City of Miami v. Wells Fargo & Co.

Decision Date01 September 2015
Docket NumberNo. 14–14544.,14–14544.
Citation801 F.3d 1258
CourtU.S. Court of Appeals — Eleventh Circuit
PartiesCITY OF MIAMI, a Florida municipal corporation, Plaintiff–Appellant, v. WELLS FARGO & CO., Wells Fargo Bank, N.A., Defendants–Appellees.

Steve W. Berman, Hagens Berman Sobol Shapiro, LLP, Seattle, WA, Robert S. Peck, Washington, DC, Erwin Chemerinsky, University of California, Irvine, Irvine, CA, Elaine T. Byszewski, Lee M. Gordon, Hagens Berman Sobol Shapiro, LLP, Pasadena, CA, Lance Harke, Harke Clasby & Bushman, LLP, Miami Shores, FL, Howard Liberson Joel Liberson Trial & Appellate Resources, Pc El Segundo, CA Victoria Mendez Office of the Miami City Attorney Miami, FL, for PlaintiffAppellant.

Paul Francis Hancock, K & L Gates LLP, Miami, FL, Carol Ann Licko, John F. O'Sullivan, Clayton P. Solomon, Hogan Lovells Us, LLP, Miami, FL, Andrew C. Glass, K & L Gates, LLP, Boston, MA, for DefendantAppellee.

Appeals from the United States District Court for the Southern District of Florida. D.C. Docket No. 1:13–cv–24508–WPD.

Before MARCUS and WILSON, Circuit Judges, and SCHLESINGER,* District Judge.


MARCUS, Circuit Judge:

On December 13, 2011, the City of Miami brought three separate fair housing lawsuits against Wells Fargo, Bank of America, and Citigroup. Each alleged that the bank in question had engaged in a decade-long pattern of discriminatory lending by targeting minorities for predatory loans. The complaints in each case were largely identical, each identifying the same pattern of behavior and supported by empirical data specific to each defendant. Moreover, each complaint contained the same two causes of action: one claim arising under the Fair Housing Act (FHA), 42 U.S.C. § 3601 et seq., as well as an attendant unjust enrichment claim under Florida law.

The three cases were heard by the same judge in the Southern District of Florida, and were resolved in the same way based on the district court's order in the Bank of America case. In this case, like the others, the district court dismissed the City's FHA claim with prejudice on three grounds: the City lacked statutory standing under the FHA because its alleged injuries fell outside the statute's “zone of interests”; the City had not adequately pled that Wells Fargo's conduct proximately caused the harm sustained by the City; and, finally, the City had run afoul of the statute of limitations and could not employ the continuing violation doctrine. Each of the three cases was appealed separately.

After thorough review, we are constrained to disagree with the district court's legal conclusions about the City's FHA claims. The most detailed account of our reasoning is set out in the companion case City of Miami v. Bank of America Corp., No. 14–14543. The same conclusions of law apply here. As a preliminary matter, we find that the City has constitutional standing to pursue its FHA claims. Furthermore, under controlling Supreme Court precedent, the “zone of interests” for the Fair Housing Act extends as broadly as permitted under Article III of the Constitution, and therefore encompasses the City's claim. While we agree with the district court's conclusion that the FHA contains a proximate cause requirement, we find that the City has adequately alleged proximate cause. Finally, the “continuing violation doctrine” would apply to the City's claims, if they are adequately pled.

Because the district court imposed too stringent a zone of interests test and wrongly applied the proximate cause analysis, it erred in dismissing the City's federal claims with prejudice and in denying the City's motion for leave to amend on the grounds of futility. As for the state law claim, we affirm the dismissal because the benefits the City allegedly conferred on the defendants were not sufficiently direct to plead an unjust enrichment claim under Florida law.


On December 13, 2013, the City of Miami brought this complex civil rights action in the United States District Court for the Southern District of Florida against Wells Fargo & Co. and Wells Fargo Bank, N.A. (collectively Wells Fargo or “the Bank”) containing two claims. First, it alleged that the defendants violated sections 3604(b)1 and 3605(a)2 of the Fair Housing Act by engaging in discriminatory mortgage lending practices that resulted in a disproportionate and excessive number of defaults by minority homebuyers and caused financial harm to the City. Complaint for Violations of the Federal Fair Housing Act at 60, City of Miami v. Wells Fargo & Co., No. 13–24508–CIV (S.D.Fla. July 9, 2014) (“Complaint”). It also alleged that the Bank unjustly enriched itself by taking advantage of “benefits conferred by the City” while, at the same time, engaging in unlawful lending practices, which “denied the City revenues it had properly expected through property and other tax payments and ... cost[ ] the City additional monies for services it would not have had to provide ... absent [the Bank's] unlawful activities.” Id. at 61.

This complaint accused Wells Fargo of engaging in both “redlining” and “reverse redlining.” Redlining is the practice of refusing to extend mortgage credit to minority borrowers on equal terms as to non-minority borrowers. Reverse redlining is the practice of extending mortgage credit on exploitative terms to minority borrowers. Id. at 3. The City alleged that the bank engaged in a vicious cycle: first it “refused to extend credit to minority borrowers when compared to white borrowers,” then “when the Bank did extend credit, it did so on predatory terms.” Id. at 4. When minority borrowers then attempted to refinance their predatory loans, they “discover[ed] that [the Bank] refused to extend credit at all, or on equal terms as refinancing similar loans issued to white borrowers.” Id. at 5.

The City claimed that this pattern of providing more onerous loans—i.e., those containing more risk, carrying steeper fees, and having higher costs—to black and Latino borrowers (as compared to white borrowers of identical creditworthiness) manifested itself in the Bank's product placements and its wholesale mortgage broker fees. Id. at 17–26. It also averred that the Bank's internal loan officer and broker compensation systems encouraged its employees to give out these types of loans even when they were not justified by the borrower's creditworthiness. See id. at 19–20, 31–32.

The City said that the Bank's conduct violated the Fair Housing Act in two ways.

First, the Bank intentionally discriminated against minority borrowers by targeting them for loans with burdensome terms. Id. at 35–40. And second, the Bank's conduct had a disparate impact on minority borrowers, resulting in a disproportionate number of foreclosures on minority-owned properties, and a disproportionate number of exploitative loans in minority neighborhoods. Id. at 27–35.

The City employed statistical analyses to draw the alleged link between the race of the borrowers, the terms of the loans, and the subsequent foreclosure rate of the underlying properties. Drawing on data reported by the Bank about loans originating in Miami from 20042012, the City claimed that a Wells Fargo loan in a predominantly (greater than 90%) minority neighborhood of Miami was 6.975 times more likely to result in foreclosure than such a loan in a majority-white neighborhood. Id. at 47. According to the City's regression analysis (which purported to control for objective risk characteristics such as credit history, loan-to-value ratio, and loan-to-income ratio), a black Wells Fargo borrower in Miami was 4.321 times more likely to receive a loan with “predatory” features3 than a white borrower, and a Latino borrower was 1.576 times more likely to receive such a loan. Id. at 6. Moreover, black Wells Fargo borrowers with FICO scores over 660 (indicating good credit) in Miami were 2.572 times more likely to receive a predatory loan than white borrowers, while a Latino borrower was 1.875 times more likely to receive such a loan. Id.

The City's data also suggested that from 20042012, 11.1% of loans made by Bank of America to black and Latino customers in Miami were high-cost, compared to just 3.2% of loans made to white customers.Id. at 41. Data cited in the complaint showed significantly elevated rates of foreclosure for loans in minority neighborhoods. While 50.5% of Wells Fargo's Miami loan originations were in “census tracts” that are at least 75% black or Latino, 63.9% of loan originations that had entered foreclosure by June 2013 were from such census tracks. Id. at 46. Likewise, 24.3% of Wells Fargo's loans in predominantly black or Latino neighborhoods resulted in foreclosure, compared to only 4.4% of its loans in non-minority (at least 50% white) neighborhoods. Id. at 47.

The complaint also alleged that the bank's loans to minorities resulted in especially quick foreclosures.4 The average time to foreclosure for Wells Fargo's black and Latino borrowers was 2.996 years, while for white borrowers it was 3.266 years. Id. at 49. The City also gathered data from various non-Miami-based studies (some nationwide, some based on case studies in other cities) to demonstrate the elevated prevalence of foreclosure, predatory loan practices, and higher interest rates among black and Latino borrowers, and the foreseeability of foreclosures arising from predatory lending practices and their attendant harm. Id. at 27–31.

The City's charges were further amplified by the statements of several confidential witnesses who claimed that the Bank deliberately targeted black and Latino borrowers for predatory loans. For example, one former loan officer attested that Wells Fargo management steered low- and middle-income borrowers away from less expensive Community Reinvestment Act loans and toward more expensive Fair Housing Act and Freddie Mac loans. Id. at 36. Another claimed that the Bank targeted minority churches and their congregations for subprime loans. Id. at 37. A third claimed that Hispanic borrowers'...

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    ...again moved to dismiss, Doc. 70. While that motion was pending, the Supreme Court granted certiorari to review City of Miami v. Wells Fargo & Co. , 801 F.3d 1258 (11th Cir. 2015), and City of Miami v. Bank of America Corp. , 800 F.3d 1262 (11th Cir. 2015), suits very similar to this one. In......
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