AIR ENDING LITIGATION FOLLOWING THE … Lending...250 FAIR LENDING LITIGATION FOLLOWING THE SUPREME COURT’S RULING IN CITY OF MIAMI* John L. Ropiequet John L. Ropiequet is of counsel

250

FAIR LENDING LITIGATION

FOLLOWING THE SUPREME COURT’SRULING IN CITY OF MIAMI *

John L. Ropiequet

John L. Ropiequet is of counsel to the Litigation Group at Saul EwingArnstein & Lehr, LLP’s Chicago office. He is a graduate of The JohnsHopkins University and Northwestern Pritzker School of Law. John isImmediate Past Chairman of the Conference on Consumer Finance Law,a Fellow of the American College of Consumer Finance Lawyers, and co-editor of the Annual Survey of Consumer Finance Law in The Busi-ness Lawyer. He is also co-editor of the 2018 supplement to The Lawof Truth in Lending and a frequent contributor to the Consumer Fi-nance Law Quarterly Report and other publications.

I. INTRODUCTION

John L. Ropiequet

After a two-year hiatus, the Eleventh Circuit has fi-nally issued its remand opinion in the cases filed byMiami against two major mortgage lenders, followingthe U.S. Supreme Court’s 2017 ruling in Bank of AmericaCorp. v. City of Miami.1 This is the most recent chapterof a long story concerning municipal2 fair lending casesthat may have more chapters left to unfold, but ap-pears to be nearing its end. Although fair lending en-forcement actions have almost vanished at the federallevel,3 some consumer organizations have begun topick up the torch.

The ebbs and flows of fair lending litigation over the past two decadeshave been chronicled extensively in the Quarterly Report. The first cycle oflitigation, starting in the mid-1990s, involved several class actions claimingthat large auto finance companies, both banks and non-banks, extendedcredit in a racially discriminatory manner in violation of the Equal Credit

* This article was adapted from an earlier version published in the Banking &Financial Services Policy Report. Reprinted with permission.1. 137 S. Ct. 1296 (2017).2. The term “municipal” will be used to describe all local governmental units,whether cities or counties.3. See Consumer Fin. Prot. Bureau, Fair Lending Report of the Bureau ofConsumer Financial Protection 28, 30 (June 2019), https://files.consumerfinance.gov/f/documents/201906_cfpb_Fair_Lending_Report.pdf [https://perma.cc/VV92-TZN5] (listing one ECOA enforcement action filed in 2017, none in2018, and one referral to DOJ in 2018).

Fair Lending Litigation Following City of Miami 251

Opportunity Act (ECOA).4 These cases resulted in a series of class settle-ments that handsomely rewarded class counsel, but provided relativelyfew benefits to the affected minority class members.5

The next cycle stemmed from the foreclosure crisis that started in 2007at the beginning of the Great Recession. A smattering of individual casesclaiming racial discrimination in violation of the ECOA and the Fair Hous-ing Act (FHA)6 was succeeded by both a new round of class actions andthe filing of significant federal enforcement actions against major mortgagelenders.7 This coincided with the commencement of the Obama Adminis-tration, marking a sea change after enforcement activity in the fair lendingarena had ceased entirely during the Bush Administration.8

The fair lending class actions and the enforcement actions coincidedwith a groundswell of demands for reform of financial practices, leadingto the enactment of the Dodd–Frank Wall Street Reform and ConsumerProtection Act of 2010 (Dodd–Frank Act).9 Title XIV of the Dodd–FrankAct, entitled the Mortgage Reform and Anti-Predatory Lending Act, tar-geted a variety of substandard mortgage lending practices that weredeemed “predatory” and Title XIV amended or added many provisions tothe Truth in Lending Act,10 and contributed to the wave of foreclosures that

4. Equal Credit Opportunity Act of 1974, Pub. L. No. 93-495, 88 Stat. 1500, 1521(1974) (codified as amended at 15 U.S.C. §§ 1691–1691f (2018)). See generallyJohn L. Ropiequet & Nathan O. Lundby, APR Split Class Actions Under the EqualOpportunity Credit Act: The End of History?, 61 Consumer Fin. L.Q. Rep. 49(2007) (examining the ECOA and litigation arising from finance contract salesand assignments that “may well extend” ECOA liability “to assignees as wellas original creditors”).5. Attorneys’ fees in twelve reported class action settlements totaled$66,523,000. Class benefits, largely in the defendants’ programs to finance morecar sales, were significantly less than that. See Ropiequet & Lundby, supra note4, at 59–60 tbl.1.6. Act of Apr. 11, 1968, Pub. L. No. 90-284, §§ 801–901, 82 Stat. 73, 81–90 (1968)(codified as amended at 42 U.S.C. §§ 3601–3612 (2018)).7. See John L. Ropiequet, Christopher S. Naveja & L. Jean Noonan, Update onCurrent and Prospective Fair Lending Enforcement and Litigation Developments, 65Consumer Fin. L.Q. Rep. 22, 23–26, 29–31 (2011) [hereinafter Fair Lending 2011](referencing single-plaintiff and U.S. Department of Justice (DOJ) enforcementcases); John L. Ropiequet, Racial Discrimination Claims in Current Mortgage andAuto Finance Litigation: The Song Remains the Same, 63 Consumer Fin. L.Q. Rep.156, 159–60 (2009) (discussing single-plaintiff cases).8. See John L. Ropiequet, Fair Lending Litigation and the Impact of Wal-MartStores, Inc. v. Dukes, 66 Consumer Fin. L.Q. Rep. 158, 163 & n.73 (2012).9. Pub. L. No. 111-203, 124 Stat. 1376 (2010) (codified in relevant part in scat-tered sections of 12 U.S.C. & 15 U.S.C.).10. John L. Ropiequet, Private Remedies for Truth in Lending Violations, in TheLaw of Truth in Lending 1001, 1007–12 (Alvin C. Harrell ed., 2014); John L.

252 Quarterly Report Vol. 73, No. 4 2019

occurred when overextended borrowers could no longer make their pay-ments as the economy worsened and unemployment peaked. Added to thevocabulary of discriminatory lending practices described as “redlining,”where credit is not offered or is denied to minority borrowers, was the term“reverse redlining,” where minority borrowers are allegedly “targeted” forunaffordable high-cost mortgage loans with unfair terms, often describedas “predatory” loans.11

One consequence of this turn of events was that local city and countygovernments began to claim that they too, not just their residents, had theright to bring actions in court to counter predatory mortgage lending prac-tices that financially devastated their communities. The municipal plaintiffssought to recover for their own damages as predatory lending allegedlycaused wide-scale defaults on unaffordable loans, foreclosures, and aban-donment of residential properties, with further consequential damages tothe local tax base and increased governmental expenditures for a host ofharms from police and fire protection to human services outlays.

The attempt to redress such grievances, by deeming the actions of mort-gage lenders and their securitizers a “public nuisance” necessitating judi-cial abatement was unsuccessful.12 But another theory has had considerablestaying power. Starting with a suit by Baltimore in 2008,13 local govern-ments alleged that they had standing under the FHA and the ECOA torecover their own damages resulting from discriminatory lending prac-tices. Such injuries were clearly some steps removed from any injuries thatminority mortgage borrowers may have suffered, and the defendant banksengaged in extensive motion practice to try to eliminate such claims with-out going to trial.14 The defendant banks had some success defending

Ropiequet, Christopher S. Naveja & Jason B. Hirsh, The Dodd–Frank Act Changesthe Consumer Finance Landscape, 64 Consumer Fin. L.Q. Rep. 284, 289–93 (2010).11. See Ropiequet, supra note 8, at 158–59.12. See Richard E. Gottlieb & Brett J. Natarelli, Update on Municipal Nuisanceand Discrimination Litigation, 65 Bus. Law. 665, 665–70 (2010) (highlightingcourts’ reasoning under the economic loss rule and lack of proximate cause asbasis for Cleveland’s lack of success on its public nuisance claims). Dismissalof Cleveland’s public nuisance case was affirmed on appeal and there havebeen no further public nuisance theory cases filed. City of Cleveland v. Ameri-quest Mortg. Sec., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009), aff ’d, 615 F.3d 496(6th Cir. 2010), cert. denied, 562 U.S. 1288 (2011).13. Mayor of Baltimore v. Wells Fargo Bank, N.A., 631 F. Supp. 2d 702, 703(D. Md. 2009); John L. Ropiequet, Predatory Lending/Fair Lending: Municipalitiesand Others Take on Mortgage Lenders, 64 Consumer Fin. L.Q. Rep. 130, 130–32,130 n.8 (2010).14. See Ropiequet, supra note 13, at 130–32 (discussing the Baltimore and Bir-mingham cases); Fair Lending 2011, supra note 7, at 31–32 (describing the Bal-timore case as the most notable example of employing motions to avoid trial).


against the first round of municipal fair lending claims,15 but to the extentthat those cases survived motions to dismiss, they were subsumed into aseries of very large settlements in enforcement actions brought by the U.S.Department of Justice (DOJ).16

The U.S. Supreme Court entered this picture with three important de-cisions. The first decision, Wal-Mart Stores, Inc. v. Dukes,17 was an employ-ment case rather than a fair lending case, but it effectively ended fair lend-ing class actions against mortgage issuers.18 These class action complaintswere all based on a theory that lenders’ “discretionary pricing policies,”which allowed mortgage brokers and bank loan officers some discretion toset interest rates and other terms for mortgage loans on a case-by-case basis,caused a disparate impact on borrowers who belonged to protectedclasses.19 In Dukes, a putative nationwide class of female Wal-Mart em-ployees claimed that a corporate policy permitting local store managersdiscretion over promotion and compensation decisions discriminatedagainst them.20 The Supreme Court found that no class action could bemaintained because a policy that granted numerous lower-level managersdecision-making discretion was not even a corporate policy.21 In the ab-sence of an identifiable corporate policy that caused the alleged discrimi-natory effects on the plaintiffs, there was no “glue” to hold the purportedclass together.22

This ruling had obvious implications for other pending fair lending classactions against mortgage lenders. The courts quickly applied the Dukes

15. See Ropiequet, supra note 13, at 131 (“[The Mayor of Baltimore court] notedthat ‘too much speculation is required to connect the causal links’ whereclaimed injuries are ‘too indirect,’ because they result from the actions of in-dependent third parties.”); see also John L. Ropiequet, Does Inclusive Commu-nities Point the Way to a More Limited Future for Fair Lending Claims?, 69 Con-sumer Fin. L.Q. Rep. 83, 89 (2015) [hereinafter Fair Lending 2015] (examiningBaltimore and other municipal fair lending cases).16. Fair Lending 2015, supra note 15, at 85–86; see also John L. Ropiequet, Chris-topher S. Naveja & L. Jean Noonan, Fair Lending Developments: A Continuationand a New Beginning, 70 Bus. Law. 625, 626–29 (2015) (reviewing DOJ fair lend-ing enforcement settlements); John L. Ropiequet, Christopher S. Naveja &L. Jean Noonan, Fair Lending Developments: Enforcement Intensifies, Class ActionsDiminish, 68 Bus. Law. 637, 637–42 (2013) (noting the differences in private fairlending litigation and settlements).17. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).18. Ropiequet, supra note 8, at 159.19. Id. at 169.20. Dukes, 564 U.S. at 355–56; Ropiequet, supra note 8, at 170–71.21. Dukes, 564 U.S. at 356–57; Ropiequet, supra note 8, at 171.22. See Dukes, 564 U.S. at 352, 359 (holding that “[b]ecause respondents provideno convincing proof of a companywide discriminatory pay and promotion pol-icy . . . they have not established the existence of any common question[,]” andtherefore cannot qualify as a class).


decision to find that those purported classes also lacked the “glue” to holdthem together because there was no identifiable corporate policy to formthe basis for a disparate impact claim.23 No fair lending class actions havebeen filed since then.

The Supreme Court’s second decision arose in a fair lending context. InTexas Department of Housing and Community Affairs v. Inclusive CommunitiesProject, Inc.,24 the Court addressed whether disparate impact claims can bemade under the FHA, when two cases that raised this question settled aftercertiorari was granted, but before the Court could hear oral argument.25

The Inclusive Communities Court ruled that FHA claimants may seek reliefunder a disparate impact theory for unintentional acts as well as suingunder a disparate treatment theory for intentional acts.26 However, theCourt imposed some significant evidentiary burdens on disparate impactplaintiffs.27 It held that statistical evidence alone, which both private plain-tiffs and the DOJ heavily relied on to establish disparate impact claims,was not enough to show a prima facie case of liability.28 The Court furtherheld that there was a robust causality requirement that must be met inorder to prevent defendants from being subjected to “abusive disparate-impact claims.”29

The Supreme Court’s third decision, Bank of America Corp. v. City ofMiami,30 arose from a second round of municipal fair lending cases thatbegan in late 2012, following the DOJ’s settlements, when three Atlanta-area counties sued a large mortgage issuer for discrimination under theFHA and the ECOA.31 Similar suits arose across the country, including casesfiled by Miami against Wells Fargo and Bank of America, and have beenmet with extensive motion practice.32 The Miami cases were dismissed bythe district court, but the Eleventh Circuit reversed, finding that InclusiveCommunities’ “robust causality” requirement for recovery of the city’s al-

23. Id. at 352; see Ropiequet, supra note 8, at 172–74 (discussing various courts’determinations of class commonality in decisions subsequent to Dukes).24. Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 135S. Ct. 2507 (2015).25. Id. at 2513; Fair Lending 2015, supra note 15, at 86 (first citing Gallagher v.Magner, 619 F.3d 823 (8th Cir. 2010), cert. granted, 565 U.S. 1013 (2011), and cert.dismissed, 565 U.S. 1187 (2013); then citing Mt. Holly Gardens Citizens in Action,Inc. v. Township of Mt. Holly, 658 F.3d 375 (3d Cir. 2011), cert. granted, 570 U.S.904, and cert. dismissed, 571 U.S. 1020 (2013)).26. Inclusive Cmtys. Project, Inc., 135 S. Ct. at 2522.27. See id. at 2523 (requiring plaintiffs to establish that a defendant has defin-itive policies that aggravate disparate treatment in affordable housing).28. Id.29. Id.30. 137 S. Ct. 1296 (2017).31. See Original Complaint at paras. 260–85, DeKalb County v. HSBC N. Am.Holdings, Inc., No. 1:12-cv-03640-AT (N.D. Ga. Oct. 18, 2012).32. Fair Lending 2015, supra note 15, at 89 & n.111.


leged damages should be assessed on a foreseeability standard, and thatMiami’s claims met that standard.33 The Supreme Court found, in turn, thatforeseeability was not enough to establish the required direct causal rela-tion between the banks’ allegedly discriminatory conduct against minorityborrowers and the city’s damages.34 It remanded the case to the EleventhCircuit to determine how to proceed, with little guidance on how to deter-mine how direct the causal connection must be.35

II. THE ELEVENTH CIRCUIT’S DECISION IN

CITY OF MIAMI V. WELLS FARGO & CO.

In the normal course of events, a case that is remanded from the Su-preme Court to a U.S. Court of Appeals will relatively quickly result inaction being taken in the court below to carry out the Supreme Court’sinstructions. The City of Miami Court held that the Eleventh Circuit’s find-ing that the city had standing to bring an FHA claim was correct.36 Whatwas incorrect was its finding that damages need only be foreseeable inorder to be proximately caused by an FHA violation, and therefore col-lectible because the FHA incorporates the common law tort standard ofproximate causation.37 The Court refused the parties’ request to “draw pre-cise boundaries . . . to determine on which side of the line the City’s finan-cial injuries fall,” leaving that for the Eleventh Circuit to define, since nei-ther it nor other U.S. Courts of Appeals had applied the proximate causestandard the Court had just set forth.38 The only guidance the Court offeredwas that the FHA did not reach damages that were “too remote” frommortgage lenders’ discriminatory acts, so that the “ripples of harm” thatflowed “far beyond the defendants’ misconduct” that a foreseeability stan-dard would allow recompense for would not be recoverable under a properproximate causation standard.39

This left a lot for the Eleventh Circuit, and any other court with a mu-nicipal fair lending case before it, to deal with. One would normally expect

33. City of Miami v. Bank of Am. Corp. (Bank of Am. Corp. I), 800 F.3d 1262,1281 (11th Cir. 2015), rev’g No. 13-24506-CIV, 2014 WL 3362348 (S.D. Fla.July 8, 2014), rev’d, 137 S. Ct. 1296 (2017); City of Miami v. Wells Fargo & Co.(Wells Fargo I), 801 F.3d 1258, 1267 (11th Cir. 2015), rev’g No. 13-24508-CIV-DIMITROULEAS, 2014 WL 11380948 (S.D. Fla. Sept. 16, 2014), rev’d, 137 S. Ct.1296 (2017).34. City of Miami, 137 S. Ct. at 1306; John L. Ropiequet, The Supreme CourtDoubles Down on the Causation Requirement for Fair Lending Cases, 71 ConsumerFin. L.Q. Rep. 219, 226–27 (2017).35. City of Miami, 137 S. Ct. at 1306.36. Id. at 1303.37. Id. at 1305.38. Id. at 1306.39. Id. (first quoting Lexmark Int’l, Inc. v. Static Control Components, Inc., 572U.S. 118, 133 (2014); then quoting Associated Gen. Contractors of Cal., Inc. v.Carpenters, 459 U.S. 519, 534 (1983)).


that on remand, the court would order significant additional briefing sothat it could view the causation issue afresh, hold an oral argument, andafter revitalized consideration, issue a new opinion. But that is not whathappened. After the Supreme Court ruled in June 2017, the Eleventh Circuitdid nothing to tackle either the problem itself, or to remand the cases toallow the district court to wrestle with the causation issue. Instead, the nextstep occurred when the defendant banks filed motions to remand the casesto the district court in October 2017, which the city opposed,40 and the cityfiled motions to set a briefing schedule in November, which the banksopposed.41

The Eleventh Circuit ordered the parties to address two questions inFebruary 2018, but did not set an oral argument.42 The parties were orderedto file simultaneous briefs, without responses, “concerning (1) the meaningof direct, proximate causation under the Fair Housing Act and (2) how thisCourt should proceed once the parties have had the opportunity to briefthat issue.”43 The court then issued its decision on remand in City of Miamiv. Wells Fargo & Co. (Wells Fargo II)44 in May 2019, almost two full yearsafter the Supreme Court’s City of Miami ruling.

Describing the city’s cases against Wells Fargo and Bank of America as“[t]his pair of ambitious fair housing lawsuits,” the Wells Fargo II courtbegan its analysis of the allegations of the amended complaints.45 The courtnoted that the Supreme Court “disagreed with this panel” on the proximatecausation issue, finding only that “foreseeability, standing alone, was nota sufficiently vigorous standard,” but that it “reached no firm conclu-sions.”46 The court further observed that “[w]hile the Court was clear thatforeseeability was not enough, it was less definitive when it came to layingout what more FHA proximate cause require[s].”47 The court therefore pro-ceeded to “endeavor carefully to apply the Court’s mandate to these com-

40. Defendant–Appellee’s Motion to Remand, Bank of Am. Corp. I, No. 14-14543(11th Cir. Oct. 26, 2017); Defendant–Appellee’s Motion to Remand, Wells Fargo I,No. 14-14544 (11th Cir. Oct. 26, 2017).41. Plaintiff–Appellant’s Motion to Restart or Set Briefing Schedule, Bank of Am.Corp. I, No. 14-14543 (11th Cir. Nov. 6, 2017); Plaintiff–Appellant’s Motion toRestart or Set Briefing Schedule, Wells Fargo I, No. 14-14544 (11th Cir. Nov. 6,2017).42. Order, Bank of Am. Corp. I, No. 14-14543-CC (11th Cir. Feb. 28, 2018); Order,Wells Fargo I, No. 14-14544-BB (11th Cir. Feb. 28, 2018).43. Id. at 2.44. City of Miami v. Wells Fargo & Co. (Wells Fargo II), 923 F.3d 1260 (11th Cir.2019).45. The court analyzed the same first amended complaints that the SupremeCourt had based its ruling on, even though later amended complaints had beenfiled in the district court during the course of the prolonged appeal process. Id.at 1266 n.2.46. Id. at 1270.47. Id.


plaints, to determine if they plausibly stated a claim under the Fair HousingAct.”48

The Wells Fargo II court found that the Supreme Court’s proximate cause“instructions,” in addition to foreseeability, also requires “some direct re-lation between the injury asserted and the injurious conduct alleged.”49

This led the court to conclude that “[t]here is give in the joints between‘some direct relation’ and ‘some direct causation’” which are not “identicalconcepts,” so that an intervening step in the causal chain will not neces-sarily vitiate proximate cause.50 Accordingly, it found that “‘[s]ome directrelation’ . . . works to guarantee that there is a ‘logical bond’ between vi-olation and injury.”51

The court then considered whether an intervening step would break thecausal chain. First, it held that “proximate cause does not always cut off atthe first step after a violative act” based on “crystal clear” Supreme Courtprecedent.52 Although the City of Miami Court stated that the “general ten-dency in these cases . . . is not to go beyond the first step” in the chain ofcausation,53 in Lexmark International, Inc. v. Static Control Components, Inc.,54

the Court went beyond the first step because there was no “discontinuity”between the corporate plaintiff’s injury for loss of customers and the de-fendant’s false and misleading statements that caused the loss, and it wasunnecessary to establish the causal link through “speculative proceedings”or “intricate, uncertain inquiries.”55 Based on this, the Wells Fargo II courtheld that “we may look to whether the injury is ‘surely attributable’ to thestatutory violation; we do not simply count the steps in the causal chain.”56

The court found that the Supreme Court’s decision in Bridge v. Phoenix Bond& Indemnity Co.57 also “turned on a connection between harm and injurythat was non-formalistic and disconnected from step-counting.”58

The defendant banks argued that City of Miami required a “first step”rule that would preclude FHA recovery for any injury that was more thanone step removed from the original discriminatory act by a mortgage

48. Id. at 1271.49. Id. at 1272 (quoting Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296,1306 (2017)).50. Id.51. Id. (citing Relation, Webster’s Third New International Dictionary1916 (2002)).52. Id. at 1273 (citing Lexmark Int’l, Inc. v. Static Control Components, Inc., 572U.S. 118 (2014)).53. Id. (quoting City of Miami, 137 S. Ct. at 1306).54. Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014).55. Wells Fargo II, 923 F.3d at 1274 (quoting Lexmark, 572 U.S. at 140) (internalquotation marks omitted).56. Id. at 1275 (citing Lexmark, 572 U.S. at 140).57. Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008).58. Wells Fargo II, 923 F.3d at 1275.


lender.59 The Wells Fargo II court rejected the argument, stating that undersuch a rule, “a plaintiff homeowner who was forced into foreclosure onaccount of a predatory bank loan that violated the Fair Housing Act wouldnever be able to plausibly allege that the foreclosure was proximatelycaused by the bank’s predation.”60 It found that if there were such a “firststep” rule, “there would have been no reason for the Supreme Court toremand this case back to our Court for further proximate cause analysis”since the case “would be over at the pleading stage.”61 It further found that“[o]nce we have reached increased foreclosures on a neighborhood or ci-tywide basis, it seems to us that the path to the City’s substantially de-creased tax base is clear, direct and immediate; we can discern no obviousintervening roadblocks.”62

The Wells Fargo II court also examined the FHA’s “broad remedial pur-pose” under the City of Miami Court’s instruction to consider “the natureof the statutory cause of action.”63 It started with the Supreme Court’s hold-ing that “[t]he injury to the City is as valid and as cognizable under theFHA as the injury to the homeowners.”64 While the FHA’s legislative his-tory was limited, the little that was said persuaded the Wells Fargo II courtthat “[t]he legislation, as its sponsors saw it, was designed to extendthrough chains of causation” to reach the many societal ills of the housingmarket caused by discrimination, including “harm to a city’s tax base.”65

The court then addressed “what is administratively possible and con-venient”66 under the factors listed by the Supreme Court in Holmes v. Se-curities Investor Protection Corp.,67 which it found to “strongly suggest thatthe City had plausibly alleged ‘some direct relation’ between the Banks’alleged conduct and the injury to the City’s tax revenue.”68 The court foundthat these factors made Miami’s claims for lost property tax revenue re-coverable, but its claims for increased municipal expenses due to fore-closures were not.69

The amended complaints described in detail how hedonic regressionanalysis of property tax records could control for other variables and isolatethe effect of redlining in a non-speculative and non-conclusory fashion.70

59. Id. at 1275–76.60. Id. at 1276.61. Id.62. Id. at 1277.63. Id. at 1278 (quoting Lexmark Int’l, Inc. v. Static Control Components, Inc.,572 U.S. 118, 133 (2014)).64. Id. at 1279 (citing Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296, 1303(2017)).65. Id. at 1280.66. Id. at 1281 (quoting City of Miami, 137 S. Ct. at 1306).67. Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258 (1992).68. Wells Fargo II, 923 F.3d at 1282.69. Id. at 1286.70. Id. at 1283.


The “aggregative nature” of Miami’s claims on a city-wide basis “also helpseliminate any discontinuity between the statutory violation and the in-jury.”71 The Wells Fargo II court noted that the district court in City of Oaklandv. Wells Fargo Bank, N.A.72 “[m]ost similarly and most recently” addressedthis question and reached the same conclusion in finding that the city’s losttax revenue could be recovered, while municipal expenditures for in-creased municipal police, fire, and building code violation expenses fordealing with foreclosed properties, which had no similar regression anal-ysis evidence to support them, were not recoverable.73 It also took note ofa similar finding in City of Philadelphia v. Wells Fargo & Co.74

With respect to the other Holmes factors, the Wells Fargo II court foundthat Miami’s damage claims would not overlap or duplicate any claims ofinjury that homeowners might bring, so there was no danger of a doublerecovery.75 In addition, it found that the city was far better suited than moredirectly injured homeowners to effectively pursue the banks’ alleged FHAviolations and to deter future misconduct.76

Both banks filed petitions for rehearing challenging the court’s “logicalbond” analysis, among other issues.77 The Eleventh Circuit denied bothpetitions78 and the banks then filed their second petitions for certiorari.Bank of America stated the question presented as, “Whether, under thisCourt’s decisions in this and other proximate-cause cases, the FHA’sproximate-cause element requires more than just some ‘logical bond’ be-tween a statutory violation and the claimed injury.”79 Wells Fargo similarlystated the question presented as, “Whether proximate cause in private lit-igation about the Fair Housing Act requires more than a ‘logical bond’between the alleged statutory violation and the plaintiff’s injury.”80 The

71. Id. at 1284 (citing Lexmark Int’l, Inc. v. Static Controls Components, Inc.,572 U.S. 118, 140).72. City of Oakland v. Wells Fargo Bank, N.A., No. 15-cv-04321-EMC, 2018 WL3008538 (N.D. Cal. June 15, 2018).73. Wells Fargo II, 923 F.3d at 1285 (citing City of Oakland, 2018 WL 3008538, at*8, *10).74. City of Philadelphia v. Wells Fargo & Co., No. 17-2203, 2018 WL 424451(E.D. Pa. Jan. 16, 2018).75. Wells Fargo II, 923 F.3d at 1287.76. Id. at 1289–90.77. Defendants–Appellees’ Petition for Rehearing En Banc at 8–10, City of Mi-ami v. Bank of Am. Corp. (Bank of Am. Corp. II), No. 14-14543 (11th Cir. May24, 2019); Defendants–Appellees’ Petition for Panel Rehearing and RehearingEn Banc at 4–7, Wells Fargo II, No. 14-14544 (11th Cir. May 24, 2019).78. Order, Bank of Am. Corp. II, No. 14-14543 (11th Cir. Aug. 26, 2019); Order,Wells Fargo II, No. 14-14544 (11th Cir. Aug. 26, 2019).79. Petition for a Writ of Certiorari at i, Bank of Am. Corp. II, No. 19-675 (U.S.Nov. 25, 2019), 2019 WL 6341145.80. Petition for a Writ of Certiorari at i, Wells Fargo II, No. 19-688 (U.S. Nov. 25,2019), 2019 WL 6465291.


ultimate resolution of Miami’s cases will therefore not be known for sometime, unless Miami’s subsequent voluntary unopposed dismissals of thetwo underlying cases result in either withdrawal or dismissal of the banks’petitions for certioriari.81

III. MUNICIPAL FAIR LENDING LITIGATION IN THE ELEVENTH

CIRCUIT FOLLOWING THE CITY OF MIAMI DECISION

Many cases similar to Miami’s lawsuits against Wells Fargo and Bankof America have been filed against major mortgage lenders since the cur-rent round of municipal fair lending litigation began in 2012 with the At-lanta suit.82 The Eleventh Circuit’s inaction on remand led most of the casesfiled in district courts in that circuit to be stayed pending a decision onremand,83 with some courts also refusing to reopen their cases.84

Only one case in an Eleventh Circuit district court has been reopenedfollowing the Supreme Court’s ruling, with summary judgment beinggranted to the defendant bank. In City of Miami Gardens v. Wells Fargo &Co.,85 the court dealt with whether the bank made any discriminatory loans

81. Miami filed its responses to the petitions for certiorari on January 27, 2020.Brief in Opposition, Bank of Am. Corp. v. City of Miami, No. 19-675 (U.S. Jan.27, 2020) (citing Fair Lending 2015, supra note 15, at 24, 27); Brief in Opposition,Wells Fargo & Co., No. 19-688 (U.S. Jan. 27, 2020) (citing Fair Lending 2015, supranote 15, at 29, 33). Miami then filed an unopposed motion to dismiss each ofthe cases in the district court and the motions were granted three days later.Order Granting Plaintiff ’s Unopposed Motion for Dismissal with Prejudice,City of Miami v. Bank of Am. Corp., No. 13-24506-CIV-DIMITROULEAS (S.D.Fla. Jan. 31, 2020); Order Granting Plaintiff ’s Unopposed Motion for Dis-missal with Prejudice, City of Miami v. Wells Fargo & Co., No. 13-24508-CIV-DIMITROULEAS (S.D. Fla. Jan. 31, 2020). Miami also dismissed a third casethat was pending against another major mortgage lender. See Order GrantingPlaintiff ’s Unopposed Motion for Dismissal with Prejudice, City of Miami v.Citigroup, Inc., No. 13-cv-24510-DIMITROULEAS (S.D. Fla. Jan. 30, 2020).82. See DeKalb County v. HSBC N. Am. Holdings, Inc., No. 1:12-CV-03640-SCJ,2013 WL 7874104, at *13–14 (N.D. Ga. Sept. 25, 2013) (providing statistical evi-dence of foreclosure risk across tri-county area clearly illustrating disparateimpact on classes protected under the FHA) (citing Original Complaint, supranote 31, at paras. 260–70).83. See, e.g., Order, HSBC N. Am. Holdings, Inc., No. 1:12-CV-3640-AT (N.D. Ga.Mar. 12, 2018) (continuing stay orders entered July 28, 2016 and May 17, 2017).84. See, e.g., Order Denying Plaintiff ’s Motion to Reopen Case, City of MiamiGardens v. Citigroup, Inc., No. 1:14-cv-22204-MGC (S.D. Fla. May 21, 2018)(“However, . . . the Eleventh Circuit is still considering how to proceed withthe cases . . . . I therefore find it appropriate to continue the stay in this matterpending further action by the Eleventh Circuit[.] Accordingly, . . . Plaintiff ’sMotion to Reopen Case (ECF No. 92) is DENIED.”).85. City of Miami Gardens v. Wells Fargo & Co., 328 F. Supp. 3d 1369 (S.D. Fla.2018), vacated & remanded per curiam by 931 F.3d 1274 (11th Cir. 2019).


to minority borrowers during the limitations period that would supporteither a disparate treatment claim or a disparate impact claim under theFHA.86 The Miami Gardens court’s earlier rulings required the city to allegewith considerable precision “(1) how [it] was injured, (2) how that injuryis traceable to the conduct of [the various defendants], and (3) how theinjury can be redressed with a favorable decision[.]”87 Limited discoveryon whether any loans issued between mid-2012 and mid-2014 violated theFHA, and therefore were not barred by the statute of limitations, produceda group of 153 loans of different types that were originated within thelimitations period, “including 130 loans to minority borrowers and 8 tonon-Hispanic white borrowers.”88

Miami Gardens’s Rule 30(b)(6) representative, its city manager, testifiedthat he could not identify any discriminatory or predatory loans, and thathe could not identify any minority borrowers who received loans that weremade on different terms from those made to similarly-situated white bor-rowers.89 The city’s expert witness, whose testimony made up the heart ofits case, matched two pairs of loans that he asserted showed evidence ofdiscrimination.90 The bank’s expert attacked the two pairings as not show-ing that the borrowers were similarly situated because they received lendercredits to defray closing costs in exchange for higher interest rates andsome promotional discounts.91

The Miami Gardens court first ruled that the “core issue” was whetherany FHA violations occurred during the FHA’s two-year statute of limi-tations period, because if so, the city could sue for earlier misconduct on acontinuing violation theory.92 Wells Fargo first argued that since the citywas bound by its Rule 30(b)(6) representative’s testimony, and the city man-ager’s testimony identified no discriminatory conduct, all claims were time-barred.93 The court agreed that the city was bound by that testimony andthat the city manager’s admissions were sufficient by themselves to grantsummary judgment to the bank.94

The court then considered, in the alternative, whether the city’s expertwitness testimony was enough to establish prima facie cases of disparateimpact and disparate treatment, and therefore defeat summary judgment.95

86. Id. at 1372.87. Id. at 1373 (quoting Order of Dismissal without Prejudice at *1, City of MiamiGardens, No. 14-22203-CIV, 2014 WL 6455660 (S.D. Fla. Oct. 1, 2014)).88. Id. at 1374.89. Id. at 1375.90. Id. at 1375–76.91. Id. at 1376.92. Id. at 1378.93. Id.94. Id. at 1378–79 (first citing QBE Ins. Corp. v. Jorda Enters., Inc., 277 F.R.D.676, 690 (S.D. Fla. 2012); then citing Wausau Underwriters Ins. Co. v. Danfoss,LLC, 310 F.R.D. 683, 687 (S.D. Fla. 2015)).95. Id. at 1379.


It first took note of the requirements set forth by the Supreme Court inInclusive Communities and the burden-shifting test in the U.S. Departmentof Housing and Urban Development’s Discriminatory Effects Standard.96

It also considered the Supreme Court’s instructions in Inclusive Communitiesthat disparate impact liability cannot be based “solely on a showing ofstatistical disparity,” that the policy that caused the disparity must be iden-tified, and that “a plaintiff must prove a ‘robust causality’ between thepolicy and the statistical disparity to ensure . . . defendants are not foundliable for racial disparities they did not create.”97

The Miami Gardens court found that the city’s expert evidence was in-sufficient to establish a disparate impact claim for several reasons. First,since the declaration of a former bank employee concerning the bank’spolicies had been stricken for lack of foundation, there was no evidenceleft in the record to support that element of an FHA claim.98 Next, sincethe city’s expert only identified two loans to minority borrowers out of 130that were allegedly more expensive, there was “insufficient record evidenceto show the policies produced ‘statistically-imbalanced lending pat-terns.’”99 Finally, the court found that the Eleventh Circuit required that, inorder to establish a basis for a disparate impact claim, the details for loansthat an expert attempts to match for minority and non-minority borrowers“must be nearly identical.”100 Finding that the city’s matched pairs werenot nearly identical because they were originated at different times andunder different structures, the court held that the comparisons “cannotsupport a claim of discrimination” under the Eleventh Circuit’s standard.101

It therefore granted summary judgment to the bank on this alternativeground.

The Miami Gardens litigation came to a sudden halt when the EleventhCircuit affirmed the district court’s ruling by vacating the judgment andremanding it with instructions to dismiss the case for lack of subject matterjurisdiction.102 Unlike the two years the court took to issue its remand opin-ion in City of Miami, the Miami Gardens court’s ruling came down only sixweeks after oral argument.

96. Id. at 1379–80 (first citing Implementation of the Fair Housing Act’s Dis-criminatory Effects Standard, 78 Fed. Reg 11460-01 (Feb. 15, 2013) (codified at,24 C.F.R. § 100.500 (2018)); then citing Tex. Dep’t of Hous. & Cmty. Affairs v.Inclusive Comtys. Project, Inc., 135 S. Ct. 2507, 2522–24 (2015)).97. Id. at 1380 (quoting Inclusive Comtys., 135 S. Ct. at 2522–23).98. Id. at 1380.99. Id. at 1380–81 (quoting City of Miami v. Wells Fargo & Co., No. 13-24508-CIV-DIMITROULEAS, 2016 WL 1156882, at *4 (S.D. Fla. Mar. 17, 2016)).100. Id. at 1382–83 (quoting Boykin v. Bank of Am. Corp., 162 F. App’x 837, 839(11th Cir. 2005)).101. Id. at 1383.102. City of Miami Gardens v. Wells Fargo & Co., 931 F.3d 1274, 1288 (11th Cir.2019) (per curiam).


In its per curiam opinion, the Eleventh Circuit took a different tack fromthe district court, looking very carefully at the evidence that the city pre-sented to defeat Wells Fargo’s summary judgment motion to see whetherthe city had met its burden to prove that it suffered an injury that providedit with constitutional standing to sue.103 The first step in its analysis was toput the limitations question to one side while it considered whether thecity’s evidence of an injury stemming from Wells Fargo’s alleged discrim-inatory mortgage lending practices was sufficient to give it standing.104

Thus, contrary to Wells Fargo’s argument that the inquiry should look atthe 153 loans made during the limitations period, none of which was fore-closed, the court instead searched for any loan that caused the city injury.105

If there were any, regardless of when they occurred, Miami Gardens wouldhave standing to bring an FHA claim, but whether its complaint was timelyfiled was “a separate issue.”106

In response to the Eleventh Circuit’s questions, Miami Gardens identi-fied one loan to a minority borrower (HC2), that was delinquent but notforeclosed, and the loan of a nonminority borrower comparator (NHW8).107

The court found that this was “insufficient to establish standing” becausethe “risk that loan HC2 will go into foreclosure at some point in time inthe future does not satisfy the requirement that a threatened injury be ‘im-minent, not conjectural or hypothetical.’”108 The court held that “[t]he de-linquency of a single loan does not establish a certainly impending riskthat the City will lose property-tax revenues or be forced to increase mu-nicipal spending to remediate blight.”109

The Eleventh Circuit observed that the city also failed to present evi-dence to establish the causation element because it admittedly never usedan hedonic regression analysis to demonstrate the effects of foreclosureson neighboring properties.110 The court noted: “The City never conductedany analysis of this kind and probably could not do so in light of the pau-city of allegedly discriminatory loans identified by the City.”111 WhileMiami Gardens’s complaint referred to ten loans that had been foreclosed,the court found that “also does the City no good[,]” because there wasneither evidence that the loans had discriminatory terms nor evidence of

103. Id. at 1282–83.104. Id.105. Id. at 1283.106. Id.107. Id. at 1283–84.108. Id. at 1283 (quoting Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)).109. Id.; see also id. (“As the Supreme Court has explained, a ‘threatened injurymust be certainly impending to constitute injury in fact,’ and ‘[a]llegations ofpossible future injury are not sufficient.’” (quoting Clapper v. Amnesty Int’l, 568U.S. 398, 409 (2013))).110. Id. at 1284.111. Id.


how Wells Fargo’s actions contributed to a decline in property values,something that could only be done through an hedonic-regression analy-sis.112

A concurring opinion joined by two of the judges on the three-judgepanel delved further into the city’s record evidence. It began with the state-ment that, “it would be difficult to overstate how misguided this litigationhas proved to be.”113 After a detailed exposition of the city’s expert’s tes-timony and the bank’s expert’s rebuttal,114 the concurrence found that thecity’s evidence of a cost disparity between minority borrower loans HC2and HC6 and nonminority borrower loan NHW8 could not form a basisfor a finding of discriminatory intent by the bank.115 Such evidence wasnecessary because the city was proceeding on a disparate treatment the-ory.116 Indeed, the concurrence found that disparate treatment was dis-proved by the fact that some nonminority borrowers were charged morethan similarly situated minority borrowers.117 The concurrence found:

If Wells Fargo priced membership in a minority race or ethnicity into itsloans, one would expect that minority borrowers would be systematicallycharged more than non-Hispanic white borrowers. But the evidence doesnot bear out that prediction. Indeed, the City’s theory of intentionaldiscrimination is less accurate than a competing hypothesis of randomvariation in pricing because that explanation would at least potentiallyaccount for the existence of loans both more and less favorable to mi-norities.118

The concurrence also argued that Miami Gardens’s evidence was insuf-ficient to support a disparate impact claim because:

[T]he City never pointed to any evidence that even suggests that WellsFargo’s policies caused this disparity in loan cost. For all we can inferfrom the evidence, the putative divergence in cost is attributable to adhoc decisions, rounding errors, small differences between the borrowers,or factors not accounted for in [city expert] Ayers’s analysis.119

IV. MUNICIPAL FAIR LENDING LITIGATION IN OTHER CIRCUITS

FOLLOWING THE CITY OF MIAMI DECISION

District courts outside of the Eleventh Circuit have felt no need to staymunicipal fair lending cases pending the circuit’s decision on remand. Sev-

112. Id.113. Id. at 1288 (Pryor, J., concurring).114. See id. at 1288–93 (discussing the expert’s utilization of “rate spread[ing]”to determine whether loans were priced higher for minority borrowers to whichthe bank’s expert rebutted, explaining the discrepancy as consistent with thoseborrowing under a lender credit incentive program).115. Id. at 1294.116. Id.117. Id. at 1295.118. Id.119. Id. at 1297.


eral decisions have been issued on motions that have sought dismissal byapplying City of Miami. Not surprisingly, the district courts have reachedsomewhat differing conclusions.

The first ruling came in City of Philadelphia v. Wells Fargo & Co.,120 one oftwo lower court decisions that the Eleventh Circuit cited in support of itsremand decision. Preliminarily, the Philadelphia court held that a 2012 DOJsettlement that covered claims by the Pennsylvania Human Relations Com-mission against Wells Fargo was not res judicata and did not bar Philadel-phia’s fair lending claims because the city lacked privity with the stateagency that obtained the settlement.121 It then held that the FHA’s statuteof limitations did not bar the city’s claims because six of the alleged dis-criminatory loans were issued within the limitations period.122

The Philadelphia court also found that the city met the pleading require-ments for a disparate impact claim under the FHA because it plausiblyalleged that a specific race-neutral policy was causally connected to “atleast seven specific policies . . . that led to disparate impacts in Wells Fargo’smortgage lending.”123 It further found that the city plausibly alleged prox-imate causation between the bank’s lending practices and the city’s allegednon-economic injuries.124 Finally, the court found that the city “adequatelyalleged an FHA claim based on continuing violation of a disparate impact”activity occurring within the limitations period, and denied the bank’s re-quest to limit discovery to limitations issues.125

In the other case cited by the Eleventh Circuit, City of Oakland v. WellsFargo Bank, N.A.,126 the district court began by focusing on how to applythe City of Miami Court’s proximate cause requirements, and rejected sev-eral arguments advanced by the city for applying a relatively loose cau-sation standard.127 It then examined the city’s three alleged injuries: theeffects of foreclosures on property values and property tax collections; thecity’s costs for criminal problems arising from foreclosures; and the allegedundermining of “Oakland’s goals and spending in programs for non-discrimination in housing.”128

Although the Oakland court remarked that “[t]he causal relationship be-tween [Wells Fargo’s] conduct and Oakland’s alleged harm is indirect andgoes through several links” and that the claimed injuries were “entirelydistinct” from any alleged discrimination in the issuance of high cost loans,it nevertheless found that being “several steps removed from [WellsFargo’s] conduct, . . . does not appear to be determinative[,]” since similar

120. No. 17-2203, 2018 WL 424451 (E.D. Pa. Jan. 16, 2018).121. Id. at *3.122. Id. at *4.123. Id.124. Id. at *5–6.125. Id. at *7.126. No. 15-cv-04321-EMC, 2018 WL 3008538 (N.D. Cal. June 15, 2018).127. Id. at *3–5.128. Id. at *3.


facts present in the City of Miami case did not cause the Supreme Court tohold that “there was no proximate cause as a matter of law.”129 It thenproceeded to examine each of the city’s claimed injuries in light of theHolmes standards.130

Distinguishing a Ninth Circuit decision that suggested a contrary con-clusion, the Oakland court found that the city’s proffered statistical analysislinking the alleged discriminatory conduct to an increase in foreclosuresand thus a loss of property tax revenue was sufficient to survive dis-missal.131 However, the court dismissed the city’s claim for municipal ex-penditures because no similar statistical analysis was proffered to supportit.132 It did so without prejudice, allowing the city to amend if it could comeup with similar substantiation.133 Wells Fargo then challenged the city’snon-economic injuries claim for lack of Article III standing. Since therewere no allegations that it was the bank, rather than general blighted con-ditions, that caused the city to divert resources to address housing discrim-ination, the Oakland court held that the city lacked standing and also dis-missed this claim without prejudice.134 The Ninth Circuit has accepted aninterlocutory appeal from this decision.135

There were also rulings in three cases filed by Cook County, Illinois thatdissected the county’s claimed injuries in light of City of Miami to determinewhich of the county’s claims were viable; the courts took a stricter viewthan the Philadelphia and Oakland courts. In the first ruling, County of Cookv. Wells Fargo & Co.,136 the court dealt with allegations that Wells Fargo’sequity-stripping practices targeted minority borrowers to a greater extentthan non-minority borrowers with similar credit histories.137 Discrimina-tion also allegedly “continued into the loan-servicing process,” such as loanmodification requests, managing workouts, and handling foreclosures.138

The county’s alleged resulting injuries were:[T]he direct costs to the Cook County Sheriff’s Office of posting evictionand foreclosure notices; registering, inspecting, and securing foreclosedor abandoned properties; serving foreclosure summonses; and executing

129. Id. at *8 (citing Canyon County v. Syngenta Seeds, Inc., 519 F.3d 969, 982(9th Cir. 2008)).130. Id. at *7–9 (citing Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 269 (1992)).131. Id. at *9 (distinguishing Or. Laborers-Emp’r’s Health & Welfare Tr. Fundv. Philip Morris, Inc., 185 F.3d 957, 965 (9th Cir. 1999)).132. Id. at *10.133. Id.134. Id. at *11–12.135. City of Oakland v. Wells Fargo Bank, N.A., No. 15-cv-04321-EMC, 2018WL 7575537 (N.D. Cal. Sept. 5, 2018), appeal docketed, No. 18-80116 (9th Cir. Jan.24, 2019).136. County of Cook v. Wells Fargo & Co., 314 F. Supp. 3d 975 (N.D. Ill. 2018).137. Id. at 979–80.138. Id. at 981.


evictions. The County’s harms also include the costs of administering anincreased number of foreclosure suits in the Circuit Court . . . . Additionalharms to the County include increased demand for other services, in-cluding housing counseling; reduced property tax revenue and propertytransfer and recording fees; and a broad destabilization of minority com-munities . . . . Homeowners in majority–minority communities are morelikely than homeowners elsewhere in Cook County to have negative eq-uity.139

The bank argued that “numerous intervening factors . . . could havecontributed to the County’s alleged harms,”140 so the court checked care-fully how direct the causation was for each category of injury.141 It foundthat the cost of administering and processing foreclosure cases by the sher-iff and by the circuit court “falls within the first step of the causal chainand thus is sufficiently direct to satisfy the proximate cause inquiry.”142

However, other claimed harms were “precisely the ‘ripples’ that City ofMiami cautions ‘flow far beyond the defendant’s misconduct[,] . . . risk[ing]massive and complex damages litigation, and involving too many ‘intri-cate, uncertain inquiries’ to establish proximate cause.”143 Allowing a re-covery for the county’s lost property tax revenue would require determin-ing “how much property tax the County would have collected but for theequity stripping[,]” which involved too many variables, so that claim wasalso rejected.144 There were similar problems for the cost of counseling pro-grams and “programs designed to address increases in crime and blight,”and for “loss of racial balance and stability.”145 Although the court foundthat the county stated plausible disparate treatment and disparate impactclaims, the limitation on damage claims substantially restricted the scopeof what the county would eventually be able to recover.146

The decision in County of Cook v. Bank of America Corp.147 was much thesame. The court found that “the bulk of the injuries the County asserts—

139. Id. at 982.140. Id. at 983.141. See generally id. (“The question, then, is whether the County’s causal chainis too attenuated for its FHA claims to proceed.”).142. Id. at 984.143. Id. at 988 (first quoting Bank of Am. Corp. v. City of Miami, 137 S. Ct.1296, 1306 (2017); then quoting Anza v. Ideal Steel Supply Corp., 547 U.S. 451,460 (2006)).144. Id. at 988–89.145. Id. at 989–90.146. See id. at 990–95 (“Isolating the effect of Wells Fargo’s equity-strippingpractice on patterns of racial segregation in Cook County would require thevery kind of ‘massive and complex damages litigation’ against which [City ofMiami] has strongly cautioned.” (quoting City of Miami, 137 S. Ct. at 1306)).147. County of Cook v. Bank of Am. Corp., No. 1:14-cv-02280, 2018 WL 1561725(N.D. Ill. Mar. 30, 2018).


tax losses and increased costs for county services such as police patrol andsupport services to evicted borrowers—do not flow directly from the dis-crimination it alleges.”148 Such losses were “several steps removed—bothtemporally and causally” from the foreclosures that the county empha-sized, as was its “catch-all claim for ‘various other injuries resulting fromthe deterioration and blight to the hardest hit neighborhoods and communi-ties.’”149 The county’s claims were limited to the “narrow category” ofclaims that were “plausibly within the ‘first step’ of causation: the out-of-pocket costs it claims to have incurred in processing the discriminatoryforeclosures, such as additional funding for the Cook County Sheriff toserve foreclosure notices and for the Circuit Court of Cook County to pro-cess the deluge of foreclosures.”150

In County of Cook v. HSBC North America Holdings, Inc.,151 the court alsoexamined the county’s various damage claims for the required direct causalrelationship to the alleged discriminatory practices. Like the County of Cookv. Bank of America court, it found that the alleged out-of-pocket costs ofdealing with foreclosures and evictions were “within the ‘first step’ of in-jury,” and were therefore recoverable.152 The claims for lost recording andother fees resulting from the bank’s alleged practice of using the MortgageElectronic Registration System (MERS) database to further its discrimina-tory practices were found to be the subject of “a squarely direct relation-ship,” and therefore also recoverable.153 However, none of the county’sother claims met the City of Miami test for proximate causation, includingthe cost of social services to foreclosed homeowners; lost property tax rev-enue from foreclosed, abandoned, and vacant properties; the diminishedproperty values of other properties; the cost of demolishing foreclosedhomes; and urban blight.154

V. OTHER FAIR LENDING LITIGATION

In the past couple of years, as federal fair lending enforcement actionshave tapered off dramatically, consumer organizations that focus on fairlending and similar issues have begun to step into the breach. The firstreported case was National Fair Housing Alliance v. Federal National Mortgage

148. Id. at *5.149. Id. (quoting Second Amended Complaint at para. 376, County of Cook, No.1:14-cv-02280 (N.D. Ill. July 7, 2017)).150. Id. at *7.151. County of Cook v. HSBC N. Am. Holdings, Inc., 314 F. Supp. 3d 950 (N.D.Ill. 2018).152. Id. at 962 (quoting Hemi Grp., LLC v. City of New York, 559 U.S. 1, 10–12(2010)).153. Id. at 965.154. Id. at 962–65.


Ass’n,155 in which a group of fair housing community organizations chal-lenged the Federal National Mortgage Association’s (Fannie Mae) main-tenance of foreclosed properties in minority neighborhoods on a nation-wide basis.156 The plaintiffs alleged that the FHA required Fannie Mae tomaintain all of its post-foreclosure Real Estate Owned (REO) homes “with-out regard to race, color, . . . or national origin.”157 Based on a four-yearinvestigation of more than 2,300 properties, they alleged that Fannie Mae“failed to conduct routine exterior maintenance and marketing of REOproperties in communities of color, thereby leaving those REOs in a stateof neglect, while satisfactorily conducting routine exterior maintenance andmarketing of its REO properties in predominantly white neighborhoods,therefore leaving those REOs in a materially better condition.”158

Fannie Mae moved to dismiss on two grounds, asserting that the plain-tiffs lacked standing to sue and failed to state a claim.159 With respect tostanding, the NFHA court held that the plaintiffs established the necessaryorganizational standing to sue by alleging that they had to “devote signifi-cant resources to identifying and counteracting discriminatory practices,thus requiring the diversion of resources from the organization’s counsel-ing referral services.”160 The court also found that the plaintiffs stated adisparate impact claim under the FHA because they alleged that FannieMae had a policy of delegating discretion while failing to supervise “dif-ferential maintenance based upon the properties’ age and value[,]” findingthat this was sufficient to establish “the robust cause of discriminatory im-pact” at the pleadings stage.161

With respect to causation, the court further found that the plaintiffs’“statistical evidence demonstrating the causal connection between the del-egation of duties and the differential maintenance” also met the robustcausality requirement.162 Although Fannie Mae’s motion to dismiss raisedconcerns about the plaintiffs’ methodology, the court dismissed the con-cerns as going “to the weight of the evidence and are not dispositive of thedetermination whether Plaintiffs have adequately pled discrimination atthis procedural stage.”163 The court rejected Fannie Mae’s limitations ar-gument because the plaintiffs properly alleged the existence of a continuingFHA violation that extended beyond the limitations period.164 However,

155. Nat’l Fair Hous. All. v. Fed. Nat’l Mortg. Ass’n, 294 F. Supp. 3d 940 (N.D.Cal. 2018).156. Id. at 943–44.157. Id. at 943.158. Id. at 944.159. Id. at 945.160. Id. at 946.161. Id. at 948.162. Id.163. Id.164. Id. at 948–49.


the court dismissed the plaintiffs’ disparate treatment claim, finding thatthey failed to allege the necessary element that Fannie Mae was motivatedto discriminate on the basis of race.165

The plaintiffs then filed an amended complaint to address deficienciesin its disparate treatment claim that Fannie Mae also moved to dismiss.The court found that liberal use of the word “intentional” in the amendedcomplaint did not suffice to plead intentionally discriminatory conduct, nordid allegations of “deliberate indifference” or “reckless disregard” withrespect to adoption of policies that allegedly caused a disparate impact.166

However, because the plaintiffs brought Fannie Mae’s shortcomings to itsattention, the plaintiffs’ allegations that it failed to implemented correctiveaction was sufficient to state a disparate treatment claim.167 The court alsofound that the provision of the Housing and Economic Recovery Act thatbarred penalties and fines against Fannie Mae in its capacity as conservatordid not operate to preclude the plaintiffs from recovering attorneys’ feesunder the FHA, although it did bar the plaintiffs’ claim for punitive dam-ages.168 The motion to dismiss was therefore granted in part and denied inpart.

In another case, the plaintiff, a fair housing organization in Connecticut,challenged a local bank’s alleged redlining of minority mortgage loan ap-plicants.169 It was alleged that the bank maintained “gerrymandered CRAassessment areas” in the Hartford metropolitan area, generated “signifi-cantly fewer applications for credit from majority-non-white neighborhoodsthan its competitors[,]” denied mortgage loans to minority applicants “at asubstantially higher rate” than its competitors, and made statements thatdiscouraged minority borrowers from applying for credit.170 The case wasquickly settled, but the settlement agreement was not filed of record incourt.171 The plaintiff’s press release announced that the settlement resultedin “more than $16 million dollars in access to credit, homeownership sub-sidies, and economic development loans into low and moderate incomecommunities of color” for both homeowners and small businesses, and thatthe bank would “open a loan production office in a neighborhood that

165. Id. at 949.166. Nat’l Fair Hous. All., No. C 16-06969 JSW, 2019 WL 3779531, at *4–5 (N.D.Cal. Aug. 12, 2019).167. Id. at *5–6.168. Id. at *6–7.169. Complaint, Conn. Fair Hous. Ctr., Inc. v. Liberty Bank, No. 3:18-cv-01654-AVC (D. Conn. Oct. 4, 2018).170. Id. at 3.171. Stipulation to Dismiss, Conn. Fair Hous. Ctr., Inc., No. 3:18-cv-01654-AVC(D. Conn. Feb. 28, 2019). The attached settlement agreement is restricted frompublic view as of this writing.


continues to be underserved by banking institutions.”172 The relief in thesettlement reportedly included a $10 million fund for loans to minorityborrowers at below-market rates, adding $5 million to the bank’s com-munity development program, another fund of $300,000 to promote homeownership, and $200,000 granted to community organizations.173

172. Fionnuala Darby–Hudgens, A Historic Fair Lending Settlement for Con-necticut Residents, Conn. Fair Housing Ctr. (Mar. 4, 2019), https://www.ctfairhousing.org/a-historic-fair-lending-settlement-for-connecticut-residents/[https://perma.cc/MY43-TPLC].173. Kenneth R. Gosselin, Fair housing advocates hail settlement with LibertyBank in lawsuit alleging racial bias in lending practices, Hartford Courant (Mar.4, 2019), https://www.courant.com/breaking-news/biz-liberty-bank-fair-housing-complaint-20190304-yvlurbk56za75cx2ymfricfq4m-story.html [https://perma.cc/CS6T-DBEP.

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AIR ENDING LITIGATION FOLLOWING THE … Lending...250 FAIR LENDING LITIGATION FOLLOWING THE SUPREME COURT’S RULING IN CITY OF MIAMI* John L. Ropiequet John L. Ropiequet is of counsel