On Thursday, the Senate Health, Education, Labor and Pensions Committee is scheduled to hold a confirmation hearing for Tom Perez, the current Assistant Attorney General for Civil Rights and President Obama’s nominee to be the next Secretary of Labor. As if on cue, four of the Obama Administration’s perpetual gadflies — Reps. Darrell Issa (R-CA), Patrick McHenry (R-NC) & Bob Goodlatte (R-VA) and Sen. Chuck Grassley (R-IA) — released a report yesterday with the breathless title “DOJ’s Quid Pro Quo with St. Paul: How Assistant Attorney General Thomas Perez Manipulated Justice and Ignored the Rule of Law.” The report accuses Perez of brokering a “quid pro quo” deal where DOJ agreed to keep out of a potential fraud lawsuit against the city of St. Paul if St. Paul agreed to withdraw a civil rights case that was pending before the Supreme Court. Here’s what actually happened:
1. Perez’s Actions Likely Saved A Key Prong Of Federal Fair Housing Law
The federal Fair Housing Act forbids most landlords, realtors, mortgage lenders and other people involved in selling or renting housing from engaging in racial, gender, religious or several other forms of discrimination. Like all discrimination cases, however, these lawsuits are notoriously difficult to prove because they turn upon the secret reasons why banks and property owners decide to deal with certain people and not others. There’s nothing illegal about renting to a white couple when a black couple also wanted the same unit, or about denying a home loan to a woman or a minority — unless, of course, the decision not to rent to the black couple or to deny the loan was made because of their gender or minority status.
For this reason, civil rights law provides several mechanisms that allow victims of discrimination to pursue cases without first having to develop a talent for mind-reading. One of the most important of these mechanisms is “disparate impact” lawsuits, which allow a court to infer discrimination if an renter or lender’s policies consistently lead to women or minorities winding up with the short end of the stick. Thus, for example, Perez’s Civil Rights Division won a $335 million settlement from the mortgage lender Countrywide, after it discovered that Countrywide “charged higher fees and rates to more than 200,000 minority borrowers across the country than to white borrowers who posed the same credit risk.” In one year, for example, “Countrywide employees charged Hispanic applicants in Los Angeles an average of $545 more in fees for a $200,000 loan than they charged non-Hispanic white applicants with similar credit histories.” DOJ was able to use this pattern of discrimination to win this settlement, thanks to the concept of disparate impact, even though they never uncovered a smoking gun document where Countrywide’s senior management openly confessed to racial discrimination.
While the Supreme Court has never considered whether disparate impact suits are permitted under the Fair Housing Act, all nine of the federal appeals courts to consider the question held that they are. Chief Justice Roberts, however, crusaded against these kinds of lawsuits for more than 30 years, and when an unusually weak Fair Housing claim reached the Supreme Court in 2011, many court observers feared that the conservative justices would use it an opportunity to gut the Fair Housing Act and forbid disparate impact housing suits. Perez helped convince the city of St. Paul, which brought that very weak case to the Supreme Court’s attention, to withdraw its appeal — potentially saving much of federal fair housing law in the process.