Today's Trends in Credit Regulation

Eleventh Circuit Upholds City of Miami's Fair Housing Act Claims
By Webb McArthur

The Fair Housing Act has been a hot topic this year. Last month, the Eleventh Circuit Court of Appeals considered, among other things, whether a city has constitutional standing to pursue Fair Housing Act claims. The court found that it can, explaining that a city may fall within the "zone of interests," a term used by the Eleventh Circuit's case of Nasser v. City of Homewood, 671 F.2d 432 (1982).

The City of Miami sued Bank of America Corporation, Wells Fargo & Co., and Citigroup, Inc. for allegedly violating the Fair Housing Act, claiming that the banks' discriminatory mortgage lending practices towards minorities, which resulted in disproportionate and excessive defaults, caused financial harm to the city. The city also alleged a claim for unjust enrichment. The trial court dismissed the unjust enrichment claim without prejudice and dismissed the FHA claim with prejudice, finding that the city lacked standing, that it did not adequately plead that the banks' conduct proximately caused the harm the city complained of, and that the claim was barred by the FHA's 2-year statute of limitations. The U.S. Court of Appeals for the Eleventh Circuit affirmed the trial court's decision on the unjust enrichment claim, but reversed and remanded the trial court's decision on the FHA claim.

The appellate court found that the city had constitutional Article III standing. The banks argued that the city had not adequately alleged a causal connection between the city's injury and the banks' conduct. The appellate court disagreed, noting that the city presented "regression analyses that link [the banks'] treatment of minority borrowers to predatory loans, predatory loans to foreclosure, and foreclosure to reduced tax revenue." Regarding statutory standing, the appellate court found that standing under the FHA extends as broadly as permitted under Article III and that the city falls within the "zone of interests" protected by the FHA because it alleged that its injury was caused by, in Bank of America's case, a policy that was either motivated by racial discrimination or resulted in a disparate impact on minorities, and in Wells Fargo and Citibank's case, "race-based discrimination in [their] predatory lending practices."

Next, the appellate court disagreed with the trial court that the city did not allege that the banks' practices were the proximate cause of the city's injury because of the myriad factors that could have led to the city's losses and, in Bank of America's case, because any harm the city suffered could not have been caused by Bank of America directly. The appellate court found that the appropriate test to determine proximate cause is whether the defendant could have foreseen the type of harm that the plaintiff suffered. The appellate court found that Bank of America had access to materials that drew a link between predatory lending practices, foreclosures, and reduction in property tax revenues and that there was a sufficiently close connection between Bank of America's alleged discrimination and the city's harm for it to conclude that the city adequately pled proximate cause. The appellate court also found that the city was not required to allege that Wells Fargo and Citibank's conduct was the sole cause of its injury, and "the fact that there are multiple plausible, foreseeable links in the alleged causal chain is not fatal to the [c]ity's claim."

In addition, the appellate court found that the city should be given the opportunity to remedy any statute of limitations deficiencies by pleading that a particular loan closed within two years before it filed suit. If it does, it might then qualify for application of the continuing violation doctrine, which allows a plaintiff to proceed on similar claims filed outside of the statute of limitations as long as one act of discrimination occurred within the statute of limitations period.

Finally, the appellate court agreed with the trial court that the city did not state a claim for unjust enrichment because it did not allege that it conferred a direct benefit on the banks to which the banks were not otherwise legally entitled. The city alleged that the banks inequitably received municipal services as well as the benefits of zoning ordinances and tax laws. The appellate court found that these services and laws apply to all city residents and that the banks were legally entitled to these services like any other Miami property owner.

The court concluded its opinion in the following way: "Nothing we have said in this opinion should be taken to pass judgment on the ultimate success of the City's claims. We hold only that the City has constitutional standing to bring its FHA claims, and that the district court erred in dismissing those claims with prejudice on the basis of a zone of interests analysis, a proximate cause analysis, or the inapplicability of the continuing violation doctrine."

Webb McArthur is an associate in the Maryland office of Hudson Cook, LLP. Webb can be reached at 410-865-5424 or by email at

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