Courts: Bank of America Corp. v. City of Miami

On Monday, the Supreme Court ruled in a 5-3 decision that the City of Miami is able to sue Wells Fargo and Bank of America under the Fair Housing Act of 1968. The Court’s decision is an important step towards opening the floodgates for cities across the nation to sue predatory lenders for targeting minority communities with incredibly risky high-interest subprime loans. 

The judgment is a long time coming considering cases against the banks have been brought forth by cities such as Baltimore, Los Angeles, Oakland, and Cook County, Ill. since the widespread injury and foreclosures of the financial crisis in 2008. However, the decision possesses a strong caveat, and the accountability of the Banks within the scope of the case is certainly limited. Nevertheless, the case and its world-wide context could prove to be an important precedent. 

The Plaintiff’s Case: 

According to the court-filings by the City of Miami, Bank of America and Wells Fargo illegally targeted majority-minority neighborhoods, known to the banks to have poor credit, for predatory sub-prime loans. 

Miami alleged that the Fair Housing Act (FHA) “prohibits, among other things, racial discrimination in connection with real-estate transactions, and permits any ‘aggrieved person’ to file a civil damages action for a violation of the act.” The City charges the Banks with intentionally lending to African-American and Latino borrowers “on worse terms than equally creditworthy non-minority borrowers.” 

The injury suffered by the City of Miami as a result of the Banks’ “discriminatory conduct” led to an unusually high amount of foreclosures and vacancies in minority neighborhoods. This harmed the City’s ability to “assure racial integration, diminished the City’s property-tax revenue, and increased demand for police, fire, and other municipal services.” 

The Defense: 

The banks argued that when Congress passed FHA they did not intend for the law to be used for the purposes Miami is pursuing. The defending banks ask if cities do in fact qualify as an “aggrieved person,” after all “Municipal suits like this one were unheard of until recently, when enterprising contingency-fee counsel began pushing them.” According to Bank of America’s spokesman Lawrence Grayson, the city’s charges are “without merit.” 

The Decision:

The Supreme Court’s majority opinion handed down by Justice Breyer, recognizes that a city, in this case Miami, is an “aggrieved person.” Indeed, if the Supreme Court can declare that corporations are people in Citizens United v. F.E.C, why not cities? It’s surprising that the Supreme Court has taken this long to add more ‘people’ into the democratic political process. At least cities represent people. Perhaps one day soon, the Supreme Court will find that corporate cities are people too, and the American political system will be able to revert back to its rightful home under the stewardship of the City of London.  

Now that the City of Miami is an “aggrieved person” under the FHA, they can bring suit against the Banks. Previously, only individuals and the federal government could sue. Now cities have the opportunity to take action against the banks for the harm their practices had on communities. This harm is not just limited to the discrimination of minority communities but also significant financial loss on behalf of the city in lost property taxes, revenue, and expenditures related to curbing the negative effects of the bank’s targeted injurious policies. 

However, the Court did qualify their opinion by finding that the U.S. Court of Appeals for the 11th Circuit “erred in concluding” that Miami’s complaints – namely, that the discriminatory conduct of the banks ensured a disproportionate amount of foreclosures in minority neighborhoods. This conduct caused the loss of the city’s tax revenue while simultaneously increasing the demand for municipal services. 

To put it plainly, the Court decided that Miami did not yet meet the “proximate-cause requirement” of the FHA, “some direct relation between the injury asserted and the injurious conduct alleged.” Thus, before the Supreme Court could make any further judgement, a lower court needs to define “the contours of proximate cause” and if Miami can substantially prove that the city’s-alleged injuries were more than just the “foreseeable results” of the Banks’ misconduct. 

Therefore, the decision allows Miami into the courtroom, but requires them to prove, to a higher, more difficult degree, the causal link between the banks intention and Miami’s injury. The likely reason for the Court having “raised the bar of proof” on Miami was because there is concern that this decision could open the flood-gates not only to similar suits from other individuals and cities, but even from, you guessed it: businesses. 

Conclusion:

The decision leaves the Banks quietly confident that the “new standards” of proof required will be difficult to establish. Because of the qualified opinion given by the Court, the decision has been described as “half-full, half-empty.” This phrase could seemingly have been borrowed from the banks themselves - in description of the results of their discriminatory foreclosure policies.  

Remarkably, banks and other notable financial corporations have proven immune to punishment following their actions that led to the 2008 Global Financial crisis. The American taxpayer was even kind enough to bail them out of the cesspool of greed they attempted to drown the country in. Incredibly, it may well be through the unexpected avenue of the FHA civil rights legislation of 1968 – that these “too-big-to-fail” institutions could be held, at least partially accountable. It will be reminiscent of murderous Al Capone’s conviction of tax evasion if the banks are shaken from their secure ivory towers and proven to be not so untouchable.