragraph (c)(1) of this section, the respondent or defendant has the burden of proving that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests of the respondent or defendant.
(3) If the respondent or defendant satisfies the burden of proof set forth in paragraph (c)(2) of this section, the charging party or plaintiff may still prevail upon proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect.
(d) Relationship to discriminatory intent. A demonstration that a practice is supported by a legally sufficient justification, as defined in paragraph (b) of this section, may not be used as a defense against a claim of intentional discrimination.
24 C.F.R. § 100.500.
In contrast, the 2020 Rule, set to go into effect on October 26, 2020, significantly alters the
2013 Rule’s standards. It provides:
(a) General. Liability may be established under the Fair Housing Act based on a specific policy's or practice's discriminatory effect on members of a protected class under the Fair Housing Act even if the specific practice was not motivated by a discriminatory intent.
(b) Pleading stage. At the pleading stage, to state a discriminatory effects claim based on an allegation that a specific, identifiable policy or practice has a discriminatory effect, a plaintiff or charging party (hereinafter, “plaintiff”) must sufficiently plead facts to support each of the following elements:
(1) That the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law;
(2) That the challenged policy or practice has a disproportionately adverse effect on members of a protected class;
3

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(3) That there is a robust causal link between the challenged policy or practice and the adverse effect on members of a protected class, meaning that the specific policy or practice is the direct cause of the discriminatory effect;
(4) That the alleged disparity caused by the policy or practice is significant; and
(5) That there is a direct relation between the injury asserted and the injurious conduct alleged.
(c) Burdens of proof in discriminatory effect cases. The burdens of proof to establish that a policy or practice has a discriminatory effect, are as follows:
(1) A plaintiff must prove by the preponderance of the evidence each of the elements in paragraphs (b)(2) through (5) of this section.
(2) A defendant or responding party (hereinafter, “defendant”) may rebut a plaintiff's allegation under (b)(1) of this section that the challenged policy or practice is arbitrary, artificial, and unnecessary by producing evidence showing that the challenged policy or practice advances a valid interest (or interests) and is therefore not arbitrary, artificial, and unnecessary.
(3) If a defendant rebuts a plaintiff's assertion under paragraph (c)(1) of this section, the plaintiff must prove by the preponderance of the evidence either that the interest (or interests) advanced by the defendant are not valid or that a less discriminatory policy or practice exists that would serve the defendant's identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant.
(d) Defenses. The following defenses are available to a defendant in a discriminatory effect case.
(1) Pleading stage. The defendant may establish that a plaintiff has failed to sufficiently plead facts to support an element of a prima facie case under paragraph (b) of this section, including by showing that the defendant's policy or practice was reasonably necessary to comply with a third-party requirement, such as a:
(i) Federal, state, or local law;
(ii) Binding or controlling court, arbitral, administrative order or opinion; or
(iii) Binding or controlling regulatory, administrative or government guidance or requirement.
(2) After the pleading stage. The defendant may establish that the plaintiff has failed to meet the burden of proof to establish a discriminatory effects claim under paragraph (c) of this section, by demonstrating any of the following:
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(i) The policy or practice is intended to predict an occurrence of an outcome, the prediction represents a valid interest, and the outcome predicted by the policy or practice does not or would not have a disparate impact on protected classes compared to similarly situated individuals not part of the protected class, with respect to the allegations under paragraph (b). This is not an adequate defense, however, if the plaintiff demonstrates that an alternative, less discriminatory policy or practice would result in the same outcome of the policy or practice, without imposing materially greater costs on, or creating other material burdens for the defendant.
(ii) The plaintiff has failed to establish that a policy or practice has a discriminatory effect under paragraph (c) of this section.
(iii) The defendant's policy or practice is reasonably necessary to comply with a third party requirement, such as a:
(A) Federal, state, or local law;
(B) Binding or controlling court, arbitral, administrative order or opinion; or
(C) Binding or controlling regulatory, administrative, or government guidance or requirement.
(e) Business of insurance laws. Nothing in this section is intended to invalidate, impair, or supersede any law enacted by any state for the purpose of regulating the business of insurance.
(f) Remedies in discriminatory effect cases. In cases where liability is based solely on a discriminatory effect theory, remedies should be concentrated on eliminating or reforming the discriminatory practice so as to eliminate disparities between persons in a particular protected class and other persons. In administrative proceedings under 42 U.S.C. 3612(g) based solely on discriminatory effect theory, HUD will seek only equitable remedies, provided that where pecuniary damage is proved, HUD will seek compensatory damages or restitution; and provided further that HUD may pursue civil money penalties in discriminatory effect cases only where the defendant has previously been adjudged, within the last five years, to have committed unlawful housing discrimination under the Fair Housing Act, other than under this section.
(g) Severability. The framework of the burdens and defenses provisions are considered to be severable. If any provision is stayed or determined to be invalid or their applicability to any person or circumstances invalid, the remaining provisions shall be construed as to be given the maximum effect permitted by law.
24 C.F.R. § 100.500 (effective October 26, 2020).
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There can be doubt that the 2020 Rule weakens, for housing discrimination victims and fair
housing organizations, disparate impact liability under the Fair Housing Act. It does so by
introducing new, onerous pleading requirements on plaintiffs,1 and significantly altering the burden-
shifting framework by easing the burden on defendants of justifying a policy with discriminatory
effect while at the same time rendering it more difficult for plaintiffs to rebut that justification.2 In
addition, the 2020 Rule arms defendants with broad new defenses which appear to make it easier for
offending defendants to dodge liability and more difficult for plaintiffs to succeed. In short, these
changes constitute a massive overhaul of HUD’s disparate impact standards, to the benefit of
putative defendants and to the detriment of putative plaintiffs (and, by extension, fair housing
organizations, such as MFHC).
Plaintiffs are fair housing organizations that provide an array of services to victims of
housing and lending discrimination, including legal representation, education, and advocacy. (See
Dkt. No. 12-1; Dkt. No. 12-2.) They filed this action on September 28, 2020, seeking to vacate the
2020 Rule under the APA. (Dkt. No. 1.) On October 6, 2020, Plaintiffs filed their motion for
preliminary injunction and stay under 5 U.S.C. § 705. (Dkt. No. 11.) Defendants opposed Plaintiffs’
motion on October 14, 2020, arguing a lack of standing and ripeness as well as failure to satisfy the
1 See 2020 Rule, 24 C.F.R. § 100.500(b) (requiring at “the pleadings stage,” among other things, that plaintiffs “sufficiently plead facts to support” . . . “[t]hat the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law.”) 2 For example, the 2013 Rule requires defendants, after plaintiffs meet their initial burden of showing that the practice “caused or predictably will cause a discriminatory effect,” to prove “that the challenged practice is necessary to achieve one or more substantial, legitimate, nondiscriminatory interests,” before the burden shifts back to plaintiffs. 2013 Rule, 24 C.F.R. § 100.500(c)(2) (emphasis added). The 2020 Rule, however, permits defendants to “rebut a plaintiff's allegation under (b)(1) . . . that the challenged policy or practice is arbitrary, artificial, and unnecessary by producing evidence showing that the challenged policy or practice” merely “advances a valid interest.” 2020 Rule, 24 C.F.R. § 100.500(c)(2) (emphasis added). In addition, the 2013 Rule, at the third step of the burden-shifting framework, permits a plaintiff to prevail by “proving that the substantial, legitimate, nondiscriminatory interests supporting the challenged practice could be served by another practice that has a less discriminatory effect,” 2013 Rule, 24 C.F.R. § 100.500(c)(2), whereas the 2020 Rule requires the plaintiff to prove “that a less discriminatory policy or practice exists that would serve the defendant's identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant,” 2020 Rule 24 C.F.R. § 100.500(c)(2) (emphasis added).
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requirements for obtaining a preliminary injunction. Plaintiffs thereafter filed a reply brief, and the court held a hearing on October 16, 2020. (Dkt. Nos. 25, 27, 28.)
III. SUBJECT MATTER JURISDICTION “Article III of the Constitution confines the judicial power of federal courts to deciding actual ‘Cases’ or ‘Controversies.’” Hollingsworth v. Perry, 570 U.S. 693, 704 (2013). “Two of the . . . manifestations [of this limitation] are the justiciability doctrines of standing and ripeness, which are interrelated; each is rooted in Article III.” Reddy v. Foster, 845 F.3d 493, 499 (1st Cir. 2017). A. Standing “[T]he standing inquiry [is] focused on whether the party invoking jurisdiction had the requisite stake in the outcome when the suit was filed.” Davis v. Fed. Election Comm'n, 554 U.S. 724, 734 (2008). To show standing, “[a] plaintiff must demonstrate (1) an injury in fact which is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical,’ (2) that the injury is ‘fairly traceable to the challenged action,’ and (3) that it is ‘likely . . . that the injury will be redressed by a favorable decision.’” Massachusetts v. United States Dep't of Health & Human Servs., 923 F.3d 209, 221–22 (1st Cir. 2019) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). Moreover, “[i]t is well-established that an organization can sue to obtain compensation for injuries it sustains,” so long as these same requirements are met. Sexual Minorities Uganda v. Lively, 960 F. Supp. 2d 304, 324 (D. Mass. 2013); see Havens Realty Corp. v. Coleman, 455 U.S. 363, 379-80 (1982). Accordingly, organizational standing exists when the organization suffers (or likely will suffer) “an injury to its organizational activities.” Equal Means Equal v. Ferriero, 2020 WL 4548248, at *10 (D. Mass. Aug. 6, 2020). The court concludes, at this preliminary stage of the litigation, that Plaintiff MFHC has demonstrated standing. See Massachusetts v. E.P.A., 549 U.S. 497, 518 (2007) (only one plaintiff need establish standing). Contrary to the government’s significantly overstated argument, MFHC has
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shown more than “a mere interest in a problem.” Sierra Club v. Morton, 405 U.S. 727, 739 (1972). Rather, MFHC “has set forth predictions of injury, supported by evidence” which “would be caused by the federal regulations and would be redressable by an injunction.” Massachusetts, 923 F.3d. at 227; see also E. Bay Sanctuary Covenant v. Barr, 964 F.3d 832, 843–44 (9th Cir. 2020). Specifically, MFHC attests that if the 2020 Rule goes into effect, it will be forced to expend additional resources in preparing to bring disparate impact claims due to the heightened pleading and proof requirements, abandon potential disparate impact claims which are otherwise viable under the 2013 Rule, and modify its education and training programs. (See Dkt. No. 12-1 ¶¶ 24-28, 44-49.) As the First Circuit has explained, plaintiffs “need not wait for an actual injury to occur before filing suit” nor “demonstrate that it is literally certain that the harms they identify will come about.” Massachusetts, 923 F.3d. at 222, 224; see also Adams v. Watson, 10 F.3d 915, 921 (1st Cir. 1993) (“[I]t could hardly be thought that administrative action likely to cause harm cannot be challenged until it is too late.” (internal quotation marks omitted)). By demonstrating a “substantial probability” that concrete and particularized harm will occur to MFHC’s core mission of combatting housing discrimination, MFHC has satisfied the standing requirement. Maine People's All. And Nat. Res. Def. Council v. Mallinckrodt, Inc., 471 F.3d 277, 284 (1st Cir. 2006). B. Ripeness
The court also concludes that this APA challenge is ripe. The “ripeness doctrine seeks to prevent the adjudication of claims relating to ‘contingent future events that may not occur as anticipated, or indeed may not occur at all.’” Reddy, 845 F.3d at 500 (quoting Texas v. United States, 523 U.S. 296, 300 (1998)); see also Roman Catholic Bishop of Springfield v. City of Springfield, 724 F.3d 78, 89 (1st Cir. 2013) (“The basic rationale of the ripeness inquiry is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements.” (internal quotation marks omitted)). Moreover, as to APA challenges, “[w]here, as here, a petition
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involves purely legal claims in the context of a facial challenge to a final rule, a petition is ‘presumptively reviewable,’” i.e., ripe. Owner-Operator Indep. Drivers Ass'n, Inc. v. Fed. Motor Carrier Safety Admin., 656 F.3d 580, 586 (7th Cir. 2011) (quoting Sabre, Inc. v. Dep't of Transp., 429 F.3d 1113, 1119 (D.C.Cir.2005)). Plaintiffs have brought such a facial challenge to a final rule based on purely legal claims. See Bucklew v. Precythe, 139 S. Ct. 1112, 1127 (2019) (“A facial challenge is really just a claim that the law or policy at issue is [unlawful] in all its applications.”); Nat'l Ass'n of Home Builders v. U.S. Army Corps of Engineers, 417 F.3d 1272, 1281–84 (D.C. Cir. 2005) (“[C]laims that an agency’s action is arbitrary and capricious or contrary to law present purely legal issues.” (internal quotation marks omitted) Although Plaintiffs’ challenge to the 2020 Rule is somewhat abstract, that is in the nature of disparate impact theory. The government has made well-reasoned points on this issue but, at this preliminary stage, the court finds Plaintiffs’ challenge is sufficiently “fit” for judicial resolution and they face immediate hardship if the court were to withhold review. See Roman Catholic Bishop of Springfield, 724 F.3d at 89-93.
IV. ANALYSIS Plaintiffs seek a preliminary injunction barring implementation of HUD’s 2020 Disparate Impact Rule and a stay of the effective date of this rule under the Administrative Procedure Act (“APA”), 5 U.S.C. § 705.3 The parties agree that the same standard governs both forms of relief. “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). “In each case, courts ‘must balance the competing claims of injury and must consider the effect on each party of the granting or withholding of the requested relief.’” Id. (quoting Amoco Production Co. v. Village of Gambell, Ak., 480 U.S. 531, 542
3 In relevant part, 5 U.S.C. § 705 provides: “On such conditions as may be required and to the extent necessary to prevent irreparable injury, the reviewing court, including the court to which a case may be taken on appeal from or on application for certiorari or other writ to a reviewing court, may issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings.” 5 U.S.C. § 705.
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(1987)). “The purpose of such interim equitable relief is not to conclusively determine the rights of the parties . . . but to balance the equities as the litigation moves forward.” Trump v. Int’l Refugee Assistance Project, 137 S. Ct. 2080, 2087 (2017) (internal citation omitted). In order to obtain such preliminary injunctive relief, a plaintiff must demonstrate “(1) a substantial likelihood of success on the merits, (2) a significant risk of irreparable harm if the injunction is withheld, (3) a favorable balance of hardships, and (4) a fit (or lack of friction) between the injunction and the public interest.” NuVasive, Inc. v. Day, 954 F.3d 439, 443 (1st Cir. 2020) (internal quotation marks omitted). The First Circuit has explained that likelihood of success on the merits is “the most important of the four preliminary injunction factors.” Doe v. Trustees of Bos. Coll., 942 F.3d 527, 533 (1st Cir. 2019). A. Likelihood of Success on the Merits
In support of their preliminary injunction motion, Plaintiffs rely on three arguments: (1) the 2020 Rule is “contrary to law”; (2) the changes to the 2013 Rule are “arbitrary and capricious”; and (3) the 2020 Rule’s inclusion of the “outcome prediction defense,” to be codified at 24 C.F.R. § 100.500(d)(2)(i), violates the APA’s “notice and comment” requirements. The court only addresses Plaintiffs’ second argument, which it finds is likely meritorious.
“The APA ‘sets forth the procedures by which federal agencies are accountable to the public and their actions subject to review by the courts.’” Dep't of Homeland Sec. v. Regents of the Univ. of California, 140 S. Ct. 1891, 1905 (2020) (quoting Franklin v. Massachusetts, 505 U.S. 788, 796(1992)). “It requires agencies to engage in ‘reasoned decisionmaking,’ . . . and directs that agency actions be ‘set aside’ if they are ‘arbitrary’ or ‘capricious,’ 5 U.S.C. § 706(2)(A).” Id. (internal citation omitted). This standard of review is “narrow” and “a court is not to substitute its judgment for that of the agency.” Id. (internal quotation marks omitted); see also F.C.C. v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009) (“Under what we have called this ‘narrow’ standard of review, we insist that an agency ‘examine the relevant data and articulate a satisfactory explanation for its action.’” (quoting
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Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43 (1983))).
As explained above, the 2020 Rule constitutes a significant overhaul to HUD’s interpretation of disparate impact standards. HUD’s explanation for these changes generally boil down to two justifications: (1) they bring these standards into alignment with the Supreme Court’s decision in Inclusive Communities, and (2) they provide greater clarity to the public. See generally 85 Fed Reg. 6028801.
As to the first justification, the parties vigorously dispute whether the changes “merely incorporate” the standards set forth by the Supreme Court in Inclusive Communities and other precedent, as Defendants argue. (Dkt. No. 24 at 16; see also id. at 22-24.) The court believes both sides have exaggerated their respective arguments on this point. For example, Plaintiffs argue there is no judicial support for the 2020 Rule’s requirement, to be codified in 24 C.F.R. § 100.500(b)(1), that a plaintiff must plead, at the outset, facts showing “[t]hat the challenged policy or practice is arbitrary, artificial, and unnecessary to achieve a valid interest or legitimate objective such as a practical business, profit, policy consideration, or requirement of law.” But, as Defendants point out, the “arbitrary, artificial, and unnecessary” language comes directly from Inclusive Communities, 576 U.S. at 540, 543, 544. Moreover, Plaintiffs completely ignore, in their briefing, the Eighth Circuit’s decision in Ellis v. City of Minneapolis, 860 F.3d 1106, 1112 (8th Cir. 2017), which interpreted Inclusive Communities to require that plaintiffs allege in the complaint that the challenged policy is “arbitrary and unnecessary.”
On the other hand, the additional language in 24 C.F.R. § 100.500(b)(1)—“such as a practical business, profit, policy consideration”—is not, as far as the court is aware, found in any judicial decision. The same is true as to other important provisions in the 2020 Rule, including the new “outcome prediction” defense; the requirement at the third step of the burden-shifting
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framework that the plaintiff prove “a less discriminatory policy or practice exists that would serve the defendant's identified interest (or interests) in an equally effective manner without imposing materially greater costs on, or creating other material burdens for, the defendant”; and the conflating of a plaintiff’s prima facie burden and pleading burden. 2020 Rule, 24 C.F.R. § 100.500(c)(3) (emphasis added), (d)(1), and (d)(2)(iii). These significant alterations, which run the risk of effectively neutering disparate impact liability under the Fair Housing Act, appear inadequately justified.
Similarly, HUD’s second explanation for the changes—to provide greater clarity—appear arbitrary and capricious. As Plaintiffs argue, the 2020 Rule, with its new and undefined terminology, altered burden-shifting framework, and perplexing defenses accomplish the opposite of clarity—“it raises far more questions than it answers.” (Dkt. No. 12 at 12.)
Accordingly, at this very preliminary stage, the court finds Plaintiff have shown a substantial likelihood of success on the merits as to their claim that the 2020 Rule is arbitrary and capricious under the APA. B. Irreparable Harm
As explained, the 2020 Rule’s massive changes pose a real and substantial threat of imminent harm to MFHC’s mission by raising the burdens, costs, and effectiveness of disparate impact liability. Moreover, because the APA does not provide for monetary damages, these harms are not recoverable if the 2020 Rule is allowed to go into effect but later vacated. See E. Bay Sanctuary Covenant, 964 F.3d at 854; D.C. v. U.S. Dep't of Agric., 444 F. Supp. 3d 1, 34–38 (D.D.C. 2020); City & Cty. of San Francisco v. U.S. Citizenship & Immigration Servs., 408 F. Supp. 3d 1057, 1121 (N.D. Cal. 2019); New Hampshire Hosp. Ass'n v. Burwell, 2016 WL 1048023, at *16–18 (D.N.H. Mar. 11, 2016). The court therefore finds Plaintiffs have demonstrated a significant risk of irreparable harm if the injunction is withheld.
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C. Balance of Harms and Public Interest The final two preliminary injunction factors “merge when the Government is the opposing
party.” Nken v. Holder, 556 U.S. 418, 435 (2009). Defendants have not identified any particularized risks of harm the government or the public would face should the injunction issue, especially given the existence of the 2013 Rule, which has been and can continue to be workable, for both sides, in the realm of disparate impact litigation. In addition, the court finds it is in the public interest to require agencies to adequately justify significant changes to its regulations, particularly changes that weaken anti-discrimination provisions. As the Supreme Court explained in Inclusive Communities, disparate impact liability “is consistent with the FHA's central purpose” of “eradicate[ing] discriminatory practices within a sector of our Nation's economy.” Inclusive Communities, 576 U.S. at 539 (2015). Moreover, “disparate-impact liability under the FHA also plays a role in uncovering discriminatory intent: It permits plaintiffs to counteract unconscious prejudices and disguised animus that escape easy classification as disparate treatment.” Id. at 540. The court finds the balance of harms and public interest supports a preliminary injunction pending a complete review of Plaintiffs’ APA challenge.
V. CONCLUSION For these reasons, the court ALLOWS Plaintiffs’ Motion for a Preliminary Injunction Under 5 U.S.C. § 705 to Postpone the Effective Date of HUD’s Unlawful New Rule (Dkt. No. 11). (1)The court therefore, pursuant to 5 U.S.C. § 705, STAYS the implementation of HUD’s Rule entitled HUD’s Implementation of the Fair Housing Act’s Disparate Treatment Standard, 85 Fed. Reg. 60288 (Sept. 24, 2020) (to be codified at 24 C.F.R. § 100.500), in its entirety, pending entry of a final judgment on Plaintiffs’ APA claims. The effective date of the Final Rule is hereby POSTPONED pending conclusion of these review proceedings. (2) In addition, pursuant to Rule 65(a) of the Federal Rules of Civil Procedure, the court PRELIMINARILY ENJOINS Defendants and their officers, agents, servants, employees, and attorneys, and any person in active concert or participation with them, from implementing or enforcing the Rule entitled HUD’s Implementation of the Fair Housing Act’s Disparate Treatment Standard, 85 Fed. Reg. 60288 (Sept. 24, 2020), in any manner or in any
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Case 3:20-cv-11765-MGM Document 29 Filed 10/25/20 Page 14 of 14 respect, and shall preserve the status quo pursuant to the regulations in effect as of the date of this Order, until further order of the court. (3) No bond shall be required pursuant to Federal Rule of Civil Procedure 65(c). It is So Ordered.
_/s/ Mark G. Mastroianni________ MARK G. MASTROIANNI United States District Judge
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