Ruling is important victory for civil rights

On May 1, the U.S Supreme Court gave civil rights plaintiffs an important victory when it ruled that the city of Miami had standing to sue under the Fair Housing Act to challenge discriminatory lending by banks. In Bank of America v. City of Miami, 2017 DJDAR the court, in a 5-3 decision, held that the city was an "aggrieved person" within the zone of interests protected by the statute. The court also said the city needs to allege and prove that its injuries were proximately caused by the bank's discriminatory lending and the court remanded the case for the federal court of appeals to consider the causation question. The Fair Housing Act, adopted in 1968, not long after the death of Dr. Martin Luther King Jr., broadly prohibits race discrimination in housing. The act makes it unlawful "[t]o discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race ... or national origin." It also forbids discrimination by "any person or other entity whose business includes engaging in residential real estate-related transactions ... in making available such a transaction, or in the terms or conditions of such a transaction, because of race ... or national origin."

A lawsuit to enforce the act may be brought by the attorney general or by an "aggrieved person." The statute broadly defines "[a]ggrieved person" to include any person who — (1) claims to have been injured by a discriminatory housing practice; or (2) believes that such person will be injured by a discriminatory housing practice that is about to occur."

The city of Miami sued Bank of America and Wells Fargo Bank to challenge their racially discriminatory lending practices. The 63-page complaint alleges that these banks directed highly undesirable mortgage loans especially to African-American and Latino borrowers and refused to refinance them on terms that were available particularly to white borrowers. The 11th U.S. Circuit Court of Appeals, in concluding that the city of Miami had standing to sue under the act, explained: "[T]he bank[s] targeted black and Latino customers in Miami for predatory loans that carried more risk, steeper fees, and higher costs than those offered to identically situated white customers, and created internal incentive structures that encouraged employees to provide these types of loans."

The complaint alleged that a regression analysis of available data in Miami reported by the bank demonstrated that African-American borrowers were 4.321 times more likely to receive a discriminatory loan than a white borrower with similar underwriting and borrower characteristics. Latino borrowers were 1.576 times more likely to receive such loans. Statements from bank employees confirmed that the practice was to direct undesirable loans especially to minority borrowers.

The predictable happened and foreclosures occurred, especially when the banks refused to offer refinancing on terms available for white borrowers. A discriminatory loan to an African-American borrower in Miami was 13.324 times more likely to result in foreclosure than a non-discriminatory loan to a white borrower with similar risk characteristics, and a discriminatory loan to a Latino borrower was 17.341 times more likely to result in foreclosure than a loan in a predominantly non-discriminatory loan to a white borrower with similar risk characteristics. Moreover, the complaint alleged that a loan made to a borrower residing in a predominantly minority neighborhood in Miami was 5.857 times more likely to result in foreclosure than a loan in a non-minority neighborhood.

The city of Miami sued claiming that it was "aggrieved" by the banks' discriminatory lending practices. It suffered loss of tax revenue, costs attendant to the often abandoned houses, and a frustration of its goal of ending racial segregation in housing. The Supreme Court found that Miami's allegations were sufficient for standing. Justice Stephen Breyer — writing for a majority that included Chief Justice John Roberts and Justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan — concluded: "We hold that the City's claimed injuries fall within the zone of interests that the FHA arguably protects. Hence, the City is an 'aggrieved person' able to bring suit under the statute." The court said, "we conclude that the City's claims of financial injury in their amended complaints—specifically, lost tax revenue and extra municipal expenses — satisfy the ... standing requirement."

But the court also said that Miami also would have to allege and prove that its injuries were proximately caused by the bank's discriminatory lending practices. The court said that the 11th Circuit asked only whether there was "foreseeability." Justice Breyer declared: "We conclude that the Eleventh Circuit erred in holding that foreseeability is sufficient to establish proximate cause under the FHA. As we have explained, proximate cause 'generally bars suits for alleged harm that is 'too remote' from the defendant's unlawful conduct.' In the context of the FHA, foreseeability alone does not ensure the close connection that proximate cause requires."

The court, though, refused to articulate a standard for what is sufficient for proximate cause, saying instead that the lower courts should do that before it rules. The court said: "The parties have asked us to draw the precise boundaries of proximate cause under the FHA and to determine on which side of the line the City's financial injuries fall. We decline to do so .... The lower courts should define, in the first instance, the contours of proximate cause under the FHA and decide how that standard applies to the City's claims for lost property-tax revenue and increased municipal expenses."

Racial discrimination in housing remains a significant problem throughout the United States. Banks have historically contributed to this problem in their discriminatory lending practices. The Supreme Court's decision is an important victory for civil rights because it allows cities to sue to halt and remedy this racial discrimination.