A ruling by the U.S. Supreme Court last month will definitely have an effect in litigation between cities and banks under the Fair Housing Act (FHA). The ruling was in a case over the impact of predatory lending practices on local communities. The court’s decision has been referred to as “a mixed-bag ruling,” with each side able to claim a victory of sorts. Tony Mauro, writing for the National Law Journal, stated:
Civil rights and civil liberties groups applauded the court’s 5-3 decision affirming that Miami has standing to claim in court that it was harmed by the discriminatory lending practices of banks targeting minority borrowers.
However, banks were relieved on a second issue. The high court unanimously agreed that Miami must meet a high standard of proof to establish that the banks’ actions caused the city’s injuries. The court vacated and remanded the case back to the U.S. Court of Appeals for the Eleventh Circuit which had ruled in favor of Miami on the standing issue and also on the “proximate cause” issue. The 11th Circuit had found that all of the harms Miami suffered, such as lower property tax revenue and higher costs of city services, were “foreseeable.” The Supreme Court stated that foreseeability alone was not enough to sustain a claim for damages.
Lawyers in our firm’s Consumer Fraud & Commercial Litigation Section believe that the ruling will encourage cities to file suit against lenders. The court pretty well laid out something like a roadmap for cities. Lawsuits similar to Miami’s have been filed in Miami and also in Cobb County and DeKalb County in Georgia.
There was a great deal of interest in this appeal. For example, a brief was filed in the case by 26 cities across the nation. The following are some observations about the court’s opinion:
Brianne Gorod, chief counsel of the Constitutional Accountability Center, said, “The key takeaway from the court’s opinion is that Miami and other cities have standing to sue – that’s a win for Miami. To be sure, it would have been better for Miami had the court affirmed on the proximate cause issue, as well, but the court’s opinion leaves no doubt that the Eleventh Circuit can conclude on remand that there is proximate cause.”
Kristen Clarke, president of the Lawyers’ Committee for Civil Rights Under Law, also applauded the decision, while calling the proximate-clause finding “a small step backward.” Clarke said, “Our nation is still wrestling with the collateral consequences of the foreclosure crisis. Today’s Supreme Court decision reinforces the critical role that states and cities must play in holding banks and other actors accountable for actions that continue to harm communities, particularly minority communities that have borne the brunt of the crisis.”
Justice Stephen Breyer, writing for the majority in the consolidated cases of Bank of America v. City of Miami and Wells Fargo & Co. v. City of Miami, said longstanding court precedents established that “the city’s claimed injuries fall within the zone of interests that the FHA arguably protects. Hence, the city is an ‘aggrieved person’ able to bring suit under the statute.” But Judge Breyer also wrote:
The housing market is interconnected with economic and social life. A violation of the FHA may, therefore, ‘be expected to cause ripples of harm to flow’ far beyond the defendant’s misconduct. … Nothing in the statute suggests that Congress intended to provide a remedy wherever those ripples travel.
Banking and business groups also filed briefs in the case warning that a broad interpretation of standing could invite a flood of litigation not only from cities, but from plumbers and grocers who lost income because of neighborhood foreclosures. The American Banking Association stated in a brief: “According to the Eleventh Circuit … the category of potential FHA plaintiffs is essentially limitless.”
Chief Justice John Roberts Jr. joined Justices Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan in the majority. Justice Clarence Thomas dissented in part, joined by Justices Anthony Kennedy and Samuel Alito Jr. Justice Neil Gorsuch did not participate in the case.
It will be most interesting to see what results from this most significant opinion from the highest court in the land. In my opinion there will be a sharp increase in this litigation. Lawyers in our firm’s Consumer Fraud & Commercial Litigation Section are taking a strong look at these cases.
Source: National Law Journal
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