Supreme Court Case Could Scuttle Bias Suits Against Big Banks

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By Chris Bruce

June 28 — The U.S. Supreme Court agreed to consider whether Miami may allege lending bias against Bank of America and Wells Fargo in a case that could fuel or scuttle similar suits by other cities against big banks ( Bank of Am. Corp. v. Miami, U.S., No. 15-cv-01111, cert. granted 6/28/16 Wells Fargo & Co. v. Miami, U.S., No. 15-cv-01112, cert. granted 6/28/16 ).

Bank of America and Wells Fargo in March asked the justices to review a September federal appeals court ruling that said Miami has standing to assert its claims under the Fair Housing Act. Miami says discriminatory loans led to widespread foreclosures, increased municipal expenditures and lower tax revenue (48 BBD, 3/11/16).

Valerie Hletko, a partner with BuckleySandler in Washington who represents financial institutions, said a ruling against Miami would be a blow to other city-filed lawsuits against lenders that base standing on similar claims.

“The bottom would fall out of all of them with a ruling by the Supreme Court that a plaintiff under the Fair Housing Act must be within the zone of interests Congress intended to protect,” Hletko told Bloomberg BNA in a June 28 e-mail.

Fair Housing Act

The court's June 28 decision to hear the dispute, now consolidated into one case, also sets the stage for more application of its June 2015 decision in Tex. Dep't of Hous. v. Inclusive Cmtys. Project, Inc.

The Inclusive Communities case said the Fair Housing Act allows claims of disparate impact discrimination in addition to claims of disparate treatment. Unlike claims of disparate treatment, disparate impact claims allege discriminatory effects, with no need to show an intent to discriminate (123 BBD 6/26/15).

The case was decided on a 5-4 vote, with now-deceased Justice Antonin Scalia joining dissenters Chief Justice John G. Roberts, Jr., and Justices Clarence Thomas and Samuel A. Alito, Jr.

Justice Anthony M. Kennedy, who wrote the majority opinion, laid out a set of “cautionary standards” on how lower courts are to apply the ruling.

According to Hletko, the court's June 28 decision to grant the Bank of America and Wells Fargo petitions may mean the justices have more to say on that subject.

“It may signal that the Supreme Court is prepared to put teeth into its decision in Inclusive Communities, which clarified and stiffened the hurdles that plaintiffs must clear in order to plead and prove disparate impact discrimination,” Hletko said.

Although the court won't hear the case until its next term, briefing could begin this summer.

Banks Welcome Action

In a June 28 e-mail, Bank of America spokesman Lawrence Grayson said the bank “is fully committed to the anti-discrimination principles underlying the Fair Housing Act and supports the law’s role in protecting individuals from being unfairly deprived of housing.”

“But we believe that a municipality seeking purely monetary recovery is not covered by the statute, and we welcome the Supreme Court’s scrutiny and clarity,” he said.

Wells Fargo spokesman Tom Goyda also welcomed the action by the justices. “We appreciate the Supreme Court’s decision today and look forward to presenting our strong argument that the city does not have standing under the Fair Housing Act to make the claims it put forth in its lawsuits against Wells Fargo and other lenders,” Goyda told Bloomberg BNA in a June 28 e-mail.

City Suits Ongoing

The underlying cases by Miami against Bank of America and Wells Fargo are still ongoing in federal court in Florida, along with a separate but similar lawsuit by Miami against Citigroup.

The city recently filed amended complaints against all three institutions, saying defects in previous filings have been cured and that the suits should go forward ( Miami v. Bank of Am., S.D. Fla., No. 13-cv-24506, brief filed 6/10/16 ; Miami v. Wells Fargo & Co., S.D. Fla., No. 13-cv-24508, brief filed 6/10/16 ; Miami v. Citigroup, S.D. Fla., No. 13-cv-24510, brief filed 6/10/16 ).

Although Bank of America and Wells Fargo say Miami lacks standing for its suit, all three banks have raised a separate objection to Judge William P. Dimitrouleas of the U.S. District Court for the Southern District of Florida. According to the banks, Miami failed to file its claims properly within the Fair Housing Act's two-year statute of limitations.

All three institutions are battling lawsuits by other cities and local governments that similarly allege economic injury due to discriminatory loans.

Among others, two are on appeal in the U.S. Court of Appeals for the Ninth Circuit. Those were brought by Los Angeles, which sued Bank of America and Wells Fargo under the Fair Housing Act only to have its claims rejected.

To contact the reporter on this story: Chris Bruce in Washington at cbruce@bna.com

To contact the editor responsible for this story: Mike Ferullo at mferullo@bna.com

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