In a decision released May 1, 2017, the U.S. Supreme Court in Bank of America Corp. v. City of Miami, Case No. 15-1111, allowed a suit by a municipality under the Fair Housing Act (FHA), alleging predatory lending by a number of large banks reduced property tax revenues and increased costs. The Supreme Court sent the case back to a lower court to determine whether the bank’s lending practices were responsible for the city’s economic losses. The case is another in a long series of cases that arose out of the 2008 credit crisis.

Bank of America Corp. v. City of Miami involved a lawsuit filed in federal district court by the City of Miami against Bank of America and Wells Fargo that alleged the banks violated the FHA. The FHA prohibits, among other things, racial discrimination in real estate transactions, and permits an “aggrieved person” to file suit for civil damages.  Miami’s claims allege the banks lent money to African American and Latino residents on unfavorable terms compared to equally credit-worthy nonminority borrowers, and induced defaults by failing to extend refinancing and loan modification offers to minority borrowers. The district court dismissed the complaint because it “fell outside the zone of interests” protected by the FHA, and failed to demonstrate a causal connection between the city’s economic losses and the banks’ discriminatory conduct.

The Supreme Court held the city was an “aggrieved person” under the FHA and could satisfy the constitutional standing requirements. The Supreme Court further held a claim for damages under the FHA is akin to a tort action, meaning the city must prove the common law requirement that the banks’ conduct was the proximate cause of the city’s injuries. The holding potentially opens the door for municipalities across the country to sue for lost property tax revenue and increased municipal expenses associated with foreclosures.