While holding that cities may sue lenders under the Fair Housing Act, alleging reduced property tax revenues due to predatory lending, the Supreme Court today found that the lower court should have used a more stringent test to determine whether the city of Miami was entitled compensation for its losses. As a result, the court sent the case back to a lower court to determine whether banks’ lending practices were responsible for Miami’s economic injuries to a degree that justify holding the banks financially liable.
The case involves a lawsuit brought by Miami against Bank of America and Wells Fargo alleging FHA violations. The complaints were initially dismissed by a Miami federal district court but were reversed by the Eleventh Circuit, which found that Miami had standing under the FHA to sue the banks because the city demonstrated a nexus between the alleged injuries and the banks’ conduct. The American Bankers Association and several financial and housing groups filed a friend-of-the-court brief in support of the banks, requesting that the Supreme Court review the case.
While the court’s 5-3 ruling does not affirm ABA’s argument challenging municipalities’ standing to sue over economic injuries under the FHA, it does place limits on municipalities’ ability to allege financial injuries without proving proximate cause. “[T]he lower courts should define, in the first instance, the contours of proximate cause under the FHA and decide how that standard applies to the City’s claims for lost property-tax revenue and increased municipal expenses,” the opinion said. For more information, contact ABA’s Thomas Pinder.