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Eleventh Circuit Allows Municipal-Plaintiff FHA Claims to Proceed—in Part

In a long-awaited, 76-page opinion, the Eleventh Circuit decided that Fair Housing Act claims by the City of Miami against major banks seeking damages from foreclosures can proceed in part.  In lawsuits originally filed years ago, the city alleged that discriminatory mortgage origination and servicing practices led to defaults, foreclosures, and ultimately a reduction in the city’s property tax receipts and costs associated with providing municipal services.  The Eleventh Circuit held that claims for property tax damages may continue, but claims for municipal services costs are too remote, even at the pleading stage, to satisfy the proximate cause requirements of the FHA.

The case was on remand from the Supreme Court after it decided, in Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296 (2017), that while municipalities seeking generalized damages from foreclosures are “aggrieved persons” under the statute, all FHA claims must satisfy a proximate cause standard requiring a “direct relation” between the alleged discrimination and the plaintiff’s purported damages. 

The decision likely will have a major impact on similar cases pending throughout the country.  Of course, it will bind and govern litigation going forward in district courts throughout the Eleventh Circuit—including not just the City of Miami cases but other actions brought by the City of Miami Gardens and Fulton, Cobb, and DeKalb Counties in Georgia.  Those cases have been stayed for nearly three years (since the Supreme Court first agreed to decide the issue) and will surely be re-opened imminently in light of the Eleventh Circuit’s decision.  It may have persuasive effect in an upcoming Ninth Circuit decision in a case brought by the City of Oakland or in any number of other similar cases filed in Illinois and Maryland. 

Mark RooneyFHA