Wednesday, November 9, 2016

SCOTUS Hears Oral Arguments on Novel Fair Housing Act Claim by City of Miami


I know everyone has been paying close attention to the presidential race, but there was something else important happening yesterday: SCOTUS heard oral arguments on whether municipalities can bring claims under the Fair Housing Act (Title VIII of the Civil Rights Act of 1968).

The question originates from a lawsuit filed by the City of Miami against Bank of America that was consolidated with another case where the city sued Wells Fargo. In both cases the city argued that these financial institutions had engaged in a long and targeted practice of making risky loans to minority borrowers (loans that were 5x more likely to result in a default than loans made to white borrowers). Further, the city alleged that in the wake of the 2008 crisis the banks refused to allow these distressed homeowners to refinance or engage in a loan modification, even through they routinely offered such deals to similarly situated white borrowers.

The scope of who can serve as a party under a Fair Housing Act claim raises interesting policy issues. The city argues that it is within the "zone of interest" for standing purposes because the discriminatory loan practices created large numbers of defaults and foreclosures, which in turn resulted in the proliferation of abandoned and blighted properties that hit hard the bottom line of cities when they needed resources the most. 

The suit was initially filed against BoA in July 2013 and against Wells Fargo in July 2014, but both were dismissed by the district court for lack of standing and on the basis that the city had failed to prove that the bank's behavior was the proximate cause of the harm alleged. In September 2015, the 11th circuit remanded both of these cases for further proceedings on the proximate cause determination and held that the city did indeed have standing under the Fair Housing Act

Now it's up to the eight justices to decide. There are interesting arguments on both sides. The city asserts that local governments are in a unique position to guard against housing discrimination and that because of the collective interest that they represent cities should be allowed to use tools like the Fair Housing Act to police bad behavior. Incidentally, this is in line with a recent article by Kathleen Engel at Suffolk University regarding local government responses to the housing crisis. The financial institutions, on the other hand, argue that the city's position would take the scope of the Fair Housing Act too far and that the connection between the loss of property tax revenues and discriminatory lending practices is too attenuated and specultaitve in this case to provide relief to the city.

Stay to tuned to see what happens!

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