City of Miami v. Bank of Am. Corp.

Decision Date01 September 2015
Docket NumberNo. 14–14543.,14–14543.
Citation800 F.3d 1262
PartiesCITY OF MIAMI, a Florida Municipal Corporation, Plaintiff–Appellant, v. BANK OF AMERICA CORPORATION, Bank of America, N.A., et al., Defendants–Appellees.
CourtU.S. Court of Appeals — Eleventh Circuit

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

Thomas Hefferon, Matthew S. Sheldon, Goodwin Procter, LLP, Washington, DC, James McGarry, Boston, MA, Christopher Stephen Carver, Brendan Herbert, Akerman, LLP, Miami, FL, for DefendantsAppellees.

Appeals from the United States District Court for the Southern District of Florida. D.C. Docket No. 1:13–cv–24506–WPD.

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


MARCUS, Circuit Judge:

The City of Miami has brought an ambitious fair housing lawsuit against Bank of America,1 alleging that it engaged in a decade-long pattern of discriminatory lending in the residential housing market that caused the City economic harm. The City claims that the bank targeted black and Latino customers in Miami for predatory loans that carried more risk, steeper fees, and higher costs than those offered to identically situated white customers, and created internal incentive structures that encouraged employees to provide these types of loans. The predatory loans, as identified by the City, include: high-cost loans (i.e., those with an interest rate at least three percentage points above a federally established benchmark), subprime loans, interest-only loans, balloon payment loans, loans with prepayment penalties, negative amortization loans, no documentation loans, and adjustable rate mortgages with teaser rates (i.e., a lifetime maximum rate greater than the initial rate plus 6%). Complaint for Violations of the Federal Fair Housing Act at 34, City of Miami v. Bank of America Corp., No. 13–24506–CIV (S.D.Fla. July 9, 2014) (“Complaint”). The City alleged that by steering minorities toward these predatory loans, Bank of America caused minority-owned properties throughout Miami to fall into unnecessary or premature foreclosure, depriving the City of tax revenue and forcing it to spend more on municipal services (such as police, firefighters, trash and debris removal, etc.) to combat the resulting blight. The City asserts 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 district court dismissed the City's FHA claim with prejudice on three grounds: the City lacked statutory standing under the FHA because it fell outside the statute's “zone of interests”; the City had not adequately pled that Bank of America'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. We disagree with each of these conclusions.

As a preliminary matter, we find that the City has constitutional standing to pursue its FHA claims. We also conclude that 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 that the FHA contains a proximate cause requirement, we find that this analysis is based on principles drawn from the law of tort, and that the City has adequately alleged proximate cause. Finally, we conclude that the “continuing violation doctrine” can 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, we conclude that 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 Bank of America Corporation, Bank of America N.A., Countrywide Financial Corporation, Countrywide Home Loans, and Countrywide Bank, FSB (collectively “Bank of America” or “the Bank”) containing two claims. First, it alleged that the defendants violated sections 3604(b)2 and 3605(a)3 of the Fair Housing Act, Complaint at 53, 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. 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.”

The complaint accused Bank of America 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. Complaint 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 to those offered ... 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 retail lending pricing, its wholesale lending broker fees, and its wholesale lending product placement. Id. at 18–25. It also averred that the Bank's internal loan officer compensation system encouraged its employees to give out these types of loans even when they were not justified by the borrower's creditworthiness. See id. at 20, 24. The City claimed that Bank of America's practice of redlining and reverse redlining constituted a “continuing and unbroken pattern” that persists to this day. Id. at 4.

The City said that the Bank's conduct violated the Fair Housing Act in two ways. First, the City alleged that the Bank intentionally discriminated against minority borrowers by targeting them for loans with burdensome terms. Id. at 30–33. Second, the City claimed that 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 26–30.

Among other things, 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 Bank of America loan in a predominantly (greater than 90%) minority neighborhood of Miami was 5.857 times more likely to result in foreclosure than such a loan in a majority-white neighborhood. Id. at 43. 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), id. at 37, a black Bank of America borrower in Miami was 1.581 times more likely to receive a loan with “predatory” features4 than a white borrower, and a Latino borrower was 2.087 times more likely to receive such a loan. Moreover, black Bank of America borrowers with FICO scores over 660 (indicating good credit) in Miami were 1.533 times more likely to receive a predatory loan than white borrowers, while a Latino borrower was 2.137 times more likely to receive such a loan. Id. at 6.

The City's data also suggested that from 20042012, 21.9% of loans made by Bank of America to black and Latino customers in Miami were high-cost, compared to just 8.9% of loans made to white customers. Id. at 34. Data cited in the complaint showed significantly elevated rates of foreclosure for loans in minority neighborhoods. While 53.3% of Bank of America's Miami loan originations were in “census tracts” that are at least 75% black or Latino, 95.7% of loan originations that had entered foreclosure by June 2013 were from such census tracks.Id. at 39. And 32.8% of Bank of America's loans in predominantly black or Latino neighborhoods resulted in foreclosure, compared to only 7.7% of its loans in non-minority (at least 50% white) neighborhoods. Id. at 40. Likewise, a Bank of America borrower in a predominantly black or Latino census tract was 1.585 times more likely to receive a predatory loan as a borrower with similar characteristics in a non-minority neighborhood. Id. at 38.

The complaint also alleged that the bank's loans to minorities resulted in especially quick foreclosures.5 The average time to foreclosure for Bank of America's black and Latino borrowers was 3.144 years and 3.090 years,...

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