The Supreme Court handed a partial victory to the city of Miami Monday, ruling it was authorized to bring ambitious lawsuits alleging Bank of America Corp. and Wells Fargo & Co. engaged in financial-crisis era discriminatory lending that led to urban blight and falling property values.
The court, however, in a 5-3 ruling, said Miami in future proceedings will have to establish that the banks caused direct harm to the city, a standard that could prove challenging.
The court's opinion, written by Justice Stephen Breyer, concluded that Miami had legal standing to bring the lawsuits under the Fair Housing Act, which bars discrimination in housing sales and rentals, as well as in related real-estate transactions.
The court rejected the banks' argument that the city wasn't an appropriate party to bring a claim under the housing law. The banks didn't immediately respond to requests for comment.
About a dozen other cities or local governments have brought lawsuits similar to Miami's.
Miami and the other municipalities are suggesting a novel theory -- that discriminatory housing policies by banks can harm not only homeowners and potential buyers, but also cities themselves, given the blight and urban decay that can follow. The court's ruling found that this theory is legally plausible.
The Supreme Court ruling sends the case back to the 11th U.S. Circuit Court of Appeals in Atlanta to review whether the banks' alleged misconduct has a "direct relation" to the injuries the city alleges.
Chief Justice John Roberts joined the court's four liberals in the majority opinion. Justice Clarence Thomas, joined by Justices Anthony Kennedy and Samuel Alito, dissented, concluding that the cities had no right to bring suit under the Fair Housing Act.
The case was argued before President Donald Trump appointee Justice Neil Gorsuch joined the court, so he didn't take part in the decision.
The lawsuits alleged that the banks' lending practices discriminated against minority borrowers, steering them toward loans with less-favorable terms and higher fees that were more likely to fail. When those loans led to foreclosures in large numbers, city neighborhoods suffered, causing diminishing tax revenues and others harms to Miami, the city alleged.
The banks denied the allegations and said the lawsuits were attempts by the city, working with private plaintiffs' lawyers, to boost its coffers.
The Supreme Court didn't consider whether Bank of America and Wells Fargo actually violated the fair housing law. Instead it only examined whether Miami should be allowed to proceed with its claims.
Write to Brent Kendall at firstname.lastname@example.org and Jess Bravin at email@example.com
(END) Dow Jones Newswires
May 01, 2017 11:35 ET (15:35 GMT)