Oakland’s Fair Housing Case Against Wells Fargo Lives On

By Evan Weinberger

The city of Oakland can continue to press claims that Wells Fargo & Co.’s alleged shoddy mortgage lending practices resulted in a wave of foreclosures and shriveled property tax revenues after a federal judge rejected the bank’s motion to dismiss June 15.

Oakland provided significant statistical analysis to show how discriminatory lending practices at Wells Fargo could have resulted in a spike in foreclosures among black and Hispanic borrowers, U.S. District Judge Edward M. Chen of the U.S. District Court for the Northern District of California said.

Allowing Oakland’s property tax claims could potentially put Wells Fargo on the hook for millions of dollars in damages.

Although Wells Fargo can dispute the city’s statistics, those arguments are better addressed as a question of fact at trial rather than at the initial pleadings stage, Chen wrote.

“On balance, the property-tax injury survives the pleading stage because Oakland’s proffered statistical analyses have the potential to provide certainty to the damages calculation,” he wrote.

Oakland, San Francisco-based Wells Fargo’s neighbor, alleged in a September 2015 lawsuit that discriminatory lending practices targeting black and Hispanic borrowers prior to the financial crisis led to a wave of foreclosures that caused the city to lose large amounts of property tax revenues and spend millions on upkeep of the foreclosed properties.

Wells Fargo is ready to continue to defend against Oakland’s claim, bank spokesman Tom Goyda said in a June 18 email statement to Bloomberg Law.

“While the court’s decision allows the lawsuit to continue to the next phase, this does not suggest that any of claims ultimately will prevail, and we are prepared to defend our record as a fair and responsible lender,” Goyda said.

Supreme Court Weighs In

The case was put on hold while the U.S. Supreme Court considered similar litigation filed by the city of Miami against Bank of America Corp. Municipalities could sue mortgage lenders over alleged violations of the Fair Housing Act if they are able to provide statistical backing, the high court ruled in May 2017.

That ruling allowed several cases brought by municipalities against big banks to move forward, including the Oakland’s property tax claims.

Oakland City Attorney Barbara J. Parker welcomed the June 15 ruling, which she said was a direct result of last year’s Supreme Court ruling in Miami’s case against Bank of America.

Wells Fargo needs to be held accountable for its actions, she added.

“Not only have these predatory and racially discriminatory business practices increased poverty and wiped out or drastically reduced wealth for minority communities while bankers prospered, the City of Oakland has suffered great financial harm as a result of these racially discriminatory practices and the ensuing foreclosure crisis,” Parker said in a statement emailed to Bloomberg Law.

Oakland’s Case Trimmed

Other claims brought by the city were not as successful.

Chen refused to allow Oakland’s damages claims related to upkeep costs to move forward, but said the could seek declarartory or injunctive relief.

Oakland could refile its damages claims if it provides a stronger statistical backing, Chen wrote.

Chen also rejected Oakland’s claims that Wells Fargo’s lending practices hobbled the city’s efforts to promote fair housing efforts, although Oakland was given the opportunity to refile those claims.

Wells Fargo is represented by Proskauer Rose LLP, Munger Tolles & Olson LLP, and K&L Gates LLP.

The case is: City of Oakland v. Wells Fargo & Co. , N.D. Cal., No. 15-cv-04321, motion to dismiss denied in part, granted in part 6/15/18 .

To contact the reporter on this story: Evan Weinberger in New York at eweinberger@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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