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Miami Lawsuit Against Big Banks for Predatory Lending Continues

SAN FRANCISCO, CALIFORNIA - FEBRUARY 07: A customer uses an ATM at a Wells Fargo Bank office on February 07, 2019 in San Francisco, California. Wells Fargo customers are experiencing difficulty using ATMs and the Wells Fargo phone app after reports of a technical issue at the outage at a server farm located in Shoreview, Minnesota. (Photo by Justin Sullivan/Getty Images)
By William Vogeler, Esq. on May 09, 2019 9:08 AM

In a decision by the U.S. Eleventh Circuit Court of Appeals, Judge Stanley Marcus described cases against Wells Fargo and Bank of America in a word: "ambitious." That's because Miami has fought the banks to the U.S. Supreme Court and back again. In City of Miami v. Wells Fargo & Co., the city alleges the banks intentionally targeted black and Latino residents for predatory loans.

On remand from the Supreme Court, the Eleventh Circuit had to decide whether the city adequately plead proximate cause between the claimed injuries and the allegedly injurious conduct. In a word, the appeals court said: "Yes."

Proximate Cause

It was much more complicated than that, of course. When the Supreme Court passes on a question, you know it's not simple. The Eleventh Circuit considered it as applied to the alleged facts under the Fair Housing Act. By targeting consumers with bad loans, the city alleged, the banks caused injury to its tax base. As borrowers lost their homes to foreclosures, city taxes went down. That's where proximate cause became the issue.

"Proximate cause asks whether there is a direct, logical, and identifiable connection between the injury sustained and its alleged cause," Marcus wrote. "If there is no discontinuity to call into question whether the alleged misconduct led to the injury, proximate cause will have been adequately pled."

That's a quote.

The appeals court said the claimed injury was more than foreseeable. It was directly connected to the banks' targeted marketing, which resulted in foreclosures, which depressed property values, which reduced the tax base.

That's not a quote.

Not Exactly a Win

It was not a total win for the city. Others have tried and failed. The appeals court said some of the city's claimed injuries, such as expenditures on municipal services, fell short. Increases in police, fire, sanitation, and similar municipal expenses, for example, are not included. The judges pointed out that their ruling does not suggest the city will win at the trial level. "Many questions, and many difficult questions, remain and will have to be worked out in the district court," they said.

The cases started in December 2013. The parties still need a trial date.

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