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Fate Of Municipal-Plaintiff FHA Suits In Justices' Hands

Law360

The U.S. Supreme Court on Tuesday announced it will hear an appeal by two banks in a case that could define the reach of mortgage discrimination lawsuits under the Fair Housing Act. Bank of America and Wells Fargo are challenging the city of Miami’s lawsuit seeking to hold the banks responsible for allegedly discriminatory mortgage practices dating back to the subprime boom which, the city claims, resulted in a raft of foreclosures, in turn causing them to lose property tax revenue and incur out-of-pocket costs associated with municipal services rendered at vacant properties. The banks argue that the municipality is not an “aggrieved person” under the law — both because reduced tax receipts and municipal expenditures are not within the “zone of interests” Congress sought to protect in enacting the FHA, and because the city’s injuries, if any, were not caused by any alleged discriminatory conduct.

The court’s eventual ruling could provide some much-needed clarity to lower courts wrestling with standing issues in FHA cases. Across the country, at least eight different municipalities are pursuing substantially similar cases against bank defendants. The decision to review City of Miami also comes just one year after the court decided Texas Department of Housing and Community Affairs v. Inclusive Communities Project Inc., 135 S. Ct. 2507 (2015), holding that claims under a disparate impact theory of liability are allowed under the Fair Housing Act, subject to a “robust causality requirement” at the pleading stage. The City of Miami case could provide more nuanced guidance on the causality requirements in pleading an FHA claim, and will be a key case to watch in the Supreme Court’s 2016 term.

Originally published in Law360; reprinted with permission.