Bank of Am. Corp. v. City of Miami
197 L. Ed. 2d 678, 137 S. Ct. 1296, 2017 U.S. LEXIS 2801 (2017)
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Rule of Law:
A city is an 'aggrieved person' with a cause of action under the Fair Housing Act (FHA) for economic injuries resulting from discriminatory lending practices. However, to establish a claim for damages, the plaintiff must demonstrate that the injury has a direct relation to the defendant's conduct, as mere foreseeability is insufficient to establish proximate cause.
Facts:
- The City of Miami alleged that Bank of America and Wells Fargo engaged in discriminatory and predatory lending practices.
- The banks allegedly targeted African-American and Latino customers with mortgage loans that had riskier and less favorable terms than those offered to similarly situated white, non-Latino customers.
- These practices included excessively high interest rates, unjustified fees, and refusals to refinance or modify loans for minority borrowers.
- The alleged predatory practices led to disproportionately high default and foreclosure rates in Miami's minority neighborhoods.
- The concentration of foreclosures and vacancies resulted in a decline in property values in these neighborhoods.
- Consequently, the City of Miami suffered a decrease in its property tax revenues.
- The City also incurred increased costs for municipal services, such as police, fire, and code enforcement, to address the blight and unsafe conditions caused by the numerous vacancies.
Procedural Posture:
- The City of Miami sued Bank of America and Wells Fargo in the U.S. District Court for the Southern District of Florida, a federal trial court.
- The District Court dismissed the complaints, holding that the City's alleged harms fell outside the FHA's zone of interests and that the complaints failed to show a sufficient causal connection.
- After the City filed amended complaints, the District Court declined to reconsider its dismissals.
- The City of Miami, as appellant, appealed the dismissals to the U.S. Court of Appeals for the Eleventh Circuit.
- The Court of Appeals reversed the District Court, finding the City's claims were within the FHA's zone of interests and that proximate cause was adequately alleged under a foreseeability standard.
- The Banks, as petitioners, sought and were granted a writ of certiorari from the U.S. Supreme Court.
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Issue:
Does a city qualify as an 'aggrieved person' with a cause of action under the Fair Housing Act when it claims financial harm from discriminatory mortgage lending practices, and is a showing of foreseeability sufficient to establish proximate cause for such claims?
Opinions:
Majority - Justice Breyer
Yes, a city qualifies as an 'aggrieved person' under the FHA, but No, foreseeability alone is not sufficient to establish proximate cause. The City's claims of lost tax revenue and increased municipal expenses fall within the zone of interests that the FHA protects, allowing it to bring a suit. The FHA’s definition of 'aggrieved person' is interpreted broadly, a view supported by precedents like Gladstone, Realtors v. Village of Bellwood, and ratified by Congress in its 1988 FHA amendments. However, because the FHA creates a cause of action akin to a tort, common-law proximate cause principles apply, which require 'some direct relation between the injury asserted and the injurious conduct alleged.' A foreseeability-only standard is too lenient and would risk 'massive and complex damages litigation' for remote 'ripples of harm.' The Court of Appeals erred by applying this lower standard, so the case is vacated and remanded for the lower courts to apply the 'direct relation' standard in the first instance.
Dissenting in part - Justice Thomas
No, the city's claims fall outside the FHA's zone of interests, and even if they did, they fail the proximate cause requirement as a matter of law. Miami’s purely economic injuries—strained municipal budgets—are only marginally related to the FHA's core purpose of preventing discrimination in the sale or rental of housing and promoting integration. While the majority's proximate cause standard is correct, the Court should apply it now and dismiss the case. The causal chain from discriminatory lending to defaulted loans, foreclosures, vacancies, lower property values, and finally to lost tax revenue is too attenuated and remote to satisfy the 'direct relation' test.
Analysis:
This decision solidifies a broad interpretation of statutory standing under the FHA, allowing municipalities to sue for economic harms like lost tax revenue, thereby expanding the scope of potential plaintiffs. However, the Court simultaneously raises the bar for proving such claims by rejecting a simple foreseeability test for proximate cause in favor of a stricter 'direct relation' standard. This creates a significant new hurdle for plaintiffs, as they must now demonstrate a close, immediate causal link between the discriminatory practice and their financial loss, which can be difficult in complex economic scenarios. Future litigation will focus on defining the precise boundaries of this 'direct relation' test, shaping the practical ability of cities and other indirectly injured parties to recover damages under the FHA.
