Chase Bank USA, N.A. v. City of Cleveland, No. 10-4115 (6th Cir. 2012)
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Cleveland sued financial institutions, alleging that by securitizing subprime mortgages and foreclosing on houses, defendants allegedly contributed to declines in property values, shrinking tax base, and increased criminal activity, causing a public nuisance. The district court dismissed, finding preemption by state law and failure to demonstrate that defendants unreasonably interfered with a public right or were the proximate cause of alleged harm. The Sixth Circuit affirmed. Cleveland filed another suit in state court against non-diverse institutions, alleging public-nuisance, violation of the Ohio Corrupt Activities Act, (RICO analogue), by inaccurately claiming title to mortgages and notes in foreclosures in violation of Ohio Rev. Code 2923.32. Cleveland also sought to recover (Ohio Revised Code 715.261) costs incurred maintaining or demolishing foreclosed houses. While the case was pending, banks sought a declaratory judgment that Cleveland’s public-nuisance claim was preempted by the National Bank Act and an injunction against the suits. The district court suggested that it lacked subject-matter jurisdiction and dismissed. Subsequently, the state court dismissed Cleveland’s public-nuisance and OCAA claims; appeal is pending. The U.S. Supreme Court denied certiorari in the first case, so that declaratory relief is now moot. The Sixth Circuit reversed with respect to the second suit; the district court had jurisdiction.
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