The Supreme Court has ruled in Bank of America Corp. et al. v. City of Miami that Miami does have standing to sue lenders for alleged violations of the federal Fair Housing Act’s antidiscrimination provisions that the city claims caused its tax revenues to decline and its public services to become overburdened.
The FHA forbids racial discrimination in the sale or leasing of housing, and makes it illegal for any person or other entity whose business involves residential real estate to discriminate against any person “in making available such a transaction, or in the terms or conditions of such a transaction, because of race . . . .”
A typical claim of an FHA violation concerns prospective home buyers or lessees who are discriminated against during the home-buying or leasing process, as Justice Clarence Thomas observed in dissenting from the portion of the majority’s decision that concerned Miami’s standing to sue.
In contrast, Miami sued on its own behalf, claiming that Bank of America and Wells Fargo intentionally issued riskier mortgages on less favorable terms to African American and Latino borrowers than they issued to similarly situated white, non-Latino customers, and that those allegedly unlawful practices adversely impacted the city’s racial composition, impaired the city’s goals of assuring racial integration and desegregation, frustrated the city’s efforts to promote fair housing and integrated communities, and disproportionately caused foreclosures and vacancies in the city’s minority neighborhoods.
The foreclosures and vacancies, in particular, were alleged to have caused decreased property values in minority neighborhoods, thereby reducing property tax revenues collected by the city and forcing the city to spend more on municipal services and to remedy blight and unsafe and dangerous conditions existing at properties that were foreclosed on by the banks.
However, Miami’s use of lost tax revenues as a basis for standing was not unprecedented. In holding that Miami had standing to sue, the majority relied heavily on its holding in Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979), which was brought by the village of Bellwood, Illinois; one black resident of Bellwood and four white residents of Bellwood; and one black resident of a neighboring town against two real estate brokerage firms accused of deliberately steering white home buyers away from majority-black neighborhoods and black home buyers away from majority-white neighborhoods. There, the Court found that all of the plaintiffs—including the municipal plaintiff, which had claimed that the brokerages’ unlawful practices diminished its tax base—had standing under a prior version of the FHA. This same reasoning resulted in the Court’s determination that Miami had standing to maintain its claims.
Despite this victory, it is unclear whether the ruling will open the floodgates to similar suits by other cash-strapped municipalities that have struggled to replace tax revenues lost in the wake of the nationwide foreclosure crisis and to meet the rising demand for public and social services that cities like Miami have directly attributed to predatory lending practices.
A significant challenge still lies ahead for Miami. Specifically, the Supreme Court ruled that, despite its newfound “aggrieved person” status, Miami will still be required to prove that the lenders’ allegedly unlawful practices are not “too remote” from the injuries experienced by the city, so as to satisfy the proximate cause requirement that has been read into the statute by courts reviewing FHA claims.
In so ruling, the Court reversed the Eleventh Circuit, which had concluded that in the context of the FHA, the proper standard for proximate cause is based on foreseeability, which the city had demonstrated despite the presence of several intervening links “in the causal chain,” none of which, the Eleventh Circuit reasoned, were unforeseeable.
Justice Stephen Breyer, writing for the majority, in which the Court’s four liberal members were joined by Chief Justice John Roberts, provided a succinct, textbook analysis of the proximate cause requirement:
“[F]oreseeability alone does not ensure the close connection that proximate cause requires. . . . A violation of the FHA may, therefore, ‘be expected to cause ripples of harm to flow’ far beyond the defendant’s misconduct. . . . Nothing in the statute suggests that Congress intended to provide a remedy wherever those ripples travel.”