City of Miami v. Citigroup Inc.

Decision Date01 September 2015
Docket NumberNo. 14–14706.,14–14706.
Citation801 F.3d 1268
PartiesCITY OF MIAMI, a Florida Municipal Corporation, Plaintiff–Appellant, v. CITIGROUP INC., Citibank, N.A., Citimortgage, Inc., Citi Holdings, Inc., Citicorp Trust Bank, FSB, Defendants–Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

Steve W. Berman, Seattle, WA, Elaine T. Byszewski, Pasadena, CA, Lee M. Gordon, Hagens Berman Sobol Shapiro, LLP, Pasadena, CA, Robert S. Peck, Washington, DC, Erwin Chemerinsky, University of California, Irvine, Irvine, 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.

Lucia Nale, Stephen Joseph Kane, Debra Bogo–Ernst, Mayer Brown, LLP, Chicago, IL, Benjamine Reid, Avi Robert Kaufman, Carlton Fields Jorden Burt, PA, Miami, FL, for DefendantsAppellees.

Appeals from the United States District Court for the Southern District of Florida, D.C. Docket No. 1:13–cv–24510–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 Citigroup, Bank of America, and Wells Fargo. 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 Citigroup'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, 800 F.3d 1262, 2015 WL 5102581 (11th Cir.2015). 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 Citigroup Inc., Citibank, N.A., Citimortgage, Inc., Citi Holdings, Inc., and Citicorp Trust Bank, FSB (collectively “Citigroup” 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 36, City of Miami v. Citigroup Inc., No. 13–24510–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 37–38.

This complaint accused Citigroup 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 terms equal or similar to those ... offered to white borrowers.” Id. at 5.

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 18–19. 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 14–18.

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 Citigroup loan in a predominantly (greater than 90%) minority neighborhood of Miami was 4.516 times more likely to result in foreclosure than such a loan in a majority-white neighborhood. Id. at 24. 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 Citigroup borrower in Miami was 5.955 times more likely to receive a loan with “predatory” features3 than a white borrower, id. at 5, and a Latino borrower was 3.463 times more likely to receive such a loan, id. at 6. Moreover, black Citigroup borrowers with FICO scores over 660 (indicating good credit) in Miami were 15.086 times more likely to receive a predatory loan than white borrowers, while a Latino borrower was 5.282 times more likely to receive such a loan. Id.

The City's data also suggested that from 20042012, 54.6% of loans made by Citigroup to black and Latino customers in Miami were high-cost, compared to 31.1% of loans made to white customers. Id. at 19. Data cited in the complaint showed significantly elevated rates of foreclosure for loans in minority neighborhoods. While 88.7% of Citigroup's Miami loan originations were in “census tracts” that are at least 50% black or Latino, 95.9% of loan originations that had entered foreclosure by June 2013 were from such census tracks.Id. at 24. Likewise, 31.9% of Citigroup's loans in predominantly black or Latino neighborhoods resulted in foreclosure, compared to only 9.4% of its loans in non-minority (at least 50% white) neighborhoods. Id.

The complaint also alleged that the bank's loans to minorities resulted in especially quick foreclosures.4 The average time to foreclosure for Citigroup's Latino borrowers was 2.733 years, while for white borrowers it was 2.991 years. Id. at 26. 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 14–18.

The City sought damages based on reduced property tax revenues. Id. at 29. It claimed that the Bank's lending policies caused minority-owned property to fall into unnecessary or premature foreclosure. The foreclosed-upon properties lost substantial value and, in turn, decreased the value of the surrounding properties, thereby depriving the City of property tax revenue.

Id. The City alleged that “Hedonic regression” techniques could be used to quantify the losses the City suffered that were attributable to the Bank's conduct. Id. at 30–31. The City also sought damages based on the cost of the increased municipal services it provided to deal with the problems attending the foreclosed and often vacant properties—including police, firefighters, building inspectors, debris collectors, and others. These increased services, the City claimed, would not have been necessary if the properties had not been foreclosed upon due to the Bank's discriminatory lending practices. Id. at 32–33. The City also sought a declaratory judgment that the Bank's conduct violated the FHA, an injunction barring...

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