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SCOTUS Says: Cities Can Sue Big Banks for Discriminatory Practices

This week, the Supreme Court issued a decision that could have far reaching implications for the relationship between local governments and businesses, like banks and lenders, involved in real estate. In short, SCOTUS ruled that cities and local governments, under certain conditions, are "aggrieved individuals" that can bring claims for damages pursuant to the Fair Housing Act. However, those damages need to be rather certain.

The case involved the city of Miami's charge of racially discriminatory predatory lending against Bank of America and Wells Fargo. The city claimed that the discriminatory practices of the banks targeted Hispanic and African American minorities for predatory loan schemes, which defaulted at a high rate in concentrated minority areas, and as a result, caused the city economic injury. The economic injury came as a result of not just the decreased tax revenue, but also as a result of increased city expenses.

Don't Start Popping Bottles Yet

While most people might want to celebrate a win like this for extending rights under the FHA to cities, there's a rather significant catch. At the same time that SCOTUS okayed the city's legal claim, it also kicked the lower court's ruling back on another matter related to the claim that could prove insurmountable: the standard for how damages are evaluated.

Where before the appellate court found that the city's injury only needed to be a foreseeable injury, SCOTUS explained that the standard is actually much stricter than merely foreseeable. As such, the High Court ordered the appellate court reexamine the evidence and determine whether the injury was a direct result of the alleged conduct.

What Comes Next?

As a result of the Court's reversal and remand to the lower court, the appellate court will need to re-review the case. This will generally involve additional briefing to the court by the involved parties, and sometimes additional oral arguments. Then the appeals court will issue a new decision, which, assuming it is not appealed again, would either allow the case against the banks to move forward with a trial in the district court, or could finally end the case completely.

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