Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 1 of 19
ADRMOP,PROTO,PRVADR,REFDIS,STAYED
U.S. District Court California Northern District (San Francisco) CIVIL DOCKET FOR CASE #: 3:15−cv−04321−EMC

City Of Oakland v. Wells Fargo Bank, N.A. et al Assigned to: Edward M. Chen Referred to: Magistrate Judge Joseph C. Spero Case in other court: USCA, 19−15169 Cause: 28:1331 Federal Question: Other Civil Rights
Plaintiff

Date Filed: 09/21/2015 Jury Demand: Plaintiff Nature of Suit: 443 Civil Rights: Accommodations Jurisdiction: Federal Question

The City of Oakland

represented by Barbara J. Parker Oakland City Attorney's Office One Frank H. Ogawa Plaza, 6th Fl. Oakland, CA 94612−1999 (510)238−3815 Email: bjparker@oaklandcityattorney.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Maria Bee Oakland City Attorney's Office One Frank H. Ogawa Plaza, 6th Fl. Oakland, CA 94612−1999 (510) 238−3814 Email: mbee@oaklandcityattorney.org LEAD ATTORNEY ATTORNEY TO BE NOTICED

Joel Keith Liberson Trial and Appellate Resources, P.C. 400 Continental Boulevard, 6th Floor El Segundo, CA 90245 (310)426−2361 Email: joel@taresources.com ATTORNEY TO BE NOTICED

Joseph Marc Sellers Cohen Milstein Sellers & Toll PLLC West Tower, Suite 500 1100 New York Avenue Washington, DC 20005−3964 202−408−4600 Fax: 202−408−4699 Email: jsellers@cohenmilstein.com PRO HAC VICE ATTORNEY TO BE NOTICED

Robert S. Peck Center for Constitutional Litigation, P.C. 455 Massachusetts Avenue, N.W. Suite 152 Washington, DC 20009 (202) 944−2874 Fax: (646) 365−3382 Email: robert.peck@cclfirm.com ATTORNEY TO BE NOTICED

Yosef Peretz Peretz & Associates 22 Battery Street, Suite 200 San Francisco, CA 94111

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 2 of 19
(415) 732−3777 Fax: 415−732−3791 Email: yperetz@peretzlaw.com ATTORNEY TO BE NOTICED
Yosef Peretz Peretz & Associates 22 Battery Street, Suite 202 San Francisco, CA 94111 (415) 732−3777 Fax: (415) 732−3791 ATTORNEY TO BE NOTICED
Sumy Kim Peretz and Associates 22 Battery Street Suite 200 San Francisco, CA 94111 415−534−6702 Fax: 415−732−3791 Email: skim@peretzlaw.com ATTORNEY TO BE NOTICED

V. Defendant Wells Fargo Bank, N.A.

represented by Edward Patrick Sangster K&L Gates LLP Four Embarcadero Center, Suite 1200 San Francisco, CA 94111 415−882−8200 Fax: 415−882−8220 Email: ed.sangster@klgates.com LEAD ATTORNEY ATTORNEY TO BE NOTICED
Neal Katyal Hogan Lovells US LLP 555 Thirteenth Street, NW Washington, DC 20004 (202) 637−5528 Fax: (202) 637−5910 Email: neal.katyal@hoganlovells.com LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Rio S. Pierce Hagens Berman Sobol Shapiro LLP 715 Hearst Avenue, Suite 202 Berkeley, CA 94710 (510) 725−3000 Fax: (510) 725−3001 Email: riop@hbsslaw.com TERMINATED: 06/15/2018 LEAD ATTORNEY
Bart Harper Williams Proskauer Rose 2029 Century Park East 24th Floor Los Angeles, CA 90067−3010 310−284−4520 Fax: 310−557−2193 Email: bwilliams@proskauer.com

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 3 of 19
ATTORNEY TO BE NOTICED
Daniel Paul Collins Munger Tolles & Olson LLP 350 South Grand Avenue, 50th Floor Los Angeles, CA 90071−3426 (213) 683−9100 Fax: (213) 687−3702 Email: Daniel.Collins@mto.com ATTORNEY TO BE NOTICED
Joshua Patashnik Munger, Tolles and Olson LLP 560 Mission Street, 27th Floor San Francisco, CA 94105−2907 415−512−4072 Fax: 415−644−6972 Email: josh.patashnik@mto.com TERMINATED: 09/05/2018
Kyle Alexander Casazza Proskauer Rose LLP 2029 Century Park East Suite 2400 Los Angeles, CA 90067 310−557−2193 Fax: 310−557−2193 Email: kcasazza@proskauer.com ATTORNEY TO BE NOTICED
Manuel Francisco Cachan Proskauer Rose LLP 2049 Century Park East Suite 3200 Los Angeles, CA 90067 310−284−4568 Email: mcachan@proskauer.com ATTORNEY TO BE NOTICED
Miriam Kim Munger, Tolles & Olson 560 Mission Street, 27th Floor San Francisco, CA 94105 415−512−4041 Email: Miriam.Kim@mto.com ATTORNEY TO BE NOTICED
Paul F. Hancock K and L Gates 200 South Biscayne Blvd Suite 3900 Miami, FL 33131 (305) 539−3300 Email: Paul.Hancock@klgates.com PRO HAC VICE ATTORNEY TO BE NOTICED
Terry Edward Sanchez Munger Tolles & Olson LLP 355 South Grand Avenue, 35th Floor Los Angeles, CA 90071−1560 (213) 683−9100 Fax: (213) 687−3702 Email: Terry.Sanchez@mto.com ATTORNEY TO BE NOTICED

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 4 of 19

Defendant Wells Fargo & Co.
Amicus National Fair Housing Alliance, Inc.

represented by Edward Patrick Sangster (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Neal Katyal (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Rio S. Pierce (See above for address) TERMINATED: 06/15/2018 LEAD ATTORNEY
Bart Harper Williams (See above for address) ATTORNEY TO BE NOTICED
Daniel Paul Collins (See above for address) ATTORNEY TO BE NOTICED
Jennifer Lynn Roche Proskauer LLP 2029 Century Park East Suite 2400 Los Angeles, CA 90067−3010 310 557−2900 Fax: 310 557−2193 Email: jroche@proskauer.com ATTORNEY TO BE NOTICED
Joshua Patashnik (See above for address) TERMINATED: 09/05/2018
Kyle Alexander Casazza (See above for address) ATTORNEY TO BE NOTICED
Manuel Francisco Cachan (See above for address) ATTORNEY TO BE NOTICED
Miriam Kim (See above for address) ATTORNEY TO BE NOTICED
Paul F. Hancock (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Terry Edward Sanchez (See above for address) ATTORNEY TO BE NOTICED
represented by Christopher Brancart Brancart & Brancart

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 5 of 19

Post Office Box 686 Pescadero, CA 94060 650−879−0141 Fax: 650−879−1103 Email: cbrancart@brancart.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Joseph D. Rich Lawyers' Committee for Civil Rights Under Law 1401 New York Avenue N.W. Suite 400 Washington, DC 20005 202−662−8331 Email: tsilverstein@lawyerscommittee.org LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Joseph Marc Sellers (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Thomas Samuel Silverstein Lawyers' Committee for Civil Rights Under Law 1401 New York Avenue N.W. Suite 400 Washington, DC 20005 202−662−8316 Email: tsilverstein@lawyerscommittee.org LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Brian C Corman Cohen Milstein Sellers Toll PLLC 1100 New York Ave., N.W. Suite 500 Washington, DC 20005 202−408−4600 Fax: 202−408−4699 Email: bcorman@cohenmilstein.com PRO HAC VICE ATTORNEY TO BE NOTICED

Morgan Whitney Williams National Fair Housing Alliance 1101 Vermont Ave., N.W., Suite 710 Washington, DC 20005 202−898−1661 Email: mwilliams@nationalfairhousing.org PRO HAC VICE ATTORNEY TO BE NOTICED

Amicus
Lawyers' Committee for Civil Rights under Law, Inc.

represented by Christopher Brancart (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 6 of 19

Amicus
Poverty & Race Research Action Council, Inc.

Joseph Marc Sellers (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Brian C Corman (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Joseph D. Rich (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Thomas Samuel Silverstein (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
represented by Christopher Brancart (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED
Joseph D. Rich (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Thomas Samuel Silverstein (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED
Brian C Corman (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED
Joseph Marc Sellers (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

Date Filed 09/21/2015
09/21/2015 09/21/2015

# Docket Text
1 COMPLAINT against Wells Fargo & Co., Wells Fargo Bank, N.A. ( Filing fee $ 400, receipt number 0971−9853000.). Filed byCity Of Oakland. (Attachments: # 1 Civil Cover Sheet)(Kim, Sumy) (Filed on 9/21/2015) (Entered: 09/21/2015)
2 Proposed Summons. (Kim, Sumy) (Filed on 9/21/2015) (Entered: 09/21/2015)
3 Case assigned to Magistrate Judge Sallie Kim.
Counsel for plaintiff or the removing party is responsible for serving the Complaint or Notice of Removal, Summons and the assigned judge's standing orders and all other new case documents upon the opposing parties. For information, visit E−Filing A New Civil Case at http://cand.uscourts.gov/ecf/caseopening.

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 7 of 19

09/22/2015 09/22/2015 09/22/2015 09/22/2015 09/23/2015 10/07/2015 10/08/2015 10/08/2015 10/08/2015 10/08/2015
10/08/2015 10/08/2015 10/08/2015 10/08/2015

Standing orders can be downloaded from the court's web page at www.cand.uscourts.gov/judges. Upon receipt, the summons will be issued and returned electronically. Counsel is required to send chambers a copy of the initiating documents pursuant to L.R. 5−1(e)(7). A scheduling order will be sent by Notice of Electronic Filing (NEF) within two business days. (cjlS, COURT STAFF) (Filed on 9/21/2015) (Entered: 09/21/2015)
4 Initial Case Management Scheduling Order with ADR Deadlines: Case Management Statement due by 12/16/2015. Case Management Conference set for 12/23/2015 01:30 PM in Courtroom A, 15th Floor, San Francisco. (ysS, COURT STAFF) (Filed on 9/22/2015) (Entered: 09/22/2015)
5 Summons Issued as to Wells Fargo & Co., Wells Fargo Bank, N.A.. (ysS, COURT STAFF) (Filed on 9/22/2015) (Entered: 09/22/2015)
6 ASSOCIATION of Counsel Robert S. Peck Pro Hac Vice by City Of Oakland. (Peck, Robert) (Filed on 9/22/2015) (Entered: 09/22/2015)
7 MOTION for leave to appear in Pro Hac Vice Robert S. Peck ( Filing fee $ 305, receipt number 0971−9857687.) filed by City Of Oakland. (Peck, Robert) (Filed on 9/22/2015) (Entered: 09/22/2015)
8 Order by Magistrate Judge Sallie Kim granting 7 Motion for Pro Hac Vice as to attorney Robert Peck. (mklS, COURT STAFF) (Filed on 9/23/2015) (Entered: 09/23/2015)
9 CONSENT/DECLINATION to Proceed Before a US Magistrate Judge by City Of Oakland.. (Kim, Sumy) (Filed on 10/7/2015) (Entered: 10/07/2015)
10 NOTICE of Appearance by Joshua Patashnik (Patashnik, Joshua) (Filed on 10/8/2015) (Entered: 10/08/2015)
11 CONSENT/DECLINATION to Proceed Before a US Magistrate Judge by Wells Fargo & Co., Wells Fargo Bank, N.A... (Patashnik, Joshua) (Filed on 10/8/2015) (Entered: 10/08/2015)
12 NOTICE of Appearance by Terry Edward Sanchez (Sanchez, Terry) (Filed on 10/8/2015) (Entered: 10/08/2015)
13 CLERK'S NOTICE OF IMPENDING REASSIGNMENT TO A U.S. DISTRICT COURT JUDGE: The Clerk of this Court will now randomly reassign this case to a District Judge because either (1) a party has not consented to the jurisdiction of a Magistrate Judge, or (2) time is of the essence in deciding a pending judicial action for which the necessary consents to Magistrate Judge jurisdiction have not been secured. You will be informed by separate notice of the district judge to whom this case is reassigned.
ALL HEARING DATES PRESENTLY SCHEDULED BEFORE THE CURRENT MAGISTRATE JUDGE ARE VACATED AND SHOULD BE RE−NOTICED FOR HEARING BEFORE THE JUDGE TO WHOM THIS CASE IS REASSIGNED.
This is a text only docket entry; there is no document associated with this notice. (mklS, COURT STAFF) (Filed on 10/8/2015) (Entered: 10/08/2015)
14 NOTICE of Appearance by Bart Harper Williams (Williams, Bart) (Filed on 10/8/2015) (Entered: 10/08/2015)
15 NOTICE of Appearance by Miriam Kim Notice of Appearance (Kim, Miriam) (Filed on 10/8/2015) (Entered: 10/08/2015)
16 STIPULATION to Extend Time to Respond to the Initial Complaint by 30 Days filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 10/8/2015) (Entered: 10/08/2015)
17 STIPULATION WITH PROPOSED ORDER to Set Schedule for Motion to Dismiss and Declaration of Bart Williams in support of Stipluation filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Proposed Order)(Williams, Bart) (Filed on 10/8/2015) (Entered: 10/08/2015)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 8 of 19

10/09/2015 10/13/2015

18 ORDER REASSIGNING CASE. Case reassigned to Judge Hon. Haywood S Gilliam, Jr for all further proceedings. Magistrate Judge Sallie Kim no longer assigned to the case.. Signed by Executive Committee on 10/9/15. (as, COURT STAFF) (Filed on 10/9/2015) (Entered: 10/09/2015)
19 CLERK'S NOTICE SETTING CASE MANAGEMENT CONFERENCE FOR REASSIGNED CIVIL CASE. Notice is hereby given that a Case Management Conference has been set for December 29, 2015, before Judge Haywood S. Gilliam, Jr., at 2:00 p.m., in Courtroom 15, 18th Floor, 450 Golden Gate Avenue, San Francisco, CA. Case Management Statement due by December 22, 2015.

(This is a text only docket entry, there is no document associated with this notice.)

10/14/2015 10/14/2015 10/14/2015

(ndrS, COURT STAFF) (Filed on 10/13/2015) (Entered: 10/13/2015)
20 ORDER by Judge Haywood S. Gilliam, Jr. Granting 17 Stipulation to Set Schedule for Motion to Dismiss (ndrS, COURT STAFF) (Filed on 10/14/2015) (Entered: 10/14/2015)
Reset Deadlines Pursuant to Docket No. 20 : Responses due by 12/14/2015; Replies due by 1/8/2016. (ndrS, COURT STAFF) (Filed on 10/14/2015) (Entered: 10/14/2015)
21 CLERK'S NOTICE. Notice is hereby given that the Case Management Conference, previously set for December 29, 2015, is vacated.

(This is a text only docket entry, there is no document associated with this notice.)

11/13/2015
11/18/2015 11/18/2015 11/23/2015 11/23/2015 12/07/2015 12/07/2015

(ndrS, COURT STAFF) (Filed on 10/14/2015) (Entered: 10/14/2015)
22 MOTION to Dismiss Complaint; Memorandum of Points & Authorities in Support Thereof filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. Motion Hearing set for 2/11/2016 02:00 PM in Courtroom 15, 18th Floor, San Francisco before Hon. Haywood S Gilliam Jr.. Responses due by 12/14/2015. Replies due by 1/8/2016. (Attachments: # 1 REQUEST FOR JUDICIAL NOTICE AND EXHIBITS A−O THEREOF, # 2 WELLS FARGO DEFENDANTS CERTIFICATION OF INTERESTED ENTITIES PURSUANT TO FED R. CIV. PROC. 7.1 AND CIVIL LOCAL RULE 3−16;, # 3 DECLARATION OF RIO PIERCE, # 4 [PROPOSED] ORDER, # 5 Exhibit A, # 6 Exhibit B, # 7 Exhibit C through R, # 8 Proof of Service)(Williams, Bart) (Filed on 11/13/2015) Modified on 11/23/2015 (dtmS, COURT STAFF). (Entered: 11/13/2015)
23 NOTICE of Appearance by Daniel Paul Collins as Additional Counsel for Defendants Wells Fargo & Co. and Wells Fargo Bank, N.A. (Collins, Daniel) (Filed on 11/18/2015) (Entered: 11/18/2015)
24 Re−notice 22 Motion to Dismiss Hearing set for 2/11/2016 at 2:00 PM in Courtroom 15, 18th Floor, San Francisco before Hon. Haywood S. Gilliam Jr.. (Williams, Bart) (Filed on 11/18/2015) Modified on 11/20/2015 (hdjS, COURT STAFF). (Entered: 11/18/2015)
Electronic filing error. Certificate of Interested Entities Required to be Filed Separately on the Docket. Please re−file. Re: 22 MOTION to Dismiss filed by Wells Fargo Bank, N.A., Wells Fargo & Co. (dtmS, COURT STAFF) (Filed on 11/23/2015) (Entered: 11/23/2015)
25 Certificate of Interested Entities by Wells Fargo & Co., Wells Fargo Bank, N.A. identifying Corporate Parent Wells Fargo & Company for Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 11/23/2015) (Entered: 11/23/2015)
26 STIPULATION WITH PROPOSED ORDER To Amend Briefing Schedule filed by The City of Oakland. (Attachments: # 1 Proposed Order)(Peretz, Yosef) (Filed on 12/7/2015) Modified on 12/7/2015 (dtmS, COURT STAFF). (Entered: 12/07/2015)
27 ORDER by Judge Haywood S. Gilliam, Jr. Granting 26 Stipulation To Amend Briefing Schedule. (ndrS, COURT STAFF) (Filed on 12/7/2015) Modified on 12/8/2015 (ndrS, COURT STAFF). (Entered: 12/08/2015)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 9 of 19

12/08/2015 12/18/2015 01/13/2016 02/10/2016 02/12/2016 02/16/2016 02/17/2016 02/18/2016
02/18/2016 03/24/2016 04/06/2016 04/08/2016
04/14/2016 04/15/2016 04/15/2016

Reset Deadlines Pursuant to 27 as to 22 First MOTION to Dismiss Complaint: Responses due by 12/18/2015; Replies due by 1/13/2016. (ndrS, COURT STAFF) (Filed on 12/8/2015) (Entered: 12/08/2015)
28 RESPONSE (re 22 MOTION to Compel First MOTION to Dismiss Complaint ) filed byThe City of Oakland. (Attachments: # 1 Supplement Opposition to Request for Judicial Notice)(Peretz, Yosef) (Filed on 12/18/2015) (Entered: 12/18/2015)
29 REPLY (re 22 MOTION to Compel First MOTION to Dismiss Complaint ) filed byWells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Reply to Opposition to Request for Judicial Notice)(Williams, Bart) (Filed on 1/13/2016) (Entered: 01/13/2016)
30 ORDER VACATING HEARING AND DIRECTING PARTIES TO RESPOND. Signed by Judge Haywood S. Gilliam, Jr. on 2/10/2016. (ndrS, COURT STAFF) (Filed on 2/10/2016) (Entered: 02/10/2016)
31 NOTICE by Wells Fargo & Co., Wells Fargo Bank, N.A. Joint Report in Response to Court's February 10, 2016 Order (Williams, Bart) (Filed on 2/12/2016) (Entered: 02/12/2016)
32 ORDER OF RECUSAL. Signed by Judge Haywood S. Gilliam, Jr. on 2/16/2016. (ndrS, COURT STAFF) (Filed on 2/16/2016) (Entered: 02/16/2016)
33 ORDER, Case reassigned to Hon. Edward M. Chen. Hon. Haywood S Gilliam, Jr no longer assigned to the case.. Signed by Executive Committee on 2/17/16. (haS, COURT STAFF) (Filed on 2/17/2016) (Entered: 02/17/2016)
34 CLERK'S NOTICE resetting 22 MOTION to Dismiss Complaint for 4/7/2016 01:30 PM in Courtroom 5, 17th Floor, San Francisco before Edward M. Chen. Fully briefed.. (This is a text−only entry generated by the court. There is no document associated with this entry.), Set/Reset Deadlines as to (bpf, COURT STAFF) (Filed on 2/18/2016) (Entered: 02/18/2016)
35 CASE MANAGEMENT SCHEDULING ORDER: Case Management Conference set for 5/12/2016 09:30 AM in Courtroom 5, 17th Floor, San Francisco. Joint CMC statement due 5/5/2016. Signed by Judge Edward M. Chen on 2/18/16. (bpf, COURT STAFF) (Filed on 2/18/2016) (Entered: 02/18/2016)
36 STATEMENT OF RECENT DECISION pursuant to Civil Local Rule 7−3.d (2) filed byWells Fargo & Co., Wells Fargo Bank, N.A.. (Patashnik, Joshua) (Filed on 3/24/2016) (Entered: 03/24/2016)
37 NOTICE by Wells Fargo & Co., Wells Fargo Bank, N.A. of Association of Counsel (Williams, Bart) (Filed on 4/6/2016) (Entered: 04/06/2016)
38 Minute Entry for proceedings held before Edward M. Chen: Motion Hearing held on 4/7/2016 re 22 MOTION to Compel First MOTION to Dismiss Complaint filed by Wells Fargo Bank, N.A., Wells Fargo & Co. ; granting in part and denying in part 22 Motion to Dismiss. Case Management Statement due by 6/9/2016. Initial Case Management Conference reset for 6/16/2016 09:30 AM in Courtroom 5, 17th Floor, San Francisco.Total Time in Court 52 minutes. Court Reporter Name Lydia Zinn. (bpf, COURT STAFF) (Date Filed: 4/8/2016) (Entered: 04/08/2016)
39 TRANSCRIPT ORDER for proceedings held on 04/07/2016 before Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., for Court Reporter Lydia Zinn. (Sanchez, Terry) (Filed on 4/14/2016) (Entered: 04/14/2016)
40 STIPULATION WITH PROPOSED ORDER To Extend Defendants' Time To Answer Pursuant To Local Civ. Rule 6−2(a) filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Declaration of Terry Sanchez, # 2 Proposed Order)(Sanchez, Terry) (Filed on 4/15/2016) (Entered: 04/15/2016)
41 STIPULATION AND ORDER re 40 STIPULATION WITH PROPOSED ORDER To Extend Defendants' Time To Answer Pursuant To Local Civ. Rule 6−2(a) filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Signed by Judge Edward M. Chen on 4/15/16. (bpf, COURT STAFF) (Filed on 4/15/2016) (Entered: 04/15/2016)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 10 of 19

04/28/2016
05/05/2016 05/05/2016 05/09/2016 05/11/2016
06/10/2016 06/10/2016 06/13/2016 06/16/2016 06/16/2016 06/16/2016 06/23/2016 06/24/2016
06/24/2016 06/24/2016

42 Transcript of Proceedings held on 4/7/2016, before Judge Edward M. Chen. Court Reporter/Transcriber Lydia Zinn, telephone number (415) 531−6587. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerk's Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction. After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. (Re 39 Transcript Order ) Redacted Transcript Deadline set for 5/31/2016. Release of Transcript Restriction set for 7/27/2016. (Related documents(s) 39 ) (Zinn, Lydia) (Filed on 4/28/2016) (Entered: 04/28/2016)
43 MOTION for leave to appear in Pro Hac Vice ( Filing fee $ 305, receipt number 0971−10426176.) filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Hancock, Paul) (Filed on 5/5/2016) (Entered: 05/05/2016)
44 Defendants Wells Fargo ANSWER to Complaint byWells Fargo & Co., Wells Fargo Bank, N.A.. (Sanchez, Terry) (Filed on 5/5/2016) (Entered: 05/05/2016)
45 ORDER by Judge Edward M. Chen granting 43 Motion for Pro Hac Vice (Hancock). (bpfS, COURT STAFF) (Filed on 5/9/2016) (Entered: 05/09/2016)
46 CLERK'S NOTICE. Case Management Statement due by 6/16/2016. Initial Case Management Conference reset from 6/16/2016 to 6/23/2016 09:30 AM in Courtroom 5, 17th Floor, San Francisco. (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpfS, COURT STAFF) (Filed on 5/11/2016) (Entered: 05/11/2016)
47 ADR Clerk's Notice re: Non−Compliance with Court Order (ewh, COURT STAFF) (Filed on 6/10/2016) (Entered: 06/10/2016)
48 ADR Certification (ADR L.R. 3−5 b) of discussion of ADR options for Defendants (Patashnik, Joshua) (Filed on 6/10/2016) (Entered: 06/10/2016)
49 ADR Certification (ADR L.R. 3−5 b) of discussion of ADR options for Plaintiff (Peretz, Yosef) (Filed on 6/13/2016) (Entered: 06/13/2016)
50 Certificate of Interested Entities by Wells Fargo & Co., Wells Fargo Bank, N.A. identifying Corporate Parent Wells Fargo & Company for Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 6/16/2016) (Entered: 06/16/2016)
51 STIPULATION and Proposed Order selecting Private ADR by Wells Fargo & Co., Wells Fargo Bank, N.A. filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 6/16/2016) (Entered: 06/16/2016)
52 JOINT CASE MANAGEMENT STATEMENT filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 6/16/2016) (Entered: 06/16/2016)
53 *** FTR TRANSCRIPT ORDER *** TRANSCRIPT ORDER for proceedings held on 06/23/2016 before Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., FTR time: ? (Williams, Bart) (Filed on 6/23/2016) Modified on 6/23/2016 (rjdS, COURT STAFF). (Entered: 06/23/2016)
54 Minute Entry for proceedings held before Edward M. Chen: Initial Case Management Conference held on 6/23/2016. Case referred to Private ADR. Case Management Statement due by 8/25/2016. Further Case Management Conference set for 9/1/2016 10:30 AM in Courtroom 5, 17th Floor, San Francisco. FTR Time 10:12−10:29. (bpfS, COURT STAFF) (Date Filed: 6/24/2016) (Entered: 06/24/2016)
55 STIPULATION AND ORDER re 51 STIPULATION and Proposed Order selecting Private ADR by Wells Fargo & Co., Wells Fargo Bank, N.A. filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Signed by Judge Edward M. Chen on 6/24/16. (bpfS, COURT STAFF) (Filed on 6/24/2016) (Entered: 06/24/2016)
56 Transcript of FTR Proceedings, 10:12 a.m. to 10:29 a.m. held on 06/23/16, before Judge Chen. Transcriber Pamela A. Batalo, telephone number 626−688−7509;pamela_batalo@cand.uscourts.gov. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerk's Office public terminal or may be purchased through the Court Reporter/Transcriber until the

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07/01/2016 07/08/2016
07/08/2016 07/08/2016 07/08/2016 07/15/2016 07/20/2016
07/22/2016 07/22/2016 07/27/2016
07/29/2016 07/29/2016
07/29/2016 08/25/2016 09/02/2016

deadline for the Release of Transcript Restriction. After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. (Re 53 Transcript Order, ) Redaction Request due 7/15/2016. Redacted Transcript Deadline set for 7/25/2016. Release of Transcript Restriction set for 9/22/2016. (Related documents(s) 53 ) (Batalo, Pam) (Filed on 6/24/2016) (Entered: 06/24/2016)
57 TRANSCRIPT ORDER for proceedings held on 6/23/2016 before Edward M. Chen by The City of Oakland, for Court Reporter Pam Batalo. (Peretz, Yosef) (Filed on 7/1/2016) (Entered: 07/01/2016)
58 MOTION to Stay Proceedings filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. Motion Hearing set for 9/1/2016 01:30 PM in Courtroom 5, 17th Floor, San Francisco before Edward M. Chen. Responses due by 7/22/2016. Replies due by 7/29/2016. (Williams, Bart) (Filed on 7/8/2016) (Entered: 07/08/2016)
59 Request for Judicial Notice re 58 MOTION to Stay Proceedings filed byWells Fargo & Co., Wells Fargo Bank, N.A.. (Related document(s) 58 ) (Williams, Bart) (Filed on 7/8/2016) (Entered: 07/08/2016)
60 Proposed Order re 58 MOTION to Stay Proceedings by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 7/8/2016) (Entered: 07/08/2016)
61 Declaration in Support of 58 MOTION to Stay Proceedings filed byWells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Exhibit A − H)(Related document(s) 58 ) (Casazza, Kyle) (Filed on 7/8/2016) (Entered: 07/08/2016)
62 STIPULATION WITH PROPOSED ORDER [Stipulation and [Proposed] Protective Order Regarding Confidential Information] filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 7/15/2016) (Entered: 07/15/2016)
63 STIPULATION AND ORDER re 62 Protective Order Regarding Confidential Information] filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Signed by Judge Edward M. Chen on 7/20/16. (bpfS, COURT STAFF) (Filed on 7/20/2016) (Entered: 07/20/2016)
64 RESPONSE (re 22 MOTION to Dismiss) filed by The City of Oakland. (Attachments: # 1 Supplement, # 2 Declaration)(Peretz, Yosef) (Filed on 7/22/2016) Modified on 7/25/2016 (slhS, COURT STAFF). (Entered: 07/22/2016)
65 Joint Discovery Letter Brief filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Exhibit Nos. 1−5)(Williams, Bart) (Filed on 7/22/2016) (Entered: 07/22/2016)
66 ORDER denying Wells Fargo's ex parte request to stay discovery. Re 65 Joint Discovery Letter Brief filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Signed by Judge Edward M. Chen on 7/27/16. (bpfS, COURT STAFF) (Filed on 7/27/2016) (Entered: 07/27/2016)
67 NOTICE of Change of Address by Yosef Peretz on behalf of Robert S. Peck (Peretz, Yosef) (Filed on 7/29/2016) (Entered: 07/29/2016)
68 CLERK'S NOTICE. Initial Case Management Conference reset for 9/1/2016 from 9:30 AM to 1:30 PM in Courtroom 5, 17th Floor, San Francisco. Joint CMC statement due 8/25/2016 (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpfS, COURT STAFF) (Filed on 7/29/2016) (Entered: 07/29/2016)
69 REPLY (re 58 MOTION to Stay Proceedings ) filed byWells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 7/29/2016) (Entered: 07/29/2016)
70 CASE MANAGEMENT STATEMENT filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Williams, Bart) (Filed on 8/25/2016) (Entered: 08/25/2016)
71 Minute Entry for proceedings held before Edward M. Chen: Motion Hearing held on 9/1/2016 re 58 MOTION to Stay Proceedings filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Granted. Case Management Statement due by 2/16/2017. Further Case Management Conference set for 2/23/2017 10:30 AM in

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 12 of 19

09/02/2016 09/06/2016 09/06/2016
09/12/2016 09/30/2016 10/03/2016 10/03/2016 10/04/2016 11/02/2016 02/16/2017 02/23/2017 02/24/2017
02/27/2017 03/07/2017

Courtroom 5, 17th Floor, San Francisco.Total Time in Court 1 hour 10 minutes. Court Reporter Name Lydia Zinn. (bpf, COURT STAFF) (Date Filed: 9/2/2016) (Entered: 09/02/2016)
72 ORDER by Judge Edward M. Chen Granting 58 Defendant's Motion to Stay. (emcsec, COURT STAFF) (Filed on 9/2/2016) (Entered: 09/02/2016)
73 TRANSCRIPT ORDER for proceedings held on 09/02/2016 before Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., for Court Reporter Lydia Zinn. (Williams, Bart) (Filed on 9/6/2016) (Entered: 09/06/2016)
74 Transcript of Proceedings held on 9/1/2016, before Judge Edward M. Chen. Court Reporter/Transcriber Lydia Zinn, telephone number (415) 531−6587. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerk's Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction. After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. (Re 73 Transcript Order ) Redacted Transcript Deadline set for 10/7/2016. Release of Transcript Restriction set for 12/5/2016. (Related documents(s) 73 ) (Zinn, Lydia) (Filed on 9/6/2016) (Entered: 09/06/2016)
75 TRANSCRIPT ORDER for proceedings held on 9/1/2016 before Edward M. Chen by The City of Oakland, for Court Reporter Lydia Zinn. (Peretz, Yosef) (Filed on 9/12/2016) (Entered: 09/12/2016)
76 First Administrative Motion to File Under Seal filed by The City of Oakland. (Attachments: # 1 Declaration, # 2 Exhibit, # 3 Proposed Order, # 4 Exhibit)(Peretz, Yosef) (Filed on 9/30/2016) (Entered: 09/30/2016)
77 Statement re 72 Order on Motion to Stay Re Joint Statement Regarding Meet and Confer Efforts by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 10/3/2016) (Entered: 10/03/2016)
78 ORDER by Judge Edward M. Chen granting 76 Administrative Motion to File Exhibit A of Docket 70 Under Seal. (bpfS, COURT STAFF) (Filed on 10/3/2016) (Entered: 10/03/2016)
79 ORDER re 77 Statement re: meet and confer efforts re: discovery filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Signed by Judge Edward M. Chen on 10/4/16. (bpfS, COURT STAFF) (Filed on 10/4/2016) (Entered: 10/04/2016)
80 Statement re 79 Order re: meet and confer efforts / SECOND JOINT STATEMENT RE CONTINUING MEET AND CONFER EFFORTS by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 11/2/2016) (Entered: 11/02/2016)
81 CASE MANAGEMENT STATEMENT filed by The City of Oakland. (Peretz, Yosef) (Filed on 2/16/2017) (Entered: 02/16/2017)
82 TRANSCRIPT ORDER for proceedings held on 02/23/2017 before Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., for Court Reporter FTR − San Francisco. (Casazza, Kyle) (Filed on 2/23/2017) (Entered: 02/23/2017)
83 Minute Entry for proceedings held before Edward M. Chen: Further Case Management Conference held on 2/23/2017. Case Management Statement due by 6/1/2017. Further Case Management Conference set for 6/8/2017 10:30 AM in Courtroom 5, 17th Floor, San Francisco. FTR Time 10:57−11:47. (bpfS, COURT STAFF) (Date Filed: 2/24/2017) Modified on 2/24/2017. Proceedings transcribed by Joan Columbini. (afmS, COURT STAFF). (Entered: 02/24/2017)
84 TRANSCRIPT ORDER for proceedings held on 2/21/2017 before Edward M. Chen by The City of Oakland, for Court Reporter FTR − Oakland. (Peretz, Yosef) (Filed on 2/27/2017) (Entered: 02/27/2017)
85 Transcript of Proceedings held on February 23, 2017, before Judge Edward M. Chen. Court Reporter/Transcriber Joan Marie Columbini, CSR, telephone number

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 13 of 19

03/09/2017 05/01/2017 05/03/2017
05/05/2017 05/05/2017
05/18/2017 05/18/2017 05/25/2017
05/26/2017 06/01/2017 06/20/2017 06/26/2017 07/21/2017 07/24/2017

joan.columbini.csr@gmail.com 510−367−3043. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerk's Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction. After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. (Re 84 Transcript Order, 82 Transcript Order ) Redaction Request due 3/28/2017. Redacted Transcript Deadline set for 4/7/2017. Release of Transcript Restriction set for 6/5/2017. (Related documents(s) 84 , 82 ) (Columbini, Joan) (Filed on 3/7/2017) (Entered: 03/07/2017)
86 Letter dated 3/9/17 from Yosef Peretz. (Peretz, Yosef) (Filed on 3/9/2017) Modified on 3/10/2017 (slhS, COURT STAFF). (Entered: 03/09/2017)
87 NOTICE by The City of Oakland of Decision of Supreme Court of the United States (Peretz, Yosef) (Filed on 5/1/2017) (Entered: 05/01/2017)
88 CLERK'S NOTICE. Further Case Management Conference advanced from 6/8/2017 to 5/11/2017 10:30 AM in Courtroom 5, 17th Floor, San Francisco. Case Management Statement due by 5/5/2017. (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpfS, COURT STAFF) (Filed on 5/3/2017) (Entered: 05/03/2017)
89 STIPULATION WITH PROPOSED ORDER Regarding Case Management Conference filed by The City of Oakland. (Attachments: # 1 Proposed Order)(Peretz, Yosef) (Filed on 5/5/2017) (Entered: 05/05/2017)
90 STIPULATION AND ORDER re 89 Regarding Case Management Conference filed by The City of Oakland Case Management Statement due by 5/18/2017. Further Case Management Conference set for 5/25/2017 10:30 AM in Courtroom 5, 17th Floor, San Francisco. Signed by Judge Edward M. Chen on 5/5/17. (bpfS, COURT STAFF) (Filed on 5/5/2017) (Entered: 05/05/2017)
91 JOINT CASE MANAGEMENT STATEMENT filed by The City of Oakland. (Peretz, Yosef) (Filed on 5/18/2017) (Entered: 05/18/2017)
92 JOINT CASE MANAGEMENT STATEMENT Amended, with Exhibits Attached filed by The City of Oakland. (Peretz, Yosef) (Filed on 5/18/2017) (Entered: 05/18/2017)
93 Minute Entry for proceedings held before Edward M. Chen: Further Case Management Conference held on 5/25/2017. Case Management Statement due by 9/28/2017. Further Case Management Conference set for 10/5/2017 10:30 AM in Courtroom 5, 17th Floor, San Francisco. FTR Time 10:38−10:45. (bpfS, COURT STAFF) (Date Filed: 5/25/2017) Modified on 5/26/2017: Matter transcribed by Leo Mankiewicz. (rjdS, COURT STAFF). (Entered: 05/25/2017)
94 TRANSCRIPT ORDER for proceedings held on 5/25/17 before Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., for Court Reporter FTR − San Francisco. (Williams, Bart) (Filed on 5/26/2017) (Entered: 05/26/2017)
95 TRANSCRIPT ORDER for proceedings held on 5/26/2017 before Edward M. Chen by The City of Oakland, for Court Reporter FTR − San Francisco. (Peretz, Yosef) (Filed on 6/1/2017) (Entered: 06/01/2017)
96 STIPULATION WITH PROPOSED ORDER Relating to Amended Complaint filed by The City of Oakland. (Attachments: # 1 Proposed Order)(Peretz, Yosef) (Filed on 6/20/2017) (Entered: 06/20/2017)
97 STIPULATION AND ORDER re 96 Relating to Amended Complaint filed by The City of Oakland. Signed by Judge Edward M. Chen on 6/26/17. (bpfS, COURT STAFF) (Filed on 6/26/2017) (Entered: 06/26/2017)
98 STIPULATION WITH PROPOSED ORDER filed by The City of Oakland. (Attachments: # 1 Proposed Order Proposed Order)(Peretz, Yosef) (Filed on 7/21/2017) (Entered: 07/21/2017)
99 STIPULATION AND ORDER re 98 extending time to file amended complaint. Signed by Judge Edward M. Chen on 7/24/17. (bpfS, COURT STAFF) (Filed on

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 14 of 19

08/09/2017 08/10/2017
08/11/2017 08/15/2017
08/15/2017 09/14/2017 09/18/2017 10/06/2017
10/11/2017 11/08/2017

7/24/2017) (Entered: 07/24/2017)
100 STIPULATION WITH PROPOSED ORDER filed by The City of Oakland. (Attachments: # 1 Proposed Order)(Peretz, Yosef) (Filed on 8/9/2017) (Entered: 08/09/2017)
101 Transcript of Proceedings held on 05/25/2017, before Judge Edward M. Chen. Court Reporter/Transcriber Leo T. Mankiewicz, CSR, RMR, CRR, telephone number (415) 722−7045; email: leomank@gmail.com.. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerk's Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction. After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. (Re 94 Transcript Order ) Redaction Request due 8/31/2017. Redacted Transcript Deadline set for 9/11/2017. Release of Transcript Restriction set for 11/8/2017. (Related documents(s) 94 ) (Mankiewicz, Leo) (Filed on 8/10/2017) (Entered: 08/10/2017)
102 TRANSCRIPT ORDER for proceedings held on 05−25−2017 before Edward M. Chen by The City of Oakland, for Court Reporter Leo Mankiewicz. (Peretz, Yosef) (Filed on 8/11/2017) (Entered: 08/11/2017)
103 STIPULATION AND ORDER re 100 filed by The City of Oakland Case Management Statement due by 11/22/2017. Further Case Management Conference reset for 11/30/2017 01:30 PM in Courtroom 5, 17th Floor, San Francisco. Motion to Dismiss First Amended Complaint Hearing set for 11/30/2017 01:30 PM in Courtroom 5, 17th Floor, San Francisco before Edward M. Chen. Signed by Judge Edward M. Chen on 8/15/17. (bpfS, COURT STAFF) (Filed on 8/15/2017) (Entered: 08/15/2017)
104 FIRST AMENDED COMPLAINT against Wells Fargo & Co., Wells Fargo Bank, N.A.. Filed by The City of Oakland. (Peretz, Yosef) (Filed on 8/15/2017) Modified on 8/16/2017 (slhS, COURT STAFF). (Entered: 08/15/2017)
105 STIPULATION WITH PROPOSED ORDER re 104 Amended Complaint filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Proposed Order Granting Stipulation Regarding Briefing Schedule for Challenge to the First Amended Complaint)(Williams, Bart) (Filed on 9/14/2017) (Entered: 09/14/2017)
106 STIPULATION AND ORDER re 105 re 104 Amended Complaint filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Case Management Statement due by 12/7/2017. Initial Case Management Conference/Motion to Dismiss reset for 12/14/2017 01:30 PM in Courtroom 5, 17th Floor, San Francisco. Signed by Judge Edward M. Chen on 9/18/17. (bpfS, COURT STAFF) (Filed on 9/18/2017) (Entered: 09/18/2017)
107 MOTION to Dismiss Plaintiff's First Amended Complaint; Memorandum of Points and Authorities in Support Thereof filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. Motion Hearing set for 12/14/2017 01:30 PM in Courtroom 5, 17th Floor, San Francisco before Judge Edward M. Chen. Responses due by 10/20/2017. Replies due by 10/27/2017. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Proposed Order)(Williams, Bart) (Filed on 10/6/2017) Modified on 10/10/2017 (slhS, COURT STAFF). (Entered: 10/06/2017)
108 CLERK'S NOTICE as to 107 MOTION to Dismiss Plaintiff's First Amended Complaint. Per prior stipulation and order, opposition due by 11/13/2017. Reply due by 11/27/2017. Motion Hearing set for 12/14/2017 01:30 PM in Courtroom 5, 17th Floor, San Francisco before Judge Edward M. Chen. (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpf, COURT STAFF) (Filed on 10/11/2017) (Entered: 10/11/2017)
109 CLERK'S NOTICE. Non−parties seeking to file amicus briefs shall file an Administrative Motion for Leave to File Amicus Brief by November 8, 2017. Response/opposition to such motions shall be filed by November 9, 2017, at 12:00 p.m. Approved amicus briefs shall be filed by November 13, 2017. Such briefs shall be no longer than 25 pages. (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpfS, COURT STAFF) (Filed on 11/8/2017)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 15 of 19

11/08/2017
11/09/2017 11/13/2017 11/13/2017 11/13/2017 11/13/2017 11/13/2017
11/14/2017
11/14/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/15/2017 11/27/2017

(Entered: 11/08/2017)
110 ADMINISTRATIVE MOTION for Permission to File Amicus Brief filed by National Fair Housing Alliance, Inc., Lawyers' Committee for Civil Rights under Law, Inc., Poverty & Race Research Action Council, Inc.. Responses due by 11/9/2018. (Attachments: # 1 Declaration, # 2 Proposed Order)(Brancart, Christopher) (Filed on 11/8/2017) (Entered: 11/08/2017)
111 ORDER by Judge Edward M. Chen granting 110 Administrative Motion to file an amicuscuriae brief. (bpf, COURT STAFF) (Filed on 11/9/2017) (Entered: 11/09/2017)
112 MOTION for Leave to Appear in Pro Hac Vice of Joseph Sellers, (Filing Fee: $310.00, receipt number 0971−11872186) filed by The City of Oakland. (Attachments: # 1 Exhibit CGS)(Sellers, Joseph) (Filed on 11/13/2017) (Entered: 11/13/2017)
113 MOTION for Leave to Appear in Pro Hac Vice of Joseph D. Rich, (Filing Fee: $310.00, receipt number 0971−11873048) filed by Lawyers' Committee for Civil Rights under Law, Inc.. (Attachments: #(1) Exhibit Certificate of Good Standing)(Rich, Joseph) (Filed on 11/13/2017) (Entered: 11/13/2017)
114 MOTION for Leave to Appear in Pro Hac Vice of Thomas Silverstein, (Filing Fee: $310.00, receipt number 0971−11873129) filed by Lawyers' Committee for Civil Rights under Law, Inc.. (Attachments: # 1 Exhibit Certificate of Good Standing)(Silverstein, Thomas) (Filed on 11/13/2017) (Entered: 11/13/2017)
115 Brief of Amicus Curiae filed byLawyers' Committee for Civil Rights under Law, Inc., National Fair Housing Alliance, Inc., Poverty & Race Research Action Council, Inc.. (Brancart, Christopher) (Filed on 11/13/2017) (Entered: 11/13/2017)
116 OPPOSITION/RESPONSE to (re 107 MOTION to Dismiss Plaintiff's First Amended Complaint); Memorandum of Points and Authorities thereto filed by The City of Oakland. (Attachments: # 1 Exhibit Request for Judicial Notice in Opposition to Defendant's Motion to Dismiss)(Peretz, Yosef) (Filed on 11/13/2017) (Entered: 11/13/2017)
117 MOTION for Leave to Appear in Pro Hac Vice of Brian Corman, (Filing Fee: $310.00, receipt number 0971−11874491) filed by Lawyers' Committee for Civil Rights under Law, Inc., National Fair Housing Alliance, Inc., Poverty & Race Research Action Council, Inc.. (Attachments: #(1) Exhibit CGS)(Corman, Brian) (Filed on 11/14/2017) (Entered: 11/14/2017)
118 First MOTION for Leave to Appear in Pro Hac Vice Morgan Williams, (Filing Fee: $310.00, receipt number 265TR3VB), (Filing Fee Previously Paid on 11/10/2017) filed by National Fair Housing Alliance, Inc.. (Attachments: #(1) Certificate/Proof of Service)(Williams, Morgan) (Filed on 11/14/2017) (Entered: 11/14/2017)
119 ORDER by Judge Edward M. Chen granting 112 Motion for Pro Hac Vice (Sellers). (bpfS, COURT STAFF) (Filed on 11/15/2017) (Entered: 11/15/2017)
120 ORDER by Judge Edward M. Chen granting 113 Motion for Pro Hac Vice (Rich). (bpfS, COURT STAFF) (Filed on 11/15/2017) (Entered: 11/15/2017)
121 ORDER by Judge Edward M. Chen granting 114 Motion for Pro Hac Vice (Silverstein). (bpfS, COURT STAFF) (Filed on 11/15/2017) (Entered: 11/15/2017)
122 ORDER by Judge Edward M. Chen granting 117 Motion for Pro Hac Vice (Corman). (bpfS, COURT STAFF) (Filed on 11/15/2017) (Entered: 11/15/2017)
123 ORDER by Judge Edward M. Chen granting 118 Motion for Pro Hac Vice(Williams). (bpfS, COURT STAFF) (Filed on 11/15/2017) (Entered: 11/15/2017)
124 REPLY in Support (re 107 MOTION to Dismiss Plaintiff's First Amended Complaint) filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Attachments: # 1 Exhibit Request for Judicial Notice)(Williams, Bart) (Filed on 11/27/2017) Modified on 11/28/2017 (slhS, COURT STAFF). (Entered: 11/27/2017)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 16 of 19

12/07/2017 12/15/2017
01/17/2018 01/17/2018 01/19/2018 01/21/2018
01/25/2018 01/26/2018 02/02/2018 02/22/2018 03/01/2018 03/22/2018 03/27/2018 03/28/2018 04/02/2018 04/06/2018

125 JOINT CASE MANAGEMENT STATEMENT filed by The City of Oakland. (Peretz, Yosef) (Filed on 12/7/2017) (Entered: 12/07/2017)
126 Minute Entry for proceedings held before Judge Edward M. Chen: Motion Hearing held on 12/14/2017 re 107 MOTION to Dismiss Plaintiff's First Amended Complaint filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Under submission. Case Management Statement due by 3/22/2018. Further Case Management Conference set for 3/29/2018 10:30 AM in Courtroom 5, 17th Floor, San Francisco.Total Time in Court: 1 hour 30 minutes. Court Reporter: Lydia Zinn. Plaintiff Attorney: Robert Peck and Joel Liberson. Defendant Attorney: Paul Hancock, Ed Sangster, Kyle Casazza and Olivia Kelman. (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpf, COURT STAFF) (Date Filed: 12/15/2017) (Entered: 12/15/2017)
127 Statement of Recent Decision by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 1/17/2018) (Entered: 01/17/2018)
128 TRANSCRIPT ORDER for proceedings held on 12/14/17 before Judge Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., for Court Reporter Lydia Zinn. (Williams, Bart) (Filed on 1/17/2018) (Entered: 01/17/2018)
129 Statement of Decision by The City of Oakland. (Peretz, Yosef) (Filed on 1/19/2018) (Entered: 01/19/2018)
130 Transcript of Proceedings held on 12/14/2017, before Judge Edward M. Chen. Court Reporter/Transcriber Lydia Zinn, telephone number (415) 531−6587. Per General Order No. 59 and Judicial Conference policy, this transcript may be viewed only at the Clerk's Office public terminal or may be purchased through the Court Reporter/Transcriber until the deadline for the Release of Transcript Restriction. After that date it may be obtained through PACER. Any Notice of Intent to Request Redaction, if required, is due no later than 5 business days from date of this filing. (Re 128 Transcript Order ) Redacted Transcript Deadline set for 2/21/2018. Release of Transcript Restriction set for 4/23/2018. (Related documents(s) 128 ) (zinnlr62S, COURT STAFF) (Filed on 1/21/2018) (Entered: 01/21/2018)
131 TRANSCRIPT ORDER for proceedings held on 12−14−2017 before Judge Edward M. Chen by Wells Fargo & Co., Wells Fargo Bank, N.A., for Court Reporter Lydia Zinn. (Sanchez, Terry) (Filed on 1/25/2018) (Entered: 01/25/2018)
132 TRANSCRIPT ORDER for proceedings held on 12−14−2017 before Judge Edward M. Chen by The City of Oakland, for Court Reporter Lydia Zinn. (Peretz, Yosef) (Filed on 1/26/2018) (Entered: 01/26/2018)
133 Statement of Recent Decision by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 2/2/2018) (Entered: 02/02/2018)
134 Statement of Decision Re: Fields, et al. v. Twitter, Inc. by The City of Oakland. (Peretz, Yosef) (Filed on 2/22/2018) (Entered: 02/22/2018)
135 Statement of Recent Decision by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 3/1/2018) (Entered: 03/01/2018)
136 JOINT CASE MANAGEMENT STATEMENT filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 3/22/2018) (Entered: 03/22/2018)
137 ORDER resetting CMC. Case Management Statement due by 5/10/2018. Further Case Management Conference reset from 3/28/2018 to 5/17/2018 10:30 AM in San Francisco, Courtroom 05, 17th Floor. Signed by Judge Edward M. Chen on 3/27/18. (bpf, COURT STAFF) (Filed on 3/27/2018) (Entered: 03/27/2018)
138 Statement of Recent Decision by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 3/28/2018) (Entered: 03/28/2018)
139 Statement of Recent Decision by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 4/2/2018) (Entered: 04/02/2018)
140 Statement of Decision Re: County of Cook, Ill. v. Wells Fargo Financial, Inc., et al. by The City of Oakland. (Peretz, Yosef) (Filed on 4/6/2018) (Entered: 04/06/2018)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 17 of 19

04/09/2018 05/10/2018 05/15/2018
05/30/2018
06/14/2018 06/15/2018 06/15/2018 06/29/2018 07/13/2018 07/13/2018 07/13/2018
07/13/2018
07/16/2018 07/16/2018
07/17/2018 07/17/2018

141 Statement of Decision re: County of Cook, Ill. v. Bank of America, et al. by The City of Oakland. (Peretz, Yosef) (Filed on 4/9/2018) (Entered: 04/09/2018)
142 JOINT CASE MANAGEMENT STATEMENT filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 5/10/2018) (Entered: 05/10/2018)
143 ORDER resetting CMC re: 142 Joint Case Management Statement filed by Wells Fargo Bank, N.A., Wells Fargo & Co. Case Management Statement due by 7/12/2019. Further Case Management Conference set for 7/19/2018 10:30 AM in San Francisco, Courtroom 05, 17th Floor. Signed by Judge Edward M. Chen on 5/15/18. (bpfS, COURT STAFF) (Filed on 5/15/2018) (Entered: 05/15/2018)
144 CLERK'S NOTICE. Further Case Management Conference reset from 7/19/2018 to 8/16/2018 10:30 AM in San Francisco, Courtroom 05, 17th Floor. Case Management Statement due by 8/9/2018. (This is a text−only entry generated by the court. There is no document associated with this entry.)(bpfS, COURT STAFF) (Filed on 5/30/2018) (Entered: 05/30/2018)
145 Statement of Recent Decision by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Williams, Bart) (Filed on 6/14/2018) (Entered: 06/14/2018)
146 NOTICE of Change In Counsel by Terry Edward Sanchez (Sanchez, Terry) (Filed on 6/15/2018) (Entered: 06/15/2018)
147 ORDER by Judge Edward M. Chen Granting in Part and Denying in Part 107 Defendants' Motion to Dismiss. (emcsec, COURT STAFF) (Filed on 6/15/2018) (Entered: 06/15/2018)
148 ANSWER to 104 Amended Complaint by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Sangster, Edward) (Filed on 6/29/2018) Modified on 7/2/2018 (slhS, COURT STAFF). (Entered: 06/29/2018)
149 MOTION for leave to appear in Pro Hac Vice ( Filing fee $ 310, receipt number 0971−12509643.) filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Katyal, Neal) (Filed on 7/13/2018) (Entered: 07/13/2018)
150 NOTICE of Appearance by Edward Patrick Sangster (Sangster, Edward) (Filed on 7/13/2018) (Entered: 07/13/2018)
151 MOTION to Amend/Correct 147 Order on Motion to Dismiss Notice Of Motion and Motion to Amend the Court's June 15, 2018 Memorandum Opinion and Order to Include a Certification Under 28 U.S.C. § 1292(B); Memorandum of Points and Authorities in Support Thereof filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. Motion Hearing set for 9/6/2018 01:30 PM in San Francisco, Courtroom 05, 17th Floor before Judge Edward M. Chen. Responses due by 7/27/2018. Replies due by 8/3/2018. (Sangster, Edward) (Filed on 7/13/2018) (Entered: 07/13/2018)
152 Proposed Order re 151 MOTION to Amend/Correct 147 Order on Motion to Dismiss Notice Of Motion and Motion to Amend the Court's June 15, 2018 Memorandum Opinion and Order to Include a Certification Under 28 U.S.C. § 1292(B); Memorandum of Points and Author by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Sangster, Edward) (Filed on 7/13/2018) (Entered: 07/13/2018)
153 ORDER by Judge Edward M. Chen granting 149 Motion for Pro Hac Vice. (bpfS, COURT STAFF) (Filed on 7/16/2018) (Entered: 07/16/2018)
154 CLERK'S NOTICE. Further Case Management Conference reset from 8/16/2018 to 9/6/2018 01:30 PM in San Francisco, Courtroom 05, 17th Floor. Case Management Statement due by 8/30/2018. (This is a text−only entry generated by the court. There is no document associated with this entry.) (bpfS, COURT STAFF) (Filed on 7/16/2018) (Entered: 07/16/2018)
155 Application for Refund, Receipt Number 26AU378L by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Katyal, Neal) (Filed on 7/17/2018) (Entered: 07/17/2018)
156 Refund Status re 155 Application for Refund DECLINED. (rghS, COURT STAFF) (Filed on 7/17/2018) (Entered: 07/17/2018)

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 18 of 19

07/20/2018 07/24/2018 07/27/2018
07/27/2018 07/30/2018 07/30/2018
08/03/2018
09/05/2018 09/05/2018 09/14/2018
09/21/2018 11/08/2018 01/28/2019 01/29/2019 02/22/2019 02/25/2019

157 STIPULATION to Continue Case Management Conference and Hearing on Defendants' Motion to Amend the Court's June 15, 2018 Memorandum Opinion and Order filed by The City of Oakland. (Peretz, Yosef) (Filed on 7/20/2018) (Entered: 07/20/2018)
158 NOTICE by The City of Oakland Notice of Appearance of Maria Bee as Co−Counsel for Plaintiff City of Oakland (Bee, Maria) (Filed on 7/24/2018) (Entered: 07/24/2018)
159 OPPOSITION/RESPONSE (re 151 MOTION to Amend/Correct 147 Order on Motion to Dismiss Notice Of Motion and Motion to Amend the Court's June 15, 2018 Memorandum Opinion and Order to Include a Certification Under 28 U.S.C. § 1292(B); Memorandum of Points and Author ) filed byThe City of Oakland. (Peretz, Yosef) (Filed on 7/27/2018) (Entered: 07/27/2018)
160 Request for Judicial Notice re 159 Opposition/Response to Motion, filed byThe City of Oakland. (Related document(s) 159 ) (Peretz, Yosef) (Filed on 7/27/2018) (Entered: 07/27/2018)
161 Proposed Order re 157 Stipulation to Continue CMC and Hearing by The City of Oakland. (Peretz, Yosef) (Filed on 7/30/2018) (Entered: 07/30/2018)
162 STIPULATION AND ORDER GRANTING STIPULATION TO CONTINUE CASE MANAGEMENT CONFERENCE AND HEARING ON DEFENDANTS' MOTION TO AMEND re 157 Stipulation. Motion Hearing set for 9/13/2018 01:30 PM in San Francisco, Courtroom 05, 17th Floor before Judge Edward M. Chen. Case Management Statement due by 9/6/2018. Further Case Management Conference set for 9/13/2018 01:30 PM in San Francisco, Courtroom 05, 17th Floor. Signed by Judge Edward M. Chen on 7/30/2018. (tlhS, COURT STAFF) (Filed on 7/30/2018) (Entered: 07/30/2018)
163 REPLY in Support (re 151 MOTION to Amend/Correct 147 Order on Motion to Dismiss Notice Of Motion and Motion to Amend the Court's June 15, 2018 Memorandum Opinion and Order to Include a Certification Under 28 U.S.C. § 1292(B); Memorandum of Points and Author ) filed byWells Fargo & Co., Wells Fargo Bank, N.A.. (Sangster, Edward) (Filed on 8/3/2018) (Entered: 08/03/2018)
164 NOTICE of Change In Counsel by Terry Edward Sanchez (Sanchez, Terry) (Filed on 9/5/2018) (Entered: 09/05/2018)
165 ORDER by Judge Edward M. Chen Granting 151 Defendants' Motion to Amend Order to Include Certification for Interlocutory Appeal. (emcsec, COURT STAFF) (Filed on 9/5/2018) (Entered: 09/05/2018)
166 CLERK'S NOTICE SCHEDULING FURTHER CASE MANAGEMENT CONFERENCE: Case Management Statement due by 2/21/2019. Further Case Management Conference set for 2/28/2019 at 10:30 AM in San Francisco, Courtroom 05, 17th Floor. (This is a text−only entry generated by the court. There is no document associated with this entry.) (afmS, COURT STAFF) (Filed on 9/14/2018) (Entered: 09/14/2018)
167 USCA Case Number 18−80116 re Petition for Permission to Appeal (slhS, COURT STAFF) (Filed on 9/21/2018) (Entered: 09/21/2018)
168 NOTICE of Change of Address by Bart Harper Williams of Proskauer Rose LLP for Defendants Wells Fargo & Co. and Wells Fargo Bank, N.A. (Williams, Bart) (Filed on 11/8/2018) (Entered: 11/08/2018)
169 Notice of Appeal FEE PAID (Filing fee$505,receipt number 0971−13040468). (Katyal, Neal) (Filed on 1/28/2019) (Entered: 01/28/2019)
170 ORDER of USCA as to 167 USCA Case Number (slhS, COURT STAFF) (Filed on 1/29/2019) (Entered: 01/29/2019)
171 CASE MANAGEMENT STATEMENT (Joint) filed by The City of Oakland. (Peretz, Yosef) (Filed on 2/22/2019) (Entered: 02/22/2019)
172 CLERK'S NOTICE: Telephonic Further Case Management Conference set for 3/7/2019 10:30 AM in San Francisco, Courtroom 05, 17th Floor. Joint Case Management Statement due by 2/28/2019. The parties shall make arrangements

Case: 3:15-cv-4321 As of: 10/17/2019 08:54 PM PDT 19 of 19

02/25/2019 02/28/2019 03/07/2019

to appear through Court Call. (This is a text−only entry generated by the court. There is no document associated with this entry.) (afmS, COURT STAFF) (Filed on 2/25/2019) Modified on 2/25/2019 (afmS, COURT STAFF). (Entered: 02/25/2019)
173 Transcript Designation Form for proceedings held on 4/7/2016; 2/23/2017; 5/25/2017; 12/14/2017 before Judge Edward M. Chen, re 170 USCA Order Transcript due by 3/25/2019. (Katyal, Neal) (Filed on 2/25/2019) (Entered: 02/25/2019)
174 USCA Case Number 19−15169 re 167 USCA Case Number. (slhS, COURT STAFF) (Filed on 2/28/2019) (Entered: 02/28/2019)
175 Minute Entry for proceedings held before Judge Edward M. Chen:

Telephonic Status Conference held on 3/7/2019. Court orders stay without prejudice. See pdf image for further details.

Total Time in Court: 23 Minutes. Court Reporter: Not Reported.

Court Call: Plaintiff Attorneys: Maria Bee, Joel Liberson, Robert Peck, Yosef Peretz. Defendant Attorneys: Paul Hancock, Edward Sangster.

04/03/2019 04/04/2019 04/04/2019 04/05/2019 04/08/2019 04/22/2019 04/23/2019

Attachment: Minute Order. (afmS, COURT STAFF) (Date Filed: 3/7/2019) (Entered: 03/08/2019)
176 STIPULATION WITH PROPOSED ORDER Regarding Extension of Time for Filing Motion to Authorize Discovery filed by The City of Oakland. (Peretz, Yosef) (Filed on 4/3/2019) (Entered: 04/03/2019)
177 Order by Judge Edward M. Chen granting 176 Stipulation to Extend Deadline for Filing Motion to Authorize Discovery.(afmS, COURT STAFF) (Filed on 4/4/2019) (Entered: 04/04/2019)
178 ORDER REFERRING CASE to Magistrate Judge for Discovery purposes. Signed by Judge Edward M. Chen on 4/4/2019. (afmS, COURT STAFF) (Filed on 4/4/2019) (Entered: 04/04/2019)
CASE REFERRED to Magistrate Judge Joseph C. Spero for Discovery (ahm, COURT STAFF) (Filed on 4/5/2019) (Entered: 04/05/2019)
179 NOTICE OF REFERENCE AND ORDER RE DISCOVERY PROCEDURES. Signed by Chief Magistrate Judge Joseph C. Spero on 4/8/19. (klhS, COURT STAFF) (Filed on 4/8/2019) (Entered: 04/08/2019)
180 STIPULATION WITH PROPOSED ORDER TO EXTEND DEADLINE FOR FILING JOINT LETTER RE DISCOVERY DISPUTE filed by Wells Fargo & Co., Wells Fargo Bank, N.A.. (Sangster, Edward) (Filed on 4/22/2019) (Entered: 04/22/2019)
181 Order, signed 4/23/19, by Chief Magistrate Judge Joseph C. Spero granting 180 Stipulation To Extend Deadline for Filing Joint Letter re: Discovery Dispute.(klhS, COURT STAFF) (Filed on 4/23/2019) (Entered: 04/23/2019)

 
 Case3:15-cv-04321-SK Document1 Filed09/21/15 Page1 of 38

1

Barbara J. Parker (SBN 69722) OAKLAND CITY ATTORNEY

2 One Frank H. Ogawa Plaza, 6th Floor

Oakland, CA 94612

3 Telephone: (510) 238-6512

4 Yosef Peretz (SBN 209288) PERETZ & ASSOCIATES
5 22 Battery Street, Suite 202 San Francisco, California 94111
6 Telephone: (415) 732-3777 Facsimile: (415) 732-3791
7

Joel Liberson (SBN 164857) 8 TRIAL & APPELLATE RESOURCES, P.C.
400 Continental Blvd., 6th Floor 9 El Segundo, CA 90245 10 Telephone: (917) 848-3218

11

Robert S. Peck (pro hac vice pending) CENTER FOR CONSTITUTIONAL LITIGATION

12

777 6th Street NW, Suite 520 Washington, DC 20001

13 Telephone: (202) 944-2803

14 Attorneys for Plaintiff CITY OF OAKLAND

15

UNITED STATES DISTRICT COURT

16

NORTHERN DISTRICT OF CALIFORNIA

17

18

CITY OF OAKLAND, a municipal Corporation,

Civil Case No.

19

COMPLAINT AND DEMAND FOR JURY

Plaintiff,

TRIAL

20

21 vs.

22 WELLS FARGO & CO., and WELLS FARGO BANK, N.A.,
23

24

Defendants.

25

26

27

28
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page2 of 38

1 I. NATURE OF THE ACTION

2

1. Plaintiff City of Oakland (“Oakland” or the “City”) brings this action

3 against Wells Fargo & Co., Inc. and Wells Fargo, N.A. (hereafter “Wells” or the

4 “Bank”) for the economic impact of its longstanding, unbroken policy and practice
5 of steering minority borrowers in Oakland into mortgage loans offered on
6
“predatory” terms (defined herein as terms that have higher costs and risk features
7
than more favorable and less expensive loans for which the borrower was eligible
8
and which are regularly issued to similarly situated white borrowers) and for its
9
policy of refusing to extend credit to minority borrowers who desired to refinance
10
the more expensive loans they previously received when such credit was extended
11
to white borrowers.
12
2. The adverse impact that the Bank’s mortgage lending policies and
13
14 practices would cause in terms of widespread economic and non-economic
15 damages throughout the City were entirely foreseeable, inter alia, through a

16 variety of analytical tools and published reports available to the Bank.

17

3. This suit is brought pursuant to the Fair Housing Act of 1968

18 (“FHA”), as amended, 42 U.S.C. §§ 3601, et seq., and the California Fair

19 Employment and Housing Act (“FEHA”), California Government Code (“Gov’t

20 Code”) §12900, et seq., by the City to seek redress for injuries caused by Wells

21 Fargo’s pattern or practice of illegal and discriminatory mortgage lending.

22 Specifically, Oakland seeks injunctive relief and damages for the injuries caused

23 by (1) the origination of mortgage loans on predatory terms in minority

24 neighborhoods and to minority borrowers that are the result of Wells Fargo’s
25 unlawful and discriminatory lending practices, and (2) the Bank’s subsequent 26 refusal to extend credit to minority borrowers seeking to refinance previously 27 issued unnecessarily expensive loans. The unlawful conduct alleged herein
28
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page3 of 38

1 consists of both intentional discrimination and disparate impact discrimination.

2 Wells Fargo’s policies and practices identified herein were not justified by business

3 necessity or legitimate business interests. There were less costly and thus less

4 discriminatory alternatives available to Wells Fargo that would have achieved the

5 same business goals as were achieved by these policies and practices.

6

4. While Wells has adapted to changing market conditions necessitated

7 by enhanced public scrutiny of its mortgage lending practices, one issue has

8 remained constant since at least 2004 – Wells has systematically engaged in a
9 continuous pattern and practice of steering minority borrowers in Oakland into
10
mortgage loans with predatory terms when more favorable and less expensive
11
loans were being offered to similarly situated non-minority borrowers. This
12
unlawful pattern and practice continues through the present and has not terminated.
13
Therefore, the operative statute of limitations governing actions brought pursuant
14
to the FHA and FEHA has not commenced to run.
15
5. Wells Fargo’s discriminatory lending practices knowingly place
16
17 vulnerable, underserved borrowers in loans they cannot afford. The practices
18 maximize Wells Fargo’s profits without regard to the borrower’s best interests, the
19 borrower’s ability to repay, or the financial health of underserved minority

20 neighborhoods, resulting in an excessively high number of more expensive loans

21 in Oakland. Moreover, Wells Fargo has averted any significant risk to itself by

22 selling the vast majority of mortgage loans it originates or purchases on the

23 secondary market.

24

6. The pattern and practice of lending discrimination engaged in by

25 Wells Fargo consists of traditional redlining1 and reverse redlining,2 both of which

26
27 1 Redlining is the practice of denying credit to particular neighborhoods based on race. 2 Reverse redlining is the practice of flooding a minority community with exploitative loan
28 products.
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page4 of 38

1 have been deemed to violate the FHA and FEHA. Wells Fargo engaged in

2 redlining, and continues to engage in said conduct, by refusing to extend mortgage

3 credit to minority borrowers in Oakland on equal terms as to non-minority

4 borrowers. Wells Fargo engaged in reverse redlining, and continues to engage in

5 said conduct, by extending mortgage credit on predatory terms to minority

6 borrowers in minority neighborhoods in Oakland on the basis of the race or

7 ethnicity of its residents.

8

7. Wells Fargo’s discriminatory misconduct has also caused an

9 excessive and disproportionately high number of foreclosures in the minority

10
neighborhoods of Oakland. These foreclosures often occur when a minority

11
borrower who previously received a predatory loan sought to refinance the loan,
12
only to discover that Wells Fargo refused to extend credit at all, or on equal terms
13
as refinancing similar loans issued to white borrowers. The inevitable result of the
14
combination of issuing unnecessarily expensive or inappropriate loans, and then
15
refusing to refinance the loans, was foreclosure.
16

17

8. Wells Fargo would have had comparable rates of issuing predatory

18 loans and resulting foreclosures in minority and white communities within

19 Oakland if the Bank was properly and uniformly applying responsible

20 underwriting practices in both communities. Wells Fargo possesses sophisticated

21 underwriting technology, analytic tools, data, and access to reports that allow it to

22 foreseeably predict with precision the likelihood that it had issued an improperly

23 more expensive loan, as well as the likelihood the loan would result in delinquency,

24 default or foreclosure.3 And if that were not sufficient, the Bank had branch

25

26 3 The scope of Wells’ risk analysis policies and practices is set forth in detail

27

throughout

the

Bank’s

2014

Annual

Report

at

https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-

28 reports/2014-annual-report.pdf.

COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page5 of 38

1 offices located in Oakland and knew, or certainly should have known, of the

2 adverse consequences of its lending misconduct to minority borrowers and the City

3 regardless of whether the Bank subsequently sold the loan or servicing rights to a

4 third party. Consequently, the Bank’s issuance of improperly more expensive

5 loans to minority borrowers and the consequent foreclosures or other financial

6 pressures that resulted in deterioration of the property were foreseeable, evident,

7 and not the result of random, superseding events.

8

9. While Wells purports to be a good corporate and community citizen,

9 the reality is exactly the opposite. The Bank was putting its financial interests

10
ahead of its customers and the City of Oakland in order to maximize profits.

11
10. According to former Federal Reserve Chairman Ben Bernanke,
12
“foreclosures can inflict economic damage beyond the personal suffering and
13
dislocation that accompany them. Foreclosed properties that sit vacant for months
14
(or years) often deteriorate from neglect, adversely affecting not only the value of
15
the individual property but the values of nearby homes as well. Concentrations of
16

17 foreclosures have been shown to do serious damage to neighborhoods and

18 communities, reducing tax bases and leading to increased vandalism and crime.

19 Thus, the overall effect of the foreclosure wave, especially when concentrated in

20 lower-income and minority areas, is broader than its effects on individual 21 homeowners.”4

22

11. The discriminatory lending practices at issue herein have resulted in

23 what has been described as the “greatest loss of wealth for people of color in

24

25

26 4 Remarks by Federal Reserve Chairman Ben Bernanke at the Operation HOPE Global Financial 27 Dignity Summit, Atlanta, Georgia at pg. 4 (November 15, 2012) available at
www.federalreserve.gov/newsevents/speech/bernanke20121115a.htm. 28
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page6 of 38

1 modern US history.”5 It is well-established that poverty and unemployment rates

2 for minorities exceed those of whites, and therefore, home equity represents a

3 disproportionately high percentage of the overall wealth for minorities.6 As

4 Bernanke recently explained, as a result of the housing crisis, “most or all of the
5 hard-won gains in homeownership made by low-income and minority 6 communities in the past 15 years or so have been reversed.”7 The resulting impact 7 of these practices represents “nothing short of the preeminent civil rights issue of 8 our time, erasing, as it has, a generation of hard fought wealth accumulation among 9 African-Americans.”8
10
11 II. PARTIES

12

12. Plaintiff City of Oakland is a municipal corporation organized

13 pursuant to Article XI of the California Constitution and provides the usual variety

14 of services to its residents and visitors as do other municipalities, including police

15 and fire services.

16

13. The City also has a long history of promoting and seeking to maintain

17 a diverse, stable, and integrated community. These objectives are achieved

18
through the active involvement of the City’s elected officials and numerous City
19
Agencies and Departments. For example, the Oakland Housing and Community
20
Development Division of the City’s Community and Economic Development
21

22

23 5 United for a Fair Economy, Foreclosed: State of the Dream 2008, at v (Jan. 15, 2008), available at http://www.faireconomy.org/files/StateOfDream_01_16_08_Web.pdf.
24 6 Robert Schwemm and Jeffrey Taren, Discretionary Pricing, Mortgage Discrimination, and the 25 Fair Housing Act, 45 HARVARD CIVIL RIGHTS-CIVIL LIBERTIES LAW REV. 375, 382 (2010).

26 7 Bernanke, supra n.4, at p. 3.

27

8 Charles Nier III and Maureen St. Cyr, A Racial Financial Crisis: Rethinking the Theory of Reverse Redlining to Combat Predatory Lending Under the Fair Housing Act, 83 TEMPLE LAW

28 REVIEW 941, 942 (2011).

COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page7 of 38

1 Agency promotes access to decent affordable housing in healthy, sustainable

2 neighborhoods with full access to life-enhancing services. It works with

3 participating lenders to assist low and moderate-income, first-time homebuyers

4 purchase homes in Oakland through its Mortgage Assistance Program (“MAP”),

5 its “Shared Appreciation Mortgage” program, and its CalHome Program to

6 purchase homes in Oakland.

7

14. Wells Fargo & Company is a nationwide, diversified, financial

8 services company. Upon information and belief, its corporate headquarters are
9 located in San Francisco, California. It is the parent company of Wells Fargo Bank,
10
N.A.
11
15. Wells Fargo Bank, N.A. is organized as a national banking association
12
under the laws of the United States. Upon information and belief, its corporate
13
headquarters are is located in South Dakota. It maintains multiple offices in the
14
State of California and the City of Oakland for the purposes of soliciting
15
applications for and making residential mortgage loans and engaging in other
16
17 business activities.

18

16. The Defendants in this action are, or were at all relevant times, subject

19 to California state laws governing fair lending, including FEHA, which prohibits

20 financial institutions from discriminating on the basis of race and national origin

21 in providing financial assistance for the purchase of housing, California

22 Government Code § 12955(e); and makes discriminating on the basis of race and

23 national origin in making available, or in the terms and conditions of, residential

24 real estate-related transactions a violation of California Government Code §

25 12955(i).

26

17. The Defendants in this action are or were businesses that provide

27 financial assistance for the purchase of housing and engage in residential real

28 estate-related transactions in the City of Oakland within the meaning of FEHA.
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page8 of 38

1

18. Based on information reported pursuant to the Home Mortgage

2 Disclosure Act, in addition to loans that Defendants originated directly, Defendants

3 are responsible for residential home loans acquired from, and/or sold by or through,

4 Wells Fargo Financial, Wells Fargo Funding, Inc., Wachovia Mortgage, FSB,

5 Wachovia Bank, N.A., Wachovia Mortgage Co., World Savings Bank, FSB,

6 American Mortgage Network, Inc., and Home Services Lending, LLC.

7

19. Upon information and belief, the City alleges that each of the

8 Defendants was and is an agent of the other Defendants. Each Defendant, in acting
9 or omitting to act as alleged in this Complaint, was acting in the course and scope
10
of its actual or apparent authority pursuant to such agencies, and/or the alleged acts
11
or omissions of each Defendant as agent were subsequently ratified and adopted
12
by each agent as principal. Each Defendant, in acting or omitting to act as alleged
13
in this Complaint, was acting through its agents, and is liable on the basis of the
14
acts and omissions of its agents.
15

16 III. JURISDICTION AND VENUE
17
20. This Court has original jurisdiction over the City’s claims because it
18
19 is based on a federal statute, FHA. This Court has supplemental jurisdiction over 20 the Gov’t Code claims and other California state claims brought herein pursuant to 21 28 U.S.C. §1367.

22 IV. VENUE

23
21. Venue is proper in the United States District Court, Northern District
24
of California, pursuant to the FHA, because Defendants conduct business in this
25
district, because the City is located in this district, and a substantial part of the
26
events and omissions giving rise to the City’s claims occurred in this district.
27

28
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page9 of 38

1 V.
2 3

WELLS ENGAGED IN DISCRIMINATORY LENDING PRACTICES
A. Specific Unlawful Lending Practices

4

22. Wells Fargo engaged in numerous discriminatory lending practices

5 during the time periods at issue herein. A partial list of these practices include,

6 but is not limited to, the following:

7

8

a. failing to adequately monitor the Bank’s policies and

practices regarding mortgage loans, including but not limited

9

to originations, marketing, sales, and risk management;

10

b. reverse redlining;

11

c. placing borrowers in predatory loans even though they

12

qualify for prime loans on better terms;

13

d. failing to prudently underwrite hybrid adjustable-rate

14

mortgages (“ARMs”), such as 2/28s and 3/27s;9

15
e. failing to prudently underwrite refinance loans, where

16

borrowers substitute more unaffordable mortgage loans for

17

existing mortgages that they are well-suited for and that allow

them to build equity;

18

19

f. allowing mortgage brokers to charge “yield spread

premiums” for qualifying a borrower for an interest rate that is

20

higher than the rate the borrower qualifies for and can actually

21

afford;

22

g. failing to underwrite loans based on traditional

23

underwriting criteria such as debt-to-income ratio, loan-tovalue ratio, FICO score, and work history;

24

25

26 9 In a 2/28 ARM, the “2” represents the number of years the mortgage will be fixed over the 27 term of the loan, while the “28” represents the number of years the interest rate paid on the
mortgage will be variable. Similarly, in a 3/27 ARM, the interest rate is fixed for three years and 28 variable for the remaining 27-year amortization.
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page10 of 38

1

h. requiring substantial prepayment penalties that prevent

2

borrowers whose credit has improved from refinancing their

subprime loan to a prime loan;

3

i. charging excessive points and fees that are not associated

4

with any increased benefits for the borrower;

5

j. creating a compensation scheme incentivizing

6

employees to steer minority borrowers into predatory loans;

7

and

8

k. redlining.

9

B. Wells Intentionally Discriminated Against Minority Borrowers in

10

Violation of the FHA and FEHA as Demonstrated by Former Bank Employees

11
23. Confidential Witnesses (“CWs”) are former Wells Fargo employees
12
familiar with the Bank’s lending and business practices pertinent to the instant
13
lawsuit in the greater Oakland region. CWs describe how Wells Fargo has targeted
14
minorities and residents of minority neighborhoods in and around Oakland for
15
more expensive mortgage loans.
16
24. CW1 worked for Wells Fargo from 2006 to 2011 as a bank teller in
17
18 the Emeryville and Fruitvale Avenue branches.

19

25. CW2 worked for Wells Fargo from approximately March 2012 to

20 August 2014 as a loan processor at the Bank’s processing center in San Leandro as

21 well as in the REO Department.

22

26. CW3 worked for Wells Fargo from approximately February 2011 to

23 February 2012 as a mortgage consultant in Oakland.

24
i. Wells Fargo targets minorities for predatory loan terms
25
27. CW 1 said that sales quotas for the Fruitvale branch, which had a
26
27 particularly high number of minority customers, were set by a higher level Wells
28 Fargo Office. The Fruitvale branch was very aggressive selling products to
COMPLAINT AND JURY DEMAND
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page11 of 38

1 minority customers, including mortgage loans. The witness explained that she was

2 trained to sell the benefit of a product and not discuss the potential risks or

3 downside of the product.

4

28. CW 2 explained that the Bank originated a higher rate of adjustable

5 rate loans to minority borrowers than white borrowers, and very few minority

6 borrowers received conventional 30-year fixed rate mortgages, which were

7 approved mostly for non-minority borrowers. The witness very rarely saw

8 conventional loans being issued to borrowers with a Hispanic name. The witness

9 stated that minority borrowers complained that they did not understand the terms

10
of their loans and that loan officers failed to fully explain the adverse consequences

11
of the adjustable rate loans.
12
29. CW 3 stated that minority borrowers regularly complained that they
13
were led to believe they had obtained a fixed rate loan only to subsequently
14
discover that it was in reality an adjustable rate loan. Minority borrowers who
15
were often not as sophisticated as white borrowers were particularly susceptible to
16

17 not understanding their loan terms.

18

30. CW 3 stated that Wells Fargo loan officers failed to adequately

19 explain to minority borrowers pertinent details regarding adjustable rate and

20 interest-only loans, and that the Bank also failed to provide brochures at branch

21 locations which fully explained these loans. Rather, disclosures were sent in the

22 mail after a customer applied for the loan, and Bank employees typically did not

23 explain the details once the customer received a brochure. Additionally, the Bank

24 required that loan officers themselves pay if they wanted to provide product

25 brochures written in Spanish. The witness explained that Wells Fargo merely

26 trained its loan officers to ensure that borrowers received disclosures, but were not

27

28
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1 required to discuss the disclosures with a borrower or ensure that the borrower

2 understood them.

3

31. CW 1 said that minority borrowers did not always appear to

4 understand the Bank’s products, including mortgage loans.

5

6

ii. Wells Fargo profiled Bank customers to sell products

7

32. CW 1 said that the Bank’s computer and data system profiled

8 customers and targeted them with a variety of products, including mortgage loans.

9 These products often appeared as “pop-ups” on the tellers screen and the tellers

10 were required to offer these products. The number of “pop-up” offers the tellers

11 clicked when talking with a customer was a factor the bank used to evaluate their

12 performance. The Bank provided tellers with incentive pay for referring customers

13 who signed up for these offers, which included mortgage loans.

14

15

iii. Minorities in Oakland Receive More Expensive Loan

Terms from Wells Fargo Regardless of Creditworthiness

16

33. As discussed herein, a non-exhaustive list of the types of predatory
17

18 loans that Wells Fargo steered minorities into when they otherwise qualified for

19 less expensive and less risky loans include the following: high-cost loans (i.e.,

20 loans with an interest rate that was at least 3% above the Treasury rate prior to

21 2010 and 1.5% above the prime mortgage rate thereafter),10 subprime loans,

22 interest-only loans, balloon payment loans, loans with prepayment penalties,

23 negative amortization loans, no documentation loans, higher cost government

24

25

26

27 10 This definition applies to first lien loans. 28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page13 of 38

1 loans, including FHA11 and VA12 loans and HELOC’s, and/or ARM loans with

2 teaser rates (i.e., lifetime maximum rate > initial rate + 6%).

3

34. Data reported by the Bank and available through both public and

4 private databases shows that minorities in Oakland received more expensive loan

5 terms from Wells Fargo more frequently than white borrowers regardless of

6 creditworthiness.

7

35. A regression analysis of this data controlling for borrower race and

8 objective risk characteristics such as credit history, loan-to-value ratio, and the
9 ratio of loan amount to income demonstrates that, from 2004-2013, an African-
10
American borrower in Oakland was 2.403 times more likely to receive a loan with
11
predatory terms as a white borrower in Oakland possessing similar underwriting
12
and borrower characteristics.13 The regression analysis further demonstrates that a
13
Hispanic borrower in Oakland was 2.520 times more likely to receive a predatory
14
loan as a white borrower possessing similar underwriting and borrower
15
characteristics. These odds ratios demonstrate a pattern of statistically significant
16
17 differences between African-American and white borrowers and between Hispanic 18 and white borrowers. 14

19

20

21 11 FHA loans are insured by the Federal Housing Administration and require borrowers to pay for mortgage insurance and may entail other costs. People with credit scores under 500 generally
22 are ineligible for FHA loans.

23

12 VA loans are guaranteed by the U.S. Department of Veterans Affairs, available to veterans or surviving spouses who do not remarry, and generally do not require a down payment on the

24 property.

13 As alleged throughout the complaint, all references to the date range 2004-2013 are intended 25 to include the time period up to and including December 31, 2013. Wells Fargo issued more

26 expensive loans to minority borrowers in Oakland during this time period.

27

14 Statistical significance is a measure of probability that an observed outcome would not have occurred by chance. As used in this Complaint, an outcome is statistically significant if the

28 probability that it could have occurred by chance is less than 1%.

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1

36. The regression analysis also shows that these disparities persist when

2 comparing only borrowers with FICO scores above 660. An African-American

3 borrower in Oakland with a FICO score above 660 was 2.261 times more likely to

4 receive a predatory loan as a white borrower in Oakland with similar underwriting

5 and borrower characteristics. A Hispanic borrower in Oakland with a FICO score

6 above 660 was 2.366 times more likely to receive a predatory loan as a white

7 borrower in Oakland with similar underwriting and borrower characteristics. These

8 odds ratios demonstrate a pattern of statistically significant differences between
9 African-American and white borrowers and between Hispanic and white
10
borrowers.
11
37. A similar regression analysis taking into account the racial makeup of
12
the borrower’s neighborhood rather than the individual borrower’s race shows that
13
borrowers in heavily minority neighborhoods in Oakland were more likely to
14
receive more expensive and higher risk loans than borrowers in heavily white
15
neighborhoods. For example, a borrower in a minority census tract (census tract
16
17 consisting of at least 50% African-American or Hispanic households) was 3.207
18 times more likely to receive a predatory loan as a borrower with similar
19 characteristics in a non-minority neighborhood in Oakland (census tract with at

20 least 50% white households). These odds ratios demonstrate a pattern of

21 statistically significant differences between African-American and white

22 borrowers and between Hispanic and white borrowers.

23

38. Additionally, data reported by the Bank and available through public

24 databases shows that in 2004-2013, 6.8% of loans made by Wells Fargo to African-

25 American and Hispanic customers in Oakland were high cost, but only 1.6% of

26 loans made to white customers in Oakland were high cost. This data demonstrates

27

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page15 of 38

1 a pattern of statistically significant differences in the product placement for high

2 cost loans between minority and white borrowers.

3

39. Thus, the disparities regarding the issuance of more expensive and

4 higher risk loans to minority borrowers are not the result of or otherwise explained

5 by legitimate non-racial underwriting criteria.

6

7

iv. Oakland’ Data Analysis is Corroborated by Additional

Studies/Reports

8

40. According to Discretionary Pricing, Mortgage Discrimination, and
9

10 the Fair Housing Act, 45 HARVARD CIVIL RIGHTS-CIVIL LIBERTIES LAW REV. 375,

11 398 (2010), several studies dating back to 2000 have established that minority

12 borrowers were charged higher interest rates/fees than similar creditworthy white

13 borrowers.

14

41. Likewise, according to A Racial Financial Crisis, 83 TEMPLE LAW

15 REV. 941, 947, 949 (2011), one study concluded that “even after controlling for

16 underwriting variables, African-American borrowers were 6.1% to 34.3% more

17 likely than whites to receive a higher rate subprime mortgage during the subprime

18 boom.” And another study found that significant loan pricing disparity exists

19 among low risk borrowers – African-American borrowers were 65% more likely

20 to receive a subprime home purchase loan than similar creditworthy white

21 borrowers, and 124% more likely to receive a subprime refinance loan.

22

42. Similarly, the Center for Responsible Lending’s November 2011

23 Report, Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures,
24 stated that “racial and ethnic differences in foreclosure rates persist even after
25 accounting for differences in borrower incomes.” Further, the Center stated it is 26 “particularly troublesome” that minorities received riskier loans “even within
27
[similar] credit ranges.” For example, among borrowers having FICO scores above
28

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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page16 of 38

1 660, the incidence of higher rate loans among various groups was as follows:

2 whites – 6.2%; African-American – 21.4%; and Hispanic – 19.3%.

3

43. A seminal report on foreclosure activity by Mark Duda and William

4 Apgar documents the negative impact that rising foreclosures have on low-income

5 and low-wealth minority communities, using Chicago as a case study. Mr. Apgar

6 is a Senior Scholar at the Joint Center for Housing Studies of Harvard University,

7 and a Lecturer on Public Policy at Harvard’s John F. Kennedy School of

8 Government. He previously served as the Assistant Secretary for Housing/Federal

9 Housing Commissioner at the U.S. Department of Housing and Urban

10
Development, and also Chaired the Federal Housing Finance Board. Mr. Apgar

11
holds a Ph.D. in Economics from Harvard University. Mr. Duda is a Research

12
Fellow at the Joint Center for Housing Studies. The Apgar-Duda report has
13
continually been cited by subsequent governmental, public sector, and private
14
sector reports due to its clarity and thoroughness with respect to the negative
15
impact foreclosures have on lower-income and minority neighborhoods.15
16

17

44. This significant report highlights the foreseeability of foreclosures

18 arising from issuing more expensive and higher risk loans demonstrating that such

19 foreclosures impose significant and predictable costs on borrowers, municipal

20 governments, and neighboring homeowners.

21

45. Another report, by the Center for Responsible Lending, uses a

22 national dataset to show that the foreclosure rate for low- and moderate-income

23 African-Americans is approximately 1.8 times higher than it is for low- and

24 moderate-income non-Hispanic whites. The gap is smaller for Hispanics,

25 especially among low-income households, but even among low-income Hispanics

26

27

15 See W. Apgar, M. Duda & R. Gorey, The Municipal Costs of Foreclosures: A Chicago Case Study (2005) (available at http://www.nw.org/network/neighborworksProgs/

28 foreclosuresolutions/documents/2005Apgar-DudaStudy- FullVersion.pdf).

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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page17 of 38

1 the foreclosure rate is 1.2 times that of low-income whites. Racial and ethnic

2 disparities in foreclosure rates cannot be explained by income, since disparities

3 persist even among higher-income groups. For example: approximately 10 percent

4 of higher-income African-American borrowers and 15 percent of higher-income

5 Hispanic borrowers have lost their home to foreclosure, compared with 4.6 percent

6 of higher income non-Hispanic white borrowers. Overall, low- and moderate-

7 income African-Americans and middle- and higher-income Hispanics have

8 experienced the highest foreclosure rates.16

9

10

C. Wells Fargo’s Targeting of Minorities who in Fact Receive More Expensive Loan Terms Regardless of Creditworthiness Causes

11

Foreclosures

12

i. Data shows that Wells Fargo’s foreclosures are

disproportionately located in minority neighborhoods in

13

Oakland

14
46. In addition to the disproportionate distribution of Wells Fargo
15
foreclosures in African-American and Hispanic neighborhoods, disparate rates of
16
foreclosure based on race further demonstrate Wells Fargo’s failure to follow
17

18 responsible underwriting practices in minority neighborhoods. While 14.1% of

19 Wells Fargo’s loans in neighborhoods consisting of greater than 50% African-

20 American or Hispanic neighborhoods in Oakland result in foreclosure, the same is

21 true for only 3.3% of its loans in non-minority (at least 50% white) neighborhoods

22 in Oakland. In other words, a Wells Fargo loan in an African-American or

23 Hispanic neighborhood is 4.752 times more likely to result in foreclosure as a

24 Wells Fargo loan in a non-minority neighborhood. These odds ratios demonstrate

25

26

27

16 Center for Responsible Lending, Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures (2011) (available at www.responsiblelending.org/mortgage-lending/research--

28 analysis/Lost-Ground-2011.pdf).

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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page18 of 38

1 a pattern of statistically significant differences between African-American and

2 white borrowers and between Hispanic and white borrowers.

3

47. Thus, Wells Fargo’s discretionary lending policies and pattern or

4 practice of targeting of minorities, who in fact receive more expensive and

5 unfavorable loan terms regardless of creditworthiness, have caused and continue

6 to cause foreclosures in Oakland.

7

8

ii. Data shows that Wells Fargo’s loans to minorities result in

especially quick foreclosures in Oakland

9

10

48. A comparison of the time from origination to foreclosure of Wells

11 Fargo’s loans originated in Oakland from 2004 to 2013 shows a disparity with

12 respect to the speed with which loans to Hispanics and white borrowers move into

13 foreclosure. The average time to foreclosure for Hispanic borrowers in Oakland is

14 3.411 years, and for white borrowers in Oakland is 3.861 years. These statistically

15 significant disparities demonstrate that Wells Fargo aggressively moved Hispanic

16 borrowers into foreclosure as compared with how the Bank handled foreclosures

17 for white borrowers.

18

49. This disparity in time to foreclosure represents yet another statistical

19 marker demonstrating that Wells Fargo engaged in lending practices consistent

20 with reverse redlining. The disparity in time to foreclosure demonstrates that Wells
21 Fargo is engaged in irresponsible underwriting in minority communities that does
22 not serve the best interests of borrowers. If Wells Fargo were applying the same
23 underwriting practices in Hispanic and white neighborhoods in Oakland, there 24 would not be a significant difference in time to foreclosure. Were Wells Fargo 25 underwriting borrowers in both communities with equal care and attention to 26 proper underwriting practices, borrowers in Hispanic communities would not find
27
themselves in financial straits significantly sooner than borrowers in white
28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page19 of 38

1 communities. The faster time to foreclosure in Hispanic neighborhoods is

2 consistent with underwriting practices in minority communities that are less

3 concerned with determining a borrower’s ability to pay and qualifications for the

4 loan than they are in maximizing short-term profit.

5

50. The HUD/Treasury Report confirms that time to foreclosure is an

6 important indicator of predatory practices: “[t]he speed with which the subprime

7 loans in these communities have gone to foreclosure suggests that some lenders 8 may be making mortgage loans to borrowers who did not have the ability to repay 9 those loans at the time of origination.”17
10

11

iii. Data shows that the discriminatory loan terms cause the

foreclosures in Oakland
12

13

51. Steering borrowers into loans with predatory terms that are less

14 advantageous than more favorable loans for which they qualify can cause

15 foreclosures because the borrowers are required to make higher loan payments.

16 The difference between what a borrower who is steered into a more expensive loan

17 must pay and the lower amount for which the borrower qualified can cause the

18 borrower to be unable to make payments on the mortgage. In such instances, the

19 borrower would have continued to make payments on the mortgage and remained

20 in possession of the premises had Wells Fargo made the loan without improperly

21 steering the borrower into a more expensive loan. Steering borrowers in this

22 manner, therefore, causes foreclosures and vacancies.

23

52. Giving a loan to an applicant who does not qualify for the loan,

24 especially a refinance or home equity loan, can also cause foreclosures and

25

26 17 United States Department of Housing & Urban Development and United States Department of the Treasury, Curbing Predatory Home Mortgage Lending (2000), at 25 (available at
27 http://www.huduser.org/Publications/pdf/treasrpt.pdf) (“HUD/Treasury Report”).

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page20 of 38

1 vacancies. Some homeowners live in properties that they own subject to no

2 mortgage. Other homeowners live in properties with modest mortgages that they

3 can comfortably afford to pay. Where a lender, such as Wells Fargo, solicits such

4 a homeowner to take out a home equity loan on their property, or alternatively, to

5 refinance their existing loan into a larger loan without properly underwriting them

6 to assure that they can make the monthly payments for the new, larger loan, the

7 result is likely to be that the borrower will be unable to make payments on the

8 mortgage. This is particularly true where the borrower is refinanced from a fixed-
9 rate loan into an adjustable-rate loan that the lender knows the borrower cannot
10
afford should interest rates rise. In some instances the lender may refinance the
11
borrower into a new loan that the lender knows the borrower cannot sustain given
12
the borrower’s present debt obligations and financial resources. In such
13
circumstances, the likely result of such practices is to cause homeowners who are
14
otherwise occupying properties without a mortgage, or comfortably making
15
payments on a modest existing mortgage, to be unable to make payment on a new,
16
17 unaffordable loan. This, in turn, causes foreclosures and vacancies. If these
18 unaffordable refinance and home equity loans had not been made, the subject
19 properties would not have become vacant.

20

53. A regression analysis of loans issued by Wells Fargo in Oakland from

21 2004-2013 controlling for objective risk characteristics such as credit history, loan

22 to value ratio, and the ratio of loan amount to income demonstrates that a predatory

23 loan is 1.753 times more likely to result in foreclosure than a non-predatory loan.

24

54. A regression analysis of loans issued by Wells Fargo in Oakland from

25 2004-2013 controlling for objective risk characteristics such as credit history, loan

26 to value ratio, and the ratio of loan amount to income demonstrates that a predatory

27 loan issued to an African-American borrower is 2.583 times more likely to result

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page21 of 38

1 in foreclosure than a more favorable and less expensive loan issued to a white

2 borrower in Oakland. The regression further establishes that a predatory loan

3 issued to a Hispanic borrower is 3.312 times more likely to result in foreclosure

4 than a more favorable and less expensive loan issued to a white borrower in

5 Oakland.

6
7 VI. OAKLAND HAS BEEN INJURED BY WELLS FARGO’S DISCRIMINATORY LOAN PRACTICES
8
55. Oakland has suffered both non-economic and economic injuries as a
9
10 direct result of Wells Fargo’s pattern or practice of issuing predatory mortgage 11 loans in minority neighborhoods in Oakland, and the City seeks redress for these
12 injuries. The City does not seek redress in this action for injuries resulting from

13 mortgages originated by lenders other than Wells Fargo.

14

56. Wells Fargo continues to engage in the pattern or practice described

15 herein with similar and continuing deleterious consequences to the City.

16

57. Through the use of expert evidence and analytic tools such as Hedonic

17 regression, Oakland is capable of establishing that the Bank’s lending practices

18 were the cause of the resulting injuries alleged herein in a manner that excludes

19 other potential causes.

20
A. Non-Economic Injuries
21

22

58. Wells Fargo’s lending practices have adversely impacted the City’s

23 numerous programs designed to promote fair housing and a safe, integrated

24 community where all residents have the opportunity to prosper. For example the

25 Housing and Community Development Department is charged with managing the

26 City’s Public Housing and HUD programs which benefit minority homeowners in

27

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page22 of 38

1 particular.18 The Department provides various forms of assistance to enable low

2 and moderate income residents to purchase homes. One of the Department’s

3 primary objectives is to “identify and thwart predatory lending practices and

4 collaborate with reputable lenders.” The Department also operates numerous
5 Housing Repair and Rehabilitation Programs designed to assist low and moderate
6 income homeowners correct health and safety violations, building code violations,
7 abate code deficiencies, and major systems in danger of failure.19 The City provides
8 funding to certain non-profit organizations to promote fair housing and eliminate
9 housing discrimination on the basis of race or national origin.20 Additionally, the 10 purpose and mission of the City’s Nuisance Abatement Program is to “promote the
11
health and safety of Oakland citizens by preventing, identifying, and eliminating
12
public nuisances.” These nuisances involve numerous activities directly linked to
13
the Bank’s lending practices, including, but not limited to abandoned or
14
deteriorated property, structural and electrical hazards, criminal activity, fire
15
hazards, zoning violations, excess debris and trash, and litter.21
16

17

B. Economic Injuries

18

59. The City has suffered economic injury based upon reduced property

19 tax revenues resulting from (a) the decreased value of the vacant properties

20 themselves, and (b) the decreased value of properties surrounding the vacant

21 properties. In addition, the City has suffered economic injury resulting from the 22 cost of municipal services that it provided and still must provide to remedy blight
23

24 18 http://www2.oaklandnet.com/Government/o/hcd/a/BusinessGoals/index.htm
25 19
26 http://www2.oaklandnet.com/Government/o/hcd/s/HousingRepairRehabPrograms/DOWD0087 17
27 20 http://www2.oaklandnet.com/Government/o/hcd/s/HSC/DOWD008652 28 21 http://www2.oaklandnet.com/Government/o/CityAdministration/index.htm
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page23 of 38

1 and unsafe and dangerous conditions which exist at properties that were foreclosed

2 as a result of Wells Fargo’s illegal lending practices.

3

C. Oakland has been Injured by a Reduction in Property Tax

4

Revenues from Foreclosures Caused by Discriminatory Loans

Issued by Wells Fargo

5

6

60. When a home falls into foreclosure, it affects the property value of the

7 foreclosed home as well as the values of other homes in the neighborhood. These

8 decreased property values in turn reduce property tax revenues to the City. As

9 property values drop, Oakland communities could lose many millions in property

10 tax revenues from the decreased value of the foreclosed homes themselves and

11 those in the surrounding neighborhoods.

12

61. Vacancies and short sales even prior to completion of foreclosure also

13 result in diminished home values. Indeed, “[i]n 12 states, including California,

14 Florida, Arizona, New York and New Jersey, pre-foreclosure sales actually

15 outnumbered REO sales.”22 Such distressed sales reduce property values.23

16

62. Homes in foreclosure tend to experience a substantial decline in value,

17 and the relative decline can be measured by a number of objective criteria,

18 including the well-established Case-Shiller Home Price Index. A portion of this

19 lost home value is attributable to homes foreclosed as a result of Wells Fargo’s

20 discriminatory loan practices.

21

63. The decreased property values of foreclosed homes in turn reduce

22 property tax revenues to the City and constitute damages suffered by Oakland.
23

24

25
26 22 See http://www.realtytrac.com/content/news-and-opinion/short-sales-increasing-in-2012-short -sale-process----realtytrac-7204.
27 23 See http://www.realtytrac.com/content/foreclosure-market-report/us-foreclosure-sales-and28 short-sales-report-q1-2013-7732.
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page24 of 38

1 Property tax losses suffered by Oakland as a result of Wells Fargo’s foreclosures

2 are fully capable of empirical quantification.

3

64. Routinely maintained property tax and other data allow for the precise

4 calculation of the property tax revenues lost by the City as a direct result of

5 particular Wells Fargo foreclosures. Using a well-established statistical regression

6 technique that focuses on effects on neighboring properties, the City can isolate the

7 lost property value attributable to Wells Fargo foreclosures from losses attributable

8 to other causes, such as neighborhood conditions. This technique, known as
9 Hedonic regression, when applied to housing markets, isolates the factors that
10
contribute to the value of a property by studying thousands of housing transactions.
11
Those factors include the size of a home, the number of bedrooms and bathrooms,
12
whether the neighborhood is safe, whether neighboring properties are well-
13
maintained, and more. Hedonic analysis determines the contribution of each of
14
these house and neighborhood characteristics to the value of a home.
15
65. The number of foreclosures in a neighborhood is one of the
16
17 neighborhood traits that Hedonic regression can examine. Hedonic regression
18 allows for the calculation of the impact on a property’s value of the first foreclosure
19 in close proximity (e.g., ⅛ or ¼ of a mile), the average impact of subsequent

20 foreclosures, and the impact of the last foreclosure.

21

66. Foreclosures attributable to Wells Fargo in minority neighborhoods

22 in Oakland can be analyzed through Hedonic regression to calculate the resulting

23 loss in the property values of nearby homes. This loss can be distinguished from

24 any loss attributable to non-Wells Fargo foreclosures or other causes. The loss in

25 property value in minority neighborhoods in Oakland attributable to Wells Fargo’s

26 unlawful acts and consequent foreclosures can be used to calculate the City’s

27 corresponding loss in property tax revenues.

28
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1

67. Various studies establish that Hedonic regression can be used for this

2 purpose. A study published by the Fannie Mae Foundation, using Chicago as an

3 example, determined that each foreclosure is responsible for an average decline of

4 approximately 1.1% in the value of each single-family home within an eighth of a

5 mile.24 Application of such Hedonic regression methodology to data regularly

6 maintained by Oakland can be used to quantify precisely the property tax injury to

7 the City caused by Wells Fargo’s discriminatory lending practices and resulting

8 foreclosures in minority neighborhoods.

9

68. Other studies have focused on the impact of abandoned homes on

10
surrounding property values. A study in Philadelphia, for example, found that each

11
home within 150 feet of an abandoned home declined in value by an average of

12
$7,627; homes within 150 to 299 feet declined in value by $6,810; and homes
13
within 300 to 449 feet declined in value by $3,542.25
14
69. A Los Angeles study reported, “[i]t is conservatively estimated that
15
each foreclosed property will cause the value of neighboring homes within an
16

17 eighth of a mile to drop 0.9%.” Thus, “[i]n Oakland, impacted homeowners could

18 experience property devaluation of $53 billion.”26 This decreased property value

19 of neighboring homes in turn reduces property tax revenues to the City.

20

70. The studies cited herein highlight the foreseeability of tax related

21 harm to the City as the result of foreclosures arising from issuing more expensive

22 and higher risk loans to minority borrowers who qualified for more favorable loans.

23

24 24 See Dan Immergluck & Geoff Smith, The External Costs of Foreclosure: The Impact of SingleFamily Mortgage Foreclosures on Property Values, 17 Housing Policy Debate 57, 69 (2006).

25 25 See Anne B. Shlay & Gordon Whitman, Research for Democracy: Linking Community 26 Organizing and Research to Leverage Blight Policy, at 21 (2004).

27

26 The Alliance of Californians for Community Empowerment and the California Reinvestment Coalition, The Wall Street Wrecking Ball: What Foreclosures are Costing Los Angeles

28 Neighborhoods, at 3 (2011) (“Cost to Los Angeles Report”).

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1

D. Oakland Is Injured Because It Provided and Still Must Provide Costly Municipal Services for Foreclosure Properties in Minority

2

Neighborhoods as a Direct Result of Discriminatory Loans

Originated or Purchased by Wells Fargo

3

71. Wells Fargo foreclosure properties cause direct costs to the City
4

because the City is required to provide increased municipal services at these
5

6 properties. Even prior to completion of the foreclosure process, data shows that

7 20% of homes are vacated.27 These services would not have been necessary if the

8 properties had not been foreclosed upon. Moreover, these foreclosures resulting

9 from Wells Fargo’s unlawful conduct have contributed to the necessity for the City

10 to divert essential municipal services that would have been utilized for other

11 purposes to promote the health, welfare, and safety of its residents.

12

72. For example, the City’s Police and Fire Departments have sent, and

13 will continue to send personnel and police/fire vehicles to Wells Fargo foreclosure

14 properties to respond to a variety of problems, including increased vagrancy,

15 criminal activity, fire hazards, and threats to public health and safety that arise at

16 these properties because of their foreclosure status. Because violent crime has

17 generally been found to increase due to foreclosures, the Oakland Police and Fire

18 Departments must respond to calls reporting suspicious activity at foreclosure

19 properties and perform ongoing investigations involving criminal activity,

20 including gang activity, at these properties.

21

73. The Oakland Building Services Division has devoted, and will

22 continue to devote personnel time and out-of-pocket funds to perform a number of
23
tasks that arise at these properties because of their foreclosure status. These
24
include, but are not limited to the following: (a) inspect and issue violations in
25
contravention of California and local law; (b) undertake reasonable precautions to
26

27 27 See http://www.realtytrac.com/content/foreclosure-market-report/owner-vacated-foreclosure28 update-7771.
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page27 of 38

1 protect the public at dangerous property sites, including but not limited to erecting

2 appropriate physical barriers and boarding-up dangerous conditions at the

3 properties; (c) condemn and demolish vacant structures deemed an imminent

4 hazard to public safety.

5

74. The City frequently hires independent contractors to perform certain

6 services, including, but not limited to, (i) removing excess vegetation at vacant

7 properties, (ii) hauling away trash and debris at vacant properties, (iii) boarding

8 vacant property from casual entry, (iv) putting up fencing to secure vacant

9 properties, and (v) painting and removing graffiti at vacant properties.

10

75. The Oakland City Attorney’s Office has devoted, and will continue to

11
devote personnel time and out-of-pocket resources perform a number of tasks that

12
arise at these properties because of their foreclosure status. These include, but are

13
not limited to the following: (a) prosecuting code enforcement cases; and (b)
14

pursuing court ordered injunctions involving a myriad of potential problems at
15

foreclosure properties.
16

17

76. As stated by the Cost to Los Angeles Report, “[l]ocal government

18 agencies have to spend money and staff time on blighted foreclosed properties,

19 providing maintenance, inspections, trash removal, increased public safety calls,

20 and other code enforcement services …. Responding to these needs is a gargantuan

21 task that involves multiple agencies and multiple levels of local government.”28

22

77. Moreover, the Apgar-Duda report underscores the foreseeability of

23 municipal costs as the result of foreclosures arising from issuing more expensive

24 and higher risk loans to minority borrowers who qualified for more favorable loans.

25

26

27 28 The Wall Street Wrecking Ball: What Foreclosures are Costing Los Angeles Neighborhoods, 28 supra, n. 23.
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page28 of 38

1 VII. SAMPLE PROPERTIES IN THE CITY OF OAKLAND

2

A. Foreclosures

3

78. Plaintiff has preliminarily identified 982 more expensive and higher

4 risk loans issued to minority borrowers by Wells Fargo in Oakland between 2004-

5 2013 that resulted in commencement of foreclosure proceedings.29 The City has

6
already incurred, or will incur in the future, damages corresponding to each of these

7
properties. A sample of property addresses corresponding to these foreclosures is
8
set forth below:
9
836 31st Street, Oakland, CA 94608
10
2208 50th Avenue, Oakland, CA 94601
11
7827 Weld Street, Oakland, CA 94621
12
2681 79th Avenue, Oakland, CA 94605
13

14

B. Predatory Loans Issued Subsequent to September 21, 2013

15

79. Wells Fargo has continued to issue predatory mortgage loans to

16 minorities in Oakland subsequent to September 21, 2013. A sample of property

17 addresses corresponding to the issuance of these loans is set forth below:

18

2226 42nd Avenue, Oakland 94601 (9/25/13)

19
10226 Graffian Street, Oakland 94603 (10/16/13)

20
9400 Granada Avenue, Oakland 94605 (12/12/13)

21
9772 Anza Avenue, Oakland 94605 (12/24/13)
22

23

24

25 29 Plaintiff anticipates that it will be able to identify more foreclosures resulting from the issuance of more expensive and higher risk loans to minority borrowers who qualified for more favorable

26 loans during this time period with the benefit of discovery. This conclusion derives from the fact

27

that because of certain reporting limitations, the publicly available mortgage loan databases utilized by Plaintiff are not as comprehensive as the mortgage loan databases maintained by and

28 in the possession of an issuing bank.

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1 VIII. CLAIMS FOR RELIEF

2

FIRST CLAIM FOR RELIEF

3

(Violation of the Federal Fair Housing Act, 42 U.S.C. §§ 3601, et seq.)

4

80. The City repeats and incorporates by reference all allegations

5 contained in the preceding paragraphs as if fully set forth herein.

6
81. The FHA’s stated purpose is to provide, “within constitutional
7
limitations, for fair housing throughout the United States.”
8
82. In contravention of that purpose, Wells Fargo’s acts, policies, and
9
practices as described constitute intentional lending discrimination on the basis of
10
race. Wells Fargo has intentionally targeted residents of predominantly African-
11
American and Hispanic neighborhoods in Oakland for different treatment than
12

residents of predominantly white neighborhoods in Oakland with respect to
13

14 mortgage lending. Wells Fargo has intentionally targeted residents of these

15 neighborhoods for high-cost loans without regard to their credit qualifications and

16 without regard to whether they qualify for more advantageous loans, including

17 prime loans. Wells Fargo has intentionally targeted residents of these

18 neighborhoods for increased interest rates, points, and fees, and for other

19 disadvantageous loan terms including, but not limited to, adjustable rates,

20 prepayment penalties, and balloon payments. Wells Fargo has intentionally

21 targeted residents of these neighborhoods for unfair and deceptive lending

22 practices in connection with marketing and underwriting mortgage loans.

23

83. Wells Fargo’s acts, policies, and practices have had an adverse and

24 disproportionate impact on African-Americans and Hispanics and residents of
25 predominantly African-American and Hispanic neighborhoods in Oakland as 26 compared to similarly situated whites and residents of predominantly white 27 neighborhoods in Oakland. This adverse and disproportionate impact is the direct
28
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1 result of Wells Fargo’s policies of providing discretion to loan officers and others

2 responsible for mortgage lending; failing to monitor this discretion to ensure that

3 borrowers were being placed in loan products on a nondiscriminatory basis when

4 Wells Fargo had notice of widespread product placement disparities based on race

5 and national origin; giving loan officers and others responsible for mortgage

6 lending large financial incentives to issue loans to African-Americans and

7 Hispanics that are costlier than better loans for which they qualify; otherwise

8 encouraging and directing loan officers and others responsible for mortgage

9 lending to steer borrowers into high-cost loans or loans with adjustable rates,

10
prepayment penalties, or balloon payments without regard for whether they qualify

11
for better loans, including but not limited to prime loans; and setting interest rate
12
caps. These policies have caused African-Americans and Hispanics and residents
13
of predominantly African-American and Hispanic neighborhoods in Oakland to
14
receive mortgage loans from Wells Fargo that have materially less favorable terms
15
than mortgage loans given by Wells Fargo to similarly situated whites and
16

17 residents of predominantly white neighborhoods in Oakland, and that are

18 materially more likely to result in foreclosure.

19

84. Wells Fargo’s residential lending-related acts, policies, and practices

20 constitute reverse redlining and violate the Fair Housing Act as:

21

(a) Discrimination on the basis of race and national origin in

22 making available, or in the terms and conditions of, residential real estate-related

23 transactions, in violation of 42 U.S.C. § 3605(a); and

24

(b) Discrimination on the basis of race and national origin in

25 the terms, conditions, or privileges of sale of a dwelling, in violation of 42 U.S.C.

26 § 3604(b).

27

28
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1

85. Wells Fargo’s policies or practices are not justified by business

2 necessity or legitimate business interests.

3

86. Wells Fargo’s policies and practices are continuing.

4

87. The City is an “aggrieved person” as defined by 42 U.S.C. § 3602(i)

5 and has suffered damages as a result of Wells Fargo’s conduct.

6

88. The City’s damages include lost tax revenues and the need to provide

7 increased municipal services. The loss of tax revenues at specific foreclosure sites

8 and at closely neighboring properties in predominantly minority neighborhoods of

9 the City was a foreseeable consequence that was fairly traceable to Wells Fargo’s

10
discriminatory lending. Likewise, the need to provide increased municipal services

11
at blighted foreclosure sites in predominantly minority neighborhoods of the City
12
was a foreseeable consequence that was fairly traceable to Wells Fargo’s
13
discriminatory lending.
14
89. Wells Fargo’s policies and practices, as described herein, had the
15
purpose and effect of discriminating on the basis of race or national origin. These
16

17 policies and practices were intentional, willful, or implemented with reckless

18 disregard for the rights of African-American and Hispanic borrowers.

19

90. The City has substantial interest in preventing discriminatory lending

20 that causes disproportionately minority home foreclosures within its boundaries,

21 in preventing segregated areas where minority loans are more likely to foreclose,

22 and in holding banks accountable for damages arising from that discriminatory

23 lending. Accordingly, the City’s interests in obtaining injunctive relief to prevent

24 such discrimination and in remedying the blight and recovering the lost property

25 taxes resulting from the disproportionately minority home foreclosures in Oakland

26 are directly related to ensuring “fair housing throughout the United States.”

27

28
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1

91. In doing the acts herein alleged, Wells Fargo acted with oppression,

2 fraud, malice, and in reckless or willful disregard of the City’s rights, and Oakland

3 therefore are entitled to punitive damages in an amount according to proof at the

4 time of trial.

5

6

SECONDCLAIM FOR RELIEF

(Violation of the California Fair Employment and Housing Act

7

Gov’t Code §§ 12900, et seq.)

8
92. The City repeats and incorporates by reference all allegations
9

10 contained in the preceding paragraphs as if fully set forth herein.

11

93. FEHA seeks to prohibit discrimination on the basis of race and

12 national origin regarding the purchase of housing within California.

13

94. In contravention of that purpose, Wells Fargo’s acts, policies, and

14 practices as described constitute lending discrimination on the basis of race. Wells

15 Fargo has targeted residents of predominantly African-American and Hispanic

16 neighborhoods in Oakland for different treatment than residents of predominantly

17 white neighborhoods in Oakland with respect to mortgage lending. Wells Fargo

18 has targeted residents of these neighborhoods for high-cost loans without regard to

19 their credit qualifications and without regard to whether they qualify for more

20 advantageous loans, including prime loans. Wells Fargo has targeted residents of

21 these neighborhoods for increased interest rates, points, and fees, and for other

22 disadvantageous loan terms including, but not limited to, adjustable rates,

23 prepayment penalties, and balloon payments. Wells Fargo has targeted residents of

24 these neighborhoods for unfair and deceptive lending practices in connection with

25 marketing and underwriting mortgage loans.

26

95. Wells Fargo’s acts, policies, and practices have had an adverse and

27
disproportionate impact on African-Americans and Hispanics and residents of
28

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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page33 of 38

1 predominantly African-American and Hispanic neighborhoods in Oakland as

2 compared to similarly situated whites and residents of predominantly white

3 neighborhoods in Oakland. This adverse and disproportionate impact is the direct

4 result of Wells Fargo’s policies of providing discretion to loan officers and others

5 responsible for mortgage lending; failing to monitor this discretion to ensure that

6 minority borrowers were placed in less expensive loan products for which they

7 were qualified when Wells Fargo had notice of widespread product placement

8 disparities based on race and national origin; giving loan officers and others
9 responsible for mortgage lending large financial incentives to issue loans to
10
African-Americans and Hispanics that are costlier than better loans for which they
11
qualify; otherwise encouraging and directing loan officers and others responsible
12
for mortgage lending to steer borrowers into more expensive and higher risk loans
13
without regard for whether they qualify for less expensive loans; failing to properly
14
underwrite loans to minority borrowers despite having extensive analytical tools
15
and data to perform this task. This non-exhaustive list of policies have caused
16
17 African-Americans and Hispanics and residents of predominantly African-
18 American and Hispanic neighborhoods in Oakland to receive mortgage loans from
19 Wells Fargo that are more expensive and have higher risk features than mortgage

20 loans given by Wells Fargo to similarly situated whites and residents of

21 predominantly white neighborhoods in Oakland and are more likely to result in

22 damages to the City.

23

96. Wells Fargo’s residential lending-related acts, policies, and practices

24 constitute reverse redlining and redlining and violate FEHA:

25

(a) Discrimination on the basis of race and national origin in

26 providing financial assistance for the purchase of housing, in violation of

27 California Government Code § 12955(e); and

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page34 of 38

1

(b) Discrimination on the basis of race and national origin in

2 making available, or in the terms and conditions of, residential real estate-related

3 transactions, in violation of California Government Code § 12955(i).

4

97. Wells Fargo’s policies or practices are not justified by business

5 necessity or legitimate business interests.

6

98. Wells Fargo’s policies and practices are continuing.

7

99. The City is an “aggrieved person” as defined by Gov’t Code §

8 12989.1 and has suffered damages as a result of Well Fargo’s conduct.

9

100. The City’s damages include lost tax revenues and the need to provide

10
increased municipal services. The loss of tax revenues at specific foreclosure sites

11
and at closely neighboring properties in predominantly minority neighborhoods of
12
the City was a foreseeable consequence that was fairly traceable to Wells Fargo’s
13
discriminatory lending. Likewise, the need to provide increased municipal services
14
at blighted foreclosure sites in predominantly minority neighborhoods of the City
15
was a foreseeable consequence that was fairly traceable to Wells Fargo’s
16

17 discriminatory lending.

18

101. Wells Fargo’s policies and practices, as described herein, had the

19 purpose and effect of discriminating on the basis of race or national origin. These

20 policies and practices were intentional, willful, or implemented with reckless

21 disregard for the rights of African-American and Hispanic borrowers.

22

102. The City has substantial interest in preventing discriminatory lending

23 that causes disproportionately minority home foreclosures within its boundaries,

24 in preventing segregated areas where minority loans are more likely to foreclose,

25 and in holding banks accountable for damages arising from that discriminatory

26 lending. Accordingly, the City’s interests in obtaining injunctive relief to prevent

27 such discrimination and in remedying the blight and recovering the lost property

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page35 of 38

1 taxes resulting from the disproportionately minority home foreclosures in Oakland

2 are directly related to ensuring “fair housing throughout the United States.”

3

103. In doing the acts herein alleged, Wells Fargo acted with oppression,

4 fraud, malice, and in reckless or willful disregard of the City’s rights, and Oakland

5 therefore are entitled to punitive damages in an amount according to proof at the

6 time of trial.

7

THIRD CLAIM FOR RELIEF

8

(Common Law Claim For Unjust Enrichment)

9

104. The City repeats and incorporates by reference all preceding

10
paragraphs as if fully set forth herein.

11
105. Wells Fargo has received and utilized benefits derived from a variety
12
of municipal services, including police protection, as well as zoning ordinances,
13
tax laws, and other laws and services that have enabled Defendants to operate and
14
profit within the City of Oakland while engaging in a lengthy pattern and practice
15
of unlawful activity. Wells Fargo is not legally entitled to the benefits of these
16

17 services to the extent they were utilized to further the unlawful conduct alleged

18 herein.

19

106. Defendants are aware of and have taken advantage of the services and

20 laws provided by the City of Oakland to further their unlawful businesses practices.

21

107. As a direct and proximate result of Defendants’ predatory lending

22 practices, Defendants have been enriched at the City’s expense by utilizing benefits

23 conferred by the City and, rather than engaging in lawful lending practices,

24 practicing unlawful lending practices that have both denied the City revenues it

25 had properly expected through property and other tax payments and by costing the

26 City additional monies for services it would not have had to provide in the

27 neighborhoods affected by foreclosures due to predatory lending, absent the

28
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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page36 of 38

1 Defendants’ unlawful activities. Additionally, by foreclosing on the properties for

2 which Wells Fargo issued predatory loans, the City expended otherwise

3 unnecessary externalities to protect the properties acquired by Defendants in

4 foreclosure, including, at a minimum, increased police protection. Defendants

5 were specially benefitted as the new owners of these properties. Defendants have

6 failed to remit those wrongfully obtained benefits or reimburse the City for its costs

7 improperly caused by Defendants, and retention of the benefits by Defendants

8 would be unjust without payment.

9

108. In addition, to its detriment the City has paid for the Defendants’

10 externalities or Defendants’ costs of harm caused by its mortgage lending

11
discrimination, in circumstances where Defendants are and have been aware of this
12
obvious benefit and retention of such benefit would be unjust.
13

14

DEMAND FOR JURY TRIAL

15

109. Plaintiff hereby demands a trial by jury in this action on all issues so

16 triable.
17

18

PRAYER FOR RELIEF

19

WHEREFORE, the City respectfully prays that the Court grant it the

20 following relief:

21

A. Enter a declaratory judgment that the foregoing acts, policies, and

22 practices of Wells Fargo violate the FHA 42 U.S.C. §§ 3604 and 3605 and

23 California Government Code § 12900, et seq.;

24

B. Enter a permanent injunction enjoining Wells Fargo and its directors,

25 officers, agents, and employees from continuing the discriminatory conduct

26 described herein, and directing Wells Fargo and its directors, officers, agents, and
27
employees to take all affirmative steps necessary to remedy the effects of the
28

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Case3:15-cv-04321-SK Document1 Filed09/21/15 Page37 of 38

1 discriminatory conduct described herein, and to prevent additional instances of

2 such conduct or similar conduct from occurring in the future, pursuant to 42 U.S.C.

3 § 3613(c)(1) and California Government Code § 12989.2;

4

C. Award compensatory damages to the City in an amount to be

5 determined by the jury that would fully compensate the City of Oakland for its

6 injuries caused by the conduct of Wells Fargo alleged herein, pursuant to 42 U.S.C.

7 § 3613(c)(1) and California Government Code § 12989.2;

8

D. Award punitive damages to the City in an amount to be determined

9 by the jury that would punish Wells Fargo for the willful, wanton, and reckless

10
conduct alleged herein, and that would effectively deter similar conduct in the

11
future, pursuant to 42 U.S.C. § 3613(c)(1) and California Government Code
12
§ 12989.2;
13
E. Award the City its reasonable attorneys’ fees and costs, pursuant to
14
42 U.S.C. § 3613(c)(2) and California Government Code § 12989.2;
15
F. Require payment of pre-judgment interest on monetary damages; and
16

17

G. Order such other relief as this Court deems just and equitable.

18
19 Date: September 21, 2015

OAKLAND CITY ATTORNEY

20

By: (-) Barbara J. Parker

21

Barbara J. Parker

22

23
Dated: September 21, 2015
24

PERETZ & ASSOCIATES

25

26

27

// //

28 //

By: (-) Yosef Peretz Yosef Peretz

COMPLAINT AND JURY DEMAND
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1 Dated: September 21, 2015 TRIAL & APPELLATE RESOURCES, P.C.

2
By: (-) Joel Liberson

3

Joel Liberson

4
Dated: September 21, 2015
5

CENTER FOR CONSTITUTIONAL LITIGATION

6

By: (-) Robert S. Peck

7

Robert S. Peck

(pro hac vice pending)

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28
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 Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 1 of 51

1 Barbara J. Parker (SBN 69722) OAKLAND CITY ATTORNEY
2 One Frank H. Ogawa Plaza, 6th Floor Oakland, CA 94612
3 Telephone: (510) 238-6512

4 Yosef Peretz (SBN 209288) PERETZ & ASSOCIATES
5 22 Battery Street, Suite 200 San Francisco, California 94111
6 Telephone: (415) 732-3777 Facsimile: (415) 732-3791
7
Joel Liberson (SBN 164857) 8 TRIAL & APPELLATE RESOURCES, P.C.
3655 Torrance Blvd., Third Floor 9 Torrance, CA 90503 10 Telephone: (917) 848-3218

11

Robert S. Peck (pro hac vice) CENTER FOR CONSTITUTIONAL LITIGATION, PC

12

50 Riverside Boulevard, Suite 12A New York, NY 10069

13 Telephone: (202) 944-2874

14 Attorneys for Plaintiff CITY OF OAKLAND

15

UNITED STATES DISTRICT COURT

16

NORTHERN DISTRICT OF CALIFORNIA

17

18

CITY OF OAKLAND, a municipal Corporation,

Civil Case No. 3:15-cv-04321-EMC

19

FIRST AMENDED COMPLAINT AND

Plaintiff,

DEMAND FOR JURY TRIAL

20

21 vs.

22 WELLS FARGO & CO., and WELLS FARGO BANK, N.A.,
23

24

Defendants.

25

26

27

28
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1 I. NATURE OF THE ACTION

2

1. Plaintiff City of Oakland (“Oakland” or the “City”) brings this action against

3 Wells Fargo & Co., Inc. and Wells Fargo, N.A. (hereafter “Wells” or the “Bank”) for the

4 economic and noneconomic harm suffered by the City as a result of the Bank’s longstanding,
5 unbroken policy and practice of steering minority borrowers in Oakland into mortgage loans offered on “discriminatory” terms (defined herein as terms that have higher costs and risk
6 features than more favorable and less expensive loans for which the borrower was eligible and
7 which are regularly issued to similarly situated white borrowers) and for its policy of refusing to
8 extend credit to minority borrowers who desired to refinance the more expensive loans they 9 previously received when such credit was extended to white borrowers.

10

2. The conduct the City seeks to remedy is embedded in a larger context, on the

11 one hand, of a history of redlining and reverse redlining in Oakland, and also, on the other, of

12 the specific Wells Fargo culture and total breakdown of appropriate internal controls that should

13 prevent and should have prevented not only the discriminatory lending here, but the improper
14 account creation practices now under scrutiny by numerous courts and agencies. 3. The City brings this suit pursuant to the Fair Housing Act of 1968 (“FHA”), as
15 amended, 42 U.S.C. §§ 3601, et seq., and the California Fair Employment and Housing Act
16 (“FEHA”), California Government Code (“Gov’t Code”) §12900, et seq., to seek redress for
17 injuries directly caused by Wells Fargo’s1 pattern or practice of illegal and discriminatory
18 mortgage lending. Specifically, Oakland seeks injunctive relief and damages for the injuries

19 directly caused by (1) the origination of mortgage loans on discriminatory terms in minority

20 neighborhoods and to minority borrowers that are the result of Wells Fargo’s unlawful and

21 discriminatory lending practices, and (2) the Bank’s subsequent refusal to extend credit to
22 minority borrowers seeking to refinance previously issued unnecessarily expensive loans. These
illegal practices suppressed property values in minority and low income communities in 23
Oakland, reduced the City’s property tax revenues, and increased the cost of providing 24

25 1 Defendants collectively are referred to as “Wells Fargo,” including: Wells Fargo & Co., and Wells Fargo Bank, N.A. Plaintiff alleges that Defendants are also liable for residential home
26 loans and lending operations acquired from, and/or sold by or through: Wells Fargo Financial,
27 Wells Fargo Funding, Inc., Wachovia Mortgage, FSB, Wachovia Bank, N.A., Wachovia Mortgage Co., World Savings Bank, FSB, American Mortgage Network, Inc., and Home
28 Services Lending, LLC (hereinafter referred to as the “Acquired Entities”).
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1 municipal services such as police, fire fighting and code enforcement, required the City to divert
2 resources intended for other programs, as well as neutralizing and increasing costs of pursuing
3 fair housing policies and programs and providing housing counseling and other housing-related services utilizing resources of the City of Oakland.
4 4. The unlawful conduct alleged herein consists of both intentional discrimination
5 and disparate impact discrimination. Wells Fargo’s policies and practices identified herein were
6 not justified by business necessity or legitimate business interests. There were less costly 7 alternatives available to Wells Fargo that would have achieved the same business goals as were
8 achieved by these policies and practices but would not have yielded the same discriminatory

9 results. For example, Wells Fargo could have charged white borrowers with the same risk

10 profiles as minority borrowers the same rates and not violated the law. With respect to disparate

11 treatment, Wells Fargo knowingly repeated and thus ratified the same discriminatory policies
12 year after year, and went further in targeting minority customers. 5. While Wells has adapted to changing market conditions necessitated by enhanced
13 public scrutiny of its mortgage lending practices, one issue has remained constant since at least
14 2004: Wells has systematically engaged in a continuous and unbroken discriminatory pattern
15 and practice of steering minority borrowers in Oakland into higher cost or more onerous
16 mortgage loans with discriminatory terms when more favorable and less expensive loans were

17 being offered to similarly situated non-minority borrowers. This unlawful pattern and practice

18 continues through the present and has not terminated. Therefore, the operative statute of

19 limitations governing actions brought pursuant to the FHA and FEHA has not commenced to

20 run.

6. Major banks, including Wells Fargo, have a long history of engaging in 21
redlining2 throughout Oakland. These lending practices resulted in entire neighborhoods and 22
racial and ethnic groups being denied access to credit and homeownership, and contributing to
23 the high rates of poverty and lack of wealth accumulation in these communities.

24

7. In the late 1990s, Wells Fargo adapted to changing market conditions and began

25 to flood historically underserved minority communities with mortgage loans that consisted of a

26 variety of high cost and abusive mortgage loan products as compared to the mortgage loans

27

28 2 Redlining is the practice of denying credit to particular neighborhoods based on race.
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1 issued to similarly situated white borrowers. This practice of issuing exploitative loan products
2 in minority communities has come to be known as “reverse redlining.” Both redlining and
3 reverse redlining have been deemed to violate the FHA by federal courts throughout the country. As former Federal Reserve Chairman Ben Bernanke acknowledged, these twin evils of
4 mortgage discrimination “continue to have particular significance to mortgage markets.”3
5 8. Wells Fargo’s discriminatory lending practices knowingly place vulnerable,
6 underserved borrowers in loans they cannot afford. The practices maximize Wells Fargo’s profits 7 without regard to the borrower’s best interests, the borrower’s ability to repay, or the financial
8 health of underserved minority neighborhoods, or the costs and injuries to the City of Oakland.

9 Moreover, Wells Fargo has averted any significant risk to itself by selling the vast majority of

10 mortgage loans it originates or purchases on the secondary market.

11

9. Wells Fargo’s discriminatory misconduct has also directly caused an excessive

12 and disproportionately high number of foreclosures, particularly in minority and low-income
neighborhoods in Oakland. These foreclosures often occur when a minority borrower who 13
previously received a discriminatory loan sought to refinance the loan, only to discover that 14
Wells Fargo refused to extend credit at all, or only would refinance on less favorable terms
15 compared to what the Bank would offer to refinance similar loans issued to white borrowers.

16 The inevitable and direct consequence of the combination of issuing unnecessarily expensive

17 or inappropriate loans, and then refusing to refinance the loans, was foreclosure.

18

10. These discriminatory patterns and practices have directly caused an excessive

19 and disproportionately high number of foreclosures on the loans it has made to minorities in the
20 City of Oakland. In particular, as a result of these patterns and practices, foreclosures on loans originated by Wells Fargo are concentrated in neighborhoods with higher proportions of
21 minorities.
22 11. Wells Fargo would have had comparable foreclosure rates in minority and white
23 neighborhoods if it was properly and uniformly applying responsible underwriting practices.
24 Wells Fargo possesses sophisticated underwriting technology, analytic tools, data, and access
25

26 3 Remarks by Federal Reserve Chairman Ben Bernanke at the Operation HOPE Global Financial 27 Dignity Summit, Atlanta, Georgia, Challenges in Housing and Mortgage Markets, at 10 (Nov.
15, 2012), available at www.federalreserve.gov/newsevents/speech/bernanke 20121115a.htm. 28
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1 to reports that allow it to predict with precision the likelihood that it had improperly issued a

2 more expensive loan, as well as the likelihood the loan would result in delinquency, default, or
3 foreclosure.4 And if that was not sufficient, the Bank had branch offices located in Oakland and
knew, or should have known, of the adverse consequences of its lending misconduct to minority 4
borrowers and the City regardless of whether the Bank subsequently sold the loan or servicing 5
rights to a third party. Consequently, the Bank’s improper issuance of more expensive loans to 6 minority borrowers and the resulting injuries suffered by the City were not the result of random
7 events.

8

12. The data on Wells Fargo loans in the City of Oakland reveals a widespread

9 pattern or practice of discrimination. For example, a regression analysis that controls for credit

10 history and other factors demonstrates that African-American Wells Fargo borrowers were

11 2.403 times more likely to receive a high-cost or high-risk loan5 than a white borrower. Latino

12 borrowers were 2.520 times more likely to receive a high-cost or high-risk loan than comparable
white borrowers. The regression analysis confirms that African-Americans with FICO scores 13
over 660 are 2.261 times more likely to receive a high-cost or high-risk loan from Wells Fargo 14
as a white borrower, and a Latino borrower 2.366 times more likely.

15

13. This is not the first challenge to Wells Fargo’s discriminatory lending practices.

16 To date, successful discriminatory lending actions alleging conduct similar to that alleged

17 herein have been brought against Wells Fargo by the City of Baltimore, the City of Memphis,

18 the Department of Justice, and the Federal Reserve Bank. The Federal Reserve levied an $85

19 million penalty against Wells Fargo, representing the largest penalty it has assessed in a 20 consumer protection enforcement action.

21

22

23

4 The scope of Wells Fargo’s risk analysis policies and practices is set forth in detail throughout numerous Annual Reports, including, for example, the Bank’s 2015 Annual Report, available at

24 https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-reports/2015annual-report.pdf and the Bank’s 2016 Annual Report, available at

25 https://www.wellsfargo.com/assets/pdf/about/investor-relations/annual-reports/2016-annual-

26 report.pdf. 5 As used here, “high-cost or high-risk loans” are loans with one or more of the following
27 characteristics or types: loans that are rate-spread reportable under the Home Mortgage

Disclosure Act, subprime loans, negative amortization loans, “No-Doc” loans, balloon 28 payments, and/or “interest only” or teaser loans that also carry a prepayment penalty.

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1

14. The Department of Justice’s Civil Rights Division determined that mortgage

2 brokers who generated loan applications through Wells Fargo’s wholesale channel, and were

3 granted broad pricing discretion by Wells Fargo, had charged higher fees and rates to tens of

thousands of minority borrowers across the country than they had to white borrowers who posed 4
the same credit risk—selling what Wells Fargo employees in Baltimore referred to as “ghetto 5
loans.”

6

15. According to former Federal Reserve Chairman Ben Bernanke, “foreclosures can

7 inflict economic damage beyond the personal suffering and dislocation that accompany them.

8 Foreclosed properties that sit vacant for months (or years) often deteriorate from neglect,

9 adversely affecting not only the value of the individual property but the values of nearby homes

10 as well. Concentrations of foreclosures have been shown to do serious damage to neighborhoods
11 and communities, reducing tax bases and leading to increased vandalism and crime. Thus, the 12 overall effect of the foreclosure wave, especially when concentrated in lower-income and
minority areas, is broader than its effects on individual homeowners.”6 13
16. The discriminatory lending patterns and practices at issue herein have resulted 14
in what many leading commentators describe as the “greatest loss of wealth for people of color 15 in modern US history.” It is well established that poverty and unemployment rates for minorities
16 exceed those of whites, and therefore, home equity represents a disproportionately high
17 percentage of the overall wealth for minorities.7 As Chairman Bernanke explained, as a result
18 of the housing crisis, “most or all of the hard-won gains in homeownership made by low-income
19 and minority communities in the past 15 years or so have been reversed.”8 The resulting impact 20 of these practices represents “nothing short of the preeminent civil rights issue of our time,
erasing, as it has, a generation of hard fought wealth accumulation among African-Americans.”9 21

22

23 6 Remarks by Federal Reserve Chairman Ben Bernanke at the Operation HOPE Global Financial 24 Dignity Summit, Atlanta, Georgia at pg. 4 (November 15, 2012) available at
www.federalreserve.gov/newsevents/speech/bernanke20121115a.htm. 25 7 Robert Schwemm & Jeffrey Taren, Discretionary Pricing, Mortgage Discrimination, and the 26 Fair Housing Act, 45 Harv. C.R.-C.L. L. Rev. 375, 382 (2010).
8 Bernanke, supra note 3. 27 9 Charles Nier III & Maureen St. Cyr, A Racial Financial Crisis: Rethinking the Theory of
Reverse Redlining to Combat Predatory Lending Under the Fair Housing Act, 83 Temple L. 28 Rev. 941, 942 (2011).
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1

17. In addition to directly causing injuries to minority borrowers who received these

2 discriminatory loans, Wells Fargo’s discriminatory pattern and practices at issue here have

3 caused numerous injuries directly to the City of Oakland, including, without limitation: (a)
suppressed property tax revenues resulting from declining property values of both the 4
foreclosed properties and those properties in close proximity to the foreclosed properties; (b) 5
the cost of increased municipal services for these properties, many of which are incurred even 6 before foreclosure; and (c) wasteful or neutralized spending and allocation of resources by the
7 City to achieve fair housing, while undermining the City’s efforts to promote fair non-

8 discriminatory housing opportunities to its citizens, as well as the benefits of living in an

9 integrated community.

10

18. The widespread economic and non-economic injuries throughout the City

11 directly caused by the Bank’s discriminatory mortgage lending policies and practices were

12 known, recklessly ignored, or knowable to the Bank through a variety of analytical tools and published reports available to the Bank had it not turned a blind eye. The Bank’s wrongful
13 conduct herein alleged directly caused injury to the City because Defendants issued
14 discriminatory loans that directly caused foreclosures. As detailed below, these foreclosures
15 damaged the City’s stated mission of providing fair housing to its residents, in the form of

16 decreased property tax revenue, and in the form of increased expenditures for municipal

17 services. Thus, the City is entitled to recover the injuries that are directly attributable to the

18 Bank’s conduct.

19

19. This suit seeks to recoup the damages sustained by the City as a result of Wells

20 Fargo’s discriminatory pattern and practices in mortgage lending and enjoin the continuation of
these discriminatory pattern and practices. Wells Fargo is, unfortunately, a recidivist corporate 21
actor, and, just as it is being held accountable for its blatant and shocking unauthorized account 22
creation scheme that is currently and recently in the news, so too should it be accountable for
23 this functionally similar approach to profits over compliance, in this case, at the expense of

24 minorities, and at great cost to the City.

25

26

27

28
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1 II. PARTIES

2

20. Plaintiff City of Oakland is a municipal corporation organized pursuant to Article

3 XI of the California Constitution and provides the usual variety of services to its residents and

4 visitors as do other municipalities, including police and fire services.

5

21. The City also has a long history of promoting and seeking to maintain a diverse,

stable, and integrated community. These objectives are achieved through the active involvement 6
of the City’s elected officials and numerous City Agencies and Departments. For example, the 7
Oakland Housing and Community Development Division of the City’s Community and

8 Economic Development Agency promotes access to decent affordable housing in healthy,

9 sustainable neighborhoods with full access to life-enhancing services and provides funding to at

10 least five different non-profit organizations that offer fair housing services to landlords, tenants,

11 and families with children. It works with participating lenders to assist low and moderate-

12 income, first-time homebuyers purchase homes in Oakland through its Mortgage Assistance

13 Program (“MAP”), its “Shared Appreciation Mortgage” program, and its CalHome Program to

14 purchase homes in Oakland.

22. Wells Fargo & Company is a nationwide, diversified, financial services company. 15
Upon information and belief, its corporate headquarters are located in San Francisco, California.

16 It is the parent company of Wells Fargo Bank, N.A.

17

23. Wells Fargo Bank, N.A. is organized as a national banking association under the

18 laws of the United States. Upon information and belief, its corporate headquarters are located in

19 South Dakota. It maintains multiple offices in the State of California and the City of Oakland for

20 the purposes of soliciting applications for and making residential mortgage loans and engaging

21 in other business activities.

22

24. The Defendants in this action are, or were at all relevant times, subject to

California state laws governing fair lending, including FEHA, which prohibits financial 23
institutions from discriminating on the basis of race and national origin in providing financial 24
assistance for the purchase of housing, California Government Code § 12955(e); and makes

25 discriminating on the basis of race and national origin in making available, or in the terms and

26 conditions of, residential real estate-related transactions a violation of California Government

27 Code § 12955(i).

28

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1

25. The Defendants in this action are or were businesses that provide financial

2 assistance for the purchase of housing and engage in residential real estate-related transactions

3 in the City of Oakland within the meaning of FEHA.

26. Defendants acquired residential home loans sold by or through the Acquired 4
Entities. Through these loan acquisition agreements and arrangements, Defendants acquired the 5
liabilities associated with these loans, including, without limitation, liabilities for violations of

6 the FHA, from the Acquired Entities.

7

27. Upon information and belief, the City alleges that each of the Defendants was and

8 is an agent of the other Defendants. Each Defendant, in acting or omitting to act as alleged in

9 this Complaint, was acting in the course and scope of its actual or apparent authority pursuant to

10 such agencies, and/or the alleged acts or omissions of each Defendant as agent were subsequently
11 ratified and adopted by each agent as principal. Each Defendant, in acting or omitting to act as 12 alleged in this Complaint, was acting through its agents, and is liable on the basis of the acts and
omissions of its agents. 13

14 III. JURISDICTION

15

28. This Court has original jurisdiction over the City’s claims because it is based on

16 a federal question pursuant to 28 U.S.C. § 1331, that arises under a federal statute, the FHA.

17 This Court has supplemental jurisdiction over the Gov’t Code claims and other California state 18 claims brought herein pursuant to 28 U.S.C. §1367.

19 IV. VENUE

20

29. Venue is proper in the United States District Court, Northern District of

21 California, pursuant to the FHA, because Defendants conduct business in this district, because

22 the City is located in this district, and a substantial part of the events and omissions giving rise

23 to the City’s claims occurred in this district.

24 V. WELLS FARGO ENGAGED IN DISCRIMINATORY LENDING PRACTICES
25 30. Wells Fargo engaged in both intentional discriminatory business practices and
26 neutral business practices that created “artificial, arbitrary and unnecessary” barriers to fair
27 housing opportunities for minority home purchasers and owners. Confidential Witnesses
28
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1 (“CWs”) confirm the existence of these practices. The CWs are former Wells Fargo employees

2 responsible for making and/or underwriting loans on behalf of Wells Fargo in Oakland, and

3 each had clients in Oakland. CW1 worked for Wells Fargo from 2006 to 2011 as a bank teller
in the Emeryville and Fruitvale Avenue branches. CW2 worked for Wells Fargo from 4
approximately March 2012 to August 2014 as a loan processor at the Bank’s processing center 5
in San Leandro as well as in the REO Department. CW3 worked for Wells Fargo from
6 approximately February 2011 to February 2012 as a mortgage consultant in Oakland.

7

8

A. Wells Fargo Intentionally Discriminated Against Minorities in Violation of the Fair Housing Act and the FEHA

9

31. Wells Fargo’s employees intentionally steered minority borrowers into high cost

10 loans because of their race.

11

32. Wells Fargo’s loan officers and mortgage consultants used race as a factor in

12 determining which loan products to offer borrowers, what interest rates to charge, and whether

13 to use certain devices and options such as “lender credits.”

14

33. CW 2 explained that the Bank originated a higher rate of adjustable rate loans to

minority borrowers than white borrowers, and very few minority borrowers received 15
conventional 30-year fixed rate mortgages, which were approved mostly for non-minority 16
borrowers. The witness very rarely saw conventional loans being issued to borrowers with a 17 Hispanic name. The witness stated that minority borrowers complained that they did not

18 understand the terms of their loans and that loan officers failed to fully explain the adverse

19 consequences of the adjustable rate loans.

20

34. CW 3 stated that minority borrowers regularly complained that they were led to

21 believe they had obtained a fixed rate loan only to subsequently discover that it was in reality
22 an adjustable rate loan. Minority borrowers who were often not as sophisticated as white
23 borrowers were particularly susceptible to not understanding their loan terms. 35. CW 3 stated that Wells Fargo loan officers failed to adequately explain to
24 minority borrowers’ pertinent details regarding adjustable rate and interest-only loans, and that
25 the Bank also failed to provide brochures at branch locations which fully explained these loans.
26 Rather, disclosures were sent in the mail after a customer applied for the loan, and Bank
27 employees typically did not explain the details once the customer received a brochure.

28 Additionally, the Bank required that loan officers themselves pay if they wanted to provide

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1 product brochures written in Spanish. The witness explained that Wells Fargo merely trained

2 its loan officers to ensure that borrowers received disclosures, but were not required to discuss

3 the disclosures with a borrower or ensure that the borrower understood them.

36. CW 1 said that minority borrowers did not always appear to understand the 4
Bank’s products, including mortgage loans. In other words, Wells Fargo specifically took 5
advantage of minority borrowers to maximize profits.

6

37. In selling minority borrowers more expensive loans, Wells Fargo loan officers

7 and mortgage consultants associated and pushed various higher-cost loan products and options

8 with minority borrowers. For example, upon information and belief, both FHA and

9 conventional loans issued to minority borrowers were more expensive than loans issued to non-

10 minority borrowers.

11

38. CW 1 said that the Bank’s computer and data system profiled customers and

12 targeted them with a variety of products, including mortgage loans. These products often appeared as “pop-ups” on the tellers’ screen and the tellers were required to offer these products.
13 The number of “pop-up” offers the tellers clicked when talking with a customer was a factor
14 the bank used to evaluate their performance. The Bank provided tellers with incentive pay for
15 referring customers who signed up for these offers, which included mortgage loans.

16

B. Wells Fargo’s facially neutral business practices and policies created an

17

“artificial, arbitrary, and unnecessary” barrier to fair housing

opportunities for minority home purchasers and owners 18

19

39. Wells Fargo engaged in numerous facially neutral lending practices that resulted

in the disparate impact reflected in the statistical analyses set forth in this complaint during the 20
time periods at issue herein. These practices are united because they represent manifestations 21
of the same continuous and unbroken practice of engaging in facially neutral business policies

22 and practices that created an “artificial, arbitrary, and unnecessary” barrier to fair housing

23 opportunities for minority home purchasers and owners. A partial list of these practices

24 includes, but is not limited to, the following:

25

a. providing loan officers discretion to place borrowers in more

26

expensive and riskier loans than the borrowers qualified for;

27

b. providing loan officers discretion to sell lender credits without

28

disclosing the true effect of the pricing of those credits;

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1

c. marketing certain more expensive or riskier loan products to

2

residents in predominantly minority neighborhoods;

3

d. utilizing a compensation scheme that incentivized loan officers

to sell more expensive and riskier loans than borrowers 4
qualified for; 5
e. requiring substantial prepayment penalties that prevent

6

borrowers whose credit has improved from refinancing their

7

discriminatory loan to a prime loan;

8

f. charging excessive points and fees that are not associated with

9

any increased benefits for the borrower; and

10

g. providing loan officers with information about loan pricing that

11

is higher than the lowest price Wells Fargo could offer the

12

borrower.

40. According to Mary Kay Woodward, a Wells Fargo Senior Vice-President and 13
Lending Manager, Defendants’ policies relating to risk management, credit, and loan
14 underwriting are centralized policies formulated by Wells Fargo to be deployed nationwide, and

15 these policies are not unique to any specific location. Upon information and belief, these

16 centralized policies extend to formulating and structuring loans, and led to discriminatory

17 lending practices in violation of the FHA and the FEHA.

18

41. The CW statements make clear that these discriminatory lending practices

19 contributed to the adverse borrowing terms experienced by minority borrowers. The City

20 hereby incorporates by reference all allegations contained in the preceding paragraphs
pertaining to statements made by CW’s. 21
42. The CW statements provided numerous ways that loan officers were afforded 22
discretion to place a borrower in a more expensive loan than the borrower qualified for and how
23 that discretion resulted in discriminatory effects.

24

43. CW 1 said that sales quotas for the Fruitvale branch, which had a particularly

25 high number of minority customers, were set by a higher-level Wells Fargo Office. The

26 Fruitvale branch was very aggressive selling products to minority customers, including

27

28
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1 mortgage loans. The witness explained that she was trained to sell the benefit of a product and

2 not discuss the potential risks or downside of the product.

3

44. Similarly, loan officers used their discretion to sell more expensive FHA loans

to minority borrowers who otherwise qualified for conventional loans. 4
45. Upon information and belief, Wells Fargo entered a borrower’s financial 5
information into the Bank’s loan pricing software system. The program calculated a price for

6 the loan, but also provided a range of prices for which the loan officer had discretion to charge

7 the borrower. This process resulted in the issuance of more expensive loans to minority

8 borrowers.

9

46. Upon information and belief, Wells Fargo targeted minority borrowers for loans

10 with lender credits and minority borrowers were more receptive to these types of loans than
11 white borrowers. With a lender credit loan, the bank pays a borrower’s closing costs in 12 exchange for receiving a loan with a higher interest rate. Over time, the borrower repays the
credits by making higher monthly payments. At a certain point in time referred to as the “pay 13
back” period, the borrower is no longer repaying the credits but instead is making payments on 14
a higher interest rate loan that generates additional revenue for Wells Fargo with no additional 15 benefits for the borrower. For example, FHA loans often required closing costs that exceeded
16 the relatively low down payment required for this type of loan. Borrowers unable to pay the
17 closing costs therefore needed to obtain lender credits, and it would require a significant

18 increase in the interest rate to receive enough lender credits to cover $4,000 to $5,000 in closing

19 costs.

20

47. Together, Wells Fargo’s practices have symbiotic effects. Loan officers are

afforded discretion to sell higher-priced loan products. Loan officers frequently use race and 21

educational background as proxies for their ability to sell more expensive loan products. These 22
more expensive loan products often have closing costs, which exceed the down payment,

23 leading to the sale of lender credits to the borrowers. And as a result, borrowers residing in

24 minority neighborhoods with lower home values and with less ability to pay closing costs

25 received more loans with higher interest rates than white borrowers who did not require lender

26

27

28
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1 credits to pay closing costs. The high cost effect of the lender credits throughout the life of the

2 loan was not explained or disclosed.

3

48. Furthermore, Wells Fargo uses financial incentives to encourage loan officers to

use their discretion to sell more expensive and riskier loans. Indeed, loan officers were 4
financially incentivized to sell more expensive loans. Upon information and belief, loan 5
officers were provided with financial incentives by Wells Fargo if they issued loans to

6 borrowers at higher rates than the borrowers were qualified to receive. Not coincidentally, upon

7 information and belief, loan officers received higher commissions from the sale of more

8 expensive loans to minority borrowers, and the effect of these financial incentives was to

9 encourage the issuance of discriminatory loans to minority borrowers.

10

49. Upon information and belief, the practices and problems described by these

11 confidential witnesses are consistent with those perpetrated by Wells Fargo throughout the

12 country and have continued into the present 50. In addition to these policies and practices, Wells Fargo’s omissions and failures
13 to act and institute adequate policies to combat against the discriminatory effects of its conduct
14 make Wells Fargo further culpable for the discriminatory effects of its conduct. These
15 omissions and failures to act include, without limitation:

16

a. knowing about lending practices that either created high risk

17

and higher cost loans to minorities compared to comparably

credit situated white borrowers or failing to adequately monitor

18

the Bank’s practices regarding mortgage loans, including but

not limited to originations, marketing, sales, and risk

19

management;

20

b. failing to underwrite loans based on traditional underwriting

21

criteria such as debt-to-income ratio, loan-to-value ratio, FICO

score, and work history;

22

c. failing to prudently underwrite hybrid adjustable-rate

23

mortgages (“ARMs”), such as 2/28s and 3/27s;10

24

d. failing to prudently underwrite refinance loans, where

25

borrowers substitute unaffordable mortgage loans for existing

26 10 In a 2/28 ARM, the “2” represents the number of years the mortgage will be fixed over the 27 term of the loan, while the “28” represents the number of years the interest rate paid on the
mortgage will be variable. Similarly, in a 3/27 ARM, the interest rate is fixed for three years and 28 variable for the remaining 27-year amortization.
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1

mortgages that they are well-suited for and that allow them to

build equity; 2

3

e. failing to monitor and implement necessary procedures within Wells Fargo’s Internal Audit, Corporate Risk, Human

4

Resources, Law Department, and Board of Directors throughout

the Community Banking segment, which includes Wells

5

Fargo’s retail mortgage banking business responsible for the

unlawful activities set forth herein, to ensure compliance with

6

federal fair lending laws;

7 f. failing to abide by the terms of Wells Fargo’s Vision & Values,

8

which purportedly guides Defendants’ business practices and

relationships with customers; and 9

10

g. failing to ensure that Wells Fargo’s decentralized organizational structure was capable of properly monitoring

11

mortgage lending activities within Community Banking.

12

51. As discussed herein, the actual and foreseeable effect of these neutral business

13 practices and omissions and failures to act has created a statistically significant adverse effect

14 on minority borrowers.

52. Wells Fargo’s discriminatory lending practices stem from pervasive and long15
running problems, including the company’s corporate culture, which emphasized sales and 16
revenues first and foremost, compensation structure, and failure of internal controls and other 17 pertinent compliance procedures. Wells Fargo itself has acknowledged these problems.

18

53. For example, when consenting to the Federal Reserve’s $85 million penalty in

19 2011, Wells Fargo acknowledged that its flawed culture, employment practices, and internal

20 controls contributed to widespread illegal lending practices. Specifically, Wells Fargo

21 acknowledged that its employees “were expected to sell (a) a minimum dollar amount of loans

22 to avoid performance improvement plans that could result in loss of their positions . . . and (b)
23 a minimum dollar amount of loans to receive incentive compensation payments” and that many employees, “in order to meet sales performance standards and receive incentive compensation,
24 altered or falsified income documents and inflated prospective borrowers’ incomes to qualify
25 those borrowers for loans that they would not otherwise have been qualified to receive.” As
26

27

28
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1 Wells Fargo admitted, this misconduct occurred because Wells Fargo’s “internal controls were

2 not adequate.”

3

54. The very next year, in 2012, Wells Fargo agreed to pay $175 million to resolve

claims by the United States Department of Justice that between 2004 and 2009, Wells Fargo 4
Bank, N.A. engaged in a pattern or practice of discrimination on the basis of race and national 5
origin in residential mortgage lending in violation of the Equal Credit Opportunity Act and the

6 Fair Housing Act.

7

55. Last year, in 2016, Wells Fargo agreed to pay $1.2 billion to settle additional

8 civil mortgage fraud claims brought by the Department of Justice. In the settlement, Wells

9 Fargo admitted, acknowledged and accepted responsibility for, among other things, certifying

10 to the Department of Housing and Urban Development, during the period from May 2001

11 through December 2008, that certain residential home mortgage loans were eligible for

12 government insurance when in fact they were not, resulting in the Government having to pay

insurance claims when some of those loans defaulted. The $1.2 billion settlement with Wells 13
Fargo was the largest recovery for loan origination violations in the Federal Housing
14 Authority’s history.

15

56. Wells Fargo’s Community Banking operating segment, which includes the retail

16 mortgage banking business responsible for the unlawful lending activities at issue herein, is by

17 far the most profitable of Defendants’ three operating business segments. For example, in 2015,

18 Community Banking reported net income of $13.5 billion, representing 59% percent of
19 Defendants’ total 2015 net income,11 and in 2016 Community Banking reported net income of 20 $12.44 billion, representing 57% of Defendants’ total 2016 net income.12 Prior years yielded
similar results.13 Defendants’ unlawful mortgage lending conduct at issue herein was an 21

22
23 11 https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-reports /2015-annual-report.pdf at 30, 48.
24 12 https://www.wellsfargo.com/assets/pdf/about/investor-relations/annual-reports/2016-annual25 report.pdf at 40, 51.
13 https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-reports 26 /2014-annual-report.pdf at 34, 46;
https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-reports/201327 annual-report.pdf at 34, 44; https://www08.wellsfargomedia.com/assets/pdf/about/investor-
relations/annual-reports/2012-annual-report.pdf at 34, 44; 28
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1 important component of Community Banking’s financial success and Wells Fargo’s bottom line

2 profitability.

3

57. At all times pertinent to this action, Wells Fargo was guided by its widely

criticized philosophy of cross-selling eight products to each customer, commonly referred to as 4

the “Gr-Eight.” Within Community Banking, “the cross-sell metric represents the relationship 5
of all retail products used by customers in retail banking households.”14 Mortgage loans

6 represent one of these retail products. This practice has resulted in the commencement of

7 actions by numerous government entities, including hearings before committees of both the

8 United States Senate and House of Representatives in the fall of 2016.

9

58. Systematic problems with Wells Fargo’s culture, employment practices, and

10 internal controls persist to this day. As Wells Fargo’s independent directors acknowledged in
11 their Sales Practices Investigation Report dated April 10, 2017 (“Board Report”)15 after
12 reviewing the root causes of pervasive fraud by Wells Fargo’s Community Banking segment, employees frequently engaged in wrongdoing “to achieve sales goals and incentive
13 compensation targets.” According to the directors, many Wells Fargo employees have stated
14 “that incentive compensation plans overly emphasized sales performance, and many
15 complained to Community Banking leadership that incentive plan goals were too high, too
16 focused on sales and led to bad behavior.” The directors acknowledged: “The root cause of

17 sales practice failures was the distortion of Community Banking’s sales culture and

18 performance management system, which, when combined with aggressive sales management,

19 created pressure on employees to sell unwanted or unneeded products to customers and, in some 20 cases, to open unauthorized accounts. Wells Fargo’s decentralized corporate structure gave too

21

22

23

24

25 https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/annual-reports/2011-
26 annual-report.pdf at 30, 40.
27 14 See, e.g., Wells Fargo & Co. Annual Report 2015, supra note 11, at 46.
15 https://www08.wellsfargomedia.com/assets/pdf/about/investor-relations/presentations/ 28 2017/board-report.pdf.
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1 much autonomy to Community Banking’s senior leadership, who were unwilling to change the

2 sales model or even recognize it as the cause of the problem.”

3

59. In addition to the decentralized operational structure and fragmentation of

control functions, the Board Report provided specific details concerning the multiplicity of 4

failures that occurred within Community Banking, including, but not limited to, the following:

5

• the Audit Department had access to information regarding sales

6

practices but did not view its role as encompassing more broadly

7

the root cause of the improper sales conduct;

8

• even as late as 2015 when sales practices were labeled high risk,

there was a general perception within the bank's control

9

functions that the sales practice problems were of relatively

modest significance; 10

11

• the Board failed to receive information concerning the

magnitude of the problems in a timely manner and the board's

12

actions failed in several respects — (1) the bank should have

centralized the risk functions at an earlier date; (2) the Risk

13

Committee and Board should have insisted on a more detailed

14

and concrete action plan to track sales practice abuses, which was not implemented until this year; and (3) the Board should

15

have been more forceful in pushing its Chief Executive Officer,

John Stumpf, to change leadership within Community Banking;

16

17

• control functions outside of Community Banking, including the Board, could not adequately assess the sales practice issues

18

because Carrie Tolstedt (who has since been fired) reinforced a

culture of tight control over information concerning Community

19

Banking;

20

• Claudia Russ Anderson led the first line of defense for risk at

21

Community Banking and her performance fell far short of what

was expected/required from a senior risk officer. She failed to

22

adequately assess and advocate for changes in the business

practices that resulted in the sales integrity violations; she ran

23

interference for Tolstedt and filtered communications with other

24

Wells control officers; she was too slow to address sales practice

issues;

25

• there was a growing conflict over time between Wells Fargo’s

26

Vision and Values and Community Banking’s emphasis on sales

27

goals;

28
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1

• even when challenged by their regional leaders, the senior

leadership of Community Banking failed to appreciate or accept

2

that their sales goals were too high and becoming increasingly

3

untenable;

4

• the Community Banking identified itself as a sales organization,

like a department or retail store, rather than a service-oriented

5

financial institution;

6

• in February 2017, the Board announced the termination for

7

cause of four officers within Community Banking, including the

Group Risk Officer and the Head of Strategic Planning and

8

Finance, who bore primary responsibility for overseeing the

sales goals and incentive system; 9

10

• while sales practices at Community Banking became more

apparent between 2013-2015, Corporate Risk was still a work in

11

progress and the Chief Risk Officer had limited authority with

respect to Community Banking; 12

13

• the legal department, particularly at the senior levels, failed to discuss or appreciate the seriousness and scale of the sales

14

practice issues within Community Banking or fully consider

whether there might be a pattern of illegal conduct involved; and 15

16

• sales practice concerns have been raised with regard to Community Banking’s online insurance referral program.

17 60. On April 19, 2017, the Office of the Comptroller of the Currency issued a report
18 titled “Lessons learned review of supervision of sales practices at Wells Fargo.”16 The OCC

19 Report noted numerous compliance related problems at Wells Fargo, including among others,

20 the following:

21

• issues concerning sales practices were identified in the bank’s

22

audit committee reports as early as 2005;

23

• since 2005 the Board received regular Audit & Security

24

reports indicating the highest level of EthicsLine internal

complaint cases and employee terminations were related to

25

sales integrity violations; and

26

27 16 https://www.occ.gov/publications/publications-by-type/other-publications-reports/pub-wells-
28 fargo-supervision-lessons-learned-41917.pdf.
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1

• in 2006 Wells Fargo’s #2 strategic objective was “Going for

Gr-Eight,” which promoted doubling the number of products

2

per customer to eight.

3

61. Significantly, the systemic problems within Wells Fargo that enabled the

4 unlawful sales practices to flourish regarding the unlawful opening of bank accounts and credit

5 cards also enabled Wells Fargo to engage in the long-standing pattern and practice of unlawful

6 mortgage lending at issue herein. That point was made in a recent speech given by William

7 Dudley, President of the Federal Reserve Bank of New York, referencing both the Wells Fargo

8 new account scandal and sales practices in the mortgage banking industry. According to

President Dudley, 9

Wells Fargo’s chairman and CEO resigned after regulators

10

uncovered what appeared to be widespread fraud in the retail

bank. Compensation, once again, seems to be at the center of a

11

scandal. Neighborhood bankers were paid based on the volume of

new accounts opened, apparently with utter disregard for whether

12

customers wanted them or even knew about them. And, like

mortgage brokers in the early 2000s, it appears that job security

13

depended almost exclusively on meeting targets, regardless of how

those targets were met. There was a serious mismatch between the

14

values Wells Fargo espoused and the incentives that Wells Fargo

employed.17 15

16

62. Thus, the compensation structure incentivized Wells Fargo employees in

Community Banking and in other retail operations to evade internal controls and produce 17

discriminatory, high cost loans to minorities, because such lending increased employee

18 compensation and Wells Fargo’s revenues.

19

63. Further evidence of multiple control failures within Wells Fargo directly

20 impacting the mortgage business is reflected by the fact that for an extended period of time dating

21 back to at least 2004, Wells Fargo has engaged in a continuous pattern and practice of issuing

22 unlawful mortgages to minority borrowers throughout the country, and this practice is not limited

23 within a small and isolated geographic region. Both the scope and breadth of Defendants’

24 unlawful lending conduct is consistent with extensive control failures.

25

64. There is no legitimate business purpose for these policies and practices as non-

discriminatory policies and practices could achieve any legitimate benefits inuring therefrom. 26

27 17 See https://www.newyorkfed.org/newsevents/speeches/2017/dud170321#footnote8.
28
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1

65. Upon information and belief, the practices and problems described herein,

2 including those described by the confidential witnesses, are consistent with those perpetrated by 3 Wells Fargo throughout the country and have continued into the present.

4

C. Minorities in Oakland Receive Discriminatory Loan Terms from Wells

Fargo Regardless of Creditworthiness 5

6

66. As discussed herein, a non-exhaustive list of the types of loans that Wells Fargo

steered minorities into when they otherwise qualified for less expensive and less risky loans 7
include the following: high-cost loans (i.e., loans with an interest rate that was at least 3% 8 above the Treasury rate prior to 2010 and 1.5% above the prime mortgage rate thereafter),18

9 subprime loans, interest-only loans, balloon payment loans, loans with prepayment penalties,

10 negative amortization loans, no documentation loans, higher cost government loans, including

11 FHA19 and VA20 loans and HELOC’s, and/or ARM loans with teaser rates (i.e., lifetime

12 maximum rate > initial rate + 6%).

13

67. Data reported by the Bank and available through both public and private

14 databases shows that minorities in Oakland received more expensive loan terms from Wells
Fargo more frequently than white borrowers regardless of creditworthiness. 15
68. A regression analysis of this data controlling for borrower race and objective risk 16
characteristics such as credit history, loan-to-value ratio, and the ratio of loan amount to income 17 demonstrates that, from 2004-2013, a discriminatory loan is 1.753 times more likely to result
18 in foreclosure than a non-discriminatory loan. An African-American borrower in Oakland was

19 2.583 times more likely to receive a loan with discriminatory terms as a white borrower in

20 Oakland possessing similar underwriting and borrower characteristics.21 The regression

21

22 18 This definition applies to first lien loans.

23

19 FHA loans are insured by the Federal Housing Administration and require borrowers to pay for mortgage insurance and may entail other costs. People with credit scores under 500 generally

24 are ineligible for FHA loans.

25

20 VA loans are guaranteed by the U.S. Department of Veterans Affairs, available to veterans or surviving spouses who do not remarry, and generally do not require a down payment on the

26 property. 21 As alleged throughout the complaint, all references to the date range 2004-2013 are intended
27 to include the time period up to and including December 31, 2013. Wells Fargo issued more

expensive and riskier loans to minority borrowers in Oakland during this time period. 28

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1 analysis further demonstrates that a Latino borrower in Oakland was 3.312 times more likely to
2 receive a discriminatory loan as a white borrower possessing similar underwriting and borrower
3 characteristics. These odds ratios demonstrate a pattern of statistically significant differences between African-American and white borrowers and between Hispanic and white borrowers. 22
4 69. The regression analysis also shows that these disparities persist when comparing
5 only borrowers with FICO scores above 660. An African-American borrower in Oakland with
6 a FICO score above 660 was 2.261 times more likely to receive a discriminatory loan as a white 7 borrower in Oakland with similar underwriting and borrower characteristics. A Latino borrower
8 in Oakland with a FICO score above 660 was 2.366 times more likely to receive a

9 discriminatory loan as a white borrower in Oakland with similar underwriting and borrower

10 characteristics. These odds ratios demonstrate a pattern of statistically significant differences

11 between African-American and white borrowers and between Hispanic and white borrowers.

12

70. A similar regression analysis taking into account the racial makeup of the

borrower’s neighborhood rather than the individual borrower’s race shows that borrowers in 13
heavily minority neighborhoods in Oakland were more likely to receive more expensive and
14 higher risk loans than borrowers in heavily white neighborhoods. For example, a borrower in a

15 minority census tract (census tract consisting of at least 50% African-American or Latino

16 households) was 3.207 times more likely to receive a discriminatory loan as a borrower with

17 similar characteristics in a non-minority neighborhood in Oakland (census tract with at least

18 50% white households). These odds ratios demonstrate a pattern of statistically significant

19 differences between African-American and white borrowers and between Latino and white
20 borrowers.
71. Additionally, data reported by the Bank and available through public databases 21
shows that in 2004-2013, 6.8% of loans made by Wells Fargo to African-American and Latino 22
customers in Oakland were high cost, but only 1.6% of loans made to white customers in 23

24

25

26
27 22 Statistical significance is a measure of probability that an observed outcome would not have occurred by chance. As used in this Complaint, an outcome is statistically significant if the
28 probability that it could have occurred by chance is less than 1%.
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1 Oakland were high cost. This data demonstrates a pattern of statistically significant differences

2 in the product placement for high cost loans between minority and white borrowers.

3

72. Thus, the disparities regarding the issuance of more expensive and higher risk

loans to minority borrowers are not the result of or otherwise explained by legitimate non-racial 4
underwriting criteria. As discussed below, Wells Fargo’s neutral policies enabled and 5
incentivized loan officers to make loan pricing decisions based on the borrower’s race. The

6 results were that loan officers used race as a factor in intentionally steering borrowers into more

7 expensive and riskier loan products. The referenced CW statements establish that Wells Fargo

8 marketed high cost loans (including, but not limited to, FHA loans and loans with lender credits)

9 in minority neighborhoods, failed to provide minority borrowers with all pertinent loan

10 information, and did so due to Wells Fargo’s belief that minority borrowers would be less likely
11 to recognize the unfair terms of the offered loans due to a perceived lack of sophistication. In
12 so doing, Wells Fargo treated minority borrowers differently than white borrowers while seeking to maximize profits.
13 73. The fact that loans issued pursuant to Wells Fargo’s discriminatory lending
14 practices are more heavily concentrated in minority neighborhoods in Oakland has, based upon
15 information and belief, contributed directly to the disproportionately high rates of foreclosure
16 in the City’s minority communities.

17

D. Oakland’s Data Analysis is Corroborated by Additional Studies and

18

Reports

19

74. According to Discretionary Pricing, Mortgage Discrimination, and the Fair

20 Housing Act, 45 HARVARD CIVIL RIGHTS-CIVIL LIBERTIES LAW REV. 375, 398 (2010), several

21 studies dating back to 2000 have established that minority borrowers were charged higher

22 interest rates/fees than similar creditworthy white borrowers.

23

75. Likewise, according to A Racial Financial Crisis, 83 TEMPLE LAW REV. 941, 947,

949 (2011), one study concluded that “even after controlling for underwriting variables, African24

American borrowers were 6.1% to 34.3% more likely than whites to receive a higher rate

25 subprime mortgage during the subprime boom.” And another study found that significant loan

26 pricing disparity exists among low risk borrowers – African-American borrowers were 65%

27 more likely to receive a subprime home purchase loan than similar creditworthy white borrowers,

28 and 124% more likely to receive a subprime refinance loan.

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1

76. Similarly, the Center for Responsible Lending’s November 2011 Report, Lost

2 Ground, 2011: Disparities in Mortgage Lending and Foreclosures, stated that “racial and ethnic

3 differences in foreclosure rates persist even after accounting for differences in borrower
incomes.” Further, the Center stated it is “particularly troublesome” that minorities received 4
riskier loans “even within [similar] credit ranges.” For example, among borrowers having FICO 5
scores above 660, the incidence of higher rate loans among various groups was as follows: whites
6 – 6.2%; African-American – 21.4%; and Hispanic – 19.3%.23

7

77. The Oakland rate-spread reportable or “high cost” analysis is similar to national

8 trends as confirmed by an analysis of the national HMDA data for the period 2012-2014.

9 According to a report prepared by the Center for Responsible Lending, “[t]he percentage of

10 African-Americans with high cost loans rose from 5.3% in 2012 to 14.2% in 2013 to 25.5% in

11 2014. Similarly, the rate rose from 5.9% in 2012 to 16.8% in 2013 to 28.3% in 2014 for Latino 12 borrowers.”24
78. In general, as recently observed by the Federal Reserve in December 2012, both 13
African-American and Latino borrowers were far more likely (in fact, nearly twice more likely) 14
to obtain higher-priced loans than were white borrowers. These relationships hold both for
15 home-purchase and refinance lending and for non-conventional loans. These differences are
16 reduced, but not eliminated, after controlling for lender and borrower characteristics. “Over the

17 years, analyses of HMDA data have consistently found substantial differences in the incidence

18 of higher-priced lending across racial and ethnic lines, differences that cannot be fully explained

19 by factors included in the HMDA data.”25

20

79. African-Americans and Latinos were much more likely to receive high-cost or

high-risk loans with features that are associated with higher foreclosures, specifically 21

22

23 23 Center for Responsible Lending, Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures, at 5, 21 (Nov. 2011), available at http://www.responsiblelending.org/mortgage-

24 lending/research-analysis/Lost-Ground-2011.pdf. 24 Center for Responsible Lending Issue Brief, Mortgage Lending Continues Under Dodd-
25 Frank, at 5 (Sept. 22, 2015), available at http://www.responsiblelending.org/mortgage-

26 lending/policy-legislation/2014hmda_data_issuebrief_f.pdf.

27

25 Federal Reserve Bulletin, The Mortgage Market in 2011: Highlights from the Data Reported under the Home Mortgage Disclosure Act (Dec. 2012), available at

http://www.federalreserve.gov/pubs/bulletin/2012/PDF/2011_HMDA.pdf. 28

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1 prepayment penalties and hybrid or option ARMs. These disparities were evident even

2 comparing borrowers within the same credit score ranges. In fact, the disparities were

3 especially pronounced for borrowers with higher credit scores. For example, among borrowers

with a FICO score of over 660 (indicating good credit), African-Americans and Latinos 4
received a high interest rate loan more than three times as often as white borrowers.26 5
Disparities in the incidence of these features are evident across all segments of the credit

6 spectrum.

7

8

E. Wells Fargo’s Discriminatory Lending Practices Directly Cause Foreclosures.

9

i. Data show that Wells Fargo’s foreclosures are disproportionately

10

located in minority neighborhoods in Oakland

11

80. Wells Fargo’s failure to underwrite mortgage loans in minority and underserved

12 communities in a responsible manner has been the subject of public attention and concern for
13 years. For example, its practices are the focus of a 2004 report from the Center for Responsible
14 Lending. The report concluded that Wells Fargo’s customers “too often face the loss of their home or financial ruin as a result” of its “discriminatory practices.”27 The discriminatory
15 practices identified in the report include charging excessively high interest rates that are not
16 justified by borrowers’ creditworthiness; requiring large prepayment penalties while
17 deliberately misleading borrowers about the penalties; convincing borrowers to refinance
18 mortgages into new loans that only benefit Wells Fargo; deceiving borrowers into believing that

19 they are getting fixed-rate loans when they are really getting adjustable rate loans; charging

20 excessive fees; and more.

21

81. Such reports underscore the direct connection between foreclosures affecting

22 minority communities and Wells Fargo’s discriminatory lending practices, and their attendant
harm. 23
82. In addition to the disproportionate distribution of Wells Fargo foreclosures in 24
African-American and Hispanic neighborhoods, disparate rates of foreclosure based on race
25

26 26 Center for Responsible Lending, Lost Ground, 2011, supra note 23. 27 27 Center for Responsible Lending, A Review of Wells Fargo’s Subprime Lending, at 10 (Apr.
2004), available at http://www.responsiblelending.org/mortgage-lending/research28 analysis/ip004-Wells_Fargo-0404.pdf.
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1 further demonstrate Wells Fargo’s failure to follow responsible underwriting practices in
2 minority neighborhoods. While 14.1% of Wells Fargo’s loans in neighborhoods consisting of
3 greater than 50% African-American or Hispanic neighborhoods in Oakland result in foreclosure, the same is true for only 3.3% of its loans in non-minority (at least 50% white) neighborhoods
4 in Oakland. In other words, a Wells Fargo loan in an African-American or Hispanic
5 neighborhood is 4.752 times more likely to result in foreclosure as a Wells Fargo loan in a non-
6 minority neighborhood. These odds ratios demonstrate a pattern of statistically significant 7 differences between African-American and white borrowers and between Hispanic and white
8 borrowers.

9

83. Furthermore, as discussed herein, foreclosures affect the value of both foreclosed

10 properties and the properties in close proximity to the foreclosed properties. Where, as is the

11 case in the City of Oakland, foreclosures are spatially concentrated to particular communities,
12 the effects are magnified. Indeed, when a property is foreclosed in proximity to another borrower such that the borrower’s property value is reduced by the nearby foreclosure, that
13 borrower’s ability to obtain a refinancing of his/her loan is impaired. This is because the equity
14 ratio (i.e., the ratio of the property’s value to the loan principal) is decreased by the reduced
15 property value. Because refinancing availability and terms are directly affected by the value of
16 the securing property, such impairment can likewise contribute to the foreclosure of that

17 borrower’s property creating a downward spiral that magnifies the effects of the discrimination.

18

84. Thus, Wells Fargo’s discriminatory lending practices have directly caused and

19 continue to cause foreclosures in Oakland.

20

ii. Data show that Wells Fargo’s loans to minorities result in especially

21

quick foreclosures in Oakland

22

85. A comparison of the time from origination to foreclosure of Wells Fargo’s loans

23 originated in Oakland from 2004 to 2013 shows a disparity with respect to the speed with which
24 loans to Hispanics and white borrowers move into foreclosure. The average time to foreclosure for Hispanic borrowers in Oakland is 3.411 years, and for white borrowers in Oakland is 3.861
25 years. These statistically significant disparities demonstrate that Wells Fargo aggressively
26 moved Hispanic borrowers into foreclosure as compared with how the Bank handled
27

28
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1 foreclosures for white borrowers and provides further evidence of the directness between the

2 issuance of discriminatory mortgages and resulting foreclosures.

3

86. This disparity in time to foreclosure is further evidence that Wells Fargo is

engaged in discriminatory lending practices. The disparity in time to foreclosure demonstrates 4
that Wells Fargo is engaged in irresponsible underwriting in African-American and Latino 5
communities that does not serve the best interests of borrowers. If Wells Fargo were applying

6 the same underwriting practices in African-American and Latino neighborhoods and white

7 neighborhoods in Oakland, there would not be a significant difference in time to foreclosure

8 when comparing racial groups. Were Wells Fargo underwriting borrowers in both communities

9 with equal care and attention to proper underwriting practices, borrowers in African-American

10 and Latino communities would not find themselves in financial straits significantly sooner
11 during the lives of their loans than borrowers in white communities. The faster time to 12 foreclosure in African-American and Latino neighborhoods is consistent with underwriting
practices in minority communities that are less concerned with determining a borrower’s ability 13
to pay and qualifications for the loan than they are in maximizing short-term profit. The 14
HUD/Treasury Report confirms that time to foreclosure is an important indicator of 15 discriminatory practices: “[t]he speed with which the subprime loans in these communities have
16 gone to foreclosure suggests that some lenders may be making mortgage loans to borrowers
17 who did not have the ability to repay those loans at the time of origination.”28

18

iii. Data show that Wells Fargo’s discriminatory lending practices

19

directly cause foreclosures in Oakland

20

87. Wells Fargo’s discriminatory lending practices directly cause foreclosures and

21 vacancies in minority communities in Oakland.

22

88. Issuing more expensive and riskier loans to minority borrowers than the loans

23 for which they qualify and are issued to similarly situated white borrowers directly causes
24 increased foreclosure rates because (1) the borrowers are required to make higher loan payments; and (2) as foreclosures begin to occur in a neighborhood, refinancing out of high-
25 cost and high-risk loans becomes increasingly difficult due to suppressed loan-to-value ratios.
26

27 28 U.S. Dep’t of Housing & Urban Development and U.S. Dep’t of the Treasury, Curbing Predatory Home Mortgage Lending, at 25 (2000) (“HUD/Treasury Report”), available at
28 http://www.huduser.org/Publications/pdf/treasrpt.pdf.
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1 The difference between what a borrower who receives a more expensive loan must pay and the

2 lower amount for which the borrower qualified can cause the borrower to be unable to make
3 payments on the mortgage. Under these circumstances, a borrower who could otherwise have continued to make payments on the mortgage and remain in possession instead has a loan
4 resulting in foreclosure because Wells Fargo issued a more expensive loan in violation of the
5 Fair Housing Act. The Bank’s discriminatory lending conduct therefore directly causes
6 foreclosures and vacancies. Moreover, as foreclosures depress property values, borrowers in the
7 neighborhood who are already struggling under the weight of high-cost and high-risk loans are
8 increasingly unable to refinance their high-cost and high-risk loans which impels the borrowers

9 toward foreclosure.

10

89. Giving a loan to an applicant who does not qualify for the loan, especially a

11 refinance or home equity loan, can also directly cause foreclosures and vacancies. Some

12 homeowners live in properties that they own subject to no mortgage. Other homeowners live
in properties with modest mortgages that they can comfortably afford to pay. Where a lender, 13
such as Wells Fargo, solicits such a homeowner to take out a home equity loan on their property, 14
or alternatively, to refinance their existing loan into a larger loan without properly underwriting
15 them to assure that they can make the monthly payments for the new, larger loan, the result is

16 likely to be that the borrower will be unable to make payments on the mortgage. This is

17 particularly true where the borrower is refinanced from a fixed-rate loan into an adjustable rate

18 loan that the lender knows the borrower cannot afford should interest rates rise. In some

19 instances, the lender may refinance the borrower into a new loan that the lender knows the

20 borrower cannot sustain given the borrower’s present debt obligations and financial resources.
In such circumstances, the likely result of such practices is to cause homeowners who are 21
otherwise occupying properties without a mortgage, or comfortably making payments on a 22
modest existing mortgage, to be unable to make payment on a new, unaffordable loan. This
23 causes foreclosures and vacancies. If these unaffordable refinance and home equity loans had

24 not been made, the subject properties would not have become vacant.

25

90. A regression analysis of loans issued by Wells Fargo in Oakland from 2004 to

26 2013 controlling for objective risk characteristics such as credit history, loan to value ratio, and

27 the ratio of loan amount to income demonstrates that a high-cost or high-risk loan is 1.753 times 28 more likely to result in foreclosure than a loan that is not high-cost or high-risk.

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1

91. The regression analysis also demonstrates that a high-cost or high-risk loan made

2 to an African-American borrower was 2.573 times more likely to result in foreclosure as

3 compared with a non-high-cost, non-high-risk loan made to a white borrower with similar
borrower and underwriting characteristics. A high-cost or high-risk loan made to a Latino 4
borrower was 3.312 times more likely as a non-high-cost, non-high risk loan made to a white 5
borrower with similar risk characteristics to result in foreclosure. These odds ratios demonstrate 6 a pattern of statistically significant differences between African-American and white borrowers
7 and between Latino and white borrowers.

8

92. Regression analysis is the appropriate analytical tool to determine whether certain

9 types of loans are more likely to enter foreclosure and reveals a direct causal relationship between

10 the issuance of discriminatory loans and resulting foreclosures. Regression analysis is a
11 statistical method for determining the relationship that exists in a set of data between a variable
12 to be explained—called the “dependent variable”—and one or more “explanatory variables.” In a regression to determine whether certain types of loans were more likely to result in foreclosure,
13 the explanatory variables include whether the loan had predatory terms, the borrower’s credit
14 score, the lien type (first or subordinate lien), the property type (single-family home, condo, co-
15 op, multifamily home, manufactured home, etc.), the loan purpose (purchase, cash-out refinance,
16 rate-term refinance, etc.), the loan-to-value ratio, the combined loan-to-value ratio, the ratio of

17 monthly loan payments to monthly income, the occupancy type (owner-occupied, second home,

18 investment property), the month of loan origination, whether the loan became part of an agency

19 or non-agency securitization, whether the loan was a conventional or an FHA/VA loan, whether
20 the loan had an adjustable rate, and the property’s neighborhood characteristics such as the ratio of median income in the borrower’s Census tract to the median income in the metropolitan area,
21 the share of homes in the Census tract that are owner-occupied, and the median year in which
22 homes in the Census tract were built. By controlling for these characteristics, the regression can
23 show whether the fact that a loan had discriminatory terms made that loan more likely to result
24 in foreclosure than a loan without discriminatory terms but with identical characteristics in all
25 other respects controlled for in the regression.

26

93. Borrowers may have suffered financial hardships between the time they

27 originated a loan and the time the loan entered foreclosure. At this time, due to data limitations, 28 Plaintiffs’ foreclosure regression does not control for every possible aspect related to financial

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1 hardships, such as job losses, medical hardships, or divorce, that could plausibly affect the
2 likelihood of a loan entering foreclosure. However, adding such omitted characteristics to the
3 current regression analysis would only affect the foreclosure odds ratio for the type of loan product to the extent that the omitted characteristic is correlated with the type of loan product. If
4 there is no correlation between the presence of discriminatory terms in the loan and variations in
5 financial hardships suffered by the borrower after loan origination, then adding financial
6 hardship variables to the regression should have no material effect on the odds ratio measured 7 by the current foreclosure regression. (“Omitting variables that are not correlated with the
8 variable of interest is, in general, less of a concern, because the parameter that measures the
9 effect of the variable of interest on the dependent variable is estimated without bias.” Daniel L.

10 Rubinfeld, Reference Guide on Multiple Regression, in Reference Manual on Scientific

11 Evidence 303, 315 (Federal Judicial Center, 3d ed. 2011)). Further, the foreclosure regression
12 already controls for many aspects of the borrower’s financial condition, including credit score, loan-to-value ratio, and ratio of monthly housing payments to monthly income. The current
13 results show that, for borrowers with the same financial characteristics controlled for in the
14 regression, borrowers receiving loans with discriminatory terms are more likely to suffer
15 foreclosure than borrowers receiving loans without discriminatory terms. Because of the ability
16 of the regression to control for other external factors that might cause a foreclosure, the

17 correlation between the discriminatory terms and the foreclosure event indicates a causal

18 relationship.

19

94. Furthermore, Woodward testified that Wells Fargo maintains a comprehensive

20 worldwide database with robust statistical data regarding foreclosures, defaults, and

delinquencies and that credit policies regarding these outcomes are continually updated. This is 21

consistent with the ongoing measurement and monitoring of credit risk analysis set forth in the 22 Bank’s annual report.29

23

95. A seminal report on foreclosure activity by Mark Duda and William Apgar

24 documents the negative impact that rising foreclosures have on low-income and low-wealth

25 minority communities, using Chicago as a case study. Mr. Apgar is a Senior Scholar at the

26 Joint Center for Housing Studies of Harvard University, and a Lecturer on Public Policy at

27 29 https://www.wellsfargo.com/assets/pdf/about/investor-relations/annual-reports/2016-annual-
28 report.pdf at 67-68.
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1 Harvard’s John F. Kennedy School of Government. He previously served as the Assistant

2 Secretary for Housing/Federal Housing Commissioner at the U.S. Department of Housing and

3 Urban Development, and also chaired the Federal Housing Finance Board. Mr. Apgar holds a
Ph.D. in Economics from Harvard University. Mr. Duda is a Research Fellow at the Joint 4
Center for Housing Studies. The Apgar-Duda report has continually been cited by subsequent 5
governmental, public sector, and private sector reports due to its clarity and thoroughness with 6 respect to the negative impact foreclosures have on lower-income and minority
7 neighborhoods.30

8

96. This significant report highlights the direct connection between Wells Fargo’s

9 discriminatory lending practices in cities such as Oakland and the resulting foreclosures,

10 demonstrating that such foreclosures impose direct, significant and predictable costs on

11 borrowers, municipal governments, and neighboring homeowners.

12

97. Another report, by the Center for Responsible Lending, uses a national dataset

to show that the foreclosure rate for low- and moderate-income African-Americans is 13
approximately 1.8 times higher than it is for low- and moderate-income non-Hispanic whites.
14 The gap is smaller for Latinos, especially among low-income households, but even among low-

15 income Latinos the foreclosure rate is 1.2 times that of low-income whites. Racial and ethnic

16 disparities in foreclosure rates cannot be explained by income, since disparities persist even

17 among higher-income groups. For example: approximately 10 percent of higher-income

18 African-American borrowers and 15 percent of higher-income Latino borrowers have lost their

19 home to foreclosure, compared with 4.6 percent of higher income non-Hispanic white
20 borrowers. Overall, low- and moderate-income African-Americans and middle- and higherincome Latinos have experienced the highest foreclosure rates.31
21 98. Nearly 20 percent of loans in high-minority neighborhoods have been foreclosed
22 upon or are seriously delinquent, with significant implications for the long-term economic
23 viability of these communities.32
24

25

26

30 See W. Apgar, M. Duda & R. Gorey, The Municipal Costs of Foreclosures: A Chicago Case Study (2005), available at http://neighborworks.issuelab.org/resource/municipal_

27 cost_of_foreclosure_a_chicago_case_study. 31 Center for Responsible Lending, Lost Ground, 2011, supra note 23.
28 32 Id. at 6.

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1 VI. 2

INJURY TO OAKLAND CAUSED BY WELLS FARGO’S DISCRIMINATORY LOAN PRACTICES

3

99. Oakland’s injuries are a direct consequence of Wells Fargo’s unlawful conduct.

Wells Fargo issued discriminatory loans to minority borrowers at rates higher than those issued

4

to similarly-situated white borrowers. Those discriminatory high-cost loans led to foreclosures

5 that would not have occurred absent the discriminatorily high cost of the loans. The initiation

6 of the foreclosure process resulted in injury to the City. For example, once the foreclosure

7 process was initiated, the properties in question became derelict and neglected, causing harm to

8 the City which had to provide municipal services while the properties simultaneously decreased

9 in value, resulting in lowered property tax revenue.

10

100. Oakland has suffered both non-economic and economic injuries as a direct result

11 of Wells Fargo’s longstanding, continuing policy and practice of intentionally steering minority
borrowers in Oakland into mortgage loans that have higher costs and risk features than more 12
favorable and less expensive loans issued to similarly situated white borrowers, and engaging 13
in facially neutral business policies and practices that created an “artificial, arbitrary, and
14 unnecessary” barrier to fair housing opportunities for minority home purchasers and owners.

15 Without the implementation of these policies, neither borrowers nor the City would have

16 suffered the resultant injuries. These practices have resulted in the disproportionately high rate

17 of foreclosure on Wells Fargo loans to African-Americans and Latinos in minority and low-

18 income neighborhoods in Oakland. Oakland seeks redress for the resulting injuries to the City

19 directly caused by Wells Fargo’s policies and practices. The City does not seek redress in this

action for injuries resulting from foreclosures on mortgages originated by lenders other than 20
Wells Fargo.33 21
101. Wells Fargo continues to engage in the discriminatory pattern or practices
22 described herein with similar and continuing deleterious consequences to the City.

23

102. Through the use of expert evidence and analytic tools such as Hedonic

24 regression, Oakland is capable of establishing that the Bank’s discriminatory lending practices

25 were a direct cause of the resulting injuries alleged herein.

26

27 33 For clarity, the City does seek redress in this action for injuries resulting from foreclosures on mortgages for which Wells Fargo is responsible, including residential home loans and
28 lending operations acquired from, and/or sold by or through the Acquired Entities.
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1

A. Non-Economic Injuries

2

103. Wells Fargo’s conduct has directly and adversely impacted the ability of

3 minority residents to own homes in the City, thereby impairing the City’s goals to assure that

4 racial factors do not adversely affect the ability of any person to choose where to live in the 5 City or to detract from the social and professional benefits of living in an integrated society.
104. Wells Fargo’s lending practices have directly and adversely impacted the City’s 6
numerous programs designed to promote fair housing and a safe, integrated community where 7
all residents have the opportunity to prosper. For example, the Housing and Community 8 Development Department is charged with managing the City’s Public Housing and HUD
9 programs which benefit minority homeowners in particular.34 Every five years, the City prepares

10 an Analysis of Impediments to Fair Housing Choice for HUD, a document that “is intended to

11 inform the City’s strategy for addressing fair housing issues and identify what actions the City

12 will take to address them over the next five years.35

13

105. Additionally, The Department provides various forms of assistance to enable low

and moderate-income residents to purchase homes. One of the Department’s primary objectives 14
is to “identify and thwart predatory lending practices and collaborate with reputable lenders.” 15
The Department also operates numerous Housing Repair and Rehabilitation Programs designed

16 to assist low and moderate income homeowners correct health and safety violations, building

17 code violations, abate code deficiencies, and major systems in danger of failure.36 The City

18 provides funding to certain non-profit organizations to promote fair housing and eliminate

19 housing discrimination on the basis of race or national origin.37 Additionally, the purpose and

20 mission of the City’s Nuisance Abatement Program is to “promote the health and safety of

21 Oakland citizens by preventing, identifying, and eliminating public nuisances.” These nuisances
22 involve numerous activities directly linked to the Bank’s lending practices, including, but not limited to abandoned or deteriorated property, structural and electrical hazards, criminal activity,
23 fire hazards, zoning violations, excess debris and trash, and litter.38 The discriminatory conduct
24

25 34 http://www2.oaklandnet.com/Government/o/hcd/a/BusinessGoals/index.htm

26

35 http://www2.oaklandnet.com/government/o/hcd/s/Data/DOWD008690 36http://www2.oaklandnet.com/Government/o/hcd/s/HousingRepairRehabPrograms/DOWD00

27 8717 37 http://www2.oaklandnet.com/Government/o/hcd/s/HSC/DOWD008652

28 38 http://www2.oaklandnet.com/government/o/CityAdministration/d/NA/index.htm

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1 perpetrated by Wells Fargo’s policies on mortgage lending directly undermines the City’s use

2 of resources in support of fair housing, rendering the expenditures a nullity and warranting

3 compensation.
106. Likewise, the City’s Code Enforcement Process is designed to promote the 4
values of the FHA: “Keeping our City, neighborhoods and community clean, safe and free of 5
blight is supported by the Oakland Municipal Code 8.24. It is designed to improve the 6 appearance of Oakland streets and enhance the quality of the City’s economic growth and social
7 environment.”39

8

107. The Bank’s discriminatory lending practices directly interfere with the City’s

9 ability to achieve these important objectives.

10

B. Economic Injuries

11

108. The City has directly suffered economic injury based upon reduced property tax

12 revenues resulting from (a) the decreased value of the vacant properties themselves, and (b) the
13 decreased value of properties surrounding the vacant properties. In addition, the City has suffered economic injury resulting from the cost of municipal services that it provided and still
14 must provide to remedy blight and unsafe and dangerous conditions, which exist at properties
15 that were foreclosed as a result of Wells Fargo’s illegal lending practices. The City also
16 provides housing counseling services, the need for, and cost of which has been increased
17 significantly by these discriminatory lending practices.

18

109. In addition, the City has suffered economic injury resulting from the cost of

19 municipal services that it provided and still must provide to remedy blight and unsafe and

20 dangerous conditions which exist at properties that were foreclosed as a result of Wells Fargo’s

21 illegal lending practices.

22

i. Oakland has been injured by a suppression of property tax revenues from foreclosures caused by Wells Fargo’s discriminatory lending

23

practices.

24

110. When a home falls into foreclosure, it reduces the property value of the

25 foreclosed home as well as the values of other homes in the neighborhood. These reduced 26 property values in turn suppress property tax revenues to the City.

27 39http://www2.oaklandnet.com/government/o/PBN/OurServices/CityCodeEnforcement/index.h 28 tm
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1

111. As property values decrease (or fail to rise as much as they would absent Wells

2 Fargo’s discriminatory lending practices), Oakland loses substantial, material amounts of

3 property tax revenues from the suppressed value of the foreclosed homes themselves and those
in the surrounding neighborhood. 4
112. The suppressed property values of foreclosed homes in turn directly reduce 5
property tax revenues to the City and constitute damages suffered by Oakland. Property tax 6 revenue is initially received by Alameda County and then distributed on an annual basis (or
7 whatever the appropriate period is) to the City of Oakland.

8

113. The property tax revenue is deposited into the City’s General Fund, which in

9 turn, is directly used by the City to provide municipal services to residents, including the

10 Departments of Transportation, Public Works, Planning & Building, Housing & Community
11 Development, Economic & Workforce Development, Human Services, Parks & Recreation,
12 Oakland Public Library, Fire, Police, Human Resources Management, Race & Equity, Information Technology, Finance Department, Public Ethics Commission, Police Commission,
13 City Clerk, City Auditor, City Attorney, City Administrator, City Council, and Mayor. This
14 property tax revenue is also used to provide funding for infrastructure and secure various bonds.
15 There is a direct relationship between each dollar of property tax received from the County
16 based upon fluctuating property values and the ability of the City to fund essential services and

17 programs for residents.

18

114. Property tax losses suffered by Oakland caused by vacancies resulting from

19 Wells Fargo’s foreclosures are fully capable of empirical quantification. For example, attached

20 hereto as Exhibit A is a chart listing the reduction in property values corresponding to a sample
of addresses located in Oakland where discriminatory loans issued by Wells Fargo entered the 21
foreclosure process. Each of these properties was secured by a loan that was originated after 22
2004. The property values for each of the addresses set forth in Exhibit A decreased
23 significantly after entering the foreclosure process and never returned to the pre-foreclosure

24 value.

25

115. Vacancies and short sales even prior to completion of foreclosure also result in

26 diminished home values. Indeed, “[i]n 12 states, including California, Florida, Arizona, New

27

28
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1 York and New Jersey, pre-foreclosure sales actually outnumbered REO sales.”40 Such distressed

2 sales reduce property values.41

3

116. The property value of homes in foreclosure tends to be suppressed as compared

with those homes not in foreclosure (e.g., 28%).42 The suppression of property values can be 4

measured by economic analysis applying various objective criteria, including the well-

5 established Federal Housing Finance Agency Home Price Index for Oakland.

6

117. A portion of this lost home value is attributable to homes foreclosed as a result

7 of Wells Fargo’s discriminatory lending practices.

8

118. Homes in foreclosure tend to experience a substantial decline in value, and the

9 relative decline can be measured by a number of objective criteria, including the well-established

10 Case-Shiller Home Price Index. A portion of this lost home value is attributable to homes
11 foreclosed as a result of Wells Fargo’s discriminatory loan practices. No intervening steps occur 12 that otherwise explain the economic impact of discriminatory lending that produces foreclosure.
119. Property tax losses suffered by Oakland caused by vacancies resulting from 13
Wells Fargo’s foreclosures are fully capable of empirical quantification. 14
120. Routinely maintained property tax and other data allow for calculation of the 15 property tax revenues lost by the City as a direct result of particular Wells Fargo foreclosures.
16 Using a well-established statistical regression technique that focuses on effects on neighboring
17 properties, the City can isolate the lost property value attributable to Wells Fargo foreclosures
18 and vacancies caused by discriminatory lending from losses attributable to other causes, such
19 as neighborhood conditions. This technique, known as Hedonic regression, when applied to
20 housing markets, isolates the factors that contribute to the value of a property by studying thousands of housing transactions. Those factors include the size of a home, the number of
21 bedrooms and bathrooms, whether the neighborhood is safe, whether neighboring properties
22

23

24 40 See http://www.realtytrac.com/content/news-and-opinion/short-sales-increasing-in-2012--
25 short -sale-process----realtytrac-7204.

26

41 See http://www.realtytrac.com/content/foreclosure-market-report/us-foreclosure-sales-andshort-sales-report-q1-2013-7732.

27 42 Campbell, John Y., Stefano Giglio & Parag Pathak, National Bureau of Economic Research, NBER Working Paper Series, Forced Sales and House Prices (Apr. 2009), available at
28 http://www.nber.org/papers/w14866.pdf?new_window=1.

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1 are well maintained, and more. Hedonic analysis determines the contribution of each of these

2 house and neighborhood characteristics to the value of a home.

3

121. The number of foreclosures in a neighborhood is one of the neighborhood traits

that Hedonic analysis can examine. Hedonic analysis allows for the calculation of the impact 4
on a property’s value of the first foreclosure in close proximity (e.g., ⅛ or ¼ of a mile), the 5
average impact of subsequent foreclosures, and the impact of the last foreclosure. This loss can

6 be distinguished from any loss attributable to non-Wells Fargo foreclosures or other causes.

7 The loss in property value in minority and low-income neighborhoods in Oakland attributable

8 to Wells Fargo’s unlawful acts and consequent foreclosures can be used to calculate the City’s

9 corresponding loss in property tax revenues.

10

122. Foreclosures attributable to Wells Fargo’s discriminatory lending practices in

11 minority and low-income neighborhoods in Oakland can be analyzed through Hedonic

12 regression to calculate the resulting loss in the property values of nearby homes. This loss can
be distinguished from any loss attributable to non-Wells Fargo foreclosures or other causes. 13
The loss in property value in minority and low-income neighborhoods in Oakland attributable 14
to Wells Fargo’s unlawful acts and consequent foreclosures can be used to calculate the City’s
15 corresponding loss in property tax revenues.

16

123. Various studies establish that Hedonic regression can be used for this purpose.

17 A study published by the Fannie Mae Foundation, using Chicago as an example, determined

18 that each foreclosure is responsible for an average decline of approximately 1.1% in the value

19 of each single-family home within an eighth of a mile.43

20

124. Other studies have focused on the impact of abandoned homes on surrounding

property values. A study in Philadelphia, for example, found that each home within 150 feet of 21

an abandoned home declined in value by an average of $7,627; homes within 150 to 299 feet 22 declined in value by $6,810; and homes within 300 to 449 feet declined in value by $3,542.44

23

125. These studies highlight the direct connection between reduced tax revenues to

24 the City as the result of foreclosures and Wells Fargo’s discriminatory lending practices.

25

26 43 See Dan Immergluck & Geoff Smith, The External Costs of Foreclosure: The Impact of Single27 Family Mortgage Foreclosures on Property Values, 17 Housing Policy Debate 57, 69 (2006).
44 See Anne B. Shlay & Gordon Whitman, Research for Democracy: Linking Community 28 Organizing and Research to Leverage Blight Policy, at 21 (2004).
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1

126. And most recently, a Los Angeles study reported, “[i]t is conservatively

2 estimated that each foreclosed property will cause the value of neighboring homes within an
3 eighth of a mile to drop 0.9%.” Thus, “[i]n Los Angeles impacted homeowners could experience property devaluation of $53 billion.”45 This decreased property value of
4 neighboring homes in turn reduces property tax revenues to the City.
5 127. Application of such Hedonic regression methodology to data regularly
6 maintained by Oakland can be used to quantify the property tax injury to the City directly caused
7 by Wells Fargo’s discriminatory lending practices and resulting foreclosures in minority
8 neighborhoods.

9

128. Wells Fargo foreclosure properties and the problems associated with them

10 likewise significantly reduce surrounding property values because the neighborhoods become

11 less desirable. This in turn reduces the property tax revenues collected by Oakland.

12

ii. Oakland is injured because it provided and still must provide costly

13

municipal services for foreclosure properties in minority

neighborhoods as a direct result of Wells Fargo’s discriminatory

14

lending practices

15

129. Wells Fargo foreclosed properties directly cause damages to the City because the

16 City is required to provide increased municipal services at these properties to remediate blighted

17 conditions. Even prior to completion of the foreclosure process, data show that 20% of homes
18 undergoing foreclosure are vacated.46 These services would not have been necessary if the
19 properties had not been foreclosed upon. Moreover, these foreclosures resulting from Wells Fargo’s unlawful conduct have contributed to the necessity for the City to divert essential
20 municipal services that would have been utilized for other purposes to promote the health,
21 welfare, and safety of its residents.
22

23

24

25 45 The Alliance of Californians for Community Empowerment and the California Reinvestment Coalition, The Wall Street Wrecking Ball: What Foreclosures are Costing Los Angeles
26 Neighborhoods, at 3 (2011) (“Cost to Los Angeles Report”).
27 46 See RealtyTrac, Owner-Vacated Properties Represent 20 Percent of All Foreclosures Nationwide (June 2013), available at http://www.realtytrac.com/content/foreclosure-market-
28 report/owner-vacated-foreclosure-update-7771.
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1

130. Wells Fargo’s discriminatory lending and the subsequent foreclosures have put

2 a strain on the resources of the City’s Police Department and negatively impacted the ability to
3 police a wide assortment of communities within the City of Oakland over the last several years. 131. For example, the City’s Police and Fire Departments have sent, and will continue
4 to send personnel and police/fire vehicles to Wells Fargo foreclosure properties to respond to a
5 variety of problems. These problems include increased vagrancy, criminal activity, fire hazards,
6 and threats to public health and safety that arise at these properties because of their foreclosure
7 status. Because violent crime has generally been found to increase due to foreclosures, the
8 Oakland Police and Fire Departments must respond to calls reporting suspicious activity at

9 foreclosure properties and perform ongoing investigations involving criminal activity, including

10 gang activity, at these properties. A few examples of property addresses corresponding to loans

11 attributable to Wells Fargo where violations were identified after the loan initially entered the

12 foreclosure process include the following:

a. 2300 Maywood Avenue, Oakland, California; 13

b. 7653 Outlook Avenue, Oakland, California;

14

c. 1240 30th Street, Oakland, California; and

15

d. 3026 Logan Street, Oakland, California.

16

132. Foreclosed properties required the Police Department to dedicate resources to

17 respond to issues which required it to deploy, in numbers and frequency otherwise unusual,

18 uniformed officers and plain-clothed detectives, and to seek the assistance of Licenses and

19 Inspections Officers and other resources from other Departments within the City of Oakland.

20 This response was caused in part by the increased level of crime plaguing the neighborhoods as
a result of foreclosed and/or abandoned homes. The crimes generating these additional resource 21
requirements include burglaries to the properties and the surrounding homes, armed robbery, 22
public intoxication, drug sales and possession including heroin and cocaine, vehicle theft,
23 break-in, or abandonment, vagrancy, home squatters, and prostitution and lewd conduct.

24

133. Code enforcement complaints abound at foreclosed properties as well

25 subsequent to the date when a property initially entered the foreclosure process. These

26 violations require an inspector to visit the site of a complaint – often multiple times – and follow

27 up to ensure abatement. The abatement itself may sometimes require work hours from 28 municipal agencies such as the Oakland Building Services Division and Code Enforcement,

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1 along with police, fire, or building and planning. A few examples of property addresses

2 corresponding to loans attributable to Wells Fargo where violations were identified after the

3 loan initially entered the foreclosure process include the following:

a. 1240 30th Street – vacant unsecured house with trash and debris on the premises, 4

piles of construction debris and plant cuttings in the front and rear yards;

5 b. 5314 Genoa Street – vacant property, vehicle with expired registration on

6

property;

7

c. 3746 39th Avenue – work performed beyond the scope of permits and with

8

expired permits, wooden structure with canvas covering construction area at rear

9

of property;

10

d. 4440 Mountain View Ave – unapproved alteration and addition to house;

11

e. 1461 73rd Avenue – vegetation overgrowth, trash cans in public view,

12

inoperative/unlicensed vehicle.

134. All of these incidents had a negative impact on the property value of not just the 13
foreclosed homes themselves, but on the remaining residences of the neighborhoods, all the

14 while creating an increased fear of crime and victimization among residents. Though many of

15 these problem areas were identified by beat officers on regular patrol, many of the abandoned

16 properties prompted numerous contacts to the Oakland Police Department. These complaints

17 came in the form of emails, phone calls, and personal complaints that were directly received by

18 the City.

19

135. These complaints required officers to consistently check on these properties and

20 required a disproportionate amount of resources to manage the problem.
136. The City frequently hires independent contractors to perform certain services, 21
including, but not limited to, (i) removing excess vegetation at vacant properties, (ii) hauling 22
away trash and debris at vacant properties, (iii) boarding vacant property from casual entry, (iv)
23 putting up fencing to secure vacant properties, and (v) painting and removing graffiti at vacant

24 properties.

25

137. The Oakland City Attorney’s Office has devoted, and will continue to devote

26 personnel time and out-of-pocket resources perform a number of tasks that arise at these

27 properties because of their foreclosure status. These include, but are not limited to the following: 28 (a) prosecuting code enforcement cases; and (b) pursuing court ordered injunctions involving a

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1 myriad of potential problems at foreclosure properties. Numerous inspections revealing code

2 enforcement violations at properties within the City of Oakland occurred during the limitations

3 period. At the time of these inspections, the properties were under Wells Fargo’s control. The

City of Oakland expended time and resources logging these events, and following up with Wells 4
Fargo to get the violations cured. The City often had to make multiple contacts and requests 5
before the violations were cured.

6

138. As stated by the Cost to Los Angeles Report, “[l]ocal government agencies have

7 to spend money and staff time on blighted foreclosed properties, providing maintenance,

8 inspections, trash removal, increased public safety calls, and other code enforcement services .

9 . .. Responding to these needs is a gargantuan task that involves multiple agencies and multiple

10 levels of local government.”47

11

139. Moreover, as discussed above, the Apgar-Duda report underscores the direct

12 connection between municipal costs stemming from foreclosures in Oakland and Wells Fargo’s

discriminatory lending practices. 13
VII. SAMPLE PROPERTIES FROM THE CITY OF OAKLAND
14 A. Foreclosures

15

140. Plaintiff, through expert analysis, has preliminarily estimated that between 2004

16 and 2013, at least nine hundred eighty-two (982) loans issued to minority owners for then-

17 owner-occupied properties went into foreclosure. Expert analysis has determined that this type

18 of loan was more likely to be high-cost loans than those issued to borrowers who were not racial

19 minorities.

20

141. Upon information and belief, more discriminatory loans will be identified with

further discovery as Wells Fargo has only provided detailed loan data corresponding to loans 21

issued by Wells Fargo itself. The loans that Wells Fargo acquired from the Acquired Entities 22
have yet to be provided and analyzed.

23

142. High-cost loans issued disproportionately to minority borrowers violate the FHA

24 and the FEHA as discriminatory because they were issued to minority borrowers and were more

25 expensive than loans issued to similarly situated white borrowers. Such discriminatory loans

26 issued by Wells Fargo are continuing to enter the foreclosure process. The City has already

27

28 47 Cost to Los Angeles Report, supra note 45.
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1 incurred or will incur in the future, damages corresponding to each of these properties. A sample

2 of property addresses corresponding to these foreclosures is set forth below:

3

• 836 31st Street, Oakland, CA 94608;

4

• 2208 50th Avenue, Oakland, CA 94601;

• 7827 Weld Street, Oakland, CA 94621; and 5
• 2681 79th Avenue, Oakland, CA 94605. 6
143. Upon information and belief, the Acquired Entities engaged in the same type of
7 discriminatory conduct attributable to Wells Fargo at the time they issued loans to minority

8 homebuyers.

9

B. Discriminatory Loans Issued Subsequent to September 21, 2013

10

144. Wells Fargo has continued to issue high-cost or high-risk loans to minority

11 borrowers in Oakland subsequent to September 21, 2013. These loans violate the FHA and the

12 FEHA and are discriminatory because they were issued to minority borrowers and were more
13 expensive than the loans issued to similarly situated white borrowers during the limitations period. Upon information and belief, as well as historic experience, a significant number of the
14 properties corresponding to issuance of discriminatory loans subsequent to September 21, 2013
15 will result in foreclosures or other adverse events that will cost the City a loss of tax revenues
16 and significant remediation costs. A sample of property addresses corresponding to the issuance
17 of these loans to minority borrowers all of which closed (i.e. “originated”) during the limitations
18 period is set forth below:

19

• 2226 42nd Avenue, Oakland, CA 94601 (9/25/13);

20

• 10226 Graffian Street, Oakland, CA 94603 (10/16/13);

21

• 9400 Granada Avenue, Oakland, CA 94605 (12/12/13); and

22

• 9772 Anza Avenue, Oakland, CA 94605 (12/24/13).

23

145. An examination of publicly available information on loans issued during the

limitations period strongly supports the conclusion that a greater number of high-cost or high24
risk loans were issued to minority borrowers than to non-minority borrowers during the two 25
years preceding the filing of this Complaint. Upon information and belief, the disparity

26 exemplified by the examination of the earlier loans persists. In addition, the City maintains that

27 there is a continuing violation of the same lending practices, and therefore that the statute of

28

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1 limitations is running and/or was tolled by Wells Fargo’s conduct or agreement. There is thus 2 a single claim, requiring but a single evaluation of the overall disparate impact.

3 VIII. CLAIMS FOR RELIEF

4 FIRST CLAIM FOR RELIEF

5

(Violation of the Federal Fair Housing Act,

42 U.S.C. §§ 3601, et seq.) 6
146. The City repeats and incorporates by reference all allegations contained in the

7 preceding paragraphs as if fully set forth herein.

8

147. The FHA’s stated purpose is to provide, “within constitutional limitations, for fair

9 housing throughout the United States.”

10

148. In contravention of that purpose, Wells Fargo’s acts, policies, and practices as

11 described constitute intentional lending discrimination on the basis of race. Wells Fargo has
12 intentionally targeted residents of predominantly African-American and Hispanic
13 neighborhoods in Oakland for different treatment than residents of predominantly white neighborhoods in Oakland with respect to mortgage lending. Wells Fargo has intentionally
14 targeted residents of these neighborhoods for high-cost loans without regard to their credit
15 qualifications and without regard to whether they qualify for more advantageous loans, including
16 prime loans. Wells Fargo has intentionally targeted residents of these neighborhoods for
17 increased interest rates, points, and fees, and for other disadvantageous loan terms including, but

18 not limited to, adjustable rates, prepayment penalties, and balloon payments. Wells Fargo has

19 intentionally targeted residents of these neighborhoods for unfair and deceptive lending practices

20 in connection with marketing and underwriting mortgage loans.

21

149. Wells Fargo’s acts, policies, and practices have had an adverse and

disproportionate impact on African-Americans and Hispanics and residents of predominantly 22
African-American and Hispanic neighborhoods in Oakland as compared to similarly situated 23
whites and residents of predominantly white neighborhoods in Oakland. This adverse and
24 disproportionate impact is the direct result of Wells Fargo’s policies of providing discretion to

25 loan officers and others responsible for mortgage lending; failing to monitor this discretion to

26 ensure that borrowers were being placed in loan products on a nondiscriminatory basis when

27 Wells Fargo had notice of widespread product placement disparities based on race and national

28 origin; giving loan officers and others responsible for mortgage lending large financial

incentives

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1 to issue loans to African-Americans and Hispanics that are costlier than better loans for which
2 they qualify; otherwise encouraging and directing loan officers and others responsible for
3 mortgage lending to steer borrowers into high-cost loans or loans with adjustable rates, prepayment penalties, or balloon payments without regard for whether they qualify for better
4 loans, including but not limited to prime loans; and setting interest rate caps. These policies have
5 caused African-Americans and Hispanics and residents of predominantly African-American and
6 Hispanic neighborhoods in Oakland to receive mortgage loans from Wells Fargo that have 7 materially less favorable terms than mortgage loans given by Wells Fargo to similarly situated
8 whites and residents of predominantly white neighborhoods in Oakland, and that are materially

9 more likely to result in foreclosure.

10

150. These practices, which are united because they represent manifestations of the

11 same continuous and unbroken practice of engaging in facially neutral business policies and

12 practices that created an “artificial, arbitrary, and unnecessary” barrier to fair housing
opportunities for minority home purchasers and owners, have caused African-American and 13
Latino borrowers in low-income and predominantly African-American and Latino 14
neighborhoods in Oakland to receive mortgage loans from Wells Fargo that have materially less
15 favorable terms than mortgage loans given by Wells Fargo to similarly situated white

16 borrowers, and that are materially more likely to result in foreclosure.

17

151. Wells Fargo’s residential lending-related acts, policies, and practices constitute

18 reverse redlining and violate the Fair Housing Act as:

19

(a) Discrimination on the basis of race and national origin in making

20 available, or in the terms and conditions of, residential real estate-related transactions, in

violation of 42 U.S.C. § 3605(a); and 21

(b) Discrimination on the basis of race and national origin in the terms, 22
conditions, or privileges of sale of a dwelling, in violation of 42 U.S.C. § 3604(b).

23

152. Wells Fargo’s policies or practices are not justified by business necessity or

24 legitimate business interests.

25

153. Wells Fargo’s policies and practices are continuing.

26

154. The City is an “aggrieved person” as defined by 42 U.S.C. § 3602(i) and has

27 suffered damages as a result of Wells Fargo’s conduct.

28
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1

155. The City’s damages include lost expenditures and use of resources to pursue fair

2 housing, tax revenues from properties diminished in value or abandoned, and the need to provide

3 increased municipal services in blighted neighborhoods resulting from foreclosures. The loss of
tax revenues at specific foreclosure sites and at closely neighboring properties in predominantly 4
minority neighborhoods of the City was a foreseeable and direct consequence of Wells Fargo’s 5
discriminatory lending practices. Likewise, the need to provide increased municipal services at 6 blighted foreclosure sites in predominantly minority neighborhoods of the City was a foreseeable
7 consequence that was fairly traceable to Wells Fargo’s discriminatory lending.

8

156. Wells Fargo’s policies and practices, as described herein, had the purpose and

9 effect of discriminating on the basis of race or national origin. These policies and practices were

10 intentional, willful, or implemented with reckless disregard for the rights of African-American

11 and Hispanic borrowers.

12

157. The City has substantial interest in preventing discriminatory lending that causes

disproportionately minority home foreclosures within its boundaries, in preventing segregated 13
areas where minority loans are more likely to foreclose, and in holding banks accountable for
14 damages arising from that discriminatory lending. Accordingly, the City’s interests in obtaining

15 injunctive relief to prevent such discrimination and in remedying the blight and recovering the

16 lost property taxes resulting from the disproportionately minority home foreclosures in Oakland

17 are directly related to ensuring “fair housing throughout the United States.”

18

158. In doing the acts herein alleged, Wells Fargo acted with oppression, fraud, malice,

19 and in reckless or willful disregard of the City’s rights, and Oakland therefore are entitled to

20 punitive damages in an amount according to proof at the time of trial.

SECOND CLAIM FOR RELIEF

21

(Violation of the California Fair Employment and Housing Act,

22

Gov’t Code §§ 12900, et seq.)

23

159. The City repeats and incorporates by reference all allegations contained in the

preceding paragraphs as if fully set forth herein. 24

160. FEHA seeks to prohibit discrimination on the basis of race and national origin

25 regarding the purchase of housing within California.

26

161. In contravention of that purpose, Wells Fargo’s acts, policies, and practices as

27 described constitute lending discrimination on the basis of race. Wells Fargo has targeted

28 residents of predominantly African-American and Hispanic neighborhoods in Oakland for

FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL
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Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 46 of 51

1 different treatment than residents of predominantly white neighborhoods in Oakland with respect

2 to mortgage lending. Wells Fargo has targeted residents of these neighborhoods for high-cost
3 loans without regard to their credit qualifications and without regard to whether they qualify for more advantageous loans, including prime loans. Wells Fargo has targeted residents of these
4 neighborhoods for increased interest rates, points, and fees, and for other disadvantageous loan
5 terms including, but not limited to, adjustable rates, prepayment penalties, and balloon payments.
6 Wells Fargo has targeted residents of these neighborhoods for unfair and deceptive lending
7 practices in connection with marketing and underwriting mortgage loans.

8

162. Wells Fargo’s acts, policies, and practices have had an adverse and

9 disproportionate impact on African-Americans and Hispanics and residents of predominantly

10 African-American and Hispanic neighborhoods in Oakland as compared to similarly situated
11 whites and residents of predominantly white neighborhoods in Oakland. This adverse and 12 disproportionate impact is the direct result of Wells Fargo’s policies of providing discretion to
loan officers and others responsible for mortgage lending; failing to monitor this discretion to 13
ensure that minority borrowers were placed in less expensive loan products for which they were 14
qualified when Wells Fargo had notice of widespread product placement disparities based on 15 race and national origin; giving loan officers and others responsible for mortgage lending large
16 financial incentives to issue loans to African-Americans and Hispanics that are costlier than
17 better loans for which they qualify; otherwise encouraging and directing loan officers and others

18 responsible for mortgage lending to steer borrowers into more expensive and higher risk loans

19 without regard for whether they qualify for less expensive loans; failing to properly underwrite

20 loans to minority borrowers despite having extensive analytical tools and data to perform this
task. This non-exhaustive list of policies has caused African-Americans and Hispanics and 21
residents of predominantly African-American and Hispanic neighborhoods in Oakland to receive 22
mortgage loans from Wells Fargo that are more expensive and have higher risk features than
23 mortgage loans given by Wells Fargo to similarly situated whites and residents of predominantly

24 white neighborhoods in Oakland and are more likely to result in damages to the City.

25

163. Wells Fargo’s residential lending-related acts, policies, and practices constitute

26 reverse redlining and redlining and violate FEHA:

27

28
FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL
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Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 47 of 51

1

(a) Discrimination on the basis of race and national origin in providing

2

financial assistance for the purchase of housing, in violation of California

3

Government Code § 12955(e); and

(b) Discrimination on the basis of race and national origin in making 4
available, or in the terms and conditions of, residential real estate-related 5
transactions, in violation of California Government Code § 12955(i).

6

164. Wells Fargo’s policies or practices are not justified by business necessity or

7 legitimate business interests.

8

165. Wells Fargo’s policies and practices are continuing.

9

166. The City is an “aggrieved person” as defined by Gov’t Code § 12989.1 and has

10 suffered damages as a result of Well Fargo’s conduct.

11

167. The City’s damages include lost tax revenues and the need to provide increased

12 municipal services. The loss of tax revenues at specific foreclosure sites and at closely neighboring properties in predominantly minority neighborhoods of the City was a foreseeable
13 consequence that was fairly traceable to Wells Fargo’s discriminatory lending. Likewise, the
14 need to provide increased municipal services at blighted foreclosure sites in predominantly
15 minority neighborhoods of the City was a foreseeable consequence that was fairly traceable to

16 Wells Fargo’s discriminatory lending. Finally, the need to divert funding and resources from

17 other City agencies, departments and funds to address these problems was a foreseeable

18 consequence that was fairly traceable to Wells Fargo’s discriminatory lending.

19

168. Wells Fargo’s policies and practices, as described herein, had the purpose and

20 effect of discriminating on the basis of race or national origin. These policies and practices were
intentional, willful, or implemented with reckless disregard for the rights of African-American 21
and Hispanic borrowers. 22
169. The City has substantial interest in preventing discriminatory lending that causes
23 disproportionately minority home foreclosures within its boundaries, in preventing segregated

24 areas where minority loans are more likely to foreclose, and in holding banks accountable for

25 damages arising from that discriminatory lending. Accordingly, the City’s interests in obtaining

26 injunctive relief to prevent such discrimination and in remedying the blight and recovering the

27 lost property taxes resulting from the disproportionately minority home foreclosures in Oakland 28 are directly related to ensuring “fair housing throughout the United States.”

FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL
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Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 48 of 51

1

170. In doing the acts herein alleged, Wells Fargo acted with oppression, fraud, malice,

2 and in reckless or willful disregard of the City’s rights, and Oakland therefore are entitled to

3 punitive damages in an amount according to proof at the time of trial.

DEMAND FOR JURY TRIAL 4
171. Plaintiff hereby demands a trial by jury in this action on all issues so triable. 5
PRAYER FOR RELIEF

6

WHEREFORE, the City respectfully prays that the Court grant it the following relief:

7

A. Enter a declaratory judgment that the foregoing acts, policies, and practices of

8 Wells Fargo violate the FHA 42 U.S.C. §§ 3604 and 3605 and California Government Code

9 § 12900, et seq.;

10

B. Enter a permanent injunction enjoining Wells Fargo and its directors, officers,

11 agents, and employees from continuing the discriminatory conduct described herein, and

12 directing Wells Fargo and its directors, officers, agents, and employees to take all affirmative

steps necessary to remedy the effects of the discriminatory conduct described herein, and to 13
prevent additional instances of such conduct or similar conduct from occurring in the future,
14 pursuant to 42 U.S.C. § 3613(c)(1) and California Government Code § 12989.2;

15

C. Award compensatory damages to the City in an amount to be determined by the

16 jury that would fully compensate the City of Oakland for its injuries caused directly by the

17 conduct of Wells Fargo alleged herein, pursuant to 42 U.S.C. § 3613(c)(1) and California

18 Government Code § 12989.2;

19

D. Award punitive damages to the City in an amount to be determined by the jury

20 that would punish Wells Fargo for the willful, wanton, and reckless conduct alleged herein, and
that would effectively deter similar conduct in the future, pursuant to 42 U.S.C. § 3613(c)(1) and 21
California Government Code § 12989.2; 22
E. Award the City its reasonable attorneys’ fees and costs, pursuant to 42 U.S.C.
23 § 3613(c)(2) and California Government Code § 12989.2;

24

F. Require payment of pre-judgment interest on monetary damages; and

25

G. Order such other relief as this Court deems just and equitable.

26 //

27 // 28 //

FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL
- 48 -

Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 49 of 51

1 2 Dated: August 2, 2017

OAKLAND CITY ATTORNEY

3

By: (-) Barbara J. Parker

4

Barbara J. Parker

5 Dated: August 2, 2017
6
7
8 Dated: August 2, 2017
9
10
11 Dated: August 2, 2017
12
13
14

PERETZ & ASSOCIATES
By: (-) Yosef Peretz Yosef Peretz
TRIAL & APPELLATE RESOURCES, P.C.
By: (-) Joel Liberson Joel Liberson
CENTER FOR CONSTITUTIONAL LITIGATION
By: (-) Robert S. Peck Robert S. Peck (pro hac vice)

15

16

17

18

19

20

21

22

23

24

25

26

27

28
FIRST AMENDED COMPLAINT AND DEMAND FOR JURY TRIAL
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Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 50 of 51
EXHIBIT A

Case 3:15-cv-04321-EMC Document 104 Filed 08/15/17 Page 51 of 51
Selected Foreclosures of Wells Fargo Properties 2007‐2013

Address 836 31ST ST

First

Assessed Value as of January 1st

Foreclosure

(https://www.acgov.org/ptax_pub_app/RealSearch.do)

Event Date 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2/7/2008 $320,000 $475,000 $130,000 $129,674 $130,703 $133,457 $136,265 $136,915 $139,790 $142,027 $145,006

2208 50TH AVE 12/11/2008 $465,000 $380,000 $325,000 $224,800 $226,544 $231,215 $235,978 $237,080 $241,954 $245,750 $250,802

2681 79TH AVE 1/30/2012 $274,217 $279,840 $75,000 $75,000 $83,000 $90,000 $68,952 $69,264 $70,648 $71,724 $73,159

7827 WELD ST 3/2/2009 $462,200 $414,000 $125,000 $125,000 $102,000 $104,040 $106,120 $106,601 $108,731 $110,388 $112,596

4400 FLEMING 1/10/2008
AVE

$575,000 $586,500 $257,500 $256,888 $258,823

$263,998

$269,277

$270,498

$275,900

$280,105

$285,705

1

 
 Case 3:15-cv-04321-EMC Document 147 Filed 06/15/18 Page 1 of 28

United States District Court Northern District of California

1

2

3

4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6

7 THE CITY OF OAKLAND,

Case No. 15-cv-04321-EMC

8

Plaintiff,

9

v.

10 WELLS FARGO BANK, N.A., et al.,

11

Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS
Docket No. 107

12

13

I.

INTRODUCTION

14

The City of Oakland (“Oakland”) brings this suit against Wells Fargo & Co. and Wells

15 Fargo Bank, N.A. (herein collectively “WF”), alleging violations of the Fair Housing Act of 1968

16 (“FHA”), 42 U.S.C. §§ 3601, et seq., and the California Fair Employment and Housing Act

17 (“FEHA”), Cal. Gov. Code §§ 12900, et seq. Specifically, it alleges that WF offered mortgage

18 loans to Oakland residents on a race-discriminatory basis, constituting both intentional and

19 disparate-impact discrimination. This discrimination allegedly caused high rates of foreclosures

20 which heavily impacted minority borrowers and harmed Oakland in various ways. In light of new

21 guidance from the Supreme Court, see Bank of America Corp. v. City of Miami, 137 S. Ct. 1296

22 (2017), WF brings this motion to dismiss primarily challenging Oakland‟s ability to demonstrate

23 proximate cause.

24

Oakland claims it suffered three kinds of injuries resulting from WF‟s unlawful loan

25 practices: (1) decreases in property-tax revenues, (2) increases in municipal expenditures, and (3)

26 neutralized spending in Oakland‟s fair-housing programs. The motion is DENIED as to claims

27 based on the first injury. The motion is also DENIED as to claims based on the second injury

28 insofar as those claims seek injunctive and declaratory relief, but they are DISMISSED

Case 3:15-cv-04321-EMC Document 147 Filed 06/15/18 Page 2 of 28

United States District Court Northern District of California

1 WITHOUT PREJUDICE to the extent they seek damages. Oakland‟s claims based on the third

2 injury are DISMISSED WITHOUT PREJUDICE.

3

II. FACTUAL BACKGROUND

4

The First Amended Complaint alleges the following.

5 A. Discrimination

6

WF discriminated against racial minorities in both the origination of mortgage loans and

7 loan refinancing decisions. Docket No. 104 (“FAC”) ¶ 3. In doing so, WF engaged in both

8 intentional discrimination and disparate-impact discrimination. Id. ¶ 4.

9

As to Oakland‟s intentional-discrimination claim, Oakland alleges that “Wells Fargo‟s

10 employees intentionally steered minority borrowers into high cost loans because of their race.” Id.

11 ¶ 31. Additionally, WF employees “used race as a factor in determining” what loans to offer

12 borrowers. Id. ¶ 32. For example, WF steered minority borrowers into adjustable-rate loans

13 instead of fixed-rate loans, failed to explain loan terms, and failed to provide product brochures in

14 Spanish. Id. ¶¶ 33-37. Minority borrowers were “particularly susceptible” to not understanding

15 loan terms. Id. ¶ 34. WF targeted minorities for disadvantageous loan terms regardless of their

16 qualifications. Id. ¶ 148.

17

As to the disparate-impact claim, Oakland alleges that WF engaged in various practices

18 which, though facially neutral, “created an „arbitrary, artificial, and unnecessary‟ barrier to fair

19 housing opportunities” for minorities, id. ¶ 39, and “contributed to the adverse borrowing terms

20 experienced by minority borrowers.” Id. ¶ 41. These practices primarily consisted of giving loan

21 officers discretion and incentivizing them to offer loans that were costlier and entailed risks

22 beyond which borrowers were qualified to handle. See id. ¶¶ 39, 48, 53. In trying to sell such

23 loans, “[l]oan officers frequently use[d] race . . . as [a] prox[y] for their ability to sell more

24 expensive loan products.” Id. ¶ 47. In part, this targeting was because “minority borrowers did

25 not always appear to understand” the loans‟ terms. Id. ¶ 36. WF loan officers sold expensive

26 loans to minority borrowers more frequently than they did to similarly situated white borrowers.

27 Id. ¶¶ 44-48, 50, 62, 67. Despite this disparity and due to “[s]ystematic problems with Wells

28 Fargo‟s culture, employment practices, and internal controls,” id. ¶ 58; see id. ¶¶ 53-61, WF

2

Case 3:15-cv-04321-EMC Document 147 Filed 06/15/18 Page 3 of 28

United States District Court Northern District of California

1 allegedly failed to monitor and correct loan officers‟ actions. Id. ¶ 50.

2 B. Foreclosures

3

As a result of WF‟s loan practices, minority borrowers from WF were more likely than

4 similarly situated white borrowers to have a high-cost, high-risk (“HCHR”) loan which Oakland

5 calls “discriminatory loan[s].” Id. ¶ 68. These loans “have higher costs and risk features than

6 more favorable and less expensive loans for which the borrower was eligible and which are

7 regularly issued to similarly situated white borrowers.” Id. ¶ 1. These HCHR loans include “loans

8 that are rate-spread reportable under the Home Mortgage Disclosure Act, subprime loans, negative

9 amortization loans, „No-Doc‟ loans, balloon payments, and/or „interest only‟ or teaser loans that

10 also carry a prepayment penalty.” Id. ¶ 12 n.5. A regression analysis shows that African

11 American borrowers are 2.583 times more likely to receive HCHR loans than a similarly situated

12 white borrower, while Latino borrowers are 3.312 times more likely to receive such loans.

13 Id. ¶ 68. That analysis controlled for a variety of independent factors such as credit score, see id.

14 ¶ 92 (listing factors controlled for), but it does not control for factors such as job loss, medical 15 hardship, or divorce. Id. ¶ 93.1

16

Because HCHR loans are more expensive and riskier than normal-cost, normal-risk loans,

17 borrowers of HCHR loans are more likely to default and enter foreclosure. Id. ¶ 88; see also id.

18 ¶ 68 (regression analysis shows HCHR loans were more likely to result in foreclosure than non-

19 HCHR loans). HCHR loans from WF were concentrated in minority-heavy neighborhoods. Id.

20 ¶ 70. Hence, those neighborhoods have suffered from a higher rate of foreclosure than that in

21 white-heavy neighborhoods. Id. ¶¶ 73, 82, 87-88.

22 C. Injuries

23

These foreclosures—as well as vacancies and “short sales” occurring prior to the

24 completion of foreclosure—injured Oakland in three ways. First, they depressed the property

25 value of the foreclosed homes and nearby properties. Id. ¶¶ 110-11, 115. The lower property

26

27

1 Oakland also alleges that borrowers in minority-heavy neighborhoods were more likely to receive an undesirable loan than borrowers in white-heavy neighborhoods, though Oakland does

28

not plead that such borrowers were similarly situated financially or of different racial groups. FAC ¶ 70.

3

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United States District Court Northern District of California

1 values then resulted in lower property-tax revenues for Oakland, injuring the city financially.

2 Id. ¶¶ 111-12.

3

Second, foreclosed properties resulted in a variety of municipal problems, such as

4 “vagrancy, criminal activity, fire hazards, and threats to public health and safety.” Id. ¶¶ 131-33.

5 Oakland expended resources to remedy these problems, further injuring the city. Id. ¶¶ 130-33,

6 135-39. These problems further depressed neighborhood property values and therefore had an

7 additional impact on property taxes. Id. ¶ 134.

8

Third, disproportionately higher rates of foreclosure for minority borrowers resulted in a

9 disproportionate number of minorities losing their homes; this “impair[ed] the City‟s goals” of

10 racial integration and non-discrimination in housing, id. ¶¶ 103-07, and “adversely impact[ed] the

11 City‟s numerous programs” in pursuit of those goals, id. ¶¶ 103-07, “neutralizing” spending on

12 those programs. Id. ¶¶ 3, 17.

13

Oakland calls the first two injuries “economic injuries” and the third injury “non-economic

14 injuries.” See id. at ¶¶ 99-139.

15

III. BANK OF AMERICA V. MIAMI

16

The principal question before the Court is whether Oakland‟s injuries were proximately

17 caused by WF‟s actions under the FHA in light of the Supreme Court‟s recent decision addressing 18 the FHA‟s standard for proximate cause in Bank of America v. Miami, 137 S. Ct. 1296.2 In

19 Miami, the City of Miami sued Bank of America and WF under the FHA for intentional and

20 disparate-impact racial discrimination in mortgage lending. Miami alleged that the banks issued

21 riskier, less favorable loans to black and Latino borrowers as compared to similarly situated white

22 borrowers. Miami claimed that this discrimination damaged its racial composition and goals for

23 integration and caused a high number of foreclosures, which reduced Miami‟s property taxes and

24 raised its municipal costs. Two questions were before the Court: (1) whether Miami had

25

26

2 Because the FEHA is “substantially equivalen[t]” to the FHA, absent an indication from the state courts to the contrary, the conclusion as to the FEHA claim tracks that of the FHA claim.

27

Sisemore v. Master Fin., Inc., 151 Cal. App. 4th 1386, 1420 (2007); see also Walker v. City of Lakewood, 272 F.3d 1114, 1131 n.8 (9th Cir. 2001) (holding that “we apply the same standards to

28

FHA and FEHA claims” (citing Sada v. Robert F. Kennedy Med. Ctr., 56 Cal. App. 4th 138, 150 n.6 (1997)).

4

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United States District Court Northern District of California

1 prudential standing (also called statutory standing) to bring suit under the FHA, and (2) whether

2 Miami‟s injuries were proximately caused by the discriminatory lending, a substantive element of

3 an FHA claim. Id. at 1301.

4

As to the first question, the Court noted that prudential standing required the plaintiff‟s

5 claim to at least “arguably” fall within the “zone of interests protected by the law invoked.” Id. at

6 1302 (quoting Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377, 1388

7 (2014)). The FHA‟s “zone of interests” turns on the statutory text which permits any person

8 “aggrieved” by a discriminatory housing practice to bring suit. Id. at 1303 (quoting 42 U.S.C.

9 § 3613(a)). The Court had previously held that an aggrieved person included all who had Article

10 III standing, but Bank of America argued that those decisions were overbroad. Id. (quoting

11 § 3602(i)). The Court held that even if prudential standing did not extend to all those with Article

12 III standing, Miami‟s property-tax and municipal-spending injuries nonetheless fell within the

13 FHA‟s zone of interest and satisfied prudential standing. See id. at 1305 (relying on Gladstone

14 Realtors v. Village of Bellwood, 441 U.S. 91, 95, 110-11 (1979), which held that a village had

15 prudential standing under the FHA where realtors‟ steering practices caused the village to lose

16 racial balance and threatened to decrease property taxes). Though not expressed in the opinion, it

17 follows that a finding of prudential standing perforce establishes Article III standing.

18

As for the question of proximate cause, the Court first noted that claims for damages under

19 the FHA must be proximately caused by the unlawful conduct. See id. at 1305. It noted that “[i]n

20 the context of the FHA, foreseeability alone does not ensure the close connection that proximate

21 cause requires.” Id. at 1306. Because “[t]he housing market is interconnected with economic and

22 social life,” a violation of the FHA would be expected to cause “ripples of harm” that spread

23 beyond a defendant‟s misconduct. Id. “Nothing in the statute suggests that Congress intended to

24 provide a remedy wherever those ripples travel.” Id. In assessing proximate cause under the

25 FHA, the “[p]roximate-cause analysis is controlled by the nature of the statutory action.” Id. at

26 1305. Because “[a] damages claim under the [FHA] is analogous to a number of tort actions

27 recognized at common law,” where the Court “ha[s] repeatedly applied directness principles,”

28 “proximate cause under the FHA requires „some direct relation between the injury asserted and the

5

Case 3:15-cv-04321-EMC Document 147 Filed 06/15/18 Page 6 of 28

United States District Court Northern District of California

1 injurious conduct alleged.‟” Id. at 1306 (quoting Holmes v. Sec. Investor Protection Corp., 504

2 U.S. 258, 268 (1992)). Rephrased, “the general tendency” in suits for damages under statutes

3 analogous to common-law torts “is not to go beyond the first step.” Id. (quoting Hemi Grp., LLC

4 v. City of New York, 559 U.S. 1, 10 (2010)). The “first step” is measured beginning with the

5 defendant‟s unlawful conduct. See id. (quoting Lexmark, 134 S. Ct. at 1390). “What falls within

6 that „first step‟ depends in part on the „nature of the statutory cause of action‟ and an assessment

7 „of what is administratively possible and convenient.‟” Id. (citations omitted) (quoting Lexmark,

8 134 S. Ct. at 1390, and Holmes, 504 U.S. at 268).

9

Notwithstanding the fact that the claim of causation leading to Miami‟s asserted injuries

10 clearly went beyond the “first step,” the Court, rather than ordering dismissal, remanded the case

11 for further analysis of proximate cause. See id. at 1301-02, 1306.

12

IV. APPLICATION OF BANK OF AMERICA V. MIAMI

13

In the instant case, the FAC alleges that WF pushed HCHR loans onto minority borrowers

14 at a higher frequency than onto whites. Minorities accepted these loans at higher rates than

15 whites. When these borrowers ran into financial hardship (in part because of the higher cost and

16 risk of these loans), WF refused to refinance minority borrowers‟ loans on favorable terms.

17 Minority borrowers, having higher loan payments and less flexible terms, defaulted more often

18 than white borrowers and suffered foreclosure at higher rates than white borrowers. As noted

19 above, Oakland alleges three consequences for the City: (1) foreclosures made the affected

20 properties and neighboring properties less desirable, and their property values dropped, causing

21 Oakland to collect less property tax; (2) criminals, litterers, and others who caused municipal ills

22 were more likely to gather around the foreclosed property, thus causing Oakland to expend law

23 enforcement and other resources to ameliorate these problems; (3) Oakland‟s goals and spending

24 in programs for non-discrimination in housing were undermined. WF argues Oakland fails

25 adequately to allege proximate cause.

26

Oakland asserts two threshold arguments to avoid the thrust of Miami‟s proximate cause

27 analysis. First, Oakland argues that it must by definition satisfy proximate cause under the FHA,

28 because it clearly has standing under the FHA. “It would be illogical for Oakland to have standing

6

Case 3:15-cv-04321-EMC Document 147 Filed 06/15/18 Page 7 of 28

United States District Court Northern District of California

1 under the FHA to pursue lost property taxes and increased municipal expenses, but still be unable

2 to state a claim for those very same injuries under the FHA‟s causation standard.” Docket No. 116

3 (“Opp.”) at 10; see also id. at 8. For support, Oakland cites Gladstone, 441 U.S. at 111, which

4 held that a municipality had prudential standing to sue under the FHA where real estate brokers‟

5 steering practices disrupted the municipality‟s “racial balance and stability” and thereby

6 threatened to reduce property values and tax receipts. Miami reaffirmed Gladstone, noting that

7 prudential standing encompasses anyone who even “arguably fall[s] within the zone of interests”

8 protected by the relevant statute. Miami, 137 S. Ct. at 1309-10. In the case of the FHA, prudential

9 standing is defined “as broadly as is permitted by Article III,” so as to include “„any person who

10 . . . claims to have been injured by a discriminatory housing practice.‟” Id. (quoting 42 U.S.C.

11 § 3602(i)).

12

But while the Court held the City of Miami had standing under the FHA, it also applied the

13 standard for proximate cause on the substantive FHA claim and remanded the case for further

14 analysis. Standing is a separate issue from proximate cause. Miami clearly contemplated the

15 possibility that one might satisfy prudential standing yet fall short on proximate cause. The

16 former does not per se suffice to establish the latter as Oakland seems to suggest.

17

Second, Oakland proposes a standard for proximate cause: “the proper proximate causation

18 standard for the FHA should be a traditional „but-for‟ causation test” whereby “the alleged

19 unlawful conduct [is] the but-for cause of the alleged injury and . . . the injury [is] reasonably

20 foreseeable from the unlawful conduct.” Opp. at 12. Oakland contends this standard is consistent

21 with Miami‟s holding that “foreseeability alone” is insufficient. Id. (quoting Miami, 137 S. Ct. at

22 1305). Oakland is mistaken. But-for cause is a predicate of proximate cause; it does not add to

23 proximate cause. See Paroline v. United States, 134 S. Ct. 1710, 1722 (2014). Miami implicitly

24 rejected reliance on cause-in-fact in assessing proximate cause, 137 S. Ct. at 1306 (liability does

25 not extend to every “ripple[] of harm”), and held that foreseeability alone is not the touchstone for

26 proximate cause. Oakland‟s proposed formulation disregards that holding.

27

Oakland‟s reliance on Paroline v. United States, 134 S. Ct. 1710 (2014), and Goodyear

28 Tire & Rubber Co. v. Haeger, 137 S. Ct. 1178, 1186-87 (2017), to support its argument is

7

Case 3:15-cv-04321-EMC Document 147 Filed 06/15/18 Page 8 of 28

United States District Court Northern District of California

1 misplaced. In Paroline, the Court cast causation in fact as the “threshold requirement” to the

2 proximate cause analysis. 134 S. Ct. 1722. It specifically pointed out that proximate cause was

3 “distinct from mere causation in fact.” Id. In Goodyear, the Court held that certain judicial

4 sanctions such as attorney‟s fees must be “compensatory rather than punitive in nature.” 137 S.

5 Ct. at 1186. Thus, only those fees caused by the misconduct may be awarded. This requires the

6 court to establish a “causal link . . . between the litigant‟s misbehavior and the legal fees paid by

7 the opposing party.” Id. The required causal link in that context was the but-for standard, see id.

8 at 1187; Goodyear did not analyze proximate causation as a requisite to recovery of damages

9 under tort law.

10

Oakland also cites CSX Transportation, Inc. v. McBride, 564 U.S. 685, 700 (2011). There,

11 the Supreme Court held that the relevant causation standard for the Federal Employees Liability

12 Act (“FELA”) was whether the conduct “played any part” in causing the injury—a sort of but-for

13 standard. However, that was because FELA‟s standard “was determined by the statutory phrase

14 „resulting in whole or in part,‟” a “straightforward phrase” that was “incompatible” with

15 determinations of “whether a particular cause was sufficiently „substantial‟ to constitute a

16 proximate cause.” Id. at 696. Importantly, FELA “does not incorporate „proximate cause‟

17 standards developed in nonstatutory common-law tort actions.” Id. at 694 (internal quotation

18 marks omitted). In contrast, the Court in Miami held that the FHA does incorporate a proximate

19 cause standard that is explicitly drawn from common-law tort. See Miami, 137 S. Ct. at 1306.

20 McBride is therefore inapposite.

21

Oakland argues that the FHA‟s remedial purpose counsels for a more lenient proximate-

22 cause standard here than in Holmes and the other RICO cases. See Opp. at 14. But a similar

23 argument was rejected in Holmes. In Holmes, “SIPC[] reli[ed] on the congressional admonition

24 that RICO be „liberally construed to effectuate its remedial purposes,‟” but that “does not deflect

25 our analysis.” 503 U.S. at 274. “There is . . . nothing illiberal in our construction: We hold not

26 that RICO cannot serve to right the conspirators‟ wrongs, but merely that the . . . customers, or

27

28

8

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1 SIPC in their stead, are not proper plaintiffs.”3 Id. In other words, even if a cause of action is

2 remedial in nature, that action must be brought by the “proper plaintiff.” As Miami indicates, the

3 same is true with the FHA. Although the legislative history of the FHA reveals Congress‟

4 concerns with the ripples of harm visited upon cities by housing discrimination, including a

5 “[d]eclining tax base, poor sanitation, [and] loss of jobs,” 114 Cong. Rec. 2274 (Feb. 6, 1968)),

6 the Supreme Court nonetheless cautioned that “[n]othing in the statute suggests that Congress

7 intended to provide a remedy wherever those ripples travel.” Miami, 137 S. Ct. at 1306.

8

Hence, Oakland‟s general arguments for a qualitatively different measure of proximate

9 cause cannot be sustained. The Court must therefore ascertain the proper parameters of proximate

10 cause, grounded in common law. Miami‟s citation of prior proximate-cause cases provides some

11 but not conclusive guidance. See 137 S. Ct. at 1306.

12

V. ECONOMIC INJURIES

13 A. Length of the Causal Chain

14

In establishing the applicability of proximate cause, Miami cites three Supreme Court cases

15 that interpreted and applied the directness requirement: Holmes v. Securities Investor Protection

16 Corp., 503 U.S. 258 (1992), Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006), and Hemi

17 Group LLC v. City of New York, 559 U.S. 1 (2010).

18

In Holmes, the plaintiff was Securities Investor Protection Corporation (“SIPC”), a private

19 corporation charged by statute to reimburse customers of registered broker-dealers who were

20 unable to meet their financial obligations. Holmes, 503 U.S. at 261-62. SIPC sued Holmes for

21 RICO violations, alleging that Holmes engaged in stock-market fraud, which, when uncovered,

22 caused stock prices to drop. The price drop resulted in financial difficulties for two registered

23 broker-dealers, which liquidated. As a result, the broker-dealers were not able to meet their

24 obligations to their customers, who then sought reimbursement from SIPC. The Court held RICO

25

26

3 The Holmes Court additionally expresses its concern that the remedial purpose of RICO would actually be “hobbled” by a broad proximate cause, because it would cause “massive and complex

27

damages litigation[, which would] not only burde[n] the courts, but [would] also undermin[e] the effectiveness of treble-damages suits.” 503 U.S. at 274 (alterations in original) (quoting

28

Associated Gen. Contractors of Cal. v. Cal. State Council of Carpenters, 459 U.S. 519, 545 (1983)).

9

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1 borrowed from the common law in establishing the element of proximate cause. See id. at 267-68.

2 The proximate-cause question on appeal was whether there was “some direct relation” between

3 Holmes‟ fraud and the harm to the customers of broker-dealers (which SIPC had to reimburse).

4 Id. at 268. In this inquiry, “a plaintiff who complained of harm flowing merely from the

5 misfortunes visited upon a third person by the defendant‟s acts was generally said to stand at too

6 remote a distance to recover.” Id. at 268-69. Given this, “the link is too remote between the stock

7 manipulation alleged and the customers‟ harm, being purely contingent on the harm suffered by

8 the broker-dealers. That is, the conspirators have allegedly injured these customers only insofar as

9 the stock manipulation first injured the broker-dealers and left them without the wherewithal to

10 pay customers‟ claims.” Id. at 271. This fact put the customers‟ (and SIPC‟s) harm “beyond the

11 first step” and failed to satisfy the directness requirement. See id. at 271-72 (quoting Associated

12 Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 534 (1983)).

13

In Anza, mill-products purveyor Ideal Steel Supply sued its primary competitor National

14 Steel Supply for RICO violations. 547 U.S. at 453-54. Ideal alleged that National engaged in tax

15 fraud through the mails and wires and used the proceeds of the fraud to lower its prices. Ideal, as

16 National‟s competitor, was harmed by National‟s lower prices. The mail and wire fraud was the

17 alleged RICO violation by National. The proximate-cause question was whether National‟s fraud

18 proximately caused Ideal‟s competitive harm. The Court‟s analysis focused on the divergence

19 between the unlawful conduct and the conduct that harmed the plaintiff. While acknowledging

20 that Ideal suffered harm when National engaged in the fraud, “[t]he cause of Ideal‟s asserted

21 harms . . . is a set of actions (offering lower prices) entirely distinct from the alleged RICO

22 violation (defrauding the State).” Anza, 547 U.S. at 458. “National . . . could have lowered its

23 prices for any number of reasons unconnected to the asserted pattern of fraud. . . . Its lowering of

24 prices in no sense required it to defraud the tax authority.” Id. at 458-59 (listing other reasons why

25 National might have lowered its prices). “Likewise, the fact that a company commits tax fraud

26 does not mean the company will lower its prices . . . .” Id. at 458-59 (listing uses to which the

27 fraudulently retained money might have been employed). The harm suffered by Ideal resulted

28 from lower prices, an arguably incidental effect which did not necessarily flow from the RICO

10

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1 fraud.

2

Hemi applied and extended Anza in another RICO case. 559 U.S. at 1. In Hemi, the City

3 of New York had imposed taxes on sales of cigarettes. Out-of-state cigarette sellers were not

4 required to collect and remit the tax themselves; that onus was on the purchasers. Instead, sellers

5 were required to file a report with a New York state agency detailing each purchase by state

6 residents. New York State would then forward the information to New York City, which would

7 then be able to locate residents who had failed to pay the tax. Id. 559 U.S. at 5-6. New York City

8 sued Hemi, an out-of-state cigarette seller, alleging that Hemi did not file the required reports with

9 the state agency and thereby caused the City to lose significant sums in uncollectable tax revenue.

10 Id. Using Anza‟s analysis, the Court held that the City‟s injury failed the directness requirement.

11 Id. at 10. “The conduct directly responsible for the City‟s harm was the customers‟ failure to pay

12 their taxes. And the conduct constituting the alleged fraud was Hemi‟s failure to file . . . reports.”

13 Id. at 11. “Thus, as in Anza, the conduct directly causing the harm” was “distinct” from the

14 unlawful conduct. Id. Hemi found that this would have been sufficient to destroy proximate

15 cause, but the conduct was even more remote from the injury, because “the City‟s theory of

16 liability rests not just on separate actions, but separate actions carried out by separate parties”—

17 the customer and Hemi. Id. Worse still, these parties‟ actions directly injured different entities:

18 Hemi‟s action directly injured the State, to whom his obligation to file reports was owed, while the

19 customers‟ actions directly harmed the City, stretching the analysis to include a “fourth party.” Id.

20 The Hemi Court did not find directness, and proximate cause was not satisfied.

21

The Ninth Circuit followed the general proximate cause framework focusing on the nature

22 and quality of the chain of causation. Canyon Cty. v. Syngenta Seeds, Inc., 519 F.3d 969 (9th Cir.

23 2008). In Canyon County, the county sued four companies and an individual for hiring and

24 harboring undocumented immigrants in the county, which allegedly imposed health-care and law-

25 enforcement expenses on the county. Similar to the cases above, the Ninth Circuit found that the

26 unlawful conduct did not directly cause the injury. “[J]ust as in Anza, the cause of the plaintiff‟s

27 asserted harms is a set of actions (increased demand by people within Canyon County for public

28 health care and law enforcement services) entirely distinct from the alleged RICO violation (the

11

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1 defendants‟ knowing hiring of undocumented workers).” Id. at 982.

2

Three district court decisions have applied Miami in finding government injuries similar to

3 those asserted here too indirect to establish proximate cause. See Cty. of Cook v. HSBC N. Am.

4 Holdings Inc., No. 14 C 2031, 2018 WL 2431987 (N.D. Ill. May 30, 2018); Cty. of Cook v. Bank

5 of Am. Corp., No. 14 C 2280, 2018 WL 1561725 (N.D. Ill. Mar. 30, 2018); Cty. of Cook v. Wells

6 Fargo & Co., No. 14 C 9548, 2018 WL 1469003 (N.D. Ill. Mar. 26, 2018). For instance, in

7 County of Cook v. Wells Fargo, Cook County alleged that WF targeted minority borrowers in the

8 county for HCHR loans, resulting in foreclosures that, inter alia, decreased the county‟s property-

9 tax revenue, increased municipal expenditures related to crime and blight, and increase the

10 county‟s costs for processing foreclosures. 2018 WL 1469003, at *5, *9. The court held that the

11 property-tax and municipal-expenditure injuries involved too many intervening factors such that

12 proximate cause was not satisfied. But it also held that the increased foreclosure processing costs

13 “fall[] within the first step” and satisfy proximate cause, “despite running through an „intervening

14 link of injury‟ to borrowers.” Id. at *5 (quoting Lexmark Int’l, Inc. v. Static Control Components,

15 Inc., 134 S. Ct. 1377, 1394 (2014)). This is because “foreclosures . . . necessarily require[] the

16 expenditure of County funds,” id. at *6, in order to “post[] foreclosure and eviction notices,

17 serv[e] foreclosure summonses, execut[e] evictions, and process[] foreclosure suits.” Id. at *5.

18 And while the court acknowledged that it could be difficult to determine the number of

19 foreclosures attributable to the discrimination, statistical analysis could well overcome that hurdle.

20 See id. at *7, *8.

21

As recognized by County of Cook v. Wells Fargo, the fact that an injury “runs through a

22 separate injury” to a third party “does not by itself require dismissal on proximate cause grounds.”

23 Id. at *6. For instance, in Lexmark, 134 S. Ct. 1377, Static Control brought a counterclaim against

24 Lexmark for false advertising in violation of the Lanham Act. Lexmark sold toner cartridges and

25 competed with remanufacturers who refurbished used cartridges for sale. Static Control produced

26 parts for remanufacturers‟ use in the refurbishment process. Static Control alleged, inter alia, that

27 Lexmark warned remanufacturers that it was illegal to refurbish Lexmark cartridges and that this

28 caused remanufacturers and therefore Static Control to lose sales. On appeal, the Supreme Court

12

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1 held that proximate cause was met. In doing so, it addressed two points of attenuation: Static

2 Control‟s harm was contingent on the harm to remanufacturers, which in turn was contingent on

3 the harm to consumers. As to the first point of attenuation, the Court chose to depart from the

4 “general tendency not to stretch proximate causation beyond the first step,” because there was

5 “something very close to a 1:1 relationship” between the harm suffered by the remanufacturers

6 and Static Control. Id. at 1394 (internal quotation marks omitted) (quoting Holmes, 503 U.S. at

7 271). This 1:1 relationship arose because the parts manufactured by Static Control “both (1) were

8 necessary for, and (2) had no other use than, refurbishing Lexmark toner cartridges.” Id. “[I]f the

9 remanufacturers sold 10,000 fewer refurbished cartridges because of Lexmark‟s false advertising,

10 then it would follow more or less automatically that Static Control sold 10,000 fewer microchips

11 for the same reason, without the need for any „speculative . . . proceedings‟ or „intricate, uncertain

12 inquiries.‟” Id. (quoting Anza, 547 U.S. at 459-60). There was not the type of “discontinuity” that

13 “ordinarily” exists between the injury to a direct victim and the injury to an indirect victim. Id.

14 Under this “relatively unique” circumstance, “the remanufacturers are not „more immediate

15 victim[s]‟ than Static Control.” Id. (alteration in original) (quoting Bridge v. Phoenix Bond &

16 Indem. Co., 553 U.S. 639, 658 (2008)). As to the fact that “all commercial injuries from false

17 advertising are derivative of those suffered by consumers,” the Court was clear that “the

18 intervening step of consumer deception is not fatal to the showing of proximate cause” because 19 “the Lanham Act authorizes suit only for commercial injuries.” Id. at 1391.4

20 B. Holmes Factors

21

In addition to the length of the causal chain, Holmes examined three factors that bear on

22 proximate cause: (1) the difficulty of “ascertain[ing] the amount of a plaintiff‟s damages

23 attributable to the [unlawful conduct], as distinct from other, independent factors,” (2) whether

24

25

4 Oakland‟s citation of Paroline v. United States, 134 S. Ct. 1710 (2014), as a case in which the chain of causation was long yet satisfied proximate cause is misplaced. Opp. at 15. The unlawful

26

conduct at issue in Paroline was possession of child pornography; mere possession of child pornography, even without viewing, could inflict emotional distress on the victim, given the

27

victim‟s loss of control and autonomy. Further, as in Lexmark, possession of child pornography is “both (1) . . . necessary for, and (2) ha[s] no other use than” viewing of the material. Lexmark,

28

134 S. Ct. at 1394. And the victim‟s knowledge of the possession and viewing of the pornography is inherently implicit in the filing of the suit. Paroline‟s causal chain was therefore direct.

13

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1 permitting the suit to proceed “would force courts to adopt complicated rules apportioning

2 damages among plaintiffs at different levels of injury from the violative acts, to obviate the risk of

3 multiple recoveries,” and (3) whether the “general interest in deterring injurious conduct” justifies

4 grappling with these complex issues, accounting for the extent to which more directly injured

5 victims can “generally be counted on to vindicate the law.” Holmes, 503 U.S. at 269. These

6 factors were the “motivating principle[s]” for the directness requirement in Holmes, and appear to

7 function as a cross check on the analysis of the length of the causal chain. See Anza, 547 U.S. at

8 458-60; Canyon Cty., 519 F.3d at 982-83.

9

In Holmes, all three factors cut against a finding of proximate cause. On the first factor,

10 allowing the suit to move forward would require the district court to determine to what extent the

11 broker-dealers‟ inability to pay their customers “was the result of the alleged conspiracy to

12 manipulate, as opposed to, say, the broker-dealers‟ poor business practices or their failures to

13 anticipate developments in the financial markets.” 503 U.S. at 273. Even if this calculation could

14 be done, under the second factor, “the district court would then have to find some way to

15 apportion the possible respective recoveries by the broker-dealers and the customers.” Id. As to

16 the third factor, directly injured broker-dealers could be counted on to bring suit to vindicate the

17 law. See id. All three factors therefore militated against proximate cause.

18

In Anza, the Holmes factors also confirmed the Court‟s finding of no proximate cause. The

19 corporate plaintiff had alleged that it lost sales because its competitor—the defendant—lowered its

20 prices due to tax fraud. As to the first Holmes factor, the Court noted that the defendant “could

21 have lowered its prices for any number of reasons unconnected to the asserted pattern of fraud,”

22 and that the plaintiff‟s lost sales could be due to “many reasons.” 547 U.S. at 458-59. Calculating

23 the portion of price drop due to the fraud and then the portion of the lost sales due to the price drop

24 would be a “speculative” and “complex assessment,” and the directness requirement was “meant

25 to prevent these types of intricate, uncertain inquiries.” Id. at 459-60. The third Holmes factor

26 also counseled against finding proximate cause in Anza, because the state, being the victim of the

27 tax fraud, could be expected to vindicate the law. See id. at 460. As for the second factor, there

28 was no “appreciable risk of duplicative recoveries,” but that was not sufficient to establish

14

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1 proximate cause. Id. at 459.

2

The Holmes factors also indicated that proximate cause was not satisfied in Canyon

3 County. As for the first factor, the difficulty of attributing the county‟s damages to the

4 employment of unauthorized workers, “the asserted causal chain in this instance is quite

5 attenuated, and there are numerous other factors that could lead to higher expenditures by the

6 County.” 519 F.3d at 982. Furthermore, to calculate the portion of the county‟s injuries

7 attributable to the plaintiffs‟ unlawful conduct, the district court could not “simply estimat[e] the

8 number of undocumented immigrants employed by the companies and their average usage of

9 County services.” Id. at 983. Instead, “the court would have to construct the alternative scenario

10 of what would have occurred” if the companies had employed legally authorized workers, “an

11 intricate, uncertain inquiry” that militated against finding proximate cause. Id. (internal quotation

12 marks omitted). As for the second factor, the risk of multiple recoveries, the court noted even

13 though the county‟s harm did not flow through intervening victims, proximate cause can fail even

14 where the harm is not “passed-on” or contingent on harm to another. See id. The court did not

15 analyze the third factor. See id.

16 C. The Instant Case

17

1. Length of the Causal Chain

18

The causal relationship between WF‟s conduct and Oakland‟s alleged harm is indirect and

19 goes through several links. As in Holmes and the cases cited above, the economic injuries here are

20 contingent, inter alia, on the harm suffered by a third party, namely the minority borrowers. Both

21 the depressed property-tax revenues and the increased municipal expenditures were the result of

22 minority borrowers‟ foreclosures. As in Hemi, where “[t]he conduct directly responsible for the

23 City‟s harm was the customers‟ failure to pay their taxes,” 559 U.S. at 11, the immediate conduct

24 here that ultimately resulted in Oakland‟s harm was the homeowners‟ failure to pay their loans.

25 The harms suffered by Oakland—e.g., lower property taxes and increase police costs—are

26 “entirely distinct” from the WF‟s unlawful discrimination in the issuance of HCHR loans. Canyon

27 Cty., 519 F.3d at 982. Indeed, as in Hemi, various actions in the chain of causation here were

28 carried out by multiple parties: the unlawful discrimination was carried out by WF, leading to

15

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1 default by WF‟s customers, which in turn led to foreclosures by WF, which led to lower property

2 values and consequently lower property taxes collectable by Oakland. Likewise, the alleged law-

3 enforcement costs incurred by Oakland requires additional links in the causal chain: evictions and

4 vacancies after foreclosure by the lender or new owner, resulting in crime and code violations by

5 law-breakers (not the homeowners), resulting in increased municipal law enforcement responses

6 and costs and lowering property values causing property owners in affected neighborhoods to pay

7 less property taxes. As in Hemi, Oakland suffered economic harm at the hands of third and fourth

8 parties. Unlike Lexmark International, there is no obviously direct 1:1 relationship between harm

9 to direct victims and the harm to the plaintiff. Accordingly, the length of the causal chain counsels

10 against a finding of proximate cause.

11

On the other hand, while Oakland‟s injuries are several steps removed from WF‟s conduct,

12 that fact does not appear to be determinative. Similar facts were present in Miami, yet as noted

13 above, the Supreme Court remanded the case instead of simply holding there was no proximate

14 cause as matter of law. This suggests that despite the lengthy chain of causation, there may be

15 factual allegations in this kind of case that can survive a 12(b)(6) motion. Thus, while the

16 contingent nature of Oakland‟s economic injuries counsels against proximate cause, it does not

17 end the inquiry. Instead, the analysis must proceed to the Holmes factors.

18

2. Holmes Factors

19

The first Holmes factor requires this Court to determine whether it would be difficult to

20 ascertain the portion of Oakland‟s economic damages resulting from WF‟s unlawful conduct. The

21 concern underlying the first Holmes factor is uncertainty and difficulty in determining damages

22 attributable to the defendant‟s unlawful conduct. Here there are two factors that mitigate this

23 concern. First, unlike Holmes and Anza, the injury here is not individualized; it is aggregative;

24 where damages are aggregative, precision is not expected. Invariably some approximation is

25 required. While the fact of aggregative injury itself does not obviate proximate cause analysis as

26 Hemi and Canyon County illustrate, there is an additional consideration here. Oakland suggests

27 based on aggregative data that it can prove there is a clear quantifiable link between WF‟s

28 challenged practice and foreclosure rates and consequent harm to the city. In particular, Oakland

16

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1 has proffered a specific statistical analysis in regard to its property-tax injury. The FAC describes

2 a regression analysis that links Oakland‟s alleged unlawful conduct to an increase in foreclosures.

3 See FAC ¶¶ 12, 68-69, 90-92. Furthermore, the increase in foreclosures can be linked to

4 Oakland‟s decreased property taxes by way of Hedonic analysis. See id. ¶¶ 120-27. Anza and

5 Canyon County did not address this situation where there is an alleged provable and quantifiable

6 causal link between the defendant‟s conduct and plaintiff‟s injury despite there being multiple 7 links in the chain.5 Hence, the first Holmes factor counsels in favor of proximate cause, at least

8 with respect to Oakland‟s claim of lost tax revenues for which it has alleged the existence of an

9 available statistical model.

10

To be sure, the Ninth Circuit has referenced the relevance (or not) of statistical analysis to

11 the first Holmes factor. In Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip

12 Morris Inc., 185 F.3d 957 (9th Cir. 1999), employee health and welfare benefit plans sued tobacco

13 companies and related entities under RICO to recover the cost of treating the plans‟ beneficiaries

14 for smoking-related injuries. The court held that the plaintiffs failed to satisfy proximate cause. In

15 analyzing the first Holmes factor, the court quoted the Third Circuit:

16

The Funds‟ alleged damages are said to arise from the fact that the

tobacco companies prevented the Funds from providing smoking-

17

cessation or safer smoking information to their participants . . . . In

order to calculate the damages . . . the Funds must demonstrate how

18

many smokers would have stopped smoking if provided with

smoking-cessation information, how many would have begun

19

smoking less dangerous products . . . .

20

It is apparent why the Funds argue that they can demonstrate all of

this through aggregation and statistical modeling: it would be

21

impossible for them to do so otherwise. Yet we do not believe that

aggregation and statistical modeling are sufficient to get the Funds

22

over the hurdle of the AGC factor focusing on whether the “damages

claim is . . . highly speculative.”

23

24

25 5 In County of Cook v. Wells Fargo, the district court acknowledge that statistical analysis of

26

aggregative data might establish “the likelihood that a loan modification denied would lead to foreclosure,” 2018 WL 1469003, at *8, and thus sufficiently link the Wells Fargo conduct to at

27

least part of the county‟s harm. Although the court found that less direct injuries such as loss of tax revenues were not proximately caused by Wells Fargo, the court was not presented with

28

specific statistical analysis as alleged in this case linking Wells Fargo‟s conduct with the loss of tax revenues.

17

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1 Id. at 965 (quoting Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171

2 F.3d 912, 929 (3d Cir. 1999)). The language in the block quotation suggests that the possibility of

3 statistical analysis may not aid the plaintiff in establishing proximate cause under the first Holmes

4 factor. However, this language appears to be dicta. Nothing in the rest of the Ninth Circuit‟s

5 decision refers to any statistical analysis or any argumentation thereon. Moreover, the fact that

6 statistical modeling for quantifying the city‟s harm was asserted in Miami, see Miami, 137 S. Ct.

7 at 1302, could well have been a consideration in the Supreme Court‟s decision to remand rather

8 than order dismissal, particularly since all the harms asserted by Miami were beyond the “first

9 step” of injury; remand was required to sort out “first step” from indirect injuries as was done in

10 County of Cook v. Bank of America, County of Cook v. Wells Fargo, and County of Cook v. HSBC

11 North America Holdings.

12

Hence, the role of statistical analysis in proximate cause analysis appears to be an open

13 question. Because statistical analysis plausibly can permit the calculation of Oakland‟s property-

14 tax injury caused by WF‟s policies with some reasonable certainty, the first factor supports

15 proximate cause, at least at the pleading stage. That is not the case, however, for Oakland‟s

16 municipal-expenditure injury, for which Oakland has proffered no statistical analysis.

17

The second Holmes factor concerns the need to “adopt complicated rules apportioning

18 damages among plaintiffs at different levels of injury from the violative acts.” Holmes, 503 U.S.

19 at 269. So phrased, this concern appears to be focused on the dangers of overlapping and

20 duplicative damages. Cf. Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977) (indirect purchasers of

21 concrete blocks could not recover higher costs passed on from their suppliers, which were the

22 victims of a price-fixing scheme). Here, Oakland‟s injuries are distinct and different from those

23 suffered by the minority borrowers. Unlike indirect buyers in Illinois Brick, Oakland‟s economic

24 injuries are not the same injury passed on from the borrowers to Oakland; recovery by Oakland

25 would not threaten double compensation for the same injury. The second factor does not weigh

26 against proximate cause.

27

The third factor does weigh against proximate cause; minority borrowers are directly

28 injured victims who can bring suit. In fact, the borrowers have evidently already achieved by way

18

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1 of a consent order in a suit brought by the United States. Docket No. 107 (“Mot.”) at 11; see Mot.,

2 Exs. A (consent order establishing $125 million relief fund for affected borrowers), B (agreement

3 to terminate consent order). Considering the third factor‟s focus on deterrence and vindication of

4 the law even without Oakland‟s suit, this factor weighs against proximate cause.

5

3. Conclusion

6

On balance, the property-tax injury survives the pleading stage because Oakland‟s

7 proffered statistical analyses have the potential to provide certainty to the damages calculation. Of

8 course, WF is not precluded from challenging proximate cause on a fuller record (including close

9 analysis of Oakland‟ statistical model(s)). At this the pleading stage, however, the motion to

10 dismiss is DENIED as to the property-tax injury.

11

As for the municipal-expenditure injury, Oakland has not proffered any statistical analyses

12 comparable to those in the property-tax analysis. The first Holmes factor weighs against Oakland,

13 along with the basic context of its harm being indirect and derivative. Moreover, as noted above,

14 the municipal expenditure harm contains more links including intervening conduct of additional

15 actors (e.g., criminals who destroy or deface vacant, foreclosed homes) than the claim for

16 property-tax loss. For that reason, claims based on the municipal-expenditure injury are

17 DISMISSED WITHOUT PREJUDICE to the extent they seek damages.

18

While Miami‟s directness requirement appears to apply to claims for damages, it does not

19 appear to extend to claims for injunctions or declaratory relief, see Miami, 137 S. Ct. at 1305-06

20 (holding that “[a] damages claim under the [FHA]” is “analogous to a number of tort actions” to

21 which the directness requirement applies (quoting Curtis v. Loether, 415 U.S. 189, 195 (1974))),

22 and WF makes no argument that it does. Rather, WF‟s main complaint regarding injunctive relief

23 is that Oakland has not specified what injunctive relief would entail. See Docket No. 130, at 29-

24 31 (“I don‟t know what they want as an injunction. We are certainly willing to go forward, if the

25 money claims are dismissed, to talk about what injunctive relief might be appropriate . . . .”).

26 Therefore, WF‟s motion is DENIED as to the claims based on the municipal-expenditure injuries

27 that seek injunctive and declaratory relief.

28

The non-economic injuries are analyzed below.

19

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1

VI. NON-ECONOMIC INJURIES

2

In addition to lowering property taxes and increasing criminal and code enforcement costs,

3 Oakland also alleges that the discriminatory lending harmed Oakland‟s goals and programs related

4 to fair housing—what Oakland calls its non-economic injuries. Specifically, Oakland alleges that

5 WF‟s discriminatory lending “wast[ed] or neutralized” Oakland‟s spending to promote non-

6 discriminatory housing, FAC ¶ 17, by “undermin[ing] the City‟s use of resources in support of fair

7 housing, rendering the expenditures a nullity and warranting compensation.” Id. ¶ 105. Oakland

8 also alleges generally that the prohibited lending practices “adversely impacted” its “numerous

9 programs designed to promote fair housing” and to assist low-income homebuyers. Id. ¶¶ 104-05.

10 WF‟s discriminatory lending “interfere[d] with the City‟s ability to achieve these important

11 objectives.” Id. ¶ 107.

12

WF challenges Oakland‟s standing under Article III to assert these non-economic injuries

13 for Article III standing.

14

To support standing, Oakland cites Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982).

15 In Havens, the defendant Havens Realty Corp. owned and operated two apartment complexes.

16 Three individuals, as well as an organization called HOME, sued Havens, alleging that it engaged

17 in racial steering in violation of the FHA. HOME was a nonprofit organization dedicated to

18 “equal opportunity in housing,” in furtherance of which it operated a housing-counseling service

19 and investigated housing-discrimination complaints. Id. at 368. HOME‟s standing was based on

20 the allegation that “Plaintiff HOME has been frustrated by defendants‟ racial steering practices in

21 its efforts to assist equal access to housing through counseling and other referral services. Plaintiff

22 HOME has had to devote significant resources to identify and counteract the defendant‟s [sic]

23 racially discriminatory steering practices.” Id. at 379 (alteration in original) (quoting the appellate

24 record). The Court held that this allegation established HOME‟s injury in fact, because it alleged

25 that Haven‟s steering practices “perceptibly impaired HOME‟s ability to provide counseling and

26 referral services.” Id. “Such concrete and demonstrable injury to the organization‟s activities—

27 with the consequent drain on the organization‟s resources” fulfilled the injury-in-fact requirement.

28 Id. Thus, under Havens, an organization satisfies injury in fact if it demonstrates both “(1)

20

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1 frustration of its organizational mission; and (2) diversion of its resources to combat the particular

2 housing discrimination in question.” Smith v. Pac. Props. & Dev. Corp., 358 F.3d 1097, 1105 (9th

3 Cir. 2004); cf. La Asociacion de Trabajadores de Lake Forest v. City of Lake Forest, 624 F.3d

4 1083, 1088 (9th Cir. 2010) (litigation costs to challenge the conduct do not qualify as diversion of

5 resources).

6

The Ninth Circuit has addressed the parameters of organizational standing. In Valle del

7 Sol Inc. v. Whiting, 732 F.3d 1006 (9th Cir. 2013), three organizational plaintiffs challenged

8 Arizona Revised Statutes § 13-2929, a part of Arizona S.B. 1070 that criminalized harboring and

9 transporting unauthorized aliens within Arizona. All three organizations had diverted resources to

10 educate their members about § 13-2929. See id. at 1018. In addition, § 13-2929 frustrated their

11 programs and organizational missions to offer shelter and transportation services to unauthorized

12 aliens. This was sufficient to establish standing.

13

In Fair Housing Council of San Fernando Valley v. Roommate.com, LLC, 666 F.3d 1216

14 (9th Cir. 2012), two nonprofit organizations sued Roommate.com, a service that helped users find

15 roommates. The plaintiffs alleged that Roommates.com violated the FHA by permitting its users

16 to filter potential roommates by sex, sexual orientation, and familial status. The Ninth Circuit held

17 that the organizations had Article III standing to sue, because they had expended resources to

18 investigate the alleged violations and launch educational and outreach campaigns in response. See

19 id. at 1219; see Smith, 358 F.3d at 1105-06 (organization possessed standing to sue for defendant‟s

20 violation Fair Housing Amendments Act where the violation frustrated organization‟s “principal

21 purpose” of eliminating discrimination against disabled persons and where the organization

22 diverted resources to promote awareness of and compliance with accessibility laws); Fair Housing

23 of Marin v. Combs, 285 F.3d 899, 905 (9th Cir. 2002) (nonprofit organization possessed standing

24 to sue for housing discrimination where it diverted resources to investigate and counteract

25 defendant‟s discrimination).

26

In the case at bar, Oakland has not specifically alleged that it was required to divert

27 resources to “combat the particular housing discrimination in question.” Smith, 358 F.3d at 1105.

28 Instead, Oakland alleges that WF‟s conduct harmed “the ability of minority residents to own

21

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1 homes” in Oakland, “the City‟s goals to assure that racial factors do not” affect individuals‟ ability

2 to find housing, “the City‟s numerous programs designed to promote fair housing and a safe,

3 integrated community,” and Oakland‟s objective of “identify[ing] and thwart[ing] predatory

4 lending practices.” FAC ¶¶ 103-05. It also alleges that WF‟s conduct “directly undermines the

5 City‟s use of resources in support of fair housing, rendering the expenditures a nullity and

6 warranting compensation.” Id. ¶ 105. There are no allegations, however, that WF‟s conduct

7 caused the City to divert resources toward combating WF‟s housing discrimination.

8

Although the FAC mentions diversion of resources several times, each mention regards the

9 diversion of resources to address blight conditions, see id. ¶¶ 3, 129, 167; see also Opp. at 21, and

10 not to “combat the particular housing discrimination in question.” Smith, 358 F.3d at 1105.

11 Oakland‟s use of resources to combat crime, fires, and code violations, at bottom, is an extension

12 of the municipal-expenditure portion of the economic injury addressed above. Compare with

13 Valle del Sol, 732 F.3d at 1018 (organizations expended resources to educate members about the

14 challenged statute); Roommate.com, LLC, 666 F.3d at 1219 (organizations spent resources

15 investigating the violation and launching educational and advocacy campaigns in response).

16 Oakland does not allege a diversion of resources specifically in response to advance its fair-

17 housing program or particular efforts to assist low-income homebuyers. It does not allege it had

18 to, e.g., devote additional resources to counsel foreclosed homeowners, investigate claims of

19 lending discrimination, or promote awareness of WF‟s lending practices.

20

Finally, though the loss of a municipality‟s “racial balance and stability” constitutes an

21 injury in fact, Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 111 (1979), Oakland has

22 not alleged that it suffered such a loss. See FAC; Docket No. 130 (Hearing Transcript) at 49

23 (Oakland agreeing that it has not alleged an impact on its racial composition). Indeed, at least in

24 the short run, the availability of financing (though on unfavorable terms) could well have

25 increased minority homeownership in Oakland.

26

Hence, the Court DISMISSES WITHOUT PREJUDICE Oakland‟s claims to the extent

27 they are based on the non-economic Havens injuries. Because Oakland has not sufficiently

28 alleged standing for claims based on its non-economic harms, the Court does not reach the

22

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1 proximate-cause issue for those harms.

2

VII. DISPARATE-IMPACT CLAIM

3

As part of its motion to dismiss, WF argues that the Court should dismiss Oakland‟s claim

4 for disparate-impact discrimination. Oakland responds that the law of the case doctrine bars

5 reconsideration of the WF‟s argument, because the Court had previously determined that Oakland

6 stated a disparate-impact claim in its initial Complaint. See Docket No. 38.

7 A. Law of the Case

8

Under the law of the case doctrine, “a court is generally precluded from reconsidering an

9 issue that has already been decided by the same court.” Thomas v. Bible, 983 F.2d 152, 154 (9th

10 Cir. 1993). The district court‟s decision to apply or not apply the law of the case is discretionary.

11 See Ingle v. Circuit City, 408 F.3d 592, 594 (9th Cir. 2005).

12

The law of the case doctrine does not apply here, because Oakland‟s FAC substantially

13 revised the initial Complaint‟s disparate-impact allegations, removing many of its complained-of

14 practices and policies and substituting in new ones. Compare Docket No. 1 ¶ 22, with FAC ¶¶ 39,

15 50. Whether the new allegations pass muster is not “an issue that has already been decided.”

16 Thomas, 983 F.2d at 154; see King v. Wang, No. 2:14-cv-1817 KJM DB P, 2017 WL 3188949, at

17 *3 (E.D. Cal. July 27, 2017) (holding that the law of the case does not apply, because “the

18 allegations in the complaint and second amended complaint are sufficiently different”), report and

19 recommendation adopted, 2017 WL 4386868 (E.D. Cal. Oct. 3, 2017).

20 B. Alleged Practices and Policies

21

A disparate-impact claim relying on statistical evidence must “point to a defendant‟s policy

22 or policies causing [the] disparity.” Tex. Dep’t of Hous. & Cmty. Affairs v. Inclusive Cmtys.

23 Projects, Inc., 135 S. Ct. 2507, 2523 (2015). At the pleading stage, a disparate-impact plaintiff

24 must “allege facts . . . or produce statistical evidence demonstrating a causal connection” “between

25 the . . . policy and the disparate impact.” Id. at 2423-24.

26

The FAC alleges that WF “engaged in numerous facially neutral lending practices” which

27 resulted in a disparate impact on minority borrowers by:

28

a. providing loan officers discretion to place borrowers in more

23

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expensive and riskier loans than the borrowers qualified for;

1

b. providing loan officers discretion to sell lender credits without

disclosing the true effect of the pricing of those credits;

2

c. marketing certain more expensive or riskier loan products to

residents in predominantly minority neighborhoods;

3

d. utilizing a compensation scheme that incentivized loan officers

to sell more expensive and riskier loans than borrowers qualified

4

for;

e. requiring substantial prepayment penalties that prevent

5

borrowers whose credit has improved from refinancing their

discriminatory loan to a prime loan;

6

f. charging excessive points and fees that are not associated with

any increased benefits for the borrowers; and

7

g. providing loan officers with information about loan pricing that

is higher than the lowest price Wells Fargo could offer the

8

borrowers.

9 FAC ¶ 39. The FAC further alleges that WF loan officers, encouraged by WF‟s compensation

10 plan to sell HCHR loans, see id. ¶ 48, “used their discretion to sell more expensive FHA loans to

11 minority borrowers” by “us[ing] race and educational background as proxies for their ability to

12 sell more expensive loan products.” Id. ¶¶ 44, 47. The more expensive loans often had high

13 closing costs that led the borrower to purchase lender credits, a kind of loan to which minority

14 borrowers were especially receptive. See id. ¶¶ 46, 47.

15

Exacerbating this situation, the FAC alleges that WF is responsible for various “omissions

16 and failures to act . . . to combat against the discriminatory effects of its conduct.” FAC ¶ 50.

17 These omissions are:

18

a. knowing about lending practices that either created high risk and

higher cost loans to minorities compared to comparably credit

19

situated white borrowers or failing to adequately monitor the

Bank‟s practices regarding mortgage loans, including but not

20

limited to originations, marketing, sales, and risk management;

b. failing to underwrite loans based on traditional underwriting

21

criteria such as debt-to-income ratio, loan-to-value ratio, FICO

score, and work history;

22

c. failing to prudently underwrite hybrid adjustable-rate mortgages

(“ARMs”), such as 2/28s and 3/27s;

23

d. failing to prudently underwrite refinance loans, where borrowers

substitute unaffordable mortgage loans for existing mortgages

24

that they are well-suited for and that allow them to build equity;

e. failing to monitor and implement necessary procedures within

25

Wells Fargo‟s Internal Audit, Corporate Risk, Human

Resources, Law Department, and Board of Directors throughout

26

the Community Banking segment, which includes Wells Fargo‟s

retail mortgage banking business responsible for the unlawful

27

activities set forth herein, to ensure compliance with federal fair

lending laws;  

28

f. failing to abide by the terms of Wells Fargo‟s Vision & Values,

24

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which purportedly guides Defendants‟ business practices and

1

relationships with customers; and  

g. failing to ensure that Wells Fargo‟s decentralized organizational

2

structure was capable of properly monitoring mortgage lending

activities within Community Banking. 3

4 Id.

5

Together, these practices caused a “statistically significant adverse effect on minority

6 borrowers.” Id. ¶ 51. These allegations draw a sufficient causal link between the specific policies

7 and practices and the disparate impact on minority borrowers for pleading purposes.

8 C. Delegation of Discretion as the Basis for Disparate-Impact Claim

9

The parties debate whether giving loan officers discretion can constitute a “policy or

10 practice” that can support a disparate-impact claim. WF argues it is not, relying on Wal-Mart

11 Stores, Inc. v. Dukes, 564 U.S. 338 (2011). In Dukes, the plaintiffs alleged that Wal-Mart gave

12 local supervisors broad discretion over pay and promotion decisions and that the supervisors

13 exercised their discretion in a biased manner, resulting in a disparate impact on female employees.

14 The plaintiffs sought certification of a class of all female Wal-Mart employees in the United

15 States. Class certification requires “commonality,” which requires the class to have suffered “the

16 same injury” such that their claims “depend upon a common contention” that is “capable of

17 classwide resolution.” Id. at 350.

18

The Court held that the Dukes plaintiffs had not satisfied this requirement for class

19 certification, because the “„policy‟ of allowing discretion” is “the opposite of a uniform

20 employment practice” that would have inflicted the “same injury” on the entire class. Id. at 355

21 (emphasis omitted). This is so because managers are likely to exercise their discretion in varied

22 ways; some may intentionally discriminate or create disparate impacts, while others may not, see

23 id., so that it was “quite unbelievable” that all female Wal-Mart employees would have suffered

24 the same injury. Id. at 356. The Court recognized, however, that a policy of delegating discretion

25 may satisfy commonality where plaintiffs “identif[y] a common mode of exercising discretion that

26 pervades the entire company,” such as “some common direction.” Id. Where plaintiffs are able to

27 “identif[y]” this “common mode,” they establish that the class suffered the “same injury.” Id.; cf.

28 Ellis v. Costco Wholesale Corp., 285 F.R.D. 492, 518 (N.D. Cal. 2012) (holding that “absolute

25

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1 uniformity” in the exercise of discretion is not needed for class certification, given the “common

2 practices and policies [that] . . . affect and guide that discretion”). But the Dukes plaintiffs failed

3 to identify such a common direction. See Dukes, 564 U.S. at 356. Moreover, the Court noted

4 even the statistical disparities identified by the plaintiffs failed to establish commonality because

5 disparities did not exist in each of Wal-Mart‟s stores. Thus, the class-certification requirements

6 were not satisfied.

7

Dukes is not controlling here because the issue presently before the Court is not

8 commonality and class certification, but whether a substantive claim of disparate impact has been

9 stated for purposes of Rule 12(b)(6). To be sure, the Court in Dukes noted:

10

In the landmark case of ours which held that giving discretion to

lower-level supervisors can be the basis of Title VII liability under a

11

disparate-impact theory, the plurality opinion conditioned that

holding on the corollary that merely proving that the discretionary

12

system has produced a racial or sexual disparity is not enough.

“[T]he plaintiff must begin by identifying the specific employment

13

practice that is challenged.” That is all the more necessary when a

class of plaintiffs is sought to be certified. Other than the bare

14

existence of delegated discretion, respondents have identified no

“specific employment practice”—much less one that ties all their 1.5

15

million claims together. Merely showing that Wal-Mart‟s policy of

discretion has produced an overall sex-based disparity does not

16

suffice.

17 Id. at 357 (citation omitted) (quoting Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 994

18 (1988) (plurality opinion), and citing Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 656

19 (1989)). Importantly, however, the Ninth Circuit held after Watson that delegating discretion is a

20 “specific employment practice properly subject to a disparate impact analysis.” Rose v. Wells

21 Fargo Co., 902 F.2d 1417 (9th Cir. 1990). Rose appears to be good law notwithstanding the quote

22 from Dukes; Dukes acknowledged the distinction between the substantive law of disparate-impact

23 discrimination and class certification: “in appropriate cases, giving discretion to lower-level

24 supervisors can be the basis of Title VII liability under a disparate-impact theory . . . . But the

25 recognition that this type of Title VII claim „can‟ exist does not lead to the conclusion that every

26 employee in a company using a system of discretion has such a claim in common.” Id. at 355

27 (internal quotation marks omitted) (emphasis added) (quoting Watson, 487 U.S. at 990-91). Dukes

28 addressed class certification, not substantive disparate impact analysis. Subsequent to Dukes,

26

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United States District Court Northern District of California

1 courts have applied disparate-impact theory to varying circumstances involving delegated

2 discretion. See McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482, 489

3 (7th Cir. 2012) (teaming policy permitting employees to form their own teams can be the basis of

4 disparate-impact suit), abrogated on other grounds as recognized by Phillips v. Sheriff of Cook

5 Cty., 828 F.3d 541 (7th Cir. 2016); Nat’l Fair Housing Alliance v. Fed. Nat’l Mortg. Ass’n

6 (“Fannie Mae”), 294 F. Supp. 3d 940, 947-48 (N.D. Cal. Mar. 21, 2018) (permitting local Fannie

7 Mae employees to decide which foreclosed properties to maintain was a cognizable policy under

8 disparate-impact theory). Indeed, the district court in County of Cook v. HSBC North America

9 Holdings specifically found the complaint stated a disparate-impact claim in a similar case even

10 though much of HSBC‟s conduct was discretionary. See 2018 WL 2431987, at *12.

11

In any event, Oakland has identified specific employment practices in addition to the mere

12 delegation of discretion. For instance, WF allegedly incentivizes loan officers to sell more

13 expensive loans than that for which borrowers qualify, requires prepayment penalties that prevent

14 borrowers from refinancing HCHR loans, and fails to underwrite loans based on objective

15 underwriting criteria. See FAC ¶¶ 39, 50.

16 D. Intentional Discrimination and Disparate-Impact Discrimination

17

Finally, WF argues that allegations which suggest intentional discrimination, see, e.g., id.

18 ¶¶ 44, 47, cannot state a claim for disparate impact, because they do not state a facially neutral

19 policy. Mot. at 21 (quoting Int’l Bhd. of Teamsters v. United States, 431 U.S. 324, 335 n.15

20 (1977)). However, as Watson recognized, intentional acts of discrimination are often what cause

21 delegated discretion to have a disparate impact. See 487 U.S. at 990 (policing intentional

22 discrimination by those with discretion is one reason that disparate-impact analysis applies to

23 policies of delegating discretion). The two aspects of discrimination are not mutually exclusive.

24 See also County of Cook v. HSBC North America Holdings, 2018 WL 2431987, at *12 (“In fact,

25 one of the factors that a court considers to determine whether a plaintiff has made a prima facie

26 disparate impact case is „the presence of some evidence of discriminatory intent, even if

27 circumstantial and less than sufficient to satisfy‟ the standards required for disparate treatment.”

28 (citation omitted)).

27

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1 E. Conclusion

2

For the above reasons, Oakland successfully states a claim for disparate-impact

3 discrimination.

4

VIII. CONCLUSION

5

For the reasons stated above, the motion to dismiss is DENIED as to the claims based on

6 property-tax injuries. The motion is also DENIED as to claims based on the municipal-

7 expenditure injury insofar as they seek declaratory and injunctive relief. The municipal-

8 expenditure claims are DISMISSED WITHOUT PREJUDICE insofar as they seek damages.

9 Oakland‟s claims based on non-economic damages are DISMISSED WITHOUT PREJUDICE.

10

This order disposes of Docket No. 107.

11

12

IT IS SO ORDERED.

13

14 Dated: June 15, 2018

15

______________________________________

EDWARD M. CHEN

16

United States District Judge

17

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20

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22

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25

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27

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 Case 3:15-cv-04321-EMC Document 165 Filed 09/05/18 Page 1 of 2

United States District Court Northern District of California

1

2

3

4

UNITED STATES DISTRICT COURT

5

NORTHERN DISTRICT OF CALIFORNIA

6

7 THE CITY OF OAKLAND,

Case No. 15-cv-04321-EMC

8

Plaintiff,

9

v.

10 WELLS FARGO BANK, N.A., et al.,

11

Defendants.

ORDER GRANTING DEFENDANTS’ MOTION TO AMEND ORDER TO INCLUDE CERTIFICATION FOR INTERLOCUTORY APPEAL
Docket No. 151

12

13

Oakland’s First Amended Complaint alleges that it suffered three kinds of injuries

14 resulting from WF’s unlawful loan practices: (1) decreases in property-tax revenues, (2) increases

15 in municipal expenditures, and (3) neutralized spending in Oakland’s fair-housing programs. See

16 Docket No. 147 (“Order”). This Court denied WF’s motion as to claims based on the first injury,

17 dismissed without prejudice the claims based on the second injury to the extent Oakland sought

18 damages, and dismissed without prejudice claims based on the third injury.

19

WF now seeks an amendment to the Order to certify the order for immediate appeal under

20 28 U.S.C. § 1292(b). Docket No. 151. The Court finds this matter suitable for disposition without

21 oral argument and VACATES the hearing set for September 13, 2018.

22

Section 1292(b) permits the appeal of an interlocutory order if the district court certifies

23 that “such order involves a controlling question of law as to which there is substantial ground for

24 difference of opinion and that an immediate appeal from the order may materially advance the

25 ultimate termination of the litigation.” 28 U.S.C. § 1292(b). Certification is appropriate “when

26 novel legal issues are presented, on which fair-minded jurists might reach contradictory

27 conclusions.” Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 688 (9th Cir. 2011). These

28 conditions are met here.

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1

The Court’s Order applied the Supreme Court’s recent decision in Bank of America Corp.

2 v. City of Miami, 137 S. Ct. 1296 (2017), which established proximate cause as an element of

3 FHA claims. However, the Supreme Court deliberately left unspecified the precise contours of

4 that standard. See City of Miami, 137 S. Ct. at 1306 (declining to “draw the precise boundaries of

5 proximate cause under the FHA” and leaving that task to the lower courts in the first instance).

6 There is a substantial ground for difference of opinion on proximate cause. The lower courts have

7 issued varying opinions. Earlier this year, the Northern District of Illinois issued orders in three

8 cases involving similar facts. See Cty. of Cook v. HSBC N. Am. Holdings Inc., 314 F. Supp. 3d

9 950 (N.D. Ill. 2018); Cty. of Cook v. Wells Fargo & Co., 314 F. Supp. 3d 975 (N.D. Ill. 2018);

10 Cty. of Cook v. Bank of Am. Corp., No. 14 C 2280, 2018 WL 1561725 (N.D. Ill. Mar. 30, 2018).

11 The analysis of proximate cause in these cases differs in some respects from that of this Court.

12

This issue is proper for immediate appeal. The precise contours of proximate cause under

13 the FHA is a dispositive question of law and therefore controlling. Oakland argues that

14 certification is premature because it will amend its complaint and WF will move again to dismiss.

15 But briefing and disposition of that motion would benefit from guidance from the Ninth Circuit.

16 Any amendment is not likely to obviate the need to resolve the basic legal question.

17

The Court therefore GRANTS WF’s motion and AMENDS the order to certify the

18 following questions for immediate appeal:

19

(1) Do Oakland’s claims for damages based on the injuries asserted in the FAC satisfy

20

on a motion to dismiss proximate cause required by the FHA?

21

(2) Is the proximate-cause requirement articulated in City of Miami limited to claims

22

for damages under the FHA and not to claims for injunctive or declaratory relief?

23

This order disposes of Docket No. 151.

24

IT IS SO ORDERED.

25

26 Dated: September 5, 2018

27

______________________________________

EDWARD M. CHEN

28

United States District Judge

2