Chase Suit in 'Cleveland v. Wall Street' is Moot - U.S. Sixth Circuit
U.S. Sixth Circuit - The FindLaw 6th Circuit Court of Appeals Opinion Summaries Blog

Chase Suit in 'Cleveland v. Wall Street' is Moot

The foreclosure crisis hit Cleveland particularly hard. Between 2000 and 2008, Cuyahoga County, Ohio, (where Cleveland is located), recorded approximately 80,000 foreclosures. In 2007, County Treasurer Jim Rokakis described the city as “the epicenter of the mortgage meltdown in America.”

Cleveland responded in the classic American fashion: With lawsuits.

This week, the Sixth Circuit Court of Appeals ruled that a federal court could have granted Chase Bank’s request to block the city’s claims. Not that it matters now, Legal Newsline reports.

There are three lawsuits at the heart of this appeal:

  1. In January 2008, Cleveland sued 21 financial institutions in Ohio state court, alleging that the defendants' actions in the subprime-mortgage industry constituted a public nuisance under Ohio common law. By securitizing subprime mortgages and later foreclosing on the houses purchased through such mortgages, the defendants allegedly contributed to a financial crisis in the city that included significant declines in property values, a shrinking tax base, and an increase in criminal activity. Cleveland sought to recover for the costs it incurred in monitoring, maintaining, or demolishing foreclosed properties and for decreased tax revenues.
  2. In August 2008, Cleveland filed a second suit in Ohio state court against 28 financial institutions, including the non-diverse JPMorgan Chase Bank, N.A. In addition to pleading another public-nuisance claim, Cleveland alleged that the defendants had violated the Ohio Corrupt Activities Act (OCAA), the state RICO analogue, by inaccurately claiming title to mortgages and promissory notes in foreclosure proceedings. Cleveland also sought to recove costs incurred maintaining or demolishing foreclosed houses.
  3. In February 2008, while City of Cleveland I was pending, Chase Bank sued Cleveland in federal district court, seeking a declaratory judgment that Cleveland's public-nuisance claim in City of Cleveland I was preempted by the National Bank Act and requesting an injunction against that suit. After Cleveland filed City of Cleveland II, Chase Bank amended its complaint to request declaratory relief and an injunction against both of Cleveland's lawsuits.

The lawsuit trio turned into a hot procedural mess.

The district court ruled in August 2010 that it lacked subject-matter jurisdiction to issue declaratory relief in Chase Bank's claim, but had jurisdiction to issue an injunction. Despite the latter ruling, the court dismissed Chase Bank's suit without prejudice for failure to show irreparable harm.

Chase Bank appealed, contending that the district court had subject-matter jurisdiction to issue both declaratory and injunctive relief.

Since the case left the district court, claims between the parties in Cleveland I and II have been dismissed both voluntarily and involuntarily.

While the Sixth Circuit noted that Chase Bank's request for injunctive and declaratory relief regarding City of Cleveland I is now moot, it concluded that the federal courts did have subject-matter jurisdiction because the suit "fell within the lines of cases recognizing federal jurisdiction over preemption-based challenges to state laws brought against state officials."

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