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U.S. Supreme Court Holds that Cities Can Bring a Claim Under FHA for Lenders’ Discriminatory Practices

On May 1, 2017, in the case of Bank of America, et al. v. City of Miami, Florida (U.S. Sup. Ct. Nos. 15–1111 and 15-1112), the U.S. Supreme Court held that the city of Miami (“Miami”) is an “aggrieved person” within the meaning of the Fair Housing Act (“FHA”) and therefore authorized Miami to bring a claim for damages it suffered due to lenders discriminatory practices that resulted in financial injuries to Miami in violation of the FHA.

Miami filed a complaint against Bank of America and Wells Fargo Bank (“Banks”) alleging that the Banks intentionally targeted predatory practices at African-American and Latino neighborhoods and residents, lending to minority borrowers on worse terms than equally creditworthy nonminority borrowers and inducing defaults by failing to extend refinancing and loan modifications to minority borrowers on fair terms. It alleged that the Banks’ discriminatory conduct resulted in a disproportionate number of foreclosures and vacancies in a majority of minority neighborhoods, which diminished Miami’s property-tax revenue, and increased demand for police, fire and other municipal services.

The District Court dismissed the complaint on the grounds that (i) the harms alleged fell outside the zone of interest protected by FHA, and (ii) because the complaint failed to show a sufficient causal connection between Miami’s injury and the Banks’ alleged discriminatory conduct. The Eleventh Circuit reversed, finding that the harm alleged fell within the zone of interest protect by the FHA and that the complaint met the FHA’s proximate-cause requirement based on its finding that Miami’s alleged financial injury were a foreseeable result of the alleged misconduct.

In reaching its decision, the Supreme Court held that Miami’s claims of lost tax revenue and extra municipal expenses were the kind of financial injuries that were within the zone of interests that the FHA protects. Having concluded that these type of injuries were protected by the FHA, the Supreme Court went on to examine whether Miami was an “aggrieved person” who is authorized to bring a claim for damages under the FHA. The Supreme Court observed that its prior precedents construed the term “person aggrieved”, in the original version of FHA, to confer standing as broadly to the extent allowed by Article III of the Constitution, which resulted in authorizing plaintiffs similarly situated to Miami to have a cause of action under the FHA. It also observed that when Congress amended the FHA, it changed the term to “aggrieved person” but did not make material changes to the definition. It concluded that by doing so, Congress adopted the Supreme Court’s interpretation in the prior precedents, which meant that the term “aggrieved person” is to be construed broadly and thus includes Miami.

However, the Supreme Court found that the Eleventh Circuit erred in finding that the complaint met the FHA’s proximate-cause requirement. It reasoned that under FHA, proximate cause analysis determines “whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits” and foreseeability alone does not ensure the required “close connection”. Nevertheless, the Supreme Court declined to draw the precise boundaries of proximate-cause under the FHA and left such task to the lower courts to define. Accordingly, it vacated the Eleventh Circuit decision and remanded the matter to the District Court.


At this time, the decision opens the door to litigation by cities, and probably other local government authorities, against lenders and servicers for discriminatory lending practices or loss mitigation practices, respectively, in violation of FHA, which allegedly results in financial injuries to cities. Although the Supreme Court found that foreseeability alone is not enough to establish proximate-cause under FHA, until case law develops the boundaries of proximate-cause, it may be hard to dismiss such litigation at early stages of the case.

As a result of this decision, it is likely that the risk of litigation and reputational harm is greater for large lenders and servicers. However, it remains to be seen whether the decision would also serve as a basis to bring discrimination claims by cities against smaller lenders and servicers.