City of Los Angeles v. Citigroup Inc.
2014 U.S. Dist. LEXIS 79684, 24 F.Supp.3d 940, 2014 WL 2571558 (2014)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A municipality has Article III standing to sue a lender under the Fair Housing Act for economic injuries, such as lost property-tax revenue and increased municipal service costs, that are plausibly traceable to the lender's alleged discriminatory lending practices. The continuing violation doctrine applies to an alleged pattern or practice of discrimination, allowing claims for conduct outside the statutory period if it is linked to a timely discriminatory act.
Facts:
- The City of Los Angeles (L.A.) alleged that Citigroup Inc. (Citi) engaged in discriminatory lending practices, including 'redlining' (denying credit to minority neighborhoods) and 'reverse redlining' (targeting minority neighborhoods with predatory and exploitative loans).
- From 2004 to 2011, L.A.'s statistical analysis indicated that an African-American borrower was 2.273 times more likely to receive a predatory loan from Citi than a white borrower with similar characteristics.
- Confidential witnesses, who were former Citi employees, provided statements describing how minority borrowers were allegedly steered toward predatory loans.
- L.A. alleged that these discriminatory predatory loans were significantly more likely to result in foreclosure than loans made to white borrowers.
- L.A. claimed that the resulting foreclosures, concentrated in minority neighborhoods, led to property value declines and urban blight.
- As a direct result of these foreclosures and the subsequent blight, L.A. alleged it suffered financial harm through diminished property tax revenues and increased costs for municipal services to address the decay.
- L.A. identified approximately 1,200 specific discriminatory loans issued by Citi that had already resulted in foreclosure and expected to identify more through discovery.
Procedural Posture:
- The City of Los Angeles (Plaintiff) filed a complaint against Citigroup Inc. and its subsidiaries (Defendants) in the U.S. District Court for the Central District of California.
- The complaint asserted two claims: one for violation of the federal Fair Housing Act (FHA) and one for common-law restitution.
- Defendants filed a Motion to Dismiss under Federal Rules of Civil Procedure 12(b)(1) for lack of Article III standing and 12(b)(6) for failure to state a claim.
- Defendants also filed a Motion to Strike portions of the complaint as impertinent, immaterial, or scandalous under Rule 12(f).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a municipality have Article III standing to sue a lending institution under the Fair Housing Act for economic injuries, such as lost tax revenue and increased city service costs, allegedly caused by the lender's discriminatory mortgage practices that led to widespread foreclosures?
Opinions:
Majority - Otis D. Wright, II
Yes, a municipality has Article III standing to sue for these economic injuries. The court found that L.A. sufficiently pleaded all three elements of standing: injury in fact, causation, and redressability. Citing 'Gladstone Realtors v. Village of Bellwood,' the court held that a diminished tax base and increased service costs constitute a concrete injury in fact. The court rejected Citi's argument that overall city revenue growth negated the injury, reasoning that revenue could have been higher absent the alleged misconduct. Regarding causation, the court found L.A.'s three-step causal chain—(1) discriminatory lending led to (2) foreclosures, which caused (3) economic harm to the city—to be plausible and not too attenuated at the pleading stage, especially given the supporting statistical regression analysis. The court also held that L.A.'s claims were not barred by the statute of limitations because the 'continuing violation doctrine' applies to an alleged pattern and practice of discrimination, making the entire course of conduct actionable.
Analysis:
This decision is significant for affirming that municipalities can use the Fair Housing Act to hold lenders financially accountable for the widespread, city-level economic consequences of discriminatory lending. By validating a city's standing based on fiscal injuries like lost tax revenue, the ruling empowered local governments to seek damages for the urban blight and financial strain that followed the 2008 foreclosure crisis. This precedent lowers the barrier for similar lawsuits, establishing that a plausible causal chain supported by statistical data is sufficient to survive a motion to dismiss and proceed to discovery, thereby giving cities a powerful legal tool to combat discriminatory practices that harm their communities.
