Wells Fargo Says Oakland’s Latest Loan Bias Suit Still Won’t Fly

By Chris Bruce

Wells Fargo has asked a federal judge to throw out Oakland’s claims that biased lending damaged the city’s economy, a question at the center of several such suits against banks.

The case before Judge Edward M. Chen of the U.S. District Court for the Northern District of California tests what Oakland and similar city-plaintiffs must do to press ahead with Fair Housing Act lawsuits alleging economic harm that they blame on lending discrimination ( Oakland v. Wells Fargo Bank N.A. , N.D. Cal., motion to dismiss 10/6/17 ).

In a May ruling, Bank of Am. Corp. v. City of Miami, the U.S. Supreme Court said suits alleging financial harm under the Fair Housing Act must establish a causal connection between the alleged wrong and the claimed injury. Simply claiming that harm was foreseeable isn’t enough, the court said.

The Supreme Court gave lower courts the task of fleshing out what that standard meets in practice. Wells Fargo said Oakland’s suit, originally filed in 2015 but amended and refiled in August, still falls short. “The amendments Oakland has made in reaction to the City of Miami decision do not allege a direct causal connection sufficient to meet that case’s proximate cause standard,” Wells Fargo said.

Oakland claims Wells Fargo steered minority borrowers into mortgage loans that were offered on discriminatory terms. Oakland, like other city-plaintiffs, says it suffered economic harm in the form of higher city expenditures, a drop-off in tax revenues, and other ills it blames on Wells Fargo’s alleged practices.

However, Wells Fargo’s motion urged the court to hold that Oakland’s suit should be thrown out right away. Chen has ordered briefing on that question throughout the rest of this month, and has scheduled a hearing on the motion for Dec. 14. Any decision he renders will be watched closely not just by Wells Fargo, but also by Bank of America, JPMorgan Chase, Citigroup, and other banks facing similar Fair Housing Act lawsuits brought by Atlanta, Philadelphia, Chicago, and other jurisdictions.

Wells Fargo is represented by Bart H. Williams and Manuel F. Cachan of Proskauer Rose, Terry E. Sanchez of Munger, Tolles & Olson, and Paul F. Hancock of K&L Gates.

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

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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