City Has Standing to Bring FHA Suit Based on Discriminatory Lending Practices by Banks, Remands on Proximate Cause Issue

In this Fair Housing Act (“FHA”) claim out of Florida, the Supreme Court was asked to decide whether a municipality has standing to bring a claim under the FHA, and whether there is a sufficient causal link between predatory lending practices within minority communities and the negative effects on municipalities that result in those communities due to high foreclosure rates. The Court held that municipalities do have standing to bring FHA claims, but remanded to the lower courts to decide the issue of proximate cause.

The City of Miami (the “City”) filed suit against Bank of America and Wells Fargo (“Banks”), alleging violations of the FHA. The City alleged that the Banks had been intentionally targeting predatory lending practices toward minority neighborhoods and residents, by lending to minority borrowers on worse terms than equally creditworthy nonminority borrowers and inducing defaults by failing to extend refinancing and loan modifications to minority borrowers on fair terms. This discriminatory conduct, the City alleged, led to a disproportionate number of foreclosures and vacancies in majority-minority neighborhoods, which in turn impaired the City’s effort to assure racial integration, diminished property-tax revenue, and increased demand for police, fire, and other municipal services. The District Court dismissed the complaints on the grounds that (1) the alleged harm fell outside the zone of interests the FHA protects and (2) the complaints failed to show a sufficient causal connection between the City’s injuries and the Banks’ discriminatory conduct. The Eleventh Circuit reversed.

The Supreme Court granted review. It ruled that the City could bring suit under the FHA, as the City’s claims of financial injury were, at the least, “arguably within the zone of interests” the FHA protects. However, the Court found that the City’s complaints did not meet the FHA’s proximate-cause requirement based solely on the assertion that the alleged financial injuries were the foreseeable result of the Banks’ misconduct. The Court declined the opportunity to draw the precise boundaries of proximate cause under the FHA; instead remanding the issue to the lower courts to define, and decide how that standard applies to the City’s claims for lost property-tax revenue and increased municipal expenses.

Click here to read: Bank of America Corp. v. City of Miami, No. 15–1111 (U.S. May 1, 2017).

Edited by:

Zac Sivertsen