City of Oakland v. Wells Fargo & Co., No. 19-15169 (9th Cir. 2021)
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The City of Oakland sued under the Fair Housing Act, claiming that Wells Fargo’s discriminatory lending practices caused higher default rates, which triggered higher foreclosure rates that drove down the assessed value of properties, ultimately resulting in lost property tax revenue and increased municipal expenditures. In 2020, the Ninth Circuit affirmed the denial of Wells Fargo's motion to dismiss claims for lost property-tax revenues and affirmed the dismissal of Oakland's claims for increased municipal expenses.
On rehearing, en banc, the Ninth Circuit concluded that all of the claims should be dismissed. Under the Supreme Court’s 2017 holding, Bank of America Corp. v. City of Miami, foreseeability alone is not sufficient to establish proximate cause under the Act; there must be “some direct relation between the injury asserted and the injurious conduct alleged.” The downstream “ripples of harm” from the alleged lending practices were too attenuated and traveled too far beyond the alleged misconduct to establish proximate cause. The Fair Housing Act is not a statute that supports proximate cause for injuries further downstream from the injured borrowers; the extension of proximate cause beyond that first step was not administratively possible and convenient. Oakland also failed sufficiently to plead proximate cause for its increased municipal expenses claim.
Court Description: Fair Housing Act. The en banc court affirmed in part and reversed in part the district court’s partial grant and partial denial of Wells Fargo’s motion to dismiss and remanded for dismissal of the City of Oakland’s claims under the Fair Housing Act, alleging that Wells Fargo’s discriminatory lending practices caused higher default rates, which in turn triggered higher foreclosure rates that drove down the assessed value of properties, and which ultimately resulted in lost property tax revenue and increased municipal expenditures. The en banc court held that under Bank of America Corp. v. City of Miami, 137 S. Ct. 1296 (2017), foreseeability alone is not sufficient to establish proximate cause under the Fair Housing Act, and there must be “some direct relation between the injury asserted and the injurious conduct alleged.” The en banc court held that the downstream “ripples of harm” from Wells Fargo’s alleged lending practices were too attenuated and traveled too far beyond Wells Fargo’s alleged misconduct to establish proximate cause. The en banc court affirmed the district court’s dismissal of the City’s damages claim related to increased municipal expenditures and reversed the district court’s denial of Wells Fargo’s motion to dismiss the damages claim related to lost CITY OF OAKLAND V. WELLS FARGO & CO. 3 property tax revenue and claims for injunctive and declaratory relief. The en banc court held that the City of Oakland did not sufficiently plead proximate cause for its reduced tax revenue claim because its theory of harm went beyond the first step of the causal chain, which was the harm to minority buyers who received predatory loans. The en banc court concluded that the Fair Housing Act is not a statute that supports proximate cause for injuries further downstream, and the extension of proximate cause beyond the first step was not administratively possible and convenient. For the same reasons, the City also failed sufficiently to plead proximate cause for its increased municipal expenses claim. The en banc court held that, in addition to claims for damages, the proximate-cause requirement in Miami also applies to injunctive and declaratory relief. It therefore reversed the district court’s judgment to the contrary.
This opinion or order relates to an opinion or order originally issued on August 26, 2020.
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