The Supreme Court of the United States recently held that a city qualifies as an “aggrieved person” under the federal Fair Housing Act, 42 U.S.C. § 3601 et seq., and thus that the plaintiff city in this action had standing to assert claims under the FHA against banks the city believed were engaging in unlawful discriminatory lending practices.
According to the city, the unlawful lending practices caused, among other damages, a disproportionate number of foreclosures and vacancies in majority-minority neighborhoods, which impaired the city’s effort to assure racial integration, diminished the city’s property-tax revenue, and increased demand for police, fire, and other municipal services. The Court concluded that such alleged damages are within the “zone of interests” designed to be protected by the FHA, and the city had the right to assert its claims.
The Court also concluded that although the alleged damaging consequences of the banks’ supposed discriminatory lending practices were foreseeable, that, alone, was insufficient for the city to establish proximate cause under the FHA, as required.
The Court remanded the case to the trial court for that court to establish the parameters for sufficiently demonstrating proximate cause.
A copy of the opinion in Bank of America Corp. v. City of Miami is available at: Link to Opinion.
As you may recall, the FHA makes it unlawful to “discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race . . . .” See 42 U. S. C. §3604(b). The statute also prohibits “any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race . . . .” See 42 U.S.C. §3605(a).
The FHA allows any “aggrieved person” to file a civil action seeking damages for a violation of the statute. See 42 U.S.C. §§3613(a)(1)(A), 3613(c)(1). It defines an “aggrieved person” to include “any person who . . . claims to have been injured by a discriminatory housing practice.” 42 U.S.C. §3602(i).
Here, the city sued two different banks, alleging that they intentionally issued riskier mortgages on less favorable terms to minority customers than they issued to similarly-situated white, non-Latino customers, in violation of 42 U.S.C. §§3604(b) and 3605(a).
The city alleged that the discriminatory practices “adversely impacted the racial composition of the city,” “impaired the city’s goals to assure racial integration and desegregation,” “frustrate[d] the city’s longstanding and active interest in promoting fair housing and securing the benefits of an integrated community,” and disproportionately “cause[d] foreclosures and vacancies in minority communities.” The city further alleged that the increased foreclosures and vacancies caused (1) a reduction of the property tax revenues to the city, and (2) the city to spend more on municipal services it had provided for the vacant and dangerous properties.
The banks moved to dismiss the complaints, contending that the injuries the city alleged did not fall within the zone of interests the FHA was designed to protect and, as a result, the city does not qualify as an “aggrieved person” under the FHA. The second argument the banks made in support of dismissing the complaints was that the city had not adequately alleged a proximate cause connection between the conduct complained of and the alleged damages.
The trial court granted the banks’ motions to dismiss. On appeal, the Eleventh Circuit reversed the trial court, finding that the city qualified as an aggrieved person under the FHA, and that the complaints adequately established proximate cause by asserting the alleged damages were foreseeable.
On appeal, the Supreme Court analyzed the two issues addressed by the Eleventh Circuit: (1) whether the city qualified as an aggrieved person under the FHA, and (2) what a plaintiff needed to establish in order to satisfy the proximate cause requirement of its claim.
As to the first issue, the Supreme Court, relying on its own precedent, concluded that the definition of “person aggrieved” in the original version of the FHA “showed ‘a congressional intention to define standing as broadly as is permitted by Article III of the Constitution,’” and that the FHA permits suits by parties similarly situated to the city. The Court then determined that “Congress did not materially alter the definition of person ‘aggrieved’ when it reenacted the current version” of the FHA.
The Court referenced several similar cases in which it allowed entities or organizations or both to bring claims under the FHA alleging discriminatory lending practices that allegedly caused the same damages the city claimed in this matter. The Supreme Court relied on those prior cases to provide examples of the “zone of interests” the FHA protects.
In comparing those cases to the city’s allegations, the Court determined that the city’s allegations of reduced property values, diminished property-tax revenues, and increased demand for municipal services were all within the protected zone of interests, and that stare decisis compelled the Court’s adherence to those precedents. As a result, the Court concluded the city was entitled to bring its claims against the banks under the FHA.
As to the second issue of proximate cause, the Court concluded that the Eleventh Circuit erred in ruling that the city’s complaints met the FHA’s proximate-cause requirement based solely on the finding that the alleged financial injuries were foreseeable results of the banks’ misconduct. According to the Court, foreseeability, standing alone, is insufficient to establish the required proximate cause element of an FHA claim.
The Supreme Court first established that a claim under the FHA is akin to a tort claim, which requires the plaintiff to establish that the defendant’s alleged conduct proximately caused the plaintiff’s alleged damages. According to the Court, alleged injuries that are “too remote” from the alleged unlawful conduct will not satisfy the requirement.
In attempting to define proximate cause, the Supreme Court held that the FHA proximate cause analysis addresses “whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits.”
The Court then took issue with the Eleventh Circuit’s holding that “the proper standard for proximate cause is based on foreseeability.” According to the Court, “in the context of the FHA, foreseeability alone does not ensure the close connection that proximate cause requires. The housing market is interconnected with economic and social life. A violation of the FHA may, therefore, ‘be expected to cause ripples of harm to flow’ far beyond the defendant’s misconduct.”
The Supreme Court held that, under the FHA, proximate cause “requires some direct relation between the injury asserted and the injurious conduct alleged.”
The Court, however, declined the opportunity to set the precise boundaries of proximate cause under the FHA. According to the Supreme Court, the Eleventh Circuit used the wrong standard, such that the Supreme Court did not have the benefit of its judgment on how the established principles apply to the FHA.
The Supreme Court concluded that it should be the lower courts that establish the contours of proximate cause under the FHA. Accordingly, the Court reversed the Eleventh Circuit’s ruling and remanded the case to the trial court.