Miami Lawsuit Against Mortgage Lenders Survives Supreme Court Review
May 01 2017 - 11:50AM
Dow Jones News
By Brent Kendall and Jess Bravin
WASHINGTON -- The Supreme Court handed a partial victory to the
city of Miami Monday, ruling it was authorized to bring ambitious
lawsuits alleging Bank of America Corp. and Wells Fargo & Co.
engaged in financial-crisis era discriminatory lending that led to
urban blight and falling property values.
The court, however, in a 5-3 ruling, said Miami in future
proceedings will have to establish that the banks caused direct
harm to the city, a standard that could prove challenging.
The court's opinion, written by Justice Stephen Breyer,
concluded that Miami had legal standing to bring the lawsuits under
the Fair Housing Act, which bars discrimination in housing sales
and rentals, as well as in related real-estate transactions.
The court rejected the banks' argument that the city wasn't an
appropriate party to bring a claim under the housing law. The banks
didn't immediately respond to requests for comment.
About a dozen other cities or local governments have brought
lawsuits similar to Miami's.
Miami and the other municipalities are suggesting a novel theory
-- that discriminatory housing policies by banks can harm not only
homeowners and potential buyers, but also cities themselves, given
the blight and urban decay that can follow. The court's ruling
found that this theory is legally plausible.
The Supreme Court ruling sends the case back to the 11th U.S.
Circuit Court of Appeals in Atlanta to review whether the banks'
alleged misconduct has a "direct relation" to the injuries the city
alleges.
Chief Justice John Roberts joined the court's four liberals in
the majority opinion. Justice Clarence Thomas, joined by Justices
Anthony Kennedy and Samuel Alito, dissented, concluding that the
cities had no right to bring suit under the Fair Housing Act.
The case was argued before President Donald Trump appointee
Justice Neil Gorsuch joined the court, so he didn't take part in
the decision.
The lawsuits alleged that the banks' lending practices
discriminated against minority borrowers, steering them toward
loans with less-favorable terms and higher fees that were more
likely to fail. When those loans led to foreclosures in large
numbers, city neighborhoods suffered, causing diminishing tax
revenues and others harms to Miami, the city alleged.
The banks denied the allegations and said the lawsuits were
attempts by the city, working with private plaintiffs' lawyers, to
boost its coffers.
The Supreme Court didn't consider whether Bank of America and
Wells Fargo actually violated the fair housing law. Instead it only
examined whether Miami should be allowed to proceed with its
claims.
Write to Brent Kendall at brent.kendall@wsj.com and Jess Bravin
at jess.bravin@wsj.com
(END) Dow Jones Newswires
May 01, 2017 11:35 ET (15:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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