Mi­ami’s anti-bias suit against banks per­mit­ted

South Florida Times - - FRONT PAGE - By MARK SHER­MAN

MI­AMI – The U.S. Supreme Court ruled Mon­day that cities may sue banks un­der the fed­eral anti-dis­crim­i­na­tion in hous­ing law, but said those law­suits must tie claims about preda­tory lend­ing prac­tices among mi­nor­ity cus­tomers di­rectly to de­clines in prop­erty taxes.

The jus­tices' 5-3 rul­ing partly val­i­dated a novel ap­proach by Mi­ami and other cities to try to hold banks ac­count­able un­der the fed­eral Fair Hous­ing Act for the wave of fore­clo­sures dur­ing the hous­ing cri­sis a decade ago.

But the court still threw out an ap­pel­late rul­ing in Mi­ami's fa­vor and or­dered a lower court to re­ex­am­ine the city's law­suit against Wells Fargo and Bank of Amer­ica to be sure that there is a di­rect con­nec­tion be­tween the lend­ing prac­tices and the city's losses.

Mi­ami claimed that Wells Fargo and Bank of Amer­ica, as well as Cit­i­group, pur­sued a decade­long pat­tern of tar­get­ing African Amer­i­can and

“Mi­ami claimed that Wells Fargo and Bank of Amer­ica, as well as Cit­i­group, pur­sued a decade-long pat­tern of tar­get­ing African Amer­i­can and His­panic bor­row­ers for costlier and riskier loans than those of­fered to white cus­tomers.”

His­panic bor­row­ers for costlier and riskier loans than those of­fered to white cus­tomers.

The loans to mi­nor­ity home­own­ers went into de­fault more quickly as well, the city said.

Wells Fargo and Bank of Amer­ica ap­pealed the rul­ing by the 11th U.S. Cir­cuit Court of Ap­peals to the Supreme Court, ar­gu­ing that cities can't use the Fair Hous­ing Act to sue over re­duc­tions in tax rev­enues. The banks said the con­nec­tion be­tween a loan and the tax con­se­quences is too ten­u­ous. Cit­i­group did not ap­peal, though its law­suit also would be af­fected by what the ap­peals court does in re­sponse to Mon­day's rul­ing.

Jus­tice Stephen Breyer wrote in his ma­jor­ity opin­ion a city can make claim for fi­nan­cial harm un­der the anti-dis­crim­i­na­tion hous­ing law. But he said the sec­ond is­sue, ty­ing the loans to the drop in tax rev­enues, is more dif­fi­cult. Breyer wrote that there must be "some di­rect re­la­tion be­tween the in­jury as­serted and the in­ju­ri­ous con­duct al­leged.''

The ap­peals court should de­cide that is­sue, Breyer said.

Writ­ing in dis­sent, Jus­tice Clarence Thomas said he would have given the banks what they asked for and dis­missed Mi­ami's law­suit. Jus­tices Sa­muel Al­ito and An­thony Kennedy sided with Thomas.

The banks claimed that a rul­ing for Mi­ami could lead to law­suits ask­ing for bil­lions of dol­lars. The city said those fears were un­jus­ti­fied and pointed to sim­i­lar law­suits filed by Bal­ti­more and Mem­phis, Ten­nessee, that were set­tled for less than $10 mil­lion each.

Both sides saw some­thing to like in the out­come. “With this de­ci­sion, the Supreme Court has ac­knowl­edged the cru­cial role of mu­nic­i­pal gov­ern­ments in pro­tect­ing res­i­dents' rights. In hous­ing and lend­ing as in other ar­eas, cities can and should serve as a bul­wark against dis­crim­i­na­tion,'' said Den­nis Parker, di­rec­tor of the Amer­i­can Civil Lib­er­ties Union's racial jus­tice pro­gram.

Wells Fargo se­nior vice pres­i­dent Tom Goyda said the bank's case was helped by the court's de­ci­sion. "We be­lieve that un­der the strin­gent stan­dards ar­tic­u­lated by the Supreme Court, it will be very dif­fi­cult for Mi­ami or any other mu­nic­i­pal­ity to show the re­quired con­nec­tion be­tween the claimed dam­ages and un­sub­stan­ti­ated al­le­ga­tions about our lend­ing prac­tices, which do not re­flect how we op­er­ate in the com­mu­ni­ties we serve,'' Goyda said.

The con­sol­i­dated cases are Bank of Amer­ica v. Mi­ami, 15-1111, and Wells Fargo v. Mi­ami, 15-1112.

PHOTO COUR­TESY OF BI­OG­RA­PHY.COM

Jus­tice Clarence Thomas

PHOTO COUR­TESY OF GOBANKINGRATES

Wells Fargo and Bank of Amer­ica ap­pealed the rul­ing by the 11th U.S. Cir­cuit Court of Ap­peals to the Supreme Court, ar­gu­ing that cities can't use the Fair Hous­ing Act to sue over re­duc­tions in tax rev­enues.

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