WASHINGTON - Is it a ground-breaking victory for banks fighting unfair-lending charges? Or is it mainly just good news for trailer park owners?

That depends on whom you talk to about the recent federal appeals court ruling in Mountain Side Mobile Estates Partnership v. Secretary of Housing and Urban Development.

On its face, the case has nothing to do with fair-lending.

It does, however, involve a company arguing that business concerns forced it to follow practices that turned out to have a discriminatory effect - which is something banks may want to argue in defense of their lending practices.

Mountain Side Estates, Golden, Colo., initiated the dispute when it evicted a family that had violated its mobile home park's limit of three people per unit. The family complained to the Department of Housing and Urban Development, charging discrimination on the basis of familial status.

HUD, which enforces the Fair Housing Act, charged Mountain Side with discrimination.

Mountain Side, which until 1989 had been for adults only, argued that its three-person limit was needed to avoid overloading the park's sewers and diminishing the quality of park life.

An administrative law judge dismissed the charges three times, only to have HUD Secretary Henry Cisneros overturn the rulings and decree that Mountain Side had to prove "compelling need or necessity" for its three- person limit.

On May 30, a three-judge panel of the U.S. Court of Appeals for the 10th Circuit ruled 2 to 1 against HUD.

A defendant in a housing discrimination case "must demonstrate that the discriminatory practice has a manifest relationship to the housing in question," Judge James E. Barrett wrote in the majority opinion.

"There is no requirement that the defendant establish a 'compelling need or necessity' for the challenged practice to pass muster, since this degree of scrutiny would be almost impossible to satisfy," Judge Barrett added.

This was a clear setback for HUD and for the Justice Department, which argued the case. But will it really mean all that much to banks worried about joining the list of Justice Department fair-lending targets?

"This is a very significant decision for banks because it supports the theory that a challenged practice does not have to satisfy a 'compelling need or necessity' standard," said Robert Ledig, a partner in Fried, Frank, Harris, Shriver & Jacobson in Washington.

"As long as the bank can show a basis for tying that practice to a legitimate, good-faith concern as a lender, that would constitute sufficient justification for the practice," Mr. Ledig said.

Walt Zaleski, a partner at Bryan, Cave, McPheeters, and McRoberts, who represented Shawmut Mortgage Co. in its 1993 fair-lending negotiations with the Justice Department, isn't so sure banks will benefit from the 10th circuit ruling.

"In the real world, no lender has yet litigated a fair-lending case," he said. "Why? Because banks are very public institutions, and litigation is very prolonged, and nobody wants to live under a cloud of racism for a long time."

As a result, the standard applied by the enforcing agency - in banks' case, the Justice Department - matters more than do legal precedents, Mr. Zaleski said.

The 10th circuit ruling might give banks slightly more hope of prevailing if a fair-lending case goes to trial, he said, but "I'm not sure who's going to litigate these things."

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