By Morgan Williams
In a precedent-setting ruling, the Supreme Court upheld the right of cities to sue banks whose practices harm the municipalities and their residents. The decision in Bank of America, et al. v. City of Miami strongly ratified a core principle of the Fair Housing Act while leaving open a central question of how proximate cause is defined under the law.
In its lawsuit, the City of Miami outlined its allegations that Bank of America and Wells Fargo targeted predatory loans against African American and Latino borrowers and that when the unsustainable loans inevitably collapsed and houses fell into foreclosure, the City incurred added costs in police and code enforcement services and diminished tax revenue stemming from the bad loans. The City argued that the banks practices cause “stagnation and decline in African-American and Latino neighborhoods” and “hindered the City’s efforts to create integrated, stable neighborhoods.” The City’s claim highlights the devastating impact of the foreclosure crisis and the harmful reach of discrimination in communities of color.
The decision reaffirms bedrock Supreme Court fair housing jurisprudence—in Trafficante, Gladstone, and Havens Realty— interpreting a broad scope of the law for those seeking to redress harm from discriminatory conduct, whether in the form of a tenant being denied the opportunity to live in an integrated community or a city that loses tax revenue from racial steering practices.
Justice Breyer wrote in his 5-3 majority opinion that the City’s financial injuries including “lost tax revenue and extra municipal expenses” fall within the “zone of interests” the Fair Housing Act protects, basing his analysis in principles of stare decisis and Congressional statutory ratification, and preserving the ability of cities and other indirect victims of discrimination to seek redress in the courts.
Indeed, Breyer opined that the Court is undeterred in upholding its previous rulings that the Fair Housing Act “reflects congressional intent to confer standing… as broadly as is permitted by Article III of the Constitution.” By reestablishing the broad application of standing under the court’s “zone of interest” framework, the decision serves to buttress a central pillar of the law under recent developments in Supreme Court jurisprudence.
The court left open the question of whether the banks’ misconduct proximately caused the City’s financial injury, remanding that matter to the 11th Circuit which previously only assessed harm on the basis of whether the injury could have foreseeably flown from the discrimination alleged. Justice Breyer noted that “the housing market is interconnected with economic and social life,” such that a fair housing violation may “‘be expected to cause ripples of harm to flow’ far beyond the defendant’s misconduct,” but he reiterated that proximate cause “requires some direct relation between the injury asserted the injurious conduct alleged.”
The court declined to draw precise boundaries on what constitutes proximate cause under the law, citing a lack of guidance on the question from the lower courts, so now the civil rights advocates and banking industry defense lawyers lined up on either side of this dispute will follow the matter back down to the circuit courts. With little guidance from the Supreme Court apart from the assertion that alleged harm must somehow be more than merely foreseeable, the fight over the reach of the Fair Housing Act lives on in the next phase of this case.