Wolverhampton Council leader Ian Brookfield announced the authority had joined forces with Birmingham, Coventry, Dudley, Sandwell, Stoke and Walsall with papers being served on Tuesday.
He said the programme – which sees private companies placing people in towns and cities – only featured a third of councils in the UK while the rest “do nothing”.
The scheme came under fire earlier this week when it was revealed around 200 asylum seekers had been temporarily placed in the Britannia Hotel in Wolverhampton.
At a full council meeting Councillor Brookfield said: “We’ve always played our role as a city of sanctuary status. More recently people will have seen the horrible pictures from Afghanistan.
“Three or four months ago, when this was first identified, the leaders of the West Midlands pledged we would help 750 people straight away.
“We recognise the Afghan refugees had worked solidly on our behalf with the British armed forces in the most appalling conditions in the most dangerous place on earth. We are happy to help.
“But what we’ve got with this (dispersal) scheme is somebody throwing a huge load of seeds up in the air, seeing where they land and then let them get on with it
“Not a scintilla of cooperation with the local authorities, it’s all done through a private company – Serco in the West Midlands.
“They block book hotels, move people in within 24-48 hours with no discussions with local authorities, no finances to help some of the most damaged people we will ever see.
“It’s not good enough for us. We’ve had people coming in straight from the south coast with no nappies for the kids, no clothes.
“This allocation scheme is not fair because it is centred on places that are known to help and so there are towns and cities like us who are in the same position.
“And yet there are two thirds of authorities in our country who do nothing. Not one person – they turn the other cheek. Mainly affluent authorities.
“For myself and the leaders of Walsall, Dudley, Stoke, Birmingham, Coventry and Sandwell – enough is enough.
“This is a failing policy. It’s a broken system. We’ve taken the rather unusual step of seven authorities – half Labour half Conservative – taking the Home Office and Home Secretary to High Court.
“We’re telling them it should be mandatory across the country – if everybody did just a little bit, this problem would not exist. And we have to say to them, until you fix this the seven authorities will not be accepting any more from the dispersal scheme.
“That’s a hard thing to say but we’ve come to that point – you’ve come to the well too many times and it is dry. We have many issues within our city and across the West Midlands we can’t ignore.
“That is why we are taking them to court. I will update when we know more. But it is something we can’t afford to lose. People need to be allocated fairly and not treated like rubbish. They are not rubbish.”
Wolverhampton Conservative group leader Wendy Thompson added: “We have a great record of settling people into this city.
“Some of those people have given great service to the city. There is a lot for Wolverhampton to be glad about.
“But at the same time it is a question for how much can be coped with. It isn’t that we are unwelcoming in any way, it is simply a question of numbers.
“Every year, without fail, there have been hundreds of people that have come into Wolverhampton and over the years we must have settled thousands.
“We have a very good record but there comes a point where we all have said, if it is a dispersal scheme then surely it’s a national one and not simply keeping to certain concentrated areas.”
A Home Office spokesperson said: “The UK has a proud history of welcoming and supporting those in need of our protection.
“The Government is committed to doing everything necessary to protect the rights of asylum seekers and provide them with the safe, secure accommodation they deserve.
“We are working closely with our accommodation providers to increase the amount of Dispersed Accommodation available to us.
“We need the support of Local Authorities to do that and we are committed to working with them.”