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Supreme Court Tentatively Allows City Claims Against Banks for Discriminatory Lending to Proceed

The glass is more than half full after the Supreme Court’s ruling in Bank of America v. Miamibut not as full as local governments would like. The Supreme Court could have totally shut down local government lawsuits against banks for discriminatory lending practices—but it didn’t. The Supreme Court also could have made it easier for local governments to prove these cases—but it didn’t. 

In Bank of America v. Miami the Supreme Court held 5-3 that local governments have “standing” to bring Fair Housing Act (FHA) lawsuits against banks alleging discriminatory lending practices. But to win these claims local governments must show that their injuries were more than merely foreseeable. The State and Local Legal Center (SLLC) filed an amicus brief in this case on the side of the City of Miami.   

Miami claims that Bank of America and Wells Fargo intentionally issued riskier mortgages on less favorable terms to African-American and Latino customers than similarly situated white customers in violation of the FHA. Miami further claims these discriminatory practices caused foreclosures and vacancies which harmed the city by decreasing property values, reducing property tax revenue, and increasing costs to the city.  

The banks argue Miami lacks “standing” to sue under the FHA and that the banks did not “proximately-cause” harm to the city. Regarding standing, the FHA allows “aggrieved person[s]” to sue. The banks argue that Miami’s claimed harms do not “arguably” fall within the “zone of interests” the FHA seeks to protect—so Miami isn’t an “aggrieved person.” Regarding causation, the banks argue “the distance between [the bank’s alleged discriminatory lending practices] and the harms the City claims to have suffered is simply too great to entitle the City to collect damages.”    

The Court, in an opinion written by Justice Breyer, concluded, based on precedent, that Miami’s claims of financial injury are sufficient to meet the FHA’s standing requirement. Specifically, in Gladstone, Realtors v. Village of Bellwood (1979) the Court allowed the Village of Bellwood to sue real estate brokerage firms who were steering prospective black home buyers away from predominately white neighborhoods under the FHA for similar economic injuries.  

Regarding causation, the lower court concluded that the banks’ alleged discriminatory lending practices proximately caused the city’s economic injuries because they were the foreseeable result of the banks’ misconduct. The Supreme Court concluded foreseeability isn’t enough to prove causation. Instead, proving proximate-cause under the FHA requires “some direct relation between the injury asserted and the injurious conduct alleged.”

The Court refused to “draw the precise boundaries of proximate cause under the FHA and to determine on which side of the line the City’s financial injuries fall,” leaving it to the lower court to rule on causation.  

At least 12 other cities and counties have brought similar lawsuits against banks. All eyes will be on the Eleventh Circuit’s ruling on causation in this case.

The SLLC’s amicus brief discussed at length the nature and significance of the economic injuries cities and counties face as a result of foreclosed and vacant properties.

Deepak Gupta, Rachel Bloomekatz, and Matthew Spurlock of Gupta Wessler, wrote the SLLC brief, which was joined by the National Association of CountiesNational League of CitiesUnited States Conference of MayorsInternational City/County Management Association, and the International Municipal Lawyers Association.          

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