Eleventh Circuit upholds Miami's complaints in three big fair-housing suits against banks

City of Miami v. Bank of Am. Corp., No. 14-14543 (11th Cir. Sept 1, 2015); City of Miami v. Citigroup Inc., No. 14-14706 (11th Cir. Sept. 1, 2015); City of Miami v. Wells Fargo & Co., No. 14-14544 (11th Cir. Sept. 1, 2015).

These are three big—and important—lawsuits under the Fair Housing Act (FHA). In each, Miami alleges that the defendant banks made blacks and Latinos the targets of the kind of predatory loans that helped bring down the economy in 2008: interest-only loans, balloon payment loans, negative amortization loans, ARMs with teaser rates, and so on. When these loans led predictably to lots of foreclosures, the city lost tax revenue and was forced to spend more money on municipal services.

The district court dismissed Miami’s FHA claims on the pleadings. The Eleventh Circuit now reverses that dismissal. 

First, the Eleventh Circuit holds that Miami has standing to pursue its FHA claims: the city has Article III standing, and the FHA allows anybody with Article III standing to pursue a claim under the FHA.  

The court next holds that the FHA requires proof of proximate cause between the banks’ discrimination and the city’s injuries—and the city has adequately alleged proximate cause. According to the city’s regression analysis, blacks and Latinos were considerably more likely to receive a predatory loan than white borrowers. The city alleges, for example, that black borrowers with good credit were fifteen times more likely than comparable white borrowers to receive a predatory loan from Citigroup. Data suggests, too, that the banks’ loans to blacks and Latinos were considerably more likely to result in foreclosures—and especially quick foreclosures at that. These foreclosures, in turn, cost the city tax revenue and municipal expenditures. This link between the banks’ alleged discrimination and the city’s alleged injuries, the Eleventh Circuit says, is close enough to sustain Miami’s claims at the pleadings stage. 

The Eleventh Circuit also concludes that the continuing-violation doctrine may be able to defeat the banks’ statute-of-limitations defense (the FHA has a two-year statute of limitations). While the city’s original complaints were inadequate, the district court on remand should allow Miami to replead in order to cure its statute-of-limitations problem.

A few months ago, the Supreme Court held that the FHA recognizes certain kinds of disparate-impact claims. While Miami advances both disparate-treatment and disparate-impact claims, the Eleventh Circuit notes that, on remand, the city’s new pleading should take into account the Supreme Court’s recent ruling on the contours of disparate-impact liability.

These cases are significant. They may lead the defendant banks to file petitions for en banc review.