City of Miami v. Bank of America Corp.
2016 WL 1072488, 171 F. Supp. 3d 1314, 2016 U.S. Dist. LEXIS 37972 (2016)
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Rule of Law:
For an FHA disparate impact claim to survive a motion to dismiss, a plaintiff must plead a timely violation within the two-year statute of limitations by alleging specific facts about discriminatory loans, and must identify a facially neutral policy that is artificial, arbitrary, and unnecessary, with a robust causal link to the alleged disparity, not merely intentional discrimination.
Facts:
- Bank of America Corporation, Bank of America, N.A., Countrywide Financial Corporation, Countrywide Home Loans, and Countrywide Bank FSB (Defendants) allegedly engaged in a longstanding practice of steering minority borrowers in Miami into 'predatory' mortgage loans.
- Defendants allegedly maintained a policy of refusing to extend credit to minority borrowers seeking to refinance more expensive loans, while extending such credit to similarly situated white borrowers.
- The City of Miami (Plaintiff) sought redress for the economic impact of these alleged discriminatory practices, claiming damages such as lost tax revenues and increased municipal service costs from resulting foreclosures.
- The City identified four specific property addresses in its Second Amended Complaint where allegedly discriminatory mortgage loans closed between December 13, 2011, and December 13, 2013.
Procedural Posture:
- The City of Miami (Plaintiff) sued Bank of America Corporation, Bank of America, N.A., Countrywide Financial Corporation, Countrywide Home Loans, and Countrywide Bank FSB (Defendants) in a United States District Court (court of first instance) alleging violations of the Fair Housing Act (FHA) and unjust enrichment.
- The District Court dismissed the City's initial complaint, holding that the City lacked statutory standing to sue under the FHA, that the City’s FHA claim was barred by the statute of limitations, and that the City’s claim for unjust enrichment failed to state a claim.
- The City appealed the District Court's dismissal to the Eleventh Circuit Court of Appeals (intermediate appellate court).
- The Eleventh Circuit affirmed the dismissal of the City's unjust enrichment claim, reversed the District Court's dismissal regarding statutory standing under the FHA, and remanded the case back to the District Court to allow the City an opportunity to replead its FHA claim to cure the time-bar problem and to address the implications of the Supreme Court's Inclusive Communities decision.
- On remand, the City filed its Second Amended Complaint in the District Court.
- Defendants subsequently filed a Motion to Dismiss the City's Second Amended Complaint.
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Issue:
Does the City of Miami's Second Amended Complaint sufficiently allege a timely FHA disparate impact claim and meet the heightened pleading requirements for such a claim as articulated in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., thereby overcoming a motion to dismiss?
Opinions:
Majority - William P. Dimitrouleas
No, the City of Miami's Second Amended Complaint does not sufficiently allege a timely FHA disparate impact claim and fails to meet the pleading requirements set forth in Inclusive Communities. The court dismissed the complaint because the FHA has a two-year statute of limitations, meaning claims must be based on discriminatory housing practices that occurred or terminated within two years of the lawsuit's filing (December 13, 2011, to December 13, 2013). The City's allegations regarding four property addresses within this period were too conclusory, lacking specific details such as the borrower's minority status, loan type, how the loan was discriminatory, the closing date, or how these specific loans would lead to imminent harm to the City (e.g., foreclosure resulting in lost tax revenue). Without a specific, timely, and actionable FHA violation, the 'continuing violation' doctrine, which allows older claims to be linked to a timely one, cannot be invoked. Furthermore, the complaint failed to meet the pleading standards for a disparate impact claim as established in Inclusive Communities. The City primarily alleged intentional discrimination ('steering' minority borrowers), which is a disparate treatment claim, not a disparate impact claim that requires identifying a facially neutral policy. The complaint also failed to allege that any such neutral policy was 'artificial, arbitrary, and unnecessary' or to demonstrate a 'robust causality requirement' linking a neutral policy to the alleged statistical disparity. Finally, three of the defendants (Bank of America Corporation, Countrywide Financial Corporation, and Countrywide Home Loans, Inc.) were dismissed because the complaint did not allege they made any mortgage loans during the relevant two-year limitations period.
Analysis:
This district court decision reinforces the rigorous pleading standards established by Twombly/Iqbal and specifically applied to FHA disparate impact claims by Inclusive Communities. It clarifies that plaintiffs must provide specific factual details for alleged discriminatory loans within the statute of limitations to establish a timely FHA claim and trigger the continuing violation doctrine. The ruling also underscores the crucial distinction between claims of intentional discrimination (disparate treatment) and disparate impact, emphasizing that the latter necessitates identifying a facially neutral policy that is demonstrably arbitrary and causally linked to a statistical disparity, rather than merely alleging targeted, discriminatory conduct.
