Nat'l Fair Hous. Alliance v. Bank of Am., N.A.

• Decision Date: 18 July 2019
• Docket Number: Civil No. CCB-18-1919
• Citation: 401 F.Supp.3d 619
• Parties: NATIONAL FAIR HOUSING ALLIANCE, et al., v. BANK OF AMERICA, N.A., et al.
• Court: U.S. District Court — District of Maryland

401 F.Supp.3d 619

NATIONAL FAIR HOUSING ALLIANCE, et al.,

v.BANK OF AMERICA, N.A., et al.,

Civil No. CCB-18-1919

United States District Court, D. Maryland.

Signed July 18, 2019

Andrew David Freeman, Jean Mary Zachariasiewicz, Brown, Goldstein & Levy, LLP, Baltimore, MD, Morgan Williams, National Fair Housing Alliance, Washington, DC, for National Fair Housing Alliance et al.

Anthony Michael Alexis, Sr., Brooks Brown, Keith Eric Levenberg, Thomas M. Hefferon, Goodwin Procter LLP, Washington, DC, Ava E. Lias Booker, Melissa O. Martinez, McGuireWoods LLP, Maryan Alexander, Wilson Elser Moskowitz Edelman and Dicker LLP, Baltimore, MD, Bradley R. Kutrow, McGuireWoods LLP, Charlotte, NC, David M. Holmes, Jacob Graham, Wilson Elser Moskowitz Edleman and Dicker LLP, Chicago, IL, for Bank of America, N.A. et al.

Memorandum

Catherine C. Blake, United States District Judge

This is a large-scale effort to hold Bank of America, N.A. and its primary home-maintenance contractor, Safeguard Properties Management LLC ("Safeguard"), liable for deteriorating conditions found in many foreclosed bank-owned real estate properties. The central claim here is that Bank of America and Safeguard disproportionately neglect their home-maintenance duties in communities of color, while tending more closely to foreclosed properties in white neighborhoods. In addition to the National Fair Housing Alliance ("NFHA"), the plaintiffs are private fair housing organizations and individual home-owners who allegedly have been harmed by the defendants' conduct. The lead claims are the plaintiffs' allegations of intentional discrimination and disparate impact brought under various sections of the Fair Housing Act ("FHA"), which are accompanied by ancillary arguments under the FHA and two addendum common law nuisance claims. At issue here are the defendants' motions to dismiss this action, which are argued both on the merits and, for certain claims (and certain plaintiffs), on standing, jurisdiction, and timeliness grounds. The facts pled raise a reasonable inference that the defendants violated anti-discrimination provisions of the Fair Housing Act, 42 U.S.C. § 3601, et seq. , and the threshold legal arguments for dismissal are not persuasive at this stage of the case. Therefore, the motions will be denied.

BACKGROUND

The bundling of subprime mortgages into prime-rated securities contributed to a financial crisis in 2008 that left in its wake an era of widespread bank-owned real estate. Known as "real estate owned" properties ("REOs"), at issue here are homes upon which Bank of America foreclosed and which the bank, in turn, was unable to sell at a foreclosure sale. Bank of America P&A Mot. Dismiss at p. 12, ECF No. 44-1.¹ This case concerns an extensive seven-year (2011-2018) investigation by the plaintiffs into Bank of America's "maintenance and marketing" of REOs in its possession. Compl. ¶ 6. The investigation concluded that "[a]cross the board, properties located in communities of color were much more likely to have numerous objective routine maintenance and marketing deficiencies than the Bank of America-owned homes located in white areas[ ]" and concluded that there has been a "systemic and particularized pattern of differential treatment ... on the basis of race, color, and/or national origin." Compl. ¶ 7.

The data collected by the plaintiffs, presumed to be true here, are copious. A somewhat rough recitation goes like this: The plaintiffs developed a list of 37 "objective aspects" of routine exterior maintenance and marketing of REO properties. Compl. ¶ 6. They then examined 1,677 properties owned by Bank of America after foreclosure in both "predominantly white communities" and "communities of color." Compl. ¶¶ 5-6, 64. They conducted this investigation in 37 different metropolitan areas, including Baltimore and Prince George's County/Washington, D.C. Compl. ¶ 7, 65. The plaintiffs selected zip codes within each of the 37 metropolitan areas that were "racially concentrated with the highest foreclosure rates, and from those zip codes chose the ones with high homeownership rates that qualified as working- or middle-class neighborhoods, based on comparing the zip codes' median income to those of the metropolitan statistical area and the state" to conduct their study. Pls' Opp'n Defs' Mot. Dismiss at p. 13, ECF No. 55; Compl. ¶ 67. Within them they "inspected 100% of the Bank of America-owned homes ... in the same time period, unless the properties appeared to be occupied, someone at the property said they were the new owners, or work was actively occurring at the time of the testers' visit." Pls' Opp'n Defs' Mot. Dismiss at p. 13, ECF No. 55; Compl. ¶ 67. Once collected, they subjected these data to regression analyses, ostensibly to isolate any independent variable(s). Compl. ¶ 87.

The plaintiffs derive one central conclusion from their investigation: there are "significant disparities in the routine exterior maintenance and marketing of Bank of America-owned homes in communities of color as compared to white communities" that cannot be explained by factors other than the racial composition of the community in which the property is located. Compl. ¶ 6, 87. They found that in each metropolitan area examined, "Bank of America-owned homes located in predominantly white census block groups were better-maintained and exhibited fewer objective routine maintenance and marketing deficiencies than Bank of America-owned homes located in neighborhoods comprised primarily of African Americans and/or Latinos." Compl. ¶ 7. Their regression analyses controlled for myriad factors including prior sale prices, dwelling size, and lot size, and concluded that "the disparities uncovered by the Organizational Plaintiffs' testing cannot be explained by non-racial factors." Compl. ¶ 8, 87. It is upon this conclusion that the plaintiffs' claims are predicated.

The plaintiffs advance seven claims in their detailed 113-page Complaint. Counts I-V allege that the defendants; actions violate 42 U.S.C. § 3604(a), § 3604(b), § 3605, § 3617, and the FHA's general prohibition on actions perpetuating housing segregation. The plaintiffs make their case for discrimination under both intentional discrimination (disparate treatment) and disparate impact theories, which they outline first (and at length) before asserting specific discrimination allegations in their more abbreviated count-specific arguments. Count VI and Count VII are private nuisance claims brought by individual plaintiffs only. Bank of America and Safeguard both move to dismiss the complaint for failure to state a claim under the operative pleading standard. They put forth standing, jurisdiction, and timeliness grounds for dismissal for a substantial subset of the plaintiffs' claims.

ANALYSIS

I. Standard of Review

When ruling on a motion under Rule 12(b)(6), the court must "accept the well-pled allegations of the complaint as true," and "construe the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff." Ibarra v. United States , 120 F.3d 472, 474 (4th Cir. 1997). "Even though the requirements for pleading a proper complaint are substantially aimed at assuring that the defendant be given adequate notice of the nature of a claim being made against him, they also provide criteria for defining issues for trial and for early disposition of inappropriate complaints." Francis v. Giacomelli , 588 F.3d 186, 192 (4th Cir. 2009). "The mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6)." Walters v. McMahen , 684 F.3d 435, 439 (4th Cir. 2012) (citing Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). To survive a motion to dismiss, the factual allegations of a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations omitted). "To satisfy this standard, a plaintiff need not ‘forecast’ evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements." Walters , 684 F.3d at 439 (citation omitted). "Thus, while a plaintiff does not need to demonstrate in a complaint that the right to relief is ‘probable,’ the complaint must advance the plaintiff's claim ‘across the line from conceivable to plausible.’ " Id. (quoting Twombly , 550 U.S. at 570, 127 S.Ct. 1955 ).

II. Discussion

At issue in the present motions to dismiss are both merits arguments pertaining to the sufficiency of the plaintiffs' pleadings and a variety of threshold legal questions concerning standing, personal jurisdiction, and timeliness. While not purported to be dispositive of the entire case, these latter concerns are best discussed first to properly define the contours of the merits inquiry to follow.

A. Threshold Matters

a. Standing

The defendants contend that the organizational plaintiffs, fair housing groups from around the country that together mounted the investigation, lack standing because they have not sufficiently traced the defendants' alleged wrongdoing to their respective injuries. The plaintiffs argue that diversion of resources and frustration of mission are cognizable injuries under the FHA, that all plaintiffs in this case have incurred some amount of injury, and that requiring a precise accounting of their respective loss at this stage is more than Article III requires. A ruling to the contrary, they say, would lead to claim splitting and redundant litigation. While the defendants do not concede that even the National Fair Housing Alliance has standing, their primary dispute relates to the smaller organizational plaintiffs, who, they say, may have had no part in the investigation of...