Supreme Court Rules that Cities May Sue Banks under the FHA

On May 1, the Supreme Court in a 5 to 3 decision ruled that cities may sue lenders under the Fair Housing Act (FHA), alleging reduced property tax revenues due to predatory lending.

However, the Supreme Court found that the lower court should have used a more stringent test to determine whether the city of Miami was entitled compensation for its losses. The Supreme Court explained that the plaintiff suing under the FHA must show a direct connection between the injury and the violation.

As a result, the court sent the case back to a lower court to determine whether banks’ lending practices were responsible for Miami’s economic injuries to a degree that justify holding the banks financially liable.

This more stringent test regarding damages could stop many lawsuits from cities.

The case involves a lawsuit brought by Miami against Bank of America and Wells Fargo alleging FHA violations. The complaints were initially dismissed by a Miami federal district court but were reversed by the Eleventh Circuit, which stated Miami had standing under the FHA to sue the banks because the city demonstrated a nexus between the alleged injuries and the banks’ conduct.

Read the opinion.