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WBK Industry News - Litigation Developments

Supreme Court Holds that Cities can file Lawsuits under the Fair Housing Act

On May 1, 2017, the Supreme Court held that cities can bring suit under the Fair Housing Act (“FHA Act”) as an “aggrieved person,” because they are within the zone of interests protected by the FHA Act.

The City of Miami sued multiple banks alleging violations of the FHA Act over discriminatory lending practices.  Specifically, the plaintiff argued that the defendants intentionally made loans to minority borrowers on worse terms than equally creditworthy nonminority borrowers.  The defendants also allegedly failed to extend refinancing and loan modifications to minority borrowers on fair terms.  This discriminatory conduct allegedly caused a disproportionate number of foreclosures and vacancies in majority-minority areas, which, by decreasing the property value of the foreclosed homes as well as the values of other homes in the neighborhood, was claimed to have reduced property tax revenues to Miami, forcing Miami to spend more on municipal services to remedy blight and unsafe and dangerous conditions at the foreclosed properties.

The district court dismissed the plaintiff’s complaint, holding that (1) the economic harms alleged fall outside the zone of the interests the FHA Act protects, and (2) the complaint failed to show a sufficient causal connection between the alleged discriminatory conduct and the plaintiff’s injuries.  The United States Court of Appeals for the Eleventh Circuit reversed the district court, and reinstated the plaintiff’s claims.

The Supreme Court held that, based on precedent, the definition of an “aggrieved person” under the FHA Act shows a congressional intent to define standing as broadly as is permitted by Article III of the Constitution.  The Court previously permitted municipalities to file suits under the FHA Act alleging that racial steering practices caused losses in tax revenue.  Additionally, Congress chose to ratify the Court’s prior decisions when it reenacted the relevant statutory text without changes.  Accordingly, the city is permitted to file suit under the FHA Act.

However, the Supreme Court reversed the Court of Appeals’ holding on what the plaintiff would need to show to meet the FHA Act’s proximate cause requirement.  The Court of Appeals held that the plaintiff’s injuries were foreseeable, and that foreseeability, standing alone, was enough to satisfy the causation requirement.  The Supreme Court rejected this view, holding that a plaintiff must satisfy the common law proximate cause threshold, which requires a sufficiently close connection between the alleged harm and the conduct the statute prohibits.  Foreseeability is not enough.  The Court declined to determine whether the plaintiff’s asserted injuries satisfy the proximate cause requirement in this case, and instead remanded the case to the Court of Appeals for consideration of how the standard applies to claims for lost property-tax revenue and increased municipal expenses.

The case is Bank of America v. City of Miami, and is available here.