Fair Housing Act - Standing and Proximate Cause - Bank of America Corp. V. City of Miami

Harvard Law Review, November 2017 | Go to article overview

Fair Housing Act - Standing and Proximate Cause - Bank of America Corp. V. City of Miami


The Fair Housing Act (1) (FHA) was the last of the three major civil rights statutes passed in the 1960s, its passage spurred by a presidential commission's conclusion that the United States was "moving toward two societies, one black, one white--separate and unequal." (2) The FHA prohibits, among other things, racial discrimination in the terms and conditions of home sales and mortgage loans. (3) Any "aggrieved person" is permitted to file suit to enforce its restrictions. (4) Last Term, in Bank of America Corp. v. City of Miami, (5) the Supreme Court affirmed that cities can be "aggrieved persons" under the FHA. (6) The Court also held that "proximate cause under the FHA requires 'some direct relation between the injury asserted and the injurious conduct alleged'" and remanded the case for reconsideration under this higher standard. (7) The majority opinion is moderate in nature, with one issue resulting in a victory for the City and the other for the banks. If the Court was looking for a middle ground between the parties' positions, this was the right one. The precedents supporting broad standing under the FHA were hard to avoid, and proximate cause is a better doctrinal tool to prevent exposing lenders to the out-of-control liability that seemed to worry the Court. Future courts will decide the legacy of the decision, however, as the extent to which this standard will in fact limit liability is unclear.

Bank of America Corp. came about as an indirect result of the 2008 financial crisis. In the years following the crisis, housing markets in Florida and the City of Miami in particular were devastated. At the peak of the recession in 2010, when foreclosures numbered 2.9 million nationwide, nearly 500,000 of the foreclosed homes were located in

Florida. (8) By the time the City filed suit in 2013, Miami had a higher foreclosure rate than any other large U.S. city. (9)

According to the City, these foreclosures and their effects were not distributed proportionally across Miami's population with regard to race. Miami claimed that several banks engaged in both redlining and "reverse redlining" in the City, on the one hand refusing to offer minorities credit on the same terms as whites and on the other imposing harsher, predatory terms when loans were offered to minority borrowers. (10) Compared to similarly situated white customers, minority borrowers faced higher interest rates, were charged more baseless fees and penalties, and were more often refused loan refinancing and modification when faced with the possibility of default. (11)

On these facts, Miami filed lawsuits against Bank of America, Wells Fargo, and Citigroup, in each case bringing a claim for violations of the FHA and a claim of unjust enrichment. (12) The City alleged that the banks' practices constituted a pattern and practice of discrimination in mortgage lending that led to disproportionately high foreclosure rates in Miami's minority neighborhoods. (13) In turn, the increase in foreclosures decreased the City's property tax revenues and required additional spending on public services, such as police and emergency first responders, to remedy blight and prevent unsafe living conditions associated with the increase in vacant homes. (14) The district court dismissed the FHA claims, holding that the City did not have standing to sue under the statute because its alleged economic injuries did not fall within the zone of interests the Act was intended to protect. (15) These claims also failed, the court said, because the City could not establish that the banks' actions were the proximate cause of its injuries. (16) The district court dismissed the unjust enrichment claim on the grounds that the complaint did not state that the City "conferred any direct benefit" on the banks, as required under Florida law. (17)

The City appealed, and the Eleventh Circuit reversed in part and affirmed in part. (18) In a unanimous opinion, (19) the court began by addressing standing. …

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