Yesterday the U.S. Supreme Court heard arguments for City of Miami v. Wells Fargo and Bank of America, and early reports suggest the Court is leaning towards allowing the case to proceed – which could have major implications for who can claim damages under the Fair Housing Act, including real estate agents.
The case is not particularly complicated: Miami is seeking damages from Wells Fargo and Bank of America for what the American Constitution Society for Law and Policy describe as “well-documented deceptive, predatory lending practices.” And a favorable ruling could give agents an avenue to file lawsuits for damages their businesses might have incurred as a result of those same practices.
During Tuesday’s arguments, Robert Peck, the attorney representing the city of Miami, posited that bad loans issued by the banks “frustrated and counteracted the city’s efforts on fair housing,” which led to a loss of “the benefits of social, professional, and business opportunities” synonymous with “an integrated community free from housing discrimination.”
Neal Katyal, on behalf of Wells Fargo and Bank of America, countered Peck, claiming the city’s attempt to seek damages under the FHA was an attempt to “borrow” an injury suffered by someone else, referring, in this case, to the people forced into foreclosure and, in some instances, poverty because of discriminatory loans. Katyal said a ruling in favor of Miami would create an “unlimited theory of liability” that could not only extend the jurisdiction of the FHA, but also trigger a wave of litigation from cities and businesses claiming to have been negatively impacted by the housing crisis.
The danger of precedent
In comments Peck sent to Miami Agent via email, he suggested a decision for Miami would not be a precedent, but rather a reaffirmation of an earlier precedent set in 1979 during the case Gladstone, Realtors v. Village of Bellwood. In the case, Bellwood successfully sued a real estate company for injuries sustained as a result of “racial steering.”
“The fact that there was no flood of lawsuits since that decision suggests that there won’t be a new bevy of cases this time either,” Peck said.
Still, the possibility remains one of the Courts’ primary concerns. According reporter Amy Howe, who wrote on the SCOTUS blog, both Chief Justice John Roberts and Justice Anthony Kennedy “seemed most troubled about the implications of a ruling for the city,” with Justice Sonia Sotomayor also expressing concern – though, she was much more sympathetic to the argument.
The worry of precedent forced the Court to ask the question of how a favorable ruling for Miami could be issued without welcoming the wave of litigation that Katyal was prophesizing. It led to the more fundamental question: how is Miami calculating the damages?
Judging on property values
Peck confirmed to us that “Miami has not put a figure on (its) stage damages claim,” saying that damages are something typically articulated during the later discovery process. However, during arguments, Peck did say that the damages the city would be seeking were not especially substantial, and clarified that the eventual figure will consider decreased property tax and tourism revenues, which came as a result of predatory lending.
The Supreme Court bench was unenthused by Peck’s response, but in questioning Curtis Gannon, who represented the federal government in support of the City, it did find a potential viable option for how a favorable decision could be written to limit the FHA’s expanded jurisdiction.
Gannon’s option for the court used real estate agents, and how they might apply the FHA to a lawsuit, as an example of how it would work for Miami. The idea is to seek damages for things easy to put a specific number to. So, for instance, a real estate agent could file a lawsuit over a specific transaction that “fails to go through…because of racial discrimination,” but couldn’t seek damages for a general loss of commissions because racial discrimination caused sales to be overall lower. For Miami, the “specific transaction” could be a loss in terms of property values, but not a speculated loss on tourism revenues.
It is still unclear whether the Court will allow Miami’s case to go forward, but the early indication is it will.