Recent SCOTUS opinion raises hope for municipalities struggling to recover from effects of predatory lending practices

The Opinion of the Supreme Court of the United States in Bank of America Corp. et al. v. City of Miami, Florida, No. 15-1111, was released on May 2, 2017. I know that because I was right there in the Courtroom—with fellow REM member and Newsletter Editor Khara Coleman—as Justice Breyer, the author of the majority Opinion, announced and explained the Court’s ruling—and the ruling in a second case—as the Court’s first order of business for the day. The next order of business was administration of the oath by Chief Justice John Roberts to several groups of lawyers seeking certification of admission to the U.S. Supreme Court, including a group from the WBAI of which Khara and I were a part. It was truly a thrilling experience to know that those of us who were present on this meaningful morning were the very first people to learn of the decisions in these two cases…even before SCOTUSblog or other legal news sites announced the decisions.

The Bank of America (‘BOA’) case was decided on Cert to the U.S. Court of Appeals for the 11th Circuit. The initial lawsuit was instituted by a complaint the City of Miami filed against both BOA and Wells Fargo alleging violations of the Fair Housing Act arising from their predatory lending practices in minority communities and consequent financial damages to the City. In the SCOTUS Opinion, written by Justice Breyer, the Court held that Miami does have a cognizable claim for damages related to the discriminatory effects of such lending practices in which the two Appellant Banks engaged and so the case remains alive. The issue the Court did not reach is whether sufficient evidence exists to show that the discriminatory conduct of the Banks that purportedly resulted in higher numbers of foreclosures and housing vacancies in minority communities was the cause of the economic damages that Miami alleges it suffered as well as of impairment of the City’s efforts to achieve racial integration.

This second part of the matter—that of ‘proximate cause’ or causal connection—wasn’t fully explored in the lower courts because (1) the District Court found that the injuries asserted by Miami were not covered by the FHA and thus it dismissed the action; and (2) on appeal, the Eleventh Circuit reversed the District Court on the issue of FHA coverage and, in reviewing the City’s asserted damages, applied the standard of ‘foreseeability’ alone for determining causation. Finding that standard to be insufficient, SCOTUS vacated and remanded the case to the Eleventh Circuit Court of Appeals for further action but in its Opinion gave guidance to the lower court—almost in the form of a formula—as to what standard would suffice.

In reaching its conclusion that the City met its initial requirement of being an ‘aggrieved party’ under the FHA, the Court applied the FHA standard set forth in Holmes v. Securities Investors Protection Corp. and also analogized the subject action to tort actions, as exemplified by Curtis v. Loether, in which a claimant must establish “some direct relation between the injury asserted and the injurious conduct alleged.” Thus, as stated in the case Syllabus, the Eleventh Circuit must define, in the first instance, “the contours of proximate cause under the FHA and decide how that standard applies to the City’s claims for lost property-tax revenue and increased municipal expenses.”

While Miami has a long and difficult road to travel, there is some promise of recompense for Miami and for similarly situated communities and their units of local government that could help to ameliorate the devastation in those communities. If Miami is able to show that the disproportionate numbers of defaults and foreclosures arising from the discriminatory lending practices of the Banks concentrated in segregated communities are “directly related” to the City’s loss of property tax revenues and the need for increased municipal services to assist those devastated communities, then monetary damages may be its reward. Such an outcome could certainly help tip the scales toward the victims in these seemingly commonplace neighborhood scenarios that have been taking place throughout the country.

This author hopes that other municipalities with similar experiences decide to file amicus briefs on behalf of their own struggling communities. Additionally, various prominent NFP entities that work to make affordable, safe, quality housing available to distressed minority communities, such as the Shriver Center on Poverty Law, the Lawyers Committee for Better Housing, CVLS and the DePaul University Institute of Housing Studies might be especially persuasive on this issue given the clientele they serve and the research that some of them have published which reflects the kind of causal connection that the Bank of America v. Miami case addresses.

Even informally, many of us ‘on the ground’ have witnessed the effects on a community of abandoned homes and multi-unit buildings and, as lawyers, we also know of individuals and families that require representation in housing matters from legal aid agencies. Such knowledge in a legal context was shared with ISBA members over the past several months in a four-part CLE series on ‘Housing Justice v. Housing Injustice’. If you weren’t in the audience, you can learn about the programs in this Newsletter’s overview of that series which concluded on April 26 with ‘Resources for Rebuilding Communities’. Additionally, if your interest is piqued, you can access all four programs in ISBA’s CLE webinar archives. 