Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 1 of 111

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION

____________________________________

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MAYOR AND CITY COUNCIL

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OF BALTIMORE,

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City Hall

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100 N. Holliday St.

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Baltimore, MD 21202

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Plaintiff, )

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v.

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WELLS FARGO BANK, N.A.

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464 California Street

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San Francisco, CA 94104

)

)

and

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WELLS FARGO FINANCIAL

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LEASING, INC.,

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207 9th Street

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Des Moines, IA 50307

)

)

Defendants. )

___________________________________ )

Case No. 1:08-cv-00062-JFM

THIRD AMENDED COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF AND DAMAGES
NATURE OF THE ACTION 1. This suit is brought pursuant to the Fair Housing Act of 1968, as amended, 42 U.S.C. §§ 3601 et seq., by the Mayor and City Council of Baltimore (“Baltimore” or “City”) to seek redress for injuries caused by Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.’s pattern or practice of illegal and discriminatory mortgage lending. Specifically, Baltimore seeks injunctive relief and damages for the injuries caused by

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foreclosures on Wells Fargo loans in minority neighborhoods and to minority borrowers that are the result of Wells Fargo’s unlawful, irresponsible, unfair, deceptive, and discriminatory lending practices.
2. Since at least 2000, Wells Fargo has been engaged in a pattern or practice of targeting African-American neighborhoods in Baltimore for deceptive, predatory or otherwise unfair mortgage lending practices. The discriminatory targeting of these neighborhoods for such practices is known as “reverse redlining” and has repeatedly been held to violate the Fair Housing Act.
3. Reverse redlining by Wells Fargo has the effect and purpose of placing vulnerable, underserved borrowers in loans they cannot afford. Reverse redlining maximizes Wells Fargo’s short-term profit without regard to the borrower’s best interest, the borrower’s ability to repay, or the financial health of underserved minority neighborhoods. Wells Fargo averts any significant risk to itself by selling the loans on the secondary market shortly after originating them.
4. Reverse redlining by Wells Fargo has caused an excessive and disproportionately high number of foreclosures on the mortgage loans that Wells Fargo has made in Baltimore’s African-American neighborhoods. Wells Fargo’s foreclosures are concentrated in these neighborhoods even though the bulk of its lending in Baltimore is in white neighborhoods. A Wells Fargo loan in a predominantly (60% or greater) African-American neighborhood is three times as likely to result in foreclosure as a Wells Fargo loan in a predominantly white neighborhood.
5. Wells Fargo would have comparable foreclosure rates in African-American and white communities if it were properly and uniformly applying responsible underwriting practices
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in both. Wells Fargo possesses sophisticated underwriting technology and data that allow it to predict with precision the likelihood of delinquency, default or foreclosure. The fact that Wells Fargo’s foreclosures are so disproportionately concentrated in African-American neighborhoods is not the product of chance events. To the contrary, it reflects and is fully consistent with Defendants’ practice of targeting African-American neighborhoods and customers for discriminatory practices and predatory pricing and products. It also reflects and is consistent with Wells Fargo’s practice of failing to underwrite African-American borrowers properly and of putting these borrowers into loans they cannot afford in order to maximize the company’s profits.
6. In declarations attached to this Third Amended Complaint, former Wells Fargo employees responsible for making mortgage loans in Baltimore explain precisely how the company has used discretion in pricing and financial incentives to target African-American neighborhoods for deceptive, high priced loans that predictably result in unnecessary foreclosures.
7. Wells Fargo’s discriminatory practices, and the resulting unnecessary foreclosures in the City’s minority neighborhoods, have inflicted significant, direct, and continuing financial harm on Baltimore. Baltimore seeks redress in this action for financial injuries that are the direct result of these foreclosures.
8. In accordance with the Court’s January 6, 2010 ruling on Wells Fargo’s motion to dismiss, the City has narrowed the damages it seeks in this Third Amended Complaint to damages based on (1) municipal services provided at vacant Wells Fargo foreclosure properties that became vacant because of Wells Fargo’s illegal lending practices; and (2) reduced property
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tax revenues from limited areas within particular neighborhoods where Wells Fargo’s foreclosures constitute a disproportionately high concentration of all foreclosures.
9. Baltimore seeks specific damages suffered by the City in regard to specific Wells Fargo properties that became vacant because of Wells Fargo’s illegal lending activities. These vacant Wells Fargo properties are disproportionately located in African-American neighborhoods. They have caused housing code violations requiring expensive responses by the City. The City of Baltimore Department of Housing and Community Development (“Housing Department”) has had to devote substantial personnel time and out-of-pocket funds to inspect, board, clean, condemn, pursue litigation regarding, and take other actions with respect to the vacant Wells Fargo foreclosure properties. The Fire and Police Departments have had to send personnel, fire trucks, and police cars to respond to fires and other threats to public health and safety at the vacant Wells Fargo properties.
10. Specific services that Baltimore has been required to provide at 190 of the Wells Fargo foreclosure properties that have become vacant because of reverse redlining are set forth in precise detail in paragraphs 119-308 below. The costs of providing these and other services at vacant Wells Fargo foreclosure properties can be calculated precisely using detailed data maintained by the City and can be distinguished from the costs of providing municipal services at non-Wells Fargo foreclosures or for other reasons.
11. Baltimore also seeks damages for lost property tax revenue from limited areas (or “sub-neighborhoods”) within certain larger majority African-American neighborhoods where Wells Fargo foreclosures constitute a large percentage of all foreclosures in the area. Wells Fargo foreclosures are so disproportionately concentrated in these sub-neighborhoods, which are approximately two blocks by two blocks, that they have had a significant, deleterious, and
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quantifiable effect on the values of other homes in the same sub-neighborhoods. This has reduced the property taxes collected by the City from those homes.
12. Many of these sub-neighborhoods are clustered in historically stable working- and middle-class neighborhoods and neighborhoods that have become significantly stronger in the past decade, such as Ashburton, Cylburn, Original Northwood, Reservoir Hill, and Waltherson. Each of the sub-neighborhoods is identified in paragraph 322 below. Baltimore’s property tax losses attributable to the Wells Fargo foreclosures in these specific sub-neighborhoods can be calculated precisely and distinguished from losses due to other foreclosures and other causes. Baltimore does not seek property tax damages in this Third Amended Complaint other than damages based on Wells Fargo foreclosures in these specific sub-neighborhoods.
13. Absent judicial relief, the extent of Baltimore’s injuries resulting from Wells Fargo’s actions will continue to grow as more Wells Fargo loans move into foreclosure.
14. While Baltimore seeks redress for financial losses directly related to providing services at vacant Wells Fargo foreclosure properties and diminished tax revenues from particular sub-neighborhoods where Wells Fargo is responsible for a large portion of the foreclosures, the City does not seek to hold Wells Fargo responsible for injuries caused by nonWells Fargo foreclosures or injuries suffered by the City as a result of foreclosures generally.
PARTIES 15. Plaintiff Mayor and City Council of Baltimore is a municipal corporation, organized pursuant to Article XI-A of the Maryland Constitution. The City is authorized by the Baltimore City Charter to institute suit to recover damages suffered by the City. 16. Defendant Wells Fargo Bank, N.A. is organized as a national banking association under the laws of the United States. Upon information and belief, its corporate headquarters are
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located in California. Wells Fargo Bank, N.A. maintains multiple offices in the State of Maryland and in Baltimore for the purposes of soliciting applications for and making residential mortgage loans and engaging in other business activities.
17. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A. that was formerly incorporated in California as a separate company and registered to do business in the State of Maryland under the name Wells Fargo Home Mortgage, Inc. Wells Fargo Home Mortgage, Inc. merged into Wells Fargo Bank, N.A. on May 5, 2004. Wells Fargo Bank, N.A. continues to do business under the name Wells Fargo Home Mortgage, including in the State of Maryland and in Baltimore.
18. Wells Fargo Bank, N.A. has been one of the three largest providers of mortgage credit to homeowners in Baltimore every year since at least 2000. From 2002 to 2007, Wells Fargo Bank, N.A. made at least 1,341 mortgage loans a year to Baltimore homeowners with a collective value of more than $1 billion. No other lender made more than 1,200 mortgage loans in Baltimore in each year from 2004 to 2007, and only two others made more than 1,000 in each year. Wells Fargo Bank, N.A. made more loans to Baltimore homeowners than any other lender in 2008. Upon information and belief, Wells Fargo Bank, N.A. continues to make loans in Baltimore at a comparable pace.
19. Defendant Wells Fargo Financial Leasing, Inc. is an Iowa corporation that is registered to do business in Maryland. Upon information and belief, Wells Fargo Financial Leasing, Inc. engages in the solicitation of applications for and origination of residential mortgage loans in Baltimore.
20. Each of the Defendants was and is the agent, employee, and representative of the other Defendant. Each Defendant, in acting or omitting to act as alleged in this Third Amended
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Complaint, was acting in the course and scope of its actual or apparent authority pursuant to such agencies, or the alleged acts or omissions of each Defendant as agent were subsequently ratified and adopted by each agent as principal. Each Defendant, in acting or omitting to act as alleged in this Third Amended Complaint, was acting through its employees, agents, and/or representatives, and is liable on the basis of the acts and omissions of its employees, agents, and/or representatives.
JURISDICTION AND VENUE 21. This Court has jurisdiction over this matter pursuant to 42 U.S.C. § 3613 and 28 U.S.C. §§ 1331, 1343, because the claims alleged herein arise under the laws of the United States. 22. Venue is proper in this district under 28 U.S.C. § 1391(b) because Defendants conduct business in and are residents of the district and a substantial part of the events and omissions giving rise to the claims occurred in the district.
FACTUAL BACKGROUND A. Subprime Lending, Predatory Practices, and Reverse Redlining
23. Prior to the emergence of subprime lending, most mortgage lenders made only “prime” loans. Prime lending offered uniformly priced loans to borrowers with good credit, but individuals with blemished credit were not eligible for prime loans.
24. Subprime lending developed and began growing rapidly in the mid-1990s as a result of technological innovations in risk-based pricing and in response to the demand for credit by borrowers who were denied prime credit by traditional lenders. Advances in automated underwriting allowed lenders to predict with improved accuracy the likelihood that a borrower with blemished credit will successfully repay a loan. These innovations gave lenders the ability
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to adjust the price of loans to match the different risks presented by borrowers whose credit records did not meet prime standards. Lenders found that they could now accurately price loans to reflect the risks presented by a particular borrower. When done responsibly, this made credit available much more broadly than had been the case with prime lending.
25. Responsible subprime lending has opened the door to homeownership to many people, especially low- to moderate-income and minority consumers, who otherwise would have been denied mortgages. At the same time, however, subprime lending has created opportunities for unscrupulous lenders to engage in irresponsible lending practices that result in loans that borrowers cannot afford. This, in turn, leads directly to defaults and foreclosures.
26. Enticed by the prospect of short-term profits resulting from exorbitant origination fees, points, and related pricing schemes, some irresponsible subprime lenders took advantage of a rapidly rising real estate market to convince borrowers to enter into loans that they could not afford. Often this was accomplished with the help of deceptive practices and promises to refinance at a later date. These abusive subprime lenders did not worry about the consequences of default or foreclosure to their business because once made, the loans were sold on the secondary market.
27. As the subprime market grew, the opportunities for abusive practices grew with it. As a consequence, abusive and predatory practices “are concentrated in the subprime mortgage market,” as the federal government has found.1 These practices, which in recent years have become the target of prosecutors, legislators and regulators, include the following:
a. Failing to prudently underwrite hybrid adjustable rate mortgages (ARMs), such as 2/28s and 3/27s. After the borrower pays a low “teaser rate” for the first two or

1

United States Department of Housing & Urban Development and United States Department of the

Treasury, Curbing Predatory Home Mortgage Lending (2000) at 1 (available at http://www.huduser.org/

Publications/pdf/treasrpt.pdf) (“HUD/Treasury Report”).

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three years, the interest rate on these loans resets to a much higher rate that can continue to rise based on market conditions. Subprime lenders often underwrite these loans based only on consideration of whether the borrower can make payments during the initial teaser rate period, without regard to the sharply higher payments that will be required for the remainder of a loan’s 30-year term. Irresponsible lenders aggressively market the low monthly payment that the borrower will pay during the teaser rate period, misleading borrowers into believing that they can afford that same low monthly payment for the entire 30-year term of the loan, or that they can refinance their loan before the teaser rate period expires.
b. Failing to prudently underwrite refinance loans, where borrowers substitute unaffordable mortgage loans for existing mortgages that they are well suited for and that allow them to build equity. Such refinanced loans strip much or even all of that equity by charging substantial new fees, often hiding the fact that the high settlement costs of the new loan are also being financed. Lenders that aggressively market the ability of the borrower to pay off existing credit card and other debts by refinancing mislead borrowers into believing that there is a benefit to consolidating all of their debt into one mortgage loan, obscuring the predictable fact that that the borrower will not be able to repay the new loan. The refinanced loans are themselves often refinanced repeatedly with ever-increasing fees and higher interest rates, and with ever-decreasing equity, as borrowers seek to stave off foreclosure.
c. Allowing mortgage brokers to charge “yield spread premiums” for qualifying a borrower for an interest rate that is higher than the rate the borrower qualifies for and can actually afford.
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d. Failing to underwrite loans based on traditional underwriting criteria such as debt-to-income ratio, loan-to-value ratio, FICO score, reserves, and work history. These criteria ensure that a borrower is obtaining a loan that he or she has the resources and assets to repay, and ignoring these criteria results in many loans that bear no relation to borrowers’ ability to repay them. This allows the lender to make a quick profit from the origination, but sets the borrower up for default and foreclosure.
e. Requiring substantial prepayment penalties that prevent borrowers whose credit has improved from refinancing their subprime loan to a prime loan. Prepayment penalties not only preclude borrowers from refinancing to a more affordable loan, but reduce the borrowers’ equity when a subprime lender convinces borrowers to needlessly refinance one subprime loan with another.
f. Charging excessive points and fees that are not associated with any increased benefits for the borrower.
g. Placing borrowers in subprime loans even though they qualify for prime or FHA loans on better terms. 28. The problem of predatory practices in subprime mortgage lending is particularly acute in minority communities because of “reverse redlining.” As used by Congress and the courts, the term “reverse redlining” refers to the practice of targeting residents in certain geographic areas for credit on unfair terms due to the racial or ethnic composition of the area. In contrast to “redlining,” which is the practice of denying prime credit to specific geographic areas because of the racial or ethnic composition of the area, reverse redlining involves the targeting of an area for the marketing of deceptive, predatory or otherwise deleterious lending practices because of the race or ethnicity of the area’s residents. This practice has repeatedly been held to
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violate the federal Fair Housing Act. See, e.g., Barkley v. Olympia Mortgage Co., No. 04-cv875, 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007); Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000).
29. There is a substantial body of empirical evidence demonstrating the prevalence of reverse redlining in the subprime mortgage market. These studies show that, even after controlling for creditworthiness and other legitimate underwriting factors, subprime loans and the predatory practices often associated with subprime lending are disproportionately targeted at African Americans and African-American neighborhoods. 2
30. Reverse redlining typically flourishes where two key conditions are met. First, the practice afflicts cities where minorities historically have been denied access to credit and other banking services. The legacy of historic discrimination, or redlining, often leaves the residents of minority communities desperate for credit and without the knowledge or experience required to identify loan products and lenders offering products with the most advantageous terms for which they might qualify. Instead, residents of underserved minority communities often respond favorably to the first offer of credit made, without regard to the fairness of the product. This makes them especially vulnerable to irresponsible subprime lenders who, instead

2

See Abt Associates, Using Credit Scores to Analyze High-Cost Lending in Central City Neighborhoods

(2008) ; Calvin Bradford, Center for Community Change, Risk or Race? Racial Disparities and the Subprime

Refinance Market (2002), at vii-ix (available at http://www.knowledgeplex.org/redir.html?id=1032&url=

http%3A%2F%2Fwww.knowledgeplex.org%2Fkp%2Freport%2Freport%2Frelfiles%2Fccc_0729_risk.pdf); Center

for Responsible Lending, Borrowers in High Minority Areas More Likely to Receive Prepayment Penalties on

Subprime Loans (2005), at 1-2 (available at http://www.responsiblelending.org/mortgage-lending/research-

analysis/rr004-PPP_Minority_Neighborhoods-0105.pdf); Center for Responsible Lending, Unfair Lending: The

Effect of Race and Ethnicity on the Price of Subprime Mortgages (2006), at 16-17 (available at

http://www.responsiblelending.org/mortgage-lending/research-analysis/rr011-Unfair_Lending-0506.pdf); HUD &

Dept. of the Treasury, Curbing Predatory Home Mortgage Lending (2000), at 72 (available at

http://www.huduser.org/Publications/pdf/treasrpt.pdf); HUD, Unequal Burden: Income and Racial Disparities in

Subprime Lending in America (2000), at 4-5 (available at http://www.huduser.org/Publications/pdf/unequa

l_full.pdf); National Community Reinvestment Coalition, The Broken Credit System: Discrimination and Unequal

Access to Affordable Loans by Race and Age – Subprime Lending in Ten Large Metropolitan Areas (2003), at 31-34

(available at http://www.ncrc.org/images/stories/pdf/research/ncrcdiscrimstudy.pdf); Howell E. Jackson & Jeremy

Berry, “Kickbacks or Compensation: The Case of Yield Spread Premiums” (2002), at 9, 125 (available at

http://www.law.harvard.edu/faculty/hjackson/pdfs/january_draft.pdf).

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of underwriting carefully to ensure that the loans they offer are appropriate for their customers, engage in the unscrupulous lending practices described in paragraph 27 above.
31. Second, reverse redlining arises in cities where there are racially segregated residential living patterns. This means that the people who are most vulnerable to abusive lending practices are geographically concentrated and therefore easily targeted by lenders.
32. Both of these conditions are present in Baltimore. First, Baltimore’s minority communities historically have been victimized by traditional redlining practices. Through much of the twentieth century the federal government, mortgage lenders, and other private participants in the real estate industry acted to deny homeownership opportunities and choices to the City’s African Americans. The Secretary of the United States Department of Housing and Urban Development admitted in 1970 that the federal government had “refus[ed] to provide insurance in integrated neighborhoods, promot[ed] the use of racially restrictive covenants,” and engaged in other methods of redlining. Thompson v. U.S. H.U.D., 348 F. Supp. 2d 398, 466 (D. Md. 2005). The federal government even published a map in 1937 titled “Residential Security Map for Baltimore” designed to facilitate private redlining by mortgage providers. See id. at 471. Mortgage lenders actively engaged in redlining for decades, treating “black and [the few] integrated neighborhoods as unstable and risky.” Garrett Power, Apartheid Baltimore Style: The Residential Segregation Ordinances of 1910-1913, 42 Md. L. Rev. 289, 319, 322 (1983).
33. The practice and effects of widespread redlining in Baltimore persisted for decades. An analysis of data from the 1980s, long after much of the institutionalized governmental and corporate apparatus of discrimination had been dismantled, found that the more African-American residents in a Baltimore neighborhood, the fewer mortgage loans and dollars the neighborhood received. Anne B. Shlay, Maintaining the Divided City: Residential
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Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 13 of 111 Lending Patterns in the Baltimore SMSA (Maryland Alliance for Responsible Investment, March 1987). The study also found that while 73% of majority white census tracts received a medium or high volume of single family mortgage loans, the same was true of only 5% of majority African-American tracts.
34. Second, the City is highly segregated between African Americans and whites. As the following map shows, even though Baltimore is 64% African-American and 32% white, many neighborhoods have a much higher concentration of one racial group or the other. For example, the African-American population exceeds 90% in East Baltimore, Pimlico/Arlington/Hilltop, Dorchester/Ashburton, Southern Park Heights, Greater Rosemont, Sandtown-Winchester/Harlem Park, and Greater Govans. It exceeds 75% in Waverly and Belair Edison. At the same time, the white population of Greater Roland Park/Poplar, Medfield/Hampden/Woodberry, and South Baltimore exceeds 80%, and the white population of Cross-Country/Cheswolde, Mt. Washington/Coldspring, and North Baltimore/Guilford/Homeland exceeds 70%.
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North Baltimore/Guilford/Homeland
Greater Roland Park/Poplar

Mt. Washington/Coldspring

The Waverlies

Cross-Country/Cheswolde

Medfield/ Hampden/ Woodberry

Greater Govans

Belair Edison

Pimlico/Arlington/Hilltop

Southern Park Heights Dorchester/Ashburton

Greater Rosemont
Upton/Druid Heights SandtownWinchester/Harlem Park

Clifton-Berea Madison/East End

South Baltimore

Indicates Majority African-American Neighborhood
Indicates Majority White Neighborhood

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B. Wells Fargo Causes Excessive and Unnecessary Foreclosures in Baltimore by Targeting Predatory Subprime Practices at African Americans and AfricanAmerican Neighborhoods 35. Wells Fargo’s failure to underwrite mortgage loans in minority and underserved
communities in a responsible manner has been the subject of public attention and concern for years. For example, its practices are the focus of a 2004 report from the Center for Responsible Lending. The report concluded that the company’s customers “too often face the loss of their home or financial ruin as a result” of its “predatory practices.” Center for Responsible Lending, A Review of Wells Fargo’s Subprime Lending (Apr. 2004) at 10 (available at http://www.responsiblelending.org/mortgage-lending/researchanalysis/ip004-Wells_Fargo0404.pdf). The predatory practices identified in the report include charging excessive fees; charging excessively high interest rates that are not justified by borrowers’ creditworthiness; requiring large prepayment penalties while deliberately misleading borrowers about the penalties; using deceptive sales practices to wrap insurance products into mortgages; convincing borrowers to refinance mortgages into new loans that only benefit Wells Fargo; deceiving borrowers into believing that they are getting fixed rate loans when they are really getting adjustable rate loans; and more.
36. Wells Fargo has intentionally taken advantage of the conditions in Baltimore to target these kinds of predatory practices at African-American neighborhoods and residents. Far from being a responsible provider of much-needed credit in minority communities, Wells Fargo is a leading cause of stagnation and decline in African-American neighborhoods where its foreclosures are concentrated. Specifically, since at least 2000, its foreclosures have been concentrated in Belair Edison, East Baltimore, Pimlico/Arlington/Hilltop, Dorchester/Ashburton,
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Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 16 of 111 Southern Park Heights, Greater Rosemont, Sandtown-Winchester/Harlem Park, Greater Govans and Waverly, and other neighborhoods with African-American populations exceeding 75%.
37. Fifty-one percent of Wells Fargo’s foreclosures from 2005 to 2009 were in census tracts that are more than 80% African-American and 62% were in tracts that are over 60% African-American, but only 12% were in tracts that are 20% or less African-American. The figures are virtually identical for Wells Fargo’s foreclosures from 2000 to 2004, with more than half in tracts that are more than 80% African-American, 64% in tracts that are over 60% AfricanAmerican, and only 14.8% in tracts that are 20% or less African-American.
38. The following map represents the concentration of Wells Fargo’s foreclosures in African-American neighborhoods from 2000 through 2009.
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North Baltimore/Guilford/Homeland
Greater Roland Park/Poplar

Mt. Washington/Coldspring

The Waverlies

Cross-Country/Cheswolde

Medfield/ Hampden/ Woodberry

Greater Govans

Belair Edison

Pimlico/Arlington/Hilltop

Southern Park Heights Dorchester/Ashburton

Greater Rosemont
Upton/Druid Heights SandtownWinchester/Harlem Park

Clifton-Berea Madison/East End

South Baltimore

Indicates Majority African-American Neighborhood
Indicates Majority White Neighborhood

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39. In addition to the disproportionate distribution of Wells Fargo foreclosures in African-American neighborhoods, disparate rates of foreclosure based on race further demonstrate Defendants’ failure to follow responsible underwriting practices in AfricanAmerican neighborhoods. While 4.82% of Wells Fargo’s loans in predominantly AfricanAmerican neighborhoods result in foreclosure, the same is true for only 1.63% of its loans in predominantly white neighborhoods. In other words, a Wells Fargo loan in a predominantly African-American neighborhood is three times as likely to result in foreclosure as a Wells Fargo loan in a predominantly white neighborhood.
40. Relatedly, Wells Fargo’s foreclosure rate for loans in neighborhoods that are 80% or more African-American is nearly three times as high as the overall average of the other major mortgage lenders in Baltimore, while the ratio for its loans in neighborhoods that are less than 20% African-American is less than half the average.
41. The type of loans that result in foreclosure provides further evidence that Wells Fargo is engaged in a pattern or practice of reverse redlining in Baltimore. Approximately 65% of Wells Fargo’s Baltimore loans that result in foreclosure are fixed rate loans. This ratio is the same in both African-American and white neighborhoods. This establishes that there is no legitimate reason for the stark difference in Wells Fargo’s foreclosure rates by race.
42. Unlike adjustable rate loans, where the price may fluctuate with changing market conditions, the performance of fixed rate loans is relatively easy to predict using automated underwriting models and loan performance data because monthly payments do not vary during the life of the loan. Using these sophisticated risk assessment tools, and relying on traditional underwriting criteria such as FICO scores, debt-to-income ratios, loan-to-value ratios, and cash reserves, any lender engaged in responsible underwriting practices designed to identify qualified
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borrowers can predict with statistical certainty the likelihood of default and/or delinquency. Lenders engaged in marketing fixed rate loans in a fair and responsible manner should have no difficulty sifting out unqualified borrowers, or borrowers whose loans would likely result in delinquency, default or foreclosure.
43. Because the percentage of fixed rate loans is so high and the same in both African-American and white neighborhoods, Wells Fargo should, if it properly underwrites, have comparable foreclosure rates in both communities. The fact that Wells Fargo’s underwriting decisions result in foreclosure three times as often with respect to African-American than white neighborhoods means that it is not following fair or responsible underwriting practices with respect to African-American customers.
44. The disparate foreclosure rates are instead consistent with the type of unscrupulous subprime lending practices described in paragraphs 27, 35, 46-71. Wells Fargo engages in these and similarly inappropriate practices when making loans to African Americans and in African-American neighborhoods. This pattern or practice of targeted activities fully explains the disparate rates of foreclosure. The disparities are not the result of or otherwise explained by legitimate non-racial underwriting criteria.
45. A closer look at Wells Fargo’s lending practices and the characteristics of its loans in Baltimore demonstrates that it is engaged in a pattern or practice of reverse redlining with respect to the City’s African-American neighborhoods. As described in sections B.1 through B.7 below, sworn statements of former Wells Fargo employees and examination of Wells Fargo’s loans indicate it is engaged in unfair and discriminatory practices in Baltimore’s African-American neighborhoods that have the effect and purpose of placing inexperienced and underserved borrowers in loans they cannot afford. These practices maximize short-term profit
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without regard to the borrower’s best interest, the borrower’s ability to repay, or the financial health of underserved minority neighborhoods. This targeted pattern or practice has resulted in the disproportionately high rate of foreclosures on Wells Fargo loans found in Baltimore’s African-American neighborhoods.
1. Former Wells Fargo Employees Explain How the Company Targets African Americans in Baltimore for Subprime Loans and Abusive Subprime Lending Practices
46. Attached to this Third Amended Complaint are sworn declarations from two former Wells Fargo employees, Elizabeth Jacobson and Tony Paschal. Until late in 2007, Ms. Jacobson and Mr. Paschal were responsible for making loans on behalf of Wells Fargo in the greater Baltimore region. See Attach. A (“Jacobson Decl.”); Attach. B (“Paschal Decl.”). Jacobson and Paschal describe in great detail how Wells Fargo has targeted African Americans and residents of African-American neighborhoods in and around Baltimore for abusive subprime lending practices
47. Jacobson began working for Wells Fargo as a loan officer in August 1998. Jacobson Decl. ¶ 2. She was subsequently promoted to Sales Manager and remained in that position until leaving the company in December 2007. Id. ¶¶ 2, 34. Jacobson made subprime loans exclusively. Id. ¶ 3, 10. She made the loans in a geographic area called “Region 12” that included Baltimore, Prince George’s County, Northern Virginia, and other places. Id. ¶ 3. Most of her customers were African Americans, including African Americans in Baltimore. Id. ¶ 26. She was one of Wells Fargo’s top three subprime loan officers nationally year after year, and in some years was the company’s top subprime loan officer in the country. Id. ¶ 4. Between 2003 and 2007, Jacobson completed approximately $50 million in subprime loans per year. Id. ¶ 5. This translates into about 180 loans per year. Id. Jacobson is white.
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48. Paschal was a Wells Fargo loan officer from September 1997 to September 2007 (with a hiatus of approximately 2½ years beginning in June 1999). Paschal Decl. ¶¶ 2-3. His job was to solicit Wells Fargo borrowers to refinance their home mortgage with a prime or Federal Housing Administration (“FHA”) loan. Id. ¶¶ 3, 7. FHA loans have interest rates that are closer to prime than subprime rates. Id. ¶ 23. Paschal referred the borrowers who did not qualify to the Mortgage Resources division, known as “MORE,” which exclusively originates subprime loans. Id. ¶ 7. He worked on the same floor of the same building as the MORE employees and he communicated with them daily. Id.
49. Jacobson’s and Paschal’s declarations confirm that Wells Fargo targeted African Americans and African-American neighborhoods in Baltimore and elsewhere for deceptive, abusive and predatory subprime loans and that Wells Fargo’s subprime loan officers engaged in a myriad of deceptive, abusive and predatory practices. This constitutes reverse redlining.
a. Targeting African Americans for Subprime Mortgage Loans
50. The declarations show that Wells Fargo targeted African Americans in Baltimore in a variety of ways. One was by marketing its subprime products to predominantly AfricanAmerican zip codes in Baltimore, Prince George’s County, and Washington, D.C. Paschal Decl. ¶¶ 8, 10. Wells Fargo did not target white areas for subprime loans. Paschal Decl. ¶ 8. Paschal “heard employees in the MORE division comment that Howard County was not good for subprime loans because it has a predominantly White population.” Id.
51. Wells Fargo also targeted African-American churches in the City and their congregations for subprime loans. Jacobson Decl. ¶¶ 27-28, 30; Paschal Decl. ¶ 12. Wells Fargo did not target white churches – “[w]hen it came to marketing, any reference to ‘church’ or
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‘churches’ was understood as code for African-American or black churches.” Jacobson Decl. ¶ 30.
52. Wells Fargo even assigned employees to make presentations at the churches on the basis of race. During a conference call in 2005 with subprime loan officers and branch managers about making presentations to black churches in Baltimore, the loan officers were told that only employees “of color” could attend. Jacobson Decl. ¶ 28. Jacobson was later told that she could come, but only if she “carried someone’s bag.” Id.
53. Wells Fargo also targeted African Americans for subprime loans through a variety of special events. Jacobson Decl. ¶ 29. Wells Fargo selected employees to make presentations at these events on the basis of race, as it did with church presentations. One such event was a “‘wealth building’ seminar” designed to promote subprime products in 2005 in Greenbelt, Maryland, where the audience was expected to be predominantly African-American. Id. Jacobson was told by the manager of Emerging Markets, a subprime unit that targeted African Americans, that she was “too white” to appear before the audience at the seminar. Id. ¶¶ 27, 29. Jacobson complained to higher management, but received no response and no action was taken. Id. ¶¶ 29, 31.
54. Wells Fargo also created a unit called the “Affinity Marketing Group” in its Silver Spring, Maryland office to target African Americans, including members of African-American churches. Paschal Decl. ¶ 12. All the employees of the Affinity Marketing Group were AfricanAmerican. Id. Subprime loan officers in the group who targeted African Americans were selected on the basis of their race and Wells Fargo’s desire to use African-American employees to target African-American customers. Id.
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55. Another way in which Wells Fargo targeted African Americans was by tailoring its subprime marketing materials on the basis of race. Id. ¶ 11. It devised software to print out subprime promotional materials in different languages, one of which was called “African American” by Wells Fargo. Id. A computer screen shot from 2006 showing this option is attached to Paschal’s declaration as Exhibit A. Wells Fargo did not remove the AfricanAmerican “language” option until Paschal complained. Id.
56. Wells Fargo’s subprime loan officers held derogatory stereotypes of African Americans, which contributed to their targeting of African Americans in and around Baltimore for subprime loans. Jacobson Decl. ¶ 28; Paschal Decl. ¶ 8, 16. Subprime loan officers described African-American and other minority customers by saying “those people have bad credit” and “those people don’t pay their bills,” and by calling minority customers “mud people” and “niggers.” Paschal Decl. ¶¶ 8, 16. They referred to loans in minority communities as “ghetto loans.” Id. They described Prince George’s County, which has a slightly higher percentage of African-American residents than Baltimore, as the “subprime capitol of Maryland.” Jacobson Decl. ¶ 26. At the same time, they believed that areas such as Howard County that are predominantly white were bad locations for making subprime loans. Paschal Decl. ¶ 8.
b. Steering People Who Qualify for Prime Mortgages into Subprime Mortgages
57. Jacobson’s and Paschal’s declarations demonstrate that Wells Fargo regularly steered borrowers who qualified for prime loans into subprime loans. Wells Fargo gave loan officers substantial financial incentives and the discretion to steer borrowers in this manner. Jacobson Decl. ¶¶ 8, 10-12, 15-16, 32; Paschal Decl. ¶¶ 12-13. Paschal was instructed by management to refer borrowers who could have qualified for more advantageous prime or FHA
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loans to the subprime unit. Paschal Decl. ¶ 9. He was even reprimanded for giving too many people FHA loans instead of referring them for subprime loans. Id. ¶ 19.
58. Paschal saw many files of “minority customers who had good credit scores and credit characteristics in subprime loans who should have qualified for prime or FHA loans.” Paschal Decl. ¶ 12. Jacobson likewise made subprime loans to many people with prime credit who were referred to her by loan officers responsible for making prime loans. Jacobson Decl. ¶ 9. She could identify people steered in this manner if she had the opportunity to review Wells Fargo’s loan files. Id.
59. The financial incentives to steer people into subprime loans were very substantial. “A reps,” who made prime loans, generally made more money in referral fees by referring a person with prime credit to a subprime loan officer than by originating a prime loan. Jacobson Decl. ¶ 8. Subprime loan officers, whose pay was based on commissions and fees, likewise made more money by originating loans with higher interest rates and fees. Id. ¶ 6. This allowed Jacobson to gross well over half a million dollars in 2004 and again in 2005. Id. The effect of Wells Fargo’s compensation system for subprime loans was to put “bounties” on minority borrowers. Paschal Decl. ¶ 13.
60. Wells Fargo also gave lavish gifts and trips to successful subprime loan officers, even as foreclosures increased in recent years. Jacobson Decl. ¶ 32. This was part of a culture that focused only on making the most money possible and not on putting borrowers in loans that were appropriate for them. Id.
61. Loan officers were able to steer people with good credit into subprime loans because Wells Fargo gave them broad discretion. As Jacobson states, “underwriting guidelines and pricing rules for prime and subprime loans . . . [provided] more than enough discretion to
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allow A reps to steer prime loan customers to subprime loan officers like me. Likewise, the guidelines gave me enough discretion to figure out how to qualify most of the referrals for a subprime loan once I received the referral.” Jacobson Decl. ¶ 11. This included “discretion to decide which subprime loan products to offer the applicant” “[o]nce I received a referral from an A rep.” Id. ¶ 13.
62. Wells Fargo loan officers developed a multitude of unscrupulous ways to apply their discretion to get away with steering subprime loans to people who qualified for prime or FHA loans. One method was to intentionally mislead customers by, for example, giving “stated income” loans to customers who could document their income, or telling customers not to make a down payment or to take more cash from their home equity, which would automatically cause a prime loan to “flip” into a subprime loan. Jacobson Decl. ¶ 17; Paschal Decl. ¶ 14. Another was to intentionally mislead underwriters by “telling the underwriting department that the customer did not want to provide documentation for the loan, had no source[d] or seasoned assets, or needed to get the loan closed quickly.” Jacobson Decl. ¶¶ 15. Some loan officers would simply falsify loan applications. Id. ¶ 18. Loan officers used such techniques to increase their commissions while discriminating against minority applicants. Paschal Decl. ¶ 13.
63. In 2004 Wells Fargo responded to public criticism by creating “filters” that were supposed to prevent the steering of prime customers into subprime loans. Jacobson Decl. ¶ 19; Paschal Decl. ¶ 18. It was widely understood that the filters were not effective. Id. Loan officers learned many ways to work around the filters by using the broad discretion they were afforded by Wells Fargo. Id. These techniques were widely used. Id. Senior managers were aware of their use and eventually made certain changes in response, but the loan officers continued to easily undermine the filters. Jacobson Decl. ¶ 19. The filters were also ineffective
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because Wells Fargo did not create disincentives to steering prime customers into subprime loans. Paschal Decl. ¶ 18. To the contrary, employees continued to have substantial financial incentives to engage in such steering and continued to do so. Id. Management knew that these practices continued.
c. Other Abusive Subprime Lending Practices Engaged in by Wells Fargo
64. Jacobson’s and Paschal’s declarations further demonstrate that Wells Fargo loan officers had substantial discretion to increase the costliness of subprime loans and that they regularly used this discretion at the expense of subprime borrowers.
65. The loan officers had broad discretion to set the pricing, points, and fees for subprime loans. Jacobson Decl. ¶¶ 22, 24; Paschal Decl. ¶¶ 5, 13. Even when Wells Fargo created some limits in 2007, loan officers retained significant discretion. Jacobson Decl. ¶ 24. Loan officers had strong financial incentives to increase the pricing, points, and fees because it would increase their commissions. Id.; Paschal Decl. ¶ 13.
66. Loan officers also used this discretion to harm African-American and other minority customers by telling them that interest rates were “locked” when, in fact, the rates were not locked. Paschal Decl. ¶ 5. This prevented minority customers from getting lower interest rates, but loan officers lowered interest rates for whites in the same situation. Id.
67. Loan officers also used their discretion to select loan products and set rates and fees to “discriminate[] against minority loan applicants by not offering them [] better or newer products which had lower fixed interest rates and fees.” Paschal Decl. ¶ 14.
68. Jacobson’s and Paschal’s declarations further demonstrate that Wells Fargo loan officers deceived subprime borrowers about the inclusion and significance of onerous prepayment penalties in the terms and conditions of their loans. Jacobson Decl. ¶ 13; Paschal
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Decl. ¶ 15. The prepayment penalties typically made it difficult for borrowers to refinance into new and better loans. Jacobson Decl. ¶ 13. Loan officers were encouraged by Wells Fargo trainers not to tell applicants about the prepayment penalties. Paschal Decl. ¶ 15. When the subject was raised, loan officers told borrowers that prepayment penalties could be waived, even though they could not be, or otherwise downplayed their significance. Jacobson Decl. ¶ 13; Paschal Decl. ¶ 15.
69. Jacobson describes another abusive subprime lending practice which some Wells Fargo subprime loan officers implemented by intentionally falsifying loan files so that they could make loans to borrowers who could not afford them. Loan officers falsified applications by cutting and pasting the credit report or income documentation of borrowers who had been approved in the past into the file of applicants who would otherwise not qualify for a loan. Jacobson Decl. ¶ 18. These tactics made the applicants appear to the underwriters to satisfy the qualifications for subprime loans even though the loan officers knew that they did not. Id. Jacobson reported this conduct to management but is not aware of any corrective action that was taken. Id. ¶¶ 18, 31. Foreclosures are a predictable result of this practice.
70. Wells Fargo also qualified adjustable rate subprime loans “with the assumption that the borrower would pay the teaser rate for the full life of the loan even though this lower rate only applied during the first two or three years of the loan.” Jacobson Decl. ¶ 16. Foreclosures are a predictable result of this practice.
71. Wells Fargo also used mortgage brokers and listing agents to target African Americans and African-American neighborhoods in Baltimore and Prince George’s County and to engage in the other abusive lending practices described by Jacobson and Paschal. A declaration from Peter Hebert, a mortgage broker whose company worked for Wells Fargo,
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demonstrates that Wells Fargo used brokers and agents in this inappropriate and unlawful fashion. See Attach C. These brokers and listing agents are Wells Fargo’s agents and Wells Fargo is responsible for their acts and omissions.
2. Publicly Available Home Mortgage Disclosure Act Data Shows that Wells Fargo’s High-Cost Loans are Disproportionately Located in AfricanAmerican Neighborhoods in Baltimore
72. Publicly available data reported by Wells Fargo to federal regulators pursuant to the Home Mortgage Disclosure Act shows that in 2007, Wells Fargo made high-cost loans (i.e., loans with an interest rate that was at least three percentage points above a federally-established benchmark) to 43% of its African-American mortgage customers in Baltimore, but only to 9% of its white customers in Baltimore. In 2006, the respective rates were 65% and 15%; in 2005, the respective rates were 54% and 14%; in 2004, the respective rates were 31% and 10%. The proportion of refinance loans that are high cost is especially pronounced. In 2004, 2005, 2006, and 2007, a Wells Fargo refinance loan to an African-American borrower was 3.2 times more likely to be high cost than a refinance loan to a white borrower.
73. Racial disparities in the pricing of Wells Fargo’s mortgage loans are confirmed by a study released this year, which also found that the disparity actually increased at higher income levels. National People’s Action, The Truth About Wells Fargo: Irresponsible Lending and African Americans (2009) at 2 (available at http://www.npaus.org/downloads/truthaboutwellsfargo.pdf).
74. The maps that follow show the geographic distribution of high-cost loans in African-American and white neighborhoods in Baltimore. These maps demonstrate that Wells Fargo’s high-cost loans are disproportionately located in Baltimore’s African-American
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Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 29 of 111 neighborhoods, including, among others, Sandtown-Winchester/Harlem Park, Upton/Druid Heights, Dorchester/Ashburton, and Madison/East End.
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North Baltimore/Guilford/Homeland
Greater Roland Park/Poplar

Mt. Washington/Coldspring

The Waverlies

Cross-Country/Cheswolde

Medfield/ Hampden/ Woodberry

Greater Govans

Belair Edison Belair Edison

Pimlico/Arlington/Hilltop

Southern Park Heights Dorchester/Ashburton

Greater Rosemont
Upton/Druid Heights SandtownWinchester/Harlem Park

Clifton-Berea Madison/East End

South Baltimore

Indicates Majority African-American Neighborhood
Indicates Majority White Neighborhood

Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 31 of 111

North Baltimore/Guilford/Homeland
Greater Roland Park/Poplar

Mt. Washington/Coldspring

The Waverlies

Cross-Country/Cheswolde

Medfield/ Hampden/ Woodberry

Greater Govans

Belair Edison

Pimlico/Arlington/Hilltop

Southern Park Heights Dorchester/Ashburton

Greater Rosemont
Upton/Druid Heights SandtownWinchester/Harlem Park

Clifton-Berea Madison/East End

South Baltimore

Indicates Majority African-American Neighborhood
Indicates Majority White Neighborhood

Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 32 of 111
75. The fact that high-cost loans involving all of Wells Fargo’s loan products are more heavily concentrated in Baltimore’s African-American neighborhoods is consistent with the practice of reverse redlining and, upon information and belief, has contributed significantly to the disproportionately high rates of foreclosure in Baltimore’s African-American communities. Within the subset of high-cost loans, however, the fact that a disproportionately large percentage of Wells Fargo’s high-cost loans in African-American neighborhoods are refinance loans is particularly significant, for it is both consistent with and indicative of a deceptive and predatory subprime practice that involves encouraging minority borrowers who already have loans to refinance at excessive cost with little benefit. This increases the likelihood of foreclosure and, upon information and belief, has contributed to the disproportionately high rate of foreclosures in Baltimore’s African-American communities.
3. Wells Fargo’s Pricing Sheets Show that It Targets Homes that Are More Likely to Be Located in African-American Neighborhoods for Interest Rate Increases, and Lowers Rates for Homes that Are Disproportionately Located in White Neighborhoods
76. One reason that residents of Baltimore’s African-American neighborhoods are more likely to pay higher prices for Wells Fargo loans than residents of Baltimore’s white neighborhoods is the discriminatory pricing found on its pricing sheets. As set forth explicitly on the Wells Fargo Home Mortgage 2005 pricing sheet, attached as Attachment D, Wells Fargo requires a 50 basis point increase in the loan rate for loans of $75,000 or less, a 12.5 basis point decrease for loans of $150,000 to $400,000, and a 25 basis point decrease for loans larger than $400,000. This means that a borrower with a $75,000 thirty-year fixed rate loan who qualifies for an 8% interest rate instead receives an 8.5% interest rate, which costs an extra $9,493 over the life of the loan. An equally creditworthy borrower with a $150,000 loan receives a 7.875%
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interest rate, which costs $4,698 less than an 8% loan. A similarly qualified borrower with a $400,001 loan would receive a 7.75% interest rate, which costs $24,987 less than an 8% loan.
77. The Fannie Mae Foundation has likewise documented how modest interest rate disparities can cause dramatic financial consequences for borrowers steered into higher-cost loans. James H. Carr and Jenny Schuetz, Fannie Mae Foundation, Financial Services in Distressed Communities: Framing the Issue, Finding Solutions (2001) at 12-13 (available at http://www.cra-nc.org/financial.pdf) (1% increase in interest rate on 30-year $81,000 mortgage translates into loss of over $78,000 in wealth due to increased payments and lost investment opportunity).
78. Wells Fargo’s pricing rules have a clear and foreseeable disproportionate adverse impact on African-American borrowers. As demonstrated by the maps that follow, loans originated by Wells Fargo in Baltimore from 2004 through 2007 in the amount of $75,000 and less were almost three times as likely to be in census tracts where the population is predominantly African-American than in tracts where the population is predominantly white. By contrast, loans originated by Wells Fargo in Baltimore of more than $150,000 were 3.25 times as likely to be in tracts that are predominantly white than in tracts that are predominantly AfricanAmerican.
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Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 34 of 111

North Baltimore/Guilford/Homeland
Greater Roland Park/Poplar

Mt. Washington/Coldspring

The Waverlies

Cross-Country/Cheswolde

Medfield/ Hampden/ Woodberry

Greater Govans

Belair Edison

Pimlico/Arlington/Hilltop

Southern Park Heights Dorchester/Ashburton

Greater Rosemont
Upton/Druid Heights SandtownWinchester/Harlem Park

Clifton-Berea Madison/East End

South Baltimore

Indicates Majority African-American Neighborhood
Indicates Majority White Neighborhood

Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 35 of 111

North Baltimore/Guilford/Homeland
Greater Roland Park/Poplar

Mt. Washington/Coldspring

The Waverlies

Cross-Country/Cheswolde

Medfield/ Hampden/ Woodberry

Greater Govans

Belair Edison

Pimlico/Arlington/Hilltop

Southern Park Heights Dorchester/Ashburton

Greater Rosemont
Upton/Druid Heights SandtownWinchester/Harlem Park

Clifton-Berea Madison/East End

South Baltimore

Indicates Majority African-American Neighborhood
Indicates Majority White Neighborhood

Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 36 of 111
79. Upon information and belief, the discriminatory pricing reflected in Wells Fargo’s pricing sheets is consistent with unfair practices associated with reverse redlining and has contributed significantly to the disproportionately large number of foreclosures found in Baltimore’s African-American communities.
4. Investigation of Wells Fargo’s Pricing Practices in Philadelphia Further Demonstrates the Company Is Targeting the African-American Community for Unfair and Improper Lending Practices
80. Discriminatory pricing observed in Wells Fargo’s loan data in Baltimore is consistent with findings drawn from data obtained in litigation brought against Wells Fargo in Philadelphia. An expert report in a pending lawsuit based on Wells Fargo’s Philadelphia loans concluded that “African American borrowers, and borrowers residing in African American neighborhoods (i.e., census tracts), pay more than comparable non-African Americans and residents of communities in which White people predominate.” Aff. of I. Goldstein, Walker v. Wells Fargo Bank, N.A., No. 05-cv-6666 (E.D. Pa. July 20, 2007) at ¶ 7 (Docket No. 24, Attach. 1).
81. Upon information and belief, Wells Fargo’s pricing practices in Philadelphia are consistent with its practices in Baltimore, and provide further evidence that the company is engaged in a pattern or practice of unfair lending that contributes significantly to the disproportionately high rate of foreclosure found in Baltimore’s African-American neighborhoods.
5. Wells Fargo Underwrites Adjustable Rate Loans in Baltimore’s AfricanAmerican Neighborhoods that Borrowers Cannot Afford
82. Wells Fargo frequently originates “3/27” adjustable rate mortgages, and frequently originated “2/28” adjustable rate mortgages until mid-2007, to borrowers from predominantly African-American neighborhoods in Baltimore. Thirty-four percent of Wells
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Fargo’s foreclosures from 2000 to 2008 involved such loans. Unless properly underwritten, such loans are destined to fail.
83. Wells Fargo does not properly underwrite these loans when made to African Americans and in African-American neighborhoods. Wells Fargo does not adequately consider the borrowers’ ability to repay these loans, especially after the teaser rate expires and the interest rate increases. The fact that these loans would result in delinquency, default and foreclosure for many borrowers was, or should have been, clearly foreseeable to Wells Fargo at the time the loans were made.
84. Most of the loans that Elizabeth Jacobson made were adjustable rate mortgages. Jacobson Decl. ¶ 13. Jacobson confirms in her declaration that Wells Fargo underwrites these loans as if the teaser rate will apply for the full life of the loan instead of considering the borrowers’ ability to repay the loan after the teaser rate expires in two or three years. Id. ¶ 16.
85. The use of “2/28” and “3/27” adjustable rate mortgages in the manner described above is consistent with the practice of reverse redlining, has subjected African-American borrowers to unfair and deceptive loan terms, and has contributed significantly to the high rate of foreclosure found in Baltimore’s African-American neighborhoods.
6. The Caps on Wells Fargo’s Adjustable Rate Loans Are Higher in AfricanAmerican Neighborhoods
86. Upon information and belief, Wells Fargo has discretion to apply different caps on adjustable rate loans. The cap is the maximum rate that a borrower can be charged during the life of an adjustable rate loan.
87. The average cap on a Wells Fargo adjustable rate loan that was subject to foreclosure in 2005 or 2006 in predominantly African-American neighborhoods was 14.13%. The cap on such loans in predominantly white neighborhoods was only 13.61%.
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88. The disparity observed in caps imposed on adjustable rate loans in predominantly African-American neighborhoods and predominantly white neighborhoods further demonstrates that Well Fargo is engaged in a pattern or practice of unfair and improper lending in Baltimore’s African-American communities that contributes significantly to the high rate of foreclosure in these neighborhoods.
7. Wells Fargo’s Loans to African Americans Result in Especially Quick Foreclosures
89. A comparison of the time from origination to foreclosure of Wells Fargo’s loans in Baltimore shows a marked disparity with respect to the speed with which loans to African Americans and whites move into foreclosure. The average time to foreclosure for AfricanAmerican borrowers is 1.27 years. With white borrowers it is 1.45 years, or 14% longer.
90. This disparity in time to foreclosure is further evidence that Wells Fargo is engaged in lending practices consistent with reverse redlining. As with all of the practices identified in paragraphs 46-88 above, and like the abusive practices identified in paragraphs 27 and 35 above, the disparity in time to foreclosure demonstrates that Wells Fargo is engaged in irresponsible underwriting in African-American communities that does not serve the best interests of borrowers. If Wells Fargo were applying the same underwriting practices in Baltimore’s African-American and white neighborhoods, there would not be a significant difference in time to foreclosure. Were Wells Fargo underwriting borrowers in both communities with equal care and attention to proper underwriting practices, borrowers in African-American communities would not find themselves in financial straits significantly sooner during the lives of their loans than borrowers in white communities. The faster time to foreclosure in African-American neighborhoods is consistent with underwriting practices in the
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African-American community that are less concerned with determining a borrower’s ability to pay and qualifications for the loan than they are in maximizing short-term profit.
91. The HUD/Treasury Report confirms that time to foreclosure is an important indicator of predatory practices. Citing Baltimore specifically, HUD and Treasury stated that “[t]he speed with which the subprime loans in these communities have gone to foreclosure suggests that some lenders may be making mortgage loans to borrowers who did not have the ability to repay those loans at the time of origination,” and that “lenders should not lend to borrowers that do not have the capacity to repay the loans that the lender offers.” HUD/Treasury Report at 25.
92. The difference in time to foreclosure in Baltimore’s African-American and white neighborhoods is especially important because foreclosures occur more quickly in Baltimore than in neighboring jurisdictions, including Philadelphia and New Castle County, Delaware (which includes Wilmington). This means that the injuries that result from foreclosures in Baltimore are compounded, and therefore grow, at a faster pace.
INJURY TO BALTIMORE CAUSED BY WELLS FARGO’S DISCRIMINATION IN MORTGAGE LENDING 93. Baltimore has suffered financial injuries as a direct result of Wells Fargo’s pattern or practice of reverse redlining and the resulting disproportionately high rate of foreclosure on Wells Fargo loans to African Americans and in Baltimore’s majority African-American neighborhoods. Baltimore seeks redress for these injuries. The City does not seek redress in this action for injuries resulting from foreclosures on mortgages originated by lenders that are not associated with Wells Fargo. 94. Wells Fargo continues to engage in the discriminatory pattern or practice described herein with similar and continuing deleterious consequences to the City.
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95. In accordance with the Court’s January 6, 2010 ruling on Wells Fargo’s motion to dismiss, the City has narrowed the damages it seeks in this Third Amended Complaint to damages based on (1) municipal services provided at vacant Wells Fargo foreclosure properties that became vacant because of Wells Fargo’s illegal lending practices; and (2) reduced property tax revenues from limited areas within particular neighborhoods where Wells Fargo’s foreclosures constitute a disproportionately high concentration of all foreclosures.
96. Wells Fargo’s discriminatory lending practices, described above, include steering borrowers into loans that are more onerous than loans for which they qualify and giving loans to people who do not qualify for them. These practices cause foreclosures and vacancies that injure the City.
97. Steering borrowers into loans that are less advantageous than loans for which they qualify, including steering borrowers who qualify for prime loans into subprime loans, can cause foreclosures because the borrowers are required to make higher loan payments. The difference between what a borrower who is steered in this manner must pay and the lower amount for which the borrower qualified can cause the borrower to be unable to make payments on the mortgage. In such instances, the borrower would have continued to make payments on the mortgage and remained in possession of the premises had Wells Fargo made the loan without improperly steering the borrower into a subprime, or less advantageous loan. Steering borrowers in this manner, therefore, causes foreclosures and vacancies.
98. Giving a loan to an applicant who does not qualify for the loan, especially a refinance or home equity loan, can also cause foreclosures and vacancies. Some 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, such as Wells
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Fargo, solicits such a homeowner to take out a home equity loan on their property, or alternatively, to refinance their existing loan into a larger loan without properly underwriting them to assure that they can make the monthly payments for the new, larger loan, the result is plausibly and likely to be that the borrower will be unable to make payments on the mortgage. This is particularly true where the borrower is refinanced from a fixed rate loan into an adjustable rate loan that the lender knows the borrower cannot afford should interest rates rise. In some instances the lender may refinance the borrower into a new loan that the lender knows the borrower cannot sustain given the borrowers present debt obligations and financial resources. In such circumstances, the plausible and likely result of such practices is to cause homeowners who are otherwise occupying properties without a mortgage, or comfortably making payments on a modest existing mortgage, to be unable to make payment on a new, unaffordable loan. This, in turn, causes foreclosures and vacancies. If these unaffordable refinance and home equity loans had not been made, the subject properties would not have become vacant and would have remained occupied during the period for which the City claims damages in this Complaint.
99. Lenders use different methods to encourage borrowers to agree to take refinance loans or home equity loans that they do not need and cannot afford. One way is to solicit homeowners for “cash out” refinance loans in which the homeowner receives money to make home improvements or for other purposes. This increases the amount of money that the borrower must pay back. Lenders encourage existing homeowners to borrow more cash secured by their homes than they want, need, or can afford.
100. Another way is for the lender to solicit homeowners to consolidate unsecured debts, such as credit card debts or auto loans, into a refinanced mortgage or a home equity loan. This also increases the amount of money that must be repaid for the borrower to retain the house.
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101. In making these loans, lenders solicit homeowners to take out a new loan at a higher interest rate than they are currently paying or at a rate they cannot afford. This allows the lender to charge more points and fees at the time of closing and increases the lender’s profit margin on the loan.
102. Lenders also “roll” points and fees charged for a refinance loan or a home equity loan into the loan principal, which increases the amount owed by the borrower.
103. Lenders underwrite adjustable rate refinance loans based only on the “teaser” rate and without regard to whether the borrower will be able to afford the loan after the teaser rate expires. In many cases, the lender refinances the borrower from a stable fixed rate loan product into an adjustable rate loan with an initial low teaser rate, knowing that the borrower will not be able to afford the loan after the teaser rate expires and the rate increases.
104. All of these practices can cause borrowers’ monthly mortgage payments to increase, whether by increasing the overall size of the debt secured by their home, increasing the interest rate, or both. Lenders have the underwriting tools and indicators – such as credit scores, debt-to-income ratios, and loan-to-value ratios – to predict with great accuracy whether the increase is too much for the borrower to afford. When lenders engage in these practices without regard to whether borrowers qualify for and can afford a refinance loan or a home equity loan based on proper underwriting criteria, it causes borrowers who could afford their old mortgage loans or had no mortgage at all to be saddled with new mortgage loans that they cannot afford. These practices cause foreclosures and vacancies at properties that would not be vacant had the offending loans not been made.
105. Lenders engaged in the practices described in paragraphs 98-104 above in many instances should not be making loans to the borrowers targeted for these practices because these
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borrowers do not have the credit rating or otherwise satisfy the necessary underwriting qualifications to take on additional debt.
106. Lenders engaged in the practices described in paragraphs 98-104 above in many instances should not be making adjustable rate loans to the borrowers targeted for these practices because these borrowers do not have the credit rating or otherwise satisfy the necessary underwriting qualifications to handle the potential increase in monthly payments that may result from an adjustable rate loan.
107. Loan data analyzed by the City shows that in numerous instances, Wells Fargo gave cash-out or debt consolidation refinance or home equity loans to owners of occupied properties at issue in this Complaint that significantly increased the borrower’s mortgage debt and/or replaced the borrower’s fixed rate loan with an adjustable rate loan. These practices are consistent with Elizabeth Jacobson’s testimony, described in paragraph 69 above, that Wells Fargo gave loans to borrowers who did not qualify for and could not afford them.
108. Investigation in this case involving limited instances where the City has been able to identify and contact borrowers has shown that Wells Fargo has engaged in at least some of the practices identified in paragraphs 98-104 above at properties located in Baltimore’s AfricanAmerican neighborhoods which are the subject of this lawsuit. Investigation has shown that Wells Fargo encouraged borrowers to refinance and take more cash out of their homes than they wanted, needed, or could afford, even if the house was owned debt-free before the Wells Fargo loan. These constitute loans that Wells Fargo knew or should have known the borrower could not afford and that should not have been made. At properties where this type of loan was made, the property was occupied prior to the time Wells Fargo made the loan and the Wells Fargo loan caused the property to become vacant. Had the loan not been made, the property would have
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remained occupied. 109. Investigation has also shown that Wells Fargo encouraged borrowers to refinance
into adjustable rate loans with payments that increased over time. Wells Fargo did not apply appropriate underwriting criteria to avoid making these loans to unqualified borrowers. These also constitute loans that Wells Fargo knew or should have known the borrower could not afford and that should not have been made. At properties where these loans were made, the property was occupied prior to the time Wells Fargo made the loan and the Wells Fargo loan caused the property to become vacant. Borrowers targeted for these practices could have avoided foreclosure if Wells Fargo had not made the loan to them. By targeting such practices at owners of occupied properties identified in this Complaint, Wells Fargo has caused increased foreclosures and vacancies in Baltimore’s African-American neighborhoods. A. Baltimore Has Been Injured By Having to Provide Costly Municipal Services at
Specifically Identified Properties in African-American Neighborhoods that Have Become Vacant as a Direct Result of Discriminatory Loans Originated By Wells Fargo 110. As alleged in paragraphs 33 through 92 above, Wells Fargo’s discriminatory practices have resulted in disproportionate rates of foreclosure and notices of foreclosure for Baltimore’s African-American neighborhoods and African-American borrowers because Wells Fargo’s lending practices have put these targeted borrowers in discriminatory loans that they cannot afford or make timely payment on. These foreclosure notices result in high and unnecessary rates of vacancy at Wells Fargo properties. Of the 640 foreclosure notices for Wells Fargo loans in Baltimore from 2000 through 2009 of which the City is currently aware, 486 (76%) are in majority African-American neighborhoods. Vacancies resulting from these 640 foreclosures are also heavily concentrated in majority African-American neighborhoods. In
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majority African-American neighborhoods, 270 of the Wells Fargo foreclosure properties became vacant after Wells Fargo made the loan.
111. Vacant Wells Fargo foreclosure properties have caused direct costs to the City because the City has been required to provide a multitude of increased municipal services at the properties. These services would not have been necessary if the properties were occupied.
112. Vacant Wells Fargo foreclosure properties have resulted in violations of Baltimore’s municipal housing code. The City’s housing department has had to respond to these violations. The housing department’s responses have required substantial personnel time and out-of-pocket costs. Among other things, the City has had to inspect the vacant properties; board the vacant properties that are open to casual entry; collect garbage at the vacant properties; cut high grass and weeds at the vacant properties; take legal action to prosecute the housing code violations at the vacant properties; condemn the vacant properties that are not structurally sound and that threaten public safety; and make structural repairs to stabilize vacant properties that threaten public safety.
113. The City’s fire department has had to send personnel and fire trucks to vacant Wells Fargo foreclosure properties to respond to fire hazards and other public health and safety threats that arise at these properties because the properties are vacant.
114. The City’s police department has likewise had to send personnel and police vehicles to vacant Wells Fargo foreclosure properties to respond to public health and safety threats that arise at these properties because the properties are vacant.
115. Other City departments have had to devote personnel and incur costs to address other types of problems arising at specific vacant Wells Fargo foreclosure properties, such as vermin infestation, burst water pipes, and more. The City also has administrative costs
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associated with the provision of increased municipal services at vacant Wells Fargo foreclosure properties.3
116. The municipal services that the City has had to provide at the vacant Wells Fargo foreclosure properties – inspecting, boarding, cleaning, cutting grass and weeds, prosecuting, condemning, sending fire personnel, sending police personnel, and more – have been recorded, have costs that can be measured precisely, and are expensive.
117. Each of the Wells Fargo properties specifically identified in paragraphs 119 through 308 below became vacant because of Wells Fargo’s discriminatory lending practices and the foreclosures that are the direct result of those practices. Baltimore has been required to provide increased municipal services at these properties. Each of the municipal services provided by Baltimore at every vacant Wells Fargo foreclosure property is described in the paragraphs immediately below.4
118. The costs to the City of taking each of the actions listed for each vacant Wells Fargo foreclosure property below constitute specific damages suffered by the City because of Defendants’ illegal lending practices. Baltimore will have to continue to provide these and other municipal services at these properties in the future, particularly with respect to the 138 that remain vacant.

3

A study commissioned by the Homeownership Preservation Foundation confirms that these types of costs

are caused by foreclosures and vacancies and that they can be discerned and calculated precisely. See W. Apgar, M.

Duda & R. Gorey, The Municipal Costs of Foreclosures: A Chicago Case Study (Feb. 27, 2005) at 24-26 (available

at http://www.nw.org/network/neighborworksProgs/foreclosuresolutions/documents/2005Apgar-DudaStudy-

FullVersion.pdf). The study isolated twenty-six types of costs incurred by fifteen government agencies in response

to foreclosures in Chicago. It then analyzed the amount of each cost based on different foreclosure scenarios, such

as whether the home is left vacant, whether and to what degree criminal activity ensues, and whether the home must

be demolished. The study found that the total costs ran as high as $34,199 per foreclosure.

4

In the course of discovery, the City will identify additional services that it has provided at these properties.

It will also identify additional vacant Well Fargo foreclosure properties in African-American neighborhoods where

it has been required to provide increased municipal services.

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119. 1804 N. Carey Street: The housing department devoted personnel time to conduct one physical inspection of the property in 2006, one physical inspection of the property in 2007, and an additional physical inspection of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2006 in response to a call for service.
120. 1501 N. Payson Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2006. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property once in 2002, twice in 2004, once in 2006, and once in 2007 in response to calls for service. The fire department dispatched a vehicle and personnel to the property in response to a call for service in 2004. The fire department dispatched a fire truck, a fire engine, a medical vehicle, a Battalion Chief vehicle, and eleven personnel to the property in response to a call for service in 2006.
121. 1417 W. Lombard Street: The police department dispatched officers to the property in 2006 in response to a call for service.
122. 624 Scott Street: The police department dispatched officers to the property in 2003 and again in 2004 in response to calls for service.
123. 1833 E. North Avenue: The housing department devoted personnel time to conduct one physical inspection of the property in 2006 and two physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property twice in 2007 and three times in 2008 in response to calls for service. The fire
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department dispatched a vehicle and personnel to the property in response to a call for service in 2004. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2006.
124. 3025 E. Federal Street: The housing department devoted personnel time to conduct one physical inspection of the property in 2007 and fifteen physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property six times. The police department dispatched officers to the property in 2008 in response to calls for service.
125. 2116 E. Biddle Street: The housing department devoted personnel time to conduct two physical inspections of the property in 2003 and an additional physical inspection of the property in 2007. The police department dispatched officers to the property twice in 2003, twice in 2006, six times in 2007, and once in 2008 in response to calls for service. The fire department dispatched a fire truck, two medical vehicles, and seven personnel to the property in response to a call for service in 2008.
126. 2825 E. Chase Street: The police department dispatched officers to the property in 2003 in response to a call for service.
127. 2908 E. Monument Avenue: The housing department devoted personnel time to conduct one physical inspection of the property in 2005, one physical inspection of the property in 2006, and an additional physical inspection of the property in 2008. The police department dispatched officers to the property three times in 2004, once in 2007, once in 2008, and five times in 2009 in response to calls for service.
128. 1909 Jefferson Street: The police department dispatched officers to the property in 2008 in response to calls for service.
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129. 240 N. Rose Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2004 and to reboard the property later in the same year. The housing department devoted additional time and expense to reboard the property in 2006 and again in 2007. The housing department devoted personnel time to clean the property in 2004 and again in 2006. The housing department devoted personnel time to conduct seven physical inspections of the property in 2004; one physical inspection of the property in 2005; four physical inspections of the property in 2006, five physical inspections of the property in 2007, one physical inspection of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property twice in 2005 in response to calls for service.
130. 145 N. Potomac Street: The housing department devoted personnel time to conduct four physical inspections of the property in 2004, one physical inspection of the property in 2005, one physical inspection of the property in 2007, and one physical inspection of the property in 2008. The police department dispatched officers to the property in 2004 and again in 2007 in response to a call for service.
131. 6 N. Abington Avenue: The housing department devoted personnel time to clean the property three times in 2008. The housing department devoted personnel time to conduct one physical inspection of the property in 2006, nine physical inspections of the property in 2008, and two physical inspections of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property in 2005 and again in 2008 in
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response to calls for service. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2009.
132. 433 Gwynn Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2005, one physical inspection of the property in 2006, one physical inspection of the property in 2007, and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property four times in 2006 and three times in 2009 in response to calls for service. The fire department dispatched a fire truck, two fire engines, and twelve personnel to the property in response to a call for service in 2006. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2007. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2008. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2009. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to another call for service in 2009.
133. 328 Allendale Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2005. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2007 and again in 2008 in response to calls for service.
134. 114 Allendale Street: The housing department devoted personnel time to conduct two physical inspections of the property in 2005. The housing department devoted
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personnel time to preparing for and/or taking legal action regarding housing code violations at the property.
135. 2136 Presstman Street: The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property.
136. 1225 Poplar Grove Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2005. The housing department devoted additional time and expense to reboard the property two times in 2006. The housing department devoted personnel time to clean the property once in 2005, twice in 2006, and once in 2007. The housing department devoted personnel time to conduct seven physical inspections of the property in 2006, seven physical inspections of the property in 2007, and three physical inspections of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property once in 2007, five times in 2008, and once in 2009 in response to calls for service.
137. 2828 Brighton Street: The police department dispatched officers to the property in 2003 in response to a call for service.
138. 1703 N. Ellamont Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007. The housing department devoted additional time and expense to reboard the property in 2008. The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct eleven physical inspections of the property in
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2007, three physical inspections of the property in 2008, and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property nine times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property twice in 2007 in response to calls for service. The fire department dispatched a vehicle and personnel to the property in response to a call for service in 2005. The fire department dispatched a fire truck and four personnel to the property in response to a call for service in 2007.
139. 618 Wildwood Parkway: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006. The housing department devoted personnel time to clean the property twice in 2006. The housing department devoted personnel time to conduct four physical inspections of the property in 2006, two physical inspections of the property in 2007, and one physical inspection of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
140. 705 N. Augusta Drive: The housing department devoted personnel time to conduct four physical inspections of the property in 2006, and three physical inspections of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property three times in 2007, once in 2008, and three times in 2009 in response to calls for service.
141. 315 Marydell Road: The housing department devoted personnel time to conduct two physical inspections of the property in 2007 and two physical inspections of the property in
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Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 53 of 111
2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property five times in 2007 and twice in 2008 in response to calls for service. The fire department dispatched two fire trucks, five fire engines, a medical vehicle, two Battalion Chief vehicles, a safety officer vehicle, and thirty-three personnel to the property in response to a call for service in 2008.
142. 2714 W. North Avenue: The police department dispatched officers to the property in 2005 in response to a call for service.
143. 2101 Bryant Avenue: The police department dispatched officers to the property three times in 2002 in response to calls for service.
144. 2505 Keyworth Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2003.
145. 2419 Woodbrook Avenue: The housing department devoted personnel time to conduct five physical inspections of the property in 2004, five physical inspections of the property in 2005, and three physical inspections of the property in 2006. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property seven times.
146. 1919 Perlman Place: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006 and to reboard the property later in the same year. The housing department devoted additional time and expense to reboard the property twice in 2007 and three times in 2009. The housing department devoted personnel time to clean the property twice in 2006, twice in 2007, three times in 2008, and once in 2009. The housing department devoted personnel time to conduct two physical
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Case 1:08-cv-00062-JFM Document 176 Filed 10/21/10 Page 54 of 111
inspections of the property in 2002, two physical inspections of the property in 2003, four physical inspections of the property in 2004, five physical inspections of the property in 2006, five physical inspections of the property in 2007, four physical inspections of the property in 2008, and seven physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times. The housing department devoted personnel time to inspect and condemn the property in 2002. The police department dispatched officers to the property twice in 2002, once in 2004, twice in 2005, once in 2006, and once in 2007 in response to calls for service.
147. 2808 Clifton Park Terrace: The housing department devoted personnel time to conduct two physical inspections of the property in 2005 and two physical inspections of the property in 2006. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property twice in 2005 and four times in 2006 in response to calls for service.
148. 1331 Pentridge Road: The housing department devoted personnel time to conduct one physical inspection of the property in 2001 and one physical inspection of the property in 2003. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
149. 1717 Northbourne Road: The housing department devoted personnel time to conduct three physical inspections of the property in 2004. The police department dispatched officers to the property twice in 2004 in response to calls for service.
150. 3212 Chesterfield Avenue: The police department dispatched officers to the property in 2007 and again in 2008 in response to calls for service. The fire department
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dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2008.
151. 3228 Kentucky Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2002. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property.
152. 5315 Liberty Heights Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2009.
153. 5368 Cordelia Avenue: The housing department devoted personnel time to clean the property in 2004. The housing department devoted personnel time to conduct three physical inspections of the property in 2004.
154. 1947 W. Mosher Street: The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2009. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2010.
155. 535 N. Brice: The housing department devoted personnel time and incurred outof-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to clean the property twice in 2007, once in 2008, twice in 2009, and once in 2010. The housing department devoted personnel time to conduct eight physical inspections of the property in 2007, nine physical inspections of the property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2007 and again in 2008 in response to calls for service.
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156. 534 Carrollton Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2008 and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property in 2008 in response to a call for service.
157. 506 Arlington Avenue: The housing department devoted personnel time to conduct one physical inspection of the property in 2007 and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times. The fire department dispatched a fire truck, a fire engine, a Hazmat wagon, and nine personnel to the property in response to a call for service in 2005.
158. 1108 W. Fayette Street: The housing department devoted personnel time to clean the property twice in 2008. The housing department devoted personnel time to conduct three physical inspections of the property in 2006, four physical inspections of the property in 2007, ten physical inspections of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times.
159. 1719 Hollins Street: The housing department devoted personnel time to conduct four physical inspections of the property in 2008 and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding
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housing code violations at the property. The police department dispatched officers to the property in 2008 in response to a call for service.
160. 1721 Lemmon Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2006. The police department dispatched officers to the property in 2008 and again in 2009 in response to calls for service.
161. 113 Gilmor Street: The police department dispatched officers to the property four times in 2007 and once in 2008 in response to calls for service.
162. 1231 W. Lombard Street: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct a physical inspection of the property in 2008.
163. 435 Furrow Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007. The housing department devoted personnel time to conduct one physical inspection of the property in 2004, seven physical inspections of the property in 2006, and six physical inspections of the property in 2007. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property nine times in 2004, fourteen times in 2005, seven times in 2006, and six times in 2007 in response to calls for service. The fire department dispatched a fire engine, two medical vehicles, and seven personnel to the property in response to a call for service in 2007. The fire department dispatched a vehicle and personnel to the property in response to another call for service in 2007.
164. 1541 N. Woodyear Street: The housing department devoted personnel time to clean the property in 2008 and again in 2009. The housing department devoted personnel time to
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conduct one physical inspection of the property in 2007, five physical inspections of the property in 2008, and four physical inspections of the property in 2009. The police department dispatched officers to the property twice in 2007 and twice in 2008 in response to calls for service.
165. 417 Robert Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2007. The police department dispatched officers to the property three times in 2007 in response to calls for service.
166. 1611 Division Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007 and to reboard the property later in the same year. The housing department devoted personnel time to conduct three physical inspections of the property in 2006, five physical inspections of the property in 2007, nine physical inspections of the property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property once in 2006, six times in 2007, once in 2008, and once in 2009 in response to calls for service. The fire department dispatched a fire truck, two medical vehicles, and seven personnel to the property in response to a call for service in 2006.
167. 2214 Wilkens Avenue: The housing department devoted personnel time to clean the property in 2007. The housing department devoted personnel time to conduct one physical inspection of the property in 2006, four physical inspections of the property in 2007, and two physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property in 2007 in response to a call for service.
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168. 1126 Carroll Street: The police department dispatched officers to the property in 2006 in response to a call for service.
169. 1602 E. Federal Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2008 and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2008 in response to a call for service.
170. 801 Arnold Court: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to clean the property twice in 2008 and three times in 2009. The housing department devoted personnel time to conduct two physical inspections of the property in 2007, nine physical inspections of the property in 2008, nine physical inspections of the property in 2009, and two physical inspections of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property in 2009 in response to a call for service.
171. 1719 N. Wolfe Street: The housing department devoted personnel time to conduct one physical inspection of the property in 2005, one physical inspection of the property in 2006, and an additional physical inspection of the property in 2008.
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172. 1724 E. Oliver Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to conduct one physical inspection of the property in 2007, three physical inspections of the property in 2008, and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property eight times. The police department dispatched officers to the property once in 2006, four times in 2007, and once in 2008 in response to calls for service. The fire department dispatched five fire engines, two fire trucks, a medical vehicle, a rescue vehicle, two Battalion Chief vehicles, a safety officer vehicle, and thirty-seven personnel to the property in response to a call for service in 2007. The fire department dispatched a fire truck and four personnel to the property in response to a call for service in 2008. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2009.
173. 2313 E. Federal Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009 and to reboard the property an additional three times later in the same year. The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2008, six physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property four times in 2008 in response to calls for service.
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174. 2402 Llewelyn Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to conduct two physical inspections of the property in 2007, five physical inspections of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times. The police department dispatched officers to the property five times in 2007 in response to calls for service.
175. 2207 Preston Street: The housing department devoted personnel time to conduct two physical inspections of the property in 2006. The police department dispatched officers to the property in 2006 in response to a call for service.
176. 905 Chester Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006. The housing department devoted additional time and expense to reboard the property in 2010. The housing department devoted personnel time to clean the property in 2006. The housing department devoted personnel time to conduct three physical inspections of the property in 2006, four physical inspections of the property in 2007, five physical inspections of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times. The police department dispatched officers to the property in 2007 in response to a call for service.
177. 2438 Ashland Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2008 and three physical inspections of the
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property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times.
178. 923 N. Lakewood Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to conduct seven physical inspections of the property in 2008 and six physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property six times. The police department dispatched officers to the property in 2009 in response to a call for service.
179. 808 N. Lakewood Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted additional time and expense to reboard the property in 2009. The housing department devoted personnel time to clean the property in 2008 and again in 2009. The housing department devoted personnel time to conduct four physical inspections of the property in 2008 and nine physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property once in 2006, twice in 2007, and once in 2008 in response to calls for service. The fire department dispatched a fire truck and four personnel to the property in response to a call for service in 2008.
180. 710 N. Luzerne Avenue: The police department dispatched officers to the property in 2006 in response to a call for service.
181. 631 Robinson Street: The police department dispatched officers to the property in 2004 in response to a call for service.
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182. 509 N. Robinson Street: The police department dispatched officers to the property once in 2006 and twice in 2008 in response to calls for service.
183. 406 Belnord Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct five physical inspections of the property in 2007, two physical inspections of the property in 2008, and eight physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property eight times. The police department dispatched officers to the property three times in 2003, twice in 2004, twice in 2005, eleven times in 2006, once in 2007, six times in 2008, and three times in 2009 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2004. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2006. The fire department dispatched a vehicle and personnel to the property in response to another call for service in 2006. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a third call for service in 2006. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a fourth call for service in 2006. The fire department dispatched a fire engine, two medical vehicles, and seven personnel to the property in response to a fifth call for service in 2006. The fire department dispatched a vehicle and personnel to the property in response to a sixth call for service in 2006. The fire department dispatched a fire engine, two medical vehicles, and seven personnel to the property in response to a call for service in 2007. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call
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for service in 2008. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to another call for service in 2008.
184. 424 N. Linwood Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2007, four physical inspections of the property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property in 2007 in response to a call for service.
185. 2600 Lehmann Street: The housing department devoted personnel time to conduct one physical inspection of the property in 2006, two physical inspections of the property in 2008, and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property multiple times in 2005, multiple times in 2006, multiple times in 2007, multiple times in 2008, multiple times in 2009, and in 2010 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2009.
186. 2528 W. Lombard Street: The housing department devoted personnel time to conduct three physical inspections of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property eight times in 2006 and seven times in 2007 in response to calls for service.
187. 2506 W. Pratt Street: The housing department devoted personnel time to clean the property in 2008 and again in 2009. The housing department devoted personnel time to
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conduct two physical inspections of the property in 2008 and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property in 2008 in response to a call for service.
188. 3403 W. Caton Avenue: The housing department devoted personnel time to conduct four physical inspections of the property in 2007 and five physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property in 2008 in response to a call for service.
189. 200 N. Hilton Street: The housing department devoted personnel time to clean the property once in 2006, once in 2007, twice in 2008, and twice in 2009. The housing department devoted personnel time to conduct six physical inspections of the property in 2005, fourteen physical inspections of the property in 2006, seven physical inspections of the property in 2007, eleven physical inspections of the property in 2008, five physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property ten times. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2006. The fire department dispatched a fire engine, two medical vehicles, and eight personnel to the property in response to a call for service in 2007. The fire department dispatched a vehicle and personnel to the property in response to another call for service in 2007. The fire department dispatched a fire engine, two medical vehicles, and seven personnel to the property in response to a call for service in 2008. The fire department dispatched a fire engine and four personnel to the property
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in response to another call for service in 2008. The fire department dispatched a fire truck, two medical vehicles, and seven personnel to the property in response to a call for service in 2009.
190. 3429 Edmondson Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2005 and two physical inspections of the property in 2006. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property twenty-two times in 2004 in response to calls for service. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2005.
191. 2110 Baker Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct a physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property in 2008 and again in 2009 in response to calls for service.
192. 2835 Winchester Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2008.
193. 1214 Dukeland Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009 and to reboard the property later in the same year. The housing department devoted personnel time to conduct eight physical inspections of the property in 2008 and four physical inspections of the
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property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times.
194. 2911 Brighton Street: The housing department devoted personnel time to conduct two physical inspections of the property in 2007. The police department dispatched officers to the property twice in 2007 in response to calls for service.
195. 1619 Poplar Grove Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008 and to reboard the property later in the same year. The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct two physical inspections of the property in 2008 and three physical inspections of the property in 2009.
196. 1609 Longwood Street: The housing department devoted personnel time to conduct five physical inspections of the property in 2008. The housing department incurred outof-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property three times in 2008 and three times in 2009 in response to calls for service.
197. 3114 Normount Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The police department dispatched officers to the property once in 2008 and twice in 2009 in response to calls for service.
198. 2918 Winchester Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted additional time and expense to reboard the property in 2010. The housing department devoted personnel time to conduct one physical inspection of the property in
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2008, two physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2009 in response to a call for service.
199. 631 N. Augusta Avenue: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct a physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times.
200. 839 N. Augusta Avenue: The housing department devoted personnel time to conduct five physical inspections of the property in 2006, two physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property twice in 2006 and four times in 2007 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2007.
201. 3704 Colborne Road: The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times.
202. 1009 Lyndhurst Street: The housing department devoted personnel time to conduct five physical inspections of the property in 2006 and an additional physical inspection of
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the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times.
203. 3905 Stokes Drive: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007. The housing department devoted personnel time to conduct two physical inspections of the property in 2007 and five physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property in 2007 in response to a call for service.
204. 745 Woodington Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
205. 102 S. Loudon Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2008. The housing department incurred outof-pocket expenses to contact the owner regarding housing code violations at the property two times.
206. 4017 Ridgewood Avenue: The housing department devoted personnel time to clean the property in 2007. The housing department devoted personnel time to conduct five physical inspections of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property nine times in 2008 and three times in 2009 in response to calls for service. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2009.
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207. 3803 Bonner Road: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007 and to reboard the property an additional four times later in the same year. The housing department devoted additional time and expense to reboard the property in 2008 and again in 2009. The housing department devoted personnel time to clean the property six times in 2007 and twice in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2006, six physical inspections of the property in 2007, eight physical inspections of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property seven times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property four times in 2007 in response to calls for service. The fire department dispatched five fire engines, two fire trucks, one medical vehicle, two Battalion Chief vehicles, two safety officer vehicles, one Fire Investigation Bureau vehicle, one Air Flex vehicle, and thirty-six personnel to the property in response to a call for service in 2007. The fire department dispatched a fire engine and four personnel to the property in response to another call for service in 2007.
208. 3821 Clifton Avenue: The police department dispatched officers to the property in 2007 in response to a call for service.
209. 3617 Fairview Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006. The housing department devoted additional time and expense to reboard the property in 2007. The housing department devoted personnel time to clean the property in 2007. The housing
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department devoted personnel time to conduct two physical inspections of the property in 2006 and two physical inspections of the property in 2007. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property twice in 2006 and five times in 2007 in response to calls for service.
210. 2806 Norfolk Avenue: The housing department devoted personnel time to conduct five physical inspections of the property in 2006 and two physical inspections of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property three times in 2006 in response to calls for service.
211. 3940 Reistertown Road: The housing department devoted personnel time to conduct five physical inspections of the property in 2008. The housing department incurred outof-pocket expenses to contact the owner regarding housing code violations at the property three times.
212. 2007 Ruxton Avenue: The police department dispatched officers to the property in 2007 in response to a call for service.
213. 2016 Clifton Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2005. The housing department devoted personnel time to clean the property twice in 2006. The housing department devoted personnel time to conduct three physical inspections of the property in 2005 and eight physical inspections of the property in 2006. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property two
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times. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2004.
214. 1615 Thomas Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to clean the property in 2010. The housing department devoted personnel time to conduct two physical inspections of the property in 2009 and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
215. 3622 Edmondson Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006 and to reboard the property later in the same year. The housing department devoted additional time and expense to reboard the property three times in 2008. The housing department devoted personnel time to clean the property twice in 2006, three times in 2007, five times in 2008, and three times in 2009. The housing department devoted personnel time to conduct four physical inspections of the property in 2006, nine physical inspections of the property in 2007, nine physical inspections of the property in 2008, six physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property.
216. 4010 Penhurst Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2009. The police department dispatched officers to the property three times in 2009 in response to calls for service.
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217. 1845 McHenry Street: The housing department devoted personnel time to clean the property in 2007. The housing department devoted personnel time to conduct a physical inspection of the property in 2007.
218. 4213 Arizona Avenue: The housing department devoted personnel time to clean the property in 2007. The housing department devoted personnel time to conduct three physical inspections of the property in 2007. The police department dispatched officers to the property twice in 2007 in response to calls for service.
219. 3506 Plateau Avenue: The housing department devoted personnel time to clean the property once in 2005, once in 2008, and again in 2009. The housing department devoted personnel time to conduct nine physical inspections of the property in 2008, three physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property six times.
220. 3616 Hillsdale Road: The housing department devoted personnel time to conduct three physical inspections of the property in 2006. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
221. 4201 Fernhill Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2009. The police department dispatched officers to the property twice in 2007 and again in 2008 in response to calls for service.
222. 634 Queensgate Road: The housing department devoted personnel time to conduct a physical inspection of the property in 2007 and an additional physical inspection of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
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223. 4527 Pen Lucy Road: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct four physical inspections of the property in 2008 and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times.
224. 2811 Round Road: The housing department devoted personnel time to conduct a physical inspection of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property twice in 2007 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2007. The fire department dispatched a vehicle and personnel to the property in response to another call for service in 2007.
225. 2930 Rayshire Road: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property.
226. 446 N. Bouldin Street: The housing department devoted personnel time to conduct one physical inspection of the property in 2005 and three physical inspections of the property in 2006. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
227. 500 N. Clinton Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008 and to reboard the property later in the same year. The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct eleven
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physical inspections of the property in 2008 and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property multiple times in 2004, multiple times in 2005, multiple times in 2008, and multiple times in 2009 in response to calls for service. The fire department dispatched a fire engine, two medical vehicles, and seven personnel to the property in response to a call for service in 2004. The fire department dispatched three fire trucks, five fire engines, a medical vehicle, two Battalion Chief vehicles, a safety officer vehicle, and thirty-seven personnel to the property in response to a call for service in 2008.
228. 502 N. East Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007 and to reboard the property later in the same year. The housing department devoted additional time and expense to reboard the property in 2008. The housing department devoted personnel time to conduct ten physical inspections of the property in 2007 and four physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property twice in 2007 and once in 2008 in response to calls for service.
229. 5420 Bucknell Road: The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property five times in 2007 and once in 2008 in response to calls for service.
230. 4880 Greencrest Road: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct five
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physical inspections of the property in 2008 and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times.
231. 4403 Kavon Avenue: The housing department devoted personnel time to clean the property twice in 2008. The housing department devoted personnel time to conduct four physical inspections of the property in 2007, twelve physical inspections of the property in 2008, and six physical inspections of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property four times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property twenty-four times in 2007, fourteen times in 2008, and twice in 2009 in response to calls for service.
232. 4102 Granite Avenue: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct three physical inspections of the property in 2008 and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2009.
233. 4012 Northern Parkway: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property.
234. 6108 Birchwood Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2008.
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235. 1711 Burnwood Road: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property.
236. 1700 E. Belvedere Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to clean the property three times in 2008 and three times in 2009. The housing department devoted personnel time to conduct twenty-seven physical inspections of the property in 2008, twenty physical inspections of the property in 2009, and four physical inspections of the property in 2010. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property eleven times. The police department dispatched officers to the property multiple times in 2008, multiple in 2009, and in 2010 in response to calls for service.
237. 5108 Hillen Road: The police department dispatched officers to the property in 2007 in response to a call for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2007.
238. 1512 Stonewood Road: The housing department devoted personnel time to conduct a physical inspection of the property in 2009.
239. 5413 The Alameda: The housing department devoted personnel time to conduct four physical inspections of the property in 2007. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property three times.
240. 4700 Old York Road: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009 and to
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reboard the property an additional two times later in the same year. The housing department devoted personnel time to clean the property four times in 2009. The housing department devoted personnel time to conduct twenty-two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The housing department devoted personnel time to inspect and condemn the property in 2002. The fire department dispatched two fire trucks, five fire engines, two Battalion Chief vehicles, an Air Flex vehicle, a medical vehicle, and thirty-three personnel to the property in response to a call for service in 2009. The fire department dispatched a fire truck and four personnel to the property in response to another call for service in 2009.
241. 5917 Yorkwood Road: The housing department devoted personnel time to conduct five physical inspections of the property in 2007. The housing department incurred outof-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property twice in 2008 in response to calls for service.
242. 4446 Wrenwood Avenue: The housing department devoted personnel time to clean the property in 2007. The housing department devoted personnel time to conduct five physical inspections of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times.
243. 510 Winston Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006. The housing department devoted personnel time to clean the property in 2006. The housing department devoted personnel time to conduct six physical inspections of the property in 2005, eleven physical inspections of the property in 2006, and nine physical inspections of the property
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in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property eight times. The police department dispatched officers to the property four times in 2005 and three times in 2006 in response to calls for service. The fire department dispatched a vehicle and personnel to the property in response to a call for service in 2005. The fire department dispatched a vehicle and personnel to the property in response to another call for service in 2005. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to another call for service in 2005.
244. 307 Belvedere Avenue: The housing department devoted personnel time to conduct seven physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2008 in response to a call for service.
245. 2803 N. Edgecombe Circle: The housing department devoted personnel time to clean the property once in 2008 and three times in 2009. The housing department devoted personnel time to conduct six physical inspections of the property in 2008 and eight physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property six times. The police department dispatched officers to the property in 2008 in response to a call for service.
246. 3726 Beehler Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted additional time and expense to reboard the property in 2009. The housing department devoted personnel time to clean the property twice in 2009. The housing department devoted personnel time to conduct four physical inspections of the property in 2008
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and two physical inspections of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property four times in 2008 in response to calls for service.
247. 3611 Oakmont Avenue: The housing department devoted personnel time to conduct four physical inspections of the property in 2006, five physical inspections of the property in 2007, one physical inspection of the property in 2008, and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
248. 3000 W. Garrison Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted additional time and expense to reboard the property in 2009. The housing department devoted personnel time to clean the property three times in 2007, once in 2008, and once in 2009. The housing department devoted personnel time to conduct two physical inspections of the property in 2005, one physical inspection of the property in 2006, fifteen physical inspections of the property in 2007, eight physical inspections of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property multiple times in 2005, multiple times in 2006, multiple times in 2007, multiple times in 2008, multiple times in 2009, and multiple times in 2010 in response to calls for service. The fire department dispatched a fire engine, two medical vehicles, and eight personnel to the property in response to a call for service in 2004. The fire department dispatched a vehicle and personnel to the property in response to
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another call for service in 2004. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to another call for service in 2006. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2007. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2008.
249. 5007 Beaufort Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2006.
250. 3120 Lawnview Avenue: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct five physical inspections of the property in 2008, seven physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property sixteen times. The fire department dispatched a fire truck and four personnel to the property in response to a call for service in 2009. The fire department dispatched a fire truck and four personnel to the property in response to a call for service in 2010.
251. 4103 Chesterfield Avenue: The police department dispatched officers to the property in 2007 in response to a call for service.
252. 3617 Brehms Lane: The housing department devoted personnel time to conduct three physical inspections of the property in 2007. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property twice in 2006 in response to calls for service.
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253. 3417 Ravenwood Avenue: The housing department devoted personnel time to clean the property in 2007. The housing department devoted personnel time to conduct twelve physical inspections of the property in 2006, eight physical inspections of the property in 2007, four physical inspections of the property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property three times in 2006 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2006.
254. 1702 Gorsuch Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2007. The housing department incurred outof-pocket expenses to contact the owner regarding housing code violations at the property two times.
255. 3016 Mathews Street: The housing department devoted personnel time to clean the property twice in 2008. The housing department devoted personnel time to conduct ten physical inspections of the property in 2008 and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times.
256. 3539 Greenmount Avenue: The housing department devoted personnel time to conduct one physical inspection of the property in 2005, four physical inspections of the property in 2006, and two physical inspections of the property in 2007. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property
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four times. The police department dispatched officers to the property in 2008 in response to a call for service.
257. 1648 Chilton Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2007. The police department dispatched officers to the property in 2007 in response to a call for service.
258. 1729 E. 31st Street: The housing department devoted personnel time to clean the property three times in 2007. The housing department devoted personnel time to conduct two physical inspections of the property in 2006, seven physical inspections of the property in 2007, and seven physical inspections of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property six times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property twice in 2007 and three times in 2009 in response to calls for service.
259. 1605 E. 28th Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct seven physical inspections of the property in 2009 and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times.
260. 2014 Barclay Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2010 and to reboard the property later in the same year. The housing department devoted personnel time to clean the property once in 2006, three times in 2008, three times in 2009, and once in 2010. The
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housing department devoted personnel time to conduct three physical inspections of the property in 2006, six physical inspections of the property in 2007, ten physical inspections of the property in 2008, thirteen physical inspections of the property in 2009, and two physical inspections of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property once in 2007 and twice in 2009 in response to calls for service.
261. 2016 Barclay Street: The housing department devoted personnel time to clean the property once in 2006, once in 2008, and twice in 2009. The housing department devoted personnel time to conduct five physical inspections of the property in 2006, three physical inspections of the property in 2007, three physical inspections of the property in 2008, eight physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property in 2007 in response to a call for service.
262. 2507 Linden Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property. The fire department dispatched five fire engines, two fire trucks, one medical vehicle, two Battallion Chief vehicles, and thirty-two personnel to the property in response to a call for service in 2007.
263. 2408 Linden Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009 and to
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reboard the property later in the same year. The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2007, one physical inspection of the property in 2008, and nine physical inspections of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property eighteen times.
264. 2410 Linden Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2007, one physical inspection of the property in 2008, and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property.
265. 2227 Linden Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2007 and five physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property once in 2007 and fourteen times in 2008 in response to calls for service.
266. 1912 Park Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007. The housing department devoted additional time and expense to reboard the property twice in 2009. The housing department devoted personnel time to conduct five physical inspections of the property in 2007, ten physical inspections of the property in 2008, and thirteen physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to
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contact the owner regarding housing code violations at the property seven times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property once in 2007, three times in 2008, and once in 2009 in response to calls for service. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2009.
267. 2524 W. Cold Spring Lane: The housing department devoted personnel time to clean the property in 2007 and again in 2009. The housing department devoted personnel time to conduct two physical inspections of the property in 2007, four physical inspections of the property in 2008, and six physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property seven times.
268. 2520 Shirley Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007. The housing department devoted additional time and expense to reboard the property twice in 2009. The housing department devoted personnel time to clean the property twice in 2006, twice in 2007, once in 2008, and twice in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2006, three physical inspections of the property in 2008, and five physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
269. 1218 N. Woodyear Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008 and to
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reboard the property later in the same year. The housing department devoted additional time and expense to reboard the property twice in 2009. The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct nine physical inspections of the property in 2008 and seven physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The police department dispatched officers to the property twice in 2008 and five times in 2009 in response to calls for service.
270. 1102 N. Carrollton Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006. The housing department devoted additional time and expense to reboard the property in 2007. The housing department devoted personnel time to clean the property once in 2007, four times in 2008, and twice in 2009. The housing department devoted personnel time to conduct three physical inspections of the property in 2006, five physical inspections of the property in 2007, fourteen physical inspections of the property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property.
271. 927 N. Mount Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The fire department dispatched six fire engines, three
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fire trucks, two medical vehicles, a rescue vehicle, two Battalion Chief vehicles, an Air Flex vehicle, a Fire Investigation Bureau vehicle, a safety officer vehicle, and forty-eight personnel to the property in response to a call for service in 2008.
272. 1207 W. Lanvale Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property twice in 2006 in response to calls for service.
273. 1523 Edmondson Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The fire department dispatched a fire engine and four personnel to the property in response to a call for service in 2010.
274. 522 N. Carrollton Avenue: The housing department devoted personnel time to conduct one physical inspection of the property in 2006, five physical inspections of the property in 2007, two physical inspections of the property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property once in 2006, once in 2007, twice in 2008, and once in 2009 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2006. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to another call for service in 2006.
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275. 105 S. Calhoun Street: The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times.
276. 1812 Ramsay Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property in 2009 in response to a call for service.
277. 2204 Druid Hill Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted additional time and expense to reboard the property in 2010. The housing department devoted personnel time to clean the property once in 2007, twice in 2008, and once in 2009. The housing department devoted personnel time to conduct two physical inspections of the property in 2006, four physical inspections of the property in 2007, five physical inspections of the property in 2008, five physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property four times in 2006, fourteen times in 2007, and once in 2008 in response to calls for service. The fire department dispatched a fire engine, a medical vehicle, and six personnel to the property in response to a call for service in 2007. The fire department dispatched a vehicle and personnel to the property in response to another call for service in 2007.
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278. 1357 Carroll Street: The police department dispatched officers to the property in 2009 in response to a call for service.
279. 1207 Cleveland Street: The housing department devoted personnel time to conduct a physical inspection of the property in 2009. The police department dispatched officers to the property in 2007 and again in 2008 in response to calls for service.
280. 1218 W. Cross Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2007. The housing department devoted personnel time to clean the property once in 2006, once in 2007, and twice in 2008. The housing department devoted personnel time to conduct seven physical inspections of the property in 2006, five physical inspections of the property in 2007, eight physical inspections of the property in 2008, and five physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property nine times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property. The police department dispatched officers to the property four times in 2006 and once in 2007 in response to calls for service.
281. 1813 Aisquith Street: The housing department devoted personnel time to clean the property in 2008. The housing department devoted personnel time to conduct four physical inspections of the property in 2007, one physical inspection of the property in 2008, and an additional physical inspection of the property in 2009. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property nine times in 2008 in response to calls for service.
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282. 1506 Holbrook Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to clean the property twice in 2008, once in 2009, and once in 2010. The housing department devoted personnel time to conduct four physical inspections of the property in 2008, six physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property four times in 2008 in response to calls for service. The fire department dispatched a fire truck, a fire engine, three medical vehicles, and thirteen personnel to the property in response to a call for service in 2008.
283. 1711 Rutland Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006 and to reboard the property an additional two times later in the same year. The housing department devoted personnel time to clean the property twice in 2006. The housing department devoted personnel time to conduct five physical inspections of the property in 2006, four physical inspections of the property in 2007, three physical inspections of the property in 2008, and two physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times.
284. 1715 Rutland Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2006. The housing department devoted personnel time to clean the property in 2006 and again in 2009. The housing department devoted personnel time to conduct four physical inspections of the property in 2006, three physical inspections of the property in 2007, six physical inspections of the
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property in 2008, and four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times.
285. 1621 N. Chapel: The housing department devoted personnel time to conduct a physical inspection of the property in 2009.
286. 2131 E. Federal Street: The housing department devoted personnel time to clean the property in 2007 and again in 2009. The housing department devoted personnel time to conduct two physical inspections of the property in 2006, two physical inspections of the property in 2007, three physical inspections of the property in 2008, three physical inspections of the property in 2009, and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property twice in 2006 and twice in 2008 in response to calls for service.
287. 707 N. Luzerne Avenue: The police department dispatched officers to the property twice in 2009 in response to calls for service.
288. 2731 E. Monument Avenue: The housing department devoted personnel time to conduct four physical inspections of the property in 2007 and five physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The police department dispatched officers to the property twice in 2007, twice in 2008, and twice in 2010 in response to calls for service.
289. 543 N. Luzerne Avenue: The housing department devoted personnel time to conduct two physical inspections of the property in 2009. The housing department incurred out-
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of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property three times in 2007, twice in 2008, and twice in 2009 in response to calls for service. The fire department dispatched a fire truck, two medical vehicles, and seven personnel to the property in response to a call for service in 2009.
290. 236 N. Milton Avenue: The housing department devoted personnel time to conduct a physical inspection of the property in 2008. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property.
291. 215 N. Milton Avenue: The housing department devoted personnel time to conduct three physical inspections of the property in 2007 and two physical inspections of the property in 2008. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property four times. The police department dispatched officers to the property three times in 2008 in response to calls for service.
292. 120 N. Rose Street: The police department dispatched officers to the property in 2008 and again in 2009 in response to calls for service.
293. 161 N. Decker Avenue: The housing department devoted personnel time to clean the property in 2008 and again in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2007, four physical inspections of the property in 2008, and five physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched officers to the property two times in 2008 in response to calls for service.
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294. 1615 N. Smallwood Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to clean the property twice in 2006, once in 2007, once in 2008, and once in 2009. The housing department devoted personnel time to conduct seven physical inspections of the property in 2006, four physical inspections of the property in 2007, four physical inspections of the property in 2008, and six physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The housing department devoted personnel time to preparing for and/or taking legal action regarding housing code violations at the property.
295. 4003 Oakford Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2010. The housing department devoted personnel time to conduct a physical inspection of the property in 2008 and an additional physical inspection of the property in 2010. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2009 in response to a call for service.
296. 1828 Walbrook Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2010. The housing department devoted personnel time to conduct four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2008 in response to a call for service.
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297. 3026 Tioga Parkway: The housing department devoted personnel time to conduct a physical inspection of the property in 2010. The housing department incurred out-ofpocket expenses to contact the owner regarding housing code violations at the property.
298. 1139 Homestead Street: The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct a physical inspection of the property in 2007 and an additional physical inspection of the property in 2008.
299. 2928 Erdman Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property.
300. 3343 Ravenwood Avenue: The housing department devoted personnel time to conduct five physical inspections of the property in 2007 and five physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times.
301. 4027 Lewiston Avenue: The police department dispatched officers to the property in 2010 in response to a call for service.
302. 4829 Wilern Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009. The housing department devoted personnel time to conduct four physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property two times. The police department dispatched
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officers to the property eight times in 2008 and three times in 2009 in response to calls for service.
303. 511 Richwood Avenue: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2009 and to reboard the property an additional two times later in the same year. The housing department devoted personnel time to clean the property in 2009. The housing department devoted personnel time to conduct two physical inspections of the property in 2008 and nine physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property five times. The police department dispatched officers to the property four times in 2008 and twice in 2009 in response to calls for service.
304. 3007 Shannon Drive: The housing department devoted personnel time to conduct two physical inspections of the property in 2005. The housing department incurred outof-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2005 in response to a call for service. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2005.
305. 3427 Kenyon Avenue: The police department dispatched officers to the property eight times in 2008 in response to calls for service. The fire department dispatched a fire truck, a medical vehicle, and six personnel to the property in response to a call for service in 2008. The fire department dispatched a fire engine and four personnel to the property in response to another call for service in 2008.
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306. 4410 Marx Avenue: The police department dispatched officers to the property two times in 2009 in response to calls for service.
307. 3303 McElderry Street: The housing department devoted personnel time to clean the property twice in 2009. The housing department devoted personnel time to conduct one physical inspection of the property in 2007 and eight physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property seven times.
308. 439 N. Clinton Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2008. The housing department devoted personnel time to conduct three physical inspections of the property in 2008 and an additional physical inspection of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property. The police department dispatched officers to the property in 2008 in response to a call for service.
309. There are many additional Wells Fargo foreclosure properties that are currently vacant because of reverse redlining for which the City has not yet identified costs for providing increased municipal services. There are or will soon be housing code violations at these properties. These violations will require the City to devote personnel time and to incur out-ofpocket costs. The City will also need to send fire and police personnel and vehicles to address public health and safety threats at these properties. The City may also identify certain costs it has already incurred at these properties during the course of discovery. The properties are:
 1619 N. Ashburton Street  1934 Lexington Street  1643 N. Fulton Avenue  1557 N. Gilmor Street
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 1351 N. Carey Street  1213 W. Mulberry Street  1511 W. Lexington Street  39 S. Fulton Avenue  1934 Cumberland Street  512 N. Paca Street  331 E. North Avenue  1334 Aisquith Street  209 N. Rose Street  622 Allendale Street  806 N. Hilton Street  3911 Flowerton Road  3706 Winterbourne Road  2115 Braddish Avenue  3116 Callaway Avenue  2203 N. Pulaski Street  2614 Rosewood Avenue  2833 Oakford Avenue  3030 Oakford Avenue  1666 Shadyside Road  902 E. 41st Street  3202 Lawnview Avenue  3618 Glengyle Avenue  3102 Oakford Avenue  3021 Rosalind Avenue  5540 Midwood Avenue  4250 Shamrock Avenue  4238 Sheldon Avenue  613 Winans Way  3407 Juneway Street
310. There are also many Wells Fargo foreclosure properties that were previously
vacant because of reverse redlining for which the City has not yet identified costs for providing
increased municipal services. The City may identify such costs during discovery. There may be
housing code violations at these properties in the future that will require the City to devote
personnel time and to incur out-of-pocket costs. The City may also need to send fire and police
personnel and vehicles to address public health and safety threats at these properties in the future.
The properties are:
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 758 Deaconhill Court  1530 N. Fulton Avenue  2719 W. Baltimore Street  234 S. Monastery Avenue  3623 Rosedale Road  2308 Oswego Avenue  3904 Tivoly Avenue  2928 Clifton Park Terrace  6504 Brighton Avenue  3200 W. Roger Drive  4802 Laurel Avenue  1133 E. Northern Parkway  5810 Waycross Road  5302 Brabant Road  4404 Finney Avenue  1536 Roundhill Road  2622 Boone Street  5017 Woodlands Glen Road  2724 Uhler Avenue  402 Croydon Road  1024 Radnor Avenue  1203 Northern Parkway  2816 Roselawn Avenue  3201 Kentucky Avenue  4357 Old Frederick Road  3819 Patapsco Avenue  5511 Wesley Avenue  2014 Penrose Avenue  2106 Whittier Avenue  2521 Hoffman Street  3602 W. Forest Park Avenue  3817 Clifton Avenue  1012 N. Rosedale Street  1729 Ashburton Street  40 Bentalou Street  220 Patterson Park Avenue  536 Hurley Avenue  1746 Llewelyn Avenue  1007 Central Avenue  1115 Ward Street  1309 Hollins Street  1227 Lafayette Avenue  2917 Rock Rose Avenue  2745 The Alameda
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 1520 E. 28th Street 311. Declarations from Baltimore residents who live in neighboring properties further document and illustrate the injuries and costs incurred by Baltimore at vacant Wells Fargo foreclosure properties. Genevieve Matthews, Keisha Brooks and Mike England, Mishawn and Nona Evans, Richard and Stephen Faison, Lisa Porter, Bridget Ross, James Mears, and Sheena Sykes all live next door or a few doors down from Wells Fargo foreclosure properties that are or until recently were vacant and that are in neighborhoods that are over 70% African-American (and all but two in neighborhoods that are over 95% African-American). See Attach. E (“Matthews Decl.”); Attach. F (“Brooks Decl.”); Attach. G (“England Decl.”); Attach. H (“M. Evans Decl.”); Attach. I (“N. Evans Decl.”); Attach. J (“R. Faison Decl.”); Attach. K (“S. Faison Decl.”); Attach. L (“Porter Decl.”); Attach. M (“Ross Decl.”); Attach. N (“Mears Decl.”); Attach. O (“Sykes Decl.”); Attach. P (“Goldstein Decl.”) ¶ 15; Attach. Q (“Goldstein Supp. Decl.”) ¶ 15. This includes costs caused by crime, squatting, loitering, trash, burst pipes, rat infestation, and other problems that arise at vacant properties and are the direct and foreseeable result of vacancies. 312. Genevieve Matthews lives next to the Wells Fargo foreclosure property at 3803 Bonner Road. Matthews Decl. ¶ 3. The property has been vacant for more than a year and has been occupied by squatters repeatedly. Id. ¶¶ 3-4. Matthews explains that the City boards the property up, but new squatters break in and the City has to come back and board it again. Id. ¶ 5. Squatters recently caused a fire at the vacant property. Id. ¶ 6. City firefighters had to come to put the fire out. Id. Matthews has lived on the same block for fifty years and always thought of it as safe and pleasant until the problems began with the Wells Fargo foreclosure property. Id. ¶ 8. Now she is scared because she lives next door to a property that is occupied by squatters
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who could start another fire in the middle of the night. Id. ¶ 7. The problems identified by Matthews at 3803 Bonner Road are confirmed by the Acting Director of the Baltimore Housing Code Enforcement Legal Section (“Baltimore Code Enforcement”). See Attach. R (“Hessler Decl.”) ¶ 17(b); Attach. S (“Hessler Supp. Decl.”) ¶ 8(a).
313. Keisha Brooks and Mike England live next door to another vacant Wells Fargo foreclosure property that has been boarded by the City. Brooks Decl. ¶¶ 3, 12; England Decl. ¶¶ 3, 12. Squatters kept a pit bull in the yard until it was taken away by the City. Brooks Decl. ¶ 8; England Decl. ¶ 8. Squatters have also held pit bull fights at the property. Brooks Decl. ¶ 9; England Decl. ¶ 9. The squatters smashed one of Brooks and England’s front windows and they have had to call the police on several occasions about the vacant property. Brooks Decl. ¶¶ 1011; England Decl. ¶¶ 10-11. Trash has been piled high at the properties since it became vacant and it has rat and cockroach problems. Brooks Decl. ¶¶ 4-6; England Decl. ¶¶ 4-6. Two children had to be taken to the hospital as a result; a rat bit one and a cockroach became lodged in another’s ear. Brooks Decl. ¶¶ 4-5; England Decl. ¶¶ 4-5. Brooks and England have decided to move to a different home in part because of problems associated with the vacant property. Brooks Decl. ¶ 13; England Decl. ¶ 13.
314. Mishawn and Nona Evans live two doors from the vacant Wells Fargo foreclosure property at 3726 Beehler Ave. M. Evans Decl. ¶ 3; N. Evans Decl. ¶ 3. It has had squatters and been boarded up by the City, but the squatters remove the boards and return. M. Evans Decl. ¶¶ 4-5; N. Evans Decl. ¶ 4. Mishawn has called the police several times about the property. M. Evans Decl. ¶ 5. One time the police came and recovered drugs, drug paraphernalia, and cell phones. Id. ¶ 4. Mishawn believes some of the squatters are drug dealers. Id. The vacant property has also created trash and rat problems. M. Evans Decl. ¶ 7; N. Evans Decl. ¶ 5. Nona
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called the City about the rats and the City put down rat poison, but the rats have returned. N. Evans Decl. ¶ 5. She had cement work done in an unsuccessful effort to keep the rats away. M. Evans Decl. ¶ 7; N. Evans Decl. ¶ 5. Nona tried to sell the house but was unable to get a good price; the Evanses believe that the vacant property has harmed the value of their home. M. Evans Decl. ¶ 9; N. Evans Decl. ¶ 6.
315. Richard Faison has had to call the police several times because of loiterers who hang out and drink at the vacant Wells Fargo foreclosure property next door to him, 2520 Shirley Avenue, which was recently boarded. R. Faison Decl. ¶¶ 3, 5. He also had to call the City to turn off the water and cap a pipe at the vacant house when the pipe burst. Id. ¶ 7. Richard and Stephen Faison both confirm that the vacant house is in serious disrepair and that it has created a rat infestation because loiterers and squatters let trash accumulate. R. Faison Decl. ¶¶ 4, 6, 8, 9; S. Faison Decl. ¶¶ 5-8. They cannot even hang clothing to dry in their backyard because loiterers steal it. S. Faison Decl. ¶ 8. Stephen no longer feels safe when he goes to work early in the morning because of strangers who loiter and sleep at the vacant house next to his. S. Faison Decl. ¶ 5. The problems identified by the Faisons at 2520 Shirley Avenue are confirmed by the Acting Director of Baltimore Code Enforcement. See Hessler Supp. Decl. ¶ 8(c).
316. The vacant Wells Fargo foreclosure property at 801 Arnold Court is located a few houses from Lisa Porter’s home and is also in disrepair. Porter Decl. ¶¶ 4, 6. Trash is scattered in the yard, the grass is not cut, and rats have become an increasing problem since it became vacant. Id. ¶¶ 4-5.
317. Bridget Ross and her neighbors had to call the City to come and board up the vacant Wells Fargo foreclosure property at 500 North Clinton, which is two doors down from her home. Ross Decl. ¶ 5. Vagrants stayed at the house until it was boarded. Id. ¶ 3. It is in
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disrepair, with a broken door and broken windows and large amounts of trash in the yard, and has also become a source of many rats. Id. ¶¶ 3, 6, 7. People have stolen plumbing from the vacant property. Id. ¶ 4. Ross has been trying unsuccessfully to sell her house for two years but the nearby vacant Wells Fargo foreclosure property has made her home lose value and has made it less desirable to potential purchasers. Id. ¶ 9.
318. The Wells Fargo foreclosure property at 2918 Winchester Street is next door to James Mears’s home and has been vacant for at least two years. Mears Decl. ¶ 3. Squatters and vandals are regularly at the property drinking and using drugs. Id. ¶¶ 3-4. Mears has had to call the police because of the illicit activities at the property. Id. ¶ 5. The vacant property has caused rat, mice, and water problems at his home. Id. ¶¶ 6-7. Plumbing has been stolen from the property. Id. ¶ 4. The condition of the property negatively affects the neighborhood, and Mears and his neighbors have discussed the problems caused by the vacant property at community meetings. Id. ¶ 9.
319. Sheena Sykes lives next to another Wells Fargo foreclosure property at 2014 Penrose Avenue that was vacant. Sykes Decl. ¶¶ 2-3. The property has been inhabited by squatters and the City had to board it and clean up the trash and debris left by the squatters. Id. ¶¶ 4-6, 9. The City also had to send the police because of the squatters. Id. ¶ 6. The City has also had to come to take care of mice that spread from the vacant property to Sykes’s home. Id. ¶ 7. B. Baltimore Has Been Injured By a Reduction in Property Tax Revenues from
Specific Neighborhoods Where Wells Fargo Foreclosures Constitute a Large Percentage of All Foreclosures 320. In compliance with the Court’s January 6, 2010 ruling on Wells Fargo’s motion to dismiss, Baltimore only seeks damages in this Third Amended Complaint for lost property tax
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revenues based on properties located in limited areas within certain neighborhoods (“subneighborhoods”). These sub-neighborhoods are uniformly sized areas that, in most parts of the City, are approximately equal to two blocks by two blocks. Wells Fargo foreclosures caused by reverse redlining in the sub-neighborhoods constitute at least one-third of all foreclosures. The Wells Fargo foreclosures in these sub-neighborhoods are so disproportionately concentrated that they have a significant and deleterious effect on the property values of properties in close proximity. Baltimore does not seek damages for lost property tax revenues from properties located outside of these sub-neighborhoods.5
321. The sub-neighborhoods where Wells Fargo foreclosures constitute at least onethird of all foreclosures are clustered in the following African-American neighborhoods, among others: Ashburton, Cylburn, Original Northwood, Reservoir Hill, and Waltherson. These are neighborhoods that have long been stable middle- and working-class African-American neighborhoods, and/or have become significantly stronger in the past decade. They are not neighborhoods characterized by the kinds of problems identified in the ruling on the motion to dismiss the First Amended Complaint. See Op. (Jan. 6, 2010) at 4-5. Baltimore’s property tax damages caused by Wells Fargo are especially significant and evident in these areas where the affected sub-neighborhoods are clustered.

5

As expressly stated in paragraph 95 above, Plaintiffs have limited their claims for purposes of this Third

Amended Complaint in compliance with the Court’s ruling of January 6, 2010. However, and solely to the extent it

might be a technical requirement in the Fourth Circuit in order for Baltimore to preserve fully its right to appeal the

Court’s order dismissing the First Amended Complaint following a potential adverse final order or jury ruling in this

matter, see Young v. City of Mount Ranier, 238 F.3d 567, 573 n.4 (4th Cir. 2001), the City realleges that it has

suffered a quantifiable and compensatory tax revenue loss from every Wells Fargo foreclosure caused by reverse

redlining in African-American neighborhoods and on African-American borrowers.

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322. Wells Fargo foreclosures constitute at least one-third of all foreclosures in the
following sub-neighborhoods. The sub-neighborhoods are, approximately, the two-block areas
centered around:
 the 3700 block of Chestmont Avenue  the 1200 block of Northview Road  the 1400 block of E. Lanvale Sreet  the 1900 block of Jefferson Street  the 3400 block of Dennlyn Road  the 5300 block of Brabant Road  the 4000 block of Woodlea Avenue  the 4000 block of Chesterfield Avenue  the 5000 block of Woodlands Glen Road  the 6100 block of Frankford Avenue  the 1500 block of Stonewood Road  the 2700 block of Cylburn Avenue  the 3600 block of Brehms Lane  the 4600 block of Moravia Road  the 5600 block of Bell Avenue  the 6300 block of McClean Boulevard  the 1200 block of Southview Road  the 2400 block of W. Garrison Avenue  the 4800 block of Laurel Avenue  the 6500 block of Brighton Avenue  the 2400 block of Linden Avenue  the 1700 block of E. Oliver Street  the 200 block of South East Avenue  the 3400 block of Cedardale Road  the 3500 block of Plateau Avenue  the 5300 block of Muth Avenue  the 3300 block of N. Hilton Street  the 2200 block of E. Preston Street  the 500 block of E. 23rd Street  the 2600 block of Saint Paul Street  the 500 block of N. Carrollton Avenue  the 200 block of E. Medwick Garth  the 2600 block of Maisel Street  the 3000 block of Ascension Street  the 4800 block of Melbourne Road  the 800 block of Glen Allen Drive  the 3100 block of Strickland Street
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323. These sub-neighborhoods have been identified by reviewing all foreclosures in the City, regardless of whether they involved a Wells Fargo loan. Houses outside of these subneighborhoods are excluded from Baltimore’s claim for damages based on lost property tax revenues.
324. Routinely maintained property tax and other data allow Baltimore to calculate precisely the property tax revenues it has lost as a direct result of notices of foreclosure on particular Wells Fargo properties in the sub-neighborhoods listed above. Using a wellestablished statistical regression technique that focuses on effects on neighboring properties, the City can isolate, and in significant measure has isolated, the lost property value attributable to each individual Wells Fargo foreclosure in these sub-neighborhoods from losses attributable to other causes. This technique, known as hedonic regression when applied to housing markets, analyzes housing transactions and determines the contribution of different factors to a property’s value. The number of foreclosures in close proximity to a property is one of the factors that hedonic analysis examines. See Attach. T.
325. Notices of foreclosures on Wells Fargo loans in the sub-neighborhoods identified above can be, and in significant measure have been, analyzed through hedonic regression to calculate the resulting loss in the assessed property values of nearby homes. This loss is distinguishable from any loss attributable to non-Wells Fargo foreclosures or other causes.6 The loss in assessed property value in the sub-neighborhoods caused by Wells Fargo’s unlawful acts

6

Using hedonic regression, a study published by the Fannie Mae Foundation determined that each

foreclosure in Chicago is responsible for an average decline of approximately 1.1% in the value of each single

family home within an eighth of a mile. See Dan Immergluck & Geoff Smith, The External Costs of Foreclosure:

The Impact of Single-Family Mortgage Foreclosures on Property Values, 17 Housing Policy Debate 57 (2006) at

69. Similarly, a study of abandoned homes in Philadelphia found that each home within 150 feet of an abandoned

home declined in value by an average of $7,627; homes within 150 to 299 feet declined in value by $6,810; and

homes within 300 to 449 feet declined in value by $3,542. Anne B. Shlay & Gordon Whitman, Research for

Democracy: Linking Community Organizing and Research to Leverage Blight Policy, at 21 (2004).

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and consequent foreclosures can then be, and in significant measure has been, used to calculate

the City’s corresponding loss in property tax revenues.

326. Application of hedonic regression to data regularly maintained by Baltimore

permits precise quantification of the injury to the City caused by Defendants’ discriminatory

lending practices and resulting foreclosures in sub-neighborhoods where Wells Fargo

foreclosures constitute at least one-third of all foreclosures.

327. This lost property tax revenue is a direct result of Defendants’ discriminatory

lending practices and of the Wells Fargo foreclosures that are the direct result of those practices.

*

*

*

328. Defendants’ actions set forth herein constitute a pattern or practice of

discriminatory lending and a continuing violation of federal law. Unless enjoined, Wells Fargo

will continue to engage in the unlawful pattern or practice described above.

329. Baltimore has been, and continues to be, adversely affected by the acts, policies,

and practices of Defendants, their employees, and/or their agents.

330. The extent of Baltimore’s injuries will increase unless and until Wells Fargo

ceases to discriminate against African Americans and borrowers in majority African-American

neighborhoods

331. Defendants’ unlawful actions described above were, and are, intentional and

willful, and/or have been, and are, implemented with callous and reckless disregard for the

Baltimore’s federally protected rights.

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CAUSE OF ACTION (Federal Fair Housing Act) 332. Plaintiff repeats and incorporates by reference all allegations contained in Paragraphs 1 through 331 as if fully set forth herein. 333. Defendants’ acts, policies, and practices as documented above and discussed in particular by Jacobson and Paschal constitute intentional discrimination on the basis of race. Defendants have intentionally targeted residents of predominantly African-American neighborhoods in Baltimore for different treatment than residents of predominantly white neighborhoods in Baltimore with respect to mortgage lending. Defendants have intentionally targeted residents of these neighborhoods for subprime loans without regard to their credit qualifications and without regard to whether they qualify for more advantageous loans, including prime loans. Defendants have intentionally targeted residents of these neighborhoods for increased interest rates, points, and fees, and for other disadvantageous loan terms including but not limited to prepayment penalties. Defendants have intentionally targeted residents of these neighborhoods for unfair and deceptive lending practices in connection with marketing and underwriting subprime mortgage loans. 334. Defendants’ acts, policies, and practices have had an adverse and disproportionate impact on African Americans and residents of predominantly African-American neighborhoods in Baltimore as compared to similarly situated whites and residents of predominantly white neighborhoods in Baltimore. This adverse and disproportionate impact is the direct result of Defendants’ policies of giving substantial discretion to loan officers and others responsible for mortgage lending; giving loan officers and others responsible for mortgage lending large financial incentives to give borrowers loans that are costlier than better loans for which they qualify; otherwise encouraging and directing loan officers and others responsible for mortgage
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lending to steer people into subprime loans without regard for whether they qualify for better loans, including but not limited to prime loans; increasing the interest rate on loans of $75,000 or less and decreasing the interest rate on loans of $150,000 or more; and setting interest rate caps. See, e.g., Miller v. Countrywide Bank, N.A., 571 F. Supp. 251 (D. Mass. 2008). These policies have caused African Americans and residents of predominantly African-American neighborhoods in Baltimore to receive mortgage loans from Wells Fargo that have materially less favorable terms than mortgage loans given by Wells Fargo to similarly situated whites and residents of predominantly white neighborhoods in Baltimore, and that are materially more likely to result in foreclosure.
335. Defendants’ acts, policies, and practices constitute reverse redlining and violate the Fair Housing Act, as amended, 42 U.S.C. §§ 3604 and 3605:
(a) Defendants’ acts, policies, and practices have made and continue to make housing unavailable on the basis of race and/or color, in violation of 42 U.S.C. § 3604(a);
(b) Defendants’ acts, policies, and practices have provided and continue to provide different terms, conditions, and privileges of sale of housing, as well as different services and facilities in connection therewith, on the basis of race and/or color, in violation of 42 U.S.C. § 3604(b);
(c) Defendants’ published policies and statements have expressed and continue to express a preference on the basis of race and/or color, in violation of 42 U.S.C. § 3604(c); and
(d) Defendants’ acts, policies, and practices have provided and continue to provide different terms, conditions and privileges on the basis of race and/or color in
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connection with the making of residential real estate-related transactions, in violation of 42 U.S.C. § 3605.
DEMAND FOR JURY TRIAL 336. Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by jury on all issues triable as of right.
PRAYER FOR RELIEF WHEREFORE, Plaintiff respectfully prays that the Court grant it the following relief: (1) enter a declaratory judgment that the foregoing acts, policies, and practices of Defendants violate 42 U.S.C. §§ 3604 and 3605; (2) enter a permanent injunction enjoining Defendants and their directors, officers, agents and employees from continuing to publish, implement, and enforce the illegal, discriminatory conduct described herein and directing Defendants and their directors, officers, agents and employees to take all affirmative steps necessary to remedy the effects of the illegal, discriminatory conduct described herein and to prevent additional instances of such conduct or similar conduct from occurring in the future; (3) award compensatory damages to Plaintiff in an amount to be determined by the jury that would fully compensate Plaintiff for its injuries caused by the conduct of Defendants alleged herein; (4) award punitive damages to Plaintiff in an amount to be determined by the jury that would punish Defendants for the willful, wanton and reckless conduct alleged herein and that would effectively deter similar conduct in the future;
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(5) award Plaintiff its reasonable attorneys’ fees and costs pursuant to 42 U.S.C. § 3613(c)(2); and
(6) order such other relief as this Court deems just and equitable.
October 21, 2010 /s/ John P. Relman
John P. Relman, MD Fed Bar No. 11482 Bradley H. Blower, MD Fed. Bar No. 07641 Glenn Schlactus, Pro Hac Vice RELMAN, DANE & COLFAX, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com bblower@relmanlaw.com gschlactus@relmanlaw.com
Special Assistant City Solicitors and Attorneys for Plaintiff George Nilson, City Solicitor, MD Fed. Bar No. 01123 Suzanne Sangree, Chief Solicitor, MD Fed. Bar No. 26130 City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov
Attorneys for Plaintiff
111

 
 677 F.Supp.2d 847 (Cite as: 677 F.Supp.2d 847)
United States District Court, D. Maryland.
MAYOR AND CITY COUNCIL OF BALTIMORE, Plaintiff, v.
WELLS FARGO BANK, N.A. and Wells Fargo Financial Leasing, Inc., Defendants.
Civil No. JFM 1:08 CV-00062. Jan. 6, 2010.
*848 John Peter Relman, Bradley H. Blower, Glenn Schlactus, Relman and Dane PLLC, Washington, DC, George A. Nilson, Suzanne Sangree, Baltimore City Law Department City Hall, Baltimore, MD, for Mayor and City Council of Baltimore.
Andrew L. Sandler, Benjamin Barnet Klubes, Jonice Gray Tucker, BuckleySandler LLP, Washington, DC, for Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.
OPINION
J. FREDERICK MOTZ, District Judge.
The Mayor and City Council of Baltimore (“the City”) has brought this action against Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (“Wells Fargo”) under the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601 et seq., alleging that Wells Fargo's predatory and discriminatory lending practices have led to foreclosures that harm the City. Wells Fargo has filed a Motion to Dismiss an Amended Complaint filed by the City. The Motion to Dismiss will be granted, with leave for the City to file a Second Amended Complaint asserting narrower claims if it chooses to do so.
I. A. The City filed its initial Complaint on January 8, 2008. On March 21, 2008, Wells Fargo filed a Motion to Dismiss, challenging the City's standing and contending that the complaint failed to state a cognizable FHA violation under either a disparate treatment or disparate impact theory. On June 1, 2009, the City filed a Motion to File an Amended Complaint with

Page 1
exhibits. Chief Judge Legg then held a hearing on the initial Complaint, denied the Motion to Dismiss, and granted the City leave to file an amended complaint. Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A., et al., 631 F.Supp.2d 702, 703-04 (D.Md.2009). At that time Chief Judge Legg found it “appropriate to permit discovery and to revisit the standing questions later at the summary judgment stage.” Id. at 704. Discovery was also to include a statement from Wells Fargo about “when, and in what manner, it plans to respond” to the Amended Complaint. Id. at 704 n. 2. On August 6, 2009, the case was reassigned to me, and on the same day I held a hearing on various pending matters. Wells Fargo subsequently filed its Motion to Dismiss the Amended Complaint.FN1 A hearing on *849 that motion was held on December 14, 2009.
FN1. The City argues that Wells Fargo should not be able to file this Motion to Dismiss because it is essentially a motion for reconsideration, which would render it u ntimely and inappropriate. (City's Memo. in Opp. at 2.) This argument is without merit. The City's decision to file an Amended Complaint permits Wells Fargo to file a second Motion to Dismiss. This should not be surprising to the City because, as the City acknowledges, Judge Legg told Wells Fargo it could file a Motion to Dismiss the Amended Complaint if its initial Motion to Dismiss was denied after the hearing he held. (Id. at 11.)
I also note that although I disagree with Judge Legg about whether the City's claims should be dismissed, I very much respect the thoughtful process he put in place to test the viability of the City's claims. Indeed, at the August 6 hearing I indicated my approval of the process. It was only after I had considered the memoranda filed in connection with Wells Fargo's Motion to Dismiss the Amended Complaint that I began to question whether the claims asserted by the City were plausible and sufficient to withstand dismissal. For this reason, at the December 14 hearing I expressed (more tartly than I would have liked) my desire that counsel focus upon the issues as presently framed

677 F.Supp.2d 847 (Cite as: 677 F.Supp.2d 847)
rather than allude to the procedural history of the case.
B. Only a very limited recitation of facts, as alleged in the Amended Complaint, is necessary for the purpose of deciding the present motion. The City asserts that Wells Fargo engaged in the practice of reverse redlining, targeting the City's underserved and vulnerable minority neighborhoods. These lending practices allegedly have led to a disproportionately high rate of foreclosure in the City's African-American communities, causing an increase in abandoned and vacant homes in those areas, which in turn has allegedly caused financial harm to the City. (Am. Compl. at 1-3.) Specifically, the City argues that foreclosures have caused:
a. A significant decline in the value of nearby homes, resulting in a decrease in property tax revenue;
b. An increase in the number of abandoned and vacant homes;
c. An increase in criminal and gang activity as abandoned and vacant homes become centers for squatting, drug use, drug distribution, prostitution, and other unlawful activities;
d. Increased expenditures for police and fire protection;
e. Increased expenditures to secure abandoned and vacant homes;
f. Additional expenditures to acquire and rehabilitate vacant properties; and
g. Additional expenditures for administrative, legal, and social services.
(Id. at 50.)
II. [1] As the Supreme Court has explained, “the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. This inquiry involves both constitutional and prudential limitations on its exercise.” Gladstone Realtors v. Village of Bellwood, 441 U.S.

Page 2
91, 99, 99 S.Ct. 1601, 60 L.Ed.2d 66 (1979). Because standing under the FHA is “as broad as is permitted by Article III of the Constitution,” the constitutional and prudential limitations merge in a case brought under the FHA. See id. at 108, 99 S.Ct. 1601 (citation and internal quotation omitted). Accordingly, here I need only evaluate whether the City meets the constitutional requirements for standing. The plaintiff bears the burden of establishing that it has standing by proving that “(1) the plaintiff suffered an injury in fact ... that is concrete and particularized, and actual or imminent ...; (2) there is a causal connection between the injury and the conduct complained of; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision of the court.” South Carolina Wildlife Fed'n v. Limehouse, 549 F.3d 324, 329 (4th Cir.2008) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992)).
[2][3] An attenuated causal connection is insufficient; the injuries “must be fairly traceable to the actions of the Defendants, rather than the result of actions by some independent third party not before the court.” Dixon v. Edwards, 290 F.3d 699, 711 ( 4th Cir.2002) (citations omitted); see also Mirant Potomac River, LLC v. United States Envtl. Prot. Agency, 577 F.3d 223, 226 (4th Cir.2009) (citing Frank Krasner Enters. Ltd. v. Montgomery County, 401 F.3d 230, 234-35 (4th Cir.2005)). When claimed injuries are “highly indirect” and result from “the independent action of some third party not before the court,” too much speculation is required to connect the links in the chain of causation. *850 See Allen v. Wright, 468 U.S. 737, 757-59, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984); see also Frank Krasner, 401 F.3d at 235 (finding no standing where a third party “stands directly between the plaintiffs and the challenged conduct in a way that breaks the causal chain”). Further, as the Supreme Court has recently held, the allegations made in a co mplaint must assert a “plausible” claim against a defendant. Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). Presumably, this rule applies to allegations about standing. In any event, the concept of “plausibility” is inherent in the concept of “fair traceability” that underlines the standing requirement. See Gladstone, 441 U.S. at 110-11, 99 S.Ct. 1601 (finding that “although the complaints are more conclusory and abbreviated than good pleading would suggest,” plaintiffs did allege sufficient facts from

677 F.Supp.2d 847 (Cite as: 677 F.Supp.2d 847)
which it could be inferred that the defendants' racial steering activities in particular neighborhoods resulted in a diminishing tax base and “other harms [that] are not unlikely.”)
[4] In the present case, the City's allegations in the Amended Complaint of a causal connection between Wells Fargo's alleged misconduct and the damages the City claims is not plausible. According to the Amended Complaint, “[s]ince 2000, more than 33,000 homes have been subjected to foreclosure filings ... [and the] foreclosure crisis has caused severe economic damage to the City.” (Am. Comp. at 1.) Moreover, according to the Amended Complaint, “[e]stimates of the number of vacant homes in Baltimore range from 16,000 to 30,000.” (Am. Compl. at 18.) No allegation is made in the Amended Complaint as to how many of these vacancies have been caused by foreclosures of properties on which Wells Fargo made reverse redlined loans. However, in subsequent briefing the City has identified only 401 properties on which Wells Fargo made loans that were foreclosed upon between 2005 a nd 2008, 163 of which were located in African-American neighborhoods and became vacant after the Wells Fargo loans were initiated. (Plaintiff's Memorandum in Opposition at 6.) According to the City's own assertion, only eighty of these properties are now vacant.
Thus, using the City's own figures, Wells Fargo is responsible for only a negligible portion of the City's vacant housing stock. This fact alone demonstrates the implausibility of any alleged causal connection between Wells Fargo's alleged reverse redlining activities and the generalized type of damages claimed by the City, e.g., decline in value of homes and decreased property tax revenues resulting, increased criminal and gang activities, and increased police and fire protection resulting from building vacancies. Moreover, the alleged connection is even more implausible when considered against the background of other factors leading to the deterioration of the inner city, such as extensive unemployment, lack of educational opportunity and choice, irresponsible parenting, disrespect for the law, widespread drug use, and violence.FN2 Cf. City of Birmingham v. Citigroup,*851 Inc., No. CV-09-BE-467-S, *8 (N.D.Ala. Aug. 19, 2009) (“[T]he minority borrowers in this case could have defaulted on their mortgages for a number of reasons, none of which related to the Defendants' alleged ‘reverse redlining.’ ”). It may be entirely rea-

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sonable to posit-as the City's allegations amply support-that unscrupulous lenders took advantage of inner city residents living in a dysfunctional environment to induce them to make loans they could not afford. It does not follow, however, that it is reasonable to infer-as the City argues-that the unscrupulous lenders themselves created the dysfunctional environment they exploited.
FN2. The City's claims here are all the more implausible because, as the allegations in the Amended Complaint make clear, the severe problems faced by the inner city preexisted the making of Wells Fargo's loans. That is not to say, however, that improper lending activities are actionable only where loans are made in stable communities. Conceivably, there might be situations in which a significant amount of improper lending activity in a particular neighborhood caused then ongoing rehabilitation efforts by other home owners in that neighborhood to fail or caused a deteriorating neighborhood to become dramatically worse.
I recognize that the City has retained experts who are prepared to opine that incremental damages caused by a l ender who causes incremental damage to a community can be reasonably calculated and attributed to the lender. By ruling, as I am, that this opinion is not sufficient to withstand a motion to dismiss, I am questioning neither the qualifications nor the methodology of the City's experts. However, a court is a forum in which facts and theory must converge. There are occasions in which concrete facts are themselves dull and unenlightening, and their significance can be explained only through the testimony of persons who are trained to see their meaning. It is for such occasions that Federal Rule of Evidence 702 is designed, permitting the introduction of opinions about “scientific, technical, or other specialized knowledge” if the opinions “will assist the trier of fact to understand the evidence.” But however academically acceptable an expert's opinion might be, in order to be admissible as evidence, it must bear-from the perspective of judges, not only fellow experts-a coherent relationship to the underlying facts. This is the origin and reason for the requirement of a claim's plausibility that for almost twenty-five years has been a settled part of summary judgment law, see Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574,

677 F.Supp.2d 847 (Cite as: 677 F.Supp.2d 847)
587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) and that, at least since the decisions in Iqbal and Twombly, is part of dismissal law as well. To disregard that requirement at the outset of litigation may result in the parties incurring substantial fees, costs, and other expenses that are improvident and unnecessary.
For these reasons, Wells Fargo's Motion to Dismiss the Amended Complaint is granted. If the City desires to pursue a more limited claim, such as a claim for specific damages allegedly suffered by the City in regard to specific houses that became vacant allegedly because of Wells Fargo's lending activities or a claim for damages allegedly caused to a specific neighborhood in which Wells Fargo made enough allegedly improper loans that its activities bear a plausible causal relationship to the destruction of that neighborhood, it may file a second amended complaint on or before February 3, 2010. If, on the other hand, the City desires to continue to pursue the more generalized claims asserted in the Amended Complaint, it should appeal my ruling to the Fourth Circuit.FN3
FN3. If the City decides before February 3, 2010, that it does not want to pursue a more limited claim but instead to appeal my ruling, it should so notify me and opposing counsel as soon as the decision is made, and I will immediately enter a final order of dismissal so that no delay will be encountered in the appeal process.
ORDER For the reasons stated in the Opinion being entered herewith, it is, this 6th day of January 2010
ORDERED
*852 1. Defendants' motion to dismiss Amended Complaint is granted;
2. Plaintiff is granted leave to file a second amended complaint on or before February 3, 2010; and
3. If plaintiff chooses not to file a second amended complaint, this action is dismissed.
D.Md.,2010. Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A.

677 F.Supp.2d 847 END OF DOCUMENT

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 631 F.Supp.2d 702 (Cite as: 631 F.Supp.2d 702)

Page 1

United States District Court, D. Maryland.
MAYOR AND CITY COUNCIL OF BALTIMORE v.
WELLS FARGO BANK, N.A., et al.
Civil No. L-08-62. July 2, 2009.
*703 John Peter Relman, Bradley H. Blower, Glenn Schlactus, Relman and Dane PLLC, Washington, DC, George A. Nilson, Suzanne Sangree, Baltimore City Law Department City Hall, Baltimore, MD, for Mayor and City Council of Baltimore.
Andrew L. Sandler, Benjamin Barnet Klubes, Jonice Gray Tucker, BuckleySandler LLP, Washington, DC, for Wells Fargo Bank, N.A., et al.
MEMORANDUM TO COUNSEL
BENSON EVERETT LEGG, Chief Judge.
In January 2008, the City of Baltimore sued Wells Fargo under the Fair Housing Act for reverse redlining. The City alleges that Wells Fargo targeted black neighborhoods in Baltimore for predatory residential mortgage loans. Because the City did not take out a mortgage loan with Wells Fargo, it has no direct FHA claim against the Bank. Nevertheless, the City contends that it was harmed indirectly because many of the alleged predatory loans were foreclosed, resulting in vacant properties. The City claims damages stemming from the vacancies, including decreased property tax revenues, increased police and fire department costs, and the cost of boarding up and managing the vacant properties.
There are two times during a case when the legal sufficiency of a complaint is tested. Under Fed.R.Civ.P. 12 (Motion to Dismiss), the Court examines the complaint to see whether it states a cause of action on its face. Under Fed.R.Civ.P. 56 (Motion for Summary Judgment), which is filed after the completion of discovery, the Court examines the evidence to determine whether a material dispute of fact exists that requires a trial to resolve.

[1] Wells Fargo filed a Motion to Dismiss (Docket No. 10) the City's complaint. The motion (i) challenged the City's standing, and (ii) contended that the complaint failed to state a cognizable Fair Housing Act violation under either a disparate treatment or disparate impact theory. Ordinarily, when deciding the adequacy of a complaint under Fed.R.Civ.P. 12, the Court must accept as true the complaint's factual allegations. When the factual basis for a plaintiff's standing is challenged, however, it is appropriate for the Court to “go beyond the allegations of the complaint and in an evidentiary hearing determine if there are facts to support [standing].” See Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982).
[2] To have standing to sue, a plaintiff must have (i) suffered an actual injury, (ii) that has been caused by the defendant's challenged acts, and (iii) the injury must be subject to redress by a favorable outcome in the case. Wells Fargo challenged all three aspects of the City's standing, arguing that the City's claimed damages are so speculative that the case should be dismissed at the outset without merits discovery.
Recognizing that merits discovery in this case would be time consuming and expensive, the Court considered it appropriate to hold a hearing testing the threshold sufficiency of the City's standing claim. The hearing was set for June 29, 2009. In advance of the hearing, the Court allowed limited discovery focused on the City's alleged damages. The announced purpose *704 of the hearing was not to decide the standing issue definitively. Instead, the hearing would determine whether the City's damage allegations in support of its standing are sufficiently plausible and grounded in fact to permit the case to proceed to full-fledged merits discovery and a second testing at the summary judgment stage.
On June 1, 2009, the City filed an amended complaint and exhibits. Simultaneously, the City also requested the Court to reconsider whether, in light of new evidence filed as part of the exhibits, the hearing was still warranted. The Court denied the City's motion to reconsider but stated that it would receive the City's new evidence in connection with the hearing, which took place on June 29, 2009.
[3] Based on the record presented, the Court hereby DENIES Wells Fargo's Motion to Dismiss the

631 F.Supp.2d 702 (Cite as: 631 F.Supp.2d 702)
Complaint (Docket No. 10). Based on the new affidavits submitted by former Wells Fargo employees Elizabeth Jacobson and Tony Paschal, the City has proffered sufficient proof to proceed with its claim for disparate treatment discrimination under the Fair Housing Act. See Fed.R.Civ.P. 12(b)(6). The City's alternative theory of liability, disparate impact, has not yet been tested factually. Nevertheless, because the case will proceed on liability in general, the City is entitled to discovery on both of its theories of liability, including disparate impact. Matthews v. New Century Mortg. Corp., 185 F.Supp.2d 874, 886-87 (S.D.Ohio 2002).
[4] With respect to standing, the Court has determined that the facts in support of the City's claim of standing are sufficiently plausible and grounded in fact to permit the case to proceed to merits discovery. Moreover, the hearing demonstrated that the standing questions are inextricably intertwined with the facts central to the merits of the dispute. In such a case, it is appropriate to permit discovery and to revisit the standing questions later at the summary judgment stage. See Adams, 697 F.2d at 1219.
The case will now proceed to discovery and the filing of summary judgment motions.FN1 Counsel shall confer and submit a proposed discovery plan and schedule by July 13, 2009.FN2 On July 20, 2009 at 11:00 a.m. in Courtroom 7A, the Court will hold a conference to discuss discovery scheduling and ways to manage the case to minimize the litigation burden on the parties. As plead, the City's complaint calls into question all mortgage loans made by Wells Fargo in Baltimore City from 2000 to the present. This is quite a number. So, for example, the case might be sequenced to consider, as a first batch, loans extended during a lesser period. Also, the loans and the related properties might be analyzed according to a common set of criteria (e.g., interest rate, race of borrower, investor versus homeowner, number of vacant buildings on the block) agreed to in advance by the parties to allow for comparable analyses. The parties are encouraged to propose alternative methods to lessen the litigation burden in their July 13th submission.
FN1. The City was within its right under the federal rules to file its amended complaint. Accordingly, the Court GRANTS the City's Motion to Amend its Complaint (Docket No. 74).

Page 2
FN2. As part of the discovery plan, Wells Fargo shall now state when, and in what manner, it plans to respond to the City's amended complaint.
Despite the informal nature of this Memorandum, it is an Order of this Court, and the Clerk is directed to docket it accordingly.
D.Md.,2009. Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A. 631 F.Supp.2d 702
END OF DOCUMENT

 
 Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 1 of 49

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION

MAYOR AND CITY COUNCIL OF

)

BALTIMORE,

)

)

Plaintiff,

)

)

-v.-

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL LEASING, )

INC.

)

)

Defendants.

)

Civil Action No. 1:08-CV-00062-BEL

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE COMPLAINT

Andrew L. Sandler Benjamin B. Klubes Michael P. Kelly Benjamin P. Saul SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP 1440 New York Ave., NW Washington, DC 20005 (202) 371-7000 (Telephone) (202) 393-5760 (Facsimile)
Attorneys for Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 2 of 49
TABLE OF CONTENTS PRELIMINARY STATEMENT ........................................................................................1 BACKGROUND .................................................................................................................3 I. A MYRIAD OF SOCIAL PROBLEMS HAVE PLAGUED
THE CITY OF BALTIMORE FOR DECADES.......................................................3 II. THE CITY’S TAX LIEN SALES HAVE A
DISPROPORTIONATE IMPACT ON MINORITY HOMEOWNERS...................4 III. THE CITY’S PROPERTY TAX REVENUE INCREASES EVERY YEAR...........8 IV. THE CITY ATTEMPTS TO BLAME WELLS FARGO..........................................9 ARGUMENT........................................................................................................................10 I. THE CITY’S COMPLAINT SHOULD BE DISMISSED
FOR LACK OF SUBJECT MATTER JURISDICTION ..........................................10 A. The City Fails to Allege an Injury In Fact ............................................................13 B. The City Fails to Allege an Injury Traceable to Wells Fargo’s Conduct..............16
1. The City Cannot Allege Traceability Based on the Actions of Independent Third Parties ............................................16
2. The City Cannot Allege Traceability Because Its Injury Was Self-Inflicted .....................................................................20
II. THE FHA DOES NOT PERMIT DISPARATE IMPACT CLAIMS .......................23 III. THE CITY HAS FAILED TO STATE A CLAIM UPON WHICH
RELIEF CAN BE GRANTED BECAUSE ITS ALLEGATIONS ARE INSUFFICIENT UNDER THE FEDERAL RULES OF CIVIL PROCEDURE AND CONTROLLING SUPREME COURT PRECEDENTS ........30 A. The City Fails to Allege a Disparate Impact.........................................................31 B. The City Fails to Allege a Causal Connection between
the Purported Policies or Practices and the Alleged Disparate Impact.................37 CONCLUSION ....................................................................................................................40
i

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 3 of 49
TABLE OF AUTHORITIES
CASES
2922 Sherman Avenue Tenants’ Ass’n v. District of Columbia, 444 F.3d 673 (D.C. Cir. 2006) ..............................................................................34
Acree v. Republic of Iraq, 370 F.3d 41 (D.C. Cir. 2004) ................................................................................27
Alexander v. Choate, 469 U.S. 287 (1985)..............................................................................................28
Alexander v. Sandoval, 532 U.S. 275 (2001)..............................................................................................28, 29
Allegheny General Hospital v. Philip Morris, Inc., 228 F.3d 429 (3d Cir. 2000)..................................................................................39
Allen v. Wright, 468 U.S. 737 (1984)..............................................................................................10, 17-18
Alston v. Advanced Brands & Importing Co., 494 F.3d 562 (6th Cir. 2007), cert. dismissed, 128 S. Ct. 704 (2007) ..................................................................19
AtlantiGas Corp. v. Columbia Gas Transmission Corp., 210 F.App’x 244 (4th Cir. 2006) ..........................................................................10, 13, 14
Baker v. Smith & Wesson, No. Civ.A. 99C-09-283-FS, 2002 WL 31741522 (Del. Super. Ct. Nov. 27, 2002)...........................................19
Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007)..........................................................................................passim
Betsey v. Turtle Creek Associates, 736 F.2d 983 (4th Cir. 1984) ................................................................................29
Brown v. Coach Stores, Inc., 163 F.3d 706 (2d Cir. 1998)..................................................................................37
Burrell v. State Farm Fire & Casualty Co., No. CIV 5733, 2001 WL 797461 (S.D.N.Y. July 12, 2001) .........................................................37-38
ii

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 4 of 49
Capitol Leasing Co. v. FDIC, 999 F.2d 188 (7th Cir. 1993) ................................................................................11
Castaneda v. Pickard, 648 F.2d 989 (5th Cir. 1981) ................................................................................28
Chisom v. Roemer, 501 U.S. 380 (1991)..............................................................................................28
City of Chicago v. Beretta U.S.A. Corp., 821 N.E.2d 1099 (Ill. 2004) ..................................................................................19
City of Philadelphia v. Beretta U.S.A., Corp., 126 F. Supp. 2d 882 (E.D. Pa. 2000), aff’d, 277 F.3d 415 (3d Cir. 2002)........................................................................40
Collette v. St. Luke’s Roosevelt Hospital, 132 F. Supp. 2d 256 (S.D.N.Y. 2001)................................................................ 36, 37, 40
DaimlerChrylser Co. v. Cuno, 547 U.S. 332 (2006)..............................................................................................15
Donnelly v. Rhode Island Board of Governors for Higher Education, 929 F. Supp. 583 (D.R.I. 1996), aff’d, 110 F.3d 2 (1st Cir. 1997) ...........................................................................35-36, 37
Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005)..............................................................................................39
EEOC v. Datapoint Corp., 570 F.2d 1264 (5th Cir. 1978) ..............................................................................34
Edwards v. Johnston County Health Department, 885 F.2d 1215 (4th Cir. 1989) ..............................................................................34
Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438 (D.C. Cir. 1990) ..............................................................................11
Frank Krasner Enterprises, Ltd. v. Montgomery County, Maryland, 401 F.3d 230 (4th Cir. 2005) ................................................................................10, 16, 17
Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315 (4th Cir. 2002) ................................................................................16
iii

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 5 of 49
Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149 (4th Cir. 2000) ................................................................................10, 13
Garcia v. Johanns, 444 F.3d 625 (D.C. Cir. 2006) ..............................................................................27, 38
Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (1979)................................................................................................10, 11
Griggs v. Duke Power Co., 401 U.S. 424 (1971)..............................................................................................24, 28
Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000) ..........................................................................31
Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982)..............................................................................................10
Jackson v. Birmingham Board of Education, 544 U.S. 167 (2005)..............................................................................................28, 29
Johnson v. County of Nassau, 480 F. Supp. 2d 581 (E.D.N.Y. 2007) ..................................................................36, 37
Limbach v. Hooven & Allison Co., 466 U.S. 353 (1984)..............................................................................................29
Logan v. Denny’s, Inc., 259 F.3d 558 (6th Cir. 2010) ................................................................................3
Moore v. Hughes Helicopters, Inc., 708 F.2d 475 (9th Cir. 1983) ................................................................................32, 36
Paige v. California, 291 F.3d 1141 (9th Cir. 2002) ..............................................................................31
Pennsylvania v. New Jersey, 426 U.S. 660 (1976)..............................................................................................20
Peters v. Delaware River Port Authority, 16 F.3d 1346 (3d Cir. 1994)..................................................................................3
Public Citizen, Inc. v. National Highway Traffic Safety Administration, 489 F.3d 1279 (D.C. Cir. 2007) ............................................................................17, 20
iv

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 6 of 49
Raytheon Co. v. Hernandez, 540 U.S. 44 (2003)................................................................................................28
Robinson v. Paragon Foods, Inc. No. 1:04-CV-2940JEC, 2006 WL 2661110 (N.D. Ga. Sept. 15, 2006) ......................................................28
Rodriguez v. United States, 480 U.S. 522 (1987)..............................................................................................28
Ryan v. Homecomings Financial Network, 253 F.3d 778 (4th Cir. 2001) ................................................................................18
Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26 (1976)................................................................................................16
Smith v. City of Jackson, 544 U.S. 228 (2005)..............................................................................................passim
Smith v. Town of Clarkton, 682 F.2d 1055 (4th Cir. 1982) ..............................................................................29
Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 174 F. Supp. 2d 388 (D. Md. 2001) ......................................................................10
Stalley v. Catholic Health Initiatives, 509 F.3d 517 (8th Cir. 2007) ................................................................................11
Syverson v. International Business Machines Corp., No. C-03-04529 RMW, 2007 WL 2904252 (N.D. Cal. Oct. 3, 2007).........................................................37
Teachers’ Retirement System of Louisiana v. Hunter, 477 F.3d 162 (4th Cir. 2007) ................................................................................39
Trezza v. Hartford, Inc., No. 98 CIV 2205, 1998 WL 912101 (S.D.N.Y. Dec. 30, 1998) ........................................................38
Walls v. City of Petersburg, 895 F.2d 188 (4th Cir. 1990) ................................................................................33, 37
Walther v. Lone Star Gas Co., 977 F.2d 161 (5th Cir. 1992) ................................................................................35
v

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 7 of 49
Wards Cove Packing Co. v. Atonio, 490 U.S. 632 (1989)..............................................................................................passim
Warth v. Seldin, 422 U.S. 490 (1975)..............................................................................................11, 13
Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988)..............................................................................................30, 31
White Tail Park, Inc. v. Stroube, 413 F.3d 451 (4th Cir. 2005) ................................................................................11
STATUTORY AUTHORITY Fed. R. Civ. P. 8(a)(2).......................................................................................................30 Fed. R. Civ. P. 12(b)(1).....................................................................................................1, 10 Fed. R. Civ. P. 12(b)(6).....................................................................................................1, 2, 3, 23 Fed. R. Evid. 201 ..............................................................................................................3 Home Mortgage Disclosure Act,12 U.S.C. §§ 2801-09 ...................................................32 Title VII § 703(a), codified at 42 U.S.C. § 2000e-2(a).....................................................23-29 Age Discrimination in Employment Act, § 4(a), codified at 29 U.S.C. § 623(a).............23-28 Fair Housing Act, § 805, codified at 42 U.S.C. § 3605 ....................................................passim
OTHER AUTHORITY Board of Governors of the Federal Reserve Board, REPORT TO THE CONGRESS
ON CREDIT SCORING & ITS EFFECTS ON THE AVAILABLITY & AFFORDABILITY OF CREDIT (2007), available at http://www.federalreserve.gov/boarddocs/ RptCongress/creditscore/creditscore.pdf ..............................................................34 Robert B. Avery et al., New Information Reported Under HMDA and its Application in Fair Lending Enforcement, 91 FED. RES. BULL. 393-94 (Summer 2005) ........34 James F. Blumstein, Defining and Proving Race Discrimination: Perspectives on the Purpose vs. Results Approach from the Voting Rights Act, 69 VA. L. REV. 633 (1983)....................................................................................29
vi

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 8 of 49 5B CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE
§ 1350 & n.43 .......................................................................................................10-11 Brief for United States as Amicus Curiae, Town of Huntington v. Huntington
Branch, NAACP, 488 U.S. 15 (1988) (No. 87-1961), available at http://www.usdoj.gov/osg/ briefs/1987/sg870004.txt...........................................29
vii

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Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (collectively “Wells Fargo”) respectfully submit this Memorandum of Law in support of their Motion to Dismiss the Complaint for Declaratory and Injunctive Relief and Damages filed by the Mayor and City Council of Baltimore (“the City”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).
PRELIMINARY STATEMENT This is an unprecedented lawsuit in which the City seeks to use a single financial services company as a scapegoat for broad social problems that have plagued Baltimore for decades, including some caused by the City’s own actions. The City’s Complaint against Wells Fargo alleges that: • there have been over 33,000 foreclosure filings in Baltimore over the last seven years (Compl. ¶ 17); • there are currently 16,000 to 30,000 vacant homes in Baltimore (id. at ¶ 18); • Baltimore’s neighborhoods are “highly segregated” between minority and non-minority populations (id. at ¶ 33); and • many city neighborhoods with high concentration of minority populations suffer from “high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values.” (Id. at ¶ 65.) The City’s complaint then alleges—in conclusory and illogical fashion—that it was at least 313 foreclosures over seven years by Wells Fargo that caused the City “tens of millions of dollars” in damages. (Id. at ¶¶ 38, 70.) The City’s allegations, however, fail to discuss its own tax lien sales, which have resulted in over 19,000 foreclosure actions being filed against City homeowners during this same seven-year period—particularly harming homeowners in minority neighborhoods that are among the City’s poorest. The City places liens on homes for any type of unpaid municipal bill over
1

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$100, and then sells the liens to private investors, knowing the investors will threaten to
foreclose on the homes unless the homeowners agree to pay exorbitant fees. As a result of the
City’s actions, homeowners have lost their homes over unpaid $272 water bills. The City’s tax
lien sales, moreover, have disproportionately injured minority homeowners in the City’s poorest
neighborhoods. Over half of the 2006 tax lien sales based only on small unpaid water bills or
municipal fees involved properties in census tracts that are more than 80% African-American
and over two-thirds involved properties in tracts that are over 60% African-American, but fewer
than 11% involved properties in tracts that are 20% or less African-American.
The City’s own conduct is directly relevant to several of the reasons why the
City’s Complaint should be dismissed. First, the Court does not have subject matter jurisdiction
over this case. The City lacks standing because:
• The City cannot allege that it has suffered any discrete or palpable injury necessary to bring a case or controversy under Article III. Despite knowing the location of the 313 foreclosures it puts at issue and having all of the tax assessments and other records at its disposal, the City has not made a single specific allegation that it made any expenditure or lost any tax revenue because of any Wells Fargo foreclosure.
• The City cannot allege any injury fairly traceable to the conduct of Wells Fargo. All of the City’s injury theories rely on long, speculative causal chains purporting to connect Wells Fargo with the City’s alleged injury. The City’s injury theories are barred by wellsettled Supreme Court precedent that an injury cannot be fairly traceable if it requires the court to speculate on the motives of third parties not before the court. Similarly, the City’s causation theories are barred by equally well-settled precedent that a party’s selfinflicted injury does not give rise to standing.
Second, even if the Court had jurisdiction, the City cannot state a claim under
Rule 12(b)(6) because:
• The Fair Housing Act (“FHA”) does not permit disparate impact claims as a matter of law. The Supreme Court’s decision in Smith v. City of Jackson, 544 U.S. 228 (2005) makes clear that Congress only authorizes disparate impact liability when it uses certain statutory language that is absent from the FHA.
2

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• Even if the FHA did permit disparate impact claims, the City fails to offer factual allegations that plausibly support its disparate impact claims. In particular, the City fails to plead facts that plausibly show an actual disparate impact on a protected group or demonstrate a causal connection between the specific challenged practices or policies and the alleged disparate impact. The City never compares “similarly-situated” individuals, ignores the role of borrower creditworthiness in loan underwriting and pricing decisions, and offers only unattributed and fatally flawed statistics in its effort to show a disparate impact. The injuries the City alleges, moreover, are far too remote to state a claim, particularly in light of the City’s own conduct.
Because the Court does not have jurisdiction over this action and, alternatively, because the City
fails to state a claim upon which relief can be granted, the Court should dismiss the City’s claims. BACKGROUND1
I. A MYRIAD OF SOCIAL PROBLEMS HAVE PLAGUED THE CITY OF BALTIMORE FOR DECADES.
From 1960 through 2000, the City of Baltimore lost over thirty percent of its
population. (Ex. A, Editorial, Sprawl, BALT. SUN, Dec. 4, 2002, at 18A.) The City is estimated
to have lost another 19,788 citizens from 2000 through 2006. (Ex. B, U.S. Census Estimate for
Maryland.) A wide variety of reasons have been offered for why the population of Baltimore has
shrunk so dramatically, including crime, schools, urban decay, an exodus to the suburbs, the
City’s high property tax rates, and the economy. (See, e.g., Ex. C, Jamie Smith Hopkins, Gap
Gives City Its Chance, BALT. SUN, Jul. 25, 2006, at 1A (“One of the most violent cities in the
nation, [Baltimore] has a chronically underperforming school system, rampant drug addiction
and the highest property tax rate in the state.”).)
As its population has dwindled, Baltimore has struggled with a large number of
vacant or abandoned homes. (Ex. D, Editorial, Still a Blight, BALT. SUN, Sept. 10, 2007, at 6A
1 This factual background is based on material that can be considered on a Fed. R. Civ. P. 12(b)(1) motion or by judicial notice on a Rule 12(b)(6) motion to dismiss. See Logan v. Denny’s, Inc., 259 F.3d 558, 578 & n.9 (6th Cir. 2001) (taking judicial notice of facts stated in newspaper articles); Peters v. Del. River Port Auth., 16 F.3d 1346, 1356 n.12 (3d Cir. 1994) (taking judicial notice of newspaper accounts concerning political rivalries within the Delaware River Port Authority); Fed R. Evid. 201.
3

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(“Vacant houses remain one of the city’s stubborn, intractable problems . . . .”.) The estimated number of vacant homes has stayed relatively constant over the years. (See, e.g., Ex. E, M. Dion Thompson, Weary Homeowners Yearn for Action on City Cleanup, BALT. SUN, Aug. 23, 2000, at 1A; Ex. F, Gerald Shields, City Housing Has a Tough Set of Problems, BALT. SUN, Feb. 28, 2000, at 1B.) The City now alleges that, in 2008, there are between 16,000 and 30,000 abandoned homes in the City of Baltimore. (Compl. ¶ 18.) II. THE CITY’S TAX LIEN SALES HAVE A
DISPROPORTIONATE IMPACT ON MINORITY HOMEOWNERS. Meanwhile, throughout this decade, the City has enriched itself through tax lien
sales—a process that disproportionately forces African-American homeowners into foreclosures—often because of small unpaid water bills. (See, e.g., Ex. G, Fred Schulte & June Arney, Small Unpaid Bills Put Residents At Risk, BALT. SUN, Mar. 25, 2007, at 1A (video footage associated with article available at http://www.baltimoresun.com/business/realestate/balte.bz.waterbills25mar25,0,6802318.story?coll=bal-home-utility).) Specifically, as the BALTIMORE SUN has chronicled at length, the City places liens on properties whenever the homeowner does not pay property taxes, water bills, or other municipal fees. (Id.) The City can place liens on properties for any bill over $100. (Id.) Every year, the City sells its tax liens to private investors, knowing that those investors will then approach the homeowners and demand exorbitant fees from the homeowners in exchange for agreeing not to foreclose on their homes. (Id. (describing how one homeowner lost two properties in Berea because an unpaid water bill of $272.22 had ballooned into a demand by the investor of $6,414.69).)
The homeowners are placed in an untenable situation. Already in a dire financial strait in which they cannot pay a water or other municipal bill, they either have to pay thousands of dollars to satisfy the redemption demand by the investors or risk losing their homes. (See, e.g.,
4

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Ex. H, Jean Marbella, As Auctions on Homes Go Up, So Do Concerns, BALT. SUN, Apr. 13, 2007, at 1B (describing testimony of a woman who had to pay $6,000 to prevent her home’s foreclosure by a private investor with a lien arising from $1,000 water bill).) According to the analysis by the BALTIMORE SUN, over 400 Baltimore homes were foreclosed upon from 2004 to 2007 simply due to liens on small unpaid water bills or other municipal fees. (Ex. G.)
The City’s tax lien sales, however, have encompassed far more than just unpaid water bills. In fact, the City sold 7,435 liens in 2006, and 7,699 liens in 2007, which stemmed from unpaid real estate taxes, water bills, and municipal bills. (Ex. I, Jen DeGregorio, Baltimore City Taxes Become Hot Property, DAILY REC. (BALT.), May 30, 2006, available at 2006 WLNR 9395077, at *1; Ex. J, Tax Sale Proceeds Amid Fairness Concerns, BALT. SUN, May 16, 2007, at B2.) As a result of these sales, Baltimore City Circuit Court has been flooded for years with thousands upon thousands of foreclosure petitions from these tax sales. (Ex. K, CIR. CT. FOR BALT. CITY, TERM OF CT. ANN. REP. 5 (2005), at 5 (new cases involving “[t]ax sale foreclosures totaled four thousand, two hundred sixty-one” in fiscal year 2005); Ex. G (tax sale foreclosures comprised 4,820 cases on the court’s docket in March 2007 and occupied at least one judge full time).)
City officials have defended their tax lien sales as having “some unsavory dimensions” but as “an effective way of compelling people to pay the city.” (Ex. G (quoting Stanley J. Milesky, chief of the City’s Bureau of Treasury Management).) The City’s Department of Housing and Community Development has recommended that the City stop its tax lien sales for abandoned homes by 2010 because third party investors are “speculators [who] have financial incentives to displace homeowners and destabilize neighborhoods.” (Ex. L, DEP’T OF HOUS. & CMTY. DEV., HOUS. AUTH. OF BALT. CITY, A PLAN TO CREATE THE BALTIMORE CITY
5

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 14 of 49
LAND BANK (2007).) State legislators, moreover, who have been sharply critical of the City’s tax lien sales (publicly describing the practice as “absolutely obscene” and “dead wrong”), have sought—in the face of City opposition—to place a moratorium on them and recently have introduced various bills to address concerns about the sales. (Ex. M, Laura Smitherman and June Arney, Lawmakers Ponder Halting Foreclosures Over Water Bills, BALT. SUN, Feb. 28, 2008, at 16B; Ex. N, June Arney, Bill Would Protect Houses From Tax Sales, BALT. SUN, Mar. 7, 2008, at 6B.) Nonetheless, despite the controversy and criticism, the City has made a calculated decision to continue the practice and plans to have another tax lien sale concerning potentially as many as 20,000 properties beginning May 12. (Ex. O, Mayor & City Council of Balt., Notice of Tax Lien Sale, BALT. SUN, Mar. 19, 2008, at 1S (list of properties that spans 33 newsprint pages of fine-print).) See also City of Baltimore, Tax Certificate Auction Website, https://www.bidbaltimore.com/main (last visited on March 19, 2008) (“The Tax Sale 2008 Properties Listing includes liens on properties with delinquent real estate taxes, water bills, and other municipal liens.”).
In investigating this issue, on March 27, 2006, the BALTIMORE SUN charted where these liens were placed for just one year (2006) and just for unpaid water or other municipal bills. That map is reproduced here.
6

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A review of this map demonstrates that even this small fraction of lien sales had a disproportionate impact on minority neighborhoods. Using the addresses compiled by the BALTIMORE SUN and U.S. Census Tract data, over half (approximately 54.69%) of the City’s tax lien sales in 2006 involved properties in census tracts that are more than 80% African-American and over two-thirds (approximately 67.90%) involved properties in tracts that are over 60%
7

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African-American, but only 10.96% involved properties in tracts that are 20% or less AfricanAmerican. In this very lawsuit, the City has alleged that these types of statistics—but with much smaller numbers of foreclosures—show a disproportionate, discriminatory impact on minority homeowners. (See Compl. ¶ 37.) III. THE CITY’S PROPERTY TAX REVENUE INCREASES EVERY YEAR.
Although the destructive effects of the City’s tax lien sales have disproportionately harmed minority homeowners least able to afford it, the City of Baltimore’s property tax revenue has reached an all-time high, increasing in each fiscal year from 2000 through 2007. (Ex. P, CITY OF BALT., REPORT OF BLUE RIBBON COMMITTEE ON TAXES & FEES (2007), at 19 (describing how property tax revenue has increased from $480.5 million in FY 2000 to $585.5 million in FY 2007).) Moreover, the Maryland State Department of Assessments & Taxation, which sets assessments on all Maryland real estate on a three-year rotating basis, has consistently increased assessments of Baltimore real estate; the State raised the assessments by an average of 25% in the City of Baltimore in 2008, 19.5% in 2007, 15.2% in 2006, and 7.2% in 2005.2 Pursuant to the Homestead Tax Credit statute, the City has capped the amount up to which residential property assessments can rise in any year at 4%. (Exs. Q-T.) Therefore, even as its property tax revenues rise, the City has not been able to recover the full amount that the assessments would otherwise allow.
2 Ex. Q, MD. DEP'T OF ASSESSMENTS & TAXATION, AVERAGE ANNUAL REASSESSMENTS AND COUNTYESTABLISHED ASSESSMENT CAPS (2005); Ex. R, MD. DEP'T OF ASSESSMENTS & TAXATION, AVERAGE ANNUAL REASSESSMENTS AND COUNTY-ESTABLISHED ASSESSMENT CAPS (2006); Ex. S, MD. DEP'T OF ASSESSMENTS & TAXATION, AVERAGE ANNUAL REASSESSMENTS AND COUNTY-ESTABLISHED ASSESSMENT CAPS (2007); Ex. T, MD. DEP'T OF ASSESSMENTS & TAXATION, AVERAGE ANNUAL REASSESSMENTS AND COUNTY-ESTABLISHED ASSESSMENT CAPS (2008).
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IV. THE CITY ATTEMPTS TO BLAME WELLS FARGO. As the City states in its Complaint, Wells Fargo makes residential loans in both
minority and non-minority Baltimore neighborhoods. Even today, Live Baltimore, a non-profit organization funded by the City and designed to entice citizens to move to Baltimore, lists Wells Fargo as one of twelve preferred lenders “that know Baltimore City, and offer competitive products and quality service.” (Ex. U, Live Baltimore, Preferred Mortgage Lenders.) The Board of Directors of Live Baltimore includes City Council President Stephanie Rawlings-Blake and, in the past, has included Mayor Shelia Dixon. (Ex. V, Live Baltimore, Board of Directors 2008.)
On January 8, 2008, the City sued Wells Fargo, alleging that the City has suffered “tens of millions of dollars” in damages as a result of a depressed real estate market and attendant consequences that it alleges were caused by Wells Fargo’s lending practices. (Docket Entry No. 1; Compl. ¶ 70.) In particular, the City alleges that Wells Fargo has foreclosed upon at least 313 homes in the last seven years during a time period in which there were 33,000 foreclosure filings in the City. (Compl. ¶¶ 17, 38.) The City speculates that the number of Wells Fargo foreclosures “is probably much higher because in many cases the foreclosure records analyzed by Plaintiff do not indicate the original lender.” (Compl. ¶ 38.) The City alleges that Wells Fargo loans are particularly injurious because “they are concentrated in distressed and transitional neighborhoods” that “have high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values.” (Id. at ¶ 65.) Although the City purports to rely on a series of studies in other cities about potential costs of foreclosures, the City never makes any type of concrete allegation concerning the injury it claims to have suffered in this case.
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ARGUMENT I. THE CITY’S COMPLAINT SHOULD BE DISMISSED
FOR LACK OF SUBJECT MATTER JURISDICTION. “The standing doctrine is an indispensable expression of the Constitution’s
limitation on Article III courts’ power to adjudicate ‘cases and controversies.’” Frank Krasner Enters., Ltd. v. Montgomery County, Md., 401 F.3d 230, 234 (4th Cir. 2005). “The burden of establishing standing to sue lies squarely on the party claiming subject-matter jurisdiction.” Id. To satisfy the standing requirement of the case-or-controversy limitation on judicial authority found in Article III, Section 2 of the Constitution, the party invoking federal court jurisdiction must show that (1) it has suffered an injury in fact, (2) the injury is fairly traceable to the defendants’ actions, and (3) it is likely, and not merely speculative, that the injury will be redressed by a favorable decision. Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 154 (4th Cir. 2000) (en banc) (citations omitted). Constitutional standing concepts are “not susceptible of precise definition” and “cannot be defined so as to make application of the constitutional standing requirement a mechanical exercise.” Allen v. Wright, 468 U.S. 737, 751 (1984).3
On a Rule 12(b)(1) motion, there are two ways that a defendant can challenge the existence of subject matter jurisdiction—by attacking the facial sufficiency of the complaint or by attacking the factual sufficiency of the complaint. See, e.g., Star Scientific, Inc. v. R.J. Reynolds Tobacco Co., 174 F. Supp. 2d 388, 391 (D. Md. 2001); 5B CHARLES A. WRIGHT &
3 Ordinarily, a court would also have to assess “prudential” considerations of standing. See Gladstone Realtors v. Vill. of Bellwood, 441 U.S. 91, 99-100 (1979) (describing various components of prudential standing). However, by extending the right to sue under the FHA to “any aggrieved person,” Congress has extended standing as far as the Constitution will permit, and courts lack the authority to dismiss FHA lawsuits based on prudential considerations. Id. at 108-09; see also Havens Realty Corp. v. Coleman, 455 U.S. 363, 372 (1982) (same).
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ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1350 & n.43 (collecting cases). When a defendant attacks the facial sufficiency of the complaint, the court should dismiss the complaint if the plaintiff does not “assert facts that affirmatively and plausibly suggest that the pleader has the right he claims (here, the right to jurisdiction), rather than facts that are merely consistent with such a right.” Stalley v. Catholic Health Initiatives, 509 F.3d 517, 521 (8th Cir. 2007). When a party attacks the factual sufficiency of the complaint, “a court must apply the standard applicable to a motion for summary judgment, under which the nonmoving party must set forth specific facts beyond the pleadings to show that a genuine issue of material fact exists.” AtlantiGas Corp. v. Columbia Gas Transmission Corp., 210 F.App’x 244, 247 (4th Cir. 2006).
A district court “has considerable latitude in devising the procedures it will follow to ferret out the facts pertinent to jurisdiction.” Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 449 (D.C. Cir. 1990) (citation omitted); see also Warth v. Seldin, 422 U.S. 490, 501-02 (1975) (trial court has the power to require plaintiff to submit affidavits in support of standing). “The district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993) (citation omitted); see also Gladstone Realtors, 441 U.S. at 99-100 (considering evidence outside of the pleadings in determining standing); White Tail Park, Inc. v. Stroube, 413 F.3d 451, 459 (4th Cir. 2005).
In this case, the City essentially tries to allege three basic types of injury: the (1) Property Tax Theory, (2) Crime Theory, and (3) Rehabilitation Theory. All rely on long, speculative and attenuated theories of causation that are legally insufficient:
(1) (i) the Wells Fargo loan alone (and not some other factor such as illness, divorce, the loss of a job, the City’s practices with respect to the sale of
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tax liens or the City’s property tax rate, which is twice the rate of nearly every other neighboring Maryland city or county) caused the homeowner to default; (ii) there was no buyer willing to purchase the foreclosed-upon home at any cost, leaving the house abandoned; (iii) this caused potential real estate buyers to become less interested in the surrounding properties (and not because of any other reason such as a weakening economy or a slumping real estate market or the suitability of those other properties); (iv) this in turn caused “[a] significant decline in the value of nearby homes” (Compl. ¶ 66(a)) (and, again, not because of some other reason such as a weakening economy, slumping real estate market, or disrepair of those other properties); (v) this, as years passed, caused the Maryland State Department of Assessments & Taxation to lower property assessments (and not for any other reason); (vi) which led to “a decrease in property tax revenue” actually collected in subsequent years for the City (id. at ¶ 66(a)) (hereafter, “the City’s Property Tax Theory”);
(2) (i) the Wells Fargo loan alone (and not some other factor, including, for example, those identified above) caused the buyer to default; (ii) there was no buyer willing to purchase the foreclosed-upon home at any cost, leaving the house abandoned—(iii) which led to an increase in the number of vacant homes—(iv) which prompted gangs or other criminals to decide to increase their level of criminal activity or to initiate new criminal activity because they now had an additional few hundred homes out of 15,000—30,000 abandoned homes in the City in which to operate (id. at ¶ 66(c))—(v) which led the City to increase “police and fire protection” beyond what the City otherwise would have done (id. at ¶ 66(d)) (hereafter, “the City’s Crime Theory”); and
(3) (i) the Wells Fargo loan alone (and not some other factor, including, for example, those identified above) caused the buyer to default; (ii) the foreclosure filing actually resulted in foreclosure on the home; (iii) there was no buyer willing to purchase the foreclosed-upon home at any cost— (iv) which led to an increase in the number of vacant homes—(v) which led to the risk of the home being damaged by something or someone—(vi) which led the City to have “[i]ncreased expenditures to secure abandoned and vacant homes” and make “[a]dditional expenditures to acquire and rehabilitate vacant properties” (id. at ¶ 66(e)-(f))—(vii) which led to “[a]dditional expenditures for administrative, legal, and social services.” (Id. at ¶ 66(g)) (hereafter, “the City’s Rehabilitation Theory”).
Whether viewed on the face of the complaint or in the context of the summary judgment standard,
none of these causal chains come close to satisfying any of the elements necessary for
constitutional standing.
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A. The City Fails to Allege an Injury In Fact. In order to have standing, a plaintiff’s injury must be “distinct and palpable” and
not “abstract” or “conjectural” or “hypothetical.” Allen, 468 U.S. at 751. “Such scrutiny is necessary to filter the truly afflicted from the abstractly distressed.” Gaston Copper Recycling Corp., 204 F.3d at 154.
As an initial matter, the City fails to make any non-speculative factual allegation that it has actually suffered injury from any of the 313 homes allegedly foreclosed upon by Wells Fargo over the last seven years. Although the City has within its possession (i) the location of the 313 properties, (ii) records of the property assessments surrounding these 313 properties, (iii) police and fire records concerning any visits to those 313 properties, and (iv) records of any expenses the City incurred in rehabilitating any of the 313 properties, the City did not make any non-conclusory allegation that it actually incurred any loss of revenue or made any expenditure with respect to these 313 properties. The City’s inability to allege any concrete harm requires the dismissal of its Complaint. See, e.g., Warth, 422 U.S. at 508 (holding that “a plaintiff who seeks to challenge exclusionary zoning practices must allege specific, concrete facts demonstrating that the challenged practices harm him, and that he personally would benefit in a tangible way from the court’s intervention”) (emphasis added).
Even if it had made some non-conclusory allegation, however, the City could not allege any injury sufficient for Article III purposes. Courts have found similar claims of vague economic harm to be far too attenuated, speculative, and conjectural to constitute an injury under Article III. For instance, in AtlantiGas Corp., the Fourth Circuit dismissed a claim based on standing when a company, AtlantiGas Corp., alleged that it had a contractual agreement giving it a profit-sharing interest with a natural gas wholesaler that was allegedly damaged by an illegal
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scheme of its third party competitors. 210 F.App’x at 251. In rejecting AtlantiGas’s argument that it had standing to sue the third party competitors, the Fourth Circuit concluded that the alleged damage was “too conjectural and abstract, not distinct and palpable” because a district court would “be forced to guess what diminution in revenues, if any, is attributable to [the natural gas wholesaler] and what diminution, if any, is attributable to [the third party competitors to the wholesalers].” Id.
Just as in AtlantiGas, the City’s causal chain puts the Court in the position of having to “guess what diminution in [City] revenues, if any,” is supposedly attributable to Wells Fargo and what diminution is attributable to other sources, including the City’s own actions. When the City itself alleges that more than 33,000 Baltimore properties have been subjected to foreclosure filings from 2000 through 2007 (Compl. ¶ 1) and that there are currently 15,000 30,000 abandoned properties within Baltimore (id. at ¶ 18), it is pure speculation to argue that 313 foreclosures attributable to Wells Fargo over seven years could have caused any discrete and palpable injury to the City. Likewise, it is pure speculation to argue that Wells Fargo caused the City to make expenditures of money in fire or police costs or “rehabilitation costs” that otherwise it would not have made, particularly given the enormous number of foreclosures by others, including the over 19,000 stemming from the City’s own acts.
Indeed, the City’s claim of injury is more speculative because the gravamen of the City’s complaint is that Baltimore citizens received loans they were not able to repay. (See, e.g., id. at ¶¶ 43-44.) Even if this were true, which Wells Fargo denies, the City essentially alleges that these loans caused the real estate market to have too many prospective buyers, that the market demand for these properties in Baltimore was higher than it should have been, that property tax assessments rose higher than they should have risen, and that the City received more
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property tax revenue than it should have received. Similarly, given the reasonable inferences drawn from the City’s Complaint, there were buyers for houses that might otherwise have been vacant and otherwise would have imposed costs on the City. See DaimlerChrysler v. Cuno, 547 U.S. 332, 344 (2006) (finding taxpayer claim that tax credit to manufacturer depleted the state treasury to be conjectural in part because “[t]he very point of the tax benefits is to spur economic activity, which in turn increases government revenues.”) (emphasis in original).
In any event, the City’s allegations of injury are conclusively refuted by the City’s own property records, which are available online and should have been reviewed as part of any reasonable pre-complaint investigation. Property assessments in the City of Baltimore have only increased since 2005. (Exs. Q-T.) Most recently, in 2008, the City of Baltimore’s real estate assessments increased by an average of 25%. (Ex. T.) Indeed, the City’s proposed budget for the period July 1, 2008 through June 30, 2009 reflects property tax revenue growth of nearly 10%, or roughly $52 million, from 2007—due largely to “higher assessments.” (Ex. W, John Fritze, Dixon Budget Avoids Major Cuts, BALT. SUN, Mar. 19, 2008, available at http://www.baltimoresun.com/news/local/baltimore_city/bal-budget0319,0,6218272,print.story.)
Because the City does not and cannot make any concrete allegation that it suffered a “discrete and palpable injury,” the City does not have standing to bring its case, and the Court should dismiss the City’s action for lack of subject matter jurisdiction.
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B. The City Fails to Allege an Injury Traceable to Wells Fargo’s Conduct.
Even if the City could allege an injury, it cannot allege an injury traceable to conduct of Wells Fargo. First, the City cannot allege traceability because all of its injury theories depend on the unfettered discretion of independent parties not before the Court. Second, the City cannot allege traceability because the City’s alleged injuries are self-inflicted.
1. The City Cannot Allege Traceability Based on the Actions of Independent Third Parties.
“The traceability requirement ensures that it is likely the plaintiff’s injury was caused by the challenged conduct of the defendant, and not by the independent actions of third parties not before the court.” Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315, 320 (4th Cir. 2002). Therefore, a party has no standing to bring an action when “[t]he existence of one or more of the essential elements of standing depends on the unfettered choices made by independent actors not before the courts and whose exercise of broad and legitimate discretion the courts cannot presume either to control or to predict.” Frank Krasner Enters., Ltd., 401 F.3d at 235 (internal quotations and citations omitted) (emphasis in original); see also Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 44 (1976) (“[U]nadorned speculation will not suffice to invoke the federal judicial power.”).
Allen, 468 U.S. at 757, is the seminal Supreme Court case addressing this traceability requirement. In Allen, parents of African-American public school children sued the Internal Revenue Service, alleging that the I.R.S. failed to enforce its policy of denying taxexempt status to racially discriminatory schools and that the I.R.S.’s failures harmed the parents directly and interfered with the ability of their children to receive an education in desegregated public schools. Id. at 739-40. The parents’ complaint was not vague; they specifically identified
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17 racially discriminatory schools or school systems receiving tax-exempt status from the I.R.S. Id.
In ruling that the parents and students had no standing as a matter of law, however, the Supreme Court concluded that “[t]he line of causation between that conduct [i.e., the granting of tax exempt status by the I.R.S.] and desegregation of respondents’ schools is attenuated at best.” Id. at 757. The Supreme Court observed that: (1) “it is entirely speculative . . . whether withdrawal of a tax exemption from any particular school would lead the school to change its policies[;]” (2) “[i]t is just as speculative whether any given parent of a child attending such a private school would decide to transfer the child to public school as a result of any such changes in educational or financial policy made by the private school once it was threatened with the loss of tax-exempt status[;]” and (3) “[i]t is also pure speculation whether, in a particular community, a large enough number of the numerous relevant school officials and parents would reach decisions that collectively would have a significant impact on the racial composition of the public schools.” Id. at 758.
Courts have consistently applied the Allen analysis, rejecting causation theories alleging that “the actions of an independent third party, who was not a party to the lawsuit, stood between the plaintiff and the challenged actions.” Frank Krasner Enters., Ltd., 401 F.3d at 235; see also Public Citizen, Inc. v. Nat’l Highway Traffic Safety Admin., 489 F.3d 1279, 1290 (D.C. Cir. 2007) (finding that tire manufacturers had no standing to challenge government regulation of automakers under the theory that “NHTSA’s alleged under-regulation of the automakers will lead to more accidents than otherwise would occur, and the drivers and passengers injured in those accidents will bring warranty claims and suits not just against the automakers but also against the tire industry petitioners”).
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The City’s causation theories rest on the same type of speculative theories about the conduct of third parties that the Supreme Court in Allen and numerous other federal courts have rejected as a basis for standing. For instance, the City’s Property Tax Theory relies on a set of entirely speculative assumptions concerning the actions of prospective real estate buyers, including the City’s speculation that this collective group of individuals refused to make or lowered offers to buy surrounding properties because they would have been concerned about a Wells Fargo foreclosure in the area—and not because of concerns about a weakening economy, a slumping real estate market, the other 33,000 foreclosure filings in the City since 2000 (including City-instituted foreclosures, the over 19,000 foreclosures stemming from the City’s tax lien sales, and numerous other third-party-initiated foreclosures), other neighborhood problems including crime and schools, or the suitability of the other neighborhood properties that the buyers actually contemplated purchasing. It also relies on speculative theories concerning the effect of foreclosures on the State’s real estate assessments—which have risen in Baltimore every year since 2000.
The Court can take judicial notice that “in the volatile, modern real estate market, substantial price variations occur with weekly or monthly regularity.” Ryan v. Homecomings Fin. Network, 253 F.3d 778, 783 (4th Cir. 2001); see also Shelia Dixon, Balt. City Mayor, State of the City Address, Feb. 4, 2008 (stating that “[r]eal estate is a highly dynamic market”), http://www.sheiladixon.com/node/907. Even Baltimore City officials have consistently warned that the housing market would decline and have stated that the City should plan for a drop in revenue. (See, e.g., Ex. X, Jen DeGregorio, Baltimore City Plans for Real Estate to Slow Ahead, DAILY REC. (BALT.), Mar. 24, 2005, available at 2005 WLNR 4774467, at *1 (quoting Raymond Wacks, Budget Director, City Department of Finance, as saying in 2005 that “[b]ecause there are
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a lot of uncertainties out there, especially in real estate, we don’t want to be in the position where have to cut back on services halfway through the year because we do not have the funds.”).) Just as in Allen, the City’s Property Tax Theory cannot allege any traceable injury because it relies on a speculative—and, as shown above, untrue—causal chain that supposedly travels from Wells Fargo’s loans to foreclosures, to abandoned homes, to the opinions of prospective real estate purchasers, to the assessment practices of the State of Maryland’s Department of Assessments & Taxation, and, finally, to the City’s collected revenue.
In the same way, the City’s Crime Theory cannot allege traceability because it depends on the independent actions of third party gangs and other criminals. See, e.g., Alston v. Advanced Brands & Importing Co., 494 F.3d 562, 565 (6th Cir. 2007), cert. dismissed, 128 S. Ct. 704 (2007) (holding that parents had no standing to bring lawsuit against manufacturers of alcohol based on the advertising of alcohol to children because “the causal connection between the defendants’ advertising and the plaintiffs’ alleged injuries is broken by the intervening criminal acts of the third-party sellers and the third-party, underage purchasers.”). In emphatically rejecting a standing argument asserting that a defendant’s actions invited third parties to break the law, the Sixth Circuit observed, “[a] crime is an independent action” and “[i]ndeed, our entire concept of criminal punishment is predicated on the idea that individuals are accountable for their own actions.” Id. Courts, in numerous contexts, moreover, have prohibited municipalities from showing an injury for expenditures on services such as police and fire services because such services are routine governmental functions funded through taxes. See, e.g., Baker v. Smith & Wesson, No. Civ.A. 99C-09-283-FS, 2002 WL31741522, at *4-7 (Del. Super. Ct. Nov. 27, 2007); City of Chi. v. Beretta U.S.A. Corp., 821 N.E.2d 1099, 1143-44 (Ill. 2004).
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Finally, even if the City had alleged that it made some expenditure to rehabilitate a property foreclosed upon by Wells Fargo (which it did not), the City’s Rehabilitation Theory rests on the speculative notion that third parties defaulted on the mortgage loan because of its terms and not because of other extenuating circumstances such as a divorce, illness, or an exorbitant demand from one of the City’s tax lien purchasers. (See, e.g., Ex. H, at 1B (describing how a woman’s separation from her husband caused her to fall behind on her mortgage).) The City’s Rehabilitation Theory also presumes that there was damage done to the property that needed to be rehabilitated—which again depends on the actions of third parties. Because the City’s causation theories rely wholly on the actions of third parties, the City cannot allege standing, and the Court does not have subject matter jurisdiction over this case.
2. The City Cannot Allege Traceability Because Its Injury Was Self-Inflicted.
Even apart from the involvement of third parties, the City cannot allege traceability under any of its causation theories because the City’s alleged injuries were selfinflicted. See Pennsylvania v. New Jersey, 426 U.S. 660, 665 (1976) (states had no standing to complain about self-inflicted injury); Public Citizen, Inc., 489 F.3d at 1290 (finding no standing where the claim has “at least some of the hallmarks of a ‘self-inflicted’ injury not caused by” the defendant’s actions).
Over the last two years alone, the City has unleashed tax lien purchasers on up to 15,000 Baltimore homes, many in Baltimore’s poorest neighborhoods. By its own admission, the City’s
[e]xisting policies relating to tax liens emphasize revenue collection over neighborhood development. Tax lien purchasers are primarily interested in the liquidated value of abandoned properties and not in the development of the neighborhood. Older residents who miss a single tax payment fall prey to private tax sale purchasers whose aim is to collect high fees and interest.
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Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 29 of 49 (Ex. L at 5.) The City further admitted that the third party investors are “speculators [who] have financial incentives to displace homeowners and destabilize neighborhoods.” Id. Yet, despite this knowledge, the City has continued to sell these tax liens, even when 80% of these liens involve homes that are occupied. (See, e.g., Ex. G.) Indeed, the City’s next tax lien sale, impacting potentially as many as 20,000 properties, will begin on May 12. (Ex. O.)
The relative impact of the City’s tax lien sales can be seen by comparing the chart compiled by the BALTIMORE SUN (left) showing a fragment of the City’s tax lien sales for one year (i.e., the tax lien sales for small unpaid water bills and other municipal fees in 2006 alone) with the chart alleged by the City (right) purporting to show foreclosures involving Wells Fargo over seven years.4
4 Full scale copies of these maps have been included at Exhibit Y.
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One Year

Seven Years

The magnitude of the City’s total tax lien sales—and the disproportionate injuries it has inflicted on the City’s minority neighborhoods—dwarf any injury the City believes was caused by Wells Fargo. The City alleges that Wells Fargo has foreclosed on 313 homes over the last seven years. Tax lien purchasers filed 4,261 new foreclosure cases in fiscal year 2005 alone. (Ex. K.) From 2000 through 2007, tax lien purchasers filed over 19,000 foreclosure cases— nearly 58% of all foreclosures initiated in Baltimore during that period. The City alleges that “[c]oncentrated vacancies driven by foreclosures cause neighborhoods, especially ones already struggling, to decline rapidly.” (Compl. ¶ 18.) To the extent that the City believes that it has been injured by police, fire, and rehabilitation costs as a consequence of foreclosures, the injury
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has been self-inflicted by the City. Under well-settled case law, the City cannot trace its injury to Wells Fargo and, therefore, lacks standing to bring this action.
Finally, if the City’s FHA theory of liability is viable, the claim should be directed against the City. Specifically, the City’s tax lien practices have harmed its residents and destabilized its minority neighborhoods by both depressing property values in those neighborhoods and making it more likely that minority borrowers will default on their mortgages. Foreclosures caused by the City’s tax lien practices are “particularly injurious because they are concentrated in distressed and transitional neighborhoods,” as reflected in the BALTIMORE SUN map, and are characterized by “high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values.” (See id. at ¶ 65.) The City openly continues its tax lien practices—without regard to their self-destructive and devastating consequences— and is preparing to hold its next tax lien sale of potentially as many as 20,000 properties on May 12. (Ex. O.) II. THE FHA DOES NOT PERMIT DISPARATE IMPACT CLAIMS.
Even if the Court has jurisdiction over the Complaint (and Wells Fargo strongly asserts it does not), the City cannot state a claim under Rule 12(b)(6) because, as the Supreme Court’s recent decision in City of Jackson, 544 U.S. at 228, demonstrates, the FHA does not recognize the disparate impact liability invoked by the Complaint. The City’s claim, therefore, must be dismissed.
The City of Jackson opinion holds that the text of an anti-discrimination statute, not a broad reading of its purpose, determines whether it permits disparate impact claims. In City of Jackson, the Court considered whether the Age Discrimination in Employment Act (“ADEA”) permits disparate impact claims. Noting the similarity between the ADEA and Title VII, the Court reviewed its Title VII jurisprudence for guidance—and, in the process, clarified
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and emphasized that Title VII disparate impact jurisprudence is firmly rooted in the statutory text. Justice Stevens’ plurality opinion clarifies that the Court’s holding in Griggs v. Duke Power Co., 401 U.S. 424 (1971) (construing Title VII to permit disparate impact liability), was based on the “interpretation of § 703(a)(2) of Title VII.” City of Jackson, 544 U.S. at 234. The Court acknowledged that its opinion in Griggs relied in part on the purposes of Title VII, but explained it has “subsequently noted” that its Title VII disparate impact jurisprudence derives from the text of § 703(a)(2) of Title VII, not an analysis of the Act’s overall purpose. Id. at 235. By clarifying that its holding in Griggs was rooted in the text of Title VII rather than being implied by the statute’s overall purposes—and by basing its disparate impact analysis under the ADEA on the text of that statute—City of Jackson reaffirms the primacy of the statutory text in construing antidiscrimination statutes.
The Court’s analysis in City of Jackson shows that the text of the FHA does not permit disparate impact claims. The Court explained that disparate impact claims under Title VII are permitted by the “effects” language of § 703(a)(2). Section 703(a) provides:
(a) It shall be an unlawful employment practice for an employer (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.
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Title VII § 703(a), 42 U.S.C. § 2000e-2(a) (emphasis added).5 The Court held that the text of ADEA § 4(a)(2)—which mirrors Title VII § 703(a)(2) and prohibits actions that “otherwise adversely affect” the employee’s status—empowered it to conclude that the ADEA permits disparate impact claims. City of Jackson, 544 U.S. at 235-38. Central to its reasoning was that “the text focuses on the effects of the action on the employee rather than the motivation for the action of the employer.” Id. at 236 (emphasis in original).
In addition to explaining that Title VII § 703(a)(2) and ADEA § 4(a)(2) both permit disparate impact claims, the Court clarified that subsection (a)(1) of each statute—the subsection that the FHA mirrors—does not. The Court noted that there are “key textual differences” between subsections (a)(1) and (a)(2) of both Title VII § 703 and the ADEA § 4. City of Jackson, 544 U.S. at 236 n.6. Whereas Subsection (a)(2) permits disparate impact claims, the Court explained that Subsection (a)(1) encompasses disparate treatment, but “does not encompass disparate-impact liability,” and requires a showing of intent. Id. at 236-38 & n.6 (emphasis added). This is because “the focus of the paragraph is on the employer’s actions with respect to the targeted individual.” Id. at 236 n.6. And, although the Justices disagreed as to whether ADEA Section 4(a)(2) permits disparate impact claims, the Court was unanimous that Section 4(a)(1) does not. See id. at 236 n.6; id. at 243 (Scalia, J., concurring) (“I agree with all of the Court’s reasoning . . . .”); id. at 249 (O’Connor, J., dissenting) (“Neither petitioners nor the plurality contend that the first paragraph, § 4(a)(1), authorizes disparate impact claims, and I think it obvious that it does not. That provision plainly requires discriminatory intent . . . .”).
The Court’s clarification of Title VII and the ADEA’s disparate treatment and impact provisions shows that the FHA does not permit disparate impact claims. The language of
5 Section 4(a) of the ADEA, the statute at issue in City of Jackson, contains comparable language. See 29 U.S.C. § 623(a); City of Jackson, 544 U.S. at 233.
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the FHA’s § 805 mirrors Title VII § 703(a)(1) and ADEA § 4(a)(1), which permit disparate

treatment claims, but not disparate impact claims. Compare Title VII, § 703(a)(1), 42 U.S.C.

§ 2000e-2(a)(1), and ADEA § 4(a)(1), 29 § U.S.C. 623(a)(1), with FHA § 805(a), 42 U.S.C.

§ 3605(a). Moreover, the FHA lacks language focusing on the effects of actions comparable to

the language of Title VII § 703(a)(2) or ADEA § 4(a)(2) that supports disparate impact claims.

This is demonstrated in the following table:

Title VII (a) It shall be an unlawful employment practice for an employer—(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; (a) It shall be an unlawful employment practice for an employer— (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin.

ADEA (a) It shall be unlawful for an employer: (1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age;
(a) It shall be unlawful for an employer—. . . (2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age . . . .

FHA (a) It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin. None.

These differences are dispositive of Congress’s intent in enacting the FHA. As

the Court explained, “when Congress uses the same language in two statutes having similar

purposes, particularly when one is enacted shortly after the other, it is appropriate to presume

that Congress intended that text to have the same meaning in both statutes.” City of Jackson,

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544 U.S. at 233. On this basis, the Court concluded that an “effects” provision in the ADEA comparable to Title VII’s “effects” provision meant Congress intended to permit disparate impact claims. Id. at 235-38. In accordance with this rule of statutory construction, the “discriminate against . . . because of/on the basis of” language in the FHA must have the same meaning as Title VII and the ADEA’s identical language. The Justices were unanimous that such language permits only disparate treatment claims, not disparate impact claims. See id. at 236 n.6; id. at 243 (Scalia, J., concurring); id. at 249 (O’Connor, J., dissenting).
Just as similar language in similar statutes must be interpreted to have the same meaning, different language in similar statutes must be interpreted as having different meanings: “This use of different language in two statutes so analogous in their form and content, enacted so close in time, suggests that the statutes differ in their meaning . . . .” Acree v. Republic of Iraq, 370 F.3d 41, 61 (D.C. Cir. 2004) (Roberts, J., concurring). In contrast to Title VII and the ADEA, which contain two different anti-discrimination provisions—a “discriminate against . . . because of” provision prohibiting disparate treatment and an “effects” provision prohibiting disparate impact—the FHA lacks an “effects” provision comparable to Title VII § 703(a)(2) and ADEA § 4(a)(2). Given the narrow time period in which the statute was enacted,6 the omission of “effects” language from the FHA must be viewed as intentional—and shows that it does not permit disparate impact claims.7
The Supreme Court’s interpretation of other anti-discrimination statutes further demonstrates that the FHA does not permit disparate impact claims. When the statutory text
6 Congress enacted the FHA (enacted in 1968) shortly after Title VII (enacted in 1964) and the ADEA (enacted in 1967).
7 Cf. Garcia v. Johanns, 444 F.3d 625, 633 n.9 (D.C. Cir. 2006) (“The Supreme Court has held that this [‘effects’] language gives rise to a cause of action for disparate impact discrimination under Title VII and the ADEA. ECOA contains no such language.” (citations omitted)).
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creates a cause of action based on the “effects” or “results” of actions, the Court has held that the statute permits disparate impact claims. See, e.g., Griggs, 401 U.S. at 429-31 (Title VII); City of Jackson, 544 U.S. at 232-35 (ADEA); Raytheon Co. v. Hernandez, 540 U.S. 44, 53 (2003) (Americans with Disabilities Act (“ADA”), which mirrors Title VII); Chisom v. Roemer, 501 U.S. 380, 404 (1991) (Voting Rights Act, which addresses “results”); Alexander v. Choate, 469 U.S. 287, 299 (1985) (Rehabilitation Act, which incorporates the ADA). In contrast, when the statutory text lacks a provision creating a cause of action based on “effects” of actions, the Court has held that the statute does not permit disparate impact claims. See, e.g., Jackson v. Birmingham Bd. of Educ., 544 U.S. 167, 178 (2005) (Title IX); Alexander v. Sandoval, 532 U.S. 275, 280-81 (2001) (Title VI); see also Castaneda v. Pickard, 648 F.2d 989, 1001 (5th Cir. 1981) (Equal Education Opportunities Act); Robinson v. Paragon Foods, Inc., No. 1:04-CV-2940JEC, 2006 WL 2661110, at *6 (N.D. Ga. Sept. 15, 2006) (Title II).
The City, likely, will argue that the purposes of the FHA support the view that disparate impact claims are cognizable under the Act and that the Court should focus on the Act’s purposes rather than its text—but such an argument begs the question of what Congress intended to prohibit. The Court has explained that the purpose of a statute includes both what it sets out to change and what it resolves to leave alone, with the adopted statutory text being the best evidence of that purpose. Rodriguez v. United States, 480 U.S. 522, 526 (1987) (“Where . . . the language of a provision . . . is sufficiently clear in its context and not at odds with the legislative history, . . . there is no occasion to examine the additional considerations of policy . . . that may have influenced the lawmakers in their formulation of the statute.”) (quotations omitted). The plain language of the Act prohibits only “discriminat[ion]”—not the disparate “effects” of facially neutral actions—which shows that Congress intended it to prohibit only
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intentional discrimination.8 As U.S. Solicitor General Fried has confirmed, “[t]he legislative
history [of the FHA] reinforces the understanding [from the text of the statute] that Congress
intended to require a showing of intentional discrimination.”9 Thus, any interpretation of the
FHA “that would proscribe conduct by the recipient having only a discriminatory effect . . . do[es]
not simply ‘further’ the purpose of [the statute]; [it goes] well beyond that purpose.” Sandoval,
532 U.S. at 286 n.6 (citation omitted and emphasis in original); accord Solicitor General Brief at
n.21 (“The argument that the ambitious goals of Title VII require an expansive reading of the
statute to include a discriminatory effect standard hardly surmounts the obstacles posed by the
statute’s plain language and legislative history.”). The presence of language supporting only
disparate treatment—and not disparate impact—shows that Congress did not intend the FHA to
permit disparate impact claims.10 Because the FHA does not contain the required “effects”
language, the Court should dismiss the City’s disparate impact claims.
8 Several commentators have noted that disparate impact rights of action do not, in fact, punish actions motivated by an intent to discriminate, but rather further notions of distributive justice. See, e.g., James F. Blumstein, Defining and Proving Race Discrimination: Perspectives on the Purpose vs. Results Approach from the Voting Rights Act, 69 VA. L. REV. 633 (1983). Indeed, the City's own counsel has noted that even actions intended to prevent discrimination can lead to disparate impact liability: “A defendant with the best of intentions—indeed, even a defendant who undertakes a particular policy in the express hope of eliminating any possible discrimination—can still be held liable if plaintiff pursues a disparate impact claim. ” 1 JOHN P. RELMAN, HOUSING DISCRIMINATION PRACTICE MANUAL § 2:24 (2005). It is inconceivable that Congress could have intended the word “discriminate” to reach so far. See, e.g., Birmingham Bd. of Educ., 544 U.S. at 175 (“‘Discrimination’ is a term that covers a wide range of intentional unequal treatment.” (emphasis added)). Whether legislation should target only actions motivated by discrimination, or whether the legislation should seek to further notions of distributive justice (as Title VII and the ADEA arguably do), is a decision the courts must leave to Congress. In the FHA, Congress chose to do only the former.
9 See Brief for United States as Amicus Curiae, Town of Huntington v. Huntington Branch, NAACP, 488 U.S. 15 (1988) (No. 87-1961) (“Solicitor General Brief”) (arguing that the statutory text “strongly suggests a requirement of discriminatory motivation”), available at http://www.usdoj.gov/osg/ briefs/1987/sg870004.txt.
10 Importantly, all existing FHA disparate impact Fourth Circuit precedent to the contrary borrows the disparate impact theory from Title VII cases. See Smith v. Town of Clarkton, 682 F.2d 1055 (4th Cir. 1982) (relying on precedent from other courts that incorporated into the FHA the disparate impact theory of Title VII without the required consideration of the FHA's statutory language); Betsey v. Turtle Creek Assocs., 736 F.2d 983 (4th Cir. 1984) (citing Town of Clarkton and using the same flawed analysis). After the Supreme Court’s clarification of its Title VII jurisprudence in City of Jackson, which holds that “effects” language must exist within a statute for it to permit disparate impact claims, these holdings and their underpinnings are no longer valid. Accordingly, they and their progeny “must be regarded as retaining no vitality.” Limbach v. Hooven & Allison Co., 466 U.S. 353, 360-61 (1984).
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III. THE CITY HAS FAILED TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED BECAUSE ITS ALLEGATIONS ARE INSUFFICIENT UNDER THE FEDERAL RULES OF CIVIL PROCEDURE AND CONTROLLING SUPREME COURT PRECEDENTS. Even if the FHA did permit disparate impact claims (although, after City of
Jackson, it is clear that it does not), the City has failed to plead factual allegations in the Complaint that plausibly support its disparate impact theory under the FHA. In particular and notwithstanding the Supreme Court’s recent and explicit cautions that the federal courts should not be invoked in cases like this unless the plaintiff brings a focused and specific claim, City of Jackson, 544 U.S. at 241, and that a pleader must assert enough facts to show a “plausible” and non-speculative right to relief, Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1964-65 (2007), the City has presented a complaint that is vague, speculative, and conclusory. Indeed, the Complaint falls well short of the basic requirement that a complaint set forth a “statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
In pleading that the Defendants’ alleged underwriting, pricing, and foreclosure policies and practices, although facially neutral, “have a clear and foreseeable disproportionate adverse impact on African-American borrowers” compared with similarly situated Caucasian applicants (Compl. ¶ 51; see also id. at ¶¶ 36, 39-40, 46, 53-54), the City ignores repeated directions from the Supreme Court that complaints of racial discrimination such as this must be specific, targeted, and plausible. City of Jackson, 544 U.S. at 241; Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 657 (1989), superseded on other grounds by statute, Civil Rights Act of 1991, Pub. L. No. 102-166, 105 Stat. 1074; Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 991-93 (1988). The Court requires such specificity because, otherwise, it faces an intolerable risk that an advocate can abuse the disparate impact theory of recovery by offering vague allegations or proof where chance, unexplained coincidence, or other factors, rather than the
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defendant’s alleged conduct, are the real cause of any disparities. City of Jackson, 544 U.S. at 241; Wards Cove, 490 U.S. at 657; Watson, 487 U.S. at 991-93.
To adequately state its “reverse redlining” claim, the City “must show that the defendants’ lending practices and loan terms were ‘unfair’ and ‘predatory,’ and that the defendants either intentionally targeted on the basis of race, or that there is a disparate impact on the basis of race.” Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7, 20 (D.D.C. 2000). For the City to plead a “plausible,” Twombly, 127 S. Ct. at 1966, claim based on disparate impact theory, its Complaint must set forth (1) a specific and clearly delineated practice or policy adopted by a defendant, (2) a disparate impact on a protected group, and (3) facts demonstrating a causal connection between the specific challenged practice or policy and the alleged disparate impact. Wards Cove, 490 U.S. at 657-58; City of Jackson, 544 U.S. at 241; Paige v. California, 291 F.3d 1141, 1144-45 (9th Cir. 2002). The City’s Complaint fails to allege both the second and third of these required disparate impact elements in support of its reverse redlining claims. The Court, therefore, must dismiss it.11
A. The City Fails to Allege a Disparate Impact. The City’s claims for reverse redlining under the FHA are deficient because the complaint fails to specifically allege a disparate impact as to a particular protected class. Watson, 487 U.S. at 994-95; Wards Cove, 490 U.S. at 657. The Complaint seeks to allege that
11 To the extent the City also alleges that Defendants engaged in intentional discrimination, in violation of the FHA, which it does not or only half-heartedly appears to do (e.g., Compl. ¶ 76(c) (stating that “Defendants’ published policies and statements have expressed and continue to express a preference on the basis of race and/or color”)), such allegations of intent are conclusory and wholly lacking support. Notably absent from the Complaint is any specific factual assertion, for example, that a single loan officer marked up an interest rate or made additional charges as a result of racial animus, let alone that the Defendants, which are held by one of the nation's largest financial services companies, consciously or deliberately decided to discriminate against AfricanAmericans in Baltimore City. A “formulaic recitation of the elements of a cause of action” is inadequate to state a claim. Twombly, 127 S. Ct. at 1964-65 & n.3. For these reasons, the City’s intentional discrimination claims—to the extent they exist—must be dismissed.
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the Defendants’ underwriting policies and procedures disparately impacted African-American borrowers in Baltimore by placing them in higher-cost loans relative to “similarly-situated” Caucasian borrowers. The Complaint—due to the attenuated injury the City strains to assert— further seeks to allege that the disparate impact of the Defendants’ alleged underwriting and pricing policies, in turn, has triggered a “disproportionately high rate of foreclosures” among Baltimore’s African-American vis-à-vis “similarly-situated” Caucasian borrowers.
Conspicuously absent from the City’s Complaint, however, is any adequate statistical allegation regarding the Defendants’ underwriting, pricing, and foreclosure policies or the alleged impact they had on African-American borrowers in Baltimore as opposed to similarly-situated Caucasian borrowers. Wards Cove, 490 U.S. at 651-53; Moore v. Hughes Helicopters, Inc., 708 F.2d 475, 482 (9th Cir. 1983).
To overcome this fundamental defect, the City instead litters the Complaint with simplistic and inaccurate comparisons that, collectively, do not show an entitlement to relief on disparate impact theory. Specifically, the City cites:
• unattributed statistics that allege the Defendants underwrote the same percentage of fixed-rate loans secured by property in “African-American and white neighborhoods,” but foreclosed upon more of those loans secured by properties in “African-American neighborhoods” (Compl. ¶¶ 42-44);
• publicly available Home Mortgage Disclosure Act (“HMDA”)12 data, which Federal Reserve economists have concluded does not show disparate discriminatory impact (id. at ¶¶ 47-49);
• a facially neutral 2005 pricing sheet it pairs with unattributed data on the number and location of loans secured by properties with low values (id. at ¶¶ 50-52);
• an expert report filed in a separate lawsuit commenced in another federal district court concerning loans secured by Philadelphia—not Baltimore—property (id. at ¶¶ 53-54);
12 Codified at 12 U.S.C. §§ 2801-09.
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• its “information and belief” allegation that Defendants’ “improperly” underwrote socalled 2/28 and 3/27 adjustable rate mortgage products in a manner calculated to create a disparate impact (id. at ¶¶ 55-57);
• its “information and belief” allegation alongside unattributed statistics that the Defendants set higher interest rate caps on adjustable rate mortgage loans secured by properties in “predominantly African-American neighborhoods” than in “predominantly white neighborhoods, (id. at ¶¶ 58-60); and
• unattributed statistics that purport to show that the time between origination and initiation of foreclosure procedures by the Defendants’ is shorter for loans in “African-American neighborhoods” than in “white neighborhoods.” (Id. at ¶¶ 61-63.) The City’s allegations share a number of common flaws. First, the City’s
statistics fail to adequately represent the entire population in Baltimore. The City’s selfdescribed “African-American” neighborhoods consist of U.S. Census tracts with AfricanAmerican populations exceeding 80%, whereas “white neighborhoods” consist of those having less than 20% African-Americans. (Id. at ¶¶ 41-63 & Maps.). This strategy avoids counting not only African-Americans who own property in “white neighborhoods,” but also Caucasians who own property in “African-American” neighborhoods. The City’s statistics are, at best, speculative allegations of a potential disparate impact, and “[s]peculation as to the potential for disparate impact cannot serve as evidence of such impact itself.” Walls v. City of Petersburg, 895 F.2d 188, 191 (4th Cir. 1990) (rejecting assertion that African-Americans “are much more likely statistically” to answer employee background questionnaire in a way that would subject them to negative personnel actions because the plaintiff did not “offer any connection between these statistics and any personnel decisions by the City [nor] did she submit any evidence showing that the City had, in fact, discriminated against blacks because of their answers to these questions.”). By segmenting Baltimore into two groups that do not fairly cover the entire population or otherwise constitute the groups the City seeks to compare in this action, the City has failed to allege even a potential effect on African-American homeowners in these
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neighborhoods. See, e.g., EEOC v. Datapoint Corp., 570 F.2d 1264, 1269 (5th Cir. 1978) (court must guard against the use of data that has been “segmented and particularized and fashioned to obtain a desired conclusion”); cf. 2922 Sherman Ave. Tenants’ Ass’n v. District of Columbia, 444 F.3d 673, 681 (D.C. Cir. 2006) (reversing FHA disparate impact judgment because it was unreasonable to extrapolate the racial composition of an apartment building from the racial composition of the neighborhood in which the building was located).
Second, even if the City’s statistics accurately reflect Baltimore’s population— which they do not—the City has, nevertheless, failed to compare “similarly-situated” groups of African-American and Caucasian borrowers with loans from Wells Fargo. In particular, the City has failed to plead statistics that account for borrower credit-worthiness factors and pricing information (such as credit scores, debt-to-income ratios, and loan-to-value ratios), information which the Federal Reserve has explained is essential to properly evaluate allegations of discriminatory lending.13 It is not surprising that the City seeks to avoid citing data that includes credit scores—given the Federal Reserve Board in a report to Congress also has concluded that use of such information is not discriminatory, noting that credit scoring: (1) has increased both the availability and affordability of credit for all populations, (2) is predictive of credit risk, and (3) is not a proxy for race.14 The City’s use of HMDA data in the Complaint, therefore, adds nothing to its disparate impact allegations. See Edwards v. Johnston County Health Dep’t, 885 F.2d 1215, 1223 (4th Cir. 1989) (“[M]erely demonstrating a statistical imbalance, without more,
13 See Robert B. Avery et al., New Information Reported Under HMDA and Its Application in Fair Lending Enforcement, 91 FED. RES. BULL. 393-94 (Summer 2005) at 393-94 (explaining that “reaching convincing conclusions” as to whether specific lenders discriminate “requires institution-specific analysis” that is “not possible with the HMDA data alone,” and “improperly analyzed pricing differences” based on “raw data alone can lead to inaccurate conclusions, which in turn may be unfair to particular institutions”).
14 See Bd. of Governors of the Fed. Res. Bd., REPORT TO THE CONGRESS ON CREDIT SCORING AND ITS EFFECTS ON THE AVAILABILITY AND AFFORDABILITY OF CREDIT (2007), available at http://www.federalreserve.gov/boarddocs/RptCongress/creditscore/creditscore.pdf.
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does not establish a greater discriminatory adverse effect on one race compared to another.”); cf. Walther v. Lone Star Gas Co., 977 F.2d 161, 162 (5th Cir. 1992) (noting that even when the statistics cited are meaningful, unlike the HMDA data here, their use “alone” to prove discriminatory intent “would be a challenging endeavor”).
Third, the City’s suggestion that all “fixed-rate” loans are somehow identical is similarly specious; a “fixed rate” is just one of many features that comprise a loan product, with the “fixed” rate merely the by-product of, as the City concedes, an individualized and automated risk-assessment of race-neutral credit criteria. (Compl. ¶ 43) (emphasis added.) Likewise, the City’s suggestion that borrowers with differing loan sizes are somehow “equally creditworthy” or otherwise deserving of equal pricing is inaccurate, conclusory, and, standing alone unsupported as it does, implausible. Twombly, 127 S. Ct. at 1965. Indeed, all loans carry certain fixed, administrative costs that are amortized or priced into them. These fixed and equally applied costs necessarily increase the pricing of loans secured by property with very low values because such costs comprise a higher percentage of those loan amounts.
Finally, the City’s use of an expert affidavit concerning loans secured by Philadelphia properties in a separate case brought by an individual Philadelphia borrower in another federal district court (Compl. ¶¶ 53-54) also patently fails to compare, as required, similarly-situated groups. Neither the affidavit (which only compares the loan of a single plaintiff with 14 other Philadelphia loans), nor the case to which it relates, compares—as it must to show an entitlement to relief for disparate impact—the groups the City puts at issue in this case (similarly situated African-American and Caucasian borrowers in Baltimore). Courts have widely held that this type of “apples to oranges” comparison runs afoul of basic disparate impact pleading requirements. See, e.g., Donnelly v. R.I. Bd. of Governors for Higher Educ., 929 F.
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Supp. 583, 591 (D.R.I. 1996), aff’d, 110 F.3d 2 (1st Cir. 1997) (citation omitted); see also Wards Cove, 490 U.S. at 651-53 (reversing discriminatory impact claim based on alleged statistical disparities where differences were not between similarly-situated employees); Moore, 708 F.2d at 482 (statistical pools should “always be measured against the actual pool of applicants or eligible employees”); Collette v. St. Luke’s Roosevelt Hosp., 132 F. Supp. 2d 256, 278 (S.D.N.Y. 2001) (dismissing disparate impact claims); Johnson v. County of Nassau, 480 F. Supp. 2d 581, 598-99 (E.D.N.Y. 2007) (same).
The City seeks to salvage the inadequate comparisons in its Complaint by leveraging “information and belief” pleading. (Compl. ¶¶ 54, 56, 58.) Such invocation of the phrase “information and belief,” however, will not satisfy the fact-based pleading and Rule 8 requirements. Twombly, 127 S. Ct. at 1962-63, 1974 (rejecting conclusory allegations and holding that invocation of the phrase “information and belief,” without more, will not satisfy pleading requirements). Thus, the City’s allegation on “information and belief” that the Defendants’ (one of which was not even named in the Philadelphia lawsuit) practices with regard to 15 Philadelphia loans mirror its practices in Baltimore is conclusory, contrary to reason (and reality), and implausible. Id. The same is true of the City’s “information and belief” allegations that the Defendants did not properly underwrite their 2/28 or 3/27 loans to African-Americans and that the Defendants exercise discretion to set higher interest rate caps on adjustable rate mortgage loans secured by properties in “predominantly African-American neighborhoods” than in “predominantly white neighborhoods.”
The City has taken a scattershot approach to its burden to plead an entitlement to relief under a disparate impact theory. Rather than set forth the required “apples to apples” statistical comparison of similarly-situated groups, it instead lards its Complaint with vague and
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conclusory statements, including unattributed and misleading statistics that ignore borrower creditworthiness factors. These types of allegations simply are not enough to “raise a right to relief above the speculative level [assuming] all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 127 S. Ct. at 1965; see also Walls, 895 F.2d at 191; Donnelly, 929 F. Supp. at 591; Collette, 132 F. Supp. 2d at 278; Johnson, 480 F. Supp. 2d at 598-99.
B. The City Fails to Allege a Causal Connection between the Purported Policies or Practices and the Alleged Disparate Impact.
To meet the final element of a disparate impact claim, the City must allege that the challenged policies and practices actually caused the perceived imbalance. Merely showing a bottom line disparity is not enough:
Respondents will . . . have to demonstrate that the disparity they complain of is the result of one or more of the [ ] practices that they are attacking here, specifically showing that each challenged practice has a significantly disparate impact on [ ] opportunities for whites and nonwhites. Wards Cove, 490 U.S. at 657. See also Donnelly, 929 F. Supp. at 591-92; Brown v. Coach Stores, Inc., 163 F.3d 706, 712 (2d Cir. 1998).
Here, the City alleges, at best and certainly insufficiently, only a “bottom line . . . imbalance,” with no discernable connection between Defendants’ alleged policies and that imbalance. Wards Cove, 490 U.S. at 657. It does not allege in any meaningful way whether, or how, the policies and practices it identifies—rather than some other factors, or chance—caused the City’s African-American citizens to obtain more expensive loans than non-minority citizens, or caused more foreclosures to be initiated on loans held by the City’s African-Americans than its Caucasians. The City’s conclusory assertions of causation are not enough. Twombly, 127 S. Ct. at 1966; Collette, 132 F. Supp. 2d at 278; Syverson v. Int’l Bus. Machs. Corp., No. C-0304529 RMW, 2007 WL 2904252, at *6 (N.D. Cal. Oct. 3, 2007); Burrell v. State Farm Fire &
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Cas. Co., No. CIV 5733, 2001 WL 797461, at *10 (S.D.N.Y. Jul. 12, 2001); Trezza v. Hartford, Inc., No. 98 CIV 2205, 1998 WL 912101, at *8 (S.D.N.Y. Dec. 30, 1998).
The City fails to plead facts that link the Defendants’ conduct to the alleged disparate impact—both in terms of underwriting practices and foreclosure rates. The Complaint cites no data whatsoever to refute the simple truth that the Defendants made their loan pricing decisions based on credit risk and that similarly-situated borrowers with the same credit risk received the same rates. Nor can it. The City spends many paragraphs in the Complaint trying to relate the Defendants’ alleged practices to higher loan prices and less affordable loans, but fails to do so in large part because it completely ignores the central role that risk-based pricing and creditworthiness factors play in determining loan costs. Cf. Garcia, 444 F.3d at 635 (rejecting as “analytically flawed” appellants’ attempt to statistically link a disparate impact to appellee’s loan decision-making criteria when the statistics failed to incorporate “key relevant variables,” including credit scores). The Complaint’s extensive discussion of increased foreclosure rates on loans secured by properties in “African-American neighborhoods” suffers from similar defects, failing ultimately not just to set forth an adequate comparison of similarlysituated groups, but also failing to identify the race of a single borrower on whose property the Defendants allegedly foreclosed.
The Complaint also papers over the myriad and more likely reasons why loans might progress to foreclosure at higher rates or at a faster pace in the City’s “predominantly African-American neighborhoods.” First, as the City alleges, such neighborhoods are transitional, characterized by “high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values.” (Compl. ¶ 65.) To the extent that foreclosures occur at a higher rate in neighborhoods having the characteristics described by the
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City, each of the allegedly inherent characteristics operates independently to cause foreclosures. Personal circumstances, such as divorce, job loss, or health issues also are significant intervening factors that contribute to foreclosures. Any discrepancy in foreclosure rates that might exist, moreover, is much more likely due to the City’s own policies and practices. For example, the City’s practice of selling municipal liens to investors who leverage foreclosure as a means to collect such debts and related collection costs. (Ex. G.) Or, as another example, the City’s extremely high property tax rate, which pushes many borrowers into default and subjects them to such lien auctions. (See, e.g., Ex. C.) Discrepancies in how fast a loan moves into foreclosure, contrary to the City’s allegations, tell the Court nothing concrete about what might have caused the foreclosure. In fact, the City itself seeks, in other contexts, to increase and accelerate the pace of its own foreclosures. (Ex. L at 8, 14) (acknowledging, among other findings, the significant and detrimental impact of the City’s tax lien auctions and recommending both increasing and accelerating the City’s capacity to foreclose on abandoned property.)
Across a range of case types, courts have dismissed claims as improperly pleaded when a plaintiff has alleged, as the City does here, economic injuries too remote from the defendant’s alleged conduct to establish a sufficient causal link. See, e.g., Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 347 (2005) (upholding dismissal when plaintiff alleging an “economic loss” failed to satisfy Rule 8(a)’s pleading requirements by not providing defendant notice of “what the relevant economic loss might be or of what the causal connection might be between that loss and [the alleged conduct]”); Teachers’ Ret. Sys. of La. v. Hunter, 477 F.3d 162, 186 (4th Cir. 2007) (upholding dismissal on similar grounds); Allegheny Gen. Hosp. v. Philip Morris, Inc., 228 F.3d 429, 445 (3d Cir. 2000) (upholding dismissal of antitrust, RICO, and state common law claims by a third-party hospital that sought to recover the unreimbursed costs of
39

Case 1:08-cv-00062-JFM Document 10-1 Filed 03/21/08 Page 48 of 49
health care it provided to nonpaying patients suffering from tobacco-related disease because of the remoteness of the hospital’s injury and many alternate causalities that might have triggered it); City of Phila. v. Beretta U.S.A., Corp., 126 F. Supp. 2d 882, 911 (E.D. Pa. 2000), aff’d, 277 F.3d 415 (3d Cir. 2002) (dismissing case because municipal plaintiff failed to plead a sufficient causal connection between gun manufacturing and harm from gun-related incidents, concluding “this was a theory in search of a case, and the defendants are out of range”). Like these cases, the City’s alleged injuries are simply too speculative to show an entitlement to relief. To accept the City’s injuries (declining and diverted tax revenue) as pleaded and find that they can be traced to Wells Fargo’s foreclosures, the Court must ignore a litany of alternate causalities, including—in addition to those detailed above—a deteriorating housing market, the 33,000 other (including more than 19,000 City-caused, many other City-initiated and other third-partyinitiated) foreclosures in Baltimore from 2000 to 2007, the City’s struggling school system, preexisting criminal elements, and many other factors.
The City’s numerous conclusory assertions that causation exists (e.g., Compl. ¶ 46), do not salvage its failure to adequately allege a set of facts from which causation can plausibly be inferred. See Twombly, 127 S. Ct. at 1965; Collette, 132 F. Supp. 2d at 278 (rejecting conclusory allegations of causation, when plaintiff failed to state specific facts). Accordingly, the City’s allegations of causation are too speculative to state a claim, and its Complaint should be dismissed.
CONCLUSION For all the foregoing reasons, the Wells Fargo’s motion should be granted and the City’s Complaint should be dismissed.
40

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Dated: March 21, 2008

Respectfully submitted,
/s/ Andrew L. Sandler Andrew L. Sandler (MD Fed. Bar No. 22950) Benjamin B. Klubes (MD Fed. Bar No. 08085) Michael P. Kelly (admitted Pro Hac Vice) Benjamin P. Saul (subject to admission to MD Fed. Bar) SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP 1440 New York Ave., NW Washington, DC 20005 (202) 371-7000 (Telephone) (202) 393-5760 (Facsimile)
Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.

41

 
 Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 1 of 14

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION

MAYOR AND CITY COUNCIL OF

)

BALTIMORE,

)

)

Plaintiff,

)

)

-v.-

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL LEASING, )

INC.,

)

)

Defendants.

)

Civil Action No. 1:08-CV-00062-JFM

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE AMENDED COMPLAINT

Andrew L. Sandler Benjamin B. Klubes Jonice Gray Tucker BUCKLEYSANDLER LLP 1250 24th Street, N.W., Suite 700 Washington, D.C. 20037 (202) 349-8000 (Telephone) (202) 349-8080 (Facsimile)
Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.

Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 2 of 14
Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (collectively “Wells Fargo”) respectfully submit this Memorandum of Law in Support of their Motion to Dismiss the Amended Complaint for Declaratory and Injunctive Relief and Damages filed by the Mayor and City Council of Baltimore (“the City”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). In light of the recent decision in City of Birmingham v. Citigroup Inc., et al., CV-09-BE-467-S (N.D. Ala. Aug. 19, 2009), handed down subsequent to the parties’ August 6, 2009 Status Hearing before the Court, Wells Fargo’s Memorandum in Support of its Motion to Dismiss the Amended Complaint focuses on the City’s lack of standing to bring this action.1
PRELIMINARY STATEMENT The City has amended its original Complaint in two respects. First, in an attempt to bolster its discrimination allegation, it has added inflammatory and inaccurate allegations by disgruntled former employees, Elizabeth Jacobson and Tony Paschal, both of whom have had legal disputes with Wells Fargo in the recent past. (Am. Cmplt. ¶¶ 61-86).2 Second, in an

1

Consistent with the parties’ discussion with the Court during the August 6, 2009 Status Hearing, Wells

Fargo is prepared to proceed with discovery while the Court considers the instant Motion. Plaintiff served discovery

on September 17, 2009, and Wells Fargo intends to serve its own in the near term. In this regard, Wells Fargo looks

forward to discussing the discovery process further during the next Status Hearing with the Court on October 8,

2009.

2

In her affidavit, Ms. Jacobson admits to violating long-standing Wells Fargo internal policies and

procedures and her own customers’ trust over a period spanning nearly a decade, but Plaintiff nonetheless asserts

that, in the context of this lawsuit, Ms. Jacobson’s statements should be believed. Distancing herself from alleged

past conduct, Ms. Jacobson now has recast herself as a consumer rights champion, exploiting her new-found

celebrity status while making the rounds on television and radio programs nationwide. Ms. Jacobson’s contradictory

public statements after the filing of the Amended Complaint revealed her lack of credibility even before discovery

commenced. For example, Ms. Jacobson recently told a local radio show that loan officers were being fired for

creating false applications by cutting and pasting W-2 forms, while her affidavit asserts that she was not aware of

Wells Fargo taking action to address that issue. (Sept. 1, 2009 Marc Steiner Show Interview with Elizabeth

Jacobson, available at http://www.steinershow.org/radio/the-marc-steiner-show/september-1-2009-hour-1, 40:04-

40:11; compare with Jacobson Aff., at ¶ 18). Similarly, Mr. Paschal’s allegations, the vast majority of which center

on alleged racially-motivated employment discrimination, were squarely rejected by the Fairfax County Human

Rights Commission. Simply put, neither Ms. Jacobson nor Mr. Paschal is a credible witness.

1

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attempt to support its allegations of injury, the City has added declarations of neighbors of properties once the subject of a Wells Fargo loan who complain of purported disrepair, loitering, rats, crime, and burst pipes. (Am. Cmplt. ¶¶ 114-18). These declarations only highlight what is missing from the Amended Complaint — any plausible allegation that there is, in fact, some fairly traceable connection between any alleged harm and any alleged conduct by Wells Fargo. Indeed, even if there were a constitutionally sufficient connection between a foreclosure and the injuries alleged (and there is not) the homes in which the declarants live are largely situated on blocks with many vacant properties, including a number owned by the City itself. The Jacobson and Paschal allegations and the neighbors’ declarations represent a transparent attempt to distract the Court from Plaintiff’s obligation to plead facts sufficient under Article III of the Constitution as to causation, and they do not provide any basis to confer standing.
While the City posits several injury theories, each relies on long, speculative causal chains purporting to connect Wells Fargo with the City’s alleged injury. Each of these theories is legally insufficient, as well-settled Supreme Court precedent dictates that an injury cannot be fairly traceable if it requires a court to speculate on the motives of third parties not before the court. See, e.g., Allen v. Wright, 468 U.S. 737 (1984).
Subsequent to this Court’s denial of Wells Fargo’s Motion to Dismiss the original Complaint (attached as Exhibit 1, with exhibits thereto omitted and available at Docket No. 10), the Northern District of Alabama dismissed the City of Birmingham case (attached as Exhibit 2) for lack of standing. The City of Birmingham ruling casts this Court’s July 2, 2009 denial of Wells Fargo’s Motion to Dismiss the original Complaint in a new light. The City of Birmingham Complaint (attached as Exhibit 3), filed against several major lenders after this litigation was commenced, advanced word-for-word and line-by-line the very same Fair Housing Act (“FHA”)
2

Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 4 of 14

“reverse redlining” allegations made in the instant case (along with various other state law claims), and thus relied on the same tenuous, and ultimately unsustainable, allegations and legal theories for standing advanced in this case. The court in City of Birmingham found that the City’s complaint required — just as the Amended Complaint does here — “a series of speculative inferences . . . to connect the injuries asserted with the alleged wrongful conduct by the Defendants” in light of the fact that “the minority borrowers in this case could have defaulted on their mortgages for a number of reasons, none of which related to the Defendants’ alleged ‘reverse redlining.’” City of Birmingham, Exhibit 2, at 8. In addition, the City of Birmingham Court found, just as is the case in Baltimore, that “loss of tax revenue from property taxes and the increase in spending, like the depreciation in home values, could have been caused by any number of factors having nothing to do with the Defendants’ alleged ‘reverse redlining.’” Id.
Consistent with the City of Birmingham decision “that the alleged injuries to the City are too tenuously connected, and so not fairly traceable, to the Defendants’ alleged misconduct in this case,” (Id.), Wells Fargo moves herein to dismiss the Amended Complaint. In so doing, Wells Fargo renews its argument that the City of Baltimore is unable to establish the traceability requirement for standing and incorporates by reference the other arguments made in its Motion to Dismiss the original Complaint.3
In its presentation during the June 29, 2009 Hearing on the Motion to Dismiss, Wells Fargo highlighted the attenuated nature of the City’s alleged injury using a large sample of loans identified by the Court and highlighted, in particular, those properties identified by the City itself as the most salient examples of the harm allegedly suffered by the City. (“June 29 Hearing

3

While the instant Motion responds to the Amended Complaint and so does not duplicate the original

Motion to Dismiss, the Court has discretion to consider anew all issues underlying the original Motion to Dismiss to

the extent they overlap. See, e.g., Plotkin v. Lehman, 178 F.3d 1285 (4th Cir. 1999).

3

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Presentation,” attached as Exhibit 4). Examining the Court-designated sample — residential mortgages originated in or after January 2000 and foreclosed upon between 2005 and 2008 — Wells Fargo demonstrated that it completed foreclosure on less than 150 loans in the City of Baltimore during a four-year time period that included the height of the recent financial crisis. 4 Experts from Deloitte & Touche conducted a detailed analysis of the factors contributing to each of these foreclosures and concluded that, in each and every case, the foreclosure was precipitated by life circumstances unrelated to the terms of the loan — illness, divorce, death, job loss, nonpayment of rent by investors, and the like. Not a single one of these 143 foreclosures was caused by the terms of the Wells Fargo loan.
While Wells Fargo is confident in its ability to make similar loan-by-loan showings for each property at issue in this case, as a matter of law, it is both unnecessary and improper for Wells Fargo to be required to make a specific showing with respect to each and every loan in dispute in the case. The Court should look to the illustrative examples, with City of Birmingham as a guide, and determine that to make the necessary causal connections between the City’s claims of property tax revenue diminution and increased municipal costs, it would have to draw a series of speculative inferences dispositive of the standing question.
For the reasons set forth in the Memorandum of Law in Support of Defendants’ Motion to Dismiss the Complaint, in the June 29 Hearing Presentation, and herein, the Court must not make the speculative inferences necessary to connect the City’s asserted injuries to the wrongful conduct alleged in order to confer standing, and should dismiss the Amended Complaint for lack of jurisdiction.

4

Plaintiff alleges that there have been more than 33,000 Baltimore City homes that have been subject to

foreclosure filings since 2000. (Am. Cmplt. ¶ 1). Wells Fargo’s foreclosures are miniscule by comparison.

4

Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 6 of 14
ARGUMENT To satisfy the standing requirements of the case-or-controversy limitation on judicial authority under Article III, Section 2 of the Constitution, the party invoking federal court jurisdiction must show that (i) it has suffered injury in fact; (ii) the injury is fairly traceable to the defendant’s actions; and (iii) it is likely, and not merely speculative, that the injury will be redressed by a favorable decision. Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 153-55 (4th Cir. 2000). As discussed at length in Wells Fargo’s Memorandum in Support of its Motion to Dismiss the original Complaint, the plaintiff must demonstrate that it is “likely [that] the plaintiff’s injury was caused by the challenged conduct of the defendant, and not by the independent actions of third parties not before the court.” Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315, 320 (4th Cir. 2002). Accordingly, a party does not have standing to bring an action when “the existence of one or more of the essential elements of standing depends on the unfettered choices made by independent actors not before the courts and whose exercise of broad and legitimate discretion the courts cannot presume either to control or to predict.” Frank Krasner Enters., Ltd. v. Montgomery County, Md., 401 F.3d 230, 235 (4th Cir. 2005) (internal quotations and citations omitted) (emphasis in original). Allen, 468 U.S. 737, is the seminal Supreme Court case addressing traceability. In Allen, parents of African-American public schoolchildren sued the Internal Revenue Service, alleging that the agency failed to enforce its policy of denying tax-exempt status to racially discriminatory schools, harming the parents directly and interfering with the ability of their children to receive an education in desegregated public schools. Id. at 739-40. The Supreme Court concluded that the parents had no standing because “[t]he line of causation between that conduct [the granting of tax exempt status] and desegregation of respondents’ schools is
5

Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 7 of 14
attenuated at best.” Id. at 757. Courts have consistently applied the Allen analysis, and City of Birmingham applies it to allegations identical to those in the instant case.
The City of Baltimore, like the City of Birmingham, has theorized three types of injury: the (1) Property Tax Theory, (2) Crime Theory, and (3) Rehabilitation Theory. Each relies on a lengthy, speculative, and attenuated causal chain that is legally insufficient to support standing:
The Property Tax Theory. This approach theorizes that (i) the Wells Fargo loan (and not some other factor such as illness, divorce, job loss, incarceration, death, or the City’s own tax liens) caused the borrower to default; (ii) there was no buyer willing to purchase the foreclosed-upon home, leaving the home abandoned; (iii) this caused potential real estate buyers to become less interested in the surrounding properties (and not any other reason such as a weakening economy, a decline in the shipping and steel industries, a slumping real estate market, or pre-existing “high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values” (Am. Cmplt ¶ 109)) in the neighborhoods identified in the Amended Complaint; (iv) this, and not, for example, a weakening economy, a decline in the shipping and steel industries, a slumping real estate market, or pre-existing “high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values” (Am. Cmplt ¶ 109), caused “[a] significant decline in the value of nearby homes” (Am. Cmplt. ¶ 100(a)); (v) this caused the Maryland State Department of Assessments & Taxation to lower property assessments; (vi) which led to “a decrease in property tax revenue” collected by the City (id.).
The Crime Theory. This approach theorizes that (i) the Wells Fargo loan (and not some other factor, including, for example, those identified above) caused the borrower to default;
6

Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 8 of 14
(ii) there was no buyer willing to purchase the foreclosed-upon home, leaving the home abandoned; (iii) which led to an increase in the number of vacant homes; (iv) which prompted gangs and criminals to increase their level of illegal activity or to initiate new illegal activity because of fewer than 150 additional vacant homes among the City’s tens of thousands in which to create “centers for squatting, drug use, drug distribution, prostitution, and other unlawful activities” (Am. Cmplt. ¶ 110(c)); (v) which led the City to increase “police and fire protection.” (Am. Cmplt. ¶ 110(d)).
The Rehabilitation Theory. This approach theorizes that (i) the Wells Fargo loan (and not some other factor, including, for example, those identified above) caused the borrower to default; (ii) there was no buyer willing to purchase the foreclosed-upon home, leaving the home abandoned; (iii) which led to an increase in the number of vacant homes; (iv) which led to the risk of the home being damaged by people, animals, or weather; (v) which led the City to have “[i]ncreased expenditures to secure abandoned and vacant homes” and to make “[a]dditional expenditures to acquire and rehabilitate vacant properties” (Am. Cmplt. ¶¶ 110(e), (f)); (vi) which led to “[a]dditional expenditures for administrative, legal, and social services.” (Am. Cmplt. ¶ 110(g)).
The FHA “reverse redlining” allegations in City of Birmingham were virtually identical — word for word — to the original Complaint filed in this case, with the exception of geographically-specific allegations. Birmingham alleged that the defendant financial institutions targeted minority borrowers for subprime loans in violation of the FHA and caused foreclosures on homes in Birmingham. Birmingham alleged that this in turn led to decreased property values, decreased tax revenues, increased crime, and increased municipal expenditures. In short,
7

Case 1:08-cv-00062-JFM Document 126-1 Filed 09/18/09 Page 9 of 14
Birmingham advanced the same Property Tax, Crime, and Rehabilitation Theories as the City has here.
The court in City of Birmingham relied at length on the decision of a court in the Fourth Circuit, Tingley v. Beazer Homes Corp., No. 3:07-CV-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008). The plaintiffs in Tingley were a group of homeowners who asserted that the defendant real estate agents targeted low-income consumers for home loans and encouraged them to change or falsify information on loan applications, which qualified them for loans they could not afford, resulted in foreclosures, and ultimately, reduced the value of the plaintiffs’ own homes in the surrounding area. Id. at *4. The court concluded that it would have to make a series of speculative inferences in order to find the necessary causal connection between the alleged diminution in property values and the defendants’ conduct. Id. The court noted that “it is quite speculative that the depreciation in value of the plaintiffs’ property was caused by the foreclosures of these third party properties rather than as a result of a myriad of other factors, such as rising unemployment in the region, changes in the housing market, or other economic conditions.” Id. The court further determined that the “tenuousness of the connection between the Defendants’ alleged actions and the alleged diminished value in Plaintiffs’ property becomes greater with each additional link in the chain.” Id.
Drawing on this reasoning, and noting that the City of Birmingham case went even “one step farther than the Tingley case” by seeking recovery of purported lost tax revenue and excess municipal costs (City of Birmingham, Exhibit 2, at 8), the court granted the defendants’ motion to dismiss. The court stated that “a series of speculative inferences must be drawn to connect the injuries asserted with the alleged wrongful conduct by the Defendants” in light of the fact that:
8

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the minority borrowers in this case could have defaulted on their mortgages for a number of reasons, none of which related to the Defendants’ alleged “reverse redlining.” Also, the Defendants’ decisions to foreclose on the properties after the borrowers defaulted could be, as in Tingley, for reasons totally apart from the alleged “reverse redlining.” Furthermore, it is quite speculative that the depreciation in value of the neighboring homes in the City was caused by the foreclosures of minority borrowers’ properties rather than as a result of “a myriad of other factors,” which, as the Tingley court noted, could include “rising unemployment in the region, changes in the housing market, or other economic conditions.” Id. The court also found that the “loss of tax revenue from property taxes and the increase in spending, like the depreciation in home values, could have been caused by any number of factors having nothing to do with the Defendants’ alleged ‘reverse redlining.’” Id. Therefore, the court concluded “that the alleged injuries to the City are too tenuously connected, and so not fairly traceable, to the Defendants’ alleged misconduct in this case.” Id. In another case recently decided, City of Cleveland v. Ameriquest Mortgage Sec., Inc., 621 F.Supp.2d 513 (N.D. Ohio 2009), Cleveland advanced a nuisance claim under a similar theory of causation. Cleveland alleged that subprime lending caused “the epidemic of foreclosures afflicting the City,” and sought a recovery from financial institutions that originated mortgage loans. Id. at 516. The court similarly found that “the borrower may have lost a job . . . suffered a catastrophic injury, borrowed too much on credit cards . . . suffered investment losses that depleted savings . . . or, despite an ability to pay, simply decided to walk away from the mortgage . . . .” Id. at 534. The court also acknowledged “the City’s struggling, Rust-Belt economy, the fading prominence of the manufacturing sector, and Cleveland’s challenges in attracting a meaningful replacement.” Id. at 535 (internal quotations omitted). Thus, “[i]t would be tremendously difficult, if not completely impossible, to determine which of the City’s damages are attributable to Defendants’ alleged misconduct and not to some absent party.” Id. at 533. The court concluded that “[s]orting out these contributing factors in an effort to assign
9

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liability would be a speculation-laden, uncertain endeavor . . . .” Id. at 535. The court noted that
Cleveland itself had conceded, as the City has here, that “the foreclosure crisis was precipitated
by the broad decline in the housing market, which itself was the product of a myriad of factors
occurring in unknown and unknowable proportions, many of which were completely beyond
Defendants’ control.” Id. See Am. Cmplt. at ¶ 27 (“the real estate bubble burst in 2007 and
home prices began to fall, and foreclosure rates began their dramatic rise”).
The causal chains posited here are similar to those in City of Cleveland and
precisely the same as those in City of Birmingham. Precisely the same conclusion reached in
both cases that any alleged injury is not fairly traceable to Defendants is warranted. As
demonstrated in the affidavits submitted by Wells Fargo to the Court at the June 29, 2009
Hearing (attached as Exhibit 5):
• As an initial matter, properties once the subject of a Wells Fargo loan and now alleged to be vacant constitute approximately one quarter of one percent of the tens of thousands of vacant properties in the City of Baltimore.
• Between January 1, 2005 and December 31, 2008, Wells Fargo foreclosed on 143 loans originated on or after January 1, 2000. Each of these foreclosures was the result of factors unrelated to the terms of the loan, including excessive debt, decline in income, illness, job loss, and the nonpayment of rent to investor borrowers. (Williams Aff., attached as Exhibit 5, at ¶ 4).
• The City obtained and presented affidavits and evidence of expenditures with respect to 10 of the 143 foreclosures at issue (the “City’s 10 Best”). All 10 foreclosures involved borrower life circumstances and economic difficulties — loss of a job, loss of medical insurance combined with illness, the tragedy of a murdered son — and not Wells Fargo’s conduct. (Id. at ¶¶ 23-32). Most of the foreclosures are located in blocks with a significant number of properties owned by the City or corporate entities, and confirm the City’s own allegation that neighborhoods whose decline it attributes to Wells Fargo in fact had “high vacancy rates, low rates of owner occupancy, substantial housing code violations, and low property values” (Am. Cmplt ¶ 109) prior to any Wells Fargo foreclosure.
10

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• The City’s 10 Best includes only one non-investor borrower. (Williams Aff., Exhibit 5, at ¶ 21). Four of the ten were never owned or managed by Wells Fargo post-foreclosure, having been sold to third parties at foreclosure or reverted to the owner of the loan for disposition. Only three of the remaining six were owned by African-Americans, and all three of these had documented evidence of extensive damage prior to foreclosure, including housing code violations. (Schares Aff., attached as Exhibit 5, at ¶¶ 15, 16, 20, 21, 23).
The City’s 10 Best illustrate vividly the City of Birmingham conclusion that the causal chains alleged are — writ large — too speculative and attenuated to confer standing. Moreover, as that opinion impliedly recognized, the Court need not identify and undertake a specific examination of each delinquency, each vacant property, each alleged drug transaction or other criminal offense, each alleged squatter’s discarded trash, and each alleged pest infestation in order to conclude that any alleged misconduct by Wells Fargo was not the fairly traceable cause of any alleged injury to the City. Instead, the Court should conclude that any alleged injury may have been caused by a number of factors, including the shift in the housing market (as the City alleged in Paragraph 27 of the Amended Complaint), homeowner personal and financial difficulties, the City of Baltimore’s plummeting fortunes, or — even more directly — gangs, criminals, and pests. The alleged injuries are far too tenuously connected, and so not fairly traceable, to Wells Fargo’s alleged misconduct. Thus, the City does not have standing to assert its claims, and the Amended Complaint should be dismissed.
11

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CONCLUSION For the reasons set forth above, in the Memorandum of Law in Support of Defendants’ Motion to Dismiss the Complaint, and in Wells Fargo’s June 29 Hearing Presentation, the Court should dismiss the Amended Complaint.
Respectfully submitted,
/s/ Andrew L. Sandler Andrew L. Sandler (MD Fed. Bar No. 22950) Benjamin B. Klubes (MD Fed. Bar No. 08085) Jonice Gray Tucker (MD Fed. Bar No. 26484) BUCKLEYSANDLER LLP 1250 24th Street, N.W., Suite 700 Washington, D.C. 20037 (202) 349-8000 (Telephone) (202) 349-8080 (Facsimile) asandler@buckleysandler.com bklubes@buckleysandler.com jtucker@buckleysandler.com Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.
12

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CERTIFICATE OF SERVICE

I certify that the foregoing document, filed through the ECF system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF) and paper copies will be sent by first class mail to those indicated as non-registered participants as of September 18, 2009.

Dated: September 18, 2009

/s/ Andrew L. Sandler Andrew L. Sandler

13

 
 Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 1 of 35

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND BALTIMORE DIVISION

)

MAYOR AND CITY COUNCIL OF

)

BALTIMORE,

)

)

Plaintiff,

)

)

-v.-

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL LEASING, )

INC.,

)

)

Defendants.

)

)

Civil Action No. 1:08-CV-00062-JFM

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE SECOND AMENDED COMPLAINT

Andrew L. Sandler Benjamin B. Klubes Jonice Gray Tucker Valerie L. Hletko (pro hac vice) BUCKLEYSANDLER LLP 1250 24th Street, N.W., Suite 700 Washington, D.C. 20037 (202) 349-8000 (Telephone) (202) 349-8080 (Facsimile)
Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 2 of 35
TABLE OF CONTENTS
PRELIMINARY STATEMENT................................................................................................. 1 SUMMARY OF ARGUMENT .................................................................................................. 4 ARGUMENT ........................................................................................................................... 10 I. THE SECOND AMENDED COMPLAINT SHOULD BE DISMISSED FOR
LACK OF SUBJECT MATTER JURISDICTION. ....................................................... 10 A. The City Fails to Allege an Injury Fairly Traceable to Wells Fargo’s
Conduct............................................................................................................. 14 1. The Recycled Crime and Rehabilitation Theories Fail to Articulate
Fairly Traceable Causation..................................................................... 18 2. The Revamped Property Tax Theory Fails to Articulate Fairly
Traceable Causation............................................................................. 211 3. While the City’s Causal Chains are Uniformly Implausible, Many
Are Also Simply Impossible. ............................................................... 244 B. The City Fails to Allege an Injury-in-Fact........................................................ 277 CONCLUSION ........................................................................................................................ 30
i

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TABLE OF AUTHORITIES CASES
Allen v. Wright, 468 U.S. 737 (1984) ....................................................................................14, 27 Arthur v. Ticor Title Ins. Co. of Florida, 569 F.3d 154 (4th Cir. 2009)........................................ 22 Ashcroft v. Iqbal, 1239 S.Ct. 1937 (2009)................................................................................... 10 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ................................................................ 10 Capitol Leasing Co. v. FDIC, 999 F.2d 188 (7th Cir. 1993) ........................................................ 11 City of Birmingham v. Citigroup Inc., CV-09-BE-467-S, slip op.
(N.D. Ala. Aug. 19, 2009).............................................................................................6, 14, 16 City of Cleveland v. Ameriquest Mortgage Sec., Inc., 621 F. Supp. 2d 513
(N.D. Ohio 2009).............................................................................................................passim Crutchfield v. United States Army Corps of Eng’rs, 230 F. Supp.2d 687 (E.D. Va. 2002)......26, 29 Doe v. Blue Cross Blue Shield of Md, Inc., 173 F. Supp. 2d 398 (D. Md. 2001) ......................... 28 Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438 (D.C. Cir. 1990)................ 10 Frank Krasner Enters., Ltd. v. Montgomery County, Md., 401 F.3d 230 (4th Cir. 2005) ............. 15 Friends of the Earth, Inc. v. Gaston Copper Recycling Corp.,
204 F.3d 149 (4th Cir. 2000).......................................................................................10, 21, 23 Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315 (4th Cir. 2002) .......................14, 28, 29 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).................................................................. 26 Mayor & City Council of Baltimore v. Wells Fargo Bank, N.A. and Wells Fargo Financial
Leasing, Inc., 677 F. Supp. 2d 847 (D. Md. 2010) ............................................................passim Powers v. U.S. Home Corp., No. 09-cv-2167, 2010 WL 605727,
slip op. (D. Md. Feb. 18, 2010) ...........................................................................................5, 28 Robinson v. Board of County Comm’rs, No. 07-cv-1903, 2008 WL 2484936
(D. Md. June 19, 2009) .......................................................................................................5, 28 Securities & Exchange Commission v. Goldman Sachs & Co., 10-cv-03229
(S.D.N.Y. filed Apr. 16, 2010) ............................................................................................. 8, 9
ii

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 4 of 35 Tingley v. Beazer Homes Corp., No. 3:07-CV-176, 2008 WL 1902108
(W.D.N.C. Apr. 25, 2008).................................................................................................15, 16 United States v. Nusbaum, 01:09-CR-00328-JFM (D. Md. May 18, 2010) ................................... 3 United States v. Students Challenging Regulatory Agency Procedures (SCRAP),
412 U.S. 669, 688 (1973) ....................................................................................................... 21 White Tail Park, Inc. v. Stroube, 413 F.3d 451 (4th Cir. 2005) ................................................... 11
RULES Federal Rules of Civil Procedure 12 (b)(1) ................................................................................... 1 Federal Rules of Civil Procedure 12 (b)(6) ................................................................................... 2
STATUTES Fair Housing Act, 42 U.S.C. §3605 .............................................................................................. 2 Md. Code Ann. Tax-Prop. § 8-102, and 103 ............................................................................... 22
iii

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Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (collectively “Wells Fargo”) respectfully submit this Memorandum of Law in Support of their Motion to Dismiss the Second Amended Complaint for Declaratory and Injunctive Relief and Damages filed by the Mayor and City Council of Baltimore (“the City”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Because the City has failed to follow the Court’s direction to identify and demonstrate a connection between specific damages incurred by the City and alleged conduct fairly traceable to Wells Fargo, the standing analysis set forth in this Court’s January 6, 2010 Order dismissing the First Amended Complaint now requires dismissal of the Second Amended Complaint with prejudice.
PRELIMINARY STATEMENT The City first filed this action on January 8, 2008, against Wells Fargo, which long has brought products and services to Baltimore-area residents, as part of a campaign by the Baltimore City Law Department to generate revenue through lawsuits. (Ex. 1, Brendan Kearney, Baltimore’s Hotel Tax Lawsuit Part of Larger Litigation Strategy, Daily Record, Dec. 11, 2008). After two years of litigation by the City and its private lawyers, this Court dismissed the City’s lawsuit on January 6, 2010. In its order of dismissal, the Court recognized the steady decline of the Baltimore neighborhoods at issue beginning many years before the City’s lawsuit, which resulted from a wide range of societal problems. The Court held that the City had failed to meet its burden in seeking to attribute the foreclosure and vacancy epidemic in Baltimore to the alleged lending practices of a single bank through the use of novel and untested legal theories. Mayor & City Council of Baltimore v. Wells Fargo Bank, N.A. & Wells Fargo Financial Leasing, Inc., 677 F. Supp. 2d 847, 850 (D. Md. 2010) (Motz, J.). Specifically, the Court found that “the City’s allegations. . . of a causal connection between Wells Fargo’s alleged misconduct and the damages the City claims is not plausible” in light of the “negligible” portion of vacant housing
1

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stock attributable to Wells Fargo even using Baltimore’s own figures. Id. The Court’s

conclusions are consistent with the long-held views of the Baltimore City Council—ironically,

one of the plaintiffs in this action—which passed a resolution in 2000 acknowledging the

endemic problems created by the then 40,000 vacancies in Baltimore, recognizing that they had

become “a magnet for crime, grime, and blight” and a “drain on the City’s dwindling resources.”

(Ex. 2, City of Baltimore Res. File No. 200171 (2000), available at

http://legistar.baltimorecitycouncil.com/detailreport/?key=164). The problems the City

complains of in the instant lawsuit predate the origination of virtually every loan identified in the

Second Amended Complaint (“SAC”).

The City has now re-filed essentially the same lawsuit, and again attempts to sue

Wells Fargo directly under the Fair Housing Act, 42 U.S.C. § 3605 (“FHA”). Defying the

strictures of standing and causation, the City seeks to link Wells Fargo’s mortgage loans—many

to investors—to alleged municipal costs associated with vacant properties. The City’s own

pleadings and statements demonstrate that it does not have standing to maintain this lawsuit.

Nothing more aptly illustrates the City’s continuing failure to make a plausible claim that Wells

Fargo’s loans have a fairly traceable connection to any of the alleged damages than the fact that

more than 20 properties specifically cited in the SAC were the subject of loans made through

bond and down payment assistance community development programs administered by the State of Maryland and/or the City of Baltimore.1 Indeed, approximately 15 of the loans identified by

the City in the SAC involved City funding for second mortgages made on behalf of the City, or

its agent, to facilitate the home purchase, and in connection with which the City or its agent

1

First mortgage loans made through the Maryland Department of Housing and Community Development’s

Bond Program, for example, require a loan quality review by a designee of the State, first lien approval from the

State, and a full first lien purchase commitment from the State prior to Wells Fargo’s closing of the first lien. These

loans are purchased by and endorsed to the State following origination and closing of the loans.

2

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received a variety of documentation relating to the origination of the Wells Fargo first lien.2 Stated another way, the City sponsored second-lien loans in order to make possible some of the very Wells Fargo loans about which it now complains.
The City also has continued practices that have contributed in large measure to the vacancy problem for which it now seeks recovery from Wells Fargo. For example, just last week, the City auctioned off a record 12,689 tax liens to grant private investors the right to foreclose on properties whose owners fell even just a few hundred dollars short on their local tax and municipal bills. (Ex. 3, Fred Schulte, Ben Protess and Lagan Sebert, City Auctions Liens on Homes; Investors Can Collect, The Baltimore Sun, May 17, 2010).3 According to The Baltimore Sun, 400 Baltimore residents lost their homes for non-property-tax debts during the three-year period between 2003 and 2006, half of them for initial debts of less than $500. (Ex. 4, A License to Steal, The Baltimore Sun, May 19, 2010). 4 In contrast, the SAC only identifies 269

2

A number of these second liens were originated through the City of Baltimore’s Settlement Expense Loan

Program (“SELP”) pursuant to a formal contractual agreement between Wells Fargo and the City of Baltimore,

whereby the City provided eligible borrowers with closing cost assistance in order to encourage homeownership.

3

The corruption infecting the City’s tax lien auction process is notorious. See United States v. Nusbaum,

1:09-CR-00328-JFM (D. Md. May 18, 2010) (sentencing one of the defendants to one year and one day in federal

prison and an $800,000 fine following guilty plea to a felony charge of bid-rigging at tax lien sales). Tax lien

purchasers dramatically inflate the amount that must be paid by mortgagors to satisfy the liens, tacking on interest

and legal fees, which make it impossible for a borrower to redeem. A City tax lien placed on 3622 Edmondson

Avenue, a property as to which the City claims damages in the SAC, provides an illustrative example. This lien was

redeemed by Wells Fargo in January 2009 for more than $5,000, a 418% increase over the $972 in unpaid city

assessments that precipitated the lien. (See www.bidbaltimore.com). Far from being the irresponsible, predatory

lender that the SAC alleges, a review of the City’s public records reveals that Wells Fargo redeemed approximately

440 tax liens in or about 2008 and 2009. (Id.) These redemptions included approximately 28 liens on properties as

to which the City claims damages in the SAC. (Id.).

4

In a particularly egregious example of the results of Baltimore’s predatory tax lien practices, which

disproportionately impact African-American neighborhoods, a disabled African-American homeowner living in a

predominantly African-American neighborhood was evicted because she failed to pay a city water bill of $362,

which ballooned to $3,600 once the City’s auction winner tacked on interest and fees. (See Ex. 3). This City-

precipitated vacancy, befalling a home whose mortgage had been paid off for more than 25 years, now joins more

than 30,000 other vacancies, many of which similarly were created by the City’s own actions.

3

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 8 of 35
foreclosure cases initiated over a 10-year period related to Wells Fargo loans, and of this number only 130 were completed foreclosures by Wells Fargo with City-specified damages.
The president of the City Council, a plaintiff here, attempted to explain the fact that the number of auctioned liens has doubled since 2006, saying that the “jump reflects the pain being felt by Baltimore and other cities across the county. It’s definitely indicative of the overall recession.” (Ex. 5, Wells Fargo Mortgage Case in Baltimore Dismissed, Reuters, Jan. 7, 2010). According to the City, its own tax lien sales resulting in foreclosures on and evictions of AfricanAmericans, which add to the enormous number of vacancies in Baltimore, are compelled by economic forces beyond its control, but foreclosure by Wells Fargo can only be explained by discrimination. The City’s position is both hypocritical and legally unsustainable.
Underscoring the conclusion that the City of Baltimore is acting with wilful blindness regarding the root causes of the purported ills outlined in the SAC, in at least seven instances, the State of Maryland initiated the foreclosure action that the City now tries to attribute to Wells Fargo. This is ironic in light of the fact that Wells Fargo is a lender who, for decades, has partnered with the City and State in efforts to revitalize Baltimore, a city with one of the highest vacancy rates in the country, due, in large measure, to the failed policies and practices of its own government.
SUMMARY OF ARGUMENT The SAC makes only two changes to the First Amended Complaint, and neither addresses the fundamental deficiency that caused the Court to dismiss the City’s case—that the City cannot state a fairly traceable connection between Wells Fargo’s lending activity and its purported damages in maintaining certain properties, providing police and fire protection for those properties, and reduced property tax revenues.
4

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 9 of 35
First, the City lists 51 pages of costs unspecified by month, day, amount, or nature, which allegedly are associated with various properties that at some point in the past ten years may have been vacant. The City connects these purported damages to Wells Fargo in one sentence of its 100-page SAC with the bald assertion that “[t]hese services would not have been necessary if the properties were occupied” (SAC ¶ 97) and that they were made vacant by Wells Fargo’s lending activity. Nothing in the SAC addresses the Court’s determination that the City did not have standing in light of the “negligible” portion of the vacant housing stock even arguably attributable to Wells Fargo. City of Baltimore, 677 F. Supp. 2d at 850. In fact, the SAC purports to identify 190 properties that once were the subject of a Wells Fargo mortgage loan as to which it has made expenditures or provided services. (SAC ¶¶ 105-294).5 Only 138 of these properties are alleged to be vacant currently. (SAC ¶ 104). Of course, the City omits from the SAC statistics publicly available from its own Housing Department that there are approximately 30,000 vacant properties in Baltimore, of which the City itself owns one-third. (Ex. 6, Mayor Dixon Introduces Bold Initiative to Address Vacant Housing, available at http://www.baltimorehousing.org/wgo_detail.asp?id=323). Thus, the City’s “best case” purports to hold Wells Fargo responsible for $20 million in damages because it allegedly has responsibility for less than one-half of one percent of all vacant properties in the City.6

5

Further departing from the Court’s Order requiring articulation of a fairly traceable connection, the City

speculates about 34 vacant property addresses at which it anticipates future expenses (SAC ¶ 295), and 45 formerly

vacant properties as to which it has “not yet identified costs for providing increased municipal services.” (SAC ¶

296). Such speculative claims cannot be considered. See, e.g., Powers v. U.S. Home Corp., No. 09-cv-2167, 2010

WL 605727, slip op. (D. Md. Feb. 18, 2010); Robinson v. Board of County Comm’rs, No. 07-cv-1903, 2008 WL

2484936 (D. Md. June 19, 2009).

6

Despite its 51 pages of purported damages, the City fails to place any particular dollar value on them in the

SAC. Continuing its tactic of litigating this case in the press, however, the City publicly stated that its case is worth

$20 million. (Ex. 8, City Changes Tactics on Wells Fargo Lawsuit, The Baltimore Sun, Apr. 21, 2010).

5

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 10 of 35
While spending dozens of pages asserting damages, the SAC does nothing to address the fundamental traceability gap between Wells Fargo making a loan and causing the City damages through a vacant property. Just as the Northern District of Alabama reasoned in dismissing a substantially identical case brought by the City of Birmingham against several lenders—and as this Court reasoned in its prior ruling—the City’s SAC requires “a series of speculative inferences . . . to connect the injuries asserted with the alleged wrongful conduct by the Defendants” in light of the fact that “the minority borrowers in this case could have defaulted on their mortgages for a number of reasons, none of which related to the Defendants’ alleged ‘reverse redlining.’” (Ex. 7, City of Birmingham v. Citigroup Inc., CV-09-BE-467-S, slip op., at 8 (N.D. Ala. Aug. 19, 2009)). In addition, the City of Birmingham Court found, just as is the case here, “that the alleged injuries to the City are too tenuously connected, and so not fairly traceable, to the Defendants’ alleged misconduct in this case,” and that “loss of tax revenue from property taxes and the increase in spending, like the depreciation in home values, could have been caused by any number of factors having nothing to do with the Defendants’ alleged ‘reverse redlining.’” Id.; see also City of Cleveland v. Ameriquest Mortgage Sec., Inc., 621 F. Supp. 2d 513, 533-34 (N.D. Ohio 2009) (finding that “[i]t would be tremendously difficult, if not completely impossible, to determine which of the City’s damages are attributable to Defendants’ alleged misconduct and not to some absent party” in light of the fact that “the borrower may have lost a job . . . suffered a catastrophic injury, borrowed too much on credit cards . . . suffered investment losses that depleted savings . . . or, despite an ability to pay, simply decided to walk away from the mortgage . . . .”).
Understanding the difficulties posed to its case by the limited number of actual foreclosures associated with Wells Fargo properties, the City purports to have identified 640
6

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 11 of 35

foreclosure notices over a ten-year period from 2000 to 2009. What the SAC omits is that there were more than 45,000 foreclosure notices filed in Baltimore during the same period. (Compl. ¶ 17; Ex. 9, BNIA-JFI Compilation of Baltimore City Foreclosure Filings by Quarter, 2007-2009, available at http://www.ubalt.edu/bnia/maps.cfm). Thus, even by the City’s own numbers, Wells Fargo’s 640 foreclosure notices constitute 1.4% of those filed in the City over a ten-year period. Of course, even the 640 number is grossly inflated. The City’s conflation of notices of foreclosure with completed foreclosures defies common sense because of the undeniable fact that many foreclosure notices do not result in foreclosures, and many completed foreclosures do not result in vacancies. Thus, foreclosure notices by themselves provide no basis to establish the necessary fairly traceable connection between Wells Fargo and the City’s purported damages.
The second alteration in the SAC is that the City invents a new geographic “subneighborhood” methodology solely for the purpose of the SAC and claims to have applied an undisclosed “hedonic regression” analysis to “precise[ly]” quantify the property tax revenues lost by the City. (SAC ¶¶ 306, 310, 312).7 The City’s revamped “property tax” theory ultimately continues to fall short of providing the essential links in the causal chain because it asks the Court to accept an analytical framework invented for no other purpose than this litigation, which is based on bald assertions of expert certainty without disclosure of any methodological specifics, and which is demonstrably false inasmuch as it ignores the statutorily-required property tax assessment process. Specifically, the City ignores the property tax assessment process prescribed by law and regulation (and thus subject to judicial notice), which requires

7

Strikingly, as discussed below, two of the five neighborhoods in which the City’s “sub-neighborhoods” are

located do not have majority-minority populations according to the City’s own data, though the City’s “reverse

redlining” claim depends on that designation.

7

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 12 of 35

consideration of specific factors by assessment professionals, none of which relate to concentration of foreclosures within the City’s newly-created “sub-neighborhoods.” The “property tax” theory also focuses solely on the purported effects of foreclosures on the City’s tax revenues, while once again failing to establish a sufficiently-pled basis for the essential traceability from Wells Fargo’s alleged discriminatory conduct to such foreclosures and lost revenues.
In short, the City asks the Court to accept that this case should move forward to costly and burdensome discovery because it has a secret formula that, when applied to an artificial geographic slice of the City’s careful choosing, can purportedly parse and precisely quantify the effects of a single foreclosure event from the effects of the financial crisis, the housing market downturn, poverty, drug abuse, neglect, divorce, illness, job loss, the approximately 30,000 currently vacant properties in Baltimore, neighboring foreclosures (including those resulting from Baltimore’s thousands of tax liens resulting in hundreds of foreclosures), neighboring vacancies (many of which are owned by the City itself), and any other factor. (SAC ¶ 310). Rather than establishing a fairly traceable connection, the City’s property tax claim defines the concept of an implausible causal chain that cannot serve as the basis for standing.
The City’s continuing failure to articulate a plausible link between Wells Fargo’s lending, the enormous number of vacant properties in a city besieged by a host of socioeconomic challenges and the purported damages is wholly unsurprising. Wells Fargo has long been a fair and responsible lender with a small and balanced market share in the City of Baltimore.8 Indeed,

8

Wells Fargo did not offer payment option ARM loans, did not offer stated income subprime loans with

FICO scores less than 620, did not delegate underwriting, and was the first major lender to implement prefunding

fraud screening and income fraud prevention. Indeed, one of the allegations in Securities & Exchange Commission

(cont'd)

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Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 13 of 35
Wells Fargo has been embraced by the City as a partner in urban renewal, participating in numerous City-sponsored lending programs commenced well before 2000, some of which continue to the present. Wells Fargo continues to be a “preferred lender” approved by the State of Maryland’s Community Development Administration for Live Baltimore, a non-profit partner of the City of Baltimore Government and Housing Department, which promotes population growth. (Ex. 10, Live Baltimore Preferred Mortgage Lenders, available at http://www.livebaltimore.com/resources/preferredpartners/mortgagelenders).
As demonstrated at the hearing on Wells Fargo’s Motion to Dismiss the original Complaint, Wells Fargo again will be able to show through loan-by-loan analyses for each property at issue that it engaged in judicious underwriting, but that life circumstances such as illness, job loss, death, divorce, and investments gone awry are the true causes of delinquency. Such analyses will also show that many of these properties were in close proximity to non-Wells Fargo properties either foreclosed upon, vacant, or in disrepair, including many owned by corporations, investors, and the City itself. As a matter of law, however, it is unnecessary for Wells Fargo to bear the burden of making such a specific showing where the City’s own allegations plainly demonstrate that to make the necessary causal connections between the Wells Fargo’s lending practices and the City’s claims of property tax revenue diminution and increased municipal costs, the Court would have to draw a series of wholly speculative inferences
________________________ (cont'd from previous page) v. Goldman Sachs & Co., 10-cv-03229 (S.D.N.Y. filed Apr. 16, 2010), relates to the well-known quality of Wells Fargo loans. In that lawsuit, the SEC alleges that Goldman Sachs made materially misleading statements in connection with a synthetic collateralized debt obligation (“CDO”) tied to the performance of subprime residential mortgage-backed securities, and that the reference portfolio was selected by a hedge fund, Paulson & Co. Inc., with economic interests directly adverse to investors in the CDO. The SEC alleged that an internal e-mail relating to the selection asked, “Did [Paulson] give a reason why they kicked out all the Wells [Fargo] deals?” and the SEC itself noted in explanation that “Wells Fargo was generally perceived as one of the higher-quality subprime loan originators.” Compl. at ¶ 34, Securities & Exchange Commission v. Goldman Sachs & Co., 10-cv-03229 (S.D.N.Y. filed Apr. 16, 2010).
9

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dispositive of the standing question. The Court need not undertake a specific examination of each delinquency, each vacant property, each drug transaction or other criminal offense, each squatter’s discarded trash, and each pest infestation in order to conclude that alleged misconduct by Wells Fargo was not the fairly traceable cause of any alleged injury to the City. Just as it did with the First Amended Complaint, the Court should dismiss the SAC for failure to establish the injury-in-fact and traceability necessary to establish standing. Wells Fargo respectfully requests that the Court dismiss this action with prejudice.9
ARGUMENT I. THE SECOND AMENDED COMPLAINT SHOULD BE DISMISSED FOR LACK
OF SUBJECT MATTER JURISDICTION. To satisfy the standing requirements of the case-or-controversy limitation on
judicial authority under Article III, Section 2 of the Constitution, the party invoking federal court jurisdiction must show that (i) it has suffered injury in fact; (ii) the injury is fairly traceable to the defendant’s actions; and (iii) it is likely, and not merely speculative, that the injury will be redressed by a favorable decision. Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 153-55 (4th Cir. 2000). Under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 1239 S.Ct. 1937 (2009), a plaintiff is required to plead facts permitting a reasonable inference that a defendant is liable for the misconduct alleged, and the court is to draw on judicial experience and common sense in its review. A district court “has

9

Wells Fargo incorporates by reference the other legal arguments made in its Motion to Dismiss the original

Complaint (attached as Ex. 11, with exhibits thereto omitted and available at Docket No. 10). Wells Fargo also

incorporates by reference its background discussion, which addressed the thousands of City tax lien sales, the loss of

more than a quarter of the Baltimore population over the last 50 years, and Baltimore’s crushing burdens of crime,

poverty, joblessness, failing schools, urban decay, high property tax rates, violence, drug addiction, and the

declining economy. (Ex. 11, Memorandum of Law in Support of Defendants’ Motion to Dismiss the Complaint, at

3-8).

10

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considerable latitude in devising the procedures it will follow to ferret out the facts pertinent to jurisdiction.” Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 449 (D.C. Cir. 1990) (internal quotation and citation omitted). “The district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter exists.” Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir. 1993) (internal quotation and citation omitted); see also White Tail Park, Inc. v. Stroube, 413 F.3d 451, 459 (4th Cir. 2005).
As the City did in the First Amended Complaint, it has again, in the SAC, theorized three types of injury: the (1) Property Tax Theory, (2) Crime Theory, and (3) Rehabilitation Theory. The only theory that is substantially altered from the First Amended Complaint is the Property Tax theory. All three theories, however, still fail because they rely on lengthy, speculative, and attenuated causal chains that are legally insufficient to support standing.
The Property Tax Theory. This approach theorizes that: (i) the Wells Fargo loan (and not some other factor such as a weakening economy, illness, divorce, job loss, incarceration, death, or the City’s own tax liens) caused the borrower to default; (ii) the mere notice of foreclosure caused the home to be abandoned, and there was no buyer willing to purchase the subsequently foreclosed-upon home; (iii) this caused potential real estate buyers to become less interested in the surrounding properties (and not any other reason such as a weakening economy, a decline in the shipping and steel industries, a slumping real estate market, or pre-existing high vacancy rates, low rates of owner occupancy, housing code violations, and low property values in the “sub-neighborhoods” identified in the SAC; (iv) this, and not any other factor, such as those cited above, caused a “loss in assessed property value” (SAC ¶ 311); (v) this caused the Maryland State Department of Assessments & Taxation to lower property assessments; (vi)
11

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which led to a “corresponding loss in property tax revenues” collected by the City (Id.), which is “distinguishable from any loss attributable to non-Wells Fargo foreclosures or other causes” through “hedonic regression” analysis. (Id.)
The Crime Theory. This approach theorizes that: (i) the Wells Fargo loan (and not some other factor, including, for example, those identified above) caused the borrower to default; (ii) the mere notice of foreclosure caused the home to be abandoned, and there was no buyer willing to purchase the subsequently foreclosed-upon home; (iii) which led to an increase in the number of vacant homes; (iv) which prompted gangs and criminals to increase their level of illegal activity or to initiate new illegal activity because of 269 additional vacant homes among the City’s 30,000 vacant properties, in a city with one of the highest crime rates in the country (78.25 Part I offenses per 1,000 people in 2008) (Ex. 12, BNIA Citywide Vital Signs, available at http://www.bniajfi.org/vs/indicators/29); (v) which led the City’s fire department to “send personnel and fire trucks . . . to respond to fire hazards and other public health and safety threats” and led the City’s police department to “send personnel and police vehicles . . . to respond to public health and safety threats,” including “crime, squatting, loitering, trash, burst pipes, rat infestation, and other problems” (SAC ¶¶ 99, 100, 297).
The Rehabilitation Theory. This approach theorizes that: (i) the Wells Fargo loan (and not some other factor, including, for example, a weakening economy, illness, divorce, job loss, incarceration, death, or the City’s own tax liens) caused the borrower to default; (ii) the mere notice of foreclosure caused the home to be abandoned, and there was no buyer willing to purchase the subsequently foreclosed-upon home; (iii) which led to an increase in the number of vacant homes; (iv) which led to the risk of the home being damaged by people, animals, or weather; (v) which led to municipal housing code violations, “vermin infestation, burst water
12

Case 1:08-cv-00062-JFM Document 155-1 Filed 05/25/10 Page 17 of 35
pipes, and more” (SAC ¶¶ 98, 101); (vi) which led the City’s housing department and “other City departments” to devote “personnel time” and incur unspecified “out-of-pocket costs” and other “administrative costs.” (SAC ¶¶ 98, 101).
In support of these theories, the City has recycled its inflammatory and inaccurate allegations by disgruntled former employees, Elizabeth Jacobson and Tony Paschal, both of whom have had legal disputes with Wells Fargo in the recent past. (SAC ¶¶ 46-71).10 As well, in an attempt to support its allegations of injury, the City has recycled the declarations included in the First Amended Complaint of neighbors of properties once the subject of a Wells Fargo loan who complain of purported disrepair, loitering, rats, crime, and burst pipes. (SAC ¶¶ 114-18). Among these properties are investor-purchased homes in disrepair long before they were noticed for foreclosure and properties situated on blocks with numerous vacancies (many of which are owned by the City). The home of one of the declarants is immediately adjacent to a City-owned property that was vacant at the time that the declaration was executed and within several houses of two other City-owned properties that have been condemned. The Wells Fargo property at issue is located several houses away from the declarant’s home—yet the City remarkably asserts

10

In her affidavit, Ms. Jacobson admits to violating long-standing Wells Fargo internal policies and

procedures and her own customers’ trust over a period spanning nearly a decade, but Plaintiff nonetheless asserts

that, in the context of this lawsuit, Ms. Jacobson’s statements should be believed. (See SAC Attachment A).

Distancing herself from alleged past misconduct, Ms. Jacobson now has recast herself as a consumer rights

champion, exploiting her new-found status while making the rounds on television and radio programs nationwide.

She has made a variety of statements that contradict her affidavit, significantly undermining the credibility of her

allegations. (See, e.g., Interview by Marc Steiner with Elizabeth Jacobson, Marc Steiner Show, available at

http://www.steinershow.org/radio/the-marc-steiner-show/september-1-2009-hour-1, 40:04-40:11, Sept. 1, 2009).

Her allegations should be considered in the context of her own four Wells Fargo foreclosures actions, as well her

other meritless legal disputes with Wells Fargo. Mr. Paschal’s allegations, the vast majority of which center on

alleged racially-motivated employment discrimination, were squarely rejected by the Fairfax County Human Rights

Commission. Simply put, neither Ms. Jacobson nor Mr. Paschal is a credible witness.

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that all harm to that property comes from the foreclosure initiated by Wells Fargo, not its own vacant properties.11
The neighbors’ declarations only highlight what is missing from the SAC—any plausible allegation that there is, in fact, some fairly traceable connection between any alleged harm and any alleged conduct by Wells Fargo. Indeed, even if there were a constitutionally sufficient connection between a foreclosure and the injuries alleged (and there is not) the homes in which the declarants live are largely situated on blocks with many vacant properties, including a number owned by the City itself. The Jacobson and Paschal allegations and the neighbors’ declarations represent a transparent attempt to distract the Court from the Plaintiff’s obligation to plead facts sufficient under Article III of the Constitution as to causation, and they do not provide any basis to confer standing. The City’s SAC must be dismissed because it fails to assert (i) any injury fairly traceable to Wells Fargo’s alleged conduct; or (ii) an injury-in-fact.
A. The City Fails to Allege an Injury Fairly Traceable to Wells Fargo’s Conduct. Consistent with the governing Supreme Court precedent on the strictures of
“fairly traceable” causation, each court to have adjudicated the theories of causation advanced here has rejected them. See, e.g., City of Baltimore, 677 F. Supp. 2d 847; City of Birmingham, CV-09-BE-467-S, slip op.; City of Cleveland, 621 F.Supp.2d 513. Allen v. Wright, 468 U.S. 737 (1984) is the seminal Supreme Court case addressing traceability. In Allen, parents of African-American public school children sued the Internal Revenue Service, alleging that the agency failed to enforce its policy of denying tax-exempt status to racially discriminatory schools, harming the parents directly and interfering with the ability of their children to receive

11

Even if a vacancy could be attributed to a Wells Fargo loan, the City does not address whether the vacant

properties it owns may have contributed to the persistence of a Wells Fargo vacancy, inasmuch as prospective

homebuyers, under the City’s theory of liability, are not interested in purchasing homes on blocks with vacancies.

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an education in desegregated public schools. Id. at 739-40. The Supreme Court concluded that the parents did not have standing because “[t]he line of causation between that conduct [the granting of tax exempt status] and desegregation of respondents’ schools is attenuated at best.” Id. at 757.
To satisfy this fair traceability element, the plaintiff must demonstrate that it is “likely [that] the plaintiff’s injury was caused by the challenged conduct of the defendant, and not by the independent actions of third parties not before the court.” Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315, 320 (4th Cir. 2002). Accordingly, a party does not have standing to bring an action when “the existence of one or more of the essential elements of standing depends on the unfettered choices made by independent actors not before the courts and whose exercise of broad and legitimate discretion the courts cannot presume either to control or to predict.” Frank Krasner Enters., Ltd. v. Montgomery County, Md., 401 F.3d 230, 235 (4th Cir. 2005) (internal quotations and citations omitted) (emphasis in original).
Consistently applying the Allen analysis, the City of Birmingham court applied it to allegations fundamentally identical to those in the instant case. Birmingham alleged that the defendant financial institutions targeted minority borrowers for subprime loans in violation of the FHA and caused foreclosures on homes in Birmingham. Birmingham alleged that this, in turn, led to decreased property values, decreased tax revenues, increased crime, and increased municipal expenditures. In short, Birmingham advanced the same Property Tax, Crime, and Rehabilitation Theories as the City of Baltimore has here.
Notably, the court in City of Birmingham relied at length on the decision of a court in the Fourth Circuit, Tingley v. Beazer Homes Corp., No. 3:07-CV-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008). The plaintiffs in Tingley were a group of homeowners who
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asserted that the defendant real estate agents targeted low-income consumers for home loans and encouraged them to change or falsify information on loan applications, which qualified them for loans they could not afford, resulted in foreclosures, and ultimately, reduced the value of the plaintiffs’ own homes in the surrounding area. Id. at *4. The court concluded that it would have to make a series of speculative inferences in order to find the necessary causal connection between the alleged diminution in property values and the defendants’ conduct. Id. The court noted that “it is quite speculative that the depreciation in value of the Plaintiffs’ property was caused by the foreclosures of these third party properties rather than as a result of a myriad of other factors, such as rising unemployment in the region, changes in the housing market, or other economic conditions.” Id. The court further determined that the “tenuousness of the connection between the Defendants’ alleged actions and the alleged diminished value in Plaintiffs’ property becomes greater with each additional link in the chain.” Id.
Drawing on this reasoning, and noting that Birmingham’s complaint went even “one step farther than the Tingley case” by seeking recovery of purported lost tax revenue and excess municipal costs (Ex. 7, City of Birmingham, CV-09-BE-467-S, slip op., at 8), the court in City of Birmingham granted the defendants’ motion to dismiss. The court stated that “a series of speculative inferences must be drawn to connect the injuries asserted with the alleged wrongful conduct by the Defendants” in light of the fact that:
the minority borrowers in this case could have defaulted on their mortgages for a number of reasons, none of which related to the Defendants’ alleged “reverse redlining.” Also, the Defendants’ decisions to foreclose on the properties after the borrowers defaulted could be, as in Tingley, for reasons totally apart from the alleged “reverse redlining.” Furthermore, it is quite speculative that the depreciation in value of the neighboring homes in the City was caused by the foreclosures of minority borrowers’ properties rather than as a result of “a myriad of other factors,” which, as the Tingley court noted, could include “rising unemployment in the region, changes in the housing market, or other economic conditions.”
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Id. (citation omitted). The court also found that the “loss of tax revenue from property taxes and the increase in spending, like the depreciation in home values, could have been caused by any number of factors having nothing to do with the Defendants’ alleged ‘reverse redlining.’” Id. Therefore, the court concluded “that the alleged injuries to the City are too tenuously connected, and so not fairly traceable, to the Defendants’ alleged misconduct in this case.” Id.
In another case recently decided, City of Cleveland, Cleveland advanced a nuisance claim under a similar theory of causation. City of Cleveland, 621 F. Supp. 2d at 515-16. Cleveland alleged that subprime lending caused “the epidemic of foreclosures afflicting the City,” and sought a recovery from financial institutions that originated mortgage loans. Id. at 516. The court similarly found that “the borrower may have lost a job . . . suffered a catastrophic injury, borrowed too much on credit cards . . . suffered investment losses that depleted savings . . . or, despite an ability to pay, simply decided to walk away from the mortgage . . . .” Id. at 534. The court also acknowledged “the City’s struggling, Rust-Belt economy, the fading prominence of the manufacturing sector, and Cleveland’s challenges in attracting a meaningful replacement.” Id. at 535 (internal quotations omitted). Thus, “[i]t would be tremendously difficult, if not completely impossible, to determine which of the City’s damages are attributable to Defendants’ alleged misconduct and not to some absent party.” Id. at 533. The court concluded that “[s]orting out these contributing factors in an effort to assign liability would be a speculation-laden, uncertain endeavor . . . .” Id. at 535. The court noted that Cleveland itself had conceded that “the foreclosure crisis was precipitated by the broad decline in the housing market, which itself was the product of a myriad of factors occurring in unknown and unknowable proportions, many of which were completely beyond Defendants’ control.” Id.
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In dismissing the City of Baltimore’s First Amended Complaint, this Court similarly concluded that “the alleged connection [between purported conduct by Wells Fargo and the City’s alleged injuries] is even more implausible when considered against the background of other factors leading to the deterioration of the inner city, such as extensive unemployment, lack of educational opportunity and choice, irresponsible parenting, disrespect for the law, widespread drug use, and violence.” City of Baltimore, 677 F. Supp. 2d at 850.
Nothing in the SAC alters the soundness of this Court’s prior analysis—consistent with the analyses of other courts addressing the same theories—that the City’s Property Tax, Rehabilitation, and Crime Theories fail to set forth plausible causal chains as required by Allen and Frank Krasner Enterprises.
1. The Recycled Crime and Rehabilitation Theories Fail to Articulate Fairly Traceable Causation.
The City has identified 190 vacant properties—in a city with approximately 30,000 vacant properties—that allegedly were once the subject of a Wells Fargo residential mortgage loan, in connection with which it has made unspecified expenditures or provided certain services. (SAC ¶¶ 105-294). Once again, however, the City has failed to explain how, for example, a Wells Fargo loan made in 2002 plausibly caused the City to incur an expense in 2008 when mice showed up in the property or someone sold heroin in the property, which years before had been secured by the loan and then subsequently was sold to a third party. As in City of Birmingham and City of Cleveland, any alleged injury here was caused by a number of intervening factors, including the steep decline in the housing market, homeowners’ personal and financial difficulties, the City of Baltimore’s inveterate social and economic problems, or—even more directly—gangs, criminals, and pests.
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The true driver of any disparity in foreclosure rates between African-American and Caucasian neighborhoods, insofar as the City tries to argue that one exists, has nothing to do with discriminatory lending and everything to do with the unfortunate reality of socioeconomic disparities. The City’s dot map of Wells Fargo foreclosures at paragraph 38 of the SAC underscores the gulf between its allegations and this reality. For example, the dot map at paragraph 38 draws an arrow to the Madison/East End neighborhood, designated as over 80% African-American. Alleged Wells Fargo foreclosures are indicated with fewer than 20 dots. At the end of 2008, 24.4% of the 3,262 residential homes in this neighborhood were vacant. (Ex. 13, BNIA Neighborhood Profile, available at http://www.bniajfi.org/neighborhood_data). Notably, the neighborhood’s unemployment rate is 24.16%, its median household income is $26,372, and its high school dropout rate is 9.34%. (Id.). Thus, the City’s “best case” is that all of the alleged Wells Fargo foreclosures became vacant, and that fewer than 20 of nearly 800 vacancies —only two and a half percent— are somehow attributable to Wells Fargo. Similarly, the City’s dot map points to fewer than 20 foreclosures in Upton/Druid Heights, which is also designated as over 80% African-American. At the end of 2008, 33.93% of the 2,240 residential homes in this neighborhood were vacant. (Ex. 14, BNIA Neighborhood Profile, available at http://www.bniajfi.org/neighborhood_data). Notably, the neighborhood’s unemployment rate is 21.17%, its median household income is $13,051, and its high school dropout rate is 12.77%. (Id.). Thus, the City’s “best case” is that all of the Wells Fargo foreclosures became vacant, and that fewer than 20 of approximately 760 vacancies are somehow attributable to Wells Fargo.
By contrast, the City’s dot map points to the North Baltimore/Guilford/Homeland neighborhood, which is designated as 20% or less African-American and where Wells Fargo is alleged to have only four foreclosures, making the baseless argument that the difference in
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foreclosure rates is attributable to discrimination. At the end of 2008, only one-quarter of one percent of the 5,300 residential homes in this neighborhood were vacant. (Ex. 15, BNIA Neighborhood Profile, available at http://www.bniajfi.org/neighborhood_data). This is a predictable result when considered in the context of key socioeconomic factors. The neighborhood’s unemployment rate is 6.81%, its median household income is $106,172, and its high school dropout rate is 3.25%. (Id.). Put simply, the homeowners in this neighborhood are less likely to face foreclosure because they earn more, have a greater level of education, and are more likely to have steady employment.
The City’s effort to show that Wells Fargo foreclosures in minority neighborhoods are out of proportion to its foreclosures in non-minority neighborhoods falls flat. Neighborhoods where Wells Fargo foreclosures are alleged to be “concentrated” are the same neighborhoods with vacancy rates many times the (already-high) Baltimore City average, with unemployment and dropout rates three and four times the rates in neighborhoods where foreclosures are rare, and median household incomes that are a fraction of those in neighborhoods where foreclosures are rare. It is telling that the City of Baltimore determined that many of these neighborhoods were unstable and deteriorating long before Wells Fargo tried to help resurrect them by extending credit to their residents.12 At issue here are troubled

12

Many of the properties identified in the SAC are located in Baltimore’s Empowerment Zone, which is

comprised of neighborhoods identified as deteriorating and in need of stabilization (and thus worthy of the

investment of federal funds to assist prospective homeowners with acquisition funds). Baltimore’s Urban

Empowerment Zone was one of the first six such areas in the nation, qualifying it for an initial $100 million in

accelerated anti-poverty funding and revitalization efforts through the United States Department of Housing and

Urban Development. (Ex. 16, M.R. Cheshire, Baltimore Fights for “Empowerment Zone” $100 Million Grant,

Baltimore Afro-American, Apr. 9, 1994). It was so designated in 1994 after successful efforts by city leaders to

affirm that the proposed zone met such regulatory criteria as suffering from “pervasive poverty, unemployment, and

general distress.” See Designation of Empowerment Zones and Enterprise Communities, 59 Fed. Reg. 2700 (Jan 18,

1995) (to be codified at 24 C.F.R. pt. 597).

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neighborhoods, not troubled lending practices, and any alleged increased prevalence of Wells Fargo’s foreclosures is simply commensurate with the increased socioeconomic problems therein.
2. The Revamped Property Tax Theory Fails to Articulate Fairly Traceable Causation.
The City continues to propose to isolate the damages caused in connection with allegedly diminished property tax revenue by a single foreclosure from all surrounding foreclosures and any other causal factors through “hedonic regression” analysis. (SAC ¶¶ 310312). In dismissing the First Amended Complaint, the Court indicated that it was not persuaded that the opportunity to perform such analysis could overcome common sense and justify millions of dollars in discovery costs: “a court is a forum in which facts and theory must converge . . . however academically acceptable an expert’s opinion might be, in order to be admissible as evidence, it must bear—from the perspective of judges, not only fellow experts—a coherent relationship to the underlying facts.” City of Baltimore, 677 F. Supp. 2d at 851. As the Fourth Circuit has explained, “[f]ederal jurisdiction cannot lie if the alleged injury is merely ‘an ingenious academic exercise in the conceivable.’” Friends of the Earth, 204 F.3d at 156 (quoting United States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 688 (1973)).
As an initial matter, the City simply has failed to allege any plausible connection between Wells Fargo’s alleged discriminatory conduct and the foreclosures that it claims have diminished its tax base. All of the City’s discussion of “hedonic regression” analysis does not, and cannot, remedy this logical flaw in the SAC.
The City itself defines “predominantly” African-American neighborhoods as those comprised of “60% or greater” African-American population, and its cause of action depends on that definition. (SAC ¶¶ 4, 319, 320). However, two of the five “African-American
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neighborhoods” (SAC ¶ 307) with “sub-neighborhoods” as to which the City claims damages under the Property Tax Theory do not even meet its own definition. Specifically, the City’s own data compilations show that, as of the 2000 census, 56.5% of Northwood’s population is African-American and 40.9% of Waltherson’s population is African-American. (Ex. 17, BNIA Neighborhood Profiles, available at http://www.bniajfi.org/neighborhood_data).
In addition to the problems of speculation and attenuation inherent in the elaborate causal chain devised and the City’s failure to identify any period during which Wells Fargo completed “at least one-third of all foreclosures” in the City’s identified “subneighborhoods” (SAC ¶ 306), the Property Tax Theory also ignores the actual property tax assessment process, which requires consideration of certain factors specifically excluding any concentration of foreclosures. A theory of liability that conflicts with processes prescribed by statute must be rejected. See, e.g., Arthur v. Ticor Title Ins. Co. of Florida, 569 F.3d 154, 159 (4th Cir. 2009) (rejecting plaintiff’s “ingenious” attempt to nullify the plain language of a statute permitting charge for title insurance by splitting subject charge into “valid” and “invalid” components).
In the State of Maryland, the valuation of all real property for purposes of ad valorem taxation is a function of State government under the Maryland State Department of Assessments and Taxation (“SDAT”). Real estate is to be assessed and valued according to TaxProperty Article §8-102, and 103. A property’s market value includes such factors as the quality of construction, the number of bathrooms, and the type of land on which it is situated, and is “the most probable price which a specified interest in real property is likely to bring” under conditions including an open and competitive market and a typically motivated buyer and seller. (Ex. 18, Skolnik Aff., at ¶ 12).
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Property tax assessments are performed on a rotating three year cycle, with the City of Baltimore divided into three districts for property tax assessment purposes. The assessor’s analytical process involves identifying comparable properties in geographic proximity as to which there have been market transactions in the two and two-thirds years immediately preceding the revaluation date. The identified properties are included in the Area Sales Analysis. According to SDAT, the sales in a given area or neighborhood “are reviewed and the sales that are considered to be valid arms-length transactions are included on the area sales analysis report.” (Id., at ¶¶ 19-20). Thus, Maryland assessors are to exclude foreclosure sales from their determination of real property tax assessments. (Id., at ¶¶ 17, 22). Finally, even if “subneighborhoods” were used in the property tax assessment process, the City ignores the fact that approximately 40% of the properties at issue in the SAC have not been assessed and valued since foreclosure, and therefore the City could not have associated diminished property tax revenue collections as a result of foreclosure actions on these properties.13
In other words, the City has completely ignored the actual process of property tax assessment. Instead, it has completely invented a process that focuses solely on foreclosures in artificially compressed geographic areas that fit within its undisclosed, “trust me” “hedonic regression” analysis. The Court should not accept such an “ingenious academic exercise in the conceivable” as a basis for federal court jurisdiction. Friends of the Earth, 204 F.3d at 156 (quoting SCRAP, 412 U.S. at 688).

13

Moreover, in general, foreclosures do generate tax revenue for the City in several ways. First, the City

collects unpaid property taxes (if any) that are brought current by the lender at or before foreclosure. Second, while

the properties are held by the lender, property taxes typically are paid on time by the lender. Third, the lender pays

realty transfer taxes when it acquires a property in foreclosure and pays realty transfer taxes once again on the sales

price when the lender sells the property to a purchaser. Fourth, the Homestead Property Tax Credit (i.e., tax cap) of

the previous owner is rescinded at foreclosure and property taxes going forward are not suppressed by the tax

assessment cap.

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3. While the City’s Causal Chains are Uniformly Implausible, Many Are Also Simply Impossible.
The City of Baltimore has identified only 190 properties, over a ten-year period, in connection with which it allegedly can point to a calendar year in which it expended any resources. An examination of publicly-available information regarding these loans demonstrates that even this miniscule statistic is inflated as Baltimore has included in this population loans that were not originated by Wells Fargo, loans that were foreclosed upon by entities other than Wells Fargo, and a significant number of properties that never completed foreclosure. At best, approximately 130 properties as to which the City specifies damages in the SAC had loans that were originated by Wells Fargo and completed a foreclosure initiated by Wells Fargo. Of these properties, only approximately 112 were located within census tracts that are primarily AfricanAmerican, a claim upon which Plaintiff’s theory of discrimination depends. Approximately 50% of the loans made on these 112 properties were made to borrowers believed to be investors. An analysis of the remaining loans, approximately 60, reveals that, as to the vast majority, life circumstances such as curtailment of income, job loss, illness, divorce, death, and structural problems at the property were the root causes of default.14 In sum, the City’s causal chains fail.
In addition, the timelines for the City’s alleged damages at the identified properties do not align with the alleged Wells Fargo foreclosure in a significant number of cases. Nearly 40% of the loans identified in the SAC have one or more damage allegations that predate the notice of foreclosure. That number may be as high as 65%, but the City has failed to make

14

Available data on these loans indicates that they were far from predatory. Nearly 70% of the loans had a

fixed rate, and it appears that only approximately five of the adjustable rate mortgages had an interest rate increase

prior to foreclosure. With respect to loans for which data was available, the average interest rate was less than 8.5%

at origination and debt-to-income (“DTI”) and loan-to-value ratios (“LTV”) were conservative. The average DTI

was approximately 37% and the average LTV was approximately 85%.

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sufficient allegations about the dates of expenditures to permit such a determination with respect

to loans whose notice of foreclosure occurred in the same year as an identified expenditure.15

For example, the City claims damages in connection with four properties where such claims

predate foreclosures on the loans securing them by more than two years, and claims damages in

connection with two properties where such claims predate even notices of foreclosure on the

loans securing them by more than a year. The City even claims damages in connection with one

property for a year predating Wells Fargo’s origination of the loan at issue.

In its presentation during the June 29, 2009 Hearing on the Motion to Dismiss the

original complaint, Wells Fargo highlighted the attenuated nature of the City’s alleged injury

using a large sample of loans identified by the Court and highlighted, in particular, those

properties identified by the City itself as the most salient examples of the harm allegedly suffered

by the City. (“June 29 Hearing Presentation,” attached as Ex. 19). The City obtained and

presented affidavits and evidence of expenditures with respect to ten foreclosures at issue (the

“City’s 10 Best”). All ten remain in the list of 269 properties as to which the City seeks damages

in the SAC, and the relevant affidavits have been recycled. All ten foreclosures involved

borrower life circumstances and economic difficulties—loss of a job, loss of medical insurance

combined with illness, the tragedy of a murdered son—and not Wells Fargo’s conduct. (Ex. 18,

Williams Aff., at ¶¶ 23-32). Most of the foreclosures are located in blocks with a significant

number of properties owned by the City or corporate entities.

The City’s 10 Best include only one non-investor borrower. (Ex. 18, Williams

Aff., at ¶ 21). Four of the ten were never owned or managed by Wells Fargo post-foreclosure,

15

Prior to the completion of foreclosure proceedings and the expiration of any applicable confirmation period,

title to a foreclosed property is held by the mortgagor. Until title to the property is assumed by Wells Fargo, or

another lienholder for whom Wells Fargo is servicing the mortgage loan, the responsibility for the property’s

maintenance rests with the mortgagor. (Ex. 18, Schares Aff.. at ¶¶ 5, 6).

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having been sold to third parties at foreclosure or reverting to the owner of the loan for disposition. Only three of the remaining six were owned by African-Americans, and all three of these had documented evidence of extensive damage prior to foreclosure, including housing code violations. (Ex. 18, Schares Aff., at ¶¶ 15, 16, 20, 21, 23).
The property located at 3803 Bonner Road provides a particularly poignant example of the insufficiency of the City’s causation allegations. The borrower was an AfricanAmerican investor and co-owner of a real estate investment firm who owned at least seven other properties, including several that went into foreclosure during the same time period. The City’s own records reflect that the property received citations for Housing Code violations prior to the notice of foreclosure, and public court records show that the property ultimately was found to be unfit for human habitation by the District Court of Maryland for Baltimore City long before Wells Fargo initiated foreclosure. (Ex. 18, Schares Aff., at ¶ 21). Accordingly, the assertion that a Wells Fargo notice of foreclosure triggered a vacancy in this property and caused resulting damages to the City is implausible.
Further undermining the City’s claims against Wells Fargo, its suggestion that the Bonner Road property continues to cause damage due to Wells Fargo’s conduct is demonstrably false. (SAC ¶ 298). Through the highly-publicized efforts of Wayland Baptist Church (“WBC”), which has owned the property since early 2008, WBC’s associated community development corporation, and the efforts of other non-profits, the property is being rehabilitated and will house a senior apartment complex to be called Wayland Village Senior Apartments.16 (Ex. 20,

16

Notably, the City’s counsel used the Bonner Road property as an exemplar in a presentation approximately

three weeks after filing the SAC regarding the instant case and a virtually identical lawsuit filed in the Western

District of Tennessee. Although carefully avoiding quantifying its alleged damages in the SAC, the presentation

includes a tally of purported City expenditures on certain properties, including the Bonner Road property. As to this

property, which the City highlights as one of the most egregious of the 269 in the SAC, the City’s alleged

expenditures were a mere $2,600. Even if all expenditures were accepted as accurate, they would call into question

(cont'd)

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Bon Secours of Maryland Foundation, Wayland Baptist Church CDC and Enterprise Homes Break Ground for Wayland Village Senior Apartments in West Baltimore, PR Newswire, May 7, 2010). The Bonner Road property is illustrative of the fact that—writ large—the City’s arguments regarding fairly traceable causation are implausible.
B. The City Fails to Allege an Injury-in-Fact. In addition to failing to demonstrate a fairly traceable connection between alleged
act and injury, the City also has failed to satisfy the injury-in-fact element, which requires a plaintiff to show “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). “This requirement is designed to filter out claims of highly attenuated injuries.” Crutchfield v. United States Army Corps of Eng’rs, 230 F. Supp.2d 687, 694 (E.D. Va. 2002). An injury must be “distinct and palpable” and not “abstract” or “conjectural” or “hypothetical.” Allen, 468 U.S. at 751 (internal quotations and citations omitted).
It is pure speculation to argue that Wells Fargo caused the City to make municipal expenditures that otherwise it would not have made, particularly in light of the enormous number of foreclosures initiated by others, including the more than 19,000 initiated as a result of the City’s own tax lien sales. The City’s claims are further undermined because the State of Maryland precipitated foreclosure actions in connection with government-sponsored programs,
________________________ (cont'd from previous page) the City’s assertions that this is a multi-million dollar case. As well, the municipal efforts identified in the presentation are at variance with those identified in the SAC. (Brad Blower, Cities as a Source of Consumer Protection: Baltimore and Memphis, Address before the Fordham University School of Law (Apr. 26, 2010), attached as Ex. 21).
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including actions on at least seven of the loans it has placed at issue in this case. The City bases its entire claim on the conclusory assertion that “[t]hese services would not have been necessary if the properties were occupied.” (SAC ¶ 97). Indeed, the City’s claim is even more speculative because the gravamen of the SAC is that Baltimore residents received loans they could not afford. (SAC ¶ 3). Even if this were true, and it is not, the City’s essential allegation is that such loans caused the real estate market to have an artificial surplus of buyers, that the market demand for residential real estate in Baltimore was higher than it otherwise should have been, that property tax assessments rose higher than they otherwise should have risen, and that the City received more property tax revenue for a period than it otherwise should have received. As well, there were buyers for residential properties that otherwise should have been vacant—and would have, under the City’s theory of the case, imposed municipal costs relating to fire and police protection, crime, and rehabilitation.
In addition, the SAC includes 79 properties at which the City claims “there are or will soon be housing code violations” and at which “there may be housing code violations . . . in the future.” (SAC ¶¶ 295, 296). However, a “plaintiff alleging a future injury at some indefinite time does not support a finding of an ‘actual or imminent injury.’” Powers, 2010 WL 605727, at *3 (quoting Lujan, 504 U.S. at 564). As this Court has noted, to have standing, plaintiffs “must allege that they have been harmed in fact, not that they ‘can imagine circumstances in which [they] could be affected.’” Doe v. Blue Cross Blue Shield of Md, Inc., 173 F. Supp. 2d 398, 403 (D. Md. 2001) (quoting SCRAP, 412 U.S. at 688).
It is clear under relevant case law that the injuries claimed with respect to these 79 properties fall especially short of the “discrete and palpable” standard. In Robinson, 2008 WL 2484936, this Court dismissed a claim for lack of standing that was contingent on events that a
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plaintiff, like the City in this case, said were certain to occur. In that case, a developer pledged to donate land to a non-profit organization so that it could be used to construct low- and moderate-income housing. County officials denied a request for upgraded water and sewer services necessary to the development, and the intended builder filed suit. The Court said that, in order for the builder to show an injury-in-fact, both (i) the developer must go forward with the donated land, and (ii) the non-profit must actually contract with the builder. Because neither event was “guaranteed to occur,” the Court held that the builder did not have standing. Id. at *6.
Similarly, in Stasko, 282 F.3d 315, local residents and an association sued the United States Fish and Wildlife Service to enjoin a proposed land transaction, which they asserted would preclude construction of a planned roadway (Ferrell Parkway) and would deprive them of attendant benefits such as an emergency route and dispersed traffic flow. The Fourth Circuit found that the effects posited were “wholly speculative,” and that the plaintiffs would not suffer any injury by the transaction complained of itself. Id. at 321. Further, the court noted that it “is pure conjecture to believe that, absent the [transaction] . . . Ferrell Parkway would be built anytime in the near future.” Id. at 322. See also Crutchfield, 230 F.Supp.2d at 696 (finding that landowners who filed suit against the Army Corps of Engineers to invalidate anticipated Clean Water Act permit had no standing in light of the fact that the “asserted threatened injury is remote, not imminent, and its occurrence is predicated on [] surmise”).
Here, the City’s injuries (and prospective threatened injuries) depend not only on the speculative occurrence of acts by criminals, vagrants, or vermin far beyond Wells Fargo’s control, it also rises or falls on the bald assertion that, but for a Wells Fargo loan, the subject properties would be both occupied and free of code violations requiring municipal expenditures. (SAC ¶ 97). As such, the City has failed to demonstrate both the necessary fairly traceable
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connection between alleged act and injury and an injury-in-fact sufficiently concrete and palpable to confer standing in federal court.
CONCLUSION For the reasons set forth above, in the Memorandum of Law in Support of Defendants’ Motion to Dismiss the Complaint, and in Wells Fargo’s June 29 Hearing Presentation, the Court should dismiss the SAC.
Respectfully submitted,
/s/ Andrew L. Sandler Andrew L. Sandler (MD Fed. Bar No. 22950) Benjamin B. Klubes (MD Fed. Bar No. 08085) Jonice Gray Tucker (MD Fed. Bar No. 26484) Valerie L. Hletko (pro hac vice) BUCKLEYSANDLER LLP 1250 24th Street, N.W., Suite 700 Washington, D.C. 20037 (202) 349-8000 (Telephone) (202) 349-8080 (Facsimile) asandler@buckleysandler.com bklubes@buckleysandler.com jtucker@buckleysandler.com vhletko@buckleysandler.com Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.
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CERTIFICATE OF SERVICE

I certify that the foregoing document, filed through the Electronic Case Filing (ECF) system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF) and paper copies will be sent by first class mail to those indicated as non-registered participants as of May 25, 2010.

Dated: May 25, 2010

/s/ Andrew L. Sandler Andrew L. Sandler

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 Case 1:08-cv-00062-JFM Document 181-1 Filed 12/03/10 Page 1 of 18

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION

MAYOR AND CITY COUNCIL OF

)

BALTIMORE,

)

)

Plaintiff,

)

)

-v.-

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL LEASING, )

INC.

)

)

Defendants.

)

Civil Action No. 1:08-CV-00062-JFM

MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS THE THIRD AMENDED COMPLAINT

Andrew L. Sandler Benjamin B. Klubes Jonice Gray Tucker Valerie L. Hletko BUCKLEYSANDLER LLP 1250 24th Street, N.W., Suite 700 Washington, D.C. 20037 (202) 349-8000 (Telephone) (202) 349-8080 (Facsimile)
Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.

Case 1:08-cv-00062-JFM Document 181-1 Filed 12/03/10 Page 2 of 18
TABLE OF AUTHORTIES
CASES Allen v. Wright, 468 U.S. 737 (1984)................................................................................. 9, 11, 12 Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009)............................................................................... 6, 7, 8 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .......................................................... 6, 7, 8 City of Baltimore v. Wells Fargo Bank, 677 F. Supp. 2d 847 (D. Md. 2010)............................ 8, 9 City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S,
2009 U.S. Dist. LEXIS 123123 (N.D. Ala. Aug. 19, 2009) ........................................... 9, 10, 12 City of Cleveland v. Ameriquest Mortgage Sec.., Inc., 615 F.3d 496 (6th Cir. 2010)........... 10, 11 City of Cleveland v. Ameriquest Mortgage Sec., Inc.,
621 F. Supp. 2d 513 (N.D. Ohio 2009)................................................................................. 9, 10 Crutchfield v. U.S. Army Corps of Eng’rs, 230 F. Supp. 2d 687 (E.D. Va. 2002) ...................... 12 Doe v. Blue Cross Blue Shield of Md, Inc., 173 F. Supp. 2d 398 (D. Md. 2001).......................... 3 Francis v. Giacomelli, 588 F.3d 186 (4th Cir. 2009)...................................................................... 8 Frank Krasner Enters., Ltd. v. Montgomery Cnty, Md., 401 F.3d 230 (4th Cir. 2005) ........... 9, 11 Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315 (4th Cir. 2002) ................................... 9 Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149 (4th Cir. 2000) ........ 7 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) .............................................................. 3, 12 McBurney v. Cuccinelli, 616 F.3d 393 (4th Cir. 2010).................................................................. 7 Powers v. U.S. Home Corp., No. WMN-09-2167, 2010 WL 605727, at *3
(D. Md. Feb. 18, 2010) ............................................................................................................... 3 Tingley v. Beazer Homes Corp., No. 3:07-CV-176, 2008 WL 1902108
(W.D.N.C. Apr. 25, 2008) ........................................................................................................ 10 United States v. Nara Bank, No. CV-09-07124, 2010 WL 2766992
(C.D. Cal. May 28, 2010) ........................................................................................................... 8 United States v. Students Challenging Regulatory Agency Procedures (SCRAP),
412 U.S. 669 (1973).................................................................................................................... 3
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Case 1:08-cv-00062-JFM Document 181-1 Filed 12/03/10 Page 3 of 18 Statutes Fair Housing Act, 42 U.S.C. § 3601 ............................................................................................... 6 Other Authorities Melody Simmons, Mayor Rawlings-Blake Unveils Aggressive Push to Reduce Vacant
Properties, The Daily Record (Balt.) (Nov. 3, 2010) http://mddailyrecord.com/2010/11/03/mayor-unveils-agressive-push-to-reduce-vacantproperties-in-city/........................................................................................................................ 4 Rules U.S. Const. art. III, § 2 ................................................................................................................... 7 Fed. R. Civ. P. 12(b)(1)............................................................................................................... 1, 8 Fed. R. Civ. P. 12(b)(6)........................................................................................................... 1, 7, 8
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Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (collectively “Wells Fargo”) respectfully submit this Memorandum of Law in Support of their Motion to Dismiss the Third Amended Complaint for Declaratory and Injunctive Relief and Damages filed by the Mayor and City Council of Baltimore (“the City”) pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The City once again—and for the third time— has failed to follow the Court’s direction to identify and demonstrate a fairly traceable causal connection between specific injuries claimed by the City and alleged conduct by Wells Fargo. The City has identified the same 190 properties purportedly used as collateral to secure a Wells Fargo loan and alleged to have been vacant at some point during the last decade. It presents no specific borrowers as to whom it alleges a causal connection between Wells Fargo’s lending practices, the alleged vacancies at those properties, and the routine municipal expenditures and diminution in property tax revenues that the City claims as damages.
PRELIMINARY STATEMENT In dismissing the City’s complaint for the second time, this Court held that standing doctrine requires the City to establish “that there was a causal connection between the injuries it claims and Wells Fargo’s conduct of which it complains” and, more specifically, that the sites of alleged injury are “properties that would not have been vacant but for improper loans made by Wells Fargo.” (Memo to Counsel (ECF No. 174) at 1, 2 (“Dismissal Order”)). In other words, the City must make allegations sufficient to establish that wrongful conduct on the part of Wells Fargo is the traceable cause of a vacancy and that this vacancy resulted in propertyspecific injury to the City. As this Court articulated during the hearing on Wells Fargo’s Motion to Dismiss the Second Amended Complaint, “causation of vacancy requires that [a Wells Fargo loan] is what caused the vacancy.” (Mot. Hr’g Tr. 6:18-19, Sept. 8, 2010). Indeed, the Court
1

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stated and the City agreed that the City was required to “make credible allegations that the properties would not have been vacant but for the bad loan.” (Mot. Hr’g Tr. 30:16-19, Sept. 8, 2010).
In permitting leave to file a Third Amended Complaint (“TAC”), the Court directed the City to allege (if it could, consistent with Rule 11) that the properties relied upon were (1) occupied before the sale facilitated by the Wells Fargo loans, and (2) would have remained occupied during the period for which the City claims damages. (Dismissal Order at 12). The latitude afforded to the City was consistent with its request “for leave for a period of time for us to be able to amend the complaint to add the borrowers, to add individual borrowers to that.” (Mot. Hr’g Tr. 66:8-10, Sept. 8, 2010). The City has failed to follow the Court’s direction and to abide by its own indication that it would provide detail relating to individual borrowers. Instead, the City responded to the Dismissal Order by refiling its the Second Amended Complaint with 14 additional paragraphs largely focused on alleged improper “practices” committed by “lenders” generally in the past decade. (See TAC ¶¶ 96-109). There is no mention of Wells Fargo in 11 of the new paragraphs, and the three paragraphs that do reference Wells Fargo fail to identify a single borrower, loan, or property that satisfies the Court’s pleading requirement for standing.
Specifically, the City has failed to make a specific allegation that any one of the 190 properties identified in the TAC would be occupied but for Wells Fargo subprime loans to knowingly unqualified African-American borrowers, or to African-American borrowers steered into subprime loans whose credit ratings qualified them for less expensive products. (See TAC
2

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¶¶ 119-308).1 While the City seeks to parrot the words it believes to be required by the Court’s Dismissal Order, it has failed to connect any purported property-specific damages to any alleged conduct by Wells Fargo. Although the City was directed to make specific allegations sufficient to address the threshold issue of causation if it chose to file another complaint, the City’s TAC again fails to identify a single borrower who got an improper loan from Wells Fargo or a single property address where a vacancy purportedly was caused by a Wells Fargo loan.
As this Court previously indicated, the City has “a tough time [making a causal connection], without [the City] coming in with . . . evidence of a single borrower.” (Mot. Hr’g Tr. 25:24-25, Sept. 8, 2010). The City “can’t come in and say this is what we think and get discovery. That’s not the way the legal process works.” (Id. at 28:2-4). Moreover, even if the TAC had connected its generalized allegations to specific loans that triggered vacancies at identifiable property addresses—which it did not—it has failed to demonstrate that any borrower default and/or property vacancy was caused by an improper Wells Fargo loan, rather than from the complex weave of social and economic factors the City itself has acknowledged to be responsible for the overall sky-high vacancy rate in Baltimore. These factors include job loss, illness, death, divorce, or ill-conceived speculative home purchases.
Finally, the City also has failed to establish that it incurred costs directly attributable to a vacant property that was unoccupied because the property owner had an

1

The TAC includes 79 properties at which the City claims “there are or will soon be housing code

violations” and at which “there may be housing code violations . . . in the future.” (TAC ¶¶ 309-310). However, a

“plaintiff alleging a future injury at some indefinite time does not support a finding of an ‘actual or imminent

injury.’” Powers v. U.S. Home Corp., No. WMN-09-2167, 2010 WL 605727, at *3 (D. Md. Feb. 18, 2010) (quoting

Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 (1992)). As this Court has noted, to have standing, plaintiffs

“must allege that they have been harmed in fact, not that they ‘can imagine circumstances in which [they] could be

affected.’” Doe v. Blue Cross Blue Shield of Md, Inc., 173 F. Supp. 2d 398, 403 (D. Md. 2001) (quoting United

States v. Students Challenging Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 688 (1973)). It is clear

under relevant case law that the injuries claimed with respect to these 79 properties fall especially short of the

“discrete and palpable” standard.

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improper Wells Fargo loan.2 The problems the City complains of in the instant lawsuit predate the origination of virtually every loan identified in the TAC as this Court has noted. (See, e.g., Mot. Hr’g Tr. 14:23-15:4, Dec. 14, 2009 (“it’s simply implausible to say that because Wells caused [a property] to be vacant, a police call was made to that house. That is not plausible when one knows what the inner city is like, and knows that if the squatters hadn’t been there, they would have been next door, where there are plenty of vacant buildings.”))
The City repeatedly has acknowledged as much. Just a few weeks ago, the City’s housing commissioner observed that the City’s vacancy problem and its attendant ills are attributable to a variety of causal factors over the past 50 years, including the mass exportation of jobs and the “suburbanizing” of America. (Ex. 1, Melody Simmons, Mayor Rawlings-Blake Unveils Aggressive Push to Reduce Vacant Properties, The Daily Record (Balt.) (Nov. 3, 2010), http://mddailyrecord.com/2010/11/03/mayor-unveils-agressive-push-to-reduce-vacantproperties-in-city/.) Mayor Rawlings-Blake, a plaintiff in this action, recently described Baltimore’s vacancy epidemic as “a problem of too much supply and not enough demand.” (Id.) The Court identified this precise issue in its September 14, 2010 Order dismissing the City’s Second Amended Complaint, noting that the City’s damages claims “are premised upon the fact that the properties foreclosed upon by Wells Fargo would not have been vacant during the period for which the City claims damages but for the improper loans made by Wells Fargo” and

2

For the sake of efficiency, Wells Fargo addresses herein only the limited number of paragraphs novel to the

TAC. Wells Fargo incorporates by reference the legal arguments (none of which are diminished by the TAC) made

in its Motion to Dismiss the Second Amended Complaint (attached as Ex. 2, with exhibits thereto omitted and

available at ECF No. 155). Wells Fargo additionally incorporates by reference its discussion of the real drivers of

increased foreclosure rates in Baltimore, including the thousands of tax lien sales, the loss of more than a quarter of

the Baltimore population over the last 50 years, and Baltimore’s crushing burdens of crime, poverty, joblessness,

failing schools, urban decay, high property tax rates, violence, drug addiction, and the declining economy.

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ultimately concluding that the City failed to allege facts necessary to make this showing. (Dismissal Order at 1).
The City now seeks a fourth bite at this apple with a TAC that fails to cure the persistent and fundamental causal deficiency that resulted in the dismissal of this case twice before. The City seeks to expand the law of standing to give every neighbor with a pest infestation and every crime victim within a few blocks of a house in foreclosure access to financial institutions in federal court. Therefore, the TAC should be dismissed with prejudice.
ARGUMENT The Dismissal Order directed the City to supply a critical nexus. (See Dismissal Order at 2 (“If the City can make such allegations [sufficient to confer standing] consistent with Fed. R. Civ. P. 11 in the third amended complaint, it should do so”)). Notwithstanding, the 14 new paragraphs in the TAC articulate only allegations against lenders in general without any reference to particular properties, Wells Fargo loans, or borrowers, and thus they fall far short of showing causation or satisfying basic standards of pleading. The only references to Wells Fargo in the TAC are ambiguous and conclusory assertions that “Wells Fargo’s discriminatory lending practices,” including “steering borrowers into loans that are more onerous than loans for which they qualify and giving loans to people who do not qualify for them cause foreclosures and vacancies that injure the City.” (TAC ¶ 96). Other assertions mention Wells Fargo as an example of industry-wide wrongful practices and appear to charge Wells Fargo with only some unidentified fraction of the claims advanced: “Wells Fargo has engaged in at least some of the practices identified in paragraphs 98-104 above at properties located in Baltimore’s African-American neighborhoods.” (TAC ¶ 108 (emphasis added)). It is not even clear which practices Wells Fargo is accused of engaging in, much less
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that these allegations are sufficient to establish that Well Fargo’s purported conduct violated the Fair Housing Act, 42 U.S.C. § 3601 et seq.
The TAC’s 14 new paragraphs also fail to satisfy the Court’s requirement that subject properties “would not have been vacant but for improper loans made by Wells Fargo.” Dismissal Order at 2. As the Court previously observed, the City had an obligation “to interview a borrower who said, but for the terms of the loan I would have paid the loan and that’s what caused the vacancy.” (Mot. Hr’g Tr. 37:2-4, Sept. 8, 2010). The TAC refers to a phantom “property” where “this type of loan was made” that “was occupied prior to the time Wells Fargo made the loan and the Wells Fargo loan caused the property to become vacant.” (TAC ¶¶ 108109). The TAC refers to phantom “borrowers” who “could have avoided foreclosure if Wells Fargo had not made the loan to them.” (Id. at ¶ 109). However, the absence of any specificity in these allegations shows that the City could not make such claims with respect to even one actual property address or borrower, leaving a persistent “gap” between allegations of wrongdoing and allegations of damages. (Mot. Hr’g Tr. 38:1, Sept. 8, 2010). Instead, the City is speculating that some properties among the 190 identified in the TAC could have been occupied prior to the homeowner securing a Wells Fargo loan, and speculating that such loans may have been infected by wrongful lending practices. This pair of guesses does not satisfy either the Dismissal Order or the pleading requirements set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and their progeny.
Instead of making the specific causation allegations necessary to withstand a Motion to Dismiss under Iqbal and Twombly, the City seeks to do an end-run around these wellsettled pleading precedents by convincing this Court to permit discovery. Despite the Court’s reiteration of the pleading burden, the City has made no progress since acknowledging hopes for
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an evidentiary fishing expedition last year: “our ability to [allege fairly traceable causation] hinges . . . on things that we find out in discovery, the ability to know facts, to know what’s in the files, understand so that we can make—have our experts make what we believe are credible, supportable statements that this is how we are screening out those costs [attributable to Wells Fargo].” (Mot. Hr’g Tr. 72:20-25, Dec. 14, 2009). The Court should reject the City’s invitation to allow expensive discovery that somehow will inject substance into a complaint without legal merit. I. THE THIRD AMENDED COMPLAINT SHOULD BE DISMISSED FOR LACK
OF SUBJECT MATTER JURISDICTION. To satisfy the standing requirements of the case-or-controversy limitation on
judicial authority under Article III, Section 2 of the Constitution, the party invoking federal court jurisdiction must show that (i) it has suffered injury in fact; (ii) the injury is fairly traceable to the defendant’s actions; and (iii) it is likely, and not merely speculative, that the injury will be redressed by a favorable decision. Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 153-55 (4th Cir. 2000). “The standing doctrine, of course, depends not upon the merits, but on whether the plaintiff is the proper party to bring the suit.” McBurney v. Cuccinelli, 616 F.3d 393, 402 (4th Cir. 2010) (internal quotation omitted). To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 570). Under Twombly and Iqbal, a plaintiff is required to plead facts permitting a reasonable inference that a defendant is liable for the misconduct alleged, and the court is to draw on judicial experience and common sense in its review.
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A “sheer possibility that a defendant acted unlawfully” is not enough to

demonstrate either standing to proceed under Federal Rule of Civil Procedure 12(b)(1) or a

plausible claim under Federal Rule of Civil Procedure 12(b)(6). Iqbal, 129 S. Ct. at 1949.

Rather, the standard “requires the plaintiff to articulate facts” showing “the ‘plausibility of

entitlement to relief.’” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal,

129 S. Ct. at 1949, Twombly, 550 U.S. at 557). Here, the Court directed the City to overcome

the difference in its pleading between “possibility” and “plausibility” and it could not. A pair of

guesses that properties maybe would have been occupied but for Wells Fargo loans and that such loans were discriminatory will not suffice.3 This is especially so when the plaintiff itself has

offered a litany of alternative explanations for the vacancies at issue. (See, e.g., Ex. 1).

A.

The City Fails to Allege an Injury Fairly Traceable to Wells Fargo’s

Conduct.__________________________________________________

Consistent with the governing Supreme Court precedent on the strictures of

“fairly traceable” causation, each court to have adjudicated the theories of causation advanced

here has rejected them. See, e.g., City of Baltimore v. Wells Fargo Bank, 677 F. Supp. 2d 847

3

A recent decision in the Central District of California underscores the point that the Court need not accept

the City’s inference of discrimination at this stage of the litigation. In United States v. Nara Bank, No. CV-09-

07124, 2010 WL 2766992 (C.D. Cal. May 28, 2010), the government presented statistical evidence of

discrimination in pricing on the basis of race or national origin in auto loan financing. In dismissing the case, the

court found that the statistics were incomplete and that loan rates not included in the government’s analysis may

have undermined it. Therefore, the statistics did “not say much at all.” Nara Bank, 2010 WL 2766992, at *3. The

court so concluded even in light of the fact that the statistics were tied to particular borrowers at issue. Here, the

City’s pleading falls short even of the complaint in Nara Bank. It has failed to provide anything more than

conclusory statistical and generalized allegations relating to alleged discriminatory practices and then, separately,

the existence of certain vacant properties. (TAC ¶ 37). In other words, the statistics are empty, unsupported

assertions and, worse, bear no relationship to the properties that form the basis of the TAC.

In addition, the government in Nara Bank utilized the racial classifications “Asians” and “non-Asians” in

its disparate impact analysis, which the court viewed to be “vague at best and meaningless at worst.” Id. at *2.

Here, the City has used “African-American neighborhoods” as a proxy for African-Americans in an effort to state a

Fair Housing Act claim. (See, e.g., TAC ¶ 37). The use of geography as a proxy for race is likewise imprecise at

best and meaningless at worst. The crude assumption that subject loans were originated by African-American

borrowers simply because they were secured by properties in neighborhoods populated by a certain percentage of

African-American residents is a paltry foundation for a Fair Housing Act claim.

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(D. Md. 2010); Dismissal Order; City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S, 2009 U.S. Dist. LEXIS 123123 (N.D. Ala. Aug. 19, 2009); City of Cleveland v. Ameriquest Mortgage Sec., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009). To establish the “line of causation between that conduct” and damages articulated by the Supreme Court in Allen v. Wright, 468 U.S. 737, 757 (1984), the City must demonstrate that it is “likely [that] the plaintiff’s injury was caused by the challenged conduct of the defendant, and not by the independent actions of third parties not before the court.” Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315, 320 (4th Cir. 2002). Accordingly, the City does not have standing to bring the instant action if “the existence of one or more of the essential elements of standing depends on the unfettered choices made by independent actors not before the courts and whose exercise of broad and legitimate discretion the courts cannot presume either to control or to predict.” Frank Krasner Enters., Ltd. v. Montgomery Cnty, Md., 401 F.3d 230, 235 (4th Cir. 2005) (internal quotations and citations omitted) (emphasis in original).
The court in City of Birmingham stated that “a series of speculative inferences must be drawn to connect the injuries asserted with the alleged wrongful conduct by the Defendants” in light of the fact that “the minority borrowers in this case could have defaulted on their mortgages for a number of reasons, none of which related to the Defendants’ alleged ‘reverse redlining.’” (City of Birmingham, 2009 U.S. Dist. LEXIS at *12). The court also found that the “loss of tax revenue from property taxes and the increase in spending, like the depreciation in home values, could have been caused by any number of factors having nothing to do with the Defendants’ alleged ‘reverse redlining.’” Id. at *13. Therefore, the court concluded on the basis of basic standing principles—and not for lack of a record of particularized damages by address that might have led to a different outcome—“that the alleged injuries to the City are
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too tenuously connected, and so not fairly traceable, to the Defendants’ alleged misconduct in
this case.” Id.
Upon reviewing allegations of a similar causal chain relating to uncreditworthy
borrowers, the court in Tingley v. Beazer Homes Corp., No. 3:07-CV-176, 2008 WL 1902108, at
*5 (W.D.N.C. Apr. 25, 2008), found that:
it does not necessarily follow from this allegation that these third party home buyers subsequently defaulted on their mortgages due to the Defendants’ conduct rather than those buyers having failed to make their mortgage payments as a result of other factors, such as unemployment, health problems, a general weakening in the economy, or other financial conditions . . . To the extent that any diminished values resulted from the foreclosures, however, the connection remains too tenuous to provide standing.
Id. at *4. Also reviewing allegations relating to the causal nature of default, the court in City of
Cleveland, found that “the borrower may have lost a job . . . suffered a catastrophic injury,
borrowed too much on credit cards . . . suffered investment losses that depleted savings . . . or,
despite an ability to pay, simply decided to walk away from the mortgage . . . .” and that
“[s]orting out these contributing factors in an effort to assign liability would be a speculation-
laden, uncertain endeavor . . . .” City of Cleveland, 621 F. Supp. 2d at 534-35.
In affirming the district court’s decision, the Sixth Circuit recently held in City of
Cleveland v. Ameriquest Mortgage Sec., Inc., 615 F.3d 496, 506 (6th Cir. 2010), that it was
“impossible for Cleveland to plead proximate cause.” The court explained:
The alleged damages [to the City] that subsequently occurred [after foreclosure]—eyesores, fires, drug deals, and looting—were also not directly caused by the Defendants. Homeowners, whether the initial buyers or mortgagees that later took possession of a home, were responsible for maintaining their properties. Fires were likely started by negligent or malicious individuals or occurred because a home was poorly built. Drug dealers and looters made independent decisions to engage in that criminal conduct. Additionally, other companies not listed in the
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complaint financed sub prime loans and properties not subject to a sub prime loan nevertheless entered into foreclosure. Similar to Holmes and Anza, Cleveland had not stated a viable claim when these actions could have occurred for ‘any number of reasons unconnected to the asserted pattern of [misconduct].’ Id. at 505. Holdings from these opinions are applicable verbatim to the TAC. It does not follow from the City’s allegation of discriminatory lending practices that third-party home buyers in Baltimore defaulted on their mortgages because of alleged misconduct by Wells Fargo rather than as a result of other factors. The City has identified no borrower with a “bad” loan causing a foreclosure. Likewise, the City has identified no property with a Wells Fargo foreclosure causing a vacancy not otherwise attributable to the City’s endemic vacancy problems in the nearly three years since it filed the first predecessor complaint to the TAC—despite the Court’s clear direction that such a showing was a prerequisite to pursuing the action. (See, e.g., Mot. Hr’g Tr. 37:2-4, Sept. 8, 2010). Moreover, it does not follow from default that a property will, for example, become infested by vermin or that a gang will use it to conduct illegal activity. Because other factors inexorably interrupt the causal chain that the City must establish to have standing, the City has not pleaded proximate cause in this case. Indeed, nothing in the TAC alters the soundness of this Court’s prior analysis—consistent with the analyses of other courts addressing the same theories—that the City’s theories of liability fail to set forth plausible causal chains as required by Allen and Frank Krasner Enterprises. Wells Fargo already has demonstrated that it can show through loan-by-loan analyses that life circumstances such as illness, job loss, death, divorce, and investments gone awry are the true causes of delinquency. However, as a matter of law, it is unnecessary for Wells
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Fargo to bear the burden of making such a specific showing. As illustrated by the City of Birmingham case, this is abundantly clear where, as here, the City’s own allegations plainly demonstrate that to make the necessary causal connections between Wells Fargo’s lending practices and the City’s claims of property tax revenue diminution and increased municipal costs, the Court would have to draw a series of wholly speculative inferences dispositive of the standing question. Even if the City had been able to provide the Court with a single borrower as to whom it claims any basis to make such inferences—and it could not—the Court need not undertake a specific examination of each default, each vacant property, each drug transaction or other criminal offense, each squatter’s discarded trash, and each pest infestation to conclude that it is not possible to establish that alleged misconduct by Wells Fargo was the fairly traceable cause of any alleged injury to the City.
B. The City Fails to Allege an Injury-in-Fact. In addition to failing to demonstrate a fairly traceable connection between alleged
act and injury, the City also has failed to satisfy the injury-in-fact element, which requires a plaintiff to show “an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560. “This requirement is designed to filter out claims of highly attenuated injuries.” Crutchfield v. U.S. Army Corps of Eng’rs, 230 F. Supp. 2d 687, 694 (E.D. Va. 2002). An injury must be “distinct and palpable” and not “abstract” or “conjectural” or “hypothetical.” Allen, 468 U.S. at 751 (internal quotations and citations omitted).
The 14 additional paragraphs in the TAC purport to address whether lending practices may lead to vacancy. Since vacancy itself results in no cost to the City, the City attempts to connect purported damages inflicted by unrelated third parties to Wells Fargo in one
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sentence of its 112-page TAC with the bald assertion that “[t]hese services would not have been necessary if the properties were occupied” (TAC ¶ 111) and that they were made vacant by Wells Fargo’s lending activities. These assertions ignore the fact that the City has not offered any plausible reason to conclude either that the properties would have been occupied absent the Wells Fargo loan or that the City has suffered any “distinct and palpable” injury due to these vacancies. The 14 paragraphs added to the TAC do nothing to address it. More importantly, the City does not point to a single borrower, whose default resulted in a vacancy at a specific property address, alleged to have received a subprime loan instead of a prime loan or a loan without appropriate credit qualifications at all. Indeed, recent statements by the City’s Mayor and Housing Commissioner contradict any inference that Wells Fargo’s conduct triggered vacancies, as these City officials rightly cite broad social and economic factors as the cause of Baltimore’s vacancy problems. (See Ex. 1). Put simply, the TAC offers no basis for concluding that vacancies at the 190 properties cited by the City were triggered by any factor other than the decades-old problems acknowledged by the plaintiff itself.
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CONCLUSION For the reasons set forth above and in the Memorandum of Law in Support of Defendants’ Motion to Dismiss the Second Amended Complaint, the Court should dismiss the Third Amended Complaint with prejudice.

Respectfully submitted,

Dated: December 3, 2010

/s/ Andrew L. Sandler Andrew L. Sandler (MD Fed. Bar No. 22950) Benjamin B. Klubes (MD Fed. Bar No. 08085) Jonice Gray Tucker (MD Fed. Bar No. 26484) Valerie L. Hletko (Admitted Pro Hac Vice) BUCKLEYSANDLER LLP 1250 24th Street, N.W., Suite 700 Washington, D.C. 20037 (202) 349-8000 (Telephone) (202) 349-8080 (Facsimile) asandler@buckleysandler.com bklubes@buckleysandler.com jtucker@buckleysandler.com vhletko@buckleysandler.com
Attorneys for Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.

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CERTIFICATE OF SERVICE

I certify that the foregoing document, filed through the ECF system will be sent electronically to the registered participants as identified on the Notice of Electronic Filing (NEF) and paper copies will be sent by First Class Mail to those indicated as non-registered participants as of December 3, 2010.

Dated: December 3, 2010

/s/ Andrew L. Sandler Andrew L. Sandler

15

 
 Case 1:08-cv-00062-JFM Document 14 Filed 05/20/08 Page 1 of 82

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION

____________________________________

)

MAYOR AND CITY COUNCIL

)

OF BALTIMORE,

)

)

Plaintiff,

)

)

v.

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL

)

LEASING, INC.,

)

)

Defendants.

)

____________________________________)

No. 1:08-cv-00062-BEL

PLAINTIFF MAYOR AND CITY COUNCIL OF BALTIMORE’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION
TO DEFENDANTS’ MOTION TO DISMISS THE COMPLAINT

John P. Relman, MD Fed. Bar No. 11482 Bradley H. Blower, MD Fed. Bar No. 07641 Glenn Schlactus, pending admission pro hac vice RELMAN & DANE, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com bblower@relmanlaw.com gschlactus@relmanlaw.com Special Assistant City Solicitors

George Nilson, City Solicitor, MD Fed. Bar No. 01123
Suzanne Sangree, Chief Solicitor, MD Fed. Bar No. 26130
City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov

Attorneys for Plaintiff

Case 1:08-cv-00062-JFM Document 14 Filed 05/20/08 Page 2 of 82
TABLE OF CONTENTS TABLE OF AUTHORITIES ......................................................................................................... iv INTRODUCTION ...........................................................................................................................1 STANDARD OF REVIEW .............................................................................................................7
I. RULE 12(b)(1) ........................................................................................................7 II. RULE 12(b)(6) ........................................................................................................8 THE FACTS UPON WHICH THE MOTION TO DISMISS MUST BE DECIDED ....................9 I. THE ALLEGATIONS OF THE COMPLAINT......................................................9 II. DEFENDANTS’ ASSERTIONS ABOUT TAX LIENS
ARE IRRELEVANT AND MISLEADING..........................................................12 ARGUMENT .................................................................................................................................16
I. THE COMPLAINT SATISFIES THE CONSTITUTIONAL INJURY-IN- FACT REQUIREMENT FOR STANDING .................................16 A. The Complaint Properly Alleges Injury-In-Fact........................................16 B. Defendants’ Contrary Arguments Ignore Settled Law and the Allegations of the Complaint ........................................................18
II. THE COMPLAINT SATISFIES THE CONSTITUTIONAL TRACEABILITY REQUIREMENT FOR STANDING.......................................22 A. The Complaint Properly Alleges Traceability ............................................22 B Traceability Is Not Undermined By the Role of Third Parties. ..................24 1. Defendants Ignore the Allegations of the Complaint ....................25 2. Defendants’ Argument About the Role of Third Parties Is Based Entirely On Purported “Facts” of Which the Court May Not Take Judicial Notice .......................26
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3. Defendants’ “Facts” About Third Parties, Even if They Could Be Properly Noticed, Would Not Defeat Traceability ........28
a. It Is Well-Established That the Traceability Requirement May Be Satisfied Where Third Parties Play a Role In Causing a Plaintiff’s Injuries..........28
b. Wells Fargo’s Additional Traceability Arguments About Baltimore’s Increased Expenditures For Police and Fire Protection Are Meritless ....................32
C. Baltimore’s Injuries Are Not Self-Inflicted Through Tax Lien Sales .......34
1. Defendants’ “Self-Inflicted” Argument Is Based Entirely On Purported “Facts” About Tax Lien Sales Of Which the Court May Not Take Judicial Notice ...................35
2. Defendants’ “Facts” About Tax Liens, Even If They Could Be Properly Noticed, Would Not Show That Baltimore’s Injuries Are Self-Inflicted.....................37
III. DISPARATE IMPACT CLAIMS ARE COGNIZABLE UNDER THE FAIR HOUSING ACT..................................................................................39
A. This Court May Not Reject Directly Controlling Fourth Circuit Precedents That Have Not Been Explicitly Rejected By a Higher Court ......................................................40
B. City of Jackson Refutes Defendants’ Assertion That Whether Disparate Impact Claims Are Actionable Under a Civil Rights Statute Turns Exclusively On a Search For Particular Words In the Statute’s Text ....................................42
C. Each Factor That the Supreme Court Has Consistently Relied On In Considering Disparate Impact Claims – Legislative History and Purpose, Subsequent Congressional Action, Statutory Text, and Administrative Construction – Demonstrates That the Circuit Courts Have Properly Concluded That Disparate Impact Claims May Be Brought Under the FHA ......................................45
1. The Legislative History of the Fair Housing Act Demonstrates That Disparate Impact Claims Are Cognizable .............................46
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2. Congress Endorsed the Application of the Act to Disparate Impact Claims In the Fair Housing Amendments Act of 1988 .....48
3. The Text of the Fair Housing Act Compels the Conclusion That Disparate Impact Claims Are Cognizable ..........49
4. Administrative Implementation of the Fair Housing Act Supports a Disparate Impact Standard...........................................52
5. Relying On These Factors, the Fourth Circuit and the Ten Other Circuits to Address the Issue Have Held That the Fair Housing Act Allows Disparate Impact Claims.................54
D. Post-City of Jackson Cases Continue to Hold That Disparate Impact Claims Are Cognizable Under the Fair Housing Act ....................58
IV. BALTIMORE PROPERLY STATES A DISPARATE IMPACT CLAIM UNDER THE FAIR HOUSING ACT...................................................................59 A. Baltimore Properly Alleges A Disparate Impact On African Americans .....................................................................................59 1. Defendants Seek to Invoke a Heightened Standard of Review That Is Only Appropriate For Post-Discovery Motions ................59 2. Wells Fargo Misconstrues What It Means to Show a Disparate Impact ...............................................................62 3. Defendants Repeatedly Ignore and Contest the Allegations of the Complaint, Which They May Not Do Under Rule 12(b)(6)....63 B. Baltimore Properly Alleges That The Disparate Impact Is Caused By Wells Fargo’s Predatory Practices.......................................65
V. BALTIMORE PROPERLY STATES AN INTENTIONAL DISCRIMINATION CLAIM UNDER THE FAIR HOUSING ACT...................67
CONCLUSION..............................................................................................................................69
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TABLE OF AUTHORITIES CASES 2922 Sherman Ave. Tenants’ Ass’n v. District of Columbia, 444 F.3d 673 (D.C. Cir. 2006) .......................................................................................................................54, 60 Adams v. Bain, 697 F.2d 1213 (4th Cir. 1982) ..........................................................................7, 66 Affordable Hous. Dev. Corp. v. City of Fresno, 433 F.3d 1182 (9th Cir. 2006) ...........................59 Agostini v. Felton, 521 U.S. 203 (1997) ........................................................................................41 Alexander v. Choate, 469 U.S. 287 (1985) ....................................................................................45 Allegheny General Hospital v. Philip Morris, Inc., 228 F.3d 429 (3d Cir. 2000).........................67 Allen v. Wright, 468 U.S. 737 (1984) ............................................................................................30 Alston v. Advanced Brands & Importing Co., 494 F.3d 562 (6th Cir. 2007) ................................33 American Canoe Ass’n, Inc. v. Murphy Farms, Inc., 326 F.3d 505 (4th Cir. 2003) ...16, 22, 25, 31 Anderson v. Sara Lee Corp., 508 F.3d 181 (4th Cir. 2007).............................................................8 Arthur v. City of Toledo, 782 F.2d 565 (6th Cir. 1986) .................................................................54 AtlantiGas Corp. v. Columbia Gas Transmission Corp., 210 Fed. Appx. 244 (4th Cir. Dec. 19, 2006) .................................................................................................................20 Baker v. Smith & Wesson Corp., No. 99C-09-283, 2002 WL 31741522 (Del. Super. Ct. Nov. 27, 2002) .....................................................................................................34 Barkley v. Olympia Mortgage Co., Nos. 04-CV-875 et al., 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007)..........................................................................................................3, 25 Beaulialice v. Fed. Home Loan Mortgage Corp., No. 8:04-CV-2316-T-24-EAJ, 2007 WL 744646 (M.D. Fla. Mar. 6, 2007) ..................................................................................58 Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007) ...............................................8, 60, 65, 66 Bennett v. Spear, 520 U.S. 154 (1997) ..........................................................................................28 Betsey v. Turtle Creek Assocs., 736 F.2d 983 (4th Cir. 1984) ............................................... passim
iv

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Boleski v. American Export Lines, Inc., 385 F.2d 69 (4th Cir. 1967)............................................39 Brown v. Coach Stores, Inc., 163 F.3d 706 (2d Cir. 1998)............................................................66 Bryant v. Yellen, 447 U.S. 352 (1980) .....................................................................................29, 30 Burrell v. State Farm Fire & Cas. Co., No. 00-civ.-5733 (JGK), 2001 WL 797461 (S.D.N.Y. July 12, 2001) ...............................................................................................................66 Cardio-Med. Assocs., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68 (3d Cir. 1983).................................................................................................................................28 Carley v. Wheeled Coach, 991 F.2d 1117 (3rd Cir. 1993) ............................................................28 Center for Auto Safety v. NHTSA, 793 F.2d 1322 (D.C. Cir. 1986) ..............................................30 Charleston Hous. Auth. v. U.S. Dep’t of Agric., 419 F.3d 729 (8th Cir. 2005).............................58 Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984) ................................................44, 52, 53 Chisom v. Roemer, 501 U.S. 380 (1991) .......................................................................................45 City of Boston v. Smith & Wesson Corp., 2000 WL 1473568 (Mass. Super. 2000)......................34 City of Chicago v. Beretta U.S.A. Corp., 821 N.E.2d 1099 (Ill. 2004)..........................................34 City of Chicago v. Matchmaker Real Estate Sales Ctr., Inc., 982 F.2d 1086 (7th Cir. 1992)................................................................................................................................17 City of Cincinnati v. Beretta U.S.A. Corp., 768 N.E.2d 1136 (Ohio 2002)...................................34 City of Edmonds v. Oxford House, Inc., 514 U.S. 725 (1995).......................................................55 City of Flagstaff v. Atchison, Topeka & Santa Fe Ry. Co., 719 F.2d 322 (9th Cir. 1983)................................................................................................................................33 City of Philadelphia v. Beretta USA, Corp., 126 F. Supp. 2d 882 (E.D. Pa. 2000).......................67 Clinton v. City of New York, 524 U.S. 417 (1998).............................................................28, 29, 30 Collette v. St. Luke’s Roosevelt Hospital, 132 F. Supp. 2d 256 (S.D.N.Y. 2001) .........................61 Columbia Union College v. Clarke, 159 F.3d 151 (4th Cir. 1998)..........................................41, 42
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Case 1:08-cv-00062-JFM Document 14 Filed 05/20/08 Page 7 of 82
Cox v. City of Dallas, 430 F.3d 734 (5th Cir. 2005)......................................................................58 Crinkley v. Holiday Inns, Inc., 844 F.2d 156 (4th Cir. 1988) ........................................................33 DaimlerChrysler v. Cuno, 547 U.S. 332 (2006) ............................................................................21 Darst-Webbe Tenant Ass’n v. St. Louis Hous. Auth., 417 F.3d 898 (8th Cir. 2005) .....................59 Donnelly v. Rhode Island Bd. of Governors for Higher Education, 929 F. Supp. 583 (D.R.I. 1996), aff’d 110 F.3d 2 (1st Cir. 1997).......................................................................60 Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59 (1978) .................................32 Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) .......................................................67 Edwards v. Johnston County Health Dep’t, 885 F.2d 1215 (4th Cir. 1989) ...............41, 42, 54, 60 EEOC v. Datapoint Corp., 570 F.2d 1264 (5th Cir. 1978)............................................................60 Evans v. B.F. Perkins Co., 166 F.3d 642 (4th Cir. 1999) ................................................................7 Follman v. Hospitality Plus of Carpentersville, Inc., 532 F. Supp. 2d 960 (N.D. Ill. 2007)...............................................................................................................................65 Frank Krasner Enters., Ltd. v. Montgomery County, 410 F.3d 230 (4th Cir. 2005) .....................32 Gantt v. Security, USA, Inc., 356 F.3d 547 (4th Cir. 2004) ...........................................................33 Garcia v. Country Wide Fin. Corp., No. 07-1161-VAP (C.D. Cal. Jan. 17, 2008).......................58 Garcia v. Johanns, 444 F.3d 625 (D.C. Cir. 2006)........................................................................66 General Bldg. Contractors Ass’n, Inc. v. Pennsylvania, 458 U.S. 375 (1982) .......................45, 56 Giarratano v. Johnson, 521 F.3d 298, 2008 WL 771503 (4th Cir. 2008).......................................8 Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979) ......................................... passim Greenhouse v. MCG Capital Corp., 392 F.3d 650 (4th Cir. 2004) ...............................................36 Griggs v. Duke Power Co., 401 U.S. 424 (1971) ..........................................................................42 Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211 (4th Cir. 1993)...............................27
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Hallmark Developers, Inc. v. Fulton County, 466 F.3d 1276 (11th Cir. 2006).............................59 Hanson v. Veterans Admin., 800 F.2d 1381 (5th Cir. 1986)..........................................................54 Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000) ............3, 25, 60, 63 Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982) ..............................................16, 37, 51, 55 Heights Cmty. Congress v. Hilltop Realty, Inc., 774 F.2d 135 (6th Cir. 1985) .............................17 Hennesy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995) ................................37 HUD v. Mountain Side Mobile Estates, 2 Fair Hous.-Fair Lend. (P-H) ¶ 25,053, 1993 WL 307069 (HUD Sec’y 1993)............................................................................................52 Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d Cir.) aff’d per curiam, 488 U.S. 15 (1988)..................................................................................... passim In re Attorney’s Fees in Tax Sales Foreclosures, No. 24-C-03-3443 (Cir. Ct. Balt. City Dec. 11, 2007) .....................................................................................14, 15, 35 In re Bulldog Trucking, Inc., 147 F.3d 347 (4th Cir. 1998)...........................................................33 Int’l Bhd. of Teamsters v. United States, 431 U.S. 324 (1977)..................................................8, 68 Iqbal v. Hasty, 490 F.3d 143 (2d Cir. 2007) ....................................................................................8 Jackson v. Okaloosa County, 21 F.3d 1531 (11th Cir. 1994)........................................................54 Johnson v. County of Nassau, 480 F. Supp. 2d 581 (E.D.N.Y. 2007)...........................................60 Keith v. Volpe, 858 F.2d 467 (9th Cir. 1988).................................................................................63 Langlois v. Abington Hous. Auth., 207 F.3d 43 (1st Cir. 2000) ........................................51, 54, 57 Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001)........................................................15, 37 Logan v. Denny’s, Inc., 259 F.3d 558 (6th Cir. 2001) ...................................................................36 Long v. Ringling Bros.-Barnum & Bailey Combined Shows, Inc., 882 F. Supp. 1553 (D. Md. 1995) ................................................................................................................................21 Lorillard v. Pons, 434 U.S. 575 (1978) .........................................................................................48
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Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ................................................................8, 18 Mayers v. Ridley, 465 F.2d 630 (D.C. Cir. 1972) ..........................................................................56 McConnell v. FEC, 124 S. Ct. 619 (2003).................................................................................5, 38 McMellon v. United States, 387 F.3d 329 (4th Cir. 2004).............................................................32 Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283 (7th Cir. 1977)........................................................................................................51, 54, 55, 57, 58 Moore v. Hughes Helicopters, Inc., 708 F.2d 475 (9th Cir. 1983) ................................................60 Mountain Side Mobile Estates P’ship v. Sec’y of HUD, 56 F.3d 1243 (10th Cir. 1995)........................................................................................................4, 52, 53, 54, 56 Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Corp., 65 F.3d 1113 (4th Cir. 1995) .........................................................................................................21 Nat’l Fair Housing Alliance, Inc. v. Prudential Ins. Co. of Am., 208 F. Supp. 2d 46 (D.D.C. 2002) ..........................................................................................................47, 54, 62 NRDC, Inc. v. Watkins, 954 F.2d 974 (4th Cir. 1992) ...................................................................31 North Carolina Shellfish Growers Ass’n v. Holly Ridge Assocs., 278 F.2d 654 (E.D.N.C. 2003) ......................................................................................................................27 Ostrzenski v. Seigel, 177 F.3d 245 (4th Cir. 1999) ....................................................................8, 69 Paige v. California, 291 F.3d 1141 (9th Cir. 2002).......................................................................60 Pennsylvania v. New Jersey, 426 U.S. 660 (1976) ..................................................................17, 38 Peters v. Delaware River Port Auth., 16 F.3d 1346 (3d Cir. 1994) ..............................................36 Pfaff v. HUD, 88 F.3d 739 (9th Cir. 1996) ........................................................................52, 53, 54 Pina v. Henderson, 752 F.2d 47 (2d Cir. 1985).............................................................................36 Piney Run Pres. Ass’n v. County Comm’rs of Carroll County, 268 F.3d 255 (4th Cir. 2001) .........................................................................................................31 Pressly v. Hutto, 816 F.2d 977 (4th Cir. 1987)..............................................................................33
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Public Citizen v. FTC, 869 F.2d 1541 (D.C. Cir. 1989) ................................................................27 Public Citizen, Inc. v. NHTSA, 489 F.3d 1279 (D.C. Cir. 2007) .............................................30, 38 Ramirez v. GreenPoint Mortgage Funding, Inc., No. C08-0369, 2008 WL 2051018 (N.D. Cal. May 13, 2008) ..............................................................................58 Reinhart v. Lincoln County, 482 F.3d 1225 (10th Cir. 2007)........................................................59 Resident Advisory Bd. v. Rizzo, 564 F.2d 126 (3d Cir. 1977)..................................................54, 55 Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765 (4th Cir. 1991)..................................................................................................................................7 Sch. Dist. of Kansas City v. State of Missouri, 460 F. Supp. 421 (W.D. Mo. 1978)............................................................................................................................18 Schultz v. Braga, 290 F. Supp. 2d 637 (D. Md. 2003)...................................................................12 Schweikert v. Bank of America, N.A., 521 F.3d 285, 2008 WL 853005 (4th Cir. 2008).................................................................................................................8, 21 65, 66 Shanty Town Assocs. v. EPA, 843 F.2d 782 (4th Cir. 1988)..........................................................32 Skidmore v. Swift & Co., 323 U.S. 134 (1944) .............................................................................53 Smith v. City of Jackson, 544 U.S. 228 (2005) ..................................................................... passim Smith v. Town of Clarkton, 682 F.2d 1055 (4th Cir. 1982) ................................................... passim South Carolina Wildlife Fed’n v. South Carolina Dep’t of Transp., 485 F. Supp. 2d 661 (D.S.C. 2007)...........................................................................................................27 Southern California Edison Co. v. FERC, 502 F.3d 176 (D.C. Cir. 2007) .............................27, 37 Spann v. Colonial Village, Inc., 899 F.2d 24 (D.C. Cir. 1990)......................................................30 St. Pierre v. Dyer, 208 F.3d 394 (2d Cir. 2000) ............................................................................39 State v. Canady, 431 S.E.2d 500 (N.C. Ct. App. 1993).................................................................36 Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002)........................................................... 59-61, 68
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Syverson v. IBM Corp., No. C-03-04529-RMW, 2007 WL 2904252 (N.D. Cal. Oct. 3, 2007).................................................................................................................66 Teachers’ Retirement Sys. v. Hunter, 477 F.3d 162 (4th Cir. 2007) .............................................57 Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205 (1972) ........................................ 16, 55-57 Trezza v. Hartford, Inc., No. 98-civ.-2205 (MBM), 1998 WL 912101 (S.D.N.Y. Dec. 30, 1998) ..............................................................................................................66 Trollinger v. Tyson Foods, Inc., 370 F.3d 602 (6th Cir. 2004)......................................................19 United States v. City of Black Jack, 508 F.2d 1179 (8th Cir. 1974) ........................................53, 57 United States v. Mead Corp., 533 U.S. 218 (2001) .................................................................52, 53 United States v. North Carolina, 180 F.3d 574 (4th Cir. 1999) ......................................................7 United States v. SCRAP, 412 U.S. 669 (1973)...............................................................................29 U.S. Postal Serv. v. Aikens, 460 U.S. 711 (1983) ..........................................................................68 Valentin v. Hospital Bella Vista, 254 F.3d 358 (1st Cir. 2001) .......................................................7 Village of Bellwood v. Dwivedi, 895 F.2d 1521 (7th Cir. 1990)..............................................17, 23 Walls v. City of Petersburg, 895 F.2d 188 (4th Cir. 1990) ......................................................60, 63 Walther v. Lone Star Gas Co., 977 F.2d 161 (5th Cir. 1992) ........................................................60 Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989).............................................................62 Warren County v. State of North Carolina, 528 F. Supp. 276 (E.D.N.C. 1981) ...........................18 Warth v. Seldin, 422 U.S. 490 (1975) ............................................................................7, 18, 21, 34 Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988) .......................................................4, 60 Williams v. Matthews Co., 499 F.2d 819 (8th Cir. 1974) ..............................................................54 Zamudio v. HSBC N. Am. Holdings Inc., No. 07-C-4315, 2008 WL 517138 (N.D. Ill. Feb. 20, 2008).................................................................................................................58
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FEDERAL STATUTES 29 U.S.C. § 621(b) .........................................................................................................................51 Civil Rights Act, Title VII, 42 U.S.C. § 2000e et seq. .......................................................... passim Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq................................................................25 Fair Housing Act, 42 U.S.C. § 3601 et seq. .......................................................................... passim Fair Housing Amendments Act of 1988, Pub. L. No. 100-430, 102 Stat. 1619 (1988) ...............48 STATE STATUTES Md. Code Ann., Tax-Prop. § 14-801 et seq. ........................................................................1, 13, 14 OTHER AUTHORITIES 114 Cong. Rec. 2526 .....................................................................................................................46 114 Cong. Rec. 3422 .....................................................................................................................57 114 Cong. Rec. 5214 .....................................................................................................................47 134 Cong. Rec. 23711-12 ..............................................................................................................49 59 Fed. Reg. 18266 (Apr. 15, 1994) ..............................................................................................53 Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3521.5 (2008) ........................................................................................................5, 38 Fair Housing Amendments Act of 1987: Hearings on S. 558 Before the Subcomm. on the Constitution of the Sen. Comm. on the Judiciary, 100th Cong. (1987) .............................48 Federal Rule of Civil Procedure 12(b).................................................................................. passim Federal Rule of Evidence 201........................................................................................1, 24, 27, 35 Homeowners Ins. Discrimination: Hearing Before the Sen. Comm. on Banking, Housing, & Urban Affairs, 103d Cong. (1994).............................................................................................52 H.R. Rep. No. 100-711 (1988).................................................................................................48, 49
xi

Case 1:08-cv-00062-JFM Document 14 Filed 05/20/08 Page 13 of 82 H.R. Res. 1095, 110th Cong., 154 Cong. Rec. H2280, 2008 WL 1733432 (Apr. 15, 2008)...............................................................................................................................46 Report of the Nat’l Advisory Comm’n on Civil Disorders (1968) .................................................46 United States Dep’t of Housing & Urban Development, Title VIII Complaint Intake, Investigation & Conciliation Handbook (REV-2 2005)................................................................53
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INTRODUCTION The motion to dismiss filed by Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (collectively “Wells Fargo”) is a deliberate effort to divert the Court’s attention from Defendants’ own wrongdoing and portray Plaintiff Mayor and City Council of Baltimore (“Baltimore” or “City”) as somehow responsible for its own injuries. This attack is based on extrajudicial “facts” about the sale of tax liens that are outside the complaint and that may not be judicially noticed under Fed. R. Evid. 201. The standard of review on a motion to dismiss does not permit their consideration, and the attack should be rejected on that basis alone. Even if the Court could consider Defendants’ purported “facts,” which it cannot, they are fundamentally wrong and misleading. Defendants would have the Court believe that Baltimore has intentionally “unleashed” on its residents a program of tax lien sales that causes thousands of foreclosures for nothing more than small unpaid water bills and the like. Most astonishingly, Defendants fail to inform the Court that tax lien sales are a creature of and required by state law. See Md. Code Ann., Tax-Prop. §§ 14-801 to 14-854. Maryland law mandates that Baltimore conduct these sales and include within them any “tax,” as defined by state law, that is at least $250, and prescribes nearly the whole of the process and fees associated with it. See id. § 14-811. The reckless and misleading assertion that Baltimore bears responsibility for this program is palpably false. Defendants’ contention that 19,000 homeowners have lost their homes to tax lien foreclosures since 2000 is also a fabrication. Even Defendants’ own extrajudicial sources show that this figure reflects everyone who enters the process, not people actually foreclosed on due to tax liens. The vast majority resolve their debts and do not lose their homes. Defendants also fail to subtract foreclosures accomplished through Project 5000, a City initiative that uses tax lien foreclosures to obtain title to, and

Case 1:08-cv-00062-JFM Document 14 Filed 05/20/08 Page 15 of 82
then rehabilitate, thousands of already vacant and abandoned properties. People are not put out of their homes through Project 5000. To the contrary, the program returns vacant homes to productive use.
Wells Fargo may seek to pursue the irrelevant subject of tax liens in discovery, but the only issue at this stage is the legal sufficiency of the facts as plead in the complaint, which the Court must accept as true. Recognizing that they cannot prevail under this standard, Defendants not only seek to bring in outside and erroneous “facts,” but also ignore and misstate the complaint’s plain allegations.
Baltimore does not allege, as Defendants contend, that Wells Fargo is somehow solely responsible for the City’s troubles, or to use Defendants’ hyperbole, a “scapegoat for broad social problems.” See Mem. Law. Supp. Defs.’ Mot. Dismiss Compl. (“Defs.’ Br.”) at 1. Rather, Baltimore alleges that Wells Fargo is purposefully and intentionally engaged in “reverse redlining” in Baltimore. See Compl. ¶¶ 4-5, 46, 64, 66, 74. That is, Wells Fargo targets a variety of predatory lending practices at the City’s African Americans and residents of its African-American neighborhoods to make a quick profit because it believes it can successfully exploit those communities. See, e.g., id. ¶¶ 25, 27, 29-30, 46. These practices include:
• charging higher interest rates; • underwriting “2/28” and “3/27” adjustable rate mortgages without regard to whether the
borrower can repay the loan after the initial “teaser” rate expires; • stripping borrowers’ equity through unnecessary refinancings; • allowing mortgage brokers to charge “yield spread premiums” for inflating interest rates; • requiring substantial prepayment penalties that prevent borrowers from obtaining beneficial
refinance loans; and • charging excessive points and fees that do not correspond to benefits for the borrower. See id. ¶¶ 26, 45, 47-48. Every court to consider the issue has held that targeting such practices at a
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minority community violates the federal Fair Housing Act, 42 U.S.C. §§ 3601 et seq. (“FHA”). See, e.g., Barkley v. Olympia Mortgage Co., Nos. 04-CV-875 et al., 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007); Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000).
The direct consequence of Wells Fargo’s discrimination is an unnecessarily high foreclosure rate in Baltimore’s African-American neighborhoods. See, e.g., Compl. ¶¶ 46, 64. The unnecessary foreclosures attributable to Wells Fargo’s loans and lending practices have caused the City tens of millions of dollars in direct and empirically quantifiable harm. See id. ¶¶ 67-70. They reduce property tax revenues because Wells Fargo’s foreclosures lower the value of surrounding homes; reduce real estate transfer tax revenues by depressing the real estate market; increase spending on police and fire protection because Defendants’ foreclosures lead to vacant and abandoned homes which can become centers of unlawful activity; increase spending to secure foreclosed homes that are abandoned; increase spending to rehabilitate vacant, deteriorating homes; increase spending to handle the administrative and legal processing of Defendants’ foreclosures; and increase spending to assist City residents who have lost or are in danger of losing their homes to foreclosures. See id. ¶¶ 1, 18-20, 66. Defendants minimize harm to themselves by selling loans on the secondary market. See id. ¶¶ 25, 27, 46.
Baltimore seeks to hold Wells Fargo accountable for these and other injuries resulting from its illegal acts, not the acts of any other financial institution. The damages that Wells Fargo is ultimately liable for at the conclusion of this case will be commensurate with the number of loans it has made and the harm resulting from its own illegal practices.
Faced with these allegations, Defendants press five arguments in support of their motion. The first two concern standing. Defendants claim that Baltimore does not allege an injury-in-fact or an injury that is traceable to Wells Fargo’s violation of the FHA. See Defs.’ Br. at 13-15 (injury-in-fact);
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id. at 16-23 (traceability). The next two concern the disparate impact on African Americans of Wells

Fargo’s predatory practices. Ignoring controlling Fourth Circuit precedent, Wells Fargo contends that

disparate impact claims are not cognizable under the FHA and that, even if they are, Baltimore has not properly stated a disparate impact claim.1 See id. at 23-29 (cognizability); id. at 30-40 (not properly

stated). Finally, and solely in a footnote, Defendants argue that Baltimore has not properly stated an

intentional discrimination claim. See id. at 31 n.11. Each of these arguments is wholly without merit.

With respect to injury-in-fact, Baltimore alleges a straightforward financial injury in the tens of

millions of dollars. It further alleges that this injury can be quantified. These allegations of injury are

much more specific and concrete than those found adequate in Gladstone, Realtors v. Village of

Bellwood, 441 U.S. 91 (1979) (“Gladstone”). In Gladstone, the Supreme Court held that where racial

“steering” by realtors might diminish a town’s property tax revenues, and the possible diminution was

not even alleged but could only be inferred from the complaint, the town faced injury sufficient to confer

standing. See id. at 109-11. Here, the actual loss of property tax revenues and other financial harms are

alleged explicitly in the complaint, leaving no doubt that the injury-in-fact requirement is met.

With respect to traceability, Gladstone is again dispositive. The Supreme Court found the

town’s loss of revenue adequately traceable to the challenged steering practices because steering might

eventually cause white residents to leave the town, which might in turn lower demand for housing,

which would lower property values and therefore lower property tax revenues. See id. Thus, the mere

potential that a critical mass of non-parties would in the future respond to the challenged steering in such

a way as to produce the injury satisfied the traceability requirement. Here, Baltimore alleges that Wells

1

“A claim of disparate impact, unlike a claim of disparate treatment, does not require a finding of intentional

discrimination. Indeed, ‘the necessary premise of the disparate impact approach is that some [housing] practices, adopted

without a deliberately discriminatory motive, may in operation be functionally equivalent to intentional discrimination.’”

Mountain Side Mobile Estates P’ship v. Sec’y of HUD, 56 F.3d 1243, 1250-51 (10th Cir. 1995) (emphasis added) (quoting

Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 987 (1988)) (alteration in original).

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Fargo’s FHA violations have actually caused foreclosures, and that those particular foreclosures have actually caused harm to the City. These allegations are plausible and buttressed by scientific studies discussed in the complaint. They are sufficient under Gladstone.
Defendants nevertheless argue that traceability is defeated because third parties play some role in the causal chain here. As shown by Gladstone, as well as numerous other Supreme Court and Fourth Circuit opinions, this misrepresents the law. As long as it is likely that Wells Fargo’s discriminatory acts contribute to Baltimore’s injury, the role of third parties is irrelevant to standing. Moreover, Wells Fargo does not gain immunity under the FHA because other lenders may have engaged in similar practices. Defendants also err by seeking judicial notice of the role of third parties, a matter that is outside the complaint and that must be left for discovery and expert reports.
Defendants also object to traceability based on their misleading presentation about tax lien sales, which they claim shows that Baltimore’s injury is self-inflicted. This objection is factually wrong, as explained above, and legally flawed. An injury is only self-inflicted such that traceability is defeated if the injury is completely caused by the plaintiff’s personal choices. See McConnell v. FEC, 124 S. Ct. 619, 709 (2003); 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3521.5 (2008). Baltimore participates in the tax lien sales because Maryland requires it to, not because of its choice. Moreover, Wells Fargo’s speculation that foreclosures on its discriminatory loans are caused by tax lien sales ignores the allegations of the complaint, which must be taken as true. Those allegations directly link unnecessary and avoidable foreclosures to Wells Fargo’s bad loans and lending practices. Wells Fargo’s assertions about tax liens, as well as those about third parties, are really about the amount of damages, not traceability. This is a subject for discovery, not a motion to dismiss.
With respect to Baltimore’s disparate impact claim, Wells Fargo asks the Court to exceed its
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authority by overturning Fourth Circuit precedent. Like the ten other Circuit Courts to address the issue, the Fourth Circuit has held that disparate impact claims may be brought under the FHA. See, e.g., Smith v. Town of Clarkton, 682 F.2d 1055, 1065 (4th Cir. 1982). These decisions have been reaffirmed and applied consistently for over thirty years and are well grounded on the Act’s legislative history, purpose, text, administrative construction, and more. Defendants assert that all of these decisions were overturned sub silentio by Smith v. City of Jackson, 544 U.S. 228 (2005), a case holding that the Age Discrimination in Employment Act (“ADEA”) also permits disparate impact claims. Defendants claim that City of Jackson somehow announced a new rule about disparate impact based on a narrow, formalistic search for specific words in its text to the exclusion of all else. Contrary to this claim, City of Jackson did no such thing. The Supreme Court relied instead on the same kinds of considerations that the Fourth Circuit and the other Circuits have relied on in holding that disparate impact claims are actionable under the FHA, and City of Jackson makes clear that they have done so correctly. Every case decided after City of Jackson confirms this conclusion.
Baltimore also properly states a claim for disparate impact. It alleges, inter alia, that 8.2% of Wells Fargo’s loans in neighborhoods that are 60% or more African-American result in foreclosure, but that the same is true for only 2.1% of its loans in neighborhoods that are 60% or more white, see Compl. ¶ 39; that Wells Fargo’s high-cost loans are located disproportionately in African-American neighborhoods, see id. ¶¶ 47-49; and that properties for which Wells Fargo automatically increases or decreases the interest rate are located disproportionately in African-American and white neighborhoods, respectively, see id. ¶¶ 50-51. Baltimore further alleges that these disparities are due to various predatory practices that are set forth in the complaint. See id. ¶¶ 4-5, 45-46. Defendants baldy assert that these allegations are not true, but such assertions are not properly considered here. Furthermore,
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Defendants rely on cases concerning the sufficiency of proof at summary judgment and after trial, which are plainly inapplicable.
Finally, Baltimore plainly and properly bases this suit on intentional discrimination as well as disparate impact, and Wells Fargo’s contrary assertion is patently wrong. Baltimore alleges that Defendants purposefully and intentionally engage in reverse redlining by targeting African Americans and residents of African-American neighborhoods with predatory practices, and no more is needed to state an intentional discrimination claim under the FHA.
For all of these reasons, and as set forth in greater detail below, Baltimore respectfully submits that the motion to dismiss should be denied in its entirety.
STANDARD OF REVIEW I. RULE 12(b)(1)
Defendants’ standing arguments challenge the facial sufficiency of the complaint under Fed. R. Civ. P. 12(b)(1).2 Accordingly, “all the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a Rule 12(b)(6) consideration.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982); see Warth v. Seldin, 422 U.S. 490,

2

Though Defendants appear confused over whether their standing challenge is facial or factual, see Defs.’ Br. at 10-

12, it is clearly facial because they do not challenge the truth of any particular factual allegation. See Adams v. Bain, 697

F.2d 1213, 1219 (4th Cir. 1982) (facial challenge “contend[s] that a complaint simply fails to allege facts upon which subject

matter jurisdiction can be based,” while factual challenge “contend[s] that the jurisdictional allegations of the complaint were

not true”). The distinction is discussed in detail in Valentin v. Hospital Bella Vista, 254 F.3d 358, 362-64 (1st Cir. 2001), a

factual challenge addressing the truth of plaintiff’s allegation that she was a Florida resident in support of her invocation of

diversity jurisdiction. The stricter standard of review applicable to factual challenges – set forth in Richmond,

Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (considering “factual basis”), and

Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999) (relying on Richmond) – does not apply here. Even if

Defendants’ standing argument could be construed as a factual challenge, it would be a challenge to the truth of

“jurisdictional facts [that] are intertwined with the facts central to the merits of the dispute” and therefore “appropriately

resolved only by a proceeding on the merits.” Adams, 697 F.2d at 1219; see United States v. North Carolina, 180 F.3d 574,

580 (4th Cir. 1999) (“When a factual attack on subject matter jurisdiction involves the merits of a dispute, the proper course

of action for the district court is to find that jurisdiction exists and deal with the objection as a direct attack on the merits of

the plaintiff’s case.”) (citations, brackets, ellipsis, and quotation marks omitted).

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502 (1975) (“For purposes of ruling on a motion to dismiss for want of standing, both the trial and reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.”) (citation omitted). II. RULE 12(b)(6)
In reviewing a Rule 12(b)(6) motion, a court “must accept as true all of the factual allegations contained in the complaint.” Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007) (citation and quotation marks omitted). The court must also “construe the factual allegations of the complaint in the light most favorable to the plaintiff,” Schweikert v. Bank of America, N.A., 521 F.3d 285, 2008 WL 853005, at *2 (4th Cir. 2008) (same), and must “presume that general allegations embrace those specific facts that are necessary to support the claim,” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (citation, brackets, and quotation marks omitted). A Rule 12(b)(6) motion should not ordinarily be granted without first affording the plaintiff an opportunity to amend the complaint. See, e.g., Ostrzenski v. Seigel, 177 F.3d 245, 252-53 (4th Cir. 1999).
Defendants suggest that plaintiffs’ burden under Rule 12(b)(6) was made much heavier by Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007). Twombly stands for nothing of the sort.3 At most, Twombly merely emphasizes that a plaintiff must “allege ‘enough facts to state a claim to relief that is plausible on its face.’” Giarratano v. Johnson, 521 F.3d 298, 2008 WL 771503, at *2 (4th Cir. 2008) (quoting Twombly, emphasis supplied by Fourth Circuit). The Twombly Court was clear that this is not intended to be an onerous or even a heightened requirement, explaining that it “comports with [the] Court’s statements in the years since [1957].” Twombly, 127 S. Ct. at 1965, 1969 n.3.

3

Indeed, Twombly may not even apply here at all. As the Second Circuit explained, its “full force,” or perhaps the

decision as a whole, may be “limited to the antitrust context.” Iqbal v. Hasty, 490 F.3d 143, 157 (2d Cir. 2007). The Fourth

Circuit has not addressed that question. See Anderson, 508 F.3d at 188 n.7.

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THE FACTS UPON WHICH THE MOTION TO DISMISS MUST BE DECIDED
I. THE ALLEGATIONS OF THE COMPLAINT Baltimore is facing a severe and unprecedented crisis of residential mortgage foreclosures that is
rapidly growing even worse. See Compl. ¶¶ 1, 17. Foreclosures are not evenly distributed, though. The City’s African-American neighborhoods and homeowners are being hit the hardest, with foreclosure rates significantly higher in minority neighborhoods than in white neighborhoods. See id. ¶ 2, 28, 34.
Wells Fargo is a major contributor to the foreclosure crisis in the City’s African-American neighborhoods because it deliberately targets these neighborhoods for predatory lending practices that it does not direct at white neighborhoods. See id. ¶¶ 3-5, 35-40. Wells Fargo intentionally exploits the City’s African-American community for a quick profit by making loans that are not sound, and then selling those loans on the secondary market to avoid the risk to itself of default and foreclosure. See, e.g., id. ¶¶ 25, 27, 29-30, 45-46. Wells Fargo’s racially targeted, predatory practices include: charging borrowers in African-American neighborhoods higher interest rates than borrowers in white neighborhoods, see id. ¶¶ 47-54; failing to adequately consider the ability of African-American borrowers and borrowers in African-American neighborhoods to repay their loans, see id. ¶¶ 26(a), 5557; placing higher interest rate caps on adjustable rate mortgages in African-American neighborhoods than in white neighborhoods, see id. ¶¶ 58-60; increasing the interest rate on loans below $75,000, which are located disproportionately in African-American neighborhoods, while decreasing the interest rate on loans above $150,000, which are located disproportionately in white neighborhoods, see id. ¶¶ 50-52; targeting African Americans for unnecessary refinance loans that strip borrowers’ equity, see id. ¶ 26(b); and engaging in many other predatory subprime lending practices when making loans to African Americans and in African-American neighborhoods, see id. ¶¶ 26, 41-45; see also id. ¶ 41
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(independent study found that Wells Fargo engages in predatory lending practices). Wells Fargo engages in these discriminatory practices intentionally and willfully. See, e.g., id. ¶ 74. The loans Wells Fargo makes to African Americans and in African-American neighborhoods based on these practices should not be made or should only be made under different terms and conditions. See, e.g., id. ¶ 44. Baltimore alleges that these practices constitute reverse redlining and violate the federal Fair Housing Act. See, e.g. id. ¶¶ 25, 27, 46, 76.
Substantial evidence shows that Wells Fargo is engaged in reverse redlining in the City: data reported by Wells Fargo pursuant to the Home Mortgage Disclosure Act shows that its high-cost loans are disproportionately located in Baltimore’s African-American neighborhoods, see id. at ¶¶ 47-49; Wells Fargo pricing sheets show that interest rate increases are targeted at homes in African-American neighborhoods and decreases are targeted at homes in white neighborhoods, see id. at ¶¶ 50-52; expert analysis of Wells Fargo’s loans in Philadelphia shows that, after controlling for credit factors, African Americans pay more for their loans than similarly situated whites, see id. at ¶¶ 53-54; data shows that Wells Fargo frequently originates “2/28” and “3/27” adjustable rate mortgages in African-American neighborhoods, which are particularly susceptible to abuse and account for 30% of Wells Fargo’s foreclosures, see id. at ¶¶ 55-57; data shows that Wells Fargo incorporates higher caps on adjustable rate loans made in African-American neighborhoods than in white neighborhoods, see id. at ¶¶ 58-60; and data shows that Wells Fargo’s loans in African-American neighborhoods that go to foreclosure do so much more quickly than its loans in white neighborhoods, see id. at ¶¶ 61-63.
As a direct result of its discriminatory practices, Wells Fargo has had more loans result in foreclosure in recent years than any other lender in Baltimore and the foreclosures are concentrated in African-American neighborhoods. See id. ¶¶ 3, 10, 36-38. These neighborhoods include Belair Edison,
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East Baltimore, Pimlico/Arlington/Hilltop, Southern Park Heights, Greater Rosemont, SandtownWinchester/Harlem Park, Greater Govans, and Waverly, all of which are 75% or more AfricanAmerican. See id. ¶ 36. In fact, a Wells Fargo loan in a predominantly (60% or more) AfricanAmerican neighborhood is nearly four times as likely to result in foreclosure as a Wells Fargo loan in a predominantly white neighborhood. See id. ¶ 39. This is a direct result of the unlawful, discriminatory practices described above, not other factors such as credit scores or income. See id. ¶ 44-45.
The resulting disproportionately high number of foreclosures on Wells Fargo’s loans to African Americans and in Baltimore’s majority African-American neighborhoods has cost the City tens of millions of dollars. See id. ¶¶ 5-6, 64-70, 73. The unnecessary foreclosures on Wells Fargo loans “cause[] direct and continuing financial harm to the City” in several ways, including:
• Foreclosures on Wells Fargo loans cause the value of nearby homes to decline significantly, which reduces the City’s revenue from property taxes. These declines are especially steep because foreclosures in Baltimore are concentrated in distressed and transitional neighborhoods and often lead to abandoned and vacant homes.
• The City loses revenues from real estate transfer taxes because foreclosures on Wells Fargo loans depress the market for home sales.
• The City has to spend extra funds for police and fire protection in anticipation of a rise in criminal and gang activity because abandoned and vacant homes can become centers for squatting, drug use, drug distribution, prostitution, and other unlawful activities.
• The City has to spend extra funds for police and fire protection to respond to each additional instance of unlawful activity.
• The City has to spend extra funds to secure the rising number of abandoned and vacant homes. • The City has to spend extra funds to acquire and rehabilitate vacant, deteriorating properties. • The City has to spend extra funds for the administrative and legal processing of foreclosures on
Wells Fargo loans, and
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• The City has to spend extra funds to provide increased social services and financial assistance to recipients of Wells Fargo loans who are facing or who have lost their homes to foreclosure.
See id. ¶¶ 1, 5, 18-20, 66. Several recent studies demonstrate that the City’s damages caused by Wells Fargo’s foreclosures can be quantified using empirical data. See id. ¶¶ 67-69; Decl. of G. Schlactus (“Decl.”) at Exs. 1-3 (studies discussed in complaint).4
Baltimore filed this lawsuit to recover the damages attributable to Wells Fargo’s discriminatory loans and to enjoin Wells Fargo from continuing to engage in reverse redlining. See, e.g., Compl. ¶¶ 6, 71. Baltimore asserts that Wells Fargo’s practices violate the Fair Housing Act, 42 U.S.C. §§ 36043605. See id. ¶¶ 6, 75-76. II. DEFENDANTS’ ASSERTIONS ABOUT TAX LIENS ARE IRRELEVANT AND
MISLEADING As shown above, the Court in reviewing a motion to dismiss must consider only the allegations of the complaint, accepted as true, and may not look to assertions of fact beyond those allegations. Defendants nonetheless try to direct the Court away from the complaint by relying heavily on what is essentially a counterstatement of facts concerning matters outside the scope of the complaint. By showing that these assertions are false, Baltimore does not suggest that it is in any way appropriate to consider Defendants’ assertions of fact; rather, the City seeks only to demonstrate that discovery will prove these assertions are thoroughly misleading and wrong. Defendants place particular emphasis on tax lien sales, and portray them as an out-of-control process that Baltimore itself has intentionally “unleashed” on its residents with the aim of collecting small delinquencies regardless of how many people lose their homes. See Defs.’ Br. at 1-2, 4-8, 20-23.

4

The studies, referenced and relied on in the complaint, are properly considered part of the complaint for purposes of

a motion to dismiss. See, e.g., Schultz v. Braga, 290 F. Supp. 2d 637, 651 n.8 (D. Md. 2003). Their consideration does not

convert a motion to dismiss to a motion for summary judgment. See, e.g., id.

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They assert that this has resulted in many thousands of foreclosures, “dwarf[ing] any injury the City believes was caused by Wells Fargo,” id. at 22, and that Baltimore has nonetheless “made a calculated decision to continue the [tax lien sale] process,” id. at 6. Defendants rely on ten exhibits, most of which are newspaper articles, for these assertions, which have no basis in the complaint.
Legitimate sources that the Court may properly look to on a motion to dismiss, such as the Maryland Code, demonstrate that Wells Fargo’s assertions about tax liens are baseless. In an astounding omission, Defendants fail to tell the Court that tax lien sales are a creature of and required by state law. See Md. Code Ann., Tax-Prop. §§ 14-801 to 14-854. Maryland mandates that its counties and the City of Baltimore “shall sell . . . all property . . . on which the tax is in arrears.” Id. § 14-808. A “tax” is defined by state law as “any tax, or charge of any kind due to the State or any of its political subdivisions, or to any other taxing agency, that by law is a lien against the real property on which it is imposed or assessed . . . . includ[ing] interest, penalties, and service charges,” id. § 14-401(c), and state law further specifies that “[a]ll unpaid taxes on real property shall be, until paid, liens on the real property . . . ,” id. § 14-404(a). Baltimore is not permitted to withhold properties from a tax lien sale unless the delinquencies total less than $250. See id. § 14-811. Local governments have not been allowed to adopt contrary tax lien sale provisions since 1943. See id. § 14-851.
State law controls almost every significant aspect of the tax lien sale process. See id. §§ 14-801 to 14-854. This process generally includes notice by mail to the property owner of the tax delinquency, see id. § 14-812; multiple public notices no less than 30 days later, see id. § 14-813; public auction no less than 4 weeks later, see id. §§ 14-813(a)(3), 14-817; a six-month period following sale during which the property may be redeemed (i.e., a sale may be undone), see id. §§ 14-827, 14-828, 14-833(a); and then an eighteen-month period during which the property may still be redeemed unless the buyer first
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successfully forecloses that right through suit, see id. §§ 14-827, 14-833. The tax sale purchase is void if no foreclosure suit is filed by the end of this eighteen-month period. See id. § 14-833(c). The payments that an owner must make to redeem a property are also fixed by state law. See id. §§ 14-828, 14-843. Judge Evelyn O. Cannon, in In re Attorney’s Fees in Tax Sales Foreclosures, No. 24-C-033443 (Cir. Ct. Balt. City Dec. 11, 2007) (“J. Cannon Op.”), describes Maryland’s tax lien sale process and its history in much greater detail than space permits here. See App. Cases Not Generally Reported.
Judge Cannon’s opinion also includes a tabulation of suits filed to foreclose the right of redemption. See id. at 23 n.26 & App. F. These figures demonstrate that the figures in Defendants’ brief are misleading and inaccurate in key respects. Most fundamentally, Defendants would have the Court believe that there is no difference between the number of suits filed and the number of actual foreclosures; twice they assert that there have been 19,000 filings since 2000, and three times they assert that there have been 19,000 actual tax lien foreclosures. See Defs.’ Br. at 1, 14, 18, 22, 40. Judge Cannon’s opinion, however, demonstrates that the vast majority of tax lien foreclosure suits filed do not result in foreclosure. It shows that from January 1, 2003 through September 26, 2007, there were 17,953 filings but only 2,325 judgments foreclosing. See J. Cannon Op. at App. F. Moreover, Judge Cannon’s data does not account for thousands of properties that are listed in the newspaper but held out of the tax sale because the delinquency is paid in the interim or because the property is redeemed before suit is filed (the exact number must be left to discovery). While Judge Cannon’s precise numbers may not be subject to judicial notice and Judge Cannon herself viewed them as incomplete, see id. at 23 n.26, the Court may and should take note of the fact that there is significant data from which one could reasonably conclude that relatively few Baltimore properties listed in the newspaper for the tax lien sale actually wind up foreclosed on. Discovery will so demonstrate.
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Judge Cannon’s opinion also demonstrates that many of the actual foreclosures are part of Baltimore’s “Project 5000” program. See id. at 9 n.14. As indicated by a public memorandum from the Commissioner of the City’s Department of Housing and Community Development, discovery will show that Project 5000 is a program whereby the City uses tax foreclosures to obtain title to thousands of vacant and abandoned properties. See Decl. at Ex. 4. Project 5000 allows the City to turn dilapidated and empty homes back into homes that people live in and that benefit the surrounding community, i.e., the opposite of what happens when foreclosures caused by Wells Fargo’s discriminatory lending practices lead to abandoned homes. See id. While the Court may not take judicial notice of the truth of these matters at this stage of the litigation, it may note the existence of the documents attached hereto, see, e.g., Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001), and that Judge Cannon’s opinion and the Commissioner’s memorandum provide a compelling basis for believing that their truth will be established through discovery. Because Defendants fail to account for Project 5000 foreclosures on vacant properties, their statistics about the number people who actually lose their homes to tax lien foreclosures are vastly overstated and misleading.
Defendants’ attempt to malign Baltimore necessitates the above discussion correcting the record, but we reiterate that it does not alter the fundamental precept that Defendants’ assertions are irrelevant to a motion to dismiss because they are outside the scope of the complaint.
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ARGUMENT

I. THE COMPLAINT SATISFIES THE CONSTITUTIONAL INJURY-IN-FACT REQUIREMENT FOR STANDING5

Constitutional standing doctrine requires a plaintiff to show, inter alia, “that he personally has

suffered some actual or threatened injury as a result of the putatively illegal conduct of the

defendant . . ..” American Canoe Ass’n, Inc. v. Murphy Farms, Inc., 326 F.3d 505, 517 (4th Cir. 2003)

(citation and quotation marks omitted) (“American Canoe”). Defendants assert that this requirement is

not met for three reasons. First, they contend that Baltimore has to itemize its injury in the complaint on

a property-by-property basis. Second, they contend that Baltimore has not been injured because its

overall property tax revenues have increased. Third, they argue that the allegations of injury are too

vague. While all of these arguments fail, we first demonstrate that, under Supreme Court precedent that

Defendants do not address, the injury-in-fact requirement is easily satisfied here.

A. The Complaint Properly Alleges Injury-In-Fact

The injury alleged by Baltimore is simple and commonplace – it is financial. See, e.g., Compl. ¶

70 (“The damages and costs to Baltimore of the foreclosures caused by Defendants’ discriminatory

lending practices . . . are in the tens of millions of dollars.”). The complaint identifies several categories

of financial harm, including reduced property tax revenues, reduced real estate transfer tax revenues,

increased spending on police and fire protection, increased spending to secure foreclosed homes that are

abandoned, increased spending to rehabilitate vacant, deteriorating homes, increased spending to process

foreclosures, and increased spending to assist City residents who have lost or are in danger of losing

their homes to foreclosures. See id. ¶¶ 1, 18-20, 66.

5

As Defendants acknowledge, prudential standing requirements do not apply because Congress has extended

standing under the Fair Housing Act to the limits of Article III. See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363,

372 (1982); Gladstone, 441 U.S. at 109, 115; Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209, 212 (1972); Defs.’

Br. at 10 n.3.

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The Supreme Court has held that a less specific complaint that merely implies these kinds of injuries satisfies the injury-in-fact requirement. In Gladstone, a municipal corporation sued two local real estate companies and their employees for racial steering6 in violation of the Fair Housing Act. See 441 U.S. at 93-94. The Village alleged that it “has been injured by having [its] housing market . . . wrongfully and illegally manipulated to the economic and social detriment of the citizens of [the] village.” Id. at 95 (brackets and ellipsis in original; quotation marks omitted). Drawing inferences from this allegation, the Supreme Court held that the Village had alleged an injury sufficient to support standing in large part because “prices may be deflected downward” by the alleged unlawful acts and “[a] significant reduction in property values directly injures a municipality by diminishing its tax base.” Id. at 110-11; see also Pennsylvania v. New Jersey, 426 U.S. 660, 663-64 (1976) (per curiam) (assuming sub silentio that reduced tax revenue is an injury-in-fact and limiting standing inquiry to causation).
Numerous lower court opinions likewise demonstrate that allegations like those made by Baltimore easily show injury-in-fact. The Seventh Circuit has held that Fair Housing Act violations by real estate professionals “cause[] a destabilization of the community and a corresponding increased burden on the City [of Chicago] in the form of increased crime and an erosion of the tax base.” City of Chicago v. Matchmaker Real Estate Sales Ctr., Inc., 982 F.2d 1086, 1095 (7th Cir. 1992). Citing Gladstone, the court held that these burdens were injuries that conferred standing. See id. 1094-95. The Seventh Circuit reiterated this holding in Village of Bellwood v. Dwivedi, 895 F.2d 1521 (7th Cir. 1990), where Judge Posner recognized that the issue was “settled” by Gladstone and emphasized the Supreme Court’s reliance on an “injury . . . to the tax base.” Id. at 1525. The Sixth Circuit has also held under the FHA that an injury to a city’s tax base provides standing, see Heights Cmty. Congress v. Hilltop

6

“[I].e., directing prospective homebuyers interested in equivalent properties to different areas according to their

race.” Gladstone, 441 U.S. at 94.

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Realty, Inc., 774 F.2d 135, 138-39 (6th Cir. 1985), as have courts in non-FHA cases, see Warren County v. State of North Carolina, 528 F. Supp. 276, 282 (E.D.N.C. 1981) (finding injury-in-fact where county’s tax base could be affected by opening of toxic waste dump); Sch. Dist. of Kansas City v. State of Missouri, 460 F. Supp. 421, 437-38 (W.D. Mo. 1978) (finding injury-in-fact where school district’s tax base allegedly was reduced by segregation in surrounding communities).
It is therefore well-established that Baltimore’s allegations of injury to its property tax base and related financial harms satisfy the injury-in-fact requirement of Article III.
B. Defendants’ Contrary Arguments Ignore Settled Law and the Allegations of the Complaint
Defendants ignore the cases demonstrating that the type of injury alleged by Baltimore establishes injury-in-fact. They instead proffer three unpersuasive reasons why Baltimore has supposedly failed to adequately allege injury-in-fact.
First, Defendants assert that the City might conceivably have provided more details of its injuries on a property-by-property basis. See Defs.’ Br. at 13. This ignores the allegations identifying the number of foreclosures on Wells Fargo loans in African-American neighborhoods and alleging injury based on these foreclosures. See Compl. ¶¶ 38, 65-66, 70. More fundamentally, there is no requirement that a complaint include such a detailed breakdown of a plaintiff’s injury. As the Supreme Court held in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992), “general factual allegations of injury” adequately support standing at the pleading stage because it is presumed that they “embrace those specific facts that are necessary to support the claim.” Id. at 561. Indeed, nothing in Gladstone or the other cases discussed above holding that a city’s financial injury establishes injury-in-fact requires the extent of that injury to be quantified to any degree or alleged on a property-by-property basis in the complaint; rather, only the fact of the injury need be alleged. The sole case Defendants rely on here, Warth v. Seldin, 422
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U.S. 490 (1975), simply requires a plaintiff to allege an actual, non-speculative interest in the subject of the alleged injury. See id. at 508. Thus, for example, Baltimore may not sue over an injury to Annapolis’ tax revenues. But it is self-evident that Baltimore has a concrete interest in its own funds, and those funds are the subject of the injury at issue here.
Defendants’ argument also fails because significant information that they claim Baltimore must include in the complaint is under Defendants’ exclusive control. This includes the identification of each Wells Fargo loan to an African American and in an African-American neighborhood that has been foreclosed on, see Compl. ¶ 38, as well as the practices applied by Wells Fargo in underwriting those particular loans. Only after these and related facts are adduced through discovery will Baltimore be able to definitively identify the exact Wells Fargo loans and properties responsible for its injury.
Second, Defendants contend that Baltimore has not really alleged any injury at all because (based on documents outside the complaint that are not properly considered here, see sections II.B.2, II.C.1, infra) its property values and property tax revenues have grown in recent years. See Defs.’ Br. at 15. This argument has no merit. Even accepting Defendants’ premise, if Baltimore’s revenues are rising less than they would absent Wells Fargo’s discriminatory acts, then the City has suffered an economic injury that supports standing. See, e.g., Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 615 (6th Cir. 2004) (finding injury-in-fact where plaintiffs alleged they were paid “less than they otherwise would have” been but for illegal conduct). The City’s injury is the difference between actual revenues and the revenues the City ought to have received. See id. at 618 (damages are “the difference between what they earned and what they would have earned”). Wells Fargo’s logic would mean that any company with a year-to-year increase in profits would lack standing to bring any suit against anyone premised on an economic injury. Not surprisingly, Defendants cite no case law in support of this novel
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view of standing. Moreover, they fail to account for the City’s increased expenditures that the complaint alleges are also caused by foreclosures on Wells Fargo’s discriminatory loans, including the costs of increased policing and of processing foreclosure filings, among others. See Compl. ¶¶ 18-20, 66.
Third, Defendants assert that Baltimore’s allegations are too “vague” to constitute injury-in-fact. Defs.’ Br. at 13. Even if the cases discussed above did not require rejection of this assertion – which they do – Baltimore would still have alleged a sufficiently concrete injury because it alleges that “[d]amages suffered by the City of Baltimore as a result of Wells Fargo’s foreclosures are fully capable of empirical quantification.” Compl. ¶ 67. Baltimore supports this allegation by citing and discussing three studies that analyze the financial costs to cities of foreclosures and demonstrate that these costs can be quantified. See id. ¶¶ 67-69; Decl. at Exs. 1-3. Each uses sophisticated statistical and modeling techniques to isolate and calculate the financial harm to a major city of individual abandoned and foreclosed homes.7 The studies establish that Baltimore’s allegation that its injury can be quantified is a “plausible” allegation, at the very least. Baltimore thus alleges a concrete, quantifiable financial injury.
Defendants fail to address these allegations. Their contention that Baltimore’s pocketbook injury is too “vague” rests instead on the inapposite and unpublished case of AtlantiGas Corp. v. Columbia Gas Transmission Corp., 210 Fed. Appx. 244 (4th Cir. Dec. 19, 2006) (per curiam).8 See Defs.’ Br. at 13-14. The plaintiff there was entitled to payments from and based on the future earnings of a non-party. See AtlantiGas Corp., 210 Fed. Appx. at 246. It argued that the defendants’ actions reduced the non-party’s

7

See, e.g., Decl. Ex. 1 at 58 (“In this article, we measure the impact of foreclosures on nearby property values by

using a unique database that combines data on 1997 and 1998 foreclosures with data on neighborhood characteristics and

more than 9,600 single-family property transactions in Chicago in 1999. Even after controlling for over 40 characteristics of

properties and their respective neighborhoods, we find that foreclosures of conventional single-family loans have a

significant impact on nearby property values.”).

8

Defendants’ citation to AtlantiGas Corp. is in seeming violation of Local Rule 32.1 of the Fourth Circuit, which

limits citation of pre-2007 unpublished decisions as precedents to situations where “there is no published opinion that would

serve as well . . . .” There is no shortage of published opinions addressing the injury-in-fact requirement for standing.

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earnings, and therefore the future payments it was due. See id. at 250-51. The court viewed this as too “conjectural and abstract” to constitute an injury-in-fact because it was given no way to determine “what diminution in revenues, if any, is attributable to [the non-party] and what diminution, if any, is attributable to” the defendants. Id. at 251. Instead, it “would be forced to guess.” Id. Here, however, there will be no need to “guess” at Baltimore’s damages when it is the proper point in the case to calculate them. Discovery will show exactly which foreclosures on Wells Fargo loans were the product of discriminatory and unlawful lending practices and the precise financial injury to the City caused by those specific foreclosures. Baltimore plainly alleges that this injury can be quantified and supports this allegation by incorporating studies so demonstrating.
Moreover, any difficulty in quantifying a plaintiff’s damages goes only to whether they are determinable with “reasonable certainty” and may therefore be awarded after a finding of liability, e.g., Long v. Ringling Bros.-Barnum & Bailey Combined Shows, Inc., 882 F. Supp. 1553, 1562 (D. Md. 1995), or are instead “too speculative for a trier of fact to award,” Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Corp., 65 F.3d 1113, 1126 (4th Cir. 1995). Defendants cite no valid precedent for the proposition that difficulty in fixing damages goes to standing. Nor do they provide any authority for the proposition that it affects injunctive or declaratory relief.9

9

Defendants also briefly attempt to argue that the discriminatory lending alleged by Baltimore could only have

resulted in the City “receive[ing] more property tax revenue that it should have” and having lower costs. Defs.’ Br. at 14-15.

Although this speculative argument is hard to follow, what is clear is that it fails to “construe the factual allegations of the

complaint in the light most favorable to the plaintiff,” as the Court must. Schweikert, 2008 WL 853005, at *2. Wells Fargo

instead draws the least favorable conclusion it can from the allegations, and does so based on assertions about how real estate

markets purportedly functions that are properly the subject of expert analysis (if they are even relevant). It is much more

reasonable to conclude, as the complaint does, that Defendants’ discriminatory lending causes African Americans to lose

their homes to foreclosures in disproportionately high numbers, and that this harms, not helps, the City by causing lower

revenues and higher costs. See, e.g., Compl. ¶¶ 46, 66. This must be taken as true. See, e.g., Warth, 422 U.S. at 501.

Moreover, Defendants’ here cite only to DaimlerChrysler v. Cuno, 547 U.S. 332, 344 (2006), which concerned the inapposite

subject of taxpayer standing to challenge governmental tax policy.

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II. THE COMPLAINT SATISFIES THE CONSTITUTIONAL TRACEABILITY REQUIREMENT FOR STANDING The Constitution also requires that “that the injury fairly can be traced to the challenged
action . . . .” American Canoe, 326 F.3d at 517 (citation and quotation marks omitted). Defendants contend that this requirement is not met for two reasons – because third parties are involved in foreclosures and their aftermath, and because the injury is purportedly self-inflicted through tax lien sales. Neither reason survives scrutiny. We address both after first explaining why, as with injury-infact, Gladstone demonstrates that the complaint satisfies the traceability requirement for standing.
A. The Complaint Properly Alleges Traceability Baltimore straightforwardly alleges that its financial injuries are traceable to Wells Fargo’s discriminatory lending practices. The City alleges that Wells Fargo intentionally engages in reverse redlining by targeting predatory lending practices – including higher pricing, failing to properly consider borrowers’ ability to repay their loans, and more – at African Americans and residents of Baltimore’s African-American neighborhoods. See, e.g., Compl. ¶¶ 26, 44-62. These intentional, discriminatory, and unlawful practices “increase[] the likelihood of foreclosure,” id. ¶ 49, and have “resulted in a disproportionately high rate of foreclosure on loans to African Americans and in Baltimore’s majority African-American neighborhoods,” id. ¶ 64; see also id. ¶¶ 4-6, 52, 54, 57, 60. As set forth above, the complaint alleges that foreclosures injure the City. See id. ¶¶ 66, 70. Baltimore further alleges that the foreclosures resulting from Defendants’ unlawful reverse redlining “are particularly injurious because they are concentrated in distressed and transitional neighborhoods . . . .” Id. ¶ 65. The City supports these allegations by incorporating three studies establishing that urban foreclosures cause specific, empirically quantifiable financial harms to a city government. See id. ¶¶ 67-69; Decl. at Exs. 1-3. Thus, Baltimore’s complaint alleges that Wells Fargo’s discriminatory acts cause there to be many more
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foreclosures on African Americans and in African-American neighborhoods than there otherwise would be and that these foreclosures cost the city money.
While these allegations are both direct and supported by rigorous social science, the Supreme Court in Gladstone held that the traceability of an injury to a city’s purse is satisfied by much more tenuous and contingent connections, and without scientific backing. The Court reasoned that racial steering could ultimately bring about what Judge Posner later described as “tipping,” Dwivedi, 895 F.2d at 1525, if enough prospective buyers were led to buy homes in other towns and “if perceptible increases in the minority population directly attributable to racial steering precipitate an exodus of white residents,” Gladstone, 441 U.S. at 110. This could then result in a diminished tax base. See id. at 11011. The Court noted that while the defendants’ market share “may be relevant to the establishment of the necessary causal connection between the alleged conduct and the asserted injury,” this was a subject for a later stage of the litigation after discovery. Id. at 114 n.29. At the pleading stage, the plausibility of the connection was sufficient to maintain standing.
Baltimore’s traceability allegations are narrower and better-supported than those held sufficient in Gladstone. Among other differences, causation in Gladstone required a widespread impact on many people to bring the town to the tipping point, after which an injury might occur. But here, Baltimore alleges that each individual foreclosure that the evidence traces to Wells Fargo’s discriminatory acts is the cause of an injury because the studies incorporated in the complaint show that each additional foreclosure has specific and demonstrable costs. Accordingly, the complaint adequately alleges traceability.
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B. Traceability Is Not Undermined By the Role of Third Parties Ignoring Gladstone, Wells Fargo first objects to traceability by asserting that causation is too attenuated because third parties are involved in foreclosures and their aftermath. See Defs.’ Br. at 11-12, 18-20. The whole of this argument is based on unfounded speculation that factors other than their discriminatory loans – such as a borrower’s illness or potential purchasers’ concerns about a weakening economy – might have caused the City’s injuries. See id. Such speculation says nothing, of course, about what actually caused those injuries, as to which the allegations of the complaint must be taken as true. Any alternative scenarios that Defendants might dream up are simply irrelevant, and there is no requirement that a complaint explicitly negate them. From their speculations about third parties, Defendants conclude that no foreclosure can ever be traced to predatory practices targeted at a minority neighborhood, and that no injury suffered by the City can ever be traced to a foreclosure. In addition to the speculative nature of Defendants’ contentions about third parties, their argument suffers from three fatal flaws. First, Defendants repeat the error of ignoring the allegations of the complaint that plausibly support each part of the causal chain. Second, Defendants try to evade these allegations through judicial notice of their imagined view of the role third parties supposedly play in every possible foreclosure scenario. Federal Rule of Evidence 201(b) not does permit it, however. Third, and most important, Defendants misrepresent the law regarding traceability. Defendants’ actions need not be the sole cause or even the sole significant cause of Baltimore’s injuries to support traceability. So long as it is likely that Defendants’ illegal acts contribute to the injuries, traceability is satisfied regardless of whether third parties also play a role. Defendants also misrepresent additional law they cite with reference to the costs to the City of anticipating and responding to increased crime.
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Before addressing those issues in full, we note the far-reaching implications of Wells Fargo’s view of standing, which further demonstrate its fallacy. Wells Fargo’s approach to traceability would effectively eviscerate all lending discrimination laws, including the FHA, the Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.), and others. No one – not a homeowner, a municipality, or anyone else – would ever have standing to challenge steering, reverse redlining, or other discriminatory practices that affect a city or a neighborhood. A defendant could always secure immunity by speculating that a different company or some other factor might have played a role in causing the harm or, as Defendants do here, that no injury would have occurred had the real estate market been stronger or the local property tax rate lower. See Defs.’ Br. at 12, 39, 40. Gladstone and its progeny plainly reject any such proposition, however, and it “would be strange indeed if” a discriminatory lender “were protected from suit simply by virtue of the fact that others were also engaging in the illegal activity.” American Canoe, 326 F.3d at 520. The fact that every court to consider the issue has held that reverse redlining violates the Fair Housing Act and is actionable likewise shows that Defendants present a fundamentally flawed understanding of the Constitution’s traceability requirement. See, e.g., Barkley v. Olympia Mortgage Co., Nos. 04-CV-875 et al., 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007); Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000).
1. Defendants Ignore the Allegations of the Complaint Defendants premise their assertions about the role of third parties by mischaracterizing Baltimore’s injuries as falling into three categories: property tax losses; responding to increased incidents of crime; and the expenditure of funds on rehabilitation. See, e.g., Defs.’ Br. at 12. The injuries alleged in the complaint actually include multiple types of injuries, most of which Defendants seek to obscure. These include reduced property tax revenues, reduced real estate transfer tax revenues,
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increased spending on police and fire protection in anticipation of the likely consequences of foreclosures, increased spending to secure abandoned homes, increased spending to rehabilitate homes, increased spending to process foreclosures, and increased spending to provide assistance to City residents. See Compl. ¶¶1, 18-20, 66. Defendants focus on their self-described categories to the exclusion of the injuries actually alleged.
Defendants also ignore the allegations showing that foreclosures do, in fact, cause these injuries regardless of any role played by third parties and that the injuries can be quantified. See Compl. ¶¶ 1820, 66-67. These allegations are well supported by the studies cited in the complaint, which provide a sound, empirical basis to show direct, quantifiable consequences of Wells Fargo’s illegal acts. See id. ¶¶ 67-69. They establish that the connection between foreclosures caused by Wells Fargo’s discriminatory acts and Baltimore’s injuries is plausible.
The plausibility of the allegations supporting the other part of the causal chain – between a predatory loan that violates the Fair Housing Act and a foreclosure – is facially apparent. Losing a home to foreclosure can certainly be traced to the practices alleged in the complaint, e.g., failing to consider African-American borrowers’ ability to repay a loan, misleading African-American borrowers about the much higher payments they will face after the “teaser rate” on a 2/28 or 3/27 adjustable rate mortgage expires, or stripping African-American borrowers’ equity through repeated and unnecessary refinancings. See, e.g., id. ¶ 26.
2. Defendants’ Argument About the Role of Third Parties Is Based Entirely On Purported “Facts” of Which the Court May Not Take Judicial Notice
Instead of addressing Baltimore’s allegations, Defendants try to go outside the complaint by seeking judicial notice of their imagined view of the role of third parties in causing Baltimore’s injuries. Defendants offer no source material whatsoever in support of these “facts.” They do not even
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acknowledge that they are asking for judicial notice, but that is plainly what they seek. The Federal Rules of Evidence prohibit it:
A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b). Defendants’ “facts” are “subject to reasonable dispute” and are not “generally known” with Maryland.10 This renders judicial notice improper. First, the plausible allegations of the complaint, discussed above, show that the relevance of third parties is, at the least, “subject to reasonable dispute.” Wells Fargo may later attempt to raise the role of third parties as a defense to liability based on evidence, but their attempt to do so through judicial notice is an impermissible “effort to bootstrap standing analysis to issues that are controverted on the merits.” Southern California Edison Co. v. FERC, 502 F.3d 176, 180 (D.C. Cir. 2007) (quoting Public Citizen v. FTC, 869 F.2d 1541, 1549 (D.C. Cir. 1989)); see North Carolina Shellfish Growers Ass’n v. Holly Ridge Assocs., 278 F.2d 654, 665 (E.D.N.C. 2003) (“transform[ing] standing analysis into a determination of ultimate liability [] has been specifically rejected by the Fourth Circuit”). Second, the role of third parties in lending, foreclosures, and municipal revenues is not “generally known” by the populace of Maryland, as required for judicial notice under Rule 201(b)(1). For example, Defendants’ argument requires the Court to hold that the Maryland State Department of Assessments & Taxation’s operations are “generally known” because their argument turns in part on that department’s role in setting property taxes. See Defs.’ Br. at 12. Yet relatively few probably even know of this department’s existence. Such matters must be established through evidence, not judicial notice. See, e.g., Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211, 218-19 (4th Cir. 1993) (reversing

10

Part (2) of Rule 201(b) is not at issue because Defendants do not provide any sources in support of their “facts.”

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district court for taking “judicial notice of the facts that many volunteer fire departments operate in Maryland without governmental intervention at all and that all volunteer fire departments operate in a gray area as to the functions they provide”); Carley v. Wheeled Coach, 991 F.2d 1117, 1126 (3d Cir. 1993) (reversing district court for taking judicial notice of “rollover problems of vehicles having a high center of gravity;” “[m]ost people probably know little, if anything, about how high centers of gravity cause vehicular accidents”); Cardio-Med. Assocs., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75-76 (3d Cir. 1983) (reversing district court for taking judicial notice of factors considered by patients when choosing a doctor).
Judicial notice about how third parties make foreclosure-related decisions may not be invoked here, and the Court may not rely on Defendants’ purported and unfounded “facts” about such decision making in considering the instant motion.
3. Defendants’ “Facts” About Third Parties, Even if They Could Be Properly Noticed, Would Not Defeat Traceability a. It Is Well-Established That the Traceability Requirement May Be Satisfied Where Third Parties Play a Role In Causing a Plaintiff’s Injuries
Even if Defendants’ “facts” about third parties could be considered, those “facts” would not defeat standing because Defendants misconstrue the legal meaning of traceability. Defendants insist that the role of third parties breaks the connection between the discriminatory, unaffordable loans and Baltimore’s injuries, but this “wrongly equates injury fairly traceable to the defendant with injury as to which the defendant’s actions are the very last step in the chain of causation.” Bennett v. Spear, 520 U.S. 154, 168-69 (1997) (quotation marks and citation omitted). As long as there is a “likelihood” that the injury will result, the traceability requirement is met regardless of the role of third parties. Clinton v. City of New York, 524 U.S. 417, 432 (1998) (citations omitted).
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The Supreme Court’s Gladstone decision and the other Fair Housing Act cases discussed above demonstrate that Defendants’ view of how third parties impact traceability analysis is wrong. See section I.A, supra. Each case connects unlawful steering to a municipality’s financial injuries via the decision making of prospective homebuyers and of residents, and upholds standing.
Clinton, Bryant v. Yellen, 447 U.S. 352 (1980), and United States v. SCRAP, 412 U.S. 669 (1973), likewise refute Defendants’ view of the law. In each, private parties challenged acts of the federal government, and traceability was satisfied because third parties were likely to respond to those acts in a manner that would injure the plaintiffs. Clinton considered a constitutional challenge to the Line Item Veto Act. The plaintiff alleged that people who might otherwise sell their business to it were not likely to because the President had vetoed a capital gains tax advantage the sellers would otherwise receive. See 524 U.S. at 432. The Court found traceability “easily satisfied. ” Id. at 433 n.22. Bryant addressed the federal government’s position that 233,000 acres held by 800 landowners could not be irrigated under a federal statute. See 447 U.S. at 365-66 & n.15. The Court held that intervenors who wanted to buy the land cheaply had standing. See id. at 366-68. If the land could not be irrigated, it was “likely” that the 800 owners would choose to sell it at low prices. Id. at 368. In SCRAP, people who used Washington-area lands for recreation challenged a federal order permitting railroads to increase rates. See 412 U.S. at 678, 685. Their standing argument was that “a general rate increase would allegedly cause an increased use of nonrecyclable commodities as compared to recyclable goods, thus resulting in the need to use more natural resources to produce such goods, some of which might be taken from the Washington area, and resulting in more refuse that might be discarded in national parks in the Washington area.” Id. at 688. The Court was skeptical of this “attenuated line of causation,” but held it sufficient at the pleading stage. Id. at 689-90; see id. at 689 (“we deal here simply with the pleadings”).
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Though Wells Fargo relies heavily on Allen v. Wright, 468 U.S. 737 (1984), Allen reflects the

same kind of traceability analysis as Gladstone, Clinton, Bryant, and SCRAP. In Allen, parents of public

school children challenged the IRS’s guidelines for determining whether a private school was

nondiscriminatory and tax-exempt. See 468 U.S. at 739. They alleged that lax guidelines increased the

funds available to segregated private schools, reducing the number of white students in public schools,

and thereby reducing their children’s opportunity to receive a desegregated education. See id. at 745-46,

752-53. Even though this chain rested on the decisions of “numerous third parties (officials of racially

discriminatory schools receiving tax exemptions and the parents of children attending such schools),”

the Court held that the injury “would be fairly traceable to unlawful IRS grants of tax exemption [] if

there were enough racially discriminatory private schools receiving tax exemptions in respondents’

communities for withdrawal of those exemptions to make an appreciable difference in public school

integration.” Id. at 758-59. Standing was only rejected because plaintiffs had “made no such

allegation,” alleging instead only that four individual schools across seven states might lose an exemption under proper guidelines.11 Id. at 743, 758 & n.23. Allen thus focused on the “chain as a

whole,” like any other traceability case, and did not shortcut its analysis through a rule that the chain is automatically broken if third parties have some significant role in it.12

Here, the role of third parties fully supports the chain as a whole because it is likely that they

have acted and will continue to act to connect Wells Fargo’s discriminatory, unaffordable loans to

11

Standing for the tire manufacturers was rejected for a comparable reason in Public Citizen, Inc. v. NHTSA, 489 F.3d

1279 (D.C. Cir. 2007), also cited by Defendants. See Defs.’ Br. at 17. The problem with standing was not that third parties

were involved in the “chain of causation,” but rather that the links in the chain were not plausible. See 489 F.3d at 1290-91.

12

Moreover, Allen rested heavily on the fact that the plaintiffs challenged federal policy, bringing separation of powers

concerns to the fore. See id. at 759-61. No such challenge is made here, minimizing separation of powers concerns. See

Spann v. Colonial Village, Inc., 899 F.2d 24, 30 (D.C. Cir. 1990) (Ruth B. Ginsburg, J.) (distinguishing Allen as type of case

that “implicate[s] most acutely the separation of powers”). Separation of powers concerns recede from standing analysis

even more where, as here, Congress has extended standing to the limits of Article III. See Center for Auto Safety v. NHTSA,

793 F.2d 1322, 1337 (D.C. Cir. 1986); id. at 1336 (identifying Fair Housing Act as the “premier example”).

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Baltimore’s injuries. It is likely that a victim of reverse redlining will suffer default and foreclosure, and, as the studies cited in the complaint show, it is likely that those involved in the aftermath of a foreclosure will act such that the City suffers specific, quantifiable harm. The Supreme Court’s traceability precedents require no more.
Fourth Circuit precedents further show that Wells Fargo misstates traceability law. Wells Fargo asserts that standing is defeated, and it is absolved of responsibility for Baltimore’s injuries, by the lawful acts of third parties that are set in motion by Wells Fargo’s Fair Housing Act violations. Wells Fargo argues in each of its imagined scenarios that Baltimore must show that Wells Fargo “alone” was the sole cause of the City’s injury, see Defs.’ Br. at 11-12, but even the unlawful acts of third parties do not break causation as long as the defendant’s acts likely contribute to the injury. In American Canoe, alleged polluters disputed standing by presenting expert testimony that the plaintiffs’ injuries could likely be traced to other polluters. See id. at 519-20. The court nonetheless found traceability because “defendants’ discharges still potentially harmed” the plaintiffs. Id. at 520. Judge Luttig observed that “[i]t would be strange indeed if polluters were protected from suit simply by virtue of the fact that others were also engaging in the illegal activity.” Id. See also NRDC, Inc. v. Watkins, 954 F.2d 974, 980 (4th Cir. 1992) (though “highly probable” that river was polluted by third parties, traceability satisfied “if it can be shown that [defendant’s] discharge contributes to the pollution”) (emphasis in original); Piney Run Pres. Ass’n v. County Comm’rs of Carroll County, 268 F.3d 255, 264 (4th Cir. 2001) (reiterating Watkins holding); South Carolina Wildlife Fed’n v. South Carolina Dep’t of Transp., 485 F. Supp. 2d 661, 670 (D.S.C. 2007) (“Plaintiffs do not have to prove that defendants’ actions are the only cause of their injuries” to show traceability).
Baltimore’s traceability allegations need not even conclusively establish Wells Fargo’s own role
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in causing the injuries. Reversing a summary judgment dismissal, Watkins held that traceability need not be shown “to a scientific certainty” and that the Supreme Court’s “‘fairly traceable’ requirement . . . is not equivalent to a requirement of tort causation.” Id. at 980 n.7 (citation and quotation marks omitted); see South Carolina Wildlife Fed’n, 485 F. Supp. at 670 (same). These rules give effect to the Supreme Court’s holding that a plaintiff does not have to “negate . . . speculative and hypothetical possibilities” to satisfy Article III. Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 78 (1978) (rejecting speculative challenge to causal link as “not responsive”).
Accordingly, standing doctrine does not require Baltimore to show that factors or third parties other than or in addition to Wells Fargo do not play any significant role in causing Baltimore’s injuries.13 The complaint need not establish, to cite just some of Wells Fargo’s speculative possibilities, that an illness, a weakening economy, the state government, a tax lien, or gangs were irrelevant. See Defs.’ Br. at 11-12, 18-20. Rather, Baltimore fully supports standing by plausibly alleging that Wells Fargo’s acts likely contribute to its injuries.
b. Wells Fargo’s Additional Traceability Arguments About Baltimore’s Increased Expenditures For Police and Fire Protection Are Meritless
Defendants add two additional objections to traceability for what they term “crime theory” damages. Both reflect a misreading of the complaint by assuming that crime-related damages only concern the need to respond to specific criminal acts. But the foreclosures and vacancies caused by

13

To the extent Frank Krasner Enters., Ltd. v. Montgomery County, 410 F.3d 230 (4th Cir. 2005) (“Krasner”), holds

that traceability is cut off if a third party plays a role, as Defendants assert, it is not a valid precedent in the Fourth Circuit.

See Defs.’ Br. at 16, 17. The Fourth Circuit considered parallel facts in Shanty Town Assocs. v. EPA, 843 F.2d 782 (4th Cir.

1988), and held traceability satisfied notwithstanding the comparable role of a third party. Krasner did not consider Shanty

Town and found otherwise, but the earlier decision is the law of the circuit. See McMellon v. United States, 387 F.3d 329,

334 (4th Cir. 2004) (en banc) (“when there is an irreconcilable conflict between opinions issued by three-judge panels of this

court, the first case to decide the issue is the one that must be followed, unless and until it is overruled by this court sitting en

banc or by the Supreme Court”). Of course, if Krasner stands for the rule Defendants say it does, it is also at odds with

Supreme Court precedent.

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Defendants’ illegal practices force the City to devote increased law enforcement resources as a prophylactic measure. One of the studies discussed in the complaint notes a 6.7% rise in violent crime in neighborhoods with heightened foreclosure rates. See Decl. Ex. 1 at 59. This demonstrates that it is reasonably foreseeable that vacant and abandoned homes may become centers of illicit activities. Baltimore must therefore devote significant resources to deterring, not just responding to, a rise in crime.
Both of Defendants’ arguments are also legally meritless. Defendants first assert that where criminal acts play a role in a causation chain, the chain is automatically broken. See Defs.’ Br. at 19 (relying on Alston v. Advanced Brands & Importing Co., 494 F.3d 562 (6th Cir. 2007)). But if such were the rule, then the Fourth Circuit has repeatedly failed to recognize an obvious defect in its own subject matter jurisdiction14 in cases like Gantt v. Security, USA, Inc., 356 F.3d 547 (4th Cir. 2004) (permitting employee’s tort claim to proceed against employer based on kidnapping and rape of employee by third party), Crinkley v. Holiday Inns, Inc., 844 F.2d 156 (4th Cir. 1988) (affirming verdict in favor of hotel guests against owners and operators of hotel based on assault and theft by third parties), and Pressly v. Hutto, 816 F.2d 977 (4th Cir. 1987) (reversing summary judgment dismissal of inmate’s 42 U.S.C. § 1983 claim against prison guard based on assault by another prisoner). Whatever Alston means in the Sixth Circuit, standing is not lacking in the Fourth Circuit merely because the causation chain includes third parties’ unlawful acts.
Defendants also rely on two cases applying the Delaware and Illinois “municipal cost recovery rule” to preclude recovery by municipalities of costs associated with gun violence caused by the allegedly tortious manufacture and distribution of guns. See Defs.’ Br. at 19. That rule does not apply here. Indeed, Defendants’ cases cite City of Flagstaff v. Atchison, Topeka & Santa Fe Ry. Co., 719 F.2d

14

A federal court has a “duty to inquire, sua sponte, whether a valid basis for [Article III] jurisdiction exists, and to

dismiss the action if no such ground appears.” In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998).

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322 (9th Cir. 1983) (applying Arizona tort law), as the “leading authority” and “seminal case” on this state law rule, Baker v. Smith & Wesson Corp., 2002 WL 31741522, at *4 (Del. Super. Ct. Nov. 27, 2002); City of Chi. v. Beretta U.S.A. Corp., 821 N.E.2d 1099, 1144 (Ill. 2004), and City of Flagstaff holds that “a governmental entity may . . . recover the costs of its services . . . . where it is . . . required to effect the intent of federal legislation.” 719 F.2d at 324 (citation omitted). Congress has determined that it is required here by providing for the recovery of damages without limitation in the Fair Housing Act. See 42 U.S.C. § 3613(c). In addition, Defendants cite no authority for the proposition that this state law rule can limit Article III standing, and other state law cases hold the rule inapplicable to parallel gun violence claims. See City of Cincinnati v. Beretta U.S.A. Corp., 768 N.E.2d 1136, 1149-50 (Ohio 2002); City of Boston v. Smith & Wesson Corp., 2000 WL 1473568, at *7-8 (Mass. Super. 2000).
C. Baltimore’s Injuries Are Not Self-Inflicted Through Tax Lien Sales Defendants also assert that Baltimore’s injuries are self-inflicted and therefore not traceable to Defendants’ own discriminatory practices. See Defs.’ Br. at 20-23. This argument is based entirely on Defendants’ request for judicial notice of their deeply flawed “facts” about tax lien sales that are derived from documents outside of and not referenced in the complaint. See id. at 3 n.1, 20-23. As an initial matter, Defendants ignore the allegations of the complaint, and it is fundamental that the complaint’s allegations must be accepted as true. See, e.g., Warth, 422 U.S. at 501. As shown above, the complaint plainly alleges that a disproportionate number of foreclosures on African Americans and in African-American neighborhoods are caused by Wells Fargo and that these foreclosures – regardless of any caused by other mortgage lenders, Baltimore, or anyone else – cause significant financial harm to the City. See, e.g., Compl ¶¶ 35-40, 64-66, 70. Defendants’ assertions about other foreclosures are irrelevant.
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Defendants “self-inflicted” argument fails for two additional reasons addressed in greater detail immediately below. First, even if tax liens were somehow relevant, Defendants’ assertions about them are not subject to judicial notice under Fed. R. Evid. 201(b). Second, even if the Court could take judicial notice of Defendants’ “facts” about tax lien sales, it would not defeat traceability.
1. Defendants’ “Self-Inflicted” Argument Is Based Entirely On Purported “Facts” About Tax Lien Sales Of Which the Court May Not Take Judicial Notice
Defendants assert that Baltimore is responsible for the great majority of Baltimore’s foreclosures because it conducts tax lien sales, and that this renders its injuries self-inflicted and defeats standing. Defendants seek judicial notice of the truth of these propositions by citing ten exhibits, most of which are newspaper articles. See Defs.’ Br. at 3 n.1, Exs. G-J, M, N, Z. Federal Rule of Evidence 201(b) clearly prohibits notice of these assertions, however, because they are “subject to reasonable dispute” and are not derived from “sources whose accuracy cannot reasonably be questioned.”15
As set forth above, Wells Fargo’s assertions about tax lien sales are wholly undermined by a review of state law, which requires and controls such sales. See supra at 12-14. They are also undermined by documents such as Judge Cannon’s opinion, which may not be taken as true at this stage but demonstrate that discovery will further refute Defendants’ claims. See id. These considerations establish that Defendants have thoroughly misrepresented the truth about tax liens and that there is, at the least, a “reasonable dispute” over the accuracy of Wells Fargo’s “facts.” This alone defeats judicial notice and shows the need to put Wells Fargo to real proof.
Likewise, Wells Fargo does not rely on sources “whose accuracy cannot reasonably be questioned,” as also required by Rule 201(b). Newspapers routinely make errors, yet Defendants rely on

15

Defendants do not claim that the details about the tax liens on which they rely are “generally known.”

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them for the whole of their argument. Newspapers may be judicially noticed for general background information (as in the cases cited by Defendants, discussed immediately below) and items like stock prices, but not to resolve disputed facts central to a case. See, e.g., Greenhouse v. MCG Capital Corp., 392 F.3d 650, 655 n.4 (4th Cir. 2004) (published stock prices); but see State v. Canady, 431 S.E.2d 500, 501-02 (N.C. Ct. App. 1993) (under parallel state rule, court could not take judicial notice of newspaper report of time of sunset and phase of the moon because newspaper is not of indisputable accuracy).
Moreover, judicial notice of documents may not be used to displace the traditional judicial processes for resolving factual disputes with evidence, especially when the factual disputes involve critical issues. The two cases relied on by Defendants to support their claim for judicial notice do not remotely suggest otherwise. See Defs.’ Br. at 3 n.1. In Logan v. Denny’s, Inc., 259 F.3d 558 (6th Cir. 2001), the court took notice of the general fact of the defendant’s historical discrimination problems, but made clear that this was only of background interest – “Defendant’s past record of discrimination is not at issue here.” Id. at 578. In Peters v. Delaware River Port Authority, 16 F.3d 1346 (3d Cir. 1994), the court observed that, “as would be expected,” newspaper articles buttressed the proposition that two states’ delegations to a joint agency acted as economic competitors. Id. at 1356 & n.12. The issue in the case – “whether party affiliation is an appropriate requirement for the effective performance of the position of” head of that agency, id. at 1348 – was quite remote from that general proposition. Logan and Peters are thus both consistent with the rule that the “more critical an issue is to the ultimate disposition of the case, the less appropriate judicial notice becomes.” Pina v. Henderson, 752 F.2d 47, 50 (2d Cir. 1985) (citation omitted).
Because Wells Fargo’s “facts” about tax lien sales are central to their motion to dismiss yet vigorously disputed, the most the Court may do is take notice of the existence of Wells Fargo’s exhibits,
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but not the truth of their content. In Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001), the defendants’ motion to dismiss “rest[ed] almost entirely on factual challenges,” and “defendants’ factual assertions” were the basis for the trial court’s decision to grant the motion. Id. at 688. The circuit court reversed, explaining that the trial court erred by relying on “judicial notice of disputed facts stated in public records,” when it was permitted to notice only the “existence” of those records. Id. at 690 (emphasis in original). The trial court compounded this error by favoring the judicially noticed “facts” over the reasonable inferences that could be drawn from the complaint. See id. Likewise, Hennesy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995), affirmed the district court’s refusal to take judicial notice of the number of employees reported by a company in its own 10-K filing with the SEC. See id. at 1354-55. The issue before the court turned on this very number. See id. The 10-K could be used for cross-examination, but not to bypass normal evidentiary procedures through judicial notice. See id. at 1355.
In short, Defendants’ reliance on judicial notice for its argument about tax liens is entirely misguided and impermissible. If Defendants want to argue about the significance of tax liens, they may only try to do so after discovery and with proper evidence. Their attempt to do so now should be rejected as another “‘effort to bootstrap standing analysis to issues that are controverted on the merits.’” Southern California Edison Co., 502 F.3d at 180.
2. Defendants’ “Facts” About Tax Liens, Even If They Could Be Properly Noticed, Would Not Show That Baltimore’s Injuries Are Self-Inflicted
Defendants’ objection to traceability based on tax liens would fail even if the Court could take judicial notice of their “facts.” If Baltimore were complicit in thousands of foreclosures in recent years – which it was not – it would not constitute the kind of “self-inflicted” injury that can defeat traceability. Rather, it would go only to the calculation of Baltimore’s damages.
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First, an injury can only be self-inflicted so as to preclude standing if the plaintiff’s acts are based on “personal choice.” McConnell v. FEC, 124 S. Ct. 619, 709 (2003). That was precisely the situation in one of the two cases relied by Defendants. See Pennsylvania, 426 U.S. at 664 (injuries to states self-inflicted because “[n]othing required” them to adopt and maintain tax laws that, if rescinded, would eliminate entire injury), cited in Defs.’ Br. at 20. Regardless of the number and impact of foreclosures stemming from tax lien sales, Baltimore’s participation is dictated by state law, as shown above, and is not based on personal choice. See supra at 12-14.
Second, “[s]tanding is not defeated merely because the plaintiff has in some sense contributed to his own injury.” 13 Charles A.Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3521.5 (2008). Rather, “[s]tanding is defeated only if it is concluded that the injury is so completely due to the plaintiff’s own fault as to break the causal chain.” Id. This point is well made by Defendants’ other case. See Public Citizen, Inc. v. NHTSA, 489 F.3d 1279, 1297 n.3 (D.C. Cir. 2007) (injury to organization’s members not self-inflicted; though there are some steps they can take to prevent injury, they cannot control the acts of others that may cause injury), cited in Defs.’ Br. at 20.
Even if the “facts” asserted by Defendants were accepted, the criteria for a “self-inflicted” injury would not be satisfied. The most those facts could show would be that Baltimore bears responsibility for some foreclosures based on tax liens; they would not eliminate Wells Fargo’s responsibility for the many foreclosures that are caused by its own decision to target predatory lending practices at African Americans and African-American communities. Wells Fargo’s responsibility for foreclosures based on discriminatory, unaffordable loans is plainly alleged in the complaint and must be accepted as true. See, e.g., Compl. ¶¶ 64. The most Wells Fargo could say, then, is that Baltimore is responsible for a portion of its diminution in property tax revenues and of the other financial injuries that result from foreclosures.
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It could not say that Baltimore is “completely” responsible for the whole of these losses. The injury is therefore not self-inflicted for purposes of Article III. See St. Pierre v. Dyer, 208 F.3d 394, 402 (2d Cir. 2000) (injury was not self-inflicted, and standing was not lacking, where plaintiff “plainly has alleged that defendants engaged in conduct that contributed to causing his injury”).
What Defendants’ argument really addresses is damages, not standing. If Defendants can show, consistent with the Rules of Evidence, that the City is responsible for certain foreclosures in Baltimore, then their own responsibility for foreclosure-related damages might be reduced. The same could be true if Defendants can show that the proximate cause of foreclosure on a particular loan originated by Wells Fargo was a tax lien for which the City was responsible, and not unlawful terms and conditions for which Wells Fargo was responsible. But these are issues to be examined through discovery and, unless summary judgment is proper, presented to the trier of fact. See id. at 403 (“this is a matter more properly viewed as going to the merits rather than to standing”); cf. Boleski v. American Export Lines, Inc., 385 F.2d 69, 76 (4th Cir. 1967) (discussing situation “where the trier of fact had applied the comparative negligence rule to reduce the plaintiff’s damage award by reason of his contributory negligence”) (emphasis added). They are not susceptible to resolution on a motion to dismiss. III. DISPARATE IMPACT CLAIMS ARE COGNIZABLE UNDER
THE FAIR HOUSING ACT Clear Fourth Circuit precedent holds that disparate impact claims are cognizable under the FHA. See, e.g., Smith v. Town of Clarkton, 682 F.2d 1055, 1065 (4th Cir. 1982) (agreeing with Third, Seventh, and Eighth Circuits that “[p]roof of a discriminatory effect is . . . sufficient to prove a violation of” the FHA). The Fourth Circuit is in accord with every one of the ten other United States Courts of Appeals that have addressed the issue. Wells Fargo nonetheless asks the Court to defy binding precedent and hold that the FHA reaches discriminatory treatment claims and not disparate impact claims. See Defs.’
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Br. at 23-29. Even if the Court had the power to reverse the Fourth Circuit – which it does not – there is no sound justification for doing so.
Defendants’ extraordinary request rests on their deeply flawed interpretation of Smith v. City of Jackson, 544 U.S. 228 (2005), which holds that the Age Discrimination in Employment Act does permit disparate impact claims and makes no mention of the Fair Housing Act. Wells Fargo essentially contends that City of Jackson exposes as a grand error the uniform case law finding that disparate impact claims may be brought under the FHA.
While Defendants’ view of City of Jackson has no merit, we first show that this Court is not empowered to overturn directly controlling Fourth Circuit precedent based on the purported implication of a decision involving a wholly separate statute. We then explain how Defendants misrepresent the analysis and significance of City of Jackson. The FHA’s purpose, as expressed in legislative history, supports its application to disparate impact claims, and Congress endorsed this judicial construction when it amended the Act in 1988. The text of the Act also compels its application to disparate impact claims – Defendants’ contrary assertion notwithstanding – and administrative interpretation of the Act, entitled to great deference, is in accord. Finally, we show that the federal appellate courts’ uniform holdings that the FHA reaches disparate impact as well discriminatory treatment claims are based on this myriad of compelling factors, as endorsed by City of Jackson, and that post-City of Jackson decisions uniformly reject the argument asserted here by Defendants without fail.
A. This Court May Not Reject Directly Controlling Fourth Circuit Precedents That Have Not Been Explicitly Rejected By a Higher Court
Before considering the substance of Defendants’ contention, it is essential to recognize the limits of this Court’s power to disregard Fourth Circuit precedent. Defendants do not claim that City of Jackson explicitly rejects the application of the Fair Housing Act to disparate impact claims. Indeed,
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City of Jackson does not even mention the FHA. Defendants nonetheless ask this Court to hold that City of Jackson supersedes the Fourth Circuit’s decisions in Town of Clarkton, Edwards v. Johnston County Health Department, 885 F. 2d 1215, 1223 (4th Cir. 1989), and Betsey v. Turtle Creek Associates, 736 F.2d 983, 986 (4th Cir. 1984), all holding that disparate impact claims are cognizable under the FHA. Limitations on this Court’s power, standing alone, require rejection of that request. Even if Defendants offered a sound reading of City of Jackson – which, as shown below, they do not – Fourth Circuit precedent would not empower this Court to ignore Town of Clarkton, Edwards, and Turtle Creek based on the mere implication of a higher court’s decision in a case involving a different statute.
The Fourth Circuit addressed the issue of a lower federal court’s authority to overturn precedent from a higher court in Columbia Union College v. Clarke, 159 F.3d 151 (4th Cir. 1998). The plaintiff argued that three Supreme Court cases had “effectively overruled” an earlier one. Id. at 158-59. The Fourth Circuit began its analysis by noting the “limits of our role” as a court below the Supreme Court. Id. at 158. It then cited the “unequivocal[]” rule set forth by the Supreme Court “that lower courts are not to ‘conclude’ that the [Supreme] Court’s ‘more recent cases have, by implication, overruled [its] earlier precedent.’” Id. (quoting Agostini v. Felton, 521 U.S. 203, 237 (1997)) (emphases and brackets supplied by Fourth Circuit). Instead, the Fourth Circuit was required to follow any Supreme Court precedent with “direct” application and leave to the Supreme Court “the prerogative of overturning its own decisions.” Id. (same). The court concluded, “‘unless and until’ the Supreme Court has clearly overruled [its earlier decision], we must apply its holding, which “‘directly controls’ this case.” Id. at 159 (quoting Agostini, 521 U.S. at 237-38).
Columbia Union College, premised on the Fourth Circuit’s position beneath the Supreme Court, applies in full to the relation between the District Court and the Fourth Circuit. The Fourth Circuit’s
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precedents “directly control” the instant motion by holding that disparate impact claims are cognizable under the FHA. Neither those precedents nor the parallel precedents from the other Circuit Courts have been directly rejected by the Fourth Circuit or the Supreme Court; Wells Fargo’s only argument is that they were effectively overruled by implication. This Court, therefore, lacks the power to ignore Town of Clarkton, Turtle Creek, and Edwards. “Unless and until” a higher court “clearly overrule[s]” those cases or their equivalents from other Circuits, this Court “must apply” them. Columbia Union College, 159 F.3d at 159. The prerogative to do otherwise rests exclusively with the Fourth Circuit.
B. City of Jackson Refutes Defendants’ Assertion That Whether Disparate Impact Claims Are Actionable Under a Civil Rights Statute Turns Exclusively On a Search For Particular Words In the Statute’s Text
In City of Jackson, the Supreme Court held that the ADEA does permit disparate impact claims. Defendants nonetheless contend that, because of City of Jackson, this Court should reject the Fourth Circuit’s repeated holdings (and those of ten other Circuits) that disparate impact claims may be brought under the FHA.
Defendants assert that City of Jackson somehow changed the rationale supporting Griggs v. Duke Power Co., 401 U.S. 424, 429-30 (1971), in which the Supreme Court held that Title VII allows disparate impact claims. Despite the clear reliance on Congressional purpose in Griggs, see id. at 42930, that decision now rests, in Defendants’ view, solely on the presence of particular words in the text of Title VII, and not to any degree on the purpose of Title VII or anything else. This means, Defendants continue, that disparate impact claims may not be brought under an anti-discrimination statute unless its language is identical to the language of Title VII. They conclude that, because the language of Title VII and the FHA is not identical, Baltimore cannot state a disparate impact claim under the FHA.
Specifically, Defendants assert that City of Jackson means that whether a civil rights statute
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allows for a disparate impact claim rests only on a formalistic search for the words “otherwise adversely
affect” or nearly identical words. Defs.’ Br. at 24-29. They contend that the Supreme Court in City of
Jackson repudiated its reliance in Griggs on anything but a statute’s text, read mechanically, in
addressing this issue. This, Defendants claim, means that the analogy to Title VII and consideration of
congressional purpose in addressing the issue under the FHA are impermissible after City of Jackson.
Defendants entirely misconstrue City of Jackson. Though the Court was sharply divided as to
the result, the analytical approaches of every Justice across three opinions were much broader and
comprehensive than Defendants assert. Every Justice relied on:
• the legislative history of the ADEA, see id. at 232-33 (Majority); id. at 238 (Plurality Plus); id. at 248, 253-56 (O’Connor, J.)16;
• the purpose of the ADEA, including its comparison to the purpose of Title VII, see id. at 234, 235 n.5 (Plurality Plus); id. at 248, 256-57, 258-59, 262 (O’Connor, J.);
• the text of the ADEA’s provision, § 623(a), assertedly providing a disparate impact cause of action, see id. at 233 (Majority); id. at 235-36 & n.6, 240 (Plurality Plus); id. at 248-51 (O’Connor, J.);
• the text of another provision of the ADEA, § 623(f) (the “RFOA” provision), that influenced how § 623(a) should be construed, see id. at 233, 240 (Majority); id. at 23839, 240 (Plurality Plus); id. at 245-46 (Scalia, J.); id. at 251-53, 261, 265-67 (O’Connor, J.); and
• the nature of discrimination based on age as compared to discrimination based on race and other classes protected under Title VII,17 id. at 240-41 (Majority); id. at 236 n.7

16

The sections of Justice Stevens’s opinion that garnered five votes (sections I, II, and IV) are referred to as

“Majority.” The section of Justice Stevens’s opinion that garnered four votes (section III) is referred to as “Plurality Plus”

because Justice Scalia “agree[d] with all of the Court’s reasoning” in that section, though he did not join it. 544 U.S. 243.

Justice Scalia’s opinion is referred to as “Scalia, J.” Justice O’Connor’s opinion, joined by Justices Kennedy and Thomas, is

referred to as “O’Connor, J.” Chief Justice Rehnquist did not take part in the decision of the case.

17

The majority explained that “age, unlike race or other classifications protected by Title VII, not uncommonly has

relevance to an individual’s capacity to engage in certain types of employment. . . . Moreover, intentional discrimination on

the basis of age has not occurred at the same levels as discrimination against those protected by Title VII.” 544 U.S. at 240-

41. Justice O’Connor insisted that these distinctions underlay different Congressional purposes in enacting the ADEA and

Title VII, and therefore required the Court to treat them differently with respect to disparate impact claims. See id. at 258-59

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(Plurality Plus); id. at 254-55, 258-59, 261 (O’Connor, J.). A majority of the Court also relied on and accorded deference to the administrative construction of the ADEA, which endorsed disparate impact claims. See id. at 239-40 (Plurality Plus); id. at 243-45 (Scalia, J.). In fact, the only reason Justice Scalia did not join Part III of Justice Stevens’s opinion was his belief that, though that part was reasoned correctly, the Court should simply rest its decision on deference to the EEOC under Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). See id. at 243 (Scalia, J.).
The Supreme Court’s reliance on the ADEA’s purpose is particularly notable because it clearly reveals the fallacy of Wells Fargo’s central thesis – that City of Jackson signals the Court’s rejection of its own reliance in Griggs on Title VII’s purpose as support for that statute’s application to disparate impact claims. To the contrary, the purpose of the ADEA was of central importance even to the Justices who disagreed with applying the ADEA to disparate impact, Justices O’Connor, Kennedy, and Thomas:
In other words, the Court in Griggs reasoned that disparate impact liability was necessary to achieve Title VII’s ostensible goal of eliminating the cumulative effects of historical racial discrimination. However, that rationale finds no parallel in the ADEA context, and it therefore should not control our decision here. Even venerable canons of construction must bow, in an appropriate case, to compelling evidence of congressional intent. Id. at 262 (O’Connor, J.) (citation omitted). Justice Stevens’s opinion likewise placed great emphasis on Congressional purpose by discussing at length the purpose of the ADEA as revealed by its legislative history. See id. at 232-33, 235 n.5. He also made clear that Griggs is supported by both the purpose and text of Title VII, and that Supreme Court precedent discussing the text complements, without replacing, the emphasis on purpose in Griggs. See id. at 235. The factors considered in City of Jackson to determine whether the ADEA permits disparate impact causes of action were, therefore, much broader than Defendants acknowledge. In addition to the
(“disparate impact liability under the ADEA cannot be justified, and is not necessary, as a means of redressing the cumulative results of past discrimination”).
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statute’s text, they include its legislative history and purpose, the text of related statutory provisions, the type of discrimination at issue (e.g., race, age), and the administrative construction of the statute.18 These factors are also the foundation for prior Supreme Court cases considering the question pursuant to other civil rights statutes. See Chisom v. Roemer, 501 U.S. 380, 383, 393 (1991) (examining Voting Rights Act’s broad preamble and legislative purpose); Alexander v. Choate, 469 U.S. 287, 295-97 (1985) (examining Rehabilitation Act’s legislative history and purpose, agency interpretation, and consensus among appellate courts); General Bldg. Contractors Ass’n, Inc. v. Pennsylvania, 458 U.S. 375, 386-391 (1982) (examining 42 U.S.C. § 1981’s legislative history and purpose); Griggs, 401 U.S. at 429-30 (examining Title VII’s purpose). They are, of course, familiar tools in the exercise of statutory construction generally. Defendants’ insistence that nothing matters but a narrow search for particular words, on the other hand, is demonstrably inadequate.
C. Each Factor That the Supreme Court Has Consistently Relied On In Considering Disparate Impact Claims – Legislative History and Purpose, Subsequent Congressional Action, Statutory Text, and Administrative Construction – Demonstrates That the Circuit Courts Have Properly Concluded That Disparate Impact Claims May Be Brought Under the FHA
The factors relied on by the Supreme Court, including most recently in City of Jackson, are the same factors upon which the Fourth Circuit and ten other Circuit Courts have relied in finding a disparate impact cause of action under the FHA. The consistent use of these factors by the Supreme Court to determine the availability of a disparate impact claim confirms that the Circuit Courts have properly analyzed this question under the FHA. As shown in this section, an analysis of each factor

18

Justice O’Connor (joined by Justices Kennedy and Thomas) added in City of Jackson that “we could safely assume

that Congress had notice (and therefore intended) that the language at issue here would be read to authorize disparate impact

claims” if “Griggs had been decided before the ADEA was enacted.” 544 U.S. at 259 (emphasis in original). Before the

FHA was amended in 1988, as explained below, eight federal appellate courts had held that the FHA applies to disparate

impact claims. Because the amendments maintained the operative language of 42 U.S.C. §§ 3604 and 3605 and even

extended it to handicap and familial status, Justice O’Connor’s analysis supports crediting Congress with the intention that

the consistent judicial construction of the Act would continue to govern. See section III.C.2, infra.

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leads to the same conclusion – that Baltimore may bring a disparate impact claim under the FHA. 1. The Legislative History of the Fair Housing Act Demonstrates That Disparate Impact Claims Are Cognizable
Congress adopted the Fair Housing Act in the wake of the highly publicized report by the National Advisory Commission on Civil Disorders, which warned that the “Nation is moving toward two societies, one black, one white – separate and unequal.” See Report of the Nat’l Advisory Comm’n on Civil Disorders 1, 13 (1968). Proponents of the FHA emphasized that the facially neutral practices of private and public actors were a principal cause of residential segregation, which the Act aimed to eliminate.19 One of the Act’s leading supporters, Senator Brooke, noted that African Americans could not move to better neighborhoods because they were “surrounded by a pattern of discrimination based on individual prejudice, often institutionalized by business and industry, and Government practices.” 114 Cong. Rec. 2526 (1968) (emphases added). Senator Mondale, the Act’s principal sponsor, explained that after the Supreme Court prohibited explicitly racial zoning laws in 1917, “[l]ocal ordinances with the same effect, although operating more deviously in an attempt to avoid the Court’s prohibition, were still being enacted.” Id. at 2669 (emphasis added).
Proponents of the FHA plainly intended to eliminate these causes of residential segregation. Senator Mondale stated that it “seems only fair, and is constitutional, that Congress should now pass a fair housing act to undo the effects” of past discriminatory governmental actions. Id. (emphasis added). Because Congress was undoubtedly empowered to proscribe intentional governmental discrimination, Senator Mondale would have had no reason to comment on the Act’s constitutionality unless it aimed at the discriminatory effects of facially neutral laws and practices. While this statement focused on public

19

Marking the fortieth anniversary of the Fair Housing Act, the House of Representatives recently confirmed that the

Act aimed “to advance equal opportunity in housing and achieve racial integration . . . .” H.R. Res. 1095, 110th Cong.

(2008) (enacted), available at 154 Cong. Rec. H2280-01, 2008 WL 1733432 (Apr. 15, 2008).

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actors, there is no indication in the Act’s text or history that Congress intended to treat facially neutral private and public acts differently. See Nat’l Fair Housing Alliance, Inc. v. Prudential Ins. Co. of Am., 208 F. Supp. 2d 46, 59 n.7 (D.D.C. 2002) (“Prudential”).
The Act’s legislative history also demonstrates that Congress was aware of the difficulty of proving discriminatory intent and, because of that difficulty, allowed other forms of proof. Senator Baker introduced an amendment that would have exempted from liability any homeowner who engaged a real estate agent “without indicating any preference, limitation or discrimination based on race . . . ., or an intention to make any such preference, limitation or discrimination.” 114 Cong. Rec. at 5214. That is, it would have made those homeowners liable only if they intentionally discriminated. A number of the bill’s supporters objected that the amendment would undermine Congress’s purpose by making proof of discrimination difficult in all but the most blatant cases. Senator Dominick argued that the amendment would “increase[] the opportunity for discrimination,” id. at 5220, and Senator Percy stated that the amendment “would require proof that the single homeowner had specified racial preference. I maintain that proof would be impossible to produce.” Id. at 5216; see also id. at 5218, 5220-21 (remarks of Senators Mondale and Hart regarding the difficulty of proving discriminatory intent). Because of these concerns, the Baker amendment was defeated. See id. at 5221-22.
In short, the FHA’s sponsors clearly recognized that residential segregation stemmed in part from ostensibly neutral private and public practices and they sought to undo the effects of those practices. Together with the widespread recognition that evidence of overt discrimination would often be difficult to uncover, this confirms that Congress intended to provide a disparate impact cause of action under the FHA. The contrary conclusion would effectively condemn Congress as having adopted a measure manifestly incapable of achieving its intended aims.
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2. Congress Endorsed the Application of the Act to Disparate Impact Claims In the Fair Housing Amendments Act of 1988
When it passed the Fair Housing Amendments Act of 1988, Pub. L. No. 100-430, 102 Stat. 1619 (1988) (“FHAA”), Congress used the same language the FHA already applied to race, color, religion, sex, and national origin to add new prohibitions against discrimination because of familial status or handicap. See id. § 6(a), (b). Compare 42 U.S.C. § 3604(a), (b) with id. § 3604(f)(1), (2). Prior to the FHAA, all eight of the Circuit Courts to address the issue had concluded that the FHA includes a disparate impact cause of action. It is presumed that Congress “adopt[s prior judicial] interpretation when it re-enacts a statute without change.” Lorillard v. Pons, 434 U.S. 575, 580 (1978) (citations omitted). This presumption is especially strong here because the legislative history of the FHAA shows that Congress agreed with the Circuit Courts.
Congress’s actual knowledge of the Circuit Courts’ decisions is evident from the House Report on the FHAA and Senate hearings. The House Report explicitly cited the Fourth Circuit’s decision in Turtle Creek and a Ninth Circuit decision: “[b]ecause minority households tend to be larger and exclusion of children often has a racially discriminatory effect, two federal courts of appeal have held that adults-only housing may state a claim of racial discrimination under title VIII.” H.R. Rep. No. 100711, at 21 (1988) (emphasis added). The Report also discusses the Second Circuit’s Huntington decision permitting disparate impact claims. See id. at 90; see also Fair Housing Amendments Act of 1987: Hearings on S. 558 Before the Subcomm. on the Constitution of the Sen. Comm. on the Judiciary, 100th Cong. 529-557 (1987) (testimony and statement of Robert Schwemm) (discussing “strong consensus” in Circuit Courts).
Congressional approval of these decisions is demonstrated by the House’s rejection of an amendment mandating that “a zoning decision is not a violation of the Fair Housing Act unless the
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decision was made with the intent to discriminate on the basis of race or other prohibited criteria under
the Act.” H.R. Rep. No. 100-711, at 89 (emphasis added). The explicit purpose of the amendment was
to eliminate the disparate impact standard approved by the Fourth Circuit and other courts in favor of an
intent requirement. See id. 89-93. The House Judiciary Committee rejected it. See id. at 89.
The House likewise made clear that it intended disparate impact analysis to apply to the new
protected class of handicap:
The Committee understands that housing discrimination against handicapped persons is not limited to blatant, intentional acts of discrimination. Acts that have the effect of causing discrimination can be just as devastating as intentional discrimination. A person using a wheelchair is just as effectively excluded from the opportunity to live in a particular dwelling by the lack of access into a unit and by too narrow doorways as by a posted sign saying “No Handicapped People Allowed.”
Id. at 25 (1988) (emphasis added). By using the FHA’s original language to accomplish its goal of
reaching acts with a disparate impact based on handicap, the Committee demonstrated its agreement
with the Circuit Courts’ holdings that the original language reaches disparate impact.
In addition, the day after the FHAA was signed into law, its principal sponsor, Senator Kennedy,
made clear that “Congress accepted th[e] consistent judicial interpretation” “of the [] Federal courts of
appeals” that the FHA “prohibit[s] acts that have discriminatory effects, and that there is no need to
prove discriminatory intent.” 134 Cong. Rec. 23711-12 (1988).
3. The Text of the Fair Housing Act Compels the Conclusion That Disparate Impact Claims Are Cognizable
Baltimore brings this action under four FHA provisions, 42 U.S.C. §§ 3604(a), (b), (c) and 3605.20 As an initial matter, it is important to note that the text of these provisions does not explicitly

20

Defendants cite the text of § 3605 but not § 3604, see Defs.’ Br. at 26, even though they also address the FHA

broadly, see id. at 23, 29. Baltimore addresses the language of both sections, and demonstrates that each supports a disparate

impact cause of action.

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state that disparate impact claims are or are not cognizable. Any suggestion by Defendants that the plain language of the statute, viewed in isolation, definitively answers the question under consideration is therefore mistaken. However, the text of each may properly be interpreted as permitting disparate impact causes of action. Another provision, § 3601, mandates that this is therefore the only permissible interpretation because it is the broader one. There are key textual differences between these FHA provisions and the ADEA provisions considered in City of Jackson. Defendants ignore these differences, but they demonstrate that City of Jackson’s understanding of the ADEA’s text is consistent with holding Wells Fargo liable under the FHA based on the disparate impact of its policies.
Under 42 U.S.C. § 3604, it is unlawful: (a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin. (b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin. (c) To make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation, or discrimination. Under 42 U.S.C. § 3605: It shall be unlawful for any person or other entity whose business includes engaging in residential real estate-related transactions to discriminate against any person in making available such a transaction, or in the terms or conditions of such a transaction, because of race, color, religion, sex, handicap, familial status, or national origin. The “any person,” “because of,” and “based on” constructions fit with a disparate impact claim because they do not focus on a particular individual. The Supreme Court explained in City of Jackson that an explicit focus on a particular individual
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is the reason why one part of the ADEA, 29 U.S.C. § 623(a)(1), is inconsistent with disparate impact liability. See 544 U.S. at 236 n.6. Contrary to Wells Fargo’s claim that the language of the FHA “mirrors” the language of that part of the ADEA, Defs.’ Br. at 25, it does not. The key words in the ADEA emphasized by the City of Jackson Court – “any individual” and “because of such individual’s” – are not found in the FHA. 544 U.S. at 236 n.6 (emphases in original). The FHA uses “any person” instead of the ADEA’s “any individual,” and defines “person” to include, inter alia, “one or more individuals.” 42 U.S.C. § 3602(d). Similarly, the FHA has no parallel to the ADEA’s “such individual’s” phrase. The FHA’s use of the plural makes it more akin to the section of the ADEA that City of Jackson found does allow disparate impact claims, 29 U.S.C. § 623(a)(2), because that section of the ADEA uses the plural term “employees.”
The FHA thus reflects a general concern with all people, not just a particular individual. Accordingly, even if the language of sections 3604 and 3605 does not unambiguously allow disparate impact claims, that interpretation is at least a reasonable one. See, e.g., Metro. Hous. Dev. Corp. v. Vill. of Arlington Heights, 558 F.2d 1283, 1288 (7th Cir. 1977) (“Arlington Heights II”) (explaining the “broad” and “narrow” views of the Act); Langlois v. Abington Hous. Auth., 207 F.3d 43, 49 (1st Cir. 2000). Section 3601 mandates that, between two reasonable interpretations of the FHA, the one which provides a broader application of the Act to more activities is correct. 42 U.S.C. § 3601 (“It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.”). Wells Fargo ignores section 3601, which has no parallel in the ADEA.21 The interpretive rule reflected in section 3601 is precisely why the Supreme Court has held that prudential requirements for standing do not apply under the FHA. See, e.g., Havens, 455 U.S. at 372. Here, section 3601 requires

21

Compare 42 U.S.C. § 3601 with 29 U.S.C. § 621(b) (ADEA statement of purpose).

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the Act’s application to disparate impact claims because this construction is permitted by sections 3604

and 3605 and, in light of the Supreme Court’s unanimous approval of disparate impact claims under

Title VII more than thirty-five years ago in Griggs, is plainly constitutional.

4. Administrative Implementation of the Fair Housing Act Supports a Disparate Impact Standard

The various agencies charged with implementing and administering the FHA have embraced the

use of disparate impact analysis. Most significantly, the Secretary of HUD, who has “[t]he authority and

responsibility for administering th[e] Act,” 42 U.S.C. § 3608(a), has endorsed disparate impact. See

HUD v. Mountain Side Mobile Estates, 2 Fair Hous.-Fair Lend. (P-H) ¶ 25,053, 1993 WL 307069, at *5

(HUD Sec’y 1993). Even if the statute itself did not resolve the issue of whether disparate impact is a

valid basis of liability, the Secretary’s administrative construction adopted through adjudication is

entitled to the highest degree of Chevron deference. See United States v. Mead Corp., 533 U.S. 218, 230-31 & n.12 (2001).22 HUD has also asserted in litigation that the FHA permits a disparate impact

cause of action. See Pfaff v. HUD, 88 F.3d 739, 745 (9th Cir. 1996) (describing HUD’s position);

Mountain Side, 56 F.3d at 1250 (same). This expression of HUD’s position is also entitled to great

deference. See City of Jackson, 544 U.S. at 244-45 (Scalia, J., concurring).

In addition, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity has told

Congress that “[t]he standards to determine discrimination [in home insurance under the FHA] – as in all

other covered areas – will be based on the principles of overt discrimination, disparate treatment, and

disparate impact.” See Homeowners Ins. Discrimination: Hearing Before the Sen. Comm. on Banking,

Housing, & Urban Affairs, 103d Cong. 52 (1994) (statement of Roberta Achtenberg). Similarly, HUD’s

22

This conclusion is not altered by the Tenth Circuit’s reversal of this decision on other grounds in Mountain Side. In

fact, the Tenth Circuit expressly endorsed the Secretary’s view that the FHA includes a disparate impact cause of action.

Mountain Side Mobile Estates P’ship v. Sec’y of HUD, 56 F.3d 1243, 1250-51 (10th Cir. 1995) (“Mountain Side”).

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FHA enforcement handbook endorses disparate impact theory.23 Thus, even if Chevron deference did not apply to the Secretary’s interpretation, HUD’s view of the FHA reflected in these pronouncements is firmly rooted in the statutory framework and entitled to Skidmore deference, i.e., deference based on HUD’s “specialized experience” and “the value of uniformity.” See Mead, 533 U.S. at 234-35 (citing Skidmore v. Swift & Co., 323 U.S. 134, 139, 140 (1944)) (internal quotation marks omitted).
Other agencies have also interpreted the FHA to permit a disparate impact cause of action. As part of its enforcement responsibilities under the Act, see, e.g., 42 U.S.C. §§ 3610(g)(2)(C), 3614, the Department of Justice (“DOJ”) has successfully urged the courts to adopt an impact standard. It has done so both on behalf of HUD in 1995 and 1996, see Mountain Side and Pfaff, and on behalf of the United States in 1974, see United States v. City of Black Jack, 508 F.2d 1179, 1184-85 (8th Cir. 1974). In 1994, HUD, DOJ, the Federal Reserve Board, and seven other federal agencies that regulate financial institutions adopted a joint “Policy Statement on Discrimination in Lending” recognizing that proof of disparate impact is sufficient to establish a violation of the FHA. See 59 Fed. Reg. 18266, 18269-70 (Apr. 15, 1994).24 Although these other agencies lack the interstitial lawmaking power delegated to the Secretary of HUD, their views are also entitled to Skidmore deference, and confirm the propriety of the Secretary’s determination that a disparate impact cause of action is actionable under the FHA.

23

See HUD, No. 8024.01, Title VIII Complaint Intake, Investigation & Conciliation Handbook, 2-27 (REV-2 2005)

(available at http://www.hudclips.org/sub_nonhud/cgi/selecthbk.cgi (select “search” and 8024.01)) (“a respondent may be

held liable for violating the Fair Housing Act even if his action against the complainant was not even partly motivated by

illegal considerations”); id. at 2-28 (“even in cases where there is absolutely no evidence of discriminatory intent, a

discriminatory impact claim may result in a finding of liability”).

24

Wells Fargo’s citation to a 1988 brief plainly fails to accurately reflect the position of the Department of Justice

since, at the least, 1994. See Defs.’ Br. at 29 & n.9.

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5. Relying On These Factors, the Fourth Circuit and the Ten Other Circuits to Address the Issue Have Held That the Fair Housing Act Allows Disparate Impact Claims

The Fourth Circuit has repeatedly held that the FHA provides for a disparate impact cause of

action. See Edwards, 885 F. 2d at 1223 (“A facially neutral housing-related policy may . . . violate Title

VIII if it has a disproportionate adverse impact on minorities.”); Turtle Creek Assocs., 736 F.2d at 986

(FHA violation may be found where practice “is shown to have a disproportionate adverse impact on

minorities”); Town of Clarkton, 682 F.2d at 1065 (agreeing with Third, Seventh, and Eighth Circuits that

“[p]roof of a discriminatory effect is . . . sufficient to prove a violation of” the FHA). The other ten

United States Circuit Courts of Appeals to address the issue agree unanimously. See, e.g., Langlois, 207

F.3d at 49 (1st Cir.); Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926, 934-35 (2d Cir.)

(“Huntington”), aff’d per curiam, 488 U.S. 15 (1988); Resident Advisory Bd. v. Rizzo, 564 F.2d 126,

146-48 (3d Cir. 1977); Hanson v. Veterans Admin., 800 F.2d 1381, 1386 (5th Cir. 1986); Arthur v. City

of Toledo, 782 F.2d 565, 574-75 (6th Cir. 1986); Arlington Heights II, 558 F.2d at 1288-90 (7th Cir.);

Williams v. Matthews Co., 499 F.2d 819, 826 (8th Cir. 1974); Pfaff, 88 F.3d at 745-46 (9th Cir.);

Mountain Side, 56 F.3d at 1250-52 (10th Cir.); Jackson v. Okaloosa County, 21 F.3d 1531, 1543 (11th Cir. 1994).25 The Court would now have to usurp the prerogative of the Fourth Circuit and reject every

one of these other precedents to rule in Defendants’ favor.

The Circuit Courts’ grounds for finding the FHA applicable to disparate impact claims are broad

and mirror those relied on in City of Jackson. Their decisions reflect and often rely on the Supreme

Court’s instruction that the Act must be given a “generous construction” in light of its “broad and

25

The D.C. Circuit recently “assume[d] without deciding that [plaintiffs] may bring a disparate impact claim under the

FHA.” 2922 Sherman Ave. Tenants’ Ass’n v. District of Columbia, 444 F.3d 673, 679 (D.C. Cir. 2006). The court

recognized that the First through Eleventh Circuits have “held that the FHA . . . prohibits not only intentional housing

discrimination, but also housing actions having a disparate impact.” Id. (citation omitted). The United States District Court

for the District of Columbia recognizes a district impact claim under the FHA. See Prudential, 208 F. Supp. 2d at 58-60.

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inclusive” “language.” Trafficante, 409 U.S. at 209, 212; City of Edmonds v. Oxford House, Inc., 514 U.S. 725, 731 (1995); see also Havens, 455 U.S. at 380 (rejecting an interpretation that would “undermine[] the broad remedial intent of Congress embodied in the Act”). These requirements would be contradicted by failing to permit disparate impact claims under the FHA. See, e.g., Huntington, 844 F.2d at 935 (relying in part on Trafficante in holding disparate impact actionable); Arlington Heights II, 558 F.2d at 1289-90 (same).
The Circuit Courts also emphasize that the legislative history, as discussed above, demonstrates that recognizing disparate impact claims advances Congress’s purpose. The Second Circuit explained that Congress’s rejection of the Baker amendment “underscore[s] congressional willingness to broaden Title VIII to encompass segregation resulting from the application of facially neutral rules, even in the absence of discriminatory intent.” Huntington, 844 F.2d at 934-35. The Third Circuit agreed. See Rizzo, 564 F.2d at 147. Citing leading proponents Senators Mondale and Brooke, the Third Circuit also emphasized that “several Congressmen spoke of the importance of [the FHA] in eliminating the adverse discriminatory effects of past and present prejudice in housing.” Id. at 147 & n.30. These analyses parallel the Supreme Court’s analysis of the FHA in Gladstone, which showed by example that the Act’s legislative history is important to its construction. See 441 U.S. at 105 (support from Act’s legislative history is “substantial”). In considering remedies under the FHA, the Fourth Circuit likewise quoted Senator Mondale’s statement that the Act aims to replace “the ghettos by truly integrated and balanced living patterns.” Town of Clarkton, 682 F.2d at 1068 (citations, ellipsis omitted).
The Circuit Courts have also looked to Title VII jurisprudence because, as the Fourth Circuit put it, “the anti-discrimination objectives of [the FHA] are parallel to the goals of Title VII . . . .” Town of Clarkton, 682 F.2d at 1065; see also Turtle Creek Assocs., 736 F.2d at 987 (objectives of Title VII and
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Title VIII” are “parallel”) (citations omitted); Huntington, 844 F.2d at 935. This plainly is correct. “The objective of Congress in the enactment of Title VII . . . was to achieve equality of employment opportunities and remove barriers that have operated in the past to favor an identifiable group of white employees over other employees,” Griggs, 401 U.S. at 429-30, and the FHA’s objective was just as farreaching: “Congress was aware that the measure would have a very broad reach, and indeed the legislation was seen as an attempt to alter the whole character of the housing market.” Mayers v. Ridley, 465 F.2d 630, 652 (D.C. Cir. 1972) (en banc) (Wilkey, McGowan, & Leventhal, JJ., concurring). In light of the statutes’ close relationship, the Supreme Court has looked to its interpretation of Title VII to give meaning to provisions of the FHA. For example, in Trafficante, the Court interpreted the phrase “person aggrieved” in the FHA by citing a case that construed a similar phrase in Title VII. 409 U.S. at 208-09; cf. General Bldg., 458 U.S. at 389-90 (14th Amendment’s discriminatory purpose standard controls claims under the 1866 Civil Rights Act because the laws are “legislative cousins” and it would be “incongruous to construe” them in a “markedly different” manner). Following the Supreme Court’s example, many courts have relied in part on the availability of a disparate impact claim under Title VII and Griggs in holding that one is also permitted under the FHA. See, e.g., Town of Clarkton, 682 F.2d at 1065; Huntington, 844 F.2d at 934-36; Rizzo, 564 F.2d at 146; Mountain Side, 56 F.3d at 1250-51 & n.7.
Setting their holdings on still another foundation, the Circuit Courts have also found that the FHA reaches disparate impact claims because of the difficulty of proving intent in many cases, and the invidiousness of the effects of many practices even where that proof cannot be made. This was precisely the rationale offered by the Act’s supporters in opposition to the Baker amendment – requiring proof of intent would eviscerate the Act. The Seventh Circuit explained:
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Conduct that has the necessary and foreseeable consequence of perpetuating segregation can be as deleterious as purposefully discriminatory conduct in frustrating the national commitment “to replace the ghettos by ‘truly integrated and balanced living patterns.’” Moreover, a requirement that the plaintiff prove discriminatory intent before relief can be granted under the statute is often a burden that is impossible to satisfy. Arlington Heights II, 558 F.2d at 1289-90 (quoting Trafficante, 409 U.S. at 211 (quoting 114 Cong. Rec. 3422 (Sen. Mondale))). The Second Circuit similarly explained that “clever men may easily conceal their motivations,” and that “[o]ften, [facially neutral] rules bear no relation to discrimination upon passage, but develop into powerful discriminatory mechanisms when applied.” Huntington, 844 F.2d at 935; see also id. at 934 (“an intent requirement would strip the statute of all impact on de facto segregation”); City of Black Jack, 508 F.2d at 1185. Finally, the nation’s courts have of course also relied on the text of the FHA to support their conclusion that the Act permits disparate impact claims. Notably, courts emphasize two different components of the Act. First is the Act’s own statement of its exceptional breadth: “It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States,” 42 U.S.C. § 3601. See Huntington, 844 F.2d at 928, 934 (relying in part on § 3601 in holding disparate impact actionable); Arlington Heights II, 558 F.2d at 1289-90 (same); City of Black Jack, 508 F.2d at 1184 (same); see also Town of Clarkton, 682 F.2d at 1068 (relying on § 3601 to reject defendant’s leading objection to broad scope of trial court’s remedial order). Second, courts have considered the language of 42 U.S.C. § 3604, which enumerates some of the particular practices prohibited by the Act. They have found that this language is ambiguous as to whether it reaches disparate impact claims because, as the Seventh Circuit put it, it is subject to both a “narrow view” and a “broad view.” Arlington Heights II, 558 F.2d at 1288; see also, e.g., Langlois, 207 F.3d at 49 (text “could be thought to refer simply to intentional discrimination”) (emphasis added). In light of the many
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factors that courts have found to favor allowing disparate treatment claims under the FHA, they have adopted the broad view. See, e.g., Arlington Heights II, 558 F.2d at 1289 (“we decline to take a narrow view of the phrase ‘because of race’”).
In sum, the First through the Eleventh Circuits, including the Fourth, are in unanimous agreement that the FHA permits disparate impact claims. These courts’ analyses, grounded on Supreme Court rules of FHA construction, legislative history, purpose, analogy to Title VII, issues of proof, and the Act’s text, are multifaceted, consistent, and in accordance with City of Jackson’s analysis of the parallel question under the ADEA. The precedents across the nation are overwhelming.
D. Post-City of Jackson Cases Continue to Hold That Disparate Impact Claims Are Cognizable Under the Fair Housing Act
Given the broad foundation of the Circuit Courts’ holdings that the FHA allows disparate impact claims and Defendants’ inaccurate representation of City of Jackson, it is not surprising that the same argument Defendants make here has been rejected repeatedly by other courts. Lenders in at least four cases have asked courts to overturn precedent and hold that, because of City of Jackson, disparate impact claims are no longer cognizable under the Fair Housing Act. Each court has explicitly rejected that proposition. See Ramirez v. GreenPoint Mortgage Funding, Inc., No. C08-0369, 2008 WL 2051018, at *3-4 (N.D. Cal. May 13, 2008); Zamudio v. HSBC N. Am. Holdings Inc., No. 07-C-4315, 2008 WL 517138, at *2 (N.D. Ill. Feb. 20, 2008); Garcia v. Country Wide Fin. Corp., No. 07-1161-VAP, slip op. at 7-11 (C.D. Cal. Jan. 17, 2008) (see App. Cases Not Generally Reported); Beaulialice v. Fed. Home Loan Mortgage Corp., No. 8:04-CV-2316-T-24-EAJ, 2007 WL 744646, at *4 (M.D. Fla. Mar. 6, 2007).
In addition, after City of Jackson, at least six federal appellate opinions have held yet again, though without citing City of Jackson, that the FHA permits disparate impact claims. See Cox v. City of Dallas, 430 F.3d 734, 746 (5th Cir. 2005); Charleston Hous. Auth. v. U.S. Dep’t of Agric., 419 F.3d 729,
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740-41 (8th Cir. 2005); Darst-Webbe Tenant Ass’n v. St. Louis Hous. Auth., 417 F.3d 898, 902 (8th Cir. 2005); Affordable Hous. Dev. Corp. v. City of Fresno, 433 F.3d 1182, 1194 (9th Cir. 2006); Reinhart v. Lincoln County, 482 F.3d 1225, 1229 (10th Cir. 2007); Hallmark Developers, Inc. v. Fulton County, 466 F.3d 1276, 1286 (11th Cir. 2006). These opinions implicitly reject Defendants’ notion that decades of consistent decisions from eleven Circuits were rejected sub silentio in City of Jackson. To the contrary, these recent decisions reaffirm what is essentially, and with good reason, settled law. IV. BALTIMORE PROPERLY STATES A DISPARATE IMPACT CLAIM UNDER THE
FAIR HOUSING ACT Baltimore properly states a claim that Wells Fargo’s predatory practices, even if not motivated by race, have a disparate impact on African Americans. Wells Fargo’s assertion that the complaint does not state a claim because it does not adequately allege (1) a disparate impact or (2) a causal connection between the challenged practices and a disparate impact, see Defs.’ Br. at 30-40, fails for several reasons. First, Defendants rely on a heightened standard of review that is not appropriate at the pleading stage. Second, they misconstrue the nature of a disparate impact claim. Third, they ignore the allegations of the complaint in favor of their own, often contrary assertions of fact. Finally, they repeat the same flawed causation assertions they make with respect to Article III standing. A. Baltimore Properly Alleges a Disparate Impact On African Americans
1. Defendants Seek to Invoke a Heightened Standard of Review That Is Only Appropriate For Post-Discovery Motions
In asserting that Baltimore does not adequately allege the existence of a disparate impact on African Americans, Wells Fargo fails to recognize the very limited standard of review applicable here. In Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), the Supreme Court rejected the proposition that a heightened pleading requirement applies to discrimination claims. Specifically, it held that a
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discrimination complaint does not need to contain “specific facts establishing a prima facie case of

discrimination,” but instead need only provide “fair notice of the basis for [the plaintiff’s] claims”

consistent with Fed. R. Civ. P. 8(a)(2). Id. at 508, 514. The Court held that discovery and summary

judgment, not a heightened pleading standard, serve to define and narrow the issues. See id. at 512.

Twombly reaffirmed Swierkiewicz in the course of holding that the basis for the claim set forth in the

complaint must be plausible. See 127 S. Ct. at 1973-74.

Defendants would nonetheless have the Court hold Baltimore’s complaint to a standard of

review that is appropriate only for post-discovery motions. Indeed, their brief reads more like an attack

on an expert report than a motion to dismiss. That attack is undermined not only by Swierkiewicz and

Twombly, but also by the very authorities on which Wells Fargo relies. Tellingly, of the fourteen

discrimination cases Wells Fargo cites in this portion of its brief, see Defs.’ Br. at 30-37, only two address Rule 12(b)(6) motions.26 One of those two considered a practice that, as alleged, affected whites

and non-whites in exactly the same way. See Edwards v. Johnston County Health Dep’t, 885 F.2d 1215, 1223-24 (4th Cir. 1989).27 That case is inapposite because Baltimore alleges that Wells Fargo’s

predatory lending practices do, in fact, impact African Americans more severely than similarly situated

26

Seven are post-trial decisions and five are summary judgment decisions, all relying on standards of review

appropriate to those stages of a case. See Wards Cove Packing Co. v. Atonio, 490 U.S. 642 (1989) (post-trial), superseded by

statute, Civil Rights Act of 1991, § 105, 105 Stat. 1074-75; Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988) (same);

Walther v. Lone Star Gas Co., 977 F.2d 161 (5th Cir. 1992) (same); EEOC v. Datapoint Corp., 570 F.2d 1264 (5th Cir. 1978)

(same); Moore v. Hughes Helicopters, Inc., 708 F.2d 475 (9th Cir. 1983) (same); 2922 Sherman Ave. Tenants’ Ass’n v.

District of Columbia, 444 F.3d 673 (D.C. Cir. 2006) (same); Donnelly v. Rhode Island Bd. of Governors for Higher

Education, 929 F. Supp. 583 (D.R.I. 1996) (same), aff’d 110 F.3d 2 (1st Cir. 1997); Smith v. City of Jackson, 544 U.S. 228

(2005) (summary judgment); Walls v. City of Petersburg, 895 F.2d 188 (4th Cir. 1990) (same); Paige v. California, 291 F.3d

1141 (9th Cir. 2002) (same); Johnson v. County of Nassau, 480 F. Supp. 2d 581 (E.D.N.Y. 2007) (same); Hargraves v.

Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000) (same). Moreover, two (Walther and Johnson) concern

intentional discrimination, not disparate impact. Defendants also cite Twombly, an antitrust case.

27

The alleged practice was issuing permits allowing substandard housing to be used for migrant farmworkers. See id.

at 1217. The court explained that whites and non-whites living in the housing would be affected to exactly the same degree,

and so any statistical disparity was due to the overall makeup of the migrant farmworker population, not the challenged

practice. See id. at 1223-24. This kind of “[e]qual adverse impact on white and non-white” cannot state a disparate impact

claim. Id. at 1224.

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whites. See, e.g., Compl. ¶¶ 35-40. Defendants’ other Rule 12(b)(6) case applied the Second Circuit’s heightened pleading standard that the Supreme Court specifically rejected a year later in Swierkiewicz. See Collette v. St. Luke’s Roosevelt Hospital, 132 F. Supp. 2d 256, 276-78 (S.D.N.Y. 2001) (dismissing for failing to allege prima facie elements). Accordingly, Wells Fargo’s overarching assertion that the complaint lacks the “specificity” to state a disparate impact claim, based on summary judgment and post-trial cases, reflects the wrong standard of review. Defs.’ Br. at 30; see id. at 31 (“complaint fails to specifically allege a disparate impact as to a particular protected class”); see id. at 32 (relying on two post-trial cases in asserting that Baltimore’s statistical allegations are not “adequate”).
The proper inquiry is instead whether the complaint gives Wells Fargo fair notice of the nature of a plausible disparate impact claim. See, e.g., Swierkiewicz, 534 U.S. at 514. The complaint does so, in abundance, by enumerating particular lending practices and alleging that these practices have a disproportionately negative impact and are responsible for the disproportionately high rate of foreclosure on African Americans and residents of African-American communities (who are, by the nature of that identification, mostly African American). See, e.g. Compl. ¶¶ 26, 36-60. The complaint alleges, for example, that 8.2% of Wells Fargo’s loans in neighborhoods that are 60% or more African-American result in foreclosure, but that the same is true for only 2.1% of its loans in neighborhoods that are 60% or more white. See id. ¶ 39; see also id. at 36-38 (discussing statistics that further demonstrate the concentration of Wells Fargo foreclosures in African-American neighborhoods since at least 2000). In 2005 and 2006, two-thirds of Defendants’ foreclosures were in neighborhoods that are 60% or more African-American, but only 15.6% were in neighborhoods that are less than 20% African-American. See id. ¶¶ 3, 37. Wells Fargo increases the interest rate on loans that are less than $75,000, which are nearly twice as likely to be in African-American than in white neighborhoods, while decreasing the rate
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for loans above $150,000, which are nearly six times as likely to be in white neighborhoods. See id. ¶¶ 50-52. In 2006, Wells Fargo made high-cost loans to 65% of its African-American mortgage customers in Baltimore, but to only 15% of its white customers. See id. ¶ 47.
Through discovery, Baltimore might obtain additional statistical proof in support of its disparate impact claim and might choose to present that evidence at trial, but at the pleading stage it does not have to allege the existence of every fact that it might ultimately present to a jury. Certainly, Baltimore does not have to allege the content of any expert statistical analysis of information that, in large part, has yet to be obtained through discovery.28 Wells Fargo’s contrary suggestion is groundless.
2. Wells Fargo Misconstrues What It Means to Show a Disparate Impact Defendants also attack the adequacy of the complaint’s statistical allegations demonstrating a disparate impact on the ground that the complaint compares the impact of Wells Fargo’s practices on foreclosure rates in neighborhoods that are, respectively, at least 80% African-American and no more than 20% African-American. See Defs.’ Br. at 33-34. Defendants claim that statistics are invalid unless they account for every white and African-American resident of Baltimore and do so individually, not based on neighborhood.29 See id. Defendants’ argument fails for two reasons. First, to prevail on a disparate impact claim, a plaintiff need not show that all members or only members of the protected class are harmed by the challenged practice. See, e.g., Turtle Creek Assocs., 736 F.2d at 988 (prima facie case established where 74.9% of minority population was affected, but only

28

For example, at this stage, Baltimore cannot even identify all of the loans in Baltimore that have been foreclosed on

that were originated by Defendants because foreclosure records do not always indicate the original lender. See Compl. ¶ 38.

29

In a motion to dismiss in another case, Wells Fargo’s attorneys, Mr. Sandler and Mr. Klubes, made the same

argument about statistics “fail[ing] to adequately represent the entire population.” Decl., Ex. 5 at 20-22 (Mot. to Dismiss,

Nat’l Fair Housing Alliance, Inc. v. Prudential Ins. Co. of Am., No. 1:01-cv-02199 (D.D.C. Dec. 20, 2001)). The argument

was rejected. See Prudential, 208 F. Supp. 2d at 60-61 (“plaintiffs have alleged more than adequate facts to support their

disparate impact claim”) (citing Town of Huntington).

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26.4% of white population); Town of Clarkton, 682 F.2d at 1064-65 (decision which “fell 2.5 times more harshly on black population than on the white [population]” left “no doubt” of adverse impact); Huntington, 844 F.2d at 938 (zoning decision that affected 28% of area’s minorities but only 11% of whites “created a strong prima facie showing of discriminatory effect”); Keith v. Volpe, 858 F.2d 467, 484 (9th Cir. 1988) (racially discriminatory effect established where defendant’s action “had twice the adverse impact on minorities as it had on whites”). Unfair practices principally affecting neighborhoods that are mostly African-American therefore demonstrate a sufficient disparity to state a disparate impact claim. See, e.g., Hargraves, 140 F. Supp. 2d at 21. The complaint amply alleges such disparities. See Compl. ¶¶ 36-40, 64-65. Walls v. City of Petersburg, 895 F.2d 188 (4th Cir. 1990), which Defendants chiefly rely on here, is inapposite because the plaintiff (on summary judgment) offered no evidence whatsoever that the challenged policy had a negative impact on anyone, much less evidence of a disparate impact. See id. at 191.
Second, Defendants again ignore the complaint’s actual allegations. The complaint alleges disparate foreclosure rates on Wells Fargo mortgages in majority African-American neighborhoods compared to all other neighborhoods (not just 80% versus 20%). See Compl. ¶ 38, 64. It also alleges disparate foreclosure rates in neighborhoods that are 60% African-American as compared to those that are 60% white. See id. ¶¶ 37, 39-40. Far from alleging only a “potential” disparate impact, as Defendants assert, the City alleges an actual disparate impact regardless of how one looks at the data.
3. Defendants Repeatedly Ignore and Contest the Allegations of the Complaint, Which They May Not Do Under Rule 12(b)(6)
Wells Fargo also errs by ignoring and contesting the factual allegations of the complaint that demonstrate a disparate impact. See Defs.’ Br. at 32-36, 38. Defendants’ own assertions of “fact,” however, have no place in a Rule 12(b)(6) motion.
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Defendants’ unwillingness to accept the allegations of the complaint, as it must on a motion to dismiss, manifests in several ways. First, Defendants imply that factors like credit scores explain away every statistical disparity identified in the complaint. See id. at 34 (listing credit scores, debt-to-income ratios, and loan-to-value ratios); id. at 35 (claiming that pricing is “merely the by-product of . . . an individualized and automated risk-assessment of race-neutral criteria”) (emphasis omitted).30 Three pages later, Defendants dispense with any vestige of subtlety, asserting “the simple truth that the Defendants made their loan pricing decisions based on credit risk and that similarly-situated borrowers with the same credit risk received the same rates.” Id. at 38. There is no basis for this “simple truth,” the testing of which will undoubtedly be a central focus of discovery. To the contrary, the complaint alleges that: Wells Fargo’s illegal “targeted activities fully explain[] the disparate rates of foreclosure, see Compl. ¶ 45; Wells Fargo “ignores [traditional underwriting] criteria,” id. ¶¶ 26(d), 45; after controlling for relevant variables, Wells Fargo charges African Americans more than similarly situated whites, see id. ¶¶ 53-54; and that borrowers in African-American neighborhoods typically receive loans with higher interest rates and, on adjustable rate loans, higher interest rate caps, see id. ¶¶ 50-52, 58-60. Wells Fargo exacerbates its error by rebuking Baltimore for not analyzing the credit scores and general creditworthiness of Wells Fargo’s borrowers before filing, even though such information is in Defendants’ exclusive control. See Defs.’ Br. at 34, 37. Discovery, not Defendants’ bald assertions, will yield the truth about the role of credit scores in Wells Fargo’s approach to underwriting in Baltimore. At that time, Baltimore will have access to Wells Fargo’s loan files and the ability to test Wells Fargo’s assertions about the relative creditworthiness of its borrowers.

30

Wells Fargo’s assertion that Baltimore “concedes” that Wells Fargo’s underwriting is based on an “individualized

and automated risk-assessment of race-neutral criteria” is preposterous. See Defs.’ Br. at 35. Paragraph 43 of the complaint

explains that this is what “responsible” lenders do, but then immediately alleges that Wells Fargo “is not following fair or

responsible underwriting practices with respect to African-American customers.” Compl. ¶¶ 43-44.

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Second, Defendants assert (in the guise of calling Baltimore’s allegations “implausible”) that

they properly underwrite “2/28” and “3/27” adjustable rate loans to African Americans and exercise no

discretion in setting interest rate caps on such loans, and that their disparate pricing of loans to similarly

situated African-American and white borrowers in Philadelphia is not indicative of their practices in

Baltimore. See Defs.’ Br. at 35-36. As with Defendants’ purportedly race-neutral reliance on proper credit factors, these assertions contradict the allegations of the complaint and are wholly unsupported.31

See, e.g., Compl. ¶¶ 53-60. Baltimore is entitled to a full and fair opportunity during discovery to

challenge these defenses.

In effect, Defendants would have the Court view every statistic in the complaint in the light most

favorable to them instead of to Baltimore and reject the City’s statistics if there might be a

nondiscriminatory explanation. That does not even remotely resemble the proper standard of review.

See, e.g., Schweikert v. Bank of America, N.A., 521 F.3d 285, 2008 WL 853005, at *2 (4th Cir. 2008).

The statistics need only make a plausible showing that Wells Fargo’s practices have a racially

discriminatory impact and need not constitute sufficient proof of that impact to prevail at trial. Wells

Fargo may later, with evidence, challenge and offer its own interpretation of the data set forth in the

complaint, but it is not entitled to a presumption that it will succeed.

B. Baltimore Properly Alleges That the Disparate Impact Is Caused By Wells Fargo’s Predatory Practices

Defendants also recast their assertions about traceability as a failure adequately to allege a causal

connection between Wells Fargo’s predatory practices and the disparate foreclosures rates. See Defs.’

Br. at 37-40. Defendants rely on the same arguments, e.g., about tax lien sales and property tax rates,

31

Relatedly, Wells Fargo appears to assert here that “information and belief” pleading did not survive, or was at least

seriously hobbled, by Twombly. See Defs. Br. at 36. Twombly stands for nothing of the sort, however, and Wells Fargo cites

no authority in support. See Follman v. Hospitality Plus of Carpentersville, Inc., 532 F. Supp. 2d 960, 963 n.1 (N.D. Ill.

2007) (rejecting parallel argument).

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which fail for the same reasons.32 As set forth above, the complaint plausibly alleges that Wells Fargo targets African Americans and residents of Baltimore’s African-American neighborhoods for predatory practices, and that this is directly responsible for disproportionately high foreclosure rates on Wells Fargo loans among African Americans and in African-American communities. See sections II.A, II.B.1, supra. This more than satisfies the Twombly standard of review.
Defendants, with little elucidation, cite nine additional cases here, but none remotely suggests a different result than with respect to standing and traceability. Of the five that address discrimination claims, two applied the standard of review rejected in Swierkiewicz and simply are not good law. See Brown v. Coach Stores, Inc., 163 F.3d 706, 712-13 (2d Cir. 1998); Trezza v. Hartford, Inc., No. 98-civ.2205 (MBM), 1998 WL 912101 (S.D.N.Y. Dec. 30, 1998). One applied a summary judgment standard to a Rule 12(b)(6) motion and therefore should not be followed. See Syverson v. IBM Corp., No. C-0304529-RMW, 2007 WL 2904252, at *6 (N.D. Cal. Oct. 3, 2007) (taking standard of review from City of Jackson, a summary judgment case). The plaintiffs in another failed to identify any practice they were challenging or any disproportionate impact on anyone; they merely complained that a lender was “aggressively pursing foreclosure.” Burrell v. State Farm Fire & Cas. Co., No. 00-civ.-5733 (JGK), 2001 WL 797461, at *10 (S.D.N.Y. July 12, 2001). The fifth case addressed a class certification motion after discovery, which the court explained presented a greater challenge than establishing a prima facie discrimination case (which, as Swierkiewicz holds, presents a greater challenge than stating a claim). See Garcia v. Johanns, 444 F.3d 625, 630, 633-636 (D.C. Cir. 2006). Defendants appear to have cited

32

Defendants’ reliance on the same arguments demonstrates that, to the extent their standing challenge is read as a

factual attack instead of a facial one, the standing challenge is “intertwined with the facts central to the merits of the dispute”

and may not be considered under Rule 12. Adams, 697 F.2d at 1219; see note 2, supra at 7.

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cases based on outcome, not analytical relevance.33 V. BALTIMORE PROPERLY STATES AN INTENTIONAL DISCRIMINATION CLAIM
UNDER THE FAIR HOUSING ACT Solely in a footnote, Defendants assert that Baltimore does not allege intentional discrimination and that, even if it did, it has not stated a claim for intentional discrimination. See Defs.’ Br. at 31 n.11. Both assertions are specious. Baltimore plainly alleges that Wells Fargo is liable for intentional discrimination by alleging that Wells Fargo engages in “reverse redlining.” Compl. ¶¶ 4-5, 46, 64, 66. Baltimore alleges that Wells Fargo’s acts are “intentional and willful,” id. ¶ 74, and that it engages in predatory practices with the “effect and purpose” of taking advantage of inexperienced and underserved borrowers, id. ¶¶ 4, 46 (emphasis added). The complaint further states: “As used by Congress and the courts, the term ‘reverse redlining’ refers to the practice of targeting residents in certain geographic areas for credit on unfair terms due to the racial or ethnic composition of the area.” Id. ¶ 28 (emphasis added). Targeting an area for harmful practices based on the African-American population of that area is inherently deliberate, intentional discrimination. The complaint likewise alleges that Wells Fargo’s “targeted” practices are responsible for Wells Fargo’s disproportionately high rate of foreclosure in the City’s African-American neighborhoods, id. ¶¶ 5, 46, and that it targets African-American neighborhoods because of their

33

None of Defendants’ remaining four cases involve discrimination claims of any sort, and none offer any principles

that support Defendants’ motion. See Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005) (investor alleging

securities fraud must “provide a defendant with some indication of the [economic] loss and the causal connection that the

plaintiff has in mind”); Teachers’ Retirement Sys. v. Hunter, 477 F.3d 162, 186-88 (4th Cir. 2007) (securities fraud complaint

alleged publicity surrounding a lawsuit was responsible for economic loss, but the lawsuit did not reveal the allegations that

purportedly caused share price to decline; causal connection was inherently illogical); Allegheny General Hospital v. Philip

Morris, Inc., 228 F.3d 429 (3d Cir. 2000) (hospitals lacked standing to sue tobacco companies under antitrust and RICO laws

to recover costs of providing health care to nonpaying patients; even though “[t]here is a causal connection,” factors such as

“smokers’ independent (i.e., separate from the fraud and conspiracy) decisions to smoke” defeated standing); City of

Philadelphia v. Beretta USA, Corp., 126 F. Supp. 2d 882 (E.D. Pa. 2000) (state tort law did not support claims against gun

manufactures to recover costs of harm from gun violence; among other reasons, Pennsylvania courts take “a restrictive

approach to imposing liability upon defendants who are absent at the time of the actual injury where other adults are present

who could have acted responsibly to prevent the harm”).

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vulnerability to these practices due to the historic denial of credit to minorities, see id. ¶¶ 29-30, 64. As with so much of its motion, Defendants simply disregard these allegations.
The notion that the complaint does not state a claim for intentional discrimination is equally unfounded. Defendants’ first basis for this charge is that the complaint does not allege that “a single loan officer marked up an interest rate or made additional charges as a result of racial animus.” Defs. Br. at 31 n.11. There is no requirement that the complaint identify a particular loan officer who is personally responsible for a discriminatory loan, however. In any event, Baltimore alleges that the Defendant companies are responsible for discriminatory practices and loans, from which it may plainly be inferred that the companies did so through the acts of their employees and agents. Moreover, because intentional discrimination may be proved by circumstantial evidence alone, see, e.g., U.S. Postal Serv. v. Aikens, 460 U.S. 711, 714 n.3 (1983), Baltimore need not identify direct evidence or a “smoking gun” to prevail, let alone allege such in the complaint. To imply, as Wells Fargo does, that an intentional discrimination complaint must identify a smoking gun to survive a motion to dismiss is simply wrong.
Defendants’ second basis is that the complaint does not allege that Wells Fargo “consciously or deliberately decided to discriminate against African-Americans in Baltimore City.” This ignores the allegations, noted above, that Wells Fargo deliberately and purposefully targets African Americans in Baltimore for reverse redlining. In addition, the statistical disparities are so large here that, even standing alone, they support an inference of discriminatory intent. See, e.g., Int’l Bhd. of Teamsters v. United States, 431 U.S. 324, 339 (1977).
Furthermore, Defendants vastly overstate the pleading requirements for a claim of intentional discrimination. As explained above, the complaint need not even set forth the prima facie elements of the claim; it need only provide “fair notice of the basis for [the plaintiff’s] claims.” Swierkiewicz., 534
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U.S. at 514. There is no doubt that the complaint provides sufficient detail so that Wells Fargo is aware of what this case is about. Even if it did not, Baltimore would be entitled to the opportunity to provide greater specificity through amendment. See, e.g., Ostrzenski, 177 F.3d at 252-53.
CONCLUSION For all of the reasons stated above, Baltimore respectfully submits that Defendants’ motion to dismiss should be denied in its entirety.

May 20, 2008

Respectfully submitted,

__/s/ John P. Relman________________________ John P. Relman, MD Fed. Bar No. 11482 Bradley H. Blower, MD Fed. Bar No. 07641 Glenn Schlactus, pending admission pro hac vice RELMAN & DANE, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com bblower@relmanlaw.com gschlactus@relmanlaw.com

Special Assistant City Solicitors and Attorneys for Plaintiff

George Nilson, City Solicitor, MD Fed. Bar No. 01123 Suzanne Sangree, Chief Solicitor, MD Fed. Bar No. 26130 City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov

Attorneys for Plaintiff

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 Case 1:08-cv-00062-JFM Document 133 Filed 10/16/09 Page 1 of 49

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION

____________________________________

)

MAYOR AND CITY COUNCIL

)

OF BALTIMORE,

)

)

Plaintiff,

)

)

v.

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL

)

LEASING, INC.,

)

)

Defendants.

)

____________________________________)

No. 1:08-cv-00062-JFM

PLAINTIFF MAYOR AND CITY COUNCIL OF BALTIMORE’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS THE AMENDED COMPLAINT

John P. Relman, MD Fed. Bar No. 11482 Bradley H. Blower, MD Fed. Bar No. 07641 Glenn Schlactus, pro hac vice RELMAN & DANE, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com bblower@relmanlaw.com gschlactus@relmanlaw.com

George Nilson, City Solicitor MD Fed. Bar No. 01123
Suzanne Sangree, Chief Solicitor MD Fed. Bar No. 26130
City Hall 100 N. Holliday Street Baltimore, MD 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov

Attorneys for Plaintiff

Case 1:08-cv-00062-JFM Document 133 Filed 10/16/09 Page 2 of 49
TABLE OF CONTENTS TABLE OF AUTHORITIES ............................................................................................. iv INTRODUCTION ..............................................................................................................1 STANDARD OF REVIEW .................................................................................................8 BACKGROUND .................................................................................................................9
A. WELLS FARGO’S FIRST MOTION TO DISMISS ...................................9 B. BALTIMORE’S FIRST AMENDED COMPLAINT. ...............................11 C. WELLS FARGO’S SECOND MOTION TO DISMISS ............................11 EVIDENCE IN SUPPORT OF BALTIMORE’S ALLEGATIONS .................................13 A. EVIDENCE OF REVERSE REDLINING FROM FORMER
WELLS FARGO LOAN OFFICERS WITH EXTENSIVE KNOWLEDGE OF DEFENDANTS’ SUBPRIME LENDING PRACTICES .............................................................................................13 B. EVIDENCE THAT WELLS FARGO TARGETS AFRICAN AMERICANS ...........................................................................................15 C. EVIDENCE THAT WELLS FARGO STEERS PEOPLE WHO QUALIFY FOR PRIME MORTGAGES INTO SUBPRIME MORTGAGES AND ENGAGES IN OTHER ABUSIVE SUBPRIME PRACTICES ..............................................................................................18 1. Steering by Wells Fargo.................................................................18 2. Financial Incentives That Induce Wells Fargo Employees to
Steer Borrowers .............................................................................19 3. Broad Discretion That Allows Wells Fargo Employees to
Steer Borrowers .............................................................................20 4. Other Abusive Subprime Lending Practices By Wells Fargo .......22 D. WELLS FARGO’S REVERSE REDLINING HAS RESULTED IN AN EXCESSIVE RATE OF UNSUSTAINABLE LOANS IN AFRICAN-AMERICAN NEIGHBORHOODS .......................................23
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E. THE EVIDENCE SHOWS THAT BALTIMORE HAS STANDING BECAUSE IT HAS BEEN INJURED BY WELLS FARGO’S REVERSE REDLINING ...........................................................................24
ARGUMENT .....................................................................................................................32 A. WELLS FARGO’S MOTION TO DISMISS IS ACTUALLY A MOTION FOR RECONSIDERATION THAT IS UNTIMELY AND FAILS TO MEET THE HIGH STANDARD FOR SUCH A MOTION................................................................................................32 B. CITY OF BIRMINGHAM IS ENTIRELY INAPPOSITE..........................34 C. CITY OF CLEVELAND IS ENTIRELY INAPPOSITE.............................37 1. Prudential Limitations Applicable in City of Cleveland Do Not Apply Here ........................................................................38 2. The City of Cleveland Defendants’ Alleged Liability Was Based on Merely Securitizing Loans, Not Making or Foreclosing on Loans .....................................................................39 3. City of Cleveland Was Based On Broad Allegations That All Subprime Loans are Tortious...................................................41 4. None of the Other Bases for Dismissal in City of Cleveland Apply to Fair Housing Act Claims ................................................42 5. City of Cleveland Did Not Involve Any Laws That Regulate Mortgage Lending..........................................................................42 D. THE COURT SHOULD NOT CONSIDER WELLS FARGO’S EVIDENCE WITHOUT FIRST ALLOWING BALTIMORE TO HAVE DISCOVERY ..........................................................................43
CONCLUSION ..................................................................................................................45
iii

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TABLE OF AUTHORITIES Cases
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .......................................................36 CHRP v. Wells Fargo Bank, N.A., No. 08-CVH-3139 (Cleveland Mun. Ct. June 18, 2009) .................................................................................41 City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S (N.D. Ala. Aug. 19, 2009) ......................................................................................... passim City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009) ........................................................................................................ 37- 42 Gladstone, Realtors v. Vill. of Bellwood, 441 U.S. 91 (1979) .................................7, 38, 39 Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982) ..............................................37, 38 Holmes v. SIPC, 503 U.S. 258 (1992) ...............................................................................38 Johnson v. Montminy, 289 F. Supp. 2d 705 (D. Md. 2003).......................................2, 8, 33 New West, L.P. v. City of Joliet, 491 F.3d 717 (7th Cir. 2007) ...................................38, 39 Plotkin v. Lehman, 1999 WL 259669, 178 F.3d 1285 (table) (4th Cir. Apr. 30, 1999) .......................................................................................................8 Potter v. Potter, 199 F.R.D. 550 (D. Md. 2001) ........................................................2, 8, 33 Schultz v. Braga, 290 F. Supp. 2d 637 (D. Md. 2003).......................................................13 Tingley v. Beazer Homes Corp., No. 3:07-cv-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008) .................................................................................................36 Trafficante v. Metro. Life Ins. Co., 409 U.S. 205 (1972)...................................................38 United States v. Williams, 674 F.2d 310 (4th Cir. 1982) ...............................................2, 33
Rules Local Rule 105(10) ....................................................................................................2, 8, 34
iv

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INTRODUCTION On July 2, 2009, the Court denied Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.’s (collectively “Wells Fargo”) motion to dismiss Plaintiff Mayor and City Council of Baltimore’s (“Baltimore” or “City”)’s original Complaint. See Mayor & City Council of Baltimore v. Wells Fargo Bank, N.A., 631 F. Supp. 2d 702 (D. Md. 2009) (“Opinion” or “Op.”). The Court’s ruling was based on extensive written submissions from the parties totaling more than 2500 pages and multiple in-person and telephonic hearings, culminating in a day-long evidentiary hearing on June 29, 2009. The record was developed in such detail because Judge Legg wanted to “look under the hood” before deciding whether Baltimore was entitled to proceed with its case. Hr’g Tr. (Mar. 4, 2009) at 6; Hr’g Tr. (June 3, 2009) at 14, 24. Judge Legg took the unusual step of ordering a full evidentiary hearing on the initial motion to dismiss because he wanted to take a more detailed look at the evidence of injury and causation in support of the City’s standing. The hearing proved to be as searching as one could expect at the Rule 12 stage. At the Court’s request, see Mem. to Counsel (Mar. 6, 2009) (Docket No. 58) at 1-2, the City presented evidence that Wells Fargo targeted African-American borrowers and African-American neighborhoods in Baltimore for less favorable loan terms than similarly situated whites; that Wells Fargo employees used their discretion to steer AfricanAmerican borrowers who qualified for prime loans into subprime loans; that these discriminatory practices resulted in disproportionate rates of foreclosure and vacancy in Baltimore’s AfricanAmerican neighborhoods; and that the injury caused by Wells Fargo’s discriminatory practices is fully capable of precise measurement. See Mem. to Counsel (Mar. 6, 2009) (Docket No. 58) at 1-2. All told, the City presented nineteen sworn declarations and live testimony from three witnesses. Wells Fargo, of course, was afforded equal time to present its evidence in support of

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the very arguments against standing and causation that it is making for the second time in its new motion to dismiss. At the conclusion of the hearing, Judge Legg held that “the facts in support of the City’s claim of standing are sufficiently plausible and grounded in fact to permit the case to proceed to merits discovery,” and that the City had “proffered sufficient proof” of discrimination to state a claim. Op. at 3. On August 6, 2009, at the conclusion of a hearing on the parties’ respective discovery plans, this Court directed the parties to proceed with discovery pursuant to the framework proposed by the City. See, e.g., Hr’g Tr. at 43, 50.
Defendants’ new motion to dismiss (Sept. 18, 2009) (Docket No. 126) (“MTD II”), though technically aimed at Baltimore’s First Amended Complaint (“FAC”), is in reality nothing more than a motion to reconsider the July 2 decision. The motion must be denied because Defendants themselves do not even purport to satisfy any of the essential predicates for a motion to reconsider, i.e., the identification of newly discovered evidence, an intervening change in controlling law, or a manifest error of law. See, e.g., Potter v. Potter, 199 F.R.D. 550, 552 n.1 (D. Md. 2001). Wells Fargo simply wants the Court to “‘change its mind,’” but that is not a proper basis for seeking reconsideration. Johnson v. Montminy, 289 F. Supp. 2d 705, 706 (D. Md. 2003) (Motz, J.) (quoting United States v. Williams, 674 F.2d 310, 313 (4th Cir. 1982)). Indeed, of the 332 pages filed by Defendants in support of their new motion to dismiss, virtually all were submitted by Wells Fargo in support of its first motion to dismiss. Of the pages that are not identical, all of the points made merely restate in a different form the same arguments that the Court has already rejected. Moreover, Defendants’ motion is untimely because motions for reconsideration must be filed within ten days of the underlying ruling. See Local Rule 105(10).
The sole new item in Defendants’ submission is its reference to City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S (N.D. Ala. Aug. 19, 2009), a case about the causation
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prong of standing that provides no support for reconsideration. This unpublished decision from outside the Fourth Circuit does not raise any issue that Judge Legg did not already consider and that he did not require Baltimore to address with detailed evidence. Indeed, Judge Legg was focused on the issue of causation from the beginning of the first hearing on the first motion to dismiss. See, e.g., Hr’g Tr. (Jan. 28, 2009) at 10 (“The trickier issue in thinking about the City’s complaint is trying to find some way of quantifying the damage of the increased cost to the City . . ., figuring out what portion of the harm is caused by these Wells Fargo vacancies when there are so many vacant houses in the city.”). In response, Baltimore created a record containing extensive evidence of causation. Judge Legg held that Baltimore’s evidence was sufficient and therefore rejected Wells Fargo’s causation challenge.
The record in City of Birmingham, to the contrary, included no evidence at all of causation (or anything else). Birmingham copied the background portion of Baltimore’s original complaint, but the similarity between the cases ends there. Birmingham made no allegations whatsoever that were particular to the seven lenders it sued and presented no evidence, by way of declarations, witness testimony or statistics of any kind, that those lenders were engaged in any wrongdoing, much less wrongdoing that caused injury to Birmingham. Baltimore, by contrast, has submitted nineteen detailed declarations, live testimony from three witnesses, and additional evidence showing how Wells Fargo discriminates against City residents, the many ways that the City has been injured by Wells Fargo’s discriminatory acts, and the scientific methodology by which the City’s injuries will be traced to those acts and quantified. Baltimore has incorporated most of this evidence in its amended complaint. Birmingham did none of this, relying instead on generalized allegations about subprime lending that had nothing to do with the defendants in that case. Thus, Wells Fargo’s claim that City of Birmingham and this case are “identical,” MTD II
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at 6, 7, could not be more plainly wrong, and the dismissal of Birmingham’s unsupported complaint is neither surprising nor relevant.
Moreover, the direct and powerful evidence presented here, but wholly absent in City of Birmingham, has already answered all of Judge Legg’s questions about discrimination, discretion, and standing, including the question of causation that was also raised in City of Birmingham.
First, Baltimore’s evidence goes to the heart of its claims of reverse redlining and demonstrates in detail how Wells Fargo used discretion in pricing and financial incentives to encourage its employees to target African-American neighborhoods in Baltimore for deceptive, high priced loans that resulted in unnecessary foreclosures. In graphic terms, declarations from former Wells Fargo loan officers describe first-hand how employees specifically targeted zip codes in Baltimore and nearby areas that are African-American for subprime mortgage loans; targeted African-American churches and their congregations in Baltimore for subprime loans, but did not target white churches; selected African-American employees to solicit subprime business from African-American audiences and communities, and actually refused to let white employees make presentations to African-American audiences; drafted subprime marketing materials on the basis of race by using software to “translate” the materials into what Wells Fargo literally defined as the “language” of “African American;” referred to subprime loans located in minority communities as “ghetto loans;” referred to minority customers as “mud people,” “niggers,” those with “bad credit” and those who “don’t pay their bills;” and generally fostered a discriminatory culture that was tolerated by management. See FAC Attach. M (“Jacobson Decl.”); Attach. N (“Paschal Decl.”).1

1

Tony Paschal and Elizabeth Jacobson, as described in greater detail in their declarations and below, were

longtime Wells Fargo loan officers until 2007.

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These declarations are further supported by a declaration from mortgage broker Peter Hebert, who describes how Wells Fargo used brokers to target Baltimore for abusive subprime mortgage practices. Hebert testifies that Wells Fargo was the only one of the many lenders he worked with that targeted Baltimore in this way. See June 29, 2009 Hr’g Ex. (“Hr’g Ex.”) 3 (“Hebert Decl.”). See also infra at 15-18.
Second, the evidence also makes clear precisely how Wells Fargo employees used the discretion they were afforded under Wells Fargo rules to steer borrowers who qualified for prime loans into subprime loans. Wells Fargo employees steered borrowers who qualified for prime and Federal Housing Administration (“FHA”) loans into much more costly subprime loans; gave loan officers broad discretion and large financial incentives to steer customers into subprime products with increased interest rates, points, and fees that put, in one declarant’s words, a “bounty” on African Americans targeted for subprime loans; deceived customers in order to give them subprime loans by, for example, telling them not to put any down payment on a property or not to submit full documentation for their loan, which would cause the loans to “flip” from prime to subprime; deceived African-American borrowers by telling them their interest rates were locked, when in fact they were not and could be reduced; and deceived African Americans about the full range of more advantageous products that were available to them and for which they qualified. See Jacobson Decl.; Paschal Decl. In light of the routine use of these practices, Wells Fargo subprime lenders joked morbidly among themselves that they were “riding the stagecoach to Hell.” Jacobson Decl. ¶ 31. See infra at 18-23.
Third, the evidence clearly shows that Baltimore has standing. The Court explained in considering Wells Fargo’s standing argument the first time that “the big issue is, are the [properties] vacant or not?” See Hr’g Tr. (Jan. 28, 2009) at 106. The Court suggested that if the
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Wells Fargo foreclosure properties were vacant, it would not be difficult to see that Baltimore has been injured and has standing. See id. at 106, 111-12. The evidence demonstrates that they are. Dr. Ira Goldstein’s testimony shows that of the 401 Wells Fargo foreclosures from 2005 to 2008 that have been identified to date, 230 of the properties were vacant after the Wells Fargo loan was originated. Of these 230 vacant properties, 163 (71%) are located in predominantly (i.e., over 60%) African-American neighborhoods; 80 of these 163 remain vacant. See Hr’g Tr. (June 29, 2009) at 71-81; FAC Attach. O (“Goldstein Decl.”); Hr’g Ex. 5 (“Goldstein Suppl. Decl.”).
The evidence also confirms that these vacancies cause substantial injuries to the City. Jason Hessler, Acting Director of Baltimore Housing’s Code Enforcement Legal Section, testified in writing and in person that vacancies typically create a range of public health and safety problems that the City must devote substantial resources to address. Hessler testified that the resulting costs can be quantified precisely using detailed property-by-property records maintained by the City. He provides examples of the extensive responses required of the City at several of the Wells Fargo foreclosure properties, showing that Baltimore is repeatedly forced to allocate costly resources to address one problem after another at vacant houses. Id. Hessler also describes the typical costs associated with such responses and establishes that the costs associated with individual properties can be identified and quantified. Hr’g Tr. (June 29, 2009) at 54-70; Hr’g Ex. 7 (“Hessler Decl.”); Hr’g Ex. 8 (“Hessler Suppl. Decl.”).
Declarations from eleven City residents who live next door to or a few houses down from some of the vacant properties further explain how the public health and safety problems identified by Hessler and other problems created by the vacancies cause their neighborhoods to deteriorate and their properties to lose value. FAC Attachs. P-S; Hr’g Exs. 13-19. This shows
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that, as Baltimore alleges, vacancies also cause the City to lose significant property tax revenue by bringing down the value of surrounding homes. Dr. Goldstein and Dr. Richard Voith both confirm that the City’s tax loss attributable to each Wells Fargo foreclosure can be quantified precisely using a well-established methodology. Hr’g Tr. (June 29, 2009) at 82-86; Goldstein Decl.; Goldstein Suppl. Decl.; Hr’g Ex. 6 (“Voith Decl.”). See infra at 24-32.
This voluminous evidence plainly establishes that Baltimore has standing under the leading Fair Housing Act case on municipal standing, Gladstone, Realtors v. Vill. of Bellwood, 441 U.S. 91 (1979) (“Gladstone”), and its progeny. Gladstone found that a village had standing under a motion to dismiss standard of review based on mere allegations of injury to the village’s property tax base that were much less specific than the detailed evidence of injury to the tax base submitted by Baltimore.
In sum, Baltimore’s evidence shows that Wells Fargo has targeted African Americans, that Wells Fargo employees have discretion to select loan products and terms and have used their discretion to the detriment of African Americans, that Wells Fargo employs subjective and discretionary underwriting practices that have disparately impacted African Americans, and that Baltimore has been injured by Wells Fargo’s unlawful acts. No such evidence as to any defendant was presented in City of Birmingham, where seven lenders were sued at the same time. Accordingly, Baltimore’s detailed evidence once again requires the denial of Wells Fargo’s motion to dismiss.
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STANDARD OF REVIEW A motion for reconsideration must be filed “not later than 10 days after entry of the order” unless Fed. R. Civ. P. 60 provides otherwise. Local Rule 105(10). A motion for reconsideration is only appropriate in three circumstances: to correct a manifest error of law, to present newly discovered evidence, or because there has been an intervening change in controlling law. See, e.g., Potter v. Potter, 199 F.R.D. 550, 552 n.1 (D. Md. 2001) (quotation marks and citations omitted). It is “improper to use such a motion to ask the Court to rethink what the Court has already thought through – rightly or wrongly.” Id at 552 (quotation marks and citation omitted). Thus, when a motion to reconsider is “nothing more than a request that [the court] change its mind,” the motion should be denied. Johnson v. Montminy, 289 F. Supp. 2d 705, 706 (D. Md. 2003) (Motz, J.) (same). Defendants try to avoid the strict requirements for a motion to reconsider by asserting that, pursuant to the unpublished decision in Plotkin v. Lehman, 1999 WL 259669, 178 F.3d 1285 (table) (4th Cir. Apr. 30, 1999) (per curiam), “the Court has discretion to consider anew all issues underlying the original Motion to Dismiss to the extent they overlap.” MTD II at 3 n.3. Contrary to this assertion, Plotkin does not support de novo reconsideration of issues already decided by the Court. Plotkin merely relied on the well-established (and inapposite) proposition that an interlocutory district court order does not constitute the law of the case. See Plotkin, 1999 WL 259669, at *1.2 Only in limited circumstances may an interlocutory order be subject to a motion for reconsideration, see, e.g., Potter, 199 F.R.D. at 552 n.1, and those circumstances are absent here.

2

The City also notes that Defendants misleadingly cite Plotkin as if it were a published decision. It is not.

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BACKGROUND A. WELLS FARGO’S FIRST MOTION TO DISMISS
Baltimore commenced this case by filing a detailed complaint alleging that Wells Fargo has violated the federal Fair Housing Act (“FHA”) by targeting predatory lending practices at African Americans and residents of African-American neighborhoods in Baltimore since at least 2000. E.g., Compl. (Jan. 8, 2008) (Docket No. 1) ¶¶ 3-6. The City further alleged that Wells Fargo’s unlawful conduct has resulted in unnecessary foreclosures in African-American neighborhoods that have caused it tens of millions of dollars in direct and empirically quantifiable harm. See id. ¶¶ 67-70. This includes harm from vacancies caused by the completed foreclosures and from the filing of foreclosure actions, which contribute in a precisely quantifiable way to declines in property values and property tax revenues. See id. ¶¶ 66-70. Baltimore alleged that Wells Fargo discriminates intentionally and that its acts have a disparate impact on African Americans. See, e.g., id. ¶¶ 4-6.
Wells Fargo responded to the complaint by filing a motion to dismiss. See Defs.’ Mot. to Dismiss the Compl. (Mar. 21, 2008) (Docket No. 10). Wells Fargo asserted that Baltimore lacks standing because it cannot establish injury or traceability; that disparate impact claims are not cognizable under the FHA; and that Baltimore failed to state a claim upon which relief can be granted. See Mem. of Law in Supp. of Defs.’ Mot. to Dismiss the Compl. (Mar. 21, 2008) (Docket No. 10-2) (“MTD I”).
The Court scrutinized Wells Fargo’s initial motion to dismiss and Baltimore’s opposition in great detail over the next 15 months. The Court held multiple hearings on the motion (including three in person); instructed counsel to address 30 written questions; and ordered limited discovery regarding a subset of the loans at issue. The purpose of the Court’s thorough
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investigation was to see if the City had enough evidence to support standing and demonstrate a plausible basis for alleging FHA violations. Collectively the parties submitted over 2500 pages of argument and evidence to the Court with respect to the motion to dismiss.
The Court’s investigation culminated in an all-day evidentiary hearing on June 29, 2009, to “determine whether the City’s damage allegations in support of its standing are sufficiently plausible and grounded in fact to permit the case to proceed to full-fledged merits discovery . . . .” Op. at 2. Baltimore submitted nineteen declarations, live testimony from three witnesses, and additional evidence. Wells Fargo relied on a 74 page PowerPoint presentation, four affidavits, and live testimony from one of its affiants to make the very same arguments it is now asserting in this second motion to dismiss.3 In addition, in a filing one week before the hearing, Wells Fargo argued that a decision from May 2009 – City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009) – supported dismissal of Baltimore’s complaint for lack of standing. See Defs.’ Responsive Filing Pursuant to the Court’s June 3, Order Regarding Pl.’s Prior Submissions (June 22, 2009) (Docket No. 85) at 2-4.
The Court denied Wells Fargo’s motion to dismiss after the evidentiary hearing. See Op. The Court first held that Baltimore stated a claim based on declarations from two former Wells Fargo loan officers, Elizabeth Jacobson and Tony Paschal. Id. at 3. The Court then stated that, “[w]ith respect to standing, the Court has determined that the facts in support of the City’s claim of standing are sufficiently plausible and grounded in fact to permit the case to proceed to merits discovery.” Id.
In the same opinion denying the motion to dismiss, the Court directed the parties to submit a proposed plan for discovery. Id. at 3-4. At a hearing on August 6, 2009, the Court

3

Baltimore had not been afforded access to the documents on which Wells Fargo’s affiants relied or the

opportunity to depose them.

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accepted Baltimore’s proposal and rejected Wells Fargo’s, which would have sharply limited the amount of discovery available to Baltimore before summary judgment. Hr’g Tr. (Aug. 6, 2009) at 43 (“essentially, I’m buying the plaintiff’s position”). Discovery is now underway. B. BALTIMORE’S FIRST AMENDED COMPLAINT
While Wells Fargo’s first motion to dismiss was pending, Baltimore filed its First Amended Complaint on June 1, 2009. The FAC incorporated most of the evidence that Baltimore later presented at the June 29 evidentiary hearing. The FAC updated the City’s statistical allegations, added voluminous evidence, and did not alter the nature the City’s claims in any respect. Nothing was subtracted from Baltimore’s original complaint, and substantial rich and supported detail was added.
In a telephonic hearing on June 3, 2009, the Court stated that the June 29, 2009 evidentiary hearing would proceed as scheduled, notwithstanding the filing of the FAC. Hr’g Tr. (June 3, 2009) at 22. The Court added that if the initial motion to dismiss were denied after the evidentiary hearing, Wells Fargo would then be permitted to file a new motion to dismiss with respect to the FAC. Id. at 36. C. WELLS FARGO’S SECOND MOTION TO DISMISS
The second motion to dismiss was filed on September 18, 2009. Wells Fargo’s fourteen page brief only addresses Baltimore’s standing and makes the same arguments about standing and causation that it asserted in the initial motion to dismiss. Just as it did in support of that earlier motion, Wells Fargo again casts aspersions on Baltimore’s declarants; again relies heavily on Allen v. Wright, 468 U.S. 737 (1984), Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149 (4th Cir. 2000), Friends for Ferrell Parkway, LLC v. Stasko, 282 F.3d 315 (4th Cir. 2002), Frank Krasner Enters., Ltd. v. Montgomery County, 401 F.3d 230 (4th Cir.
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2005), and City of Cleveland; again attempts to disparage Baltimore’s damages allegations and evidence as property tax, crime, and rehabilitation “theories;” and again touts the materials it presented at the June 29 hearing.
Likewise, Wells Fargo’s three leading submissions in support of its first motion to dismiss reappear as exhibits to its new motion: the 49 page brief it submitted in March 2008, see MTD II at Ex. 1; the 74 page PowerPoint presentation it relied on at the June 29, 2009 evidentiary hearing, see id. at Ex. 4; and the 157 page collection of four affidavits it also relied on at the June 29, 2009 evidentiary hearing, see id. at Ex. 5.
Despite filing 332 pages in support of its second motion to dismiss, the sole item that was not before Judge Legg when he ruled on July 2 is the City of Birmingham case. Given that the record here is extensive, exceptionally detailed, and otherwise unchanged, it is not surprising that Wells Fargo relies so heavily on City of Birmingham in its new motion. This reliance, however, is misplaced. City of Birmingham and this case are not remotely analogous, much less “identical” as Wells Fargo claims, MTD II at 6, 7, and its citation by Wells Fargo does nothing to revive the standing argument that Judge Legg has already rejected. Birmingham rested on generalized, unsupported allegations about lending and injury unconnected to itself or the defendants it sued, while Baltimore has produced exactly the kind of detailed evidence requested and determined to be sufficient by the Court.
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EVIDENCE IN SUPPORT OF BALTIMORE’S ALLEGATIONS4 A. EVIDENCE OF REVERSE REDLINING FROM FORMER WELLS FARGO
LOAN OFFICERS WITH EXTENSIVE KNOWLEDGE OF DEFENDANTS’ SUBPRIME LENDING PRACTICES To evaluate the City’s evidence of standing and causation, Judge Legg first focused on the evidence of “reverse redlining,” or the practice of targeting African-American borrowers and African-American neighborhoods for predatory lending practices. Reverse redlining plausibly and logically results in higher rates of foreclosure in African-American neighborhoods than white neighborhoods because African-American borrowers either receive loans on materially worse terms than white borrowers or receive loans that should not have been made or are simply unaffordable. Two of the declarations incorporated in Baltimore’s FAC are from former Wells Fargo employees, Elizabeth Jacobson and Tony Paschal. Both have extensive direct knowledge of Wells Fargo’s local subprime lending practices.5

4

Baltimore’s reliance on evidence in opposition to the current motion to dismiss, as with its reliance on the

same evidence in opposition to the first motion to dismiss, does not convert the motion into a Rule 56 summary

judgment motion. With respect to the standing challenge under Rule 12(b)(1), the Court may accept evidence under

Rule 12, as Judge Legg did. With respect to the Rule 12(b)(6) challenge, consideration of evidence incorporated in

a complaint does not cause conversion. See, e.g., Schultz v. Braga, 290 F. Supp. 2d 637, 651 n.8 (D. Md. 2003).

Consistent with Schultz, Baltimore’s evidence regarding the Rule 12(b)(6) argument is part of the First Amended

Complaint. Baltimore’s additional evidence – such as the live testimony from the June 29 hearing – goes to

standing (or, in minor respect, merely confirms the evidence attached to the First Amended Complaint).

Moreover, as required under Rule 12 and recognized by Judge Legg, the Court must “accept[ the City’s evidence] and view[] it in the light most favorable to the Plaintiff.” Hr’g Tr. (June 3, 2009) at 24; see also id. at 14 (“did not intend the hearing to be a mini trial,” “did not intend to resolve credibility determinations”), 23 (“credibility issue . . . is reserved for trial”). As Judge Legg further stated, any objection by Wells Fargo that Baltimore’s evidence is “incomplete and misleading” “is essentially a determination to be made either at a summary judgment hearing . . . or [] trial if there is simply a dispute of facts.” Id. at 22-23.

In addition to the evidence and arguments addressed in this brief, Baltimore also incorporates by reference its earlier submissions in opposition to Wells Fargo’s first motion to dismiss. This is wholly proper because Wells Fargo has incorporated its earlier motion by reference. See MTD II at 3.

5

Wells Fargo’s continued gratuitous attacks on these individuals and their credibility are, as Judge Legg

explained, “of no moment” under Rule 12. Hr’g Tr. (June 3, 2009) at 23.

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Jacobson worked for Wells Fargo as a loan officer and then a sales manager from August 1998 until December 2007. Jacobson Decl. ¶ 2. She “worked directly with loan applicants to make subprime loans.” Id. ¶ 3. She made the loans in a geographic area called “Region 12” that includes Baltimore, Prince George’s County, Northern Virginia, and other places. Id. “Much of [her] business came from referrals from Wells Fargo loan officers who were on the prime side of the business,” known as “A reps.” Id. Many of the customers referred to Jacobson by A reps lived in Prince George’s County or Baltimore, and a large majority of her customers were African Americans. Id. ¶ 26.
Jacobson was one Wells Fargo’s most successful subprime loan officers in the country. Id. ¶ 4. “In 2004 [she] made more subprime loans than any other loan officer at Wells Fargo anywhere in the country” and she “was always one of the top three Wells Fargo subprime loan producers in the country.” Id. Jacobson completed approximately $50 million in subprime loans per year between 2003 and 2007. Id. ¶ 5. This translates into about 180 loans per year. Id. Because she made so many subprime loans and worked at Wells Fargo for so long, Jacobson “learned all of the ‘ins and outs’ of the subprime loan process at the company.” Id. ¶ 7. Jacobson is white. FAC ¶ 62.
Tony Paschal, like Jacobson, has extensive experience in mortgage lending at Wells Fargo. He was a Wells Fargo loan officer from September 1997 to September 2007 (with a hiatus of approximately 2½ years beginning in June 1999) in the Sales and Marketing section in Annandale, Virginia. Paschal Decl. ¶¶ 2-3, 6. His job was to solicit Wells Fargo borrowers to refinance their home mortgage with a prime or FHA loan.6 Id. ¶¶ 3, 7.

6

“FHA loans . . . offered lower interest rates that are closer to prime rates” than subprime rates. Paschal

Decl. ¶ 23.

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Paschal worked on the same floor as the Mortgage Resource division, “which is known by the acronym MORE and exclusively originated higher interest subprime loans.” Id. ¶ 7. When borrowers did not qualify for prime or FHA loans, Paschal referred them to MORE. Id. He “communicated with [the MORE employees] every day.” Id. Paschal is African-American. Id. ¶ 4. B. EVIDENCE THAT WELLS FARGO TARGETS AFRICAN AMERICANS
The declarations from Tony Paschal and Elizabeth Jacobson demonstrate the lengths to which Wells Fargo has gone to target Baltimore’s African Americans and neighborhoods that are predominantly African-American, as alleged in the FAC and in violation of the Fair Housing Act.
Paschal states that MORE employees in his office “targeted minority consumers for both purchase and refinance subprime loans,” Paschal Decl. ¶ 8, and Jacobson confirms that “Wells Fargo Home Mortgage [an unincorporated division of Wells Fargo Bank, N.A.] tried to market subprime loans to African Americans in Baltimore,” Jacobson Decl. ¶ 27. “The MORE division targeted zip codes in Washington, D.C. east of the Anacostia River, Prince George’s County, Maryland and the City of Baltimore with predominantly African-American populations.” Paschal Decl. ¶ 8; see also id. ¶ 10. “Subprime managers joked that Prince George’s County was the ‘subprime capitol of Maryland.’” Jacobson Decl. ¶ 26. At the same time, Wells Fargo refrained from targeting whites for subprime loans; Paschal “heard employees in the MORE division comment that Howard County was not good for subprime loans because it has a predominantly White population.” Paschal Decl. ¶ 8.
Wells Fargo targeted African Americans in a variety of ways. One way was by directly sending marketing materials to zip codes with predominantly African-American populations. Id.
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¶¶ 8, 10. It even tailored its subprime marketing materials on the basis of race. It devised software to print out subprime promotional materials in different so-called languages, one of which was “African American.” Id. ¶ 11. A computer screen shot from 2006 showing this option is attached to Paschal’s declaration. Id. at Ex. A. Wells Fargo did not remove the “African American” language option until Paschal complained. Id. ¶ 11.
Another “strategy used to target African-American customers [in Baltimore] was to focus on African-American churches.” Jacobson Decl. ¶ 27. Like their lack of interest in targeting white areas such as Howard County, “[s]ubprime loan officers did not market or target white churches for subprime loans. When it came to marketing, any reference to ‘church’ or ‘churches’ was understood as code for African-American or black churches.” Id. ¶ 30.
Wells Fargo combined its strategy of targeting African-American churches with another strategy – making sure that African-American employees were the face of the company for African-American audiences and customers. Jacobson was told by managers that she could not attend presentations at Baltimore’s African-Americans churches because she is not “of color;” later she was told she could go if she “carried someone’s bag.” Jacobson Decl. ¶ 28. She was likewise told that she was “‘too white’ to appear before the [virtually all black] audience” at a “wealth building seminar” in Greenbelt designed to market subprime loans. Id. ¶ 29. Jacobson “complained to several higher ranking managers . . . . [but] the company did not respond to [her] complaints and no action was taken.” Id. Likewise, a unit in Silver Spring hired an AfricanAmerican employee for the specific purpose of targeting African-American churches and their members for subprime loans. Paschal Decl. ¶ 12. Paschal further confirms that Wells Fargo “us[ed] minority subprime loan officers to solicit loans in [the minority] communities” it targeted. Id. ¶ 10. It “hired African-American loan officers exclusively from other subprime
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lenders,” and “[i]n the Annandale office, all the MORE loan officers were African-American, even though their two managers were White.” Id. ¶ 12.
Wells Fargo’s employees targeted African Americans and other minorities for subprime loans because they held derogatory stereotypes about minorities. This fostered a discriminatory culture, which management tolerated. Paschal “heard MORE employees on several occasions mimic and make fun of their minority customers by using racial slurs. They referred to subprime loans made in minority communities as ‘ghetto loans’ and minority customers by saying ‘those people have bad credit’ and ‘those people don’t pay their bills,’ and calling them ‘mud people.’” Paschal Decl. ¶ 8. Paschal’s branch manager Dave Zoldak used the racial slur “nigger” at the office and spoke “about how African Americans lived in ‘hoods’ and ‘slums.’” Id. ¶ 16. Paschal complained, yet Wells Fargo promoted Zoldak to area manager. Id.
This evidence is further supported by a declaration from Peter Hebert demonstrating that Wells Fargo also used mortgage brokers to target African-Americans in Baltimore. Hebert was a loan officer from 2002 to 2008 at Allied Home Mortgage Capital Corporation (“Allied”), a correspondent lender and mortgage broker that originated many loans for Wells Fargo in Maryland. Hebert Decl. ¶¶ 2-4, 8. Allied focused on borrowers with credit scores in the “sweet spot” of 580-620 because they were viewed as having good enough credit to qualify for a loan, but as having insufficient financial literacy to shop around for a better loan if Allied offered them a subprime loan. Id. ¶ 9. This made them “easy targets.” Id. ¶ 11. Most of its customers in this credit score range were African American and it was known that the likely recipients of subprime loans in Baltimore were African American. Id. ¶ 10. Hebert learned from his branch manager that Wells Fargo asked Allied to target Baltimore. Id. ¶ 11. Hebert explains that it would have been obvious to anyone that the borrowers in the “sweet spot” pulled in by targeting
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Baltimore would very likely be African American. Id. That is exactly what happened when Allied targeted Baltimore for Wells Fargo and “it exploited African-American borrowers.” Id. ¶¶ 12-13. As a broker, Hebert worked with hundreds of lenders in addition to Wells Fargo, but he is not aware of any others that targeted Baltimore, and thereby African Americans, like Wells Fargo did. Id. ¶¶ 3, 11. C. EVIDENCE THAT WELLS FARGO STEERS PEOPLE WHO QUALIFY FOR
PRIME MORTGAGES INTO SUBPRIME MORTGAGES AND ENGAGES IN OTHER ABUSIVE SUBPRIME PRACTICES 1. Steering by Wells Fargo Jacobson and Paschal also confirm that Wells Fargo regularly steered borrowers who qualified for prime and FHA loans into costly subprime loans. Paschal states that “I had access to Wells Fargo customers’ loan records and application files for my work in the Sales and Marketing Division and regularly saw minority customers who had good credit scores and credit characteristics in subprime loans who should have qualified for prime or FHA loans.” Paschal Decl. ¶ 12. He and others in his section were explicitly instructed by management to refer borrowers to the subprime unit even though they could have qualified for more desirable prime or FHA loans with additional time or assistance from him. Id. ¶ 9. He was even “reprimanded . . . for placing too many customers in FHA loans, when the company wanted me to refer them to a subprime loan officer . . . so that the company could make a greater profit on the loan.” Id. ¶ 19. Jacobson similarly states that “many of the referrals I received [from A reps] could qualify for a prime loan,” but that “[w]hen I got the referrals, it was my job to figure out how to get the customer into a subprime loan.” Jacobson Decl. ¶ 9. She adds that “[i]f I had access to
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Wells Fargo’s loan files right now and could review these files, I could point out exactly which
of these customers who got a subprime loan could have qualified for a prime loan.” Id.
2. Financial Incentives That Induce Wells Fargo Employees to Steer Borrowers
The reason loan officers steered people with better credit into subprime loans is that
Wells Fargo gave them large financial incentives to do so. The pay of subprime loan officers
was “based on commissions and fees,” which “were based on the size of the loan and the interest
rate.” Jacobson Decl. ¶ 6. Because “Wells Fargo charged higher interest rates and fees not only
on its 2/28 and 3/27 subprime loans, but also on its subprime fixed-rate loans, than it did for
prime loans,” id. ¶ 22, it was more lucrative to originate subprime loans. This compensation
system and the incentives it created allowed Jacobson to “gross[] more than $700,000 in sales
commissions [in 2004]” and “more than $550,000 in commissions and pay” the following year.
Id. ¶ 6. Wells Fargo likewise lavished expensive trips and gifts on successful subprime loan
officers, even as foreclosures increased in recent years. Id. ¶ 32. This was part of a culture at
Wells Fargo that focused exclusively on making the most money possible from a loan and not on
putting borrowers in loans that were appropriate for them. Id.
Paschal confirms how the compensation system operates to the detriment of minorities:
Because Wells Fargo made a higher profit on subprime loans, the company put “bounties” on minority borrowers. By this I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities. If a loan officer referred a borrower who should have qualified for a prime loan to a subprime loan, the loan officer would receive a bonus. Loan officers were able to do this because they had the discretion to decide which loan products to offer and to determine the interest rate and fees charged to the borrower. Since loan officers made more money when they charged higher interest rates and fees to borrowers, there was a great financial incentive to put as many minority borrowers as possible into subprime loans and to charge these borrowers higher rates and fees. I knew many loan officers who made more than $600,000 a year and a few who made more than $ 1 million.
Paschal Decl. ¶ 13.
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As summarized by Jacobson, “[t]here was always a big financial incentive to make a
subprime loan wherever one could.” Jacobson Decl. ¶ 24.
3. Broad Discretion That Allows Wells Fargo Employees to Steer Borrowers
As Paschal’s statement above indicates, loan officers were able to steer people with prime
credit into subprime loans because Wells Fargo gave them broad discretion. Jacobson explains
that Wells Fargo’s “underwriting guidelines and pricing rules for prime and subprime loans . . . .
[provided] more than enough discretion to allow A reps to steer prime loan customers to
subprime loan officers like me. Likewise, the guidelines gave me enough discretion to figure out
how to qualify most of the referrals for a subprime loan once I received the referral.” Jacobson
Decl. ¶ 11. This included “discretion to decide which subprime loan products to offer the
applicant” “[o]nce I received a referral from an A rep.” Id. ¶ 13.
Jacobson describes in detail the unscrupulous ways in which Wells Fargo loan officers
used their discretion to get away with steering people with prime credit into subprime loans,
beginning with A reps:
In many cases A reps used their discretion to steer prime loan customers to subprime loan officers by telling the customer, for example, that this was the only way for the loan to be processed quickly; that there would be less paperwork of documentation requirements; or that they would not have to put any money down. Customers were not told about the added costs, or advised about what was in their best interest.
Jacobson Decl. ¶ 12. With the referrals in hand, the subprime loan officers then took advantage
of their discretion “to qualify the A rep referrals for subprime loans.”
One way was to tell customers not to put any money down on the loan and borrow the entire amount, even if they could afford a big enough down payment to qualify for a prime loan. As soon as the loan was submitted without a down payment, it would “flip” from prime to subprime and a subprime loan officer would be able to get the loan qualified as a subprime loan. Another technique would be to tell the customer that the only way to get the loan closed quickly would be to submit it as a subprime loan. A third technique would be to put a
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person into a “stated income” loan, even if they had a W-2 statement that verified their income. By doing this, the loan was flipped from a prime to a subprime loan. I know that through some of these techniques borrowers with credit scores as high as 780 were steered into expensive subprime loans with as many as four points, even though they could have qualified for a prime loan. Id. ¶ 17; see also id. ¶¶ 15 (“If, for example, a customer had a high credit score that would make them a good candidate for a prime loan, it was a simple matter to get them qualified for a subprime loan by telling the underwriting department that the customer did not want to provide documentation for the loan, had no source or seasoned assets, or needed to get the loan closed quickly.”), 16. Paschal likewise explains that: Wells Fargo’s loan officers also discriminated against minority refinance applicants by encouraging them to take out more cash from their home equity. By taking out more cash, the borrower would unwittingly increase the commission the loan officer received on the loan, while at the same time eliminating his ability to qualify for a prime or FHA loan. By encouraging the borrower to take out more cash, the loan officer knowingly increased the borrower’s risk of foreclosure because of the higher loan amount. Paschal Decl. ¶ 14. Some loan officers went even further and falsified loan applications in order to put people with prime credit into subprime loans or to make subprime loans to borrowers who did not actually qualify for a loan. Jacobson Decl. ¶ 18. Jacobson states that “I was aware of A reps who would ‘cut and paste’ the credit report of a borrower who had already qualified for a loan into the file of an applicant who would not have qualified for a Wells Fargo subprime loan because of his or her credit history. I was also aware of subprime loan officers who would cut and paste W-2 forms.” Id. She “reported this conduct to management and was not aware of any action that was taken to correct the problem.” Id. It is predictable that these kinds of practices will result in foreclosures.
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In 2004 Wells Fargo responded to public criticism by creating “filters” that were supposed to prevent the steering of prime customers into subprime loans. Jacobson Decl. ¶ 19, Paschal Decl. ¶ 18. It was widely understood that the filters were ineffective. Id. Loan officers learned many ways to work around the filters by using the broad discretion that Wells Fargo gave them. Id. Senior managers knew that loan officers were using these techniques and eventually made certain changes in response, but the loan officers continued to easily undermine the filters. Jacobson Decl. ¶ 20. The filters were also ineffective because Wells Fargo did not create disincentives to steering prime customers into subprime loans. Paschal Decl. ¶ 18. To the contrary, employees continued to have substantial financial incentives to engage in such steering, id, and management knew that these practices continued.
4. Other Abusive Subprime Lending Practices By Wells Fargo Like the discretion and financial incentives loan officers had to put people who qualified for better loans into subprime loans instead, loan officers had discretion and financial incentives to originate the costliest subprime loans. “Subprime loan officers had discretion to decide what interest, points and fees to charge a borrower.” Jacobson Decl. ¶ 22. And increasing the cost of a subprime loan would increase the loan officer’s commission. Id. ¶ 24. Paschal further explains how this discretion within the universe of subprime loans was used to harm minorities: Wells Fargo also discriminated against minority loan applicants by advising them that the interest rate on their loan was “locked”, when in fact, Wells Fargo had the ability to lower the interest rate for the applicant if the market rates dropped prior to the loan closing. I believe this was deceptive and discriminatory, particularly since Wells Fargo loan officers lowered interest rates for White loan applicants when market rates dropped after the application but prior to a loan closing. Even though I complained about this differential treatment of minorities to the branch manager, Jennifer Bowman, Wells Fargo did nothing to change the practice.
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Paschal Decl. ¶ 5. Wells Fargo also “discriminated against minority loan applicants by not offering them its better or newer products which had lower fixed interest rates and fees.” Id. ¶ 14.
Loan officers also deceived subprime borrowers about onerous prepayment penalties associated with their loans. Id. ¶ 15. The prepayment penalties typically made it difficult for borrowers to refinance into new and better loans, but loan officers were encouraged by Wells Fargo trainers not to tell applicants about them. Id. When the subject was raised, loan officers told borrowers that prepayment penalties could be waived, even though they could not be, or otherwise downplayed their significance. Jacobson Decl. ¶ 13.
With Wells Fargo engaged in so many abusive lending practices, Jacobson and her colleagues “morbidly joked that we were ‘riding the stagecoach to Hell.’” Id. ¶ 31. Jacobson believes that “many current and former Wells Fargo employees” would corroborate her testimony if compelled to testify, but that they “may well be reluctant to come forward voluntarily to tell what they know for fear of retaliation, reprisal or other actions that could adversely affect their future careers in the lending industry.” Id. ¶ 35. D. WELLS FARGO’S REVERSE REDLINING HAS RESULTED IN AN
EXCESSIVE RATE OF UNSUSTAINABLE LOANS IN AFRICAN-AMERICAN NEIGHBORHOODS The discriminatory reverse redlining practices described in detail above have resulted in demonstrably less favorable outcomes for borrowers in Baltimore’s African-American neighborhoods than borrowers in white neighborhoods. From 2005 to 2008, for example, over 60% of Wells Fargo’s foreclosures were in Baltimore census tracts that are more than 60% African-American, while only 12% were in tracts that are less than 20% African-American. FAC ¶¶ 3, 51. The statistics are virtually the same for the period from 2000 through 2004. Id. ¶
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51. Likewise, the percentage of Wells Fargo mortgages in Baltimore with high interest rates is dramatically higher for African-American borrowers. Id. ¶ 87. For years, the City’s African Americans have been 3-4 times as likely as whites to receive a high-cost mortgage from Wells Fargo. Id. The starkness of these racial disparities is reflected in maps prepared by Dr. Goldstein that are incorporated in the FAC. Hr’g Tr. (June 29, 2009) at 73-74; FAC, map following ¶ 51; id., maps following ¶ 89. E. THE EVIDENCE SHOWS THAT BALTIMORE HAS STANDING BECAUSE IT
HAS BEEN INJURED BY WELLS FARGO’S REVERSE REDLINING With respect to proof of injury to the City and to causation, Judge Legg focused on evidence that the Wells Fargo foreclosures resulted in vacancies. The Court stated that, to determine whether the City has sufficient evidence to satisfy the standing requirement at the Rule 12 stage based on the Wells Fargo foreclosure properties, “the big issue is, are they vacant or not?” Hr’g Tr. (Jan. 28, 2009) at 106; see also id. (“Are they vacant or not? That’s the significant issue.”). The Court suggested that if the Wells Fargo foreclosure properties in African-American neighborhoods were vacant, it would not be difficult to see that the City has been injured by Wells Fargo’s practices and that it has standing. See id. at 106, 111-12. All three of the witnesses who testified on behalf of Baltimore at the June 29 hearing, and sixteen of the City’s nineteen declarations, speak directly to the issue of the City’s injury. The evidence shows that 230 of the 401 Wells Fargo foreclosure properties have been vacant after the Wells Fargo loan was originated, that 163 of these vacant properties (71% of them) are in predominantly African-American neighborhoods, that 80 of the 163 properties are currently vacant, and that the City is injured by the vacancies. Baltimore’s evidence on standing comes from:
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Jason Hessler, Esq., Acting Director of Baltimore Housing’s Code Enforcement Legal Section;
Dr. Ira J. Goldstein, an expert on foreclosures and foreclosure-related research who formerly served as HUD’s Director of Fair Housing and Equal Opportunity for the Mid-Atlantic Region;
Dr. Richard Voith, an expert on real estate economics who formerly served as Senior Economist at the Federal Reserve Bank of Philadelphia;
Richard and Stephen Faison, who live next door to a currently vacant Wells Fargo foreclosure property in a neighborhood that is 95.14% African-American;
Lisa Porter, who lives a few houses away from a currently vacant Wells Fargo foreclosure property in a neighborhood that is 97.37% African-American;
Bridget Ross, who lives two houses away from a currently vacant Wells Fargo foreclosure property in a neighborhood that is 81.25% African-American;
Keisha Brooks and Mike England, who live next door to a currently vacant Wells Fargo foreclosure property in a neighborhood that is 71.2% African-American;
Genevieve Matthews, who lives next door to a currently vacant Wells Fargo foreclosure property in a neighborhood that is 96.9% African-American;
Nona and Mishawn Evans, who live two houses away from a currently vacant Wells Fargo foreclosure property in a neighborhood that is 97.5% AfricanAmerican;
James Mears, who lives next door to a currently vacant Wells Fargo foreclosure property in a neighborhood that is 97.6% African-American; and
Sheena Sykes, who lives next door to a currently vacant Wells Fargo foreclosure property in a neighborhood that is 95.5% African-American.7
Dr. Goldstein analyzed the data that the Court directed the parties to produce in limited
discovery last spring. The data concerns the 401 Baltimore properties identified to date as

7

Mr. Hessler, Dr. Goldstein, and Dr. Voith testified at the June 29 hearing. See Hr’g Tr. (June 29, 2009) at

54-87. They also submitted five declarations, one of which is attached to the FAC. See FAC Attach. Q; Hr’g Exs.

5-8. The remaining witnesses submitted declarations, four of which are attached to the FAC. See FAC Attachs. P-

S; Hr’g Exs. 13-19.

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having been subject to a foreclosure action filed between 2005 and 2008 on a Wells Fargo loan.8 Goldstein Decl. ¶¶ 7-8; Hessler Suppl. Decl. ¶ 7. The data identifies 230 of these properties as having been vacant after the Wells Fargo loan was originated, including 115 that are currently vacant. Goldstein Decl. ¶ 9; Hessler Decl. ¶¶ 10-11; Hessler Suppl. Decl. ¶ 7. Goldstein determined that 163 of the 230 vacancies (or 71% of them) are located in African-American neighborhoods. Goldstein Decl. ¶ 9; Goldstein Suppl. Decl. ¶¶ 16-18. The concentration of these vacant properties in predominantly African-American areas is reflected on a map attached to Goldstein’s initial declaration. Id. at Attach. 3. Moreover, 80 of the 115 currently vacant Wells Fargo foreclosure properties (or 69% of them) are in predominantly African-American neighborhoods while only 16% are in predominantly white neighborhoods.9 Id. ¶ 10. Goldstein reiterated some of his findings at the June 29 hearing. Hr’g Tr. (June 29, 2009) at 73-81.
Additional evidence confirms that, as alleged in the FAC, vacant properties inflict particularly significant injuries on the City. E.g., FAC ¶¶ 19-20, 111, 114-118. The evidence show that vacancies cause, among other harms, squatters, increased risk of crime and fire, and infrastructure damage such as burst water pipes and broken windows. Expensive responses by the City are required to address these harms. Vacancies likewise cause especially significant declines in property values and, therefore, in property tax revenues collected by the City.

8

The Court did not require production of parallel data for foreclosures between 2000 and 2004 in light of

Wells Fargo’s representations regarding its practice of archiving pre-2005 data. Hr’g Tr. (Feb. 20, 2009) at 3-4, 11,

14.

9

Goldstein also confirmed that all of Wells Fargo’s foreclosures in Baltimore follow a stark racial pattern.

He found that 63% of the 379 properties initially identified are in predominantly African-American neighborhoods,

but only 12% are in neighborhoods that are less than 20% African-American. Goldstein Decl. ¶ 8. Wells Fargo’s

overall lending in Baltimore is not racially concentrated in this manner, however; data for 2004 through 2007

released by Wells Fargo pursuant to the Home Mortgage Disclosure Act shows that Wells Fargo made 38.7% of its

mortgage loans in Baltimore in predominantly African-American neighborhoods and 32.2% in neighborhoods that

are less than 20% African-American (2008 data had not been released at the time of the evidentiary hearing). Id. ¶

14.

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Jason Hessler testified that Baltimore Housing’s Code Enforcement Legal Section, of which he is the Acting Director, maintains detailed records of the work that the City has to do to mitigate the harm caused by vacant properties. The records are maintained on a property-byproperty basis in a system called “Computerized Housing Inspection Program,” or “CHIP.” Hr’g Tr. (June 29, 2009) at 55-60, 68; Hessler Decl. ¶ 4; Hessler Suppl. Decl. ¶ 4. CHIP logs each housing code violation identified by City Inspectors, the notes and photographs taken by Inspectors when they visit vacant properties, and actions taken by the City to minimize the harm caused by violations. Id. For example, the logs for the Wells Fargo foreclosure property at 3803 Bonner Road – a neighborhood that is 96.9% African-American – shows that Baltimore has cited the property for 13 code violations since January 2007. Hessler Decl. ¶ 17; Goldstein Suppl. Decl. ¶ 15. The property has been boarded by the City eight times and cleaned of trash and debris seven times. Squatters and a fire have been reported at the property. Hessler Decl. ¶ 17.
Hessler also confirms that the City must expend substantial funds to address these kinds of problems at vacant properties. For example, cleaning a vacant property typically costs around $232, though it can cost much more, and boarding costs approximately $275. Id. ¶¶ 6-7. When the City has to demolish a vacant property because it is structurally unsound or a blight on the neighborhood, the cost ranges from $4,000 to $70,000. Id. ¶ 8.
Using the data from CHIP logs, Hessler testifies that the cost to the City of addressing the problems caused by the vacant Wells Fargo foreclosure properties can be precisely quantified. Hr’g Tr. (June 29, 2009) at 68-69; Hessler Decl. ¶ 17. Hessler likewise testifies that he can obtain police and fire records for the vacant properties and that those departments’ costs can also be quantified. Hr’g Tr. (June 29, 2009) at 68; Hessler Decl. ¶ 9; Hessler Suppl. Decl. ¶¶ 9.
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The declarations from Keisha Brooks, Mike England, Mishawn Evans, Nona Evans, Stephen Faison, Richard Faison, Lisa Porter, Genevieve Matthews, James Mears, Bridget Ross, and Sheena Sykes demonstrate in concrete and graphic terms that the responses described by Hessler are essential. FAC Attachs. P-S; Hr’g Exs. 13-19. These Baltimore residents highlight the kinds of harm that vacancies compel the City to respond to with costly resources, including resources for police and other municipal services, and how vacancies degrade neighborhoods and thereby harm property values and property tax revenues. Id. All of these residents live next door to or a few houses away from homes that are among the currently vacant Wells Fargo foreclosure properties and in neighborhoods that are over 70% African-American (and all but two in neighborhoods that are over 95% African-American). Id.; Goldstein Decl. ¶ 15; Goldstein Suppl. Decl. ¶ 15. They describe how the vacant properties have caused the quality of their blocks to decline due to crime, squatters, fires, trash, loitering, rats, burst pipes, and more. These are direct consequences of the Wells Fargo vacancies.
Genevieve Matthews lives next to the Wells Fargo foreclosure property at 3803 Bonner Road discussed by Hessler. Hr’g Ex. 15 at ¶ 3. It has been vacant for at least a year and has been occupied by squatters repeatedly. Id. ¶¶ 3-4. Confirming Hessler’s testimony, Mathews explains that the City boards the property up, but new squatters break in and the City has to come back and board it again. Id. ¶ 5. Last year the squatters caused a fire at the vacant property. Id. ¶ 6. City firefighters had to come to put the fire out. Id. Mathews has lived on the same block for fifty years and always thought of it as safe and pleasant until the problems began with the Wells Fargo foreclosure property. Id. at ¶ 8. Now she is scared because she lives next door to a property that is occupied by squatters who could start another fire in the middle of the night. Id. ¶ 7.
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Keisha Brooks and Mike England live next door to another vacant Wells Fargo foreclosure property, which the City recently boarded up. Hr’g Ex. 13 (“Brooks Decl.”) at ¶¶ 3, 12; Hr’g Ex. 14 (“England Decl.”) at ¶¶ 3, 12. Squatters kept a pitbull in the yard until it was taken away by the City. Brooks Decl. ¶ 8; England Decl. ¶ 8. Squatters have also held pitbull fights at the property. Brooks Decl. ¶ 9; England Decl. ¶ 9. The squatters smashed one of Brooks and England’s front windows and they have had to call the police on several occasions about the vacant property. Brooks Decl. ¶¶ 10-11; England Decl. ¶¶ 10-11. Trash has been piled high at the property since it became vacant and it has rat and cockroach problems. Brooks Decl. ¶¶ 4-6; England Decl. ¶¶ 4-6. Two children had to be taken to the hospital as a result; a rat bit one and a cockroach became lodged in another’s ear. Brooks Decl. ¶¶ 4-5; England Decl. ¶¶ 4-5. Brooks and England have decided to move to a different home in part because of problems associated with the vacant property. Brooks Decl. ¶ 13; England Decl. ¶ 13.
Mishawn and Nona Evans live two doors from another vacant Wells Fargo foreclosure property. Hr’g Ex. 17 (“M. Evans Decl.”) ¶ 3; Hr’g Ex. 16 (“N. Evans Decl.”) ¶ 3. It has had squatters and been boarded up by the City, but the squatters remove the boards and return. M. Evans Decl. ¶¶ 4-5; N. Evans Decl. ¶ 4. Mishawn has called the police several times about the property. M. Evans Decl. ¶ 5. One time the police came and recovered drugs, drug paraphernalia, and cell phones. Id. ¶ 4. Mishawn believes some of the squatters are drug dealers. Id. The vacant property has also created trash and rat problems. M. Evans Decl. ¶ 7; N. Evans Decl. ¶ 5. Nona called the City about the rats and the City put down rat poison, but the rats have returned. N. Evans Decl. ¶ 5. She had cement work done in an unsuccessful effort to keep the rats away. M. Evans Decl. ¶ 7; N. Evans Decl. ¶ 5. Nona tried to sell the house but was
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unable to get a good price; the Evanses believe that the vacant property has harmed the value of their home. M. Evans Decl. ¶ 9; N. Evans Decl. ¶ 6.
Richard Faison has had to call the police several times because of loiterers who hang out and drink at the vacant Wells Fargo foreclosure property next door to him, which was recently boarded. FAC Attach. P (“R. Faison Decl.”) ¶¶ 3, 5. He also had to call the City to turn off the water and cap a pipe at the vacant house when the pipe burst. Id. ¶ 7. Richard and Stephen Faison both confirm that the vacant house is in serious disrepair and that it has created a rat infestation because loiterers and squatters let trash accumulate. R. Faison Decl. ¶¶ 4, 6, 8, 9; FAC Attach. Q (“S. Faison Decl.”) ¶¶ 5-8. They cannot even hang clothing to dry in their backyard because loiterers steal it. S. Faison Decl. ¶ 8. Stephen no longer feels safe when he goes to work early in the morning because of strangers who loiter and sleep at the vacant house next to his. S. Faison Decl. ¶ 5.
The vacant Wells Fargo foreclosure property a few houses from Lisa Porter’s home is also in disrepair. FAC Attach. R ¶¶ 4, 6. Trash is scattered in the yard, the grass is not cut, and rats have become an increasing problem since it became vacant. Id. ¶¶ 4-5.
Bridget Ross and her neighbors had to call the City to come and board up the vacant Wells Fargo foreclosure property two doors down from her home. FAC Attach. S ¶ 5. Vagrants stayed at the house until it was boarded. Id. ¶ 3. It is in disrepair, with a broken door and broken windows and large amounts of trash in the yard, and has also become a source of many rats. Id. ¶¶ 3, 6, 7. People have stolen plumbing from the vacant property. Id. ¶ 4. Ross has been trying unsuccessfully to sell her house for two years but the nearby vacant Wells Fargo foreclosure property has made her home lose value and has made it less desirable to potential purchasers. Id. ¶ 9.
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The Wells Fargo foreclosure property next door to James Mears has been vacant for at least two years. Hr’g Ex. 18 at ¶ 3. Squatters and vandals are regularly at the property drinking and using drugs. Id. ¶¶ 3-4. Mears has had to call the police multiple times because of the illicit activities at the property. Id. ¶ 5. The vacant property has caused rat, mice, and water problems at his home. Id. ¶¶ 6-7. Plumbing has been stolen from the property. Id. ¶ 4. The condition of the property negatively affects the neighborhood, and Mears and his neighbors have discussed the problems caused by the vacant property at community meetings. Id. ¶ 9.
Sheena Sykes lives next to another Wells Fargo foreclosure property. Hr’g Ex. 19 at ¶ 3. It has been vacant since she moved in a year ago. Id. ¶¶ 2-3. The property has been inhabited by squatters and the City had to board it and clean up the trash and debris left by the squatters. Id. ¶¶ 4-6, 9. The City also had to send the police because of the squatters. Id. ¶ 6. The City has also had to come to take care of mice that spread from the vacant property to Sykes’s home. Id. ¶ 7.
In addition to the cost of providing City services to address the harm caused by the vacant Wells Fargo foreclosure properties, Baltimore alleges that the serious problems described by Hessler and the neighboring residents cause the City to lose significant property tax revenue as property values decline. See FAC ¶¶ 1, 19, 110-11, 114, 123. Dr. Voith and Dr. Goldstein confirm that there is a sound, well-established methodology for calculating the City’s lost property taxes that can be applied in this case to calculate Baltimore’s damages. Hr’g Tr. (June 29, 2009) at 82-86; Voith Decl. ¶¶ 4-10; Goldstein Suppl. Decl. ¶¶ 7-13. The methodology, known as hedonic regression, allows the City to “estimate the impact [on property values] of foreclosures of Wells Fargo loans, even if they represent a fraction of the total loans entering the
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foreclosure process in Baltimore neighborhoods,” and then “estimate City [property tax] revenue impacts.” Voith Decl. ¶¶ 8-9.
The testimony from Hessler, Goldstein, Voith, and the neighbors of vacant Wells Fargo foreclosure properties demonstrates that the City is harmed by vacancies stemming from Wells Fargo’s foreclosures. They confirm that vacancies cause neighborhoods to deteriorate, which reduces property values, and cause an increased demand for costly City services. They demonstrate that, to respond to the problems caused by the vacancies, the City must devote additional funds to policing, removing trash, boarding up properties, repairing infrastructure such as burst pipes, fire protection, and more.10 The concentration of vacancies in Baltimore’s African-American neighborhoods – shown by Dr. Goldstein – therefore establishes that the City has been injured by Wells Fargo’s discriminatory lending practices. Goldstein and Voith further demonstrate that the injury can be quantified through sound scientific methods.
ARGUMENT A. WELLS FARGO’S MOTION TO DISMISS IS ACTUALLY A MOTION FOR
RECONSIDERATION THAT IS UNTIMELY AND FAILS TO MEET THE HIGH STANDARD FOR SUCH A MOTION Wells Fargo’s new motion to dismiss is nothing more than a rehash of its first motion to dismiss, with an added citation to City of Birmingham. This is entirely explicit – apart from referencing City of Birmingham, Wells Fargo’s short memorandum simply repeats its old standing argument and the same case law and evidence in support, incorporates its first and much longer motion to dismiss by reference, and attaches the material it presented at the June 29

10

These declarations also corroborate studies incorporated in the FAC finding that large measurable

foreclosure-related injuries to city governments occur when homes are left vacant. See FAC ¶¶ 120-122; W. Apgar,

M. Duda & R. Gorey, The Municipal Costs of Foreclosures: A Chicago Case Study (Feb. 27, 2005) at 23; Anne B.

Shlay & Gordon Whitman, Research for Democracy: Linking Community Organizing and Research to Leverage

Blight Policy (2004) at 161-62.

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hearing. Once again, Wells Fargo refers to the ways in which Baltimore has been injured as “property tax,” “crime,” and “rehabilitation” “theories,” and once again it asserts that the causal connection between reverse redlining and these types of injuries is too speculative and attenuated. Compare MTD I at 2, 11-12, 16-20 with MTD II at 2-11. Every single factual and legal argument that Wells Fargo relies on was discussed and examined by the Court throughout the lengthy, multi-hearing process that Judge Legg used to assess, and ultimately deny, the first motion to dismiss. Indeed, the vast majority of Wells Fargo’s submission is literally the same as what it submitted last time. Even Wells Fargo’s reliance on City of Birmingham fails to raise any new argument; rather, that case is cited as purported support for the very standing argument rejected by the Court on July 2.
It is, accordingly, apparent that Wells Fargo has not even attempted to satisfy the very high standard applicable to a motion for reconsideration. Wells Fargo does not purport to present any new evidence; it does not assert that the Court committed a manifest error of law; and it does not argue that there has been an intervening change in controlling law. See, e.g., Potter v. Potter, 199 F.R.D. 550, 552 n.1 (D. Md. 2001). The only thing new in the instant motion is its citation to City of Birmingham, an unpublished district court case from outside the Fourth Circuit that plainly would not constitute controlling law even if it were on point (which, as discussed below, it is not). Wells Fargo is transparently hoping that the Court will simply “change its mind,” but such a wish does not provide a valid basis for a motion to reconsider. Johnson v. Montminy, 289 F. Supp. 2d 705, 706 (D. Md. 2003) (Motz, J.) (quoting United States v. Williams, 674 F.2d 310, 313 (4th Cir. 1982)).
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Furthermore, the motion is untimely because a motion to reconsider must be filed within ten days of the underlying decision. See Local Rule 105(10). The motion should be denied on this basis alone. B. CITY OF BIRMINGHAM IS ENTIRELY INAPPOSITE
Wells Fargo emphasizes Judge Bowdre’s conclusion in City of Birmingham that it would require too much speculation to connect Birmingham’s alleged loss of tax revenue and added costs for police and fire protection to discriminatory reverse redlining, and that other factors could have caused such injuries. See MTD II at 3, 10. Yet these are exactly the same legal arguments that Wells Fargo made from the start, see MTD I at 2, 11-12, 16-20, which Judge Legg assessed and rejected in light of a detailed evidentiary record that wholly distinguishes this case from City of Birmingham. Thus, from a legal perspective, Wells Fargo’s reliance on City of Birmingham raises nothing new, and from a factual and evidentiary perspective, the two cases could not be more different.
Even if the Court were to reconsider Wells Fargo’s old standing argument in light of City of Birmingham, the vastly different records make clear that the case has no relevance whatsoever. The record in City of Birmingham was utterly void of any allegations or evidence specifically linking the seven defendants to discriminatory lending or injury to the plaintiff. A review of Birmingham’s complaint demonstrates that it merely made general allegations (copied from the first part of Baltimore’s original complaint) about subprime lending, predatory practices sometimes associated with subprime lending, reverse redlining, and the harm that can result. See MTD II Ex. 3 (Docket No. 126-5). Remarkably, Birmingham simply stopped there. Thus, the dismissal of Birmingham’s case was only an ordinary application of the most basic rules of pleading.
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For example, it is clear from a review of the City of Birmingham complaint, Judge Bowdre’s opinion, and the entire docket (available on PACER) that Birmingham did not offer any allegations or evidence regarding testimony about discriminatory practices from former employees, brokers, or anyone else; whether the practices resulted in foreclosure rates that differed in African-American and white neighborhoods; the incidence of loans with high interest rates and how they differed by neighborhood; or any other statistical analysis of loans or foreclosures in neighborhoods that differed by racial concentration. Likewise, Birmingham did not offer any expert testimony about how it would prove its damages and how it would distinguish harm attributable to the defendants from harm caused by other people, companies, or events. Nor did it attempt to explain what distinguished the seven defendants it sued from other lenders or how their relative responsibilities should or even could be apportioned. Anyone reading the record in City of Birmingham is left with no understanding at all about why Birmingham thought the particular companies it sued had anything to do with the unlawful practices and the attendant harm that the complaint described in exclusively general terms; all that is apparent is that Birmingham named them as defendants.
By contrast, Judge Legg insisted that the record here would have to contain detailed evidence of standing and discrimination if Baltimore were to move past the Rule 12 stage. This included evidence of causation geared to the very same standing argument raised in City of Birmingham and geared to Wells Fargo specifically. Indeed, Judge Legg focused on this issue from the very first hearing last January on Wells Fargo’s initial motion to dismiss. See, e.g., Hr’g Tr. (Jan. 28, 2009) at 10 (“The trickier issue in thinking about the City’s complaint is trying to find some way of quantifying the damage of the increased cost to the City . . ., figuring out what portion of the harm is caused by these Wells Fargo vacancies when there are so many
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vacant houses in the city.”). To see if Baltimore could meet his high standard, Judge Legg set up limited discovery and an evidentiary hearing. After reviewing the evidence, he held that the City was entitled to go forward.
As shown in detail above, while Birmingham stopped after describing illegal lending practices in general, such descriptions only provide the backdrop for the extensive record presented by Baltimore. As the testimony from Hebert, Jacobson, and Paschal shows, this record includes substantial evidence that Wells Fargo has been engaged in discriminatory lending in Baltimore. And as the testimony from Hessler, Goldstein, Voith, and many Baltimore residents shows, the record likewise directly connects Wells Fargo’s discriminatory practices to identifiable and quantifiable harm suffered by the City. Baltimore substantiates its allegations, whereas Birmingham did not even try. Thus, as Judge Legg concluded, Baltimore satisfies the plausibility standard set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and it is clear that Wells Fargo’s motion to dismiss must, for the second time, be denied.
Wells Fargo also relies on City of Birmingham to raise a case cited therein, Tingley v. Beazer Homes Corp., No. 3:07-cv-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008). It is telling that Wells Fargo did not think this unpublished case worthy of citing even once in support of its first motion to dismiss. Indeed, there is good reason for Wells Fargo to have found the case inconsequential. Unlike Wells Fargo, the defendant in Tingley made a facial challenge to standing, not a factual one. Id. at *2. Thus, the court did not hold an evidentiary hearing, id., and the evidentiary record was as empty as the record in City of Birmingham. Similarly, the complaint in Tingley set forth only the barest and most generalized allegations purportedly connecting the actions of the defendant home builders to any foreclosure or any injury. See Tingley, Class Action Compl. at ¶¶ 6-7, 31-32, App. Cases Not Generally Reported. Thus, while
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it is understandable that Judge Bowdre in City of Birmingham looked to Tingley given the similarly barren records and conclusory allegations in both cases, neither is remotely analogous to the instant case that Baltimore has already substantiated in great detail. C. CITY OF CLEVELAND IS ENTIRELY INAPPOSITE
Aside from City of Birmingham, Wells Fargo relies on the very same cases in its second motion to dismiss as it did in its first motion. Baltimore has already explained in previous briefs, incorporated herein by reference, why none of those cases support Wells Fargo’s position. The only case that Baltimore was not permitted to address in writing before was City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009), which Wells Fargo first raised a week before the June 29 evidentiary hearing. See Defs.’ Responsive Filing Pursuant to the Court’s June 3 Order Regarding Pl.’s Prior Submissions (Docket No. 85) (June 22, 2009); Order (Docket No. 91) (June 26, 2009). Thus, even though City of Cleveland presents nothing new because the case was before the Court when it denied the motion to dismiss on July 2, Baltimore explains here why the case is as inapposite as City of Birmingham.
City of Cleveland is inapposite for a multitude of reasons, including reasons specifically identified by Judge Lioi in her opinion. One of the most significant is that it relies on prudential limitations that do not apply here because this case arises under the Fair Housing Act, and standing under the FHA extends to the limits of Article III. See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 372 (1982). Another key reason that City of Cleveland is inapposite is that the defendants in that case were sued for nothing more than providing secondary market funding for subprime loans. 621 F. Supp. 2d at 516. Judge Lioi highlighted the importance of this distinction and held that it was “materially” important that the secondary market players
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(unlike Wells Fargo here) did not “originate the underlying subprime loans or initiate foreclosures.” Id. at 536.
1. Prudential Limitations Applicable in City of Cleveland Do Not Apply Here
City of Cleveland was based on a wholly different legal theory than this action. That case alleged a state common law claim for public nuisance, whereas Baltimore’s suit is based on the federal Fair Housing Act. Standing under the Fair Housing Act (unlike most statutes) reaches to the limits of Article III and prudential limitations, such as the zone of interest test, are inapplicable. See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 372 (1982); Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 109, 115 (1979) (“Gladstone”); Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 209, 212 (1972). Defendants admitted this in their first motion to dismiss. MTD I at 10 n.3 (“courts lack the authority to dismiss FHA lawsuits based on prudential considerations”). Public nuisance cases, by contrast, are subject to ordinary prudential limitations.
The difference is centrally important. In City of Cleveland, Judge Lioi repeatedly made plain that her analysis of causation was premised on the “directness requirement” of Holmes v. SIPC, 503 U.S. 258 (1992). 621 F. Supp. 2d at 531-36. But because Congress precluded the application of any prudential limitations in Fair Housing Act litigation, Holmes is inapplicable. As Judge Easterbrook explained:
For some statutes it matters whether the injuries are direct or derivative. See, e.g., Anza v. Ideal Steel Supply Corp., ___ U.S. ___, 126 S. Ct. 1991 (2006); Holmes v. SIPC, 503 U.S. 258 (1992). The Fair Housing Act is not among those statutes . . . . New West, L.P. v. City of Joliet, 491 F.3d 717, 721 (7th Cir. 2007) (emphasis added).
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Judge Easterbrook then immediately turned to the Supreme Court’s decision in Gladstone and demonstrated that it, not Holmes, controls the proper analysis in lawsuits under the Fair Housing Act. Id. As Baltimore has previously set forth, Gladstone does in fact control here and requires Wells Fargo’s motion to dismiss to be denied. See, e.g., Pl.’s Mem. P. & A. Opp. Defs.’ Mot. Dismiss Compl. (Docket No. 15) (May 22, 2008) at 17-18, 23, 25. Because City of Cleveland was a public nuisance case, Gladstone is nowhere mentioned in Jude Lioi’s opinion.
The inapplicability of the City of Cleveland/Holmes “directness requirement” under the FHA is further demonstrated by the fact that its application would preclude a municipality from maintaining a FHA challenge to racial steering by real estate agents. Yet one of the precise holdings of Gladstone is that municipalities may pursue exactly such a case. 441 U.S. at 109-10.
2. The City of Cleveland Defendants’ Alleged Liability Was Based on Merely Securitizing Loans, Not Making or Foreclosing on Loans
The twenty-two companies sued in City of Cleveland were sued because they allegedly played a “role in securitizing subprime loans into mortgage-backed securities.” 621 F. Supp. 2d at 516. They were not sued for having actually made any unlawful loans. Id. (complaint “targets Defendants not for engaging in direct subprime lending, but instead . . .”). In fact, Cleveland “insist[ed]” on “disclaiming any challenge to the actual subprime lending that occurred in Cleveland.” Id. at 530. Judge Lioi held that the difference between making loans and merely securitizing loans was crucial to her decision to dismiss the complaint. Discussing the alleged causal connection between companies that securitized loans and Cleveland’s injury, she stated: “Then someone – very importantly, not Defendants – foreclosed on the property.” Id. at 534 (emphasis added).
Judge Lioi then continued to emphasize the “material[]” importance of the fact that the City of Cleveland defendants were not sued for making loans or filing foreclosures. Id. at 536.
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Cleveland had argued that its claim was supported by an Ohio Supreme Court decision which found that causation was adequately pled in a tort case asserting that gun manufacturers and distributors were liable for harm caused by the weapons. Id. Distinguishing that case, Judge Lioi stated that “the factual allegations in this case differ markedly and materially . . . justifying a different result.” Id. She then explained why: “the guns . . . originated with the defendant gun manufacturers, while in this case, Defendants did not originate the underlying subprime loans or initiate foreclosures in Cleveland.” Id. Baltimore, to the contrary, has sued Wells Fargo under the Fair Housing Act for its actions in making loans and causing foreclosures.
Furthermore, the declarations attached to Baltimore’s amended complaint from Peter Hebert, Elizabeth Jacobson, and Tony Paschal demonstrate that Judge Lioi was correct in finding that the causation analysis is wholly different when actual lending is challenged. These declarations establish that, to increase their profit and commissions, Wells Fargo and its employees and brokers routinely and intentionally targeted borrowers in African-American neighborhoods for loans that they would not be able to afford. Far from being merely hypothetical, an unnecessarily high number of foreclosures and vacancies in these neighborhoods – with their attendant drain on City resources – is the inevitable result of these practices.
Furthermore, because the defendants in City of Cleveland were far removed from actually making and foreclosing on loans as Judge Lioi emphasized, the court there did not have before it evidence of a methodology by which causation and injury could be established. Here, to the contrary, the City has presented clear and specific evidence of a precise methodology directly connecting Wells Fargo’s lending activities to Baltimore’s injuries. Hr’g Tr. (June 29, 2009) at 82-86; Goldstein Suppl. Decl. ¶¶ 7-14; Voith Decl. ¶¶ 4-10.
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3. City of Cleveland Was Based On Broad Allegations That All Subprime Loans are Tortious
In City of Cleveland, Cleveland alleged that facilitating subprime lending was per se unlawful. See 621 F. Supp. 2d at 516 (“Plaintiff claims that subprime lending was categorically inappropriate for Cleveland due to its ‘unique’ economic situation”); id. at 530 (“[i]n essence, [Cleveland] claims that as a whole, its residents were improper candidates for receiving subprime loans”).
Baltimore makes no such sweeping and nebulous generalizations. To the contrary, Baltimore affirmatively states that “[w]hen done responsibly, [subprime lending] made credit available much more broadly than had been the case with prime lending” and that subprime loans “have opened the door to homeownership to many people, especially low- to moderateincome and minority consumers, who otherwise would have been denied mortgages.” FAC ¶¶ 23-24. Baltimore’s allegations, unlike those at issue in City of Cleveland, are narrowly focused only on those subprime lending policies and practices that target African-American neighborhoods for abusive lending practices and for loans that are less advantageous than loans given to similarly situated people in white neighborhoods.
Indeed, in a case decided against Wells Fargo in June but which Wells Fargo has failed to mention, the court concluded that when a municipality’s damages are based on unlawful acts related to particular properties, its damages are real and undeniable when those properties become vacant. See CHRP v. Wells Fargo Bank, N.A., No. 08-CVH-3139 (Cleveland Mun. Ct. June 18, 2009), App. Cases Not Generally Reported. Based on an evidentiary record, CHRP found that:
Unoccupied, boarded properties pose a hazard to neighborhood residents, in that they are an attractive nuisance for juveniles and others. They pose an arson risk greater than that of the average occupied building. Unoccupied structures attract
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criminal activity . . . . These vacant structures, often a favorite target of arsonists, pose a heightened hazard to firefighters, as the interior of a vacant home often has been vandalized, and the structural integrity compromised. . . . Vacant, boarded properties contribute to the decline of both property values and neighborhood appearance and pride. . . . The public has a pecuniary interest in the maintenance of properties also; vacant, vandalized properties lead to the decline of neighborhoods and a reduction in property values. In addition, municipalities are forced to provide services (e.g., grass cutting, yard cleaning, demolition) to neglected properties and the taxpayers must bear this financial burden. Id. ¶¶ 32, 43. In a focused case like Baltimore’s – where the allegations of wrongdoing that the City will prove will be related to specific properties and practices, not merely to providing capital for lending generally – the connection between the challenged practices and the harm from foreclosures and vacancies is not in any way conjectural. It is real and supports standing. 4. None of the Other Bases for Dismissal in City of Cleveland
Apply to Fair Housing Act Claims The remaining reasons why the motion to dismiss was granted in City of Cleveland are likewise inapplicable to Baltimore’s Fair Housing Act claim. In addition to her reliance on Holmes, Judge Lioi dismissed the case on the basis of preemption under Ohio law, see 621 F. Supp. 2d at 517-20; state tort law regarding damages, id. at 521-26; and state tort law regarding the substantive requirements of a public nuisance claim, id. at 526-31. None of these state law issues are relevant to Baltimore’s case, which arises under federal law. 5. City of Cleveland Did Not Involve Any Laws That
Regulate Mortgage Lending In City of Cleveland, Cleveland did not “allege that Defendants violated any of the myriad laws governing mortgage lending.” 621 F. Supp. 2d at 531. Judge Lioi held that this was “fatal to [Cleveland]’s claim.” Id. She added:
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Without question, it is possible that certain individual lenders engaged in specific transactions that did not comply with applicable regulations [regarding mortgage lending], but that possibility is not presented by the [Second Amended Complaint] and has no impact on the issues before the Court. Id. at n.15. Baltimore, by contrast, alleges violation of one of the central laws that govern mortgage lending, the Fair Housing Act. Indeed, Judge Lioi specifically identified the Fair Housing Act as one of six key federal statutes that regulate mortgage lending. Id. at 528.
* * * For all of these reasons, City of Cleveland continues to provide no support whatsoever for Wells Fargo’s motion to dismiss. D. THE COURT SHOULD NOT CONSIDER WELLS FARGO’S EVIDENCE WITHOUT FIRST ALLOWING BALTIMORE TO HAVE DISCOVERY Notwithstanding the fact that Judge Legg considered Wells Fargo’s 74 page PowerPoint presentation and the four affidavits it submitted at the June 29 evidentiary hearing before denying the initial motion to dismiss, Wells Fargo has chosen to rely on that same evidence once again in support of its second motion to dismiss and its arguments about City of Birmingham. See MTD II at 3-4, 10-11. Even if it were not the case that this evidence had already been considered and the City of Birmingham causation argument rejected, Wells Fargo’s reliance on these materials is improper at this stage of the case, when discovery is only beginning. The discovery that Judge Legg ordered in the spring was very limited and did not involve the vast majority of the materials on which Wells Fargo relies. For example, Wells Fargo had an affiant review the loan files and servicing records for 143 loans (leaving out many in African-American neighborhoods that Baltimore has already identified as relevant to damages) and testify that Wells Fargo is blameless. Yet Baltimore has never seen those files and records and has not deposed Wells Fargo’s affiants or any other witnesses. Thus, as Judge Legg recognized in
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denying the initial motion to dismiss, and as the Court recognized again in ruling in Baltimore’s favor with respect to a discovery plan on August 6, 2009, at a minimum Baltimore is entitled to substantial discovery before Wells Fargo may properly raise the factual arguments about standing set forth yet again in its second motion to dismiss.
Thus, even putting aside the lack of any valid basis for Wells Fargo to ask the Court to reconsider its July 2 ruling, Wells Fargo’s motion must again be denied because it rests on selfserving assertions about disputed facts that have no place at this stage of the case.11

11

While the City does not believe it necessary in light of the Court’s recent rulings entitling it to discovery,

Baltimore notes that its incorporation by reference of its submissions in opposition to Wells Fargo’s first motion to

dismiss includes its Rule 56(f) affidavit submitted on June 1, 2009. See Docket No. 75-9.

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CONCLUSION For all of the reasons stated above, Baltimore respectfully submits that Wells Fargo’s second motion to dismiss, like its first, should be denied in its entirety.

October 16, 2009

Respectfully submitted,
__/s/ John P. Relman________________________ John P. Relman, MD Fed. Bar No. 11482 Bradley H. Blower, MD Fed. Bar No. 07641 Glenn Schlactus, pro hac vice RELMAN & DANE, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com bblower@relmanlaw.com gschlactus@relmanlaw.com
Special Assistant City Solicitors and Attorneys for Plaintiff

George Nilson, City Solicitor, MD Fed. Bar No. 01123 Suzanne Sangree, Chief Solicitor, MD Fed. Bar No. 26130 City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov
Attorneys for Plaintiff

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 Case 1:08-cv-00062-JFM Document 163 Filed 07/06/10 Page 1 of 73

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION

____________________________________

)

MAYOR AND CITY COUNCIL

)

OF BALTIMORE,

)

)

Plaintiff,

)

)

v.

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL

)

LEASING, INC.,

)

)

Defendants.

)

____________________________________)

No. 1:08-cv-00062-JFM

PLAINTIFF MAYOR AND CITY COUNCIL OF BALTIMORE’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS THE SECOND AMENDED COMPLAINT

John P. Relman, MD Fed. Bar No. 11482 Glenn Schlactus, pro hac vice Megan Moran-Gates, pro hac vice RELMAN, DANE & COLFAX, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com gschlactus@relmanlaw.com mmgates@relmanlaw.com

George Nilson, City Solicitor MD Fed. Bar No. 01123
Suzanne Sangree, Chief Solicitor MD Fed. Bar No. 26130
City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov

Attorneys for Plaintiff

Case 1:08-cv-00062-JFM Document 163 Filed 07/06/10 Page 2 of 73
TABLE OF CONTENTS
TABLE OF AUTHORITIES ......................................................................................................... iv
INTRODUCTION ...........................................................................................................................1
STANDARD OF REVIEW ...........................................................................................................10
ARGUMENT .................................................................................................................................14
I. THE SECOND AMENDED COMPLAINT DEMONSTRATES THAT BALTIMORE HAS STANDING..........................................................................14
A. Baltimore Has Followed the Court’s Directions In Full and Narrowed the Damages It Seeks In the Second Amended Complaint .................................................................................................14
B. Baltimore Does Not Seek Damages for Preexisting Socioeconomic Problems or Any Other Generalized Injuries Not Directly Attributable to Wells Fargo’s Illegal Lending Practices at Specific Wells Fargo Properties..............................................................................19
C. Baltimore’s Allegations Establish a Plausible Connection Between Discriminatory Lending By Wells Fargo and the City’s Damages .......... 21
1. Wells Fargo’s Predatory and Discriminatory Lending Practices, Targeted at Baltimore’s African-American Neighborhoods, Plausibly Result In an Increased Likelihood of Notices of Foreclosure and Completed Foreclosures On the Wells Fargo Loans ...............................................................23
a. Detailed Allegations Based On Direct Evidence ..................23
b. Detailed Allegations Based On Statistical Evidence ............29
2. Foreclosures at the Wells Fargo Properties Plausibly Result in Many of the Wells Fargo Properties Becoming Vacant When They Would Otherwise Be Occupied .............................................31
3. Baltimore Is Injured By Vacancies and Foreclosures at the Wells Fargo Properties...................................................................32
a. The City’s Records Show that Vacancies at the Wells Fargo Properties Plausibly Have Caused the City to Spend Precisely Quantifiable Funds to Provide Specific Services at the Properties ......................................................33
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b. High Concentrations of Wells Fargo Foreclosures In Particular Areas Reduce Tax Revenues By Plausibly and Negatively Affecting the Value of Other Houses In Close Proximity ................................................................34
D. Baltimore Satisfies the Injury-In-Fact and Traceability Requirements for Standing................................................................................................36
1. Baltimore Has Standing Under the Supreme Court’s Seminal Fair Housing Act Case on Standing...............................................36
2. Traceability Is Not Defeated When Third Parties Play Some Role in the Causal Chain................................................................38
II. WELLS FARGO’S OBJECTIONS TO STANDING DO NOT WITHSTAND SCRUTINY...................................................................................41
A. Wells Fargo’s General Factual Assertions Are Irrelevant and Wrong ......42
1. Wells Fargo Misrepresents Injuries Alleged by the City...............42
2. Socioeconomic Challenges In Some Neighborhoods Do Not Explain Wells Fargo’s Disproportionately High Foreclosure Rate in African-American Parts of the City...................................43
3. Baltimore’s Injuries Are Not Self-Inflicted ...................................46
a. Tax Lien Sales.......................................................................47
b. Vacant Properties Owned By the City ..................................50
c. City and State Loan Programs ..............................................51
B. Wells Fargo’s Untested Assertions About Facts Purportedly Found In Its Own Undisclosed Files Do Not Provide a Proper Basis to Challenge Standing................................................................................. ...52
C. Wells Fargo’s Factual Assertions Relating to Specific Allegations in the Second Amended Complaint Are Irrelevant, Wrong, and Have No Bearing on Standing.............................................................................55
1. Assertions About Demographic Data ............................................55
2. Assertions About Maryland’s Property Tax Assessment Process ...........................................................................................56
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3. Assertions About the Level of Detail in the Second Amended Complaint .......................................................................................57

4. Assertions About the Purported Impossibility of Some of the City’s Damages ..............................................................................58

D. Wells Fargo Misconstrues the Law Regarding Standing.................................59

1.

Wells Fargo’s Assertion That the Speculative Possibility of

Third Party Involvement In the Foreclosure Process Defeats

Traceability Is Wrong As a Matter of Law ..................................59

a. City of Birmingham .................................................................60

b. City of Cleveland.....................................................................62

2. Wells Fargo’s Additional Arguments About the Injury-In-Fact Requirement Have No Merit ..................................64

CONCLUSION........................................................................................................................... ... 65

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TABLE OF AUTHORITIES Cases
Adams v. Bain, 697 F.2d 1213 (4th Cir. 1982) ....................................................................8, 10, 12 Allen v. Wright, 468 U.S. 737 (1984) ......................................................................................39, 40 American Canoe Ass’n, Inc. v. Murphy Farms, Inc., 326 F.3d 505 (4th Cir. 2003) ...............36, 46 Anderson v. Sara Lee Corp., 508 F.3d 181 (4th Cir. 2007).......................................................8, 10 Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) ..........................................................4, 10, 21, 57, 60, 62 Barkley v. Olympia Mortgage Co., Nos. 04-CV-875 et al., 2007 WL 2437810
(E.D.N.Y. Aug. 22, 2007) ..................................................................................................36 Bazemore v. Friday, 478 U.S. 385 (1986) .....................................................................................18 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) .................................................10, 21, 60, 62 Bennett v. Spear, 520 U.S. 154 (1997) .........................................................................................38 Boleski v. American Export Lines, Inc., 385 F.2d 69 (4th Cir. 1967)............................................50 Bryant v. Yellen, 447 U.S. 352 (1980) ...............................................................................38, 39, 40 City of Chicago v. Matchmaker Real Estate Sales Ctr., Inc., 982 F.2d 1086
(7th Cir. 1992)....................................................................................................................37 Cardio-Med. Assocs., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68 (3d Cir. 1983) ..................12 Carley v. Wheeled Coach, 991 F.2d 1117 (3d Cir. 1993) .............................................................12 Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1337 (D.C. Cir. 1986) ....................................40 CHRP v. Wells Fargo Bank, N.A., No. 08-CVH-3139
(Cleveland Mun. Ct. June 18, 2009) .................................................................................64 City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S
(N.D. Ala. Aug. 19, 2009) ............................................................................. 7, 8, 42, 60-62 City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513
(N.D. Ohio 2009) ..................................................................................... 7, 8, 42, 60, 62-64 Clinton v. City of New York, 524 U.S. 417 (1998) ........................................................7, 38, 39, 40
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Columbus-America Discovery Group v. Atlantic Mut. Ins. Co., 974 F.2d 450 (4th Cir. 1992) ...................................................................................................................11
Conservation Council of N. Carolina v. Costanzo, 505 F.2d 498 (4th Cir. 1974) ........................50 Crutchfield v. United States Army Corps of Engineers, 230 F. Supp. 2d 687
(E.D. Va. 2002) .................................................................................................................50 Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59 (1978) ...........................59, 65 Gladstone, Realtors v. Vill. of Bellwood, 441 U.S. 91 (1979) ............................................... passim Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211 (4th Cir. 1993)...............................12 Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000) ............................36 Heights Cmty. Congress v. Hilltop Realty, Inc., 774 F.2d 135 (6th Cir. 1985) .............................37 Hennesy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995) ................................13 Holmes v. SIPC, 503 U.S. 258 (1992) .....................................................................................62, 63 In re Attorney’s Fees in Tax Sales Foreclosures, No. 24-C-03-3443
(Cir. Ct. Balt. City Dec. 11, 2007) .....................................................................................48 Kerns v. United States, 585 F.3d 187 (4th Cir. 2009)....................................................................12 Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001)..............................................................13 Logan v. Denny’s, Inc., 259 F.3d 558 (6th Cir. 2001) ...................................................................12 Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) ............................................................11 McConnell v. FEC, 540 U.S. 93 (2003).....................................................................................9, 46 McMellon v. United States, 387 F.3d 329 (4th Cir. 2004) ............................................................39 New West, L.P. v. City of Joliet, 491 F.3d 717 (7th Cir. 2007) .....................................................63 North Carolina Shellfish Growers Ass’n v. Holly Ridge Assocs., 278 F. Supp. 2d 654
(E.D.N.C. 2003) ...............................................................................................................12 Pennsylvania v. New Jersey, 426 U.S. 660 (1976) ........................................................................37 Peters v. Delaware River Port Authority, 16 F.3d 1346 (3d Cir. 1994) ........................................12
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Pina v. Henderson, 752 F.2d 47 (2d Cir. 1985).............................................................................47 Sch. Dist. of Kansas City v. State of Missouri, 460 F. Supp. 421 (W.D. Mo. 1978) ....................37 Schweikert v. Bank of America, N.A., 521 F.3d 285 (4th Cir. 2008) .............................................10 Shanty Town Assocs. v. EPA, 843 F.2d 782 (4th Cir. 1988)..........................................................39 Southern California Edison Co. v. FERC, 502 F.3d 176 (D.C. Cir. 2007) ...................................12 Spann v. Colonial Village, Inc., 899 F.2d 24 (D.C. Cir. 1990)......................................................40 St. Pierre v. Dyer, 208 F.3d 394 (2d Cir. 2000) ............................................................................50 Tingley v. Beazer Homes Corp., No. 3:07-cv-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008) .............................................................................................................62 United States v. North Carolina, 180 F.3d 574 (4th Cir. 1999) ....................................................12 United States v. SCRAP, 412 U.S. 669 (1973)...................................................................38, 39, 40 Village of Bellwood v. Dwivedi, 895 F.2d 1521 (7th Cir. 1990)....................................................37 Warren County v. State of North Carolina, 528 F. Supp. 276 (E.D.N.C. 1981) ...........................37 Young v. City of Mount Ranier, 238 F.3d 567 (4th Cir. 2001) ......................................................18 Zenith Elecs. Corp. v. WH-TV Broadcasting Corp., 395 F.3d 416 (7th Cir. 2005).......................18
Other Authorities 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper,
Federal Practice & Procedure § 3531.5 (2008)............................................................9, 46 Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. ...............................................................45 Fair Housing Act, 42 U.S.C. § 3601 et seq............................................................................ passim Fed. R. Civ. P. 12 ................................................................................................................... passim Fed. R. Evid. 201 .........................................................................................................12, 44, 47, 59 Md. Code Ann., Tax-Prop. §§ 14-801 to 14-854.....................................................................47, 48
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INTRODUCTION In their motion to dismiss, Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (collectively “Wells Fargo”) thoroughly and deliberately misrepresent the Second Amended Complaint filed by Plaintiff Mayor and City Council of Baltimore (“Baltimore” or “City”). Wells Fargo contends that Baltimore is seeking generalized damages to compensate for broad socioeconomic problems in the City and injuries based on all foreclosures and all vacant properties throughout the City. This could not be further from the truth. Because this false proposition is the foundation of Wells Fargo’s core argument – that Baltimore lacks standing since generalized damages are not the plausible result of the illegal and discriminatory lending practices alleged – the motion to dismiss should be denied in its entirety. In considering the City’s prior complaint, the Court held that the City did not have standing because the complaint could be read as seeking generalized damages. See Op. (Jan. 6, 2010) (Docket No. 141) (“Opinion”). But the Court also explained that Baltimore could proceed if it amended its complaint to make clear that it was narrowing the scope of its damages in two respects. See id. at 1, 6. First, the City would have to limit its claim for damages based on municipal services to “specific houses that became vacant allegedly because of Wells Fargo’s lending activities.” Id. at 6. Second, it would have to limit its claim based on reduced property tax revenues to “specific neighborhood[s]” where there was a high enough concentration of Wells Fargo foreclosures. Id. Baltimore has followed the Court’s instructions precisely in the Second Amended Complaint. The Second Amended Complaint identifies 190 specific Wells Fargo foreclosure properties in African-American neighborhoods that became vacant because of Wells Fargo’s predatory and discriminatory lending practices. It sets forth specific municipal services that

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Baltimore provided at each Wells Fargo foreclosure property during and as a direct consequence of the vacancy. Baltimore’s claim for municipal services damages is limited to these properties and services (and any others precisely like them identified during discovery, which has yet to be allowed). The properties and services are carefully specified in full detail in 190 propertyspecific paragraphs in the new complaint. Second Am. Compl. (“SAC”) ¶¶ 105-294. For example, the City alleges that it boarded the vacant Wells Fargo foreclosure property at 240 North Rose Street in 2004 and reboarded it in 2004, 2006, and 2007. Id. ¶ 115. Property-byproperty and service-by-service, the Second Amended Complaint includes 52 pages with this extraordinary level of detail about the City’s damages. The City spent hundreds of hours reviewing its records to provide this level of specificity and comply with the Court’s directions.
The City likewise followed the Court’s instruction to narrowly circumscribe its claim for diminished property tax revenues. It analyzed all foreclosures in the City to identify compact and uniformly-sized areas (each approximately two blocks by two blocks) where Wells Fargo foreclosures constitute at least one-third of all foreclosures. There are 37 such areas (or “subneighborhoods”) in parts of Baltimore that are majority African-American. Each is identified in the Second Amended Complaint. SAC ¶¶ 306, 308. Many of them are clustered in stable and improving neighborhoods like Cylburn and Original Northwood. Id. ¶ 307. Baltimore now explicitly limits the property tax damages it seeks to reduced tax revenues from these subneighborhoods. Id. ¶¶ 306, 309. The high concentration of Wells Fargo foreclosures in these limited and compact areas assures that the connection between the foreclosures and lost tax revenue stemming directly from the devaluation of properties that sit in close proximity to the foreclosed Wells Fargo properties is concrete and not merely theoretical. Baltimore’s expert analysis confirms that the City has suffered a real and quantifiable loss that is due to the
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concentrated Wells Fargo foreclosures in these areas and not other factors. Id. ¶¶ 310-12. Baltimore also makes clear that it seeks only the damages specified in the Second
Amended Complaint and does not seek to recover for any generalized harm. Contrary to Wells Fargo’s contention, the City does not seek any damages for socioeconomic ills, “30,000 currently vacant properties” (Mem. Law Supp. Defs.’ Mot. Dismiss Second Am. Compl. (Docket No. 1551) (May 25, 2010) (“Defs.’ Mem.”) at 8), or foreclosures in general. See SAC ¶¶ 14 (“the City does not seek to hold Wells Fargo responsible for injuries caused by non-Wells Fargo foreclosures or injuries suffered by the City as a result of foreclosures generally”), 93 (“The City does not seek redress in this action for injuries resulting from foreclosures on mortgages originated by lenders that are not associated with Wells Fargo.”). It does not seek to hold a “single bank” liable for “a wide range of social problems.” Defs.’ Mem. at 1. Baltimore only seeks to hold Wells Fargo responsible for particular harm caused by particular discriminatory Wells Fargo loans at particular Wells Fargo foreclosure properties. Baltimore therefore makes abundantly clear in the Second Amended Complaint that it fully understands the Court’s concerns and has gone to great lengths to demonstrate that it has addressed them.
Despite these clear and significant changes in the Second Amended Complaint, Wells Fargo nonetheless asserts that Baltimore “has now re-filed essentially the same lawsuit.” Defs.’ Mem. at 2. This statement is not simply a distortion; it is palpably false. Wells Fargo’s disregard of the wealth of detail that Baltimore has added and the clarity with which the City disclaims any generalized damages is an intentional effort to confuse the record and argue against a complaint that does not now exist. The imaginary complaint that Wells Fargo envisions serves its purpose by allowing it to falsely claim that Wells Fargo is unfairly being held responsible for every imaginable ill that currently plagues the City of Baltimore. It also
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permits Wells Fargo to complain about alleged standing concerns that bear no relationship to the present allegations of this case.
While Wells Fargo attempts to obfuscate and misrepresent the contents of the Second Amended Complaint, the City’s actual allegations clearly show that it has standing because it has suffered injuries-in-fact that are traceable to Wells Fargo’s conduct. The City’s allegations need only plausibly support the injury-in-fact and traceability components of standing at the pleading stage, see Opinion at 3-4; Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (“[t]he plausibility standard is not akin to a ‘probability requirement’”), and they more than satisfy this standard.1
Three steps connect Wells Fargo’s unlawful acts to the City’s injuries. First, Wells Fargo’s discriminatory targeting of predatory lending practices at Baltimore’s African-American neighborhoods plausibly causes increased notices of foreclosure and increased completed foreclosures. The connection between targeting African-American neighborhoods for predatory lending and a greatly increased likelihood of foreclosures on the resulting loans is more than plausible, it is facially apparent. Borrowers who are charged more for a loan than they qualify for, or are deceived into taking a loan that they cannot afford, are far more likely to find themselves noticed for foreclosure or losing their home to a completed foreclosure. Substantial direct and statistical evidence in the Second Amended Complaint supports this part of the causation chain. Declarations (attached to the SAC) from former Wells Fargo employees and a mortgage broker whose company was hired by Wells Fargo explain how Wells Fargo targeted the City’s African-American neighborhoods with predatory subprime lending practices by, among other things, targeting African-American zip codes and churches, refusing to let white employees make presentations to African-American audiences, and drafting subprime marketing

1

Wells Fargo does not challenge the redressability prong of standing and concedes that prudential standing

requirements do not apply here because Congress has extended standing under the Fair Housing Act to the full

extent of Article III. See Defs.’ Mem. Law (Docket No. 10-2) (Mar. 21, 2008) at 10 n.3.

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materials on the basis of race by using software to “translate” the materials into what Wells Fargo literally defined as the “language” of “African American.” White neighborhoods were not targeted. Using a wide array of deceptive and dishonest techniques, loan officers increased their commissions by steering targeted borrowers into loans that they could not afford and that were much costlier than loans for which they qualified. In light of the routine use of these practices, Wells Fargo subprime employees joked morbidly among themselves that they were “riding the stagecoach to Hell.” See SAC ¶¶ 46-71, 84, Attachs. A-C.
A wealth of statistical allegations in the Second Amended Complaint corroborates the declarants’ testimony. See id. ¶¶ 36-43, 72-92. Wells Fargo’s foreclosure rate is three times higher in African-American neighborhoods than in white neighborhoods, id. ¶ 39, and Wells Fargo’s high-cost loans are disproportionately concentrated in African-American neighborhoods, id. ¶¶ 72-75. All of the statistical disparities set out in detail in the complaint are fully consistent with the outcome one would expect given the direct evidence of targeting provided by Wells Fargo’s own ex-employees and former broker.
The second step in the causal chain is that foreclosures plausibly cause properties to become vacant. Chief Judge Legg previously directed the parties to engage in limited discovery in large measure to test this connection. See, e.g., Mem. to Counsel (Feb. 20, 2009) (Docket No. 48). The resulting data demonstrates that the connection is strong. Out of 486 foreclosure notices on Wells Fargo loans in Baltimore’s African-American neighborhoods from 2000 to 2009 of which the City is currently aware, 269 (55%) of the properties became vacant. SAC ¶¶ 96, 104.2 This is a much higher percentage of homes than ordinarily becomes vacant. The connection is also logical – a borrower who is seriously in default and unable to make the

2

Paragraph 96 of the Second Amended Complaint mistakenly refers to 270 vacancies instead of 269.

Compare SAC ¶ 96 with id. ¶¶ 105-296 (providing addresses for 269 vacancies).

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mortgage payments is likely to leave the property. But for Wells Fargo’s targeted predatory practices and failure to make loans commensurate with borrowers’ ability to repay them, these foreclosures and vacancies would have been avoided.
The final step in the causal chain is that the City is injured by foreclosures and vacancies at Wells Fargo properties. This happens in the two ways discussed above, both of which are clearly plausible. First, the City has been required to provide additional municipal services at the 190 vacant properties. Id. ¶¶ 97-104. These services are detailed in the Second Amended Complaint and include, among others, boarding properties that are open to casual entry, inspecting properties for health and safety risks, performing structural maintenance and repairs, cutting grass and weeds, and rodent control. Id. ¶¶ 105-294. The problems that require the City to provide these services would not occur if the properties were occupied or would only occur at a dramatically reduced rate; for example, occupied properties do not need to be boarded. Second, the City has lost property tax revenues from the sub-neighborhoods where the Wells Fargo foreclosures are concentrated because the foreclosures reduce the values of other houses in close proximity. Id. ¶¶ 306-13. The City’s expert analysis confirms that the concentrated Wells Fargo foreclosures cause this harm in the discrete sub-neighborhoods. Id. ¶¶ 310-12.
The injury-in-fact and causation chain shown by Baltimore establish standing under clear case law. Baltimore’s allegations are much more specific and concrete than ones that the Supreme Court held were sufficient to support a local government’s standing under the Fair Housing Act. In Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979), the Supreme Court held that where racial “steering” by realtors might diminish a town’s property tax revenues, and the possible diminution was not even alleged but could only be inferred from the complaint, the town faced an injury-in-fact sufficient to confer standing. See id. at 109-11.
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Baltimore’s standing allegations are even stronger because the City alleges specific financial injuries that have already occurred.
With respect to traceability, Gladstone is again dispositive. The Supreme Court found the town’s loss of revenue adequately traceable to the challenged steering practices because steering might eventually cause white residents to leave the town, which might in turn lower demand for housing, which would lower property values and therefore lower property tax revenues. See id. Thus, the mere potential that a critical mass of non-parties would in the future respond to the challenged steering in such a way as to produce the injury satisfied the traceability requirement. Here, Baltimore alleges that Wells Fargo’s Fair Housing Act violations have actually caused foreclosures and vacancies at Wells Fargo properties, and that those particular foreclosures and vacancies have actually caused harm to the City. SAC ¶¶ 93-313. These allegations are plausible and backed by substantial direct and statistical evidence in the Second Amended Complaint. They are sufficient under Gladstone.
Defendants nevertheless argue that traceability is defeated because third parties play some role in the causal chain here. As shown by Gladstone, as well as numerous other controlling authorities, this misrepresents the law. As long as it is likely that Wells Fargo’s discriminatory acts contribute to Baltimore’s injury, the role of third parties is irrelevant to standing. See, e.g., Clinton v. City of New York, 524 U.S. 417 (1998).
Wells Fargo further misconstrues case law by arguing incorrectly that City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S (N.D. Ala. Aug. 19, 2009), and City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009), have some persuasive value here. They do not. The complaint and record in each case were utterly void of the kind of exceptional detail presented by Baltimore in support of each element of
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standing. Birmingham did not include any allegations explaining why a single one of the seven companies it sued did anything wrong or identifying a single concrete injury. Cleveland did little more than say that twenty-two companies destroyed “entire streets, blocks, and neighborhoods” by purchasing securitized loans on the secondary market. Both cities’ allegations about liability and consequent injury were conclusory and generalized, and the decisions dismissing their complaints therefore lack any relevance here.
Wells Fargo also raises a multitude of purely factual objections to the Second Amended Complaint. Some are general while others attempt to discredit isolated pieces of Baltimore’s injuries. While Wells Fargo’s factual assertions are wrong, misleading, and in many cases irrelevant to the claims actually alleged by the City, it is important to first note that they have no place here. Because this is a motion to dismiss, Baltimore’s plausible factual allegations must be accepted as true. See, e.g., Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007). Though courts usually have some discretion to assess facts that concern jurisdiction, they may not resolve at the Rule 12 stage factual disputes that also go to the merits of the case, as do Wells Fargo’s factual assertions about injury and causation. See, e.g., Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). These kinds of factual attacks must instead be tested through discovery and reserved until the merits stage. See id. Moreover, the Court should not accept at any stage Wells Fargo’s untested and unsupported statements of “fact,” yet that is exactly what Wells Fargo asks the Court to do by filling its motion with so many untested statements.
In any event, Wells Fargo’s assertions do not withstand scrutiny. Its claim that socioeconomic problems in certain African-American neighborhoods are the “true driver” of its foreclosures instead of its lending practices is belied by the fact that, as discovery will show, Wells Fargo has a much higher foreclosure rate in African-American neighborhoods than its
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peers. See SAC ¶ 40. Wells Fargo’s claim also misses the point; Baltimore does not seek to hold Wells Fargo liable for any socioeconomic problems, only the direct results of its own discriminatory practices. Wells Fargo’s parallel claim that the recession is to blame fails for the same reasons. Defendants likewise assert that the City has caused its own injuries through the sale of tax liens, ownership of vacant properties, and a program whereby it helps residents with the closing costs for a mortgage. These assertions fail legally and factually. An injury is only “self-inflicted” such that traceability is defeated if the injury is completely caused by the plaintiff’s personal choices. See McConnell v. FEC, 540 U.S. 93, 228 (2003); 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3531.5 (2008). Tax lien sales, however, are required by Maryland law and have a much more modest impact – if any – on the Wells Fargo foreclosures at issue than Defendants contend. The City frequently acquires and uses vacant properties to benefit neighborhoods by returning derelict properties to productive use; this is the opposite of inflicting injury. Finally, Wells Fargo vastly overstates the very minor role the City has played in helping some borrowers (only eight out of 190 vacancies) with closing costs, and also misrepresents the program.
Wells Fargo’s assertion that it reviewed its own secret files and found that it only made good loans must be disregarded as an attempt to deny Baltimore the most basic procedural protections. Its assertion that some of the Wells Fargo foreclosure properties identified by Baltimore are not in African-American areas is simply wrong. Its assertion that concentrated foreclosures cannot influence the assessed values of nearby houses is at odds with common sense and based on its expert’s overly narrow and mechanical description of the assessment process. Moreover, many of these assertions and others – such as assertions about the timing of the City’s injuries and other vacant properties near some of the vacant Wells Fargo properties – go only to
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the amount of Baltimore’s damages, not standing. If Wells Fargo can ultimately show that the harm at, for example, twenty of the 190 vacant Wells Fargo foreclosure properties was caused by something other than a predatory Wells Fargo loan, it would mitigate damages but not defeat standing. Wells Fargo’s various factual assertions, in sum, have no place at this stage of the case, are legally irrelevant, and are factually inaccurate.
For all of these reasons and others, as shown in greater detail below, Baltimore has fully satisfied the requirements for standing under Article III. Wells Fargo’s motion to dismiss should therefore be denied in its entirety.
STANDARD OF REVIEW Under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), the allegations in a complaint must be plausible. This standard applies to allegations about standing challenged under Fed. R. Civ. P. 12(b)(1), as well as to challenges under Rule 12(b)(6). See Op. (Jan. 6, 2010) (Docket No. 141) at 3-4 (“Opinion”). Twombly and Iqbal do not create a heightened pleading standard, however, and Iqbal specifically states that “[t]he plausibility standard is not akin to a ‘probability requirement.’” 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556). When the facial sufficiency of a complaint is challenged under Rule 12(b)(1), “all the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a Rule 12(b)(6) consideration.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). The Rule 12(b)(6) standard requires a court to “accept as true all of the factual allegations contained in the complaint,” Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007) (citation and quotation marks omitted), “construe the factual allegations of the complaint in the light most favorable to the plaintiff,” Schweikert v.
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Bank of America, N.A., 521 F.3d 285, 288 (4th Cir. 2008) (same), and “presume that general allegations embrace those specific facts that are necessary to support the claim,” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (citation, brackets, quotation marks omitted).
Because Wells Fargo vacillates as to whether its Rule 12(b)(1) challenge is facial or factual, compare, e.g., Defs.’ Mem. at 9 (saying that the Court should look to Baltimore’s allegations and not make factual determinations) with id. at 2-4, 13, 18-20, 22-28 (making numerous fact-based arguments), we also address strict limitations concerning the resolution of disputed facts pursuant to a factual challenge. First, while the Court has some discretion under Rule 12(b)(1) to examine facts related to subject matter jurisdiction, it is axiomatic that at no stage of a case may a court resolve factual disputes based on one side’s untested and unverified presentation of what it claims to be the facts. A court may not rely on factual assertions unless they withstand scrutiny after the other party is given a full and fair opportunity to challenge them after appropriate discovery. See, e.g., Columbus-America Discovery Group v. Atlantic Mut. Ins. Co., 974 F.2d 450, 470 (4th Cir. 1992) (reversing trial court for failing to give litigant opportunity for discovery; “due process mandates that a judicial proceeding give all parties an opportunity to be heard on the critical and decisive allegations which go to the core of the parties’ claim or defense and to present evidence on the contested facts”) (emphasis in original; citation and quotation marks omitted).
Second, even if there were a developed evidentiary record (which there is not), it would still be plainly improper under Rule 12(b)(1) to resolve the factual issues raised by Wells Fargo. Wells Fargo’s factual assertions go directly to whether Defendants caused Baltimore’s injuries and therefore to the merits of Baltimore’s case. It is well-established that on a Rule 12(b)(1) factual challenge, if “jurisdictional facts are intertwined with the facts central to the merits of the
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dispute,” then they are “appropriately resolved only by a proceeding on the merits.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982); see United States v. North Carolina, 180 F.3d 574, 580 (4th Cir. 1999) (“When a factual attack on subject matter jurisdiction involves the merits of a dispute, the proper course of action for the district court is to find that jurisdiction exists and deal with the objection as a direct attack on the merits of the plaintiff’s case.”) (citations, brackets, ellipsis, and quotation marks omitted); Mem. (July 2, 2009) (Docket No. 96) (Legg, C.J.) at 3. The Fourth Circuit recently reaffirmed this rule. Kerns v. United States, 585 F.3d 187 (4th Cir. 2009). It made clear that when jurisdictional and merits facts are intertwined, a “trial court should then afford the plaintiff the procedural safeguards – such as discovery – that would apply were the plaintiff facing a direct attack on the merits.”3 Id. at 193.
Finally, judicial notice may not be used to displace the traditional judicial processes for resolving factual disputes with evidence, especially when the factual disputes involve critical issues. Fed. R. Evid. 201(b) sets strict limits on the types of facts that may be judicially noticed. It excludes factual issues that are “subject to reasonable dispute.”4 Fed. R. Evid. 201(b). With

3

See also Southern California Edison Co. v. FERC, 502 F.3d 176, 180 (D.C. Cir. 2007) (impermissible “‘to

bootstrap standing analysis to issues that are controverted on the merits’”) (quoting Public Citizen v. FTC, 869 F.2d

1541, 1549 (D.C. Cir. 1989)); North Carolina Shellfish Growers Ass’n v. Holly Ridge Assocs., 278 F. Supp. 2d 654,

665 (E.D.N.C. 2003) (“transform[ing] standing analysis into a determination of ultimate liability [] has been

specifically rejected by the Fourth Circuit”).

4

See, e.g., Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211, 218-19 (4th Cir. 1993) (reversing

district court for taking “judicial notice of the facts that many volunteer fire departments operate in Maryland

without governmental intervention at all and that all volunteer fire departments operate in a gray area as to the

functions they provide”); Carley v. Wheeled Coach, 991 F.2d 1117, 1126 (3d Cir. 1993) (reversing district court for

taking judicial notice of “rollover problems of vehicles having a high center of gravity”); Cardio-Med. Assocs., Ltd.

v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75-76 (3d Cir. 1983) (reversing district court for taking judicial notice of

factors considered by patients when choosing a doctor).

In its initial motion to dismiss, Wells Fargo cited two cases from outside of the Fourth Circuit as purported

authority for the Court to take judicial notice of Wells Fargo’s numerous disputed factual assertions. Neither case

permits judicial notice here. In Logan v. Denny’s, Inc., 259 F.3d 558 (6th Cir. 2001), the court took notice of the

general fact of the defendant’s historical discrimination problems, but made clear that this was only of background

interest – “Defendant’s past record of discrimination is not at issue here.” Id. at 578. In Peters v. Delaware River

Port Authority, 16 F.3d 1346 (3d Cir. 1994), the court observed that, “as would be expected,” newspaper articles

buttressed the proposition that two states’ delegations to a joint agency acted as economic competitors. Id. at 1356

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one exception, Wells Fargo does not acknowledge that it is asking for judicial notice of a wide range of “facts,” but that is plainly its purpose in submitting untested exhibits and making myriad extra-record factual assertions. Because Wells Fargo’s factual assertions are central to its motion to dismiss yet vigorously disputed, the most the Court may do is take notice of the existence of Wells Fargo’s exhibits and statements, but not the truth of their content. In Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001), the defendants’ motion to dismiss “rest[ed] almost entirely on factual challenges,” and “defendants’ factual assertions” were the basis for the trial court’s decision to grant the motion. Id. at 688. The circuit court reversed, explaining that the trial court erred by relying on “judicial notice of disputed facts stated in public records,” when it was permitted to notice only the “existence” of those records. Id. at 690 (emphasis in original). The trial court compounded this error by favoring the judicially noticed “facts” over the reasonable inferences that could be drawn from the complaint. See id. Likewise, Hennesy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995), affirmed the district court’s refusal to take judicial notice of the number of employees reported by a company in its own 10K filing with the SEC. See id. at 1354-55. The issue before the court turned on this very number. See id. The 10-K could be used for cross-examination, but not to bypass normal evidentiary procedures through judicial notice. See id. at 1355.
By showing below that the factual assertions relied on by Wells Fargo are false, Baltimore does not suggest that it is in any way appropriate to consider Defendants’ assertions. Rather, the City seeks only to demonstrate that discovery will prove these assertions are thoroughly misleading and wrong.
& n.12. The issue in the case – “whether party affiliation is an appropriate requirement for the effective performance of the position of” head of that agency, id. at 1348 – was quite remote from that general proposition.
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ARGUMENT I. THE SECOND AMENDED COMPLAINT DEMONSTRATES THAT
BALTIMORE HAS STANDING A. Baltimore Has Followed the Court’s Directions In Full and Narrowed
the Damages It Seeks In the Second Amended Complaint In its January 6, 2010 decision dismissing the First Amended Complaint, the Court focused on specific paragraphs of the complaint that reasonably could be construed as seeking broad, generalized damages, potentially going beyond the illegal practices alleged to be directly attributable to Wells Fargo. As the City attempted to show, this was not its intent. See Tr. (Dec. 14, 2009) at 8-9. Its purpose in bringing this suit was to hold Wells Fargo responsible only for the injuries and costs that could be reasonably attributed to its illegal practices with respect to specific borrowers, specific properties, and affected African-American neighborhoods. Concerned that the City sought to hold Wells Fargo responsible for a wide array of injuries beyond those associated with Wells Fargo’s own loans at specific properties and neighborhoods, the Court therefore dismissed the First Amended Complaint and gave Baltimore a choice. It could appeal to the Fourth Circuit or it could amend its complaint by clearly narrowing its claim for damages. See Opinion at 6. The Court explained that the latter choice required two changes. One concerned the scope of the City’s claim for damages based on the provision of municipal services at vacant Wells Fargo properties, and the other concerned the scope of the City’s claim for damages based on the lost taxable value of houses throughout a neighborhood. The Court stated: If the City desires to pursue a more limited claim, such as a claim for specific damages allegedly suffered by the City in regard to specific houses that became vacant allegedly because of Wells Fargo’s lending activities or a claim for damages allegedly caused to a specific neighborhood in which Wells Fargo made enough allegedly improper loans that its activities bear a plausible causal relationship to the destruction of that neighborhood, it may file a second amended
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complaint . . . . Id. at 6.
Baltimore fully understands the concerns articulated by the Court in its January 6 decision and recognizes that certain paragraphs of the First Amended Complaint, as cited by the Court, were capable of being read to seek broad damages for generalized harms to the City that are not attributable to Wells Fargo’s alleged illegal conduct. The City, therefore, has followed the Court’s instructions to the letter and made significant changes in its Second Amended Complaint to narrow its claims. See, e.g., SAC ¶ 95. The City now makes clear that it does not seek to hold Wells Fargo responsible for the kinds of broad, generalized harm that led the Court to dismiss the prior complaint. The Second Amended Complaint instead seeks damages only for harm that is directly connected to particular Wells Fargo foreclosures.
The amendments clarifying and narrowing the City’s complaint are discussed in detail below. As a general matter, there are two substantial categories of amendments. First, with respect to damages for the costs of providing additional municipal services at vacant properties, Baltimore’s claims in the Second Amended Complaint are limited to “specific houses that became vacant allegedly because of Wells Fargo’s lending activities,” as required by the Court. Opinion at 6. Baltimore has devoted hundreds of hours since the First Amended Complaint was dismissed to identifying these particular properties and, in exhausting detail, the particular services provided at each. The Second Amended Complaint now identifies 190 properties that were the subject of a Wells Fargo loan that went to foreclosure, that became vacant because of the loan and foreclosure, and at which Baltimore had to provide services due to the vacancy. SAC ¶¶ 105-294. The Second Amended Complaint also identifies the services provided on a property-by-property basis. Id. The City’s Department of Housing and Community
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Development, for example, had to inspect many of the 190 vacant Wells Fargo foreclosure
properties numerous times for structural damage and violations of City ordinances. It had to
board the vacant properties when they were left open to casual entry. It had to cut the grass and
weeds at many of the vacant properties that were not maintained. Police and fire personnel had
to respond to incidents at the vacant properties as they attracted squatters and crime and became
significant fire risks.
All of these municipal services and more, and the particular vacant Wells Fargo
foreclosure properties at which they were provided, are catalogued in the Second Amended
Complaint. A representative example from the City’s 190 property-specific paragraphs reads:
240 N. Rose Street: The housing department devoted personnel time and incurred out-of-pocket expenses to purchase materials to board the property in 2004 and to reboard the property later in the same year. The housing department devoted additional time and expense to reboard the property in 2006 and again in 2007. The housing department devoted personnel time to clean the property in 2004 and again in 2006. The housing department devoted personnel time to conduct seven physical inspections of the property in 2004; one physical inspection of the property in 2005; four physical inspections of the property in 2006, five physical inspections of the property in 2007, one physical inspection of the property in 2008, and three physical inspections of the property in 2009. The housing department incurred out-of-pocket expenses to contact the owner regarding housing code violations at the property three times. The police department dispatched officers to the property twice in 2005 in response to calls for service.
Id. ¶ 115. This is an extraordinary level of detail about damages for any plaintiff to provide in a
complaint. It is the result of painstaking work to satisfy the Court’s instruction that the City limit
its damages to those that are the direct result of Wells Fargo’s own conduct.5 The Second
Amended Complaint includes 189 more paragraphs like this one covering a total of 190 unique
properties. SAC ¶¶ 105-294. The detailed information in these paragraphs comes from a

5

The City also identifies in the Second Amended Complaint 79 additional Wells Fargo foreclosure

properties that are or have been vacant. SAC ¶¶ 295-96. At this time the City has not identified services it provided

at these properties during a period of vacancy attributable to Wells Fargo. Baltimore will only seek damages based

on these vacancies if it identifies such services during discovery.

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lengthy and detailed review of the City’s records. The financial cost of each of the injuries delineated in these paragraphs can be quantified precisely based on the City’s records. Id. ¶ 102.
Equally important, in the Second Amended Complaint the City explicitly excludes from its claim any of the generalized damages that the Court previously found are not plausibly connected to discriminatory lending by Wells Fargo. The City does not seek any damages for socioeconomic problems in the City, such as unemployment, poverty, limited educational achievement, drug distribution, drug use, prostitution, or a general increase in crime, police, or fire department activity. It does not seek damages for services provided at vacant non-Wells Fargo foreclosure properties, or for vacant properties generally across the City. It does not seek damages for generally providing housing, police, fire, or other services to any neighborhood in the City; for example, if the City had to respond to a block where a vacant Wells Fargo foreclosure was located, but not to the Wells Fargo property itself, the City does not seek damages for that response. Even at the 190 vacant Wells Fargo properties where it suffered injuries for which it does seek recovery, the City has excluded many other services because it determined that they were not provided during a vacancy period attributable to Defendants. See SAC ¶¶ 14 (“the City does not seek to hold Wells Fargo responsible for injuries caused by nonWells Fargo foreclosures or injuries suffered by the City as a result of foreclosures generally”), 93 (“The City does not seek redress in this action for injuries resulting from foreclosures on mortgages originated by lenders that are not associated with Wells Fargo.”).
Second, Baltimore has likewise heeded the Court’s requirement that it narrowly circumscribe the damages it seeks for diminished property tax revenues. The Second Amended Complaint seeks tax revenue damages only for properties in close proximity to the Wells Fargo foreclosure properties. Thus, the City identifies 37 uniformly-sized sub-neighborhoods (each
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approximately two blocks by two blocks) in which Wells Fargo foreclosures constitute at least one-third of all foreclosures. Id. ¶¶ 306, 308. “Houses outside of these sub-neighborhoods are excluded from Baltimore’s claim for damages based on lost property tax revenues.”6 Id. ¶ 309; see also id. ¶ 306. Many of these sub-neighborhoods are clustered within African-American neighborhoods in Ashburton, Cylburn, Original Northwood, Reservoir Hill, and Waltherson, among others. Id. ¶¶ 12, 307. These have long been stable middle- and working-class AfricanAmerican areas and/or have become significantly stronger in the past decade. Id. They are not neighborhoods characterized by the type of dysfunctional environment noted by the Court in addressing the City’s prior and broader claims. See Opinion at 4-5; SAC ¶ 307.
Baltimore’s expert statistical analysis confirms that foreclosures have reduced property tax receipts from the 37 sub-neighborhoods, and that the high concentration of Wells Fargo foreclosures is a key cause of these losses. SAC ¶¶ 310-12. This assures that “facts and theory” now “converge” with respect to the narrowed property tax damages sought by the City. Opinion at 5. Baltimore’s expert testimony explains how the widely-accepted statistical technique of multivariate regression, known as “hedonic regression” in the context of housing, is used to determine the effect of different property and neighborhood characteristics on each house’s value. See SAC Attach. T.; Tr. (June 29, 2009) at 49, 82-86; see also SAC ¶¶ 310-12. The Supreme Court expressly approved of the use of multivariate regression in discrimination cases in Bazemore v. Friday, 478 U.S. 385 (1986). See also Zenith Elecs. Corp. v. WH-TV Broadcasting Corp., 395 F.3d 416, 419 (7th Cir. 2005) (testimony of proposed expert unreliable and inadmissible because he did not conduct a multivariate regression analysis, which is

6

The only exception is that, insofar as it is technically necessary to preserve its appellate rights, the City

continues to seek property tax damages more broadly. See SAC ¶ 306 n.5; Young v. City of Mount Ranier, 238 F.3d

567, 573 n.4 (4th Cir. 2001).

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“[p]erhaps the leading tool to” “isolate the effects of multiple variables and determine how they influence one dependent variable”). One of the characteristics analyzed here through hedonic regression is the number and proximity of foreclosures. See id. Simply put, the analysis holds factors that affect property values constant so that it can control for the effect of foreclosures on neighboring properties. By determining how concentrated Wells Fargo foreclosures impact the assessed values of surrounding properties, Baltimore is able to determine how those foreclosures impact corresponding tax revenues. Limiting the tax revenue claim to the compact subneighborhoods where Wells Fargo foreclosures constitute at least one-third of all foreclosures assures that the City’s injury has real world significance and is not merely of academic note.
Accordingly, Baltimore has substantially narrowed the scope of the damages it seeks as required by the Court’s decision dismissing the First Amended Complaint. The changes make plain that the City is not attempting to hold Wells Fargo liable for every ill that has affected the City, nor for every foreclosure or vacancy. Rather, Baltimore’s claims are explicitly limited to harm that is the direct result of specific predatory and discriminatory Wells Fargo loans at specific Wells Fargo properties that resulted in foreclosure, vacancies at those properties, and corresponding property-specific costs as documented in City files.
B. Baltimore Does Not Seek Damages for Preexisting Socioeconomic Problems or Any Other Generalized Injuries Not Directly Attributable to Wells Fargo’s Illegal Lending Practices at Specific Wells Fargo Properties
Although Baltimore clearly has followed the Court’s instructions for narrowing its case, Wells Fargo continues to argue against the kind of broad claim for damages that is simply not found in the Second Amended Complaint. Wells Fargo contends that Baltimore seeks damages for all of its socioeconomic troubles over the past decades, all of its foreclosures, and all of its vacant properties. This proposition is essential to Wells Fargo’s argument that the damages at
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issue remain too remote from its illegal lending activity to be plausible and to support standing. This argument is nothing but a straw man because, as shown above and in greater detail below, the City only seeks much narrower damages. In short, Wells Fargo argues against a Second Amended Complaint that does not exist.
Wells Fargo contends throughout its brief that Baltimore has ignored the Court’s directions and seeks broad, generalized damages. On page one, Wells Fargo describes the First Amended Complaint as an attempt to “attribute the foreclosure and vacancy epidemic in Baltimore to the alleged lending practices of a single bank,” and then, on page two, stakes out its position with a blast of false and misleading hyperbole by asserting that “[t]he City has now refiled essentially the same lawsuit,” Defs.’ Mem. at 1-2 (emphasis added). It says that the City is seeking to hold it responsible for “problems” that “predate the origination of virtually every loan identified in the Second Amended Complaint.” Id. at 2. These “problems,” as Wells Fargo would have it, are “the wide range of societal problems” causing “the steady decline of the Baltimore neighborhoods at issue beginning many years before the City’s lawsuit . . . .” Id. at 1.
Likewise, Wells Fargo repeatedly states that there are 30,000 to 40,000 vacant properties in Baltimore as if the City were seeking damages in connection with all of them.7 See id. at 2 (“40,000 vacancies”), 5 (“30,000 vacancies”), 8 (“30,000 currently vacant properties”), 18 (“30,000 vacant properties”). Wells Fargo’s misconception that Baltimore aims to hold it responsible for each vacancy across the City is particularly apparent when it states that “[n]othing in the SAC addresses the Court’s determination that the City did not have standing in light of the ‘negligible’ portion of the vacant housing stock even arguably attributable to Wells Fargo,” id. at 5, and that “[t]he City’s continuing failure to articulate a plausible link between

7

Discovery will show that the actual number of vacant residential structures in the City is currently 16,560.

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Wells Fargo’s lending, the enormous number of vacant properties in a city besieged by a host of

socioeconomic challenges and the purported damages is wholly unsurprising,” id. at 8.

Nothing could be further from the truth. In fact, Baltimore has responded directly to the

Court’s concerns and the City does not posit any link in the Second Amended Complaint

between Wells Fargo and every vacancy in the City. It does not claim damages based on any vacancies except those caused by Wells Fargo’s illegal and discriminatory lending practices.8

See, e.g., SAC ¶¶ 93, 105-294.

In sum, the failure to recognize how the City has narrowed its claim for damages wholly

undermines Wells Fargo’s core assertion that the connection between the City’s damages and the

challenged lending activities is too attenuated and implausible to support standing. Contrary to

Wells Fargo’s claims, Baltimore only seeks damages for harm caused by specific Wells Fargo

foreclosures identified in the Second Amended Complaint. As shown in the following section,

the connection between Wells Fargo’s unlawful conduct and the City’s narrowed damages is

highly plausible and more than satisfies the pleading requirements of Twombly and Iqbal.

C. Baltimore’s Allegations Establish a Plausible Connection Between Discriminatory Lending By Wells Fargo and the City’s Damages

The causal connection between Wells Fargo’s discriminatory acts and the narrowed

damages sought by the City is plausible and well-supported by the evidence and allegations

contained in the Second Amended Complaint. The causation chain is straightforward and

uncomplicated. It has three parts:

1. Wells Fargo’s predatory and discriminatory lending practices, targeted at Baltimore’s African-American neighborhoods, cause borrowers to pay more for their loans than they should or to receive loans that they cannot afford, logically and plausibly resulting in an increased likelihood of notices of foreclosure and

8

In addition to repeatedly referencing the overall number of vacancies in the City, Wells Fargo does the

same with foreclosures based on the same misreading of the Second Amended Complaint. See Defs.’ Mem. at 7, 27.

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completed foreclosures on the Wells Fargo loans in these African-American neighborhoods;
2. Notices of foreclosure and completed foreclosures at the Wells Fargo properties cause borrowers to leave their homes, plausibly resulting in many of those properties becoming vacant when they would otherwise be occupied; and
3. Vacancies and foreclosures at the Wells Fargo properties cause direct injury to the City in two ways: (a) the City must spend money to provide specific services (such as boarding, cleaning, and stabilizing structures, and fire and police services) at the Wells Fargo properties; and (b) the City loses property tax revenues in areas where the foreclosures are highly concentrated as a result of the devaluation of properties that sit in close proximity to Wells Fargo foreclosures.9
As shown immediately below, each part of the chain is well-supported by the City’s
allegations and evidence. In support of the first part, the Second Amended Complaint includes
extensive direct evidence in the form of declarations from former Wells Fargo employees that
explains exactly how Wells Fargo targeted Baltimore’s African-American neighborhoods for
predatory and discriminatory loans and steered borrowers in those neighborhoods into subprime
loans to increase Wells Fargo’s profit. It also includes a wealth of statistical evidence that is
consistent with and buttresses the direct evidence. The second part of the chain is supported by
evidence developed through a detailed analysis of Baltimore’s own records and records produced
by Wells Fargo pursuant to the limited discovery ordered by Chief Judge Legg in 2009.
The third part of the chain is supported by the detailed information drawn from the City’s
files and included in 190 new paragraphs of the complaint. The City combed its records after its
prior complaint was dismissed to document in exceptional detail the connection between specific

9

Wells Fargo misrepresents the amount of damages claimed by Baltimore in this action. Wells Fargo cites a

newspaper article that relies on a long-ago interview for the proposition that the City is seeking $20 million. See

Defs.’ Mem. at 5 & n.6. Defendants and the newspaper reporter fail to recognize that the City has narrowed it

claims substantially in the Second Amended Complaint.

Wells Fargo’s assertion that Baltimore filed this lawsuit solely to generate revenue is also wrong. See id. at

1. Defendants’ newspaper article was actually about an unrelated case and merely mentioned this case among others

filed by the City seeking affirmative monetary and other relief. Aside from the oddity of suggesting that a plaintiff’s

Article III standing is suspect when damages are sought, Wells Fargo’s attack on the City is belied by the complaint

itself. If Baltimore were solely interested in revenue, it would not be seeking injunctive and declaratory relief.

Indeed, as Wells Fargo well knows, injunctive relief is a critical component of this case for the City.

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Wells Fargo vacancies and foreclosures and its injuries. Based on this effort, the City provides 190 paragraphs itemizing the specific municipal services that it spent City funds to provide at specific vacant Wells Fargo foreclosure properties and identifies the 37 compact subneighborhoods where highly concentrated Wells Fargo vacancies are responsible for lost property tax revenues. SAC ¶¶ 105-294, 308.
1. Wells Fargo’s Predatory and Discriminatory Lending Practices, Targeted at Baltimore’s African-American Neighborhoods, Plausibly Result In an Increased Likelihood of Notices of Foreclosure and Completed Foreclosures On the Wells Fargo Loans a. Detailed Allegations Based On Direct Evidence
The Second Amended Complaint includes substantial direct evidence that Wells Fargo targeted Baltimore’s African-American neighborhoods for predatory lending practices. Declarations from former Wells Fargo employees Elizabeth Jacobson and Tony Paschal, who both have extensive direct knowledge of Wells Fargo’s local subprime lending practices, and former mortgage broker Peter Hebert are attached to and incorporated in the Second Amended Complaint. SAC Attachs. A–C (“Jacobson Decl.,” “Paschal Decl.,” “Hebert Decl.”); id. ¶¶ 4671, 84. This testimony demonstrates the lengths to which Wells Fargo has gone to target a range of predatory lending practices at Baltimore’s African Americans and predominantly AfricanAmerican neighborhoods in violation of the Fair Housing Act. Wells Fargo wholly ignores the substance of this evidence and instead resorts to attacking Jacobson’s and Paschal’s credibility and attacking Jacobson personally. See Defs.’ Mem. at 13 & n.10. These attacks are baseless and have no place at this stage of the case.10

10

Wells Fargo has launched unfounded attacks against these witnesses and their credibility from the start. As

Chief Judge Legg explained, they are “of no moment” under Rule 12. Tr. (June 3, 2009) at 23. Baltimore will

demonstrate at the appropriate point in the case that Wells Fargo’s accusations about Jacobson and Paschal do not

bear scrutiny. Baltimore also notes that Wells Fargo’s statement that Tony Paschal’s declaration is mostly about

employment discrimination is self-evidently false.

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The connection between targeting African-American neighborhoods for the predatory lending practices described by Jacobson, Paschal and Hebert and a greatly increased likelihood of foreclosure on the resulting loans is more than plausible, it is facially apparent. Borrowers who are charged more for a loan than they qualify for, or are deceived into taking a loan that they cannot afford, are far more likely to have difficulty making payments on their loans down the road and thus far more likely to find themselves noticed for foreclosure or having lost their home to a completed foreclosure. The direct evidence detailed below demonstrates that Wells Fargo intentionally made loans in African-American neighborhoods in deliberate disregard for wellestablished underwriting criteria that allow lenders to predict the likelihood that a borrower will successfully repay a loan. See, e.g., SAC ¶ 24, 84. Wells Fargo made these predatory and discriminatory loans to obtain a speedy and exorbitant profit before quickly passing on the risk of default and foreclosure to the secondary market on Wall Street. See, e.g., id. ¶¶ 3, 26. In short, the Wells Fargo loans in Baltimore’s African-American neighborhoods that are the result of racially targeted predatory practices were made without regard to whether they would fail. Wells Fargo did not need to concern itself with the likelihood that the loans would fail because of the way in which they were bundled and securitized for resale. It is more than plausible that such loans fail at an unusually high rate and in unnecessary numbers.
These practices constitute reverse redlining – the targeting of minority neighborhoods for predatory or discriminatory loans. As explained in Section I D. below, every court to consider the issue has held that reverse redlining violates the Fair Housing Act. Thus, it is the causal link between these illegal practices on the front end, and the increased likelihood of foreclosure that follows, that creates the causal chain for standing under the Fair Housing Act.
Paschal, Jacobson and Hebert explain that Wells Fargo targeted African Americans in
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Baltimore for higher interest subprime loans in multiple ways. One was by directing its subprime marketing efforts at zip codes in and around Baltimore with large African-American populations. Paschal Decl. ¶¶ 8, 10. It even tailored its subprime marketing materials on the basis of race by using software to print out subprime promotional materials in different so-called languages, one of which was “African American.” Id. ¶ 11. A computer screen shot from 2006 showing this option is attached to Paschal’s declaration. Id. at Ex. A. Another strategy was to focus on African-American churches. Jacobson Decl. ¶ 27, 30. Yet another was to make sure that African-American employees were the face of the company for African-American audiences and customers. Paschal Decl. ¶¶ 10, 12. Wells Fargo even went beyond its own employees and hired mortgage brokers to target Baltimore on its behalf by using methods that disproportionately generated African-American customers. Hebert Decl. ¶¶ 7-13.
At the same time, Wells Fargo did not target whites for subprime loans. Paschal heard colleagues who only made subprime loans say that “Howard County was not good for subprime loans because it has a predominantly White population.” Paschal Decl. ¶ 8. Similarly, white churches were not targeted. “When it came to marketing, any reference to ‘church’ or ‘churches’ was understood as code for African-American or black churches.” Jacobson Decl. ¶ 30.
Combining strategies, Wells Fargo managers told Jacobson that she could not attend presentations at Baltimore’s African-Americans churches because she is not “of color;” later she was told she could go if she “carried someone’s bag.” Jacobson Decl. ¶ 28. In another case, she was told that she was “‘too white’ to appear before the [virtually all black] audience” at a “wealth building seminar” in Greenbelt designed to market subprime loans. Id. ¶ 29. Likewise, a unit in Silver Spring hired an African-American employee for the specific purpose of targeting African-American churches and their members for subprime loans. Paschal Decl. ¶ 12.
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Wells Fargo’s employees targeted African Americans and other minorities for subprime loans because they held derogatory stereotypes about minorities. This fostered a discriminatory culture, which management tolerated. Paschal heard “employees [from the subprime division] on several occasions mimic and make fun of their minority customers by using racial slurs. They referred to subprime loans made in minority communities as ‘ghetto loans’ and minority customers by saying ‘those people have bad credit’ and ‘those people don’t pay their bills,’ and calling them ‘mud people.’” Paschal Decl. ¶ 8. Paschal’s branch manager Dave Zoldak used the racial slur “nigger” at the office and spoke “about how African Americans lived in ‘hoods’ and ‘slums.’” Id. ¶ 16.
The borrowers and neighborhoods targeted by Wells Fargo for subprime loans were subjected to a range of predatory lending practices. These practices included steering borrowers who qualified for prime and Federal Housing Administration (“FHA”) loans into costlier subprime loans. Paschal Decl. ¶ 9. Paschal was even reprimanded for placing qualified customers into more desirable FHA loans instead of more expensive and more profitable subprime loans. Id. ¶ 19. Jacobson likewise understood that it was her job to take people who qualified for prime loans and “figure out how to get the customer into a subprime loan.” Jacobson Decl. ¶ 9. If she had access to Wells Fargo loan files, she could identify customers who were steered like this. Id.
Subprime loan officers steered people with better credit into subprime loans because Wells Fargo gave them large financial incentives to do so. The pay of subprime loan officers was “based on commissions and fees,” which “were based on the size of the loan and the interest rate.” Id. ¶ 6. Wells Fargo likewise lavished expensive trips and gifts on successful subprime loan officers, even as foreclosures increased in recent years. Id. ¶ 32. Paschal confirms how the
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compensation system operates to the detriment of minorities:
Because Wells Fargo made a higher profit on subprime loans, the company put “bounties” on minority borrowers. By this I mean that loan officers received cash incentives to aggressively market subprime loans in minority communities. If a loan officer referred a borrower who should have qualified for a prime loan to a subprime loan, the loan officer would receive a bonus. Loan officers were able to do this because they had the discretion to decide which loan products to offer and to determine the interest rate and fees charged to the borrower. Since loan officers made more money when they charged higher interest rates and fees to borrowers, there was a great financial incentive to put as many minority borrowers as possible into subprime loans and to charge these borrowers higher rates and fees. I knew many loan officers who made more than $600,000 a year and a few who made more than $ 1 million.
Paschal Decl. ¶ 13. Wells Fargo’s underwriting rules and pricing guidelines gave loan officers
the broad discretion they needed to engage in these lucrative steering practices and originate the
costliest subprime loans.
Jacobson describes in detail the unscrupulous ways in which Wells Fargo loan officers
used their discretion to get away with steering people with prime credit into subprime loans,
beginning with “A reps” who were supposed to make prime loans:
In many cases A reps used their discretion to steer prime loan customers to subprime loan officers by telling the customer, for example, that this was the only way for the loan to be processed quickly; that there would be less paperwork or documentation requirements; or that they would not have to put any money down. Customers were not told about the added costs, or advised about what was in their best interest.
Jacobson Decl. ¶ 12. The subprime loan officers then took advantage of their discretion “to
qualify the A rep referrals for subprime loans.”
One way was to tell customers not to put any money down on the loan and borrow the entire amount, even if they could afford a big enough down payment to qualify for a prime loan. As soon as the loan was submitted without a down payment, it would “flip” from prime to subprime and a subprime loan officer would be able to get the loan qualified as a subprime loan. Another technique would be to tell the customer that the only way to get the loan closed quickly would be to submit it as a subprime loan. A third technique would be to put a person into a “stated income” loan, even if they had a W-2 statement that verified
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their income. By doing this, the loan was flipped from a prime to a subprime loan. I know that through some of these techniques borrowers with credit scores as high as 780 were steered into expensive subprime loans with as many as four points, even though they could have qualified for a prime loan. Id. ¶ 17; see also id. ¶¶ 15-16; Paschal Decl. ¶ 14. Some loan officers went even further and falsified loan applications in order to put people with prime credit into subprime loans or to make subprime loans to borrowers who did not actually qualify for a loan. Jacobson Decl. ¶ 18. In 2004 Wells Fargo responded to public criticism by creating “filters” that were supposed to prevent the steering of prime customers into subprime loans. But as senior managers knew, the filters were not effective. Jacobson Decl. ¶¶ 19-20, Paschal Decl. ¶ 18. Paschal further explains how other predatory subprime practices were used to harm minorities: Wells Fargo also discriminated against minority loan applicants by advising them that the interest rate on their loan was “locked”, when in fact, Wells Fargo had the ability to lower the interest rate for the applicant if the market rates dropped prior to the loan closing. I believe this was deceptive and discriminatory, particularly since Wells Fargo loan officers lowered interest rates for White loan applicants when market rates dropped after the application but prior to a loan closing. Even though I complained about this differential treatment of minorities to the branch manager, Jennifer Bowman, Wells Fargo did nothing to change the practice. Paschal Decl. ¶ 5. Wells Fargo also “discriminated against minority loan applicants by not offering them its better or newer products which had lower fixed interest rates and fees.” Id. ¶ 14. Loan officers likewise deceived subprime borrowers about onerous prepayment penalties associated with their loans, which typically made it difficult for borrowers to refinance into new and better loans. Id. ¶ 15. With Wells Fargo engaged in so many abusive lending practices, Jacobson and her colleagues “morbidly joked that we were ‘riding the stagecoach to Hell.’” Jacobson Decl. ¶ 31. Jacobson believes that “many current and former Wells Fargo employees” would corroborate her
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testimony if compelled to testify, but that they “may well be reluctant to come forward voluntarily to tell what they know for fear of retaliation, reprisal or other actions that could adversely affect their future careers in the lending industry.” Id. ¶ 35.
B. Detailed Allegations Based On Statistical Evidence The statistical evidence in the Second Amended Complaint confirms the strong causal connection between Wells Fargo’s race-based targeting of predatory practices in Baltimore and excessive foreclosures on the specific Wells Fargo loans that resulted from that targeting. The foreclosure rate on Wells Fargo’s loans in Baltimore neighborhoods that are at least 60% African-American – that is, in neighborhoods that Jacobson and Paschal explain were targeted for predatory lending – is 4.82%. SAC ¶ 39. Yet Wells Fargo’s foreclosure rate in Baltimore neighborhoods that are at least 60% white, which were not targeted, is only 1.63%. Id. This three-fold difference in foreclosure rates is the plausible and natural result of making unfair and deceptive loans in one community, while refraining from such practices in the other.11 Similarly, more than half of Wells Fargo’s foreclosures from 2005 to 2009 were in census tracts that are more than 80% African-American and 62% were in tracts that are over 60% African-American, but only 12% were in tracts that are 20% or less African-American. Id. ¶¶ 37-38. The figures are virtually identical for Wells Fargo’s foreclosures from 2000 to 2004, with more than half in tracts that are more than 80% African-American, 64% in tracts that are over 60% African-American, and only 14.8% in tracts that are 20% or less African-American. Id. These figures are particularly revealing because the bulk of Wells Fargo’s mortgage lending in Baltimore is in white neighborhoods. Id. ¶ 4.

11

By using foreclosure rates – the number of foreclosures divided by the number of originations – Baltimore

controls for differences in the raw number of loans made by Wells Fargo in African-American and white

neighborhoods, respectively.

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Wells Fargo’s high cost loans are also disproportionately concentrated in AfricanAmerican neighborhoods. Id. ¶¶ 72-75. Wells Fargo made high cost loans to 43% of its African-American mortgage customers in Baltimore, but only to 9% of its white customers. In 2006, the respective rates were 65% and 15%; in 2005, they were 54% and 14%; in 2004, they were 31% and 10%. The proportion of refinance loans that are high cost is especially pronounced. From 2004 to 2007, Wells Fargo’s refinance loans to African-American borrowers were 3.2 times more likely to be high cost than its refinance loan to white borrowers.12 Id. ¶ 72.
All of these statistical disparities about the locations of Wells Fargo’s foreclosures, the rate at which Wells Fargo loans go to foreclosure in white and African-American neighborhoods, and the incidence of Wells Fargo’s high- and low-cost loans by race of borrower and neighborhood are fully consistent with the outcome one would expect given the direct evidence of targeting described above.
Wells Fargo argues that the City’s statistics do not evidence discrimination and instead merely reflect socioeconomic differences between African-American and white neighborhoods, such as different unemployment rates and income levels. While this type of factual argument is inappropriate at this stage of the case, Wells Fargo’s assertion fails in any event because it does not explain why Wells Fargo is an outlier. For example, if Wells Fargo were right, then the banks that Wells Fargo competes with to make mortgage loans in Baltimore would have comparable foreclosure rates in African-American neighborhoods because all of these lenders make loans to borrowers confronting the same socioeconomic issues. Wells Fargo’s foreclosure

12

Additional statistical evidence in the Second Amended Complaint demonstrates that Wells Fargo targets

interest rate increases at homes in African-American neighborhoods and interest rate decreases at homes in white

neighborhoods, SAC ¶¶ 76-78; that Wells Fargo incorporates higher interest rate caps on adjustable rate loans made

in African-American neighborhoods than on loans in white neighborhoods, id. ¶¶ 86-88; and that Wells Fargo’s

loans in African-American neighborhoods that go to foreclosure do so much more quickly than its loans in white

neighborhoods, id. at ¶¶ 89-92.

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rate in these neighborhoods, however, is much higher than its major competitors. See Id. ¶ 40. It is Wells Fargo’s targeting of predatory practices in African-American neighborhoods – not socioeconomic factors – that explains why the disparity in Wells Fargo’s foreclosure rates between white and African-American neighborhoods is so excessively large compared to other lenders. Overpriced and unaffordable loans cause excessive and unnecessary foreclosures.
2. Foreclosures at the Wells Fargo Properties Plausibly Result In Many of the Wells Fargo Properties Becoming Vacant When They Would Otherwise Be Occupied
It is highly plausible that properties noticed for foreclosure are likely to become vacant. A notice of foreclosure means that the borrower is seriously in default, lacks the means to make the mortgage payments, and faces the threat of being evicted. That the borrower will leave the property unoccupied – whether as a result of giving up or being legally compelled to depart – is a natural and predictable result of the inability to maintain a mortgage and the receipt of a notice initiating foreclosure proceedings. Indeed, that is exactly what the evidence shows.
The Court previously afforded the parties limited discovery in part to test the connection between foreclosure notices on Wells Fargo loans and vacancies. See, e.g., Mem. to Counsel (Feb. 20, 2009) (Docket No. 48). The data developed through that process and independently by Baltimore since then demonstrates that there is a strong connection between a foreclosure notice on a Wells Fargo property and a vacancy at that particular property. Out of 486 foreclosure notices on Wells Fargo loans in Baltimore’s African-American neighborhoods from 2000 to 2009 of which the City is currently aware, 269 (55%) of the properties became vacant.13 Id. ¶¶ 96, 104. Plainly, this is a much higher percentage of homes than ordinarily becomes vacant. If Wells Fargo had not engaged in targeted predatory practices and instead made loans

13

As Wells Fargo notes, 138 remain vacant, see Defs.’ Mem. at 5, but this distinction does not matter. What

matters is that the City has been injured by having to provide additional municipal services at 190 of the Wells

Fargo foreclosure properties during a period of vacancy. All were vacant at the time of injury, and 138 remain so.

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commensurate with borrowers’ financial resources and ability to repay them, many if not all of these foreclosures would have been avoided. The borrowers could have continued to afford their monthly payments and kept their homes instead of leaving them vacant.
Thus, the connection between reverse redlining by Wells Fargo in Baltimore, the 486 foreclosures on Wells Fargo loans in Baltimore’s African-American neighborhoods, and the 269 properties that also suffered vacancy is anything but attenuated. To the contrary, there is a direct and plausible line connecting Wells Fargo’s targeted predatory lending practices to the 486 Wells Fargo foreclosures and the 269 Wells Fargo vacancies. But for the predatory practices and resulting foreclosures, these properties, or the vast majority of them at the very least, would have remained occupied. This is precisely what the Second Amended Complaint alleges and the evidence contained in the complaint shows. See, e.g., SAC ¶¶ 96-97, 103.
3. Baltimore Is Injured By Vacancies and Foreclosures at the Wells Fargo Properties
The vacancies and foreclosures at Wells Fargo properties injure Baltimore in two different and independently provable ways. Both are highly plausible and supported by a wealth of detailed property-specific allegations. Baltimore spent hundreds of hours examining its records to provide this detail in response to the Court’s concern that the City was claiming damages that were not sufficiently tied to particular Wells Fargo properties. These allegations establish that, to the contrary, the damages are the direct and plausible result of the Wells Fargo foreclosures and vacancies.
First, the City is injured because it must provide increased municipal services to address dangerous code violations, crime, and fires at the specific vacant Wells Fargo foreclosure properties identified in the Second Amended Complaint. Second, its property tax revenues are reduced in sub-neighborhoods where there is a high concentration of Wells Fargo foreclosures as
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a result of the devaluation of properties that lie in close proximity to the Wells Fargo foreclosure properties. Both types of injuries are specifically alleged by the Second Amended Complaint even though the City only needs to show that either one is plausible to satisfy the Article III requirements for standing.
a. The City’s Records Show that Vacancies at the Wells Fargo Properties Plausibly Have Caused the City to Spend Precisely Quantifiable Funds to Provide Specific Services at the Properties
The municipal services that Baltimore must provide at vacant Wells Fargo foreclosure properties are very specific and closely connected to a property being vacant. Vacant properties are frequently open to casual entry because a lock or a window is broken, for example, and the City must purchase materials and send personnel to board and secure them. The properties frequently become dumping grounds for garbage that must be collected. Often they are not maintained, requiring City services from structural maintenance and repairs to grass cutting to rodent control and more so that the impact on neighbors’ health, safety, and quality of life is minimized. Inspectors must be sent to the properties to assess all of these issues and the City must prosecute violations of its housing code that the inspectors identify. The police must come to the vacant Wells Fargo properties because they attract squatters, drug use, and other crime. All of these problems increase the risk of fire at the vacant Wells Fargo properties and the fire department must therefore respond to the Wells Fargo properties at an excessive rate to fight fires. These problems would not occur or would only occur at a dramatically reduced rate if the properties were occupied. Occupied properties, for example, are not left open to casual entry and do not require boarding. Squatters do not move into houses where people are living.14 See SAC ¶¶ 97-102, 297-305, Attach. R ¶¶ 3-9, Attach. S ¶ 3; see also id. Attachs. E-O.

14

Indeed, some of Wells Fargo’s own exhibits make these connections. See Defs.’ Mem. at 2 & Ex. 2; id. Ex.

6; Defs.’ Mem. of Law (Mar. 21, 2008) at Ex. F (Docket No. 10-8).

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The Second Amended Complaint details the provision of such services at 190 vacant Wells Fargo foreclosure properties. SAC ¶¶ 105-294. These allegations are based on detailed records maintained by the City that allow it to calculate the cost of providing each service to each property down to the dollar. Id. Attach. R ¶¶ 4, 9, Attach. S ¶¶ 4-5. These records likewise allow the City to separate costs that are not attributable to Wells Fargo vacancies, such as the costs of sending police officers to investigate a possible crime elsewhere on the same block or boarding an unsecured property that is vacant years after and not because of the Wells Fargo loan. Baltimore devoted hundreds of hours to reviewing these records in response to the decision dismissing the First Amended Complaint so that it could submit to the Court exhaustive detail about the exact municipal services provided at and because of the Wells Fargo vacancies, and so that it could exclude all other services from its claim for damages. The result is the City’s itemization of services that it would not have had to provide at these properties if Wells Fargo had not made the predatory loans that caused them to become vacant. Each individual predatory loan and corresponding vacancy has caused incremental harm to the City and the amount of that harm can be determined on a property-by-property basis.
b. High Concentrations of Wells Fargo Foreclosures In Particular Areas Reduce Tax Revenues By Plausibly and Negatively Affecting the Value of Other Houses In Close Proximity
The Court has already explained that where a lender that is engaged in unlawful lending activities plays a large enough role in a particular area, the connection between its unlawful activities and neighborhood decline is plausible. See Opinion at 5 n.2, 6. Baltimore analyzed all of the 486 Wells Fargo foreclosures in African-American parts of the City as well as all foreclosures by other lenders to isolate such areas. The result is the compact sub-neighborhoods identified in the Second Amended Complaint. In each, at least one-third of all foreclosures are
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Wells Fargo foreclosures. Many of these sub-neighborhoods are clustered in areas that have long been stable or have improved significantly in the past decade. SAC ¶ 307. These are not areas characterized by the problems identified by the Court in dismissing the First Amended Complaint. Id.; cf. Opinion at 4-5. It is very plausible that in these areas, the high proportion of Wells Fargo foreclosures negatively affects the values of other homes very close to the foreclosure properties. This reduces the City’s property tax revenues because property taxes are based on property values.
Baltimore’s hedonic regression analysis confirms that the causal connection between Wells Fargo’s foreclosures in the sub-neighborhoods and reduced property tax revenues from these areas is plausible. SAC ¶¶ 310-13. The City analyzed property assessment data from each assessment period, assessment procedures, and property characteristics (including the number of neighboring foreclosures) to determine the negative impact of the concentrated Wells Fargo foreclosures on the assessed value of each property in each sub-neighborhood. The City’s methodology allowed it to distinguish any effects of nearby foreclosures that are independent of the effects of other characteristics and macroeconomic factors like the recent recession. The City found that the Wells Fargo foreclosures in each sub-neighborhood are responsible for a quantifiable loss in the assessed values of the other residential properties in the same subneighborhood, and that the loss in assessed value translates into a precisely quantifiable loss in property tax revenue. Id. ¶ 311. These findings exclude any lost value due to foreclosures from outside of the sub-neighborhoods and from any non-Wells Fargo foreclosures. The City’s analysis confirms the causal connection between the concentrated Wells Fargo foreclosures and the narrowed property tax damages sought by the City in conformity with the Court’s ruling on Wells Fargo’s prior motion to dismiss.
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D. Baltimore Satisfies the Injury-In-Fact and Traceability Requirements for Standing
The Fair Housing Act prohibits racial discrimination in all aspects of housing, including real estate transactions in particular. See 42 U.S.C. §§ 3604, 3605. As discussed above, Baltimore alleges and provides extensive evidence that Wells Fargo has been engaged in a pattern or practice of targeting African-American neighborhoods in Baltimore for deceptive, predatory or otherwise unfair mortgage lending practices. The discriminatory targeting of these neighborhoods for such practices is known as “reverse redlining.” SAC ¶ 2. Every court to consider the issue has held that reverse redlining, which begins the causation chain here, violates the Fair Housing Act and is actionable. See, e.g., Barkley v. Olympia Mortgage Co., Nos. 04CV-875 et al., 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007); Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000). Standing under the Fair Housing Act requires a plaintiff to allege an injury that is traceable to a violation of the Act. See, e.g., American Canoe Ass’n, Inc. v. Murphy Farms, Inc., 326 F.3d 505, 517 (4th Cir. 2003).
1. Baltimore Has Standing Under the Supreme Court’s Seminal Fair Housing Act Case on Standing
Baltimore’s claim to standing is even stronger than the one that passed muster in Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979), the seminal case on standing under the Fair Housing Act that Wells Fargo wholly fails to address. In Gladstone, a municipal corporation sued two local real estate companies and their employees for racial steering.15 See 441 U.S. at 93-94. The Village alleged that it “has been injured by having [its] housing market . . . wrongfully and illegally manipulated to the economic and social detriment of the citizens of [the] village.” Id. at 95 (brackets and ellipsis in original; quotation marks omitted). Drawing

15

“[I].e., directing prospective homebuyers interested in equivalent properties to different areas according to

their race.” Gladstone, 441 U.S. at 94.

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inferences from this allegation, the Supreme Court held that the Village had alleged an injury-infact sufficient to support standing in large part because “prices may be deflected downward” by the alleged unlawful acts and “[a] significant reduction in property values directly injures a municipality by diminishing its tax base.” Id. at 110-11; see also Pennsylvania v. New Jersey, 426 U.S. 660, 663-64 (1976) (per curiam) (assuming sub silentio that reduced tax revenue is an injury-in-fact and limiting standing inquiry to causation).
Numerous lower court opinions likewise demonstrate that allegations like those made by Baltimore easily show injury-in-fact. The Seventh Circuit has held that Fair Housing Act violations by real estate professionals “cause[] a destabilization of the community and a corresponding increased burden on the City [of Chicago] in the form of increased crime and an erosion of the tax base.” City of Chicago v. Matchmaker Real Estate Sales Ctr., Inc., 982 F.2d 1086, 1095 (7th Cir. 1992). Citing Gladstone, the court held that these burdens were injuries that conferred standing. See id. 1094-95. The Seventh Circuit reiterated this holding in Village of Bellwood v. Dwivedi, 895 F.2d 1521 (7th Cir. 1990), stating that the issue was “settled” by Gladstone and emphasizing the Supreme Court’s reliance on an “injury . . . to the tax base.” Id. at 1525. The Sixth Circuit has also held under the FHA that an injury to a city’s tax base provides standing, see Heights Cmty. Congress v. Hilltop Realty, Inc., 774 F.2d 135, 138-39 (6th Cir. 1985), as have courts in non-FHA cases, see Warren County v. State of North Carolina, 528 F. Supp. 276, 282 (E.D.N.C. 1981) (finding injury-in-fact where county’s tax base could be affected by opening of toxic waste dump); Sch. Dist. of Kansas City v. State of Missouri, 460 F. Supp. 421, 437-38 (W.D. Mo. 1978) (finding injury-in-fact where school district’s tax base allegedly was reduced by segregation in surrounding communities).
Gladstone is also dispositive with respect to traceability. The Supreme Court held that
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the traceability of an injury to the Village’s purse was satisfied by a much more tenuous causal chain than the one here and without the kind of detailed evidentiary allegations in Baltimore’s Second Amended Complaint. The Gladstone Court reasoned that racial steering could ultimately bring about what Judge Posner later described as “tipping,” Village of Bellwood, 895 F.2d at 1525, if enough prospective buyers were led to buy homes in other towns and “if perceptible increases in the minority population directly attributable to racial steering precipitate an exodus of white residents,” Gladstone, 441 U.S. at 110. This could then harm the Village by causing the downward price pressure and reduced tax base noted above. See id. at 110-11. The links in this causal chain were far from certain (they required a widespread impact on many people to bring the town to the tipping point, after which an injury might occur) and had to be constructed by the Court, but the Court held them sufficient to satisfy Article III.
2. Traceability Is Not Defeated When Third Parties Play Some Role in the Causal Chain
Additional Supreme Court decisions make clear that, as in Gladstone and contrary to Wells Fargo’s contentions, traceability is not defeated simply because third parties play some role in the causal chain. Wells Fargo insists that the role of third parties breaks the connection between the discriminatory, unaffordable loans and Baltimore’s injuries, but this “wrongly equates injury fairly traceable to the defendant with injury as to which the defendant’s actions are the very last step in the chain of causation.” Bennett v. Spear, 520 U.S. 154, 168-69 (1997) (internal quotation marks and citation omitted). As long as there is a “likelihood” that the injury will result, the traceability requirement is met regardless of the role of third parties. Clinton v. City of New York, 524 U.S. 417, 432 (1998) (citations omitted).
Clinton, Bryant v. Yellen, 447 U.S. 352 (1980), and United States v. SCRAP, 412 U.S. 669 (1973), likewise refute Defendants’ view of the law (as does Gladstone, discussed above).
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In each, private parties challenged acts of the federal government, and traceability was satisfied because third parties were likely to respond to those acts in a manner that would injure the plaintiffs.16 Clinton considered a constitutional challenge to the Line Item Veto Act. The plaintiff alleged that people who might otherwise sell their business to it were not likely to because the President had vetoed a capital gains tax advantage the sellers would otherwise receive. See 524 U.S. at 432. The Court found traceability “easily satisfied.” Id. at 433 n.22. Bryant addressed the federal government’s position that 233,000 acres held by 800 landowners could not be irrigated under a federal statute. See 447 U.S. at 365-66 & n.15. The Court held that intervenors who wanted to buy the land cheaply had standing. See id. at 366-68. If the land could not be irrigated, it was “likely” that the 800 owners would choose to sell it at low prices. Id. at 368. In SCRAP, people who used Washington-area lands for recreation challenged a federal order permitting railroads to increase rates. See 412 U.S. at 678, 685. Their standing argument was that “a general rate increase would allegedly cause an increased use of nonrecyclable commodities as compared to recyclable goods, thus resulting in the need to use more natural resources to produce such goods, some of which might be taken from the Washington area, and resulting in more refuse that might be discarded in national parks in the Washington area.” Id. at 688. The Court was skeptical of this “attenuated line of causation,” but held it sufficient at the Rule 12 stage. Id. at 689-90
Though Wells Fargo relies heavily on Allen v. Wright, 468 U.S. 737 (1984), Allen reflects

16

To the extent Frank Krasner Enters., Ltd. v. Montgomery County, 401 F.3d 230 (4th Cir. 2005)

(“Krasner”), holds that traceability is cut off if a third party plays any role, as Defendants suggest, it is at odds with

Supreme Court precedents discussed herein. Krasner would also not be a valid precedent in the Fourth Circuit for

other reasons. The Fourth Circuit considered parallel facts in Shanty Town Assocs. v. EPA, 843 F.2d 782 (4th Cir.

1988), and held traceability satisfied notwithstanding the comparable role of a third party. Krasner did not consider

Shanty Town and found otherwise, but the earlier decision is the law of the circuit. See McMellon v. United States,

387 F.3d 329, 334 (4th Cir. 2004) (en banc) (“when there is an irreconcilable conflict between opinions issued by

three-judge panels of this court, the first case to decide the issue is the one that must be followed, unless and until it

is overruled by this court sitting en banc or by the Supreme Court”).

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the same kind of traceability analysis as Gladstone, Clinton, Bryant, and SCRAP. In Allen,

parents of public school children challenged the IRS’s guidelines for determining whether a

private school was nondiscriminatory and tax-exempt. See 468 U.S. at 739. They alleged that

lax guidelines increased the funds available to segregated private schools, reducing the number

of white students in public schools, and thereby reducing their children’s opportunity to receive a

desegregated education. See id. at 745-46, 752-53. Even though this chain rested on the

decisions of “numerous third parties (officials of racially discriminatory schools receiving tax

exemptions and the parents of children attending such schools),” the Court held that the injury

“would be fairly traceable to unlawful IRS grants of tax exemption [] if there were enough

racially discriminatory private schools receiving tax exemptions in respondents’ communities for

withdrawal of those exemptions to make an appreciable difference in public school integration.”

Id. at 758-59. Standing was only rejected because plaintiffs had “made no such allegation,”

alleging instead only that four individual schools across seven states might lose an exemption

under proper guidelines. Id. at 743, 758 & n.23. Allen thus focused on the “chain as a whole,”

like any other traceability case, and did not shortcut its analysis through a rule that the chain is automatically broken if third parties have some significant role in it.17

Accordingly, standing doctrine does not require Baltimore to show that factors or persons

other than Wells Fargo have no role in connecting the unlawful acts at issue to the City’s

injuries. Rather, Baltimore fully supports standing by plausibly alleging that Wells Fargo’s acts

likely lead to its injuries. The City does precisely this in the Second Amended Complaint.

17

Moreover, Allen rested heavily on the fact that the plaintiffs challenged federal policy, bringing separation

of powers concerns to the fore. See id. at 759-61. No such challenge is made here, minimizing separation of powers

concerns. See Spann v. Colonial Village, Inc., 899 F.2d 24, 30 (D.C. Cir. 1990) (Ruth B. Ginsburg, J.)

(distinguishing Allen as type of case that “implicate[s] most acutely the separation of powers”). Separation of

powers concerns recede from standing analysis even more where, as here, Congress has extended standing to the

limits of Article III. See Center for Auto Safety v. NHTSA, 793 F.2d 1322, 1337 (D.C. Cir. 1986); id. at 1336

(identifying Fair Housing Act as the “premier example”).

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II. WELLS FARGO’S OBJECTIONS TO STANDING DO NOT WITHSTAND SCRUTINY18 Wells Fargo’s attack on the City’s standing relies on four basic arguments. The first is
general and factual in nature, designed to suggest that it is not plausible that Wells Fargo’s foreclosures could be responsible for the vast, City-wide injuries and damages that Wells Fargo contends the City’s complaint alleges. Thus, Wells Fargo alternately argues that the loans it has made are a relative “drop in the bucket” compared to total vacancies and foreclosures in the City; that socioeconomic forces outside its control have caused many of the City’s ills; and that traceability is defeated because the City is responsible for a “self-inflicted” injury. Each of these arguments is addressed in turn below, and all lack merit.
As an initial matter, Wells Fargo misses the point. The City does not hold Wells Fargo responsible for all foreclosures or all vacancies across the City, or for that matter any other preexisting socioeconomic conditions not of its making. It seeks to hold Wells Fargo responsible only for its illegal practices and their provable consequences at specific Wells Fargo properties, and in specific sub-neighborhoods where the concentration of foreclosures has a discernible effect on property values. Even if they were responsive to the actual allegations in the complaint, these arguments are based on facts that in many cases are simply wrong, and at a minimum untested and highly disputed. For that reason alone they are not proper for judicial notice, and cannot serve as the basis for deciding a motion to dismiss.
Second, Wells Fargo asserts there is no causal connection between its lending practices and the foreclosures at its properties because it has privately reviewed its own loan files and has found no connection. It provides a multitude of untested facts and analyses it claims exonerate

18

Baltimore only addresses in this brief the arguments made by Defendants in their memorandum in support

of their motion to dismiss (Docket No. 155-1). To the extent Defendants are permitted to incorporate by reference

other arguments and assertions from other filings, as they purport to do, Baltimore likewise incorporates by

reference its earlier filings.

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the company. None of the files or analyses containing the relevant information upon which Defendants’ conclusions are based have been provided to the City or subjected to any form of cross-examination because there has been no opportunity for discovery about these issues. At this stage of the proceedings it would be fundamentally unfair to the City and improper for the Court to rely on these untested assertions to sustain a challenge to traceability and standing.
Third, Wells Fargo attempts to challenge the traceability of the causal chain by purportedly identifying specific factual omissions or inconsistencies in the Second Amended Complaint that relate to particular Wells Fargo properties or loans. Each of these attacks, which are addressed in turn below, is simply wrong. Even if that were not the case, they would go to the amount of damages that the City is entitled to recover, not the issue of standing.
Fourth and finally, Wells Fargo argues that, as a legal matter, the causal chain between its illegal acts and injury to the City is too attenuated to support traceability because of the role that third parties may play in the foreclosure process. Wells Fargo relies heavily on this legal argument, which runs throughout the motion to dismiss. For the reasons set forth in section I.D above, Wells Fargo gets the legal standard wrong. The case law is clear that the possibility that third parties may be involved in a causal chain does not defeat traceability. Wells Fargo nonetheless continues to rely on two inapposite district court rulings – City of Birmingham and City of Cleveland – to argue the same point. Both cases are readily distinguished and neither provides a basis for ignoring the Supreme Court’s more directly relevant precedent in Gladstone.
A. Wells Fargo’s General Factual Assertions Are Irrelevant and Wrong 1. Wells Fargo Misrepresents the Injuries Alleged by the City
Wells Fargo argues that Baltimore’s allegations are not plausible because the City’s damages are too broad to have been caused by “the alleged lending practices of a single
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bank . . . .” Defs.’ Mem. at 1. Defendants protest that their 486 foreclosures in AfricanAmerican neighborhoods and corresponding vacancies are too modest a portion of the overall number of foreclosures and vacancies in the City for them to be held responsible for all the foreclosures, all the vacancies, and an array of socioeconomic problems like high crime rates and low educational achievement.
As the City has already shown in explaining the precise scope of the Second Amended Complaint, this argument is a non sequitur. Wells Fargo’s “plausibility” argument is premised on an allegation that it has manufactured purely for the purpose of its motion. Baltimore makes no claim for the kind of broad and generalized damages described by Wells Fargo. To the extent its prior complaint did or could be read as doing so, the City has now made clear that the Second Amended Complaint is much narrower and seeks damages only for harm attributable to specific Wells Fargo foreclosure properties. SAC ¶¶ 104-295, 306-309.
As documented in the 190 new paragraphs specifying the property specific injuries, each additional Wells Fargo foreclosure property adds incremental injury to the City because it costs the City money to provide the necessary municipal services at each additional vacant Wells Fargo property that would otherwise be occupied but for the foreclosure. The existence of other vacancies or foreclosures by other lenders across the City has no bearing on the property specific injuries caused to the City by Wells Fargo’s predatory lending practices.
2. Socioeconomic Challenges In Some Neighborhoods Do Not Explain Wells Fargo’s Disproportionately High Foreclosure Rate In African-American Parts of the City
Although it has no response to the direct evidence of targeting, steering, and reverse redlining described by its own former employees, Wells Fargo argues that the statistical disparities in foreclosure rates between the City’s white and African-American neighborhoods
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documented in the Second Amended Complaint are fully explained by preexisting socioeconomic problems found primarily in African-American neighborhoods. Thus, instead of discrimination and predatory practices, Wells Fargo asserts that “socioeconomic disparities” between African-American and white neighborhoods are the “true driver” of its much higher foreclosure rate in Baltimore’s African-American neighborhoods. Defs.’ Mem. at 19-21.
This argument, of course, requires the Court to take judicial notice of a series of facts and statistics that Wells Fargo has cobbled together from newspaper articles and a myriad of other sources. Even if it were appropriate to consider these facts at this stage, which Fed. R. Evid. 201 does not permit, Wells Fargo’s reasoning and “facts” fail to explain why Wells Fargo’s foreclosure disparity rate is higher than its peers. If the disparity in socioeconomic conditions explained the disparity in foreclosure rates between African-American and white neighborhoods, Wells Fargo’s peers would have similarly lopsided foreclosure rates – high in African-American neighborhoods and low in white neighborhoods – yet they do not. Wells Fargo cites statistics for three of the City’s many neighborhoods about unemployment, household income, and high school dropout rates, and talks about neighborhoods in need of substantial government assistance, but all lenders make loans in the same environment. If these factors determine whether a loan winds up in foreclosure, then every lender should have the same proportion of negative outcomes. The evidence will instead show that Wells Fargo’s foreclosure rate in African-American neighborhoods is much higher than the rates of its peers. See SAC ¶ 40. Its status as an outlier is consistent with the wealth of evidence showing that Wells Fargo intentionally targeted African-American neighborhoods for predatory loans.19

19

In addition to citing statistics about certain neighborhoods, Wells Fargo suggests that certain areas

designated as “empowerment zones” faced greater challenges than others. For the same reasons discussed above,

the location of the empowerment zones does not explain Wells Fargo’s excessive foreclosure rate and does not

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Similarly, Wells Fargo attempts to shift blame from itself to the recent economic troubles in the country as a whole. This fails for the same reason as its attempt to blame socioeconomic problems in particular neighborhoods; all lenders would have similar foreclosure rates in African-American neighborhoods if Wells Fargo were right, but instead Wells Fargo is an outlier. The economy further exposed and accelerated the harm from Wells Fargo’s conduct, but it did not cause and does not excuse the harm. Moreover, the recession did not begin until 2008 and Baltimore identifies many vacant Wells Fargo foreclosure properties that caused injury before then. See SAC ¶¶ 105-294.
Wells Fargo also suggests that it would somehow be unfair to hold it responsible for any harm it has caused during the recession or in neighborhoods where there are substantial other causes of harm. Even where Baltimore can identify a violation of the law causing a specific injury, Wells Fargo contends that the City should be denied standing because other problems and other bad actors contribute to a neighborhood’s overall condition. This logic is deeply flawed and would lead to absurd results. Using Wells Fargo’s reasoning, the government would be barred from prosecuting a drug sale in a neighborhood with a substantial drug problem because a single prosecution would not make a large enough dent in the neighborhood’s overall problem. The police could not issue a ticket for speeding because one person speeding does not contribute appreciably to the overall incidence of speeding. Such outcomes are self-evidently not what the law requires.
Wells Fargo’s approach to traceability would also effectively eviscerate all lending discrimination laws, including the Fair Housing Act, the Equal Credit Opportunity Act (15 U.S.C. § 1691 et seq.), and others. No one – not a homeowner, a municipality, or anyone else –
excuse it from liability for property-specific damages caused by foreclosures on its own discriminatory and predatory loans in those zones.
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would ever have standing to challenge steering, reverse redlining, or other discriminatory practices that affect a city or a neighborhood. A defendant could always secure immunity by speculating that no injury would have occurred had the neighborhood, the real estate market, or the job market been stronger, or that a different company or some other factor might have played a role in causing the harm. Gladstone and its progeny plainly reject any such proposition, however, and it “would be strange indeed if” a discriminatory lender “were protected from suit simply by virtue of the fact that others were also engaging in the illegal activity.” American Canoe, 326 F.3d at 520. Contrary to Wells Fargo’s position, as long as the connection between illegal activity and harm is plausible – as it is here – Baltimore has standing to bring suit regardless of whether other people, economic conditions, or social conditions are also having a negative impact in the same area as a Wells Fargo foreclosure that has harmed the City.
3. Baltimore’s Injuries Are Not Self-Inflicted Wells Fargo asserts that Baltimore’s allegations are not plausible because the City’s injuries are purportedly self-inflicted through the City’s sale of tax liens, because the City owns vacant properties, and because a few of the 190 vacant properties at which Baltimore has identified damages involved a City or State loan program. These assertions are both legally irrelevant and factually inaccurate. Wells Fargo’s assertions do not support any tenable argument about traceability and are nothing more than an attempt to malign the City. An injury can only be self-inflicted so as to preclude standing if the plaintiff’s acts are based on “personal choice.” McConnell v. FEC, 540 U.S. 93, 228 (2003). “Standing is not defeated merely because the plaintiff has in some sense contributed to his own injury.” 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure § 3531.5 (2008). Rather, “[s]tanding is defeated only if it is concluded that the injury is so
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completely due to the plaintiff’s own fault as to break the causal chain.” Id. The only one of Wells Fargo’s “self-inflicted” arguments through which it even attempts to attribute to Baltimore responsibility for all of its damages, and not just damages from a few properties here and there, is its argument about tax lien sales (and that attempt fails).
Furthermore, the Court cannot accept Wells Fargo’s assertions as true or resolve at this stage disputed factual questions that go to the merits of Baltimore’s claims. See supra at 11-13. Because Wells Fargo’s arguments about self-inflicted injury depend on its assertions about disputed facts and because they go to the merits, those arguments must be rejected.20
a. Tax Lien Sales As it has done throughout this case, Wells Fargo thoroughly misrepresents the tax lien process in an effort to disparage the City for supposedly contributing to the overall number of foreclosures in the City. Moreover, its assertions about tax liens, see Defs.’ Mem. at 3-4, 8, 27, are based on untested newspapers articles that have no place here and its implicit request for judicial notice about myriad facts is improper under Fed. R. Evid. 201(b).21 See supra at 12-13. Most astonishingly, Defendants fail to inform the Court that tax lien sales are a creature of and required by state law. See Md. Code Ann., Tax-Prop. §§ 14-801 to 14-854. Maryland

20

While unjustifiably blaming Baltimore for causing its own injuries, Wells Fargo portrays itself as “a fair

and responsible lender.” Defs.’ Mem. at 8 & n.8. There is ample reason to believe that discovery will show

otherwise. For example, Wells Fargo recently acknowledged in a 10-Q filing with the SEC that “[c]ertain

government entities are conducting investigations into the mortgage lending practices of various Wells Fargo

affiliated entities, including whether borrowers were steered to more costly mortgage products,” Wells Fargo & Co.,

Form 10-Q (May 7, 2010) at 95 (available at http://www.sec.gov/Archives/edgar/data/72971/

000095012310046578/f55268e10vq.htm); Governor O’Malley singled out Wells Fargo in his 2009 State of the State

address for “choos[ing] short term profit over long-term homeownership” by failing to work with the state to prevent

additional foreclosures, see http://www.stateline.org/live/details/speech?contentId=373223; and the Center for

Responsible Lending found that Wells Fargo’s customers “too often face the loss of their home or financial ruin as a

result” of its “predatory practices.” SAC ¶ 35.

21

Newspapers may be judicially noticed for general background information and items like stock prices, but

not to resolve disputed facts central to a case. The “more critical an issue is to the ultimate disposition of the case,

the less appropriate judicial notice becomes.” Pina v. Henderson, 752 F.2d 47, 50 (2d Cir. 1985) (citation omitted).

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law mandates that Baltimore conduct these sales and include within them any “tax,” as defined by state law, that is at least $250, and prescribes nearly the whole of the process and fees associated with it.22 See id. § 14-811. The reckless and misleading assertion that Baltimore bears responsibility for this program is palpably false.
Wells Fargo’s contention that tax lien foreclosures dwarf foreclosures on Wells Fargo loans is likewise misleading and inaccurate in key respects. For example, Defendants would have the Court believe that there is no difference between the number of tax liens subject to auction and the number of actual foreclosures; they assert that 12,689 liens were subject to auction this year, but fail to explain that very few foreclosures result from liens included in an auction. Defs.’ Mem. at 3. Figures compiled by Judge Evelyn O. Cannon in In re Attorney’s Fees in Tax Sales Foreclosures, No. 24-C-03-3443 (Cir. Ct. Balt. City Dec. 11, 2007), show that the vast majority of tax lien foreclosure suits filed – and the 12,689 figure does not even purport to represent actual suits, only liens available at auction – do not result in foreclosure. See id. at 23 n.26 & App. F in App. Cases Not Generally Reported. Judge Cannon’s analysis shows that the Court may and should note that there is significant data from which one could reasonably conclude that relatively few people lose their homes to tax lien foreclosures.
Judge Cannon’s opinion also demonstrates that many of the actual foreclosures are part

22

Maryland mandates that its counties and the City of Baltimore “shall sell . . . all property . . . on which the

tax is in arrears.” Id. § 14-808. A “tax” is defined by state law as “any tax, or charge of any kind due to the State or

any of its political subdivisions, or to any other taxing agency, that by law is a lien against the real property on

which it is imposed or assessed . . . . includ[ing] interest, penalties, and service charges,” id. § 14-401(c), and state

law further specifies that “[a]ll unpaid taxes on real property shall be, until paid, liens on the real property . . . ,” id. §

14-404(a).

The tax lien process generally includes notice by mail to the property owner of the tax delinquency, see id.

§ 14-812; multiple public notices no less than 30 days later, see id. § 14-813; public auction no less than 4 weeks

later, see id. §§ 14-813(a)(3), 14-817; a six-month period following sale during which the property may be redeemed

(i.e., a sale may be undone), see id. §§ 14-827, 14-828, 14-833(a); and then an eighteen-month period during which

the property may still be redeemed unless the buyer first successfully forecloses that right through suit, see id. §§ 14-

827, 14-833. The tax sale purchase is void if no foreclosure suit is filed by the end of this eighteen-month period.

See id. § 14-833(c). The payments that an owner must make to redeem a property are also fixed by state law. See

id. §§ 14-828, 14-843.

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of Baltimore’s “Project 5000” program. See id. at 9 n.14. As indicated by a public memorandum from the Commissioner of the City’s Department of Housing and Community Development, discovery will show that Project 5000 is a program whereby the City uses tax foreclosures to obtain title to thousands of already vacant and abandoned properties. See Attach. A (Decl. of G. Schlactus) (“Schlactus Decl.”) at Ex. 1. Project 5000 allows the City to turn dilapidated and empty homes back into homes that people live in and that benefit the surrounding community, i.e., the opposite of what happens when foreclosures caused by Wells Fargo’s discriminatory lending practices lead to vacant homes. See id. Because Defendants fail to account for Project 5000 foreclosures on vacant properties and other aspects of the tax lien sale process, their claims about the number of people who actually lose their homes to tax lien foreclosures are vastly overstated and misleading.
Wells Fargo’s assertion that the number of liens auctioned has recently doubled is also thoroughly misleading. See Defs.’ Mem. at 8. In truth, as discovery will show, the number of liens purchased at the auction has dropped dramatically.
Finally, Wells Fargo’s footnote about tax liens it has redeemed demonstrates that it has caused additional harm for its borrowers. See Defs.’ Mem. at 3 n.3. Wells Fargo takes credit for redeeming the tax lien on 3622 Edmonson Avenue, but by waiting until late in the process to redeem the lien Wells Fargo allowed a private party to add $3,800 in legal fees to the redemption cost. Wells Fargo could easily have redeemed the lien during the months before state law allowed any legal fees to be added, but failed to do so.23

23

Wells Fargo’s additional statement about corruption related to the purchasing of tax liens in Maryland is

not connected to any legal argument and is purely gratuitous. Defs.’ Mem. at 3 n.3. Wells Fargo offers no

explanation of how any such corruption somehow defeats Baltimore’s standing to sue Wells Fargo for

discriminatory lending. Nor has the issue been addressed through discovery. In addition, the City was recognized

as a victim of private persons with respect to this incident.

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b. Vacant Properties Owned By the City At various points in its motion Wells Fargo sets forth variations on the “self-inflicted” theme, focusing chiefly on vacant properties allegedly owned by the City. Wells Fargo suggests their proximity to Wells Fargo properties in certain neighborhoods is the true cause of the City’s injuries. Wells Fargo makes the same claim about vacant properties that the City does not own. See Defs.’ Mem. at 13-14. Wells Fargo does not contend, however, that the existence of other vacant properties serves to break the causal chain at every property specified as a source of injury in the Second Amended Complaint. These arguments therefore only go to the amount of the City’s damages, not standing. If Wells Fargo can ultimately prove that the harm at a few of the properties was caused by City-owned or other vacant properties, and not unlawful terms and conditions for which Wells Fargo was responsible, it would only mean that Baltimore’s damages would be marginally reduced, not eliminated. As stated in one of the cases Defendants rely on, standing only concerns the existence of a traceable injury, not its amount. See Crutchfield v. United States Army Corps of Engineers, 230 F. Supp. 2d 687, 694 (E.D. Va. 2002) (“As the Fourth Circuit has noted, ‘the claimed injury need not be great or substantial; an identifiable trifle, if actual and genuine, gives rise to standing.’”) (quoting Conservation Council of N. Carolina v. Costanzo, 505 F.2d 498, 501 (4th Cir. 1974)) (brackets omitted). Moreover, any objection by Wells Fargo to the cause of a foreclosure at a particular property is to be examined through discovery and, unless summary judgment is proper, presented to the trier of fact. See St. Pierre v. Dyer, 208 F.3d 394, 403 (2d Cir. 2000) (“this is a matter more properly viewed as going to the merits rather than to standing”); cf. Boleski v. American Export Lines, Inc., 385 F.2d 69, 76 (4th Cir. 1967) (discussing situation “where the trier of fact had applied the comparative negligence
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rule to reduce the plaintiff’s damage award by reason of his contributory negligence”) (emphasis added). Such an objection is not susceptible to resolution on a motion to dismiss.
Thus, Wells Fargo’s repeated references to vacant properties owned by the City are irrelevant to the question of standing. Defs.’ Mem. at 5, 8, 9, 13, 14. For all of Defendants’ generalized talk about City-owned vacancies, they identify but a handful that are allegedly contemporaneous and close to Wells Fargo vacancies.
Moreover, Defendants misrepresent these vacancies by implying that they are a monolithic collection of decaying properties. To the contrary, discovery will show that the City acquires many vacant properties through Project 5000 or otherwise so that it can put them back into productive use, whether individually or by consolidating properties for development. Indeed, one of Wells Fargo’s own newspaper articles states that the tax sale foreclosure process (which Project 5000 utilizes) is “a primary tool in clearing title to abandoned property” so that the City can restore vacant properties to better use. Defs.’ Mem. Ex. 6.
It bears repeating here that Baltimore does not seek damages for harm related to Cityowned or other vacancies, only for harm from vacant Wells Fargo foreclosure properties.
c. City and State Loan Programs Wells Fargo asserts that Baltimore is to blame for Wells Fargo’s foreclosures because of programs through which the City and Maryland help residents purchase homes. Even if the assertion were true (which it is not), this argument provides no basis to deny standing. Out of 190 vacant Wells Fargo foreclosure properties identified by the City as sources of municipal services damages, Wells Fargo contends that “more than 20” involved a City or state program, that “approximately 15” involved a City program, and that Maryland instituted the foreclosures on seven of the Wells Fargo loans (Defendants do not explain how Maryland foreclosed on
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seven loans when only five were in its program). Defs.’ Mem. at 2, 4, 27-28. Wells Fargo

contends that “[n]othing more aptly illustrates” that Baltimore does not have standing. Id. at 2.

Even if these programs justified blaming Baltimore for foreclosures and vacancies at 20

Wells Fargo properties – which they do not – there would still be 170 vacant Wells Fargo

foreclosure properties to which the assertions do not apply. Setting aside 20 of 190 properties

could only be relevant to the amount of damages, not standing. Furthermore, Wells Fargo does

not explain why Baltimore is responsible for something purportedly done by Maryland.

In addition to these facially apparent defects, the limited inquiry Baltimore has been able

to make to date indicates that Wells Fargo’s claims about the City program (called “SELP” and

which only provides up to $5,000 in assistance that is forgiven over time) are wrong. The City

does not assess the creditworthiness of the borrower under the SELP program; that is the

responsibility of the private lender that is providing the first lien mortgage and, by far, the bulk

of the funds. Wells Fargo’s suggestion that the City signed off on the quality of the loan (“the

City or its agent received a variety of documentation” about the Wells Fargo loan) is simply

wrong. Id. at 2-3. In addition, Baltimore’s initial assessment indicates that only eight of the

vacant Wells Fargo foreclosures were purchased with SELP assistance, not fifteen as Defendants suggest.24 This demonstrates why courts do not resolve factual questions without first allowing

discovery and a process for weighing the evidence.

B. Wells Fargo’s Untested Assertions About Facts Purportedly Found In Its Own Undisclosed Files Do Not Provide a Proper Basis to Challenge Standing

In patent disregard for elementary fairness, Wells Fargo tells the Court that it has

reviewed its own records about each loan at the 190 vacancies identified by the City and

concluded that “as to the vast majority,” the foreclosure was not due to its lending practices.

24

Wells Fargo did not attach any records about these loans.

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Defs.’ Mem. at 9, 24-25. Wells Fargo asserts that the “root causes” of “the vast majority” of the foreclosures were instead intervening causes like “curtailment of income, job loss, illness, divorce, and structural problems,” without even specifying which factor purportedly excuses which loan. Id. at 24. Therefore, according to Defendants, “the City’s causal chain fails.” Id. Yet the loan files, servicing records, and other documents that Wells Fargo relies on have not been disclosed. Early in the case Baltimore requested the opportunity for discovery of such documents, but the request was denied. See Letter from John P. Relman to Hon. Benson E. Legg (Mar. 3, 2009) (Docket No. 56); Tr. (Mar. 4, 2009) at 5. Thus, these documents have never been tested and remain exclusively in Wells Fargo’s control.
All that Wells Fargo has produced about the documents is a conclusory affidavit from a consultant it hired for this case. Defs.’ Mem. Ex. 18 (Aff. of D. Williams). The City has not even been permitted a deposition of this consultant.25 Nonetheless, Wells Fargo asks the Court to unquestioningly accept its assertions that “data on these loans indicates that they were far from predatory” and that the foreclosures were caused by a litany of ills but “not Wells Fargo’s conduct.” Defs.’ Mem. at 24 n.14, 25. These untested and unverified assertions have no place in the resolution of a motion to dismiss.
At the same time that it tenders its “trust me” explanation for its version of causation, Wells Fargo tries to hide the fact that a key component of its consultant’s affidavit supports the City’s case. The consultant concluded that the most frequent reason for the Wells Fargo foreclosures in Baltimore’s African-American neighborhoods was what he termed “excessive obligation.” Id. Ex. 18 (Docket No. 155-20 at 47, 60). At the evidentiary hearing conducted by

25

Baltimore was not even given a copy of the affidavit until the middle of the evidentiary hearing conducted

by Chief Judge Legg. To this day, Wells Fargo has not provided any of the files that its consultant considered and

offered opinions about in his affidavit. The bare provision of the affidavit is not an adequate substitute for proper

discovery and a fair opportunity to contest Wells Fargo’s assertions about the contents of its hidden files.

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Chief Judge Legg, the Court recognized that this did not help Wells Fargo’s case and stated that a borrower’s excessive obligations could be caused by discriminatory underwriting of the loan. Tr. (June 29, 2009) at 158. Wells Fargo’s consultant agreed. Id.
At a later hearing, the Court stated that if Wells Fargo relied on the excessive obligations factor in support of a summary judgment motion, the motion would likely be denied because of how closely the factor can be related to the terms of the Wells Fargo loan. Tr. (Aug. 6, 2009) at 48-49, 50. Defendants now list in their motion to dismiss some of the other factors that their consultant cited as causing the foreclosures but no longer make any reference to “excessive obligation.” Wells Fargo’s conspicuous omission cannot hide the fact that testimony from its own expert requiring denial at the more exacting summary judgment stage also requires denial at the Rule 12 stage.
Wells Fargo also asserts that its secret documents reveal other reasons why the City’s damages at certain properties cannot be the result of the loans. It claims the documents show that some borrowers were investors, some of the loans were made by somebody else, some of the loans were serviced by somebody else at the time of foreclosure, and some of the properties were in disrepair before the foreclosure notice. See Defs.’ Mem. at 2, 9, 13, 24-26. None of these assertions, even if true, would justify excluding consideration of any properties identified by the City (and if it they did, it would again only go to the amount of damages, not standing, because Defendants do not assert that these factors apply to all the properties identified in the complaint). Regarding investors, the Fair Housing Act makes no distinction concerning whether or not a borrower rents a property to another person; if Wells Fargo targeted the borrower for predatory practices because of the racial composition of the property’s neighborhood or the race of the borrower, it broke the law. Nor can Wells Fargo necessarily escape liability as to any particular
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property if another company made the loan; large lenders like Wells Fargo often increase their

business by having smaller companies in effect front for them. In fact, Wells Fargo recently

agreed to pay millions of dollars to settle a lawsuit involving just such an arrangement through

which it made 14,210 mortgage loans in Maryland. See Schlactus Decl. Exs. 2-3. Likewise,

who was servicing the loan is irrelevant because this case is about discrimination in the

origination of loans (and in any event, Wells Fargo has told the Court that it generally retains

servicing rights on most loans; see Tr. (Jan. 28, 2009) at 28). Finally, what matters is whether a

property deteriorated as a result of Wells Fargo’s actions or otherwise required additional

municipal services, not whether it was in pristine condition before the foreclosure.

C. Wells Fargo’s Factual Assertions Relating to Specific Allegations in the Second Amended Complaint Are Irrelevant, Wrong, and Have No Bearing on Standing

1. Assertions About Demographic Data

Wells Fargo contends that not all of the vacant Wells Fargo foreclosures identified in the

Second Amended Complaint are in African-American parts of the City. Defs.’ Mem. at 24

(“approximately” 18 unidentified properties not in “census tracts that are primarily African-

American”). Defendants provide no support for this assertion. In truth, and as discovery will

establish, each of the 269 properties is located within a census block group that is primarily African-American.26

Wells Fargo similarly contends that two of the five neighborhoods where the sub-

neighborhoods (which form the geographic limits of the City’s narrowed property tax revenue

claim) are located “do no not have majority-minority populations.” Defs.’ Mem. at 7 n.7, 21-22.

This, too, is wrong. Discovery will show that each of the sub-neighborhoods is centered in a

census block group that is at least 53% African-American (and in most cases, at least 82%

26

Census block groups are smaller than census tracts. Several block groups comprise a tract.

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African-American). Defendants’ contrary assertion is based on misleading citations to demographic statistics for much larger geographical areas than the compact sub-neighborhoods at issue. Defs.’ Mem. at 22 & Ex. 17. Baltimore has precisely targeted its tax revenue claim in accordance with the Court’s instructions, but Defendants again fail to recognize the narrowed scope of the Second Amended Complaint.
2. Assertions about Maryland’s Property Tax Assessment Process In challenging the City’s standing to assert damages for lost tax revenues, Wells Fargo ignores the way in which Baltimore has complied with the Court’s instructions in significantly narrowing its claim for tax revenue damages, while at the same time repeating the same thoroughly misleading assertions it made about the process at the evidentiary hearing. All of these misleading assertions are based on a report from a real estate appraiser hired by Wells Fargo who Baltimore has had no chance to depose. Defs.’ Mem. at 22-23 & Ex. 18. Wells Fargo focuses exclusively and much too narrowly on a worksheet that a State tax assessor uses in assessing the value of a property. It states that the assessor writes down the sales price of nearby comparable homes, but that only arms-length sales are counted and that this excludes foreclosure sales. Wells Fargo asserts that the assessor then performs calculations based on these nearby sales to come up with the assessed value of the house under review. From this, Defendants contend that a foreclosure can never have any influence on the assessed value of nearby properties. See id. Wells Fargo’s conclusion makes no sense because it ignores the impact of foreclosures on market prices. Wells Fargo itself states that the prices of nearby houses are at the heart of the assessment process, but it does not consider the impact on the price of a house of having foreclosure properties next door, across the street, or up the block. This is akin to saying that the
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quality of local schools cannot affect the market prices of houses – and therefore their assessed values – because nothing about local schools is recorded on the assessor’s worksheet. Yet it is common sense, which courts are to apply under Iqbal, that real estate values are strongly influenced by schools. See Iqbal, 129 S. Ct. at 1950. Because it focuses so narrowly on certain mechanical steps in the assessment process, Wells Fargo entirely misses the common sense point that neighborhood characteristics like foreclosures and schools exert a substantial influence on neighborhood property values.
3. Assertions About the Level of Detail in the Second Amended Complaint
Wells Fargo objects that the City’s damages for providing municipal services at vacant Wells Fargo foreclosure properties are “unspecified by month, day, amount, or nature . . . .” Defs.’ Mem. at 5. This, it contends, raises doubts about traceability. In its original motion to dismiss, Wells Fargo argued that Baltimore lacked standing because the original complaint did not allege specific municipal services provided at specific properties. See Mem. of Law (Docket No. 10-2) (Mar. 21, 2008) at 13. That is exactly what the City has now done in the Second Amended Complaint, and so Wells Fargo now states without citing any authority that an even finer level of detail is necessary.27 Similarly, Wells Fargo appears to take the position that the City’s detailed allegations describing its narrowed tax revenue damages are inherently speculative in the absence of the type of detail found in an expert report produced pursuant to Rule 26. See, e.g., id. at 7-8.
These objections ignore the extraordinary level of detail in the Second Amended

27

Ironically, Wells Fargo continues to object later in its brief when it acknowledges that the City provided

information about the amount of damages at a few illustrative properties. See Defs.’ Mem. at 26 n.16. The City

provided these examples at the evidentiary hearing to help explain the particular types of municipal services

damages at issue. There is no inconsistency between identifying certain illustrative damages at a few sample

properties and the level of detail about damages in the Second Amended Complaint.

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Complaint about Baltimore’s damages. As discussed in section I.A above, Baltimore includes 190 property-by-property paragraphs setting forth each municipal service at each vacant Wells Fargo foreclosure property for which it seeks damages, and the location and basis for identifying each of the sub-neighborhoods that give rise to tax revenue damages. The City devoted hundreds of hours to providing this level of detail. It took great care to include only those injuries that occurred during the timeframe appropriate to each property based on when the loan was made, when the foreclosure occurred, when each property was vacant, and other relevant factors. It belies common sense for Wells Fargo to say that these damages are vague or speculative based on inadequate detail at this stage of the case.
4. Assertions About the Purported Impossibility of Some of the City’s Damages
Pulling one example from the 190 property-specific paragraphs, Wells Fargo objects that municipal services provided in 2008 cannot be attributed to a Wells Fargo loan made in 2002 if the property was sold in the intervening period. See Defs.’ Mem. at 18. To the contrary, where a Wells Fargo loan causes a property to become vacant and it remains vacant before and after being sold, Wells Fargo is responsible for the post-sale harm. And as already noted, the City does not seek damages for many services it provided at Wells Fargo foreclosure properties because the services were not adequately tied to a vacancy caused by Wells Fargo.
Wells Fargo also asserts that for one of the 190 properties, the damages precede the origination of the loan. See Defs.’ Mem. at 25. The City disagrees. This difference could be explained by the fact that the limited discovery ordered by Chief Judge Legg revealed that Wells Fargo’s origination dates do not always match the origination dates on public documents. Such discrepancies further demonstrate why courts may not make factual determinations prematurely.
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D. Wells Fargo Misconstrues the Law Regarding Standing 1. Wells Fargo’s Assertion That the Speculative Possibility of Third Party Involvement In the Foreclosure Process Defeats Traceability Is Wrong As a Matter Of Law
Wells Fargo argues that the chain of causation is too attenuated to support standing because “illness, divorce, job loss, incarceration, death,” or “some other factor” might be responsible for an individual foreclosure and not Wells Fargo’s predatory loan. Defs.’ Mem. at 11; see id. at 24. But Wells Fargo cannot defeat standing by simply speculating about factors apart from its own acts that might have played some role in contributing to some portion of Baltimore’s injuries. As the Supreme Court has held, a plaintiff does not have to “negate . . . speculative and hypothetical possibilities” to satisfy Article III. Duke Power Co. v. Carolina Envtl. Study Group, Inc., 438 U.S. 59, 78 (1978) (rejecting speculative challenge to causal link as “not responsive”). Wells Fargo’s speculation says nothing about what actually caused the City’s injuries, as to which the well-supported and plausible allegations of the Second Amended Complaint must be taken as true.
Wells Fargo’s litany of hypotheticals also fails because it is an attempt to go outside the complaint by seeking judicial notice of Defendants’ imagined view of the role of third parties in causing Baltimore’s injuries. This is prohibited by Fed. R. Evid. 201(b), which only permits judicial notice of facts that are “not subject to reasonable dispute.” How third parties make or affect foreclosure-related decisions does not meet this high standard. See supra at 12-13.
Wells Fargo’s speculation about the possible role of third parties likewise reflects a mistaken view of the law of standing. As shown in section I.D above, Baltimore does not have to show that factors or persons other than Wells Fargo have no role in connecting the unlawful acts at issue to the City’s injuries. Rather, Baltimore fully supports standing by plausibly
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alleging, as it does in the Second Amended Complaint, that Wells Fargo’s acts likely lead to its injuries. Moreover, should Wells Fargo be able to show after discovery that the cause of a particular foreclosure at a particular property was an illness or death, for example, and not a predatory loan, it would mitigate damages as to that property but it would not defeat the City’s standing in this case.
Wells Fargo nonetheless relies on City of Birmingham v. Citigroup, Inc., No. CV-09-BE467-S (N.D. Ala. Aug. 19, 2009), and City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513 (N.D. Ohio 2009), both district court cases (one unpublished) from outside this Circuit, to argue that traceability is defeated when third parties play a role in the causal chain. The cases do not stand for that proposition. Rather, they reflect the unremarkable proposition that complaints wholly lacking in specific allegations of wrongdoing and injury, and relying instead on generalizations and conclusory statements, do not satisfy Twombly and Iqbal’s plausibility requirement. City of Birmingham and City of Cleveland are not remotely analogous to this case, which is instead controlled by the Supreme Court’s directly on point decision recognizing municipal standing in Gladstone.
a. City of Birmingham City of Birmingham has no relevance here because the record in that case was utterly void of any allegations or evidence linking the seven defendants to any unlawful practices or to any specifically-identified harm. A review of Birmingham’s complaint28 demonstrates that it merely made general allegations (copied from the first part of Baltimore’s original complaint) about subprime lending, predatory practices sometimes associated with subprime lending, reverse redlining, and the harm that can result. Remarkably, Birmingham simply stopped there. Unlike

28

It is attached to Wells Fargo’s prior motion to dismiss. See Ex. 3 to Mem. of Law (Docket No. 126-5)

(Sept. 18, 2009).

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Baltimore in the Second Amended Complaint, Birmingham provided no reason to think that any particular defendant had done anything wrong, and it failed to identify any particular damages it had allegedly suffered due to loans at particular properties. Wells Fargo’s statement that the allegations in City of Birmingham were “fundamentally identical to those in the instant case” could not be further from the truth. Defs.’ Mem. at 15.
It is clear from a review of the City of Birmingham complaint, Judge Bowdre’s opinion, and the entire docket (available on PACER) that Birmingham did not offer any allegations or evidence regarding testimony about discriminatory practices from former employees, brokers, or anyone else; whether the practices resulted in foreclosure rates that differed in African-American and white neighborhoods; the incidence of loans with high interest rates and how they differed by neighborhood; any other statistical analysis of loans or foreclosures in neighborhoods that differed by racial concentration; the properties that were foreclosed on or became vacant because of discriminatory practices; or the injuries associated with each such property. Nor did Birmingham attempt to explain what distinguished the seven defendants it sued from other lenders or how their relative responsibilities should or even could be apportioned. Anyone reading the record in City of Birmingham is left with no understanding at all about why Birmingham thought the particular companies it sued had anything to do with the unlawful practices and the attendant harm that the complaint described in exclusively general terms; all that is apparent is that Birmingham named them as defendants. Some of the defendants evidently had not even done any business in Birmingham.
By contrast, Baltimore’s Second Amended Complaint contains detailed evidence that Wells Fargo has injured the City by engaging in discriminatory lending. Baltimore presents a detailed and plausible causal connection between Wells Fargo’s unlawful acts and its injuries,
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while Birmingham only set forth the kind of “conclusory statements [that] do not suffice” under Twombly and Iqbal. Iqbal, 129 S. Ct. at 1949.
Wells Fargo also relies on City of Birmingham to raise an unpublished case cited therein, Tingley v. Beazer Homes Corp., No. 3:07-cv-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008). But in Tingley, the record was as empty and void of any details as the record in City of Birmingham. Likewise, the complaint in Tingley set forth only the barest and most generalized allegations purportedly connecting the actions of the defendant home builders to any foreclosure or any injury. See Schlactus Decl. Ex. 4 at ¶¶ 6-7, 31-32 (Class Action Compl. in Tingley). Thus, while it is understandable that Judge Bowdre in City of Birmingham looked to Tingley given the similarly barren records and conclusory allegations in both cases, neither is remotely analogous to the detailed and focused claims presented by Baltimore here.
b. City of Cleveland City of Cleveland is inapposite for many reasons, including reasons specifically identified by Judge Lioi in her opinion. One of the most significant is that (like City of Birmingham and Tingley) it involved a generalized complaint wholly lacking in specificity as to liability or damages. Cleveland sought “hundreds of millions of dollars” from twenty-two companies for the deterioration of “entire streets, blocks, and neighborhoods,” none of which were identified. Schlactus Decl. Ex. 5 at ¶¶ 2, 5 (Second Am. Compl. in City of Cleveland). It “challeng[ed] securitization activity generally, not the legality of any specific [mortgage-backed securities] or of the loan given to any specific borrower.” City of Cleveland, 621 F. Supp. 2d at 531 n.15. Because it was a state common law public nuisance case, City of Cleveland also relied on prudential limitations that do not apply here. Judge Lioi repeatedly made plain that her analysis of causation was premised on the “directness requirement” of Holmes v. SIPC, 503 U.S. 258
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(1992), which is a prudential requirement. 621 F. Supp. 2d at 531-36. As Judge Easterbrook has explained, the Holmes directness requirement does not apply under the Fair Housing Act. New West, L.P. v. City of Joliet, 491 F.3d 717, 721 (7th Cir. 2007). The inapplicability of the City of Cleveland/Holmes “directness requirement” under the FHA is further demonstrated by the fact that its application would preclude a municipality from maintaining a Fair Housing Act challenge to racial steering by real estate agents. Yet one of the precise holdings of Gladstone is that municipalities may pursue exactly such a case. 441 U.S. at 109-10.
City of Cleveland is also inapposite because the defendants were sued for nothing more than providing secondary market funding for subprime loans. 621 F. Supp. 2d at 516. Judge Lioi held that it was “materially” important that the secondary market players (unlike Wells Fargo here) did not “originate the underlying subprime loans or initiate foreclosures.” Id. at 536. Discussing the alleged causal connection between companies that securitized loans and Cleveland’s injury, she stated: “Then someone – very importantly, not Defendants – foreclosed on the property.” Id. at 534 (emphasis added). Baltimore, to the contrary, has sued Wells Fargo for its actions in making loans and causing foreclosures.
Cleveland’s basic legal proposition that facilitating subprime lending was per se unlawful likewise renders the case inapt. See 621 F. Supp. 2d at 516 (“Plaintiff claims that subprime lending was categorically inappropriate for Cleveland due to its ‘unique’ economic situation”). Baltimore makes no such sweeping generalizations. Baltimore’s allegations are narrowly focused only on those subprime lending policies and practices that target African-American neighborhoods for abusive lending practices and for loans that are less advantageous than loans given to similarly situated people in white neighborhoods.
Indeed, in a case decided against Wells Fargo last year, the court concluded that when a
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municipality’s damages are based on unlawful acts related to particular properties, its damages
are real and undeniable when those properties become vacant. See CHRP v. Wells Fargo Bank,
N.A., No. 08-CVH-3139 (Cleveland Mun. Ct. June 18, 2009), App. Cases Not Generally
Reported. Based on an evidentiary record, CHRP found that:
Unoccupied, boarded properties pose a hazard to neighborhood residents, in that they are an attractive nuisance for juveniles and others. They pose an arson risk greater than that of the average occupied building. Unoccupied structures attract criminal activity . . . . These vacant structures, often a favorite target of arsonists, pose a heightened hazard to firefighters, as the interior of a vacant home often has been vandalized, and the structural integrity compromised. . . . Vacant, boarded properties contribute to the decline of both property values and neighborhood appearance and pride. . . .
The public has a pecuniary interest in the maintenance of properties also; vacant, vandalized properties lead to the decline of neighborhoods and a reduction in property values. In addition, municipalities are forced to provide services (e.g., grass cutting, yard cleaning, demolition) to neglected properties and the taxpayers must bear this financial burden.
Id. ¶¶ 32, 43.
The remaining reasons why the motion to dismiss in City of Cleveland was granted are
likewise inapplicable here. Jude Lioi also dismissed the case on the basis of preemption under
Ohio law, see 621 F. Supp. 2d at 517-20; state tort law regarding damages, id. at 521-26; and
state tort law regarding the substantive requirements of a public nuisance claim, id. at 526-31.
None of these state law issues are relevant to Baltimore’s case under federal law.
For all of these reasons, City of Cleveland provides no support for the motion to dismiss.
2. Wells Fargo’s Additional Arguments About the Injury-In-Fact Requirement Have No Merit
In arguing against injury-in-fact, Wells Fargo offers unsupported speculation that its
discriminatory lending actually benefitted the City by generating increased municipal revenues.
See Defs.’ Mem. at 23 n.13, 28. This is an attempt to turn Rule 12 on its head by asking the
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Court to draw the least favorable conclusion possible from the allegations. Moreover, Wells Fargo would have the Court do so based on assertions about how real estate markets purportedly function that are properly the subject of expert analysis (if they are even relevant). It is much more reasonable and plausible to conclude that Defendants’ discriminatory lending causes people in African-American neighborhoods to lose their homes to foreclosure in disproportionately high numbers and that this harms, not helps, the City by causing it to incur increased costs for municipal services at particular properties and to lose tax revenues from particular areas where the foreclosures are disproportionately concentrated. See Duke Power Co., 438 U.S. at 78 (plaintiff does not have to “negate . . . speculative and hypothetical possibilities” to satisfy Article III).
Finally, Wells Fargo falsely contends that Baltimore bases its standing on 79 of the 269 vacant Wells Fargo foreclosure properties as to which the City has not yet identified damages, but may during discovery. See Defs.’ Mem. at 5 n.5, 28-29. To the contrary, the City’s standing to seek municipal services damages is based on its 190 paragraph property-by-property detailed description of damages it has already incurred and that it has already identified. SAC ¶¶ 105294. The City notes the additional 79 vacancies in the Second Amended Complaint to present a fuller picture of the consequences of Wells Fargo’s illegal lending practices and to give notice of likely sources of additional harm that will be shown as the case develops. It is hardly unusual for additional damages to occur and be identified while a lawsuit is pending, and Baltimore has merely given detailed notice of this likelihood.
CONCLUSION For all of the reasons stated above, Baltimore respectfully submits that Defendants’ Motion to Dismiss the Second Amended Complaint should be denied in its entirety.
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July 6, 2010

Respectfully submitted,
__/s/ John P. Relman________________________ John P. Relman, MD Fed. Bar No. 11482 Glenn Schlactus, pro hac vice Megan Moran-Gates, pro hac vice RELMAN, DANE & COLFAX, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com gschlactus@relmanlaw.com mmgates@relmanlaw.com
Special Assistant City Solicitors and Attorneys for Plaintiff

George Nilson, City Solicitor, MD Fed. Bar No. 01123 Suzanne Sangree, Chief Solicitor, MD Fed. Bar No. 26130 City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov
Attorneys for Plaintiff

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 Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 1 of 52

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND
BALTIMORE DIVISION

____________________________________

)

MAYOR AND CITY COUNCIL

)

OF BALTIMORE,

)

)

Plaintiff,

)

)

v.

)

)

WELLS FARGO BANK, N.A.

)

)

and

)

)

WELLS FARGO FINANCIAL

)

LEASING, INC.,

)

)

Defendants.

)

____________________________________)

No. 1:08-cv-00062-JFM

PLAINTIFF MAYOR AND CITY COUNCIL OF BALTIMORE’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS THE THIRD AMENDED COMPLAINT

John P. Relman, MD Fed. Bar No. 11482 Glenn Schlactus, pro hac vice Megan Moran-Gates, pro hac vice RELMAN, DANE & COLFAX, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com gschlactus@relmanlaw.com mmgates@relmanlaw.com

George Nilson, City Solicitor MD Fed. Bar No. 01123
Suzanne Sangree, Chief Solicitor MD Fed. Bar No. 26130
City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov

Attorneys for Plaintiff

Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 2 of 52
TABLE OF CONTENTS
TABLE OF AUTHORITIES ......................................................................................................... iii
INTRODUCTION ...........................................................................................................................1
STANDARD OF REVIEW .............................................................................................................9
ARGUMENT .................................................................................................................................11
I. BALTIMORE HAS CURED THE LIMITED REMAINING DEFICIENCY THAT THE COURT IDENTIFIED REGARDING ONE OF ITS TWO CLAIMS AND HAS NOW ESTABLISHED A SUFFICIENT FACTUAL PREMISE TO PURSUE BOTH CLAIMS .................11
A. Wells Fargo’s Description of What the Court Held Is Incorrect .....................11
B. Baltimore Has Amended Its Complaint In Accordance With What the Court Actually Required ............................................................................14
II. TWOMBLY AND IQBAL ONLY REQUIRE THE CAUSAL CHAIN TO BE PLAUSIBLE, NOT PROBABLE, AND BALTIMORE’S THREE-STEP CHAIN SATISFIES THIS REQUIREMENT ..............................19
A. Wells Fargo’s Predatory and Discriminatory Lending Practices, Targeted at Baltimore’s African-American Neighborhoods, Plausibly Result In an Increased Likelihood of Notices of Foreclosure and Completed Foreclosures On the Wells Fargo Loans.............20
1. Detailed Allegations Based On Direct Evidence .......................................20
2. Detailed Allegations Based On Statistical Evidence .................................24
B. Foreclosures at the Wells Fargo Properties Plausibly Result In Many of the Wells Fargo Properties Becoming Vacant When They Would Otherwise Be Occupied ..............................................................26
C. Baltimore Is Injured By Vacancies and Foreclosures at the Wells Fargo Properties ...........................................................................27
1. The City’s Records Show that Vacancies at the Wells Fargo Properties Plausibly Have Caused the City to Spend Precisely Quantifiable Funds to Provide Specific Services at the Properties............27
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2. High Concentrations of Wells Fargo Foreclosures In Particular Areas Reduce Tax Revenues By Plausibly and Negatively Affecting the Value of Other Houses In Close Proximity .........................................................................................28
III. THE VARIOUS ARGUMENTS THAT WELLS FARGO REPEATS FROM ITS PRIOR MOTIONS CONTINUE TO LACK MERIT ........................29 A. Baltimore Does Not Have To Make Allegations About Individual Borrowers At the Pleading Stage ...................................................29 B. Socioeconomic Challenges Do Not Explain Wells Fargo’s Disproportionately High Foreclosure Rate In African-American Parts of the City ...............................................................................................33 C. Wells Fargo’s Untested Assertions About Facts Purportedly Found In Its Own Undisclosed Files Do Not Provide a Proper Basis to Challenge Standing Under Rule 12..................................................................35 D. Birmingham, Cleveland, and Tingley are Inapposite .......................................36 1. City of Birmingham .......................................................................................... 37 2. City of Cleveland .............................................................................................. 38 3. Tingley........................................................................................................41 E. Baltimore Has Adequately Alleged Injury-In-Fact, Which Is the Final Step In the Causation Chain ...................................................................42
IV. BALTIMORE HAS STANDING UNDER THE SUPREME COURT’S SEMINAL FAIR HOUSING ACT CASE ON STANDING, WHICH WELLS FARGO IGNORES .................................................................................43
CONCLUSION ..............................................................................................................................46
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TABLE OF AUTHORITIES Cases
Adams v. Bain, 697 F.2d 1213 (4th Cir. 1982) ..........................................................................9, 10 Allen v. Wright, 468 U.S. 737 (1984) ............................................................................................46 Anderson v. Sara Lee Corp., 508 F.3d 181 (4th Cir. 2007).............................................................9 Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) ........................................................... 38-40 Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) .............................................................................. passim Barkley v. Olympia Mortgage Co., Nos. 04-CV-875 et al., 2007 WL 2437810
(E.D.N.Y. Aug. 22, 2007) ..................................................................................................21 Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ........................................................... passim Bennett v. Spear, 520 U.S. 154 (1997) .........................................................................................44 Bryant v. Yellen, 447 U.S. 352 (1980) ..................................................................................... 45-46 Cardio-Med. Assocs., Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68 (3d Cir. 1983) ..................33 Carley v. Wheeled Coach, 991 F.2d 1117 (3d Cir. 1993) .............................................................33 City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S
(N.D. Ala. Aug. 19, 2009) ..................................................................................... 36-37, 41 City of Cleveland v. Ameriquest Mortgage Secs., Inc., 621 F. Supp. 2d 513
(N.D. Ohio 2009) ......................................................................................................... 36-41 Clinton v. City of New York, 524 U.S. 417 (1998) .................................................................. 44-45 Columbus-America Discovery Group v. Atlantic Mut. Ins. Co., 974 F.2d 450
(4th Cir. 1992) ...................................................................................................................10 Gladstone, Realtors v. Vill. of Bellwood, 441 U.S. 91 (1979) ...................................... 37-39, 43-46 Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211 (4th Cir. 1993)...............................33 Hargraves v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000) ............................21 Hennesy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995) ................................33
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Holmes v. SIPC, 503 U.S. 258 (1992) ..................................................................................... 38-41 Kerns v. United States, 585 F.3d 187 (4th Cir. 2009)....................................................................10 Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001)..............................................................33 Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) ............................................... 7-9, 30-31 New West, L.P. v. City of Joliet, 491 F.3d 717 (7th Cir. 2007) ............................................... 38-39 North Carolina Shellfish Growers Ass’n v. Holly Ridge Assocs.,
278 F. Supp. 2d 654 (E.D.N.C. 2003) ...............................................................................10 Pennsylvania v. New Jersey, 426 U.S. 660 (1976) ........................................................................44 S. California Edison Co. v. FERC, 502 F.3d 176 (D.C. Cir. 2007)...............................................10 Schweikert v. Bank of America, N.A., 521 F.3d 285 (4th Cir. 2008) ...............................................9 Tingley v. Beazer Homes Corp., No. 3:07-cv-176, 2008 WL 1902108
(W.D.N.C. Apr. 25, 2008) ..................................................................................... 36-37, 41 United States v. Nara Bank, No. 09-07124, 2010 WL 2766992
(C.D. Cal. May 28, 2010) ..................................................................................................24 United States v. North Carolina, 180 F.3d 574 (4th Cir. 1999) ....................................................10 United States v. SCRAP, 412 U.S. 669 (1973)......................................................................... 45-46 Vill. of Bellwood v. Dwivedi, 895 F.2d 1521 (7th Cir. 1990) ........................................................44
Other Authorities Fair Housing Act, 42 U.S.C. § 3601 et seq............................................................................ passim Fed. R. Civ. P. 8 .........................................................................................................................8, 31 Fed. R. Civ. P. 12 ................................................................................................................... passim Fed. R. Evid. 201 .....................................................................................................................33, 35
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INTRODUCTION In its September 14, 2010 ruling on Defendants Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.’s (collectively “Wells Fargo”) Motion to Dismiss the Second Amended Complaint, the Court held that Plaintiff Mayor and City Council of Baltimore (“Baltimore” or “City”) had cured the problem that led to dismissal of the First Amended Complaint, could go forward on its first claim (steering), and could add allegations that would allow it to go forward on its second type of claim (unqualified borrowers). See Memo to Counsel (Sept. 14, 2010) (Docket No. 174) (“Memo to Counsel”). Wells Fargo now relies on a plainly incorrect reading of the Memo to Counsel to argue yet again for dismissal of the entire case. Instead of acknowledging what the Court actually ruled, Wells Fargo wrongly asserts that the Court required Baltimore to add allegations explaining why any of Wells Fargo’s loans with respect to either claim has a causal connection to vacancies and injuries at the specific Wells Fargo properties identified in the complaint, and to do so with new allegations about specific individual borrowers. According to Wells Fargo, the Court found that the whole complaint must be dismissed if Baltimore did not add these borrower-specific allegations. In Wells Fargo’s view, the causation issues must be relitigated in their entirety because the Court purportedly did not decide any issues in the Memo to Counsel that advance the case beyond where it was last August. To the contrary, the Court actually made five important decisions about causation. With these five decisions, the Court substantially narrowed the issues left for resolution under Rule 12. The Court’s first decision in the Memo to Counsel was that the City had satisfactorily addressed the problem that required dismissal of the First Amended Complaint. The Court explained that Baltimore had “focus[ed] upon ‘property specific,’ rather than generalized,

Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 7 of 52
damages in the second amended complaint,” and thereby “cured the fundamental flaw I found to exist in the first amended complaint.” Memo to Counsel at 1. “[T]he external conditions affecting the value of real estate in Baltimore City may ultimately have some relevance to the City’s damages claims,” the Court explained, but not to whether the complaint should be dismissed. Id. In other words, while social and economic conditions (“external conditions”) might be relevant to determining damages at a subsequent stage of the case, the Court held that they do not defeat standing under Rule 12(b)(1).
Second, the Court examined Baltimore’s causal chain and found that causation requires allegations showing that the unlawful Wells Fargo loans caused vacancies that otherwise would not have occurred: “the City’s property specific damages . . . are premised upon the fact that the properties foreclosed upon by Wells Fargo would not have been vacant during the period for which the City claims damages but for the improper loans made by Wells Fargo.” Id.
The Court reached its third decision by analyzing whether this necessary link is present with respect to the first of the two types of improper lending alleged by Baltimore, i.e., steering. As to these improper loans, the Court held that the City’s allegations do satisfy the causation requirement: “This factual premise is adequately alleged to the extent that the City asserts that Wells Fargo steered borrowers who were eligible to obtain prime loans into a more expensive subprime loan they could not afford. Presumably, in such instances (subject to any factual defense asserted by Wells Fargo) the borrowers would have continued to make payments on their mortgages and would have remained in possession of the subject premises.” Id. Thus, the Court held that the City has met the standing requirements and may go forward on its steering claim.
Fourth, the Court found that this essential element of the causation chain was not yet sufficiently alleged as to the other type of improper lending activity – “making subprime loans to
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borrowers whose credit rating would not have permitted them to obtain a loan at all . . . .” Id. With respect to this circumscribed aspect of the Third Amended Complaint, the Court found the allegations insufficient to show that the properties at which Wells Fargo made such loans were occupied before the loan and would have remained occupied absent the loan. See id. at 1-2. The Court granted Baltimore leave to amend the complaint if it could allege facts demonstrating a link between lending to unqualified borrowers and vacancies that would not otherwise occur. See id. at 2. The Court made clear that if the City could do so, then any objection by Wells Fargo to the truth of the allegations would not defeat standing, but would instead “provid[e] Wells Fargo with a defense it could raise by way of a motion for summary judgment after discovery has been conducted.” Id.
Fifth, the Court made clear that if Baltimore could not amend its complaint to add adequate allegations in support of its claim that it was injured by Wells Fargo’s practice of making loans to unqualified borrowers, then it could still proceed on its steering claim. In that instance, “the City should limit the claims asserted in the anticipated third amended complaint to those instances where Wells Fargo steered into subprime loans borrowers who could have afforded prime loans.” Id. Wells Fargo mistakenly overlooks this important decision because it fails to recognize that the Court looked at Baltimore’s two claims of wrongdoing independently and reached separate conclusions about each.
Baltimore added fourteen new paragraphs in its Third Amended Complaint in response to the Memo to Counsel. See Third Am. Compl. (Oct. 21, 2010) (Docket No. 176) (“TAC”) ¶¶ 96109. These paragraphs fill in the gap identified by the Court by plausibly connecting Wells Fargo loans to unqualified borrowers with vacancies in the City’s African-American neighborhoods at properties that would have been occupied during the damages period but for
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the loans. The new allegations both explain the logic of this connection and aver that the City’s investigation of Wells Fargo loans at issue here has confirmed the connection.
As set forth in the City’s new allegations, refinance and home equity loans logically and plausibly establish the “but for” link between loans to unqualified borrowers and vacancies. See TAC ¶¶ 98, 104-06. These kinds of loans are given to borrowers who already own and occupy (or rent out) their homes. See id. ¶ 98. Some of these borrowers even own their homes outright without any mortgage or other encumbrance. See id. A new refinance or home equity loan frequently causes the debt secured by the house, and the corresponding monthly payments, to increase. See id. ¶¶ 98-102, 104-06. These loans must be underwritten properly to ensure that the borrower is qualified for and can afford the new, larger loan. See id. ¶¶ 98, 104-06. This is especially true when existing homeowners are refinanced from fixed rate into adjustable rate mortgages because of the potential for the monthly payments to rise when interest rates go up. See id. ¶¶ 98, 103. When lenders make new refinance and home equity loans to unqualified borrowers,
the plausible and likely result of such practices is to cause homeowners who are otherwise occupying properties without a mortgage, or comfortably making payments on a modest existing mortgage, to be unable to make payment on a new, unaffordable loan. This, in turn, causes foreclosures and vacancies. Id. ¶ 98. Without the new, larger, and unaffordable refinance or home equity loans for which they do not qualify, the borrowers would remain in circumstances where their resources are sufficient to cover their housing debt, if any. See id. ¶¶ 96, 98, 104. These unaffordable refinance and home equity loans to unqualified borrowers come about in several ways. One way is through debt consolidation. See id. ¶ 100. Homeowners are solicited to consolidate unsecured debts like credit card balances with an existing mortgage to create a new, larger loan that places the house at greater risk. See id. Another is with “cash out”
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mortgages whereby homeowners receive cash in exchange for saddling their homes with greater debt. See id. ¶ 99. Higher interest rates, points, and origination fees on the new refinance and home equity loans likewise cause the total debt secured by the house to grow. See id. ¶¶ 101-02. Engaging in these lending practices without regard to whether borrowers qualify for the new, larger loans logically and plausibly causes vacancies at homes that would otherwise remain occupied and affordable. See id. ¶ 104. As Baltimore has previously explained, lenders are able to avoid the risk of engaging in these practices by selling the loans on the secondary market. See id. ¶¶ 3, 26.
Baltimore further alleges, based on its investigation of Wells Fargo’s loans in the City’s African-American neighborhoods in response to the Memo to Counsel, that Wells Fargo has caused vacancies by engaging in predatory practices that involved making loans to unqualified borrowers. See id. ¶¶ 107-09. The investigation has shown, through both new analysis of the limited loan-level information available and new contacts with borrowers who could be located,1 in addition to the statistics and direct evidence previously incorporated in the complaint, “that Wells Fargo has engaged in at least some of the[se] practices at properties located in Baltimore’s African-American neighborhoods which are the subject of this lawsuit,” causing properties to become vacant. Id. For example, “Wells Fargo encouraged borrowers to refinance and take more cash out of their homes than they wanted, needed, or could afford, even if the house was owned debt-free before the Wells Fargo loan. These constitute loans that Wells Fargo knew or should have known the borrower could not afford and that should not have been made.” Id. ¶

1

As counsel for Baltimore stated at the September 8 hearing, the City’s ability to contact borrowers is

limited at this stage of the case because they have generally been forced to move due to the foreclosures. Tr. (Sept.

8, 2010) at 27. Wells Fargo is in a much better position to locate borrowers because of its loan files and servicing

records, which have not been disclosed.

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108. The resulting vacancies were caused by the improper loans to unqualified borrowers. See id.
Throughout its consideration of Wells Fargo’s several motions to dismiss, the Court has held Baltimore’s causation allegations to a plausibility standard. See Op. (Jan. 6, 2010) (Docket No. 141) at 3-4. This is the proper standard and is consistent with Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (“[t]he plausibility standard is not akin to a ‘probability requirement’”), and Bell Atlantic Corporation. v. Twombly, 550 U.S. 544 (2007). The City’s new allegations in support of causation satisfy the plausibility standard. They are part of the logical, three-step causation chain described by Baltimore previously: (1) the discriminatory targeting of both types of improper lending practices – steering borrowers to overpriced loans and lending to unqualified borrowers – plausibly causes increased notices of foreclosure and increased completed foreclosures; (2) foreclosures on both types of improper loans plausibly cause properties to become vacant that would otherwise be occupied; and (3) the City is plausibly injured by foreclosures and vacancies at the 190 Wells Fargo properties identified in the complaint by having to provide additional municipal services at those properties and by losing property tax revenues from the compact areas where the Wells Fargo foreclosures are concentrated because the foreclosures reduce the values of other houses in close proximity. The new allegations further demonstrate the plausibility of the causal chain with respect to the second claim addressed in the Memo to Counsel.
Contrary to Wells Fargo’s contention, allegations about individual borrowers are not necessary to meet Iqbal’s plausibility requirement with respect to the second claim. As with the first claim, Baltimore does not have to present at the pleading stage all the evidence it may ultimately introduce in support of its claims at summary judgment or trial. Rather, at the
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pleading stage, “general allegations” are sufficient as long as they plausibly support the City’s claims; the “specific facts” need only be alleged after discovery. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). This basic sequencing of a plaintiff’s burden has particular force here because the wealth of borrower-level information in Wells Fargo’s files has never been disclosed to the City. To require Baltimore to make specific allegations about specific borrowers would be to subject it to a summary judgment standard without an opportunity for discovery, which Lujan prohibits. At this stage, the proper question is whether the City’s allegations show that the causation element of standing is plausible, not whether the allegations are enough to actually prove standing. As summarized above and shown in greater detail below, and as the Court has already held with respect to the steering claim, Baltimore’s allegations satisfy this standard.
Furthermore, Wells Fargo’s assertion that the Court issued a “direction” that Baltimore “provide detail relating to individual borrowers” in the Third Amended Complaint is simply incorrect. Mem. Law Supp. Defs.’ Mot. Dismiss Third Am. Compl. (Dec. 3, 2010) (Docket No. 181-1) (“Opp.”) at 2. Tellingly, Wells Fargo does not cite to anything in the Memo to Counsel in support of this assertion. It cites only to the transcript of the September 8, 2010 hearing on the last motion to dismiss, which it misrepresents. What actually happened at the hearing was that the Court questioned the City about whether it must make allegations about individual borrowers. Baltimore explained that such detail is not necessary to establish a plausible causal chain and therefore not necessary at the pleading stage, but is instead a ground of dispute that Wells Fargo may legitimately raise at summary judgment after discovery. The Court stated that, “[w]e may or may not be apart, but I think that’s where the issue is.” Tr. (Sept. 8, 2010) (“Tr.”) at 39. At the very end of the hearing, in its final statement, counsel for the City reiterated its
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position that it is not appropriate to require borrower-specific allegations at this stage, but specifically requested leave to amend should the court reach the opposite conclusion. See id. at 66. In adjudicating the motion to dismiss and providing direction to counsel six days later, the Memo to Counsel is silent as to any such requirement about identifying borrowers. That silence cannot be equated with a “direction” that Baltimore add allegations about individual borrowers. To the contrary, consistent with Rule 8 and Lujan, the Court has not required such detailed pleading. As explained in greater detail below, the absence of any requirement of borrowerspecific allegations in the Court’s ruling was both correct and consistent with Iqbal and Twombly.
Wells Fargo’s remaining arguments are all ones it has made repeatedly in its prior motions to dismiss. While Wells Fargo would have the Court believe that Baltimore is seeking a “fourth bite at this apple,” Opp. at 5, it is actually Wells Fargo that persists in making the same arguments for a fourth time while the City has carefully tailored its amendments to respond to the Court’s ruling. Wells Fargo contends again that (1) socioeconomic conditions are the cause of all the injuries alleged by the City2; (2) personal circumstances noted in Wells Fargo’s undisclosed loan files, not improper loans, are the cause of all the foreclosures and vacancies at the properties at issue; (3) dismissals of purportedly similar cases in other jurisdictions counsel dismissal here; and (4) Baltimore has purportedly not alleged an injury-in-fact. Baltimore has shown before that each argument lacks merit and does so again in brief below.
Notwithstanding Wells Fargo’s attempts to direct the Court’s attention away from what it actually said and held in the Memo to Counsel, (1) the Court has already held that at a minimum

2

Here Wells Fargo makes repeated references to a statement by the Mayor concerning the creation of a

“Vacants to Value” program for the disposition of vacant properties in the City. See Opp. at 4, 13 & Ex. 1. That

statement, however, does not address or concern the reasons for specific vacancies at the specific Wells Fargo

properties at issue in this case.

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Baltimore may go forward as to its claim that Wells Fargo violated the Fair Housing Act by steering borrowers in African-American neighborhoods into more expensive loans than loans for which they were qualified; and (2) Baltimore has now added allegations that address sufficiently the one remaining issue the Court raised in its ruling with respect to the second claim concerning lending to unqualified borrowers. The motion to dismiss therefore should be denied in its entirety.
STANDARD OF REVIEW When the facial sufficiency of a complaint is challenged under Rule 12(b)(1), “all the facts alleged in the complaint are assumed to be true and the plaintiff, in effect, is afforded the same procedural protection as he would receive under a Rule 12(b)(6) consideration.” Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). The Rule 12(b)(6) standard requires a court to “accept as true all of the factual allegations contained in the complaint,” Anderson v. Sara Lee Corp., 508 F.3d 181, 188 (4th Cir. 2007) (citation and quotation marks omitted), “construe the factual allegations of the complaint in the light most favorable to the plaintiff,” Schweikert v. Bank of America, N.A., 521 F.3d 285, 288 (4th Cir. 2008) (same), and “presume that general allegations embrace those specific facts that are necessary to support the claim,” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) (citation, brackets, quotation marks omitted). There are likewise strict limitations concerning the resolution of disputed facts pursuant to a factual challenge under Rule 12(b)(1). First, while the Court has some discretion under Rule 12(b)(1) to examine facts related to subject matter jurisdiction, it is axiomatic that at no stage of a case may a court resolve factual disputes based on one side’s untested and unverified presentation of what it claims to be the facts. A court may not rely on factual assertions unless they withstand scrutiny after the other party is given a full and fair opportunity to challenge them
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after appropriate discovery. See, e.g., Columbus-America Discovery Group v. Atlantic Mut. Ins. Co., 974 F.2d 450, 470 (4th Cir. 1992) (reversing trial court for failing to give litigant opportunity for discovery; “due process mandates that a judicial proceeding give all parties an opportunity to be heard on the critical and decisive allegations which go to the core of the parties’ claim or defense and to present evidence on the contested facts”) (emphasis in original; citation and quotation marks omitted).
Second, even if there were a developed evidentiary record (which there is not), it would still be plainly improper under Rule 12(b)(1) to resolve the factual issues raised by Wells Fargo because they go directly to whether Defendants caused Baltimore’s injuries and therefore to the merits of Baltimore’s case. It is well-established that on a Rule 12(b)(1) factual challenge, if “jurisdictional facts are intertwined with the facts central to the merits of the dispute,” then they are “appropriately resolved only by a proceeding on the merits.” Adams, 697 F.2d at 1219; see United States v. North Carolina, 180 F.3d 574, 580 (4th Cir. 1999) (“When a factual attack on subject matter jurisdiction involves the merits of a dispute, the proper course of action for the district court is to find that jurisdiction exists and deal with the objection as a direct attack on the merits of the plaintiff’s case.”) (citations, brackets, ellipsis, and quotation marks omitted); Mem. (July 2, 2009) (Docket No. 96) (Legg, C.J.) at 3. The Fourth Circuit recently reaffirmed this rule. Kerns v. United States, 585 F.3d 187 (4th Cir. 2009). It made clear that when jurisdictional and merits facts are intertwined, a “trial court should then afford the plaintiff the procedural safeguards – such as discovery – that would apply were the plaintiff facing a direct attack on the merits.”3 Id. at 193.

3

See also S. California Edison Co. v. FERC, 502 F.3d 176, 180 (D.C. Cir. 2007) (impermissible “‘to

bootstrap standing analysis to issues that are controverted on the merits’”) (quoting Pub. Citizen v. FTC, 869 F.2d

1541, 1549 (D.C. Cir. 1989)); North Carolina Shellfish Growers Ass’n v. Holly Ridge Assocs., 278 F. Supp. 2d 654,

10

Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 16 of 52
ARGUMENT I. BALTIMORE HAS CURED THE LIMITED REMAINING DEFICIENCY
THAT THE COURT IDENTIFIED REGARDING ONE OF ITS TWO CLAIMS AND HAS NOW ESTABLISHED A SUFFICIENT FACTUAL PREMISE TO PURSUE BOTH CLAIMS A. Wells Fargo’s Description of What the Court Held Is Incorrect According to Wells Fargo, “this Court’s prior analysis [was] that the City’s theories of liability fail to set forth plausible causal chains . . . .” Opp. at 11. Wells Fargo further contends that “the City was directed to make specific allegations” about specific borrowers in the Third Amended Complaint to overcome this defect, which the Court purportedly found applicable to the whole of the prior complaint. These assertions are demonstrably false. Wells Fargo fails to appreciate that, in analyzing whether the City plausibly alleged that it was injured by Wells Fargo’s allegedly discriminatory lending practices, the Court looked at Baltimore’s two claims of wrongdoing independently. It found one claim sufficient to establish standing, one lacking in a narrow respect that could be corrected by amendment, and did not set forth any requirement that the amendment include allegations about individual borrowers. Close consideration of the Memo to Counsel, which Wells Fargo avoids, shows that the Court made a number of important decisions about the City’s standing. The Court first analyzed the Second Amended Complaint in light of the reasons it had set forth for dismissing the First Amended Complaint. The Court found that the City had satisfied its prior concerns about causation: Although the external conditions affecting the value of real estate in Baltimore City may ultimately have some relevance to the City’s damage claims, the City has cured the fundamental flaw I found to exist in the first amended complaint by
665 (E.D.N.C. 2003) (“transform[ing] standing analysis into a determination of ultimate liability [] has been specifically rejected by the Fourth Circuit”).
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focusing upon “property specific,” rather than generalized, damages in the second amended complaint. Memo to Counsel at 1. “[E]xternal conditions” is a reference to the myriad socioeconomic conditions that Wells Fargo has repeatedly stressed throughout this case, including with a stack of untested newspaper articles and other exhibits that have no place at this stage of the case. Wells Fargo argued that socioeconomic conditions defeated standing because they were the sole cause of the generalized injuries for which, according to Wells Fargo, Baltimore was seeking redress in the Second Amended Complaint. The Court held that the City had moved past that obstacle to standing by making clear through amendment of its complaint that it is only pursuing property specific damages, not generalized damages. In the second part of the Memo to Counsel, the Court considered precisely how the City’s property specific damages are causally connected to the challenged lending practices. The Court explained that the City’s new allegations of property specific damages “are premised upon the fact that the properties foreclosed upon by Wells Fargo would not have been vacant during the period for which the City claims damages but for the improper loans made by Wells Fargo.” Id. The Court further explained that the City alleges that Wells Fargo loans could be improper in two ways – either because Wells Fargo steered a borrower with prime credit into a more expensive subprime mortgage, or because it gave a mortgage to someone who did not have good enough credit to qualify for any loan. See id. This distinction, which is central to the Memo to Counsel, is wholly unaddressed in Wells Fargo’s motion to dismiss. As to the causal connection between the first claim – steering – and injury to Baltimore, the Court held that the “factual premise is adequately alleged” because “[p]resumably, in such instances . . . the borrowers would have continued to make payments on their mortgages and would have remained in possession of the subject premises.” Id. Thus, but for the improper
12

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loan, the property would not have been vacant during the damages period. The Court found that this type of claim, by itself, provides an adequate basis for the City to move past Rule 12. There is no reference in the Memo to Counsel of any remaining obstacles that the City must overcome to satisfy the standing requirements or state a claim as to discriminatory steering, or to any allegations that must be added about individual borrowers (or about anything else). As to steering, the Court found the complaint plausible and sufficient. Wells Fargo’s assertion that as to all loans, “the City has not offered any plausible reason to conclude either that the properties would have been occupied absent the Wells Fargo loan or that the City has suffered any ‘distinct and palpable’ injury due to these vacancies,” Opp. at 13, is belied by the Court’s finding that the steering claim is “adequately alleged.”
The Court then addressed the City’s allegations about the second type of predatory conduct – making loans to unqualified buyers who should not have received any loan at all. The Court found that the complaint did not allege a sufficient causal connection between this particular predatory lending practice and vacancies. Memo to Counsel at 1-2. If the loans had not been made, the Court explained, the properties securing the loans “would have been vacant in any event” unless two conditions were met: (1) that the property was occupied before Wells Fargo made the improper loan, and (2) that it would have remained occupied during the damages period. See id. at 1-2. The Court stated that, if the City could, it should add allegations showing that these conditions were met in connection with this second type of improper loan. See id. at 2. If the City could make these allegations, the Court explained that it could go forward with respect to both types of claims, not just the steering claim, because “[t]he question would then become a factual one, providing Wells Fargo with a defense it could raise by way of a motion for summary judgment after discovery has been conducted.” Id. The Court therefore gave the City
13

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the option of amending the complaint if it could plausibly support the causal connection between

loans to unqualified borrowers and vacancies at properties that would otherwise be occupied.

The Court did not say that allegations about specific borrowers were necessary to do so.

Finally, the Court’s Memo to Counsel made clear that, at a minimum, the City may go

forward on its claim of discriminatory steering. The Court specifically offered Baltimore the

choice of “limit[ing] the claims asserted in the anticipated third amended complaint to those

instances where Wells Fargo steered into subprime loans borrowers who could have afforded

prime loans,” i.e., the first type of improper loan. Id. at 2.

Wells Fargo nonetheless ignores the distinction emphasized by the Court between the two

types of improper lending practices and its decision that the complaint is adequate as to steering.

This allows it to repeat its sweeping arguments that the Court should dismiss the Third Amended Complaint in its entirety.4 Throughout its motion, it repeats the same generalized arguments it

has made before which have no bearing on the key distinction highlighted by the Court between

the two types of improper loans. These arguments are misplaced because the only question that

the Court left to resolve is whether the City has, in its Third Amended Complaint, adequately

alleged support for its second type of claim.

B. Baltimore Has Amended Its Complaint In Accordance With What the Court Actually Required

Baltimore has now amended its complaint by adding fourteen new paragraphs that

specifically address the causation issue identified by the Court concerning loans made by Wells

Fargo when no loan should have been made at all. See TAC ¶¶ 96-109. The City’s new

allegations plausibly establish a causal connection between this type of improper loan and

vacancies that injure the City. The first set of new allegations explains how, as a practical and

4

These arguments are addressed in Section III, below. Baltimore has also addressed them in prior

submissions, which the City, like Wells Fargo, incorporates by reference. See Opp. at 4 n.2.

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realistic matter, making loans to people who are not qualified can cause foreclosures and vacancies at properties that would otherwise remain occupied. The second set of new allegations affirms that Baltimore’s investigation of Wells Fargo’s loans in the City’s African-American neighborhoods has shown that Wells Fargo did make such loans which did, in fact, cause foreclosures and vacancies.
Wells Fargo nonetheless fails to consider the content, logic, and plausibility of the City’s new allegations. Instead, when Wells Fargo even acknowledges the new allegations, it misstates them. It asserts that Baltimore’s new allegations merely describe “industry-wide wrongful practices” and contain “speculati[on]” and “guesses” that Wells Fargo has engaged in those practices. Opp. at 5, 6, 8; see also id. at 2. To the contrary, the allegations directly fill in the gap identified by the Court, and Wells Fargo does not even attempt to refute them.
As explained in the new allegations in the Third Amended Complaint, refinance and home equity loans frequently cause vacancies when given to borrowers who should not get a loan. See id. ¶¶ 98-106. With both refinance and home equity loans, the first condition identified by the Court is satisfied because the property is occupied by the borrower (or the borrower’s tenant) before the loan is made. In some cases there is not even a mortgage on the property before the new loan is made; in other cases, there is a mortgage that the owner can afford. See id. ¶ 98. These new loans commonly cause the debt secured by the house to increase (in fact, this is inherent with mortgages given to people who previously owned their house without any encumbrance and with home equity loans). See id. When the new, larger loan is made without proper underwriting to ensure that the borrower is qualified for and will be able to make payments on the larger loan, “the result is plausibly and likely to be that the borrower will be unable to make payments on the mortgage.” Id. This is especially true when a homeowner
15

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with an affordable fixed rate mortgage is refinanced into an adjustable rate mortgage without regard to whether the new loan will be sustainable should interest rates rise. See id. ¶¶ 98, 103. It is likewise true when the new lender, aware of the borrower’s present debt obligations and present financial resources, knows that the resources are insufficient to handle the increased monthly payments on the larger loan. See id. For example, it is highly plausible that giving a cash out refinance loan to an unqualified homeowner with a very low credit score that causes the payments to rise significantly and turns a fixed rate loan into an adjustable rate loan with a balloon payment will result in a foreclosure and vacancy.
In such circumstances, the plausible and likely result of such practices is to cause homeowners who are otherwise occupying properties without a mortgage, or comfortably making payments on a modest existing mortgage, to be unable to make payment on a new, unaffordable loan. This, in turn, causes foreclosures and vacancies. Id. This satisfies the second condition identified by the Court. If these borrowers remain in their prior circumstances instead of taking out a new unaffordable refinance or home equity loan, the default and vacancy does not happen. Lenders encourage people who already own their homes to take out these kinds of unnecessary and unaffordable loans in several ways. With refinances, the new, larger loans may result from the lender soliciting homeowners to consolidate various unsecured debts, such as credit card debts and auto loans, with their existing mortgage into a new and larger mortgage. See id. ¶ 100. Such a loan may also be the result of lenders soliciting homeowners for “cash out” refinances, in which the lender gives the homeowner cash to make home improvements or to use in other ways. See id. ¶ 99. These loans may entail higher interest rates than borrowers are currently paying. See id. ¶ 101. They may also entail points and fees on both refinance and
16

Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 22 of 52
home equity loans that are “rolled” into the principal of the loan and increase the amount that the borrower owes. See id. ¶¶ 101-02. As the Third Amended Complaint summarizes:
All of these practices can cause borrowers’ monthly mortgage payments to increase, whether by increasing the overall size of the debt secured by their home, increasing the interest rate, or both. Lenders have the underwriting tools and indicators – such as credit scores, debt-to-income ratios, and loan-to-value ratios – to predict with great accuracy whether the increase is too much for the borrower to afford. When lenders engage in these practices without regard to whether borrowers qualify for and can afford a refinance loan or a home equity loan based on proper underwriting criteria, it causes borrowers who could afford their old mortgage loans or had no mortgage at all to be saddled with new mortgage loans that they cannot afford. These practices cause foreclosures and vacancies at properties that would not be vacant had the offending loans not been made. Id. ¶ 104. Lenders using these practices to make new loans to existing homeowners often do so with borrowers who lack the necessary credit rating or other underwriting qualifications for the additional debt or for the potential increase in monthly payments on new adjustable rate loans. See id. ¶¶ 105-06. After explaining these practices and how they cause vacancies when targeted at existing homeowners who do not qualify for a new refinance or home equity loan, the City then confirms in the Third Amended Complaint that Wells Fargo has engaged in such practices in Baltimore. Wells Fargo contends that these new allegations are mere “guesses” and “speculat[ion]” about “phantom ‘borrowers,’” Opp. at 6, 8, but the Third Amended Complaint specifically says that the new allegations are the result of investigation, not speculation. The new allegations that Wells Fargo has engaged in these practices in Baltimore are explicitly based on the City’s contacts with Wells Fargo borrowers and its analysis of Wells Fargo loan data. See TAC ¶¶ 107-09. The City avers that its analysis of loan data in response to the Court’s Memo to Counsel shows that “Wells Fargo gave cash-out or debt consolidation refinance or home equity loans to owners of occupied properties at issue in this Complaint that significantly increased the
17

Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 23 of 52
borrower’s mortgage debt and/or replaced the borrower’s fixed rate loan with an adjustable rate loan.” Id. ¶ 107. This is consistent with the testimony of former Wells Fargo loan officers Elizabeth Jacobson and Tony Paschal, described in the complaint and set forth in their declarations attached to the complaint. See id. ¶ 69 & Attach. A; id. Attach. B ¶ 14.
Baltimore further alleges based on its contacts with Wells Fargo borrowers “that Wells Fargo has engaged in at least some of the practices [described above] at properties located in Baltimore’s African-American neighborhoods which are the subject of this lawsuit.” Id. ¶ 108. Specifically, the City alleges that it has confirmed through its investigation of loans at these properties that:
Wells Fargo encouraged borrowers to refinance and take more cash out of their homes than they wanted, needed, or could afford, even if the house was owned debt-free before the Wells Fargo loan. These constitute loans that Wells Fargo knew or should have known the borrower could not afford and that should not have been made. At properties where this type of loan was made, the property was occupied prior to the time Wells Fargo made the loan and the Wells Fargo loan caused the property to become vacant. Had the loan not been made, the property would have remained occupied. Id. Baltimore has likewise found through its investigation of loans at the properties at issue here that Wells Fargo encouraged owners of occupied properties to refinance their mortgages into adjustable rate loans with increasing payments. See id. ¶ 109. Wells Fargo did not use proper underwriting criteria to ensure that these borrowers were qualified and instead made loans that were not affordable and should not have been made. See id. This caused previously occupied properties to become vacant; had the borrowers not received these new adjustable rate refinance loans, they could have continued to afford the payments under their prior loans and avoided foreclosure. See id. In sum, through the new allegations in the Third Amended Complaint, the City explains the circumstances and lending practices whereby a loan to an unqualified borrower causes the
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borrower’s previously occupied home to become vacant. The City then alleges based on its investigation of lending by Wells Fargo in Baltimore’s African-American neighborhoods that Wells Fargo has engaged in these practices in these circumstances with respect to at least some of the properties for which the City claims damages in this case, and that this has in fact caused vacancies. This satisfies the requirement set forth in the Memo to Counsel that the City demonstrate the connection between loans to unqualified borrowers and vacancies for which the City seeks damages. Wells Fargo misses the mark in response by failing even to address the City’s allegations about what has plausibly happened because of the refinance and home equity loans that Wells Fargo has given to unqualified owners of properties at issue here. The motion to dismiss should therefore be denied in full.
II. TWOMBLY AND IQBAL ONLY REQUIRE THE CAUSAL CHAIN TO BE PLAUSIBLE, NOT PROBABLE, AND BALTIMORE’S THREE-STEP CHAIN SATISFIES THIS REQUIREMENT
The Court has properly required Baltimore’s allegations of causation to satisfy the plausibility requirement articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), which apply to allegations about standing challenged under Fed. R. Civ. P. 12(b)(1), as well as to challenges under Rule 12(b)(6). See Op. (Jan. 6, 2010) (Docket No. 141) at 3-4. Importantly, Twombly and Iqbal did not create a heightened pleading standard, and Iqbal specifically states that “[t]he plausibility standard is not akin to a ‘probability requirement.’” 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556). The Court’s application of the plausibility requirement in the Memo to Counsel is consistent with these limitations.
The causation chain establishing the City’s standing entails only three steps that connect both types of Wells Fargo’s discriminatory lending to the City’s injuries. These steps are well-
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supported by the City’s allegations and substantial direct and statistical evidence incorporated in
the complaint. The three steps are:
1. Wells Fargo’s predatory and discriminatory lending practices, targeted at Baltimore’s African-American neighborhoods, cause borrowers to pay more for their loans than they should or to receive loans that they cannot afford, logically and plausibly resulting in an increased likelihood of notices of foreclosure and completed foreclosures on the Wells Fargo loans in these African-American neighborhoods;
2. Notices of foreclosure and completed foreclosures at the Wells Fargo properties cause borrowers to leave their homes, plausibly resulting in many of those properties becoming vacant when they would otherwise be occupied; and
3. Vacancies and foreclosures at the Wells Fargo properties cause direct injury to the City in two ways: (a) the City must spend money to provide specific services (such as boarding, cleaning, and stabilizing structures, and fire and police services) at the Wells Fargo properties; and (b) the City loses property tax revenues in areas where the foreclosures are highly concentrated as a result of the devaluation of properties that sit in close proximity to Wells Fargo foreclosures.
As shown in this section, each of these steps and the causation chain as a whole are plausible.
Indeed, the Court has already found that the causation chain is plausible with respect to
discriminatory steering by finding that the steering claim is “adequately alleged.” Memo to
Counsel at 1. The City’s new allegations show that causation is likewise plausible with respect
to discriminatory lending to unqualified borrowers; for example, when unqualified borrowers are
refinanced from affordable mortgages into new, larger mortgages that they cannot afford, it is
plausible that they will lose their homes.
A. Wells Fargo’s Predatory and Discriminatory Lending Practices, Targeted at Baltimore’s African-American Neighborhoods, Plausibly Result In an Increased Likelihood of Notices of Foreclosure and Completed Foreclosures On the Wells Fargo Loans
1. Detailed Allegations Based On Direct Evidence
Declarations from former Wells Fargo employees Elizabeth Jacobson and Tony Paschal,
who both have extensive direct knowledge of Wells Fargo’s local subprime lending practices,
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and former mortgage broker Peter Hebert are attached to and incorporated in the Third Amended Complaint. TAC Attachs. A-C (“Jacobson Decl.,” “Paschal Decl.,” “Hebert Decl.”); id. ¶¶ 4671, 84. Their testimony demonstrates the lengths to which Wells Fargo has gone to target a range of predatory lending practices at Baltimore’s African Americans and predominantly African-American neighborhoods in violation of the Fair Housing Act.
The connection between targeting African-American neighborhoods for the predatory lending practices described by Jacobson, Paschal and Hebert and a greatly increased likelihood of foreclosure on the resulting loans is more than plausible, it is facially apparent. Borrowers who are charged more for a loan than they qualify for, or are deceived into taking a loan for which they are not qualified, are far more likely to face foreclosure down the road. The direct evidence detailed below demonstrates that Wells Fargo intentionally made loans in AfricanAmerican neighborhoods in deliberate disregard for well-established underwriting criteria that allow lenders to predict the likelihood that a borrower will successfully repay a loan. See, e.g., TAC ¶¶ 24, 84. These practices constitute reverse redlining – the targeting of minority neighborhoods for predatory or discriminatory loans. See id. ¶ 2.5 It is more than plausible that the resulting loans fail at an unusually high rate and in unnecessary numbers.
The declarations explain that Wells Fargo targeted African Americans in Baltimore for higher interest subprime loans in multiple ways. One was by directing its subprime marketing efforts at zip codes in and around Baltimore with large African-American populations. Paschal Decl. ¶¶ 8, 10. It even tailored its subprime marketing materials on the basis of race by using software to print out subprime promotional materials in different so-called languages, one of which was “African American.” Id. ¶ 11 & Ex. A. Another strategy was to focus on African-

5

Every court to consider the issue has held that reverse redlining violates the Fair Housing Act. See, e.g.,

Barkley v. Olympia Mortgage Co., Nos. 04-CV-875 et al., 2007 WL 2437810 (E.D.N.Y. Aug. 22, 2007); Hargraves

v. Capital City Mortgage Corp., 140 F. Supp. 2d 7 (D.D.C. 2000).

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American churches. Jacobson Decl. ¶¶ 27, 30. Yet another was to make sure that AfricanAmerican employees were the face of the company for African-American audiences and customers. Paschal Decl. ¶¶ 10, 12. Wells Fargo even went beyond its own employees and hired mortgage brokers to target Baltimore on its behalf by using methods that disproportionately generated African-American customers. Hebert Decl. ¶¶ 7-13.
At the same time, Wells Fargo did not target whites for subprime loans. Paschal heard colleagues who only made subprime loans say that “Howard County was not good for subprime loans because it has a predominantly White population.” Paschal Decl. ¶ 8. Similarly, white churches were not targeted. “When it came to marketing, any reference to ‘church’ or ‘churches’ was understood as code for African-American or black churches.” Jacobson Decl. ¶ 30.
Combining strategies, Wells Fargo managers told Jacobson that she could not attend presentations at Baltimore’s African-Americans churches because she is not “of color;” later she was told she could go if she “carried someone’s bag.” Jacobson Decl. ¶ 28. In another case, she was told that she was “‘too white’ to appear before the [virtually all black] audience” at a “wealth building seminar” in Greenbelt designed to market subprime loans. Id. ¶ 29; see also Paschal Decl. ¶ 12.
The borrowers and neighborhoods targeted by Wells Fargo for subprime loans were subjected to a range of predatory lending practices. Jacobson explains that loan officers put people with prime credit into subprime loans and made subprime loans to borrowers who did not actually qualify for a loan. Jacobson Decl. ¶ 18. This is corroborated by the City’s investigation of loans to unqualified borrowers in response to the Memo to Counsel. See TAC ¶¶ 107-09. Loan officers did this in part by falsifying loan applications; Jacobson reported this conduct to management but was not aware of any corrective action. Jacobson Decl. ¶ 18. Wells Fargo also
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underwrote adjustable rate loans as if the borrower would pay the “teaser” rate for the full life of
the loan instead of assessing whether the borrower could afford the increased payments after the
teaser rate expired, often in only two years. Id. ¶ 16. Wells Fargo’s predatory practices also
included steering borrowers who qualified for prime and Federal Housing Administration loans
into costlier subprime loans. Paschal Decl. ¶¶ 9, 19.
Loan officers engaged in these practices because Wells Fargo gave them large financial
incentives to do so. The pay of subprime loan officers was “based on commissions and fees,”
which “were based on the size of the loan and the interest rate.” Jacobson Decl. ¶ 6; see id. ¶ 32;
Paschal Decl. ¶ 13. Wells Fargo’s underwriting rules and pricing guidelines gave loan officers
the broad discretion they needed to originate the costliest subprime loans. See Jacobson Decl. ¶¶
11-17, 22, 24; Paschal Decl. ¶ 13.
Jacobson describes in detail the unscrupulous ways in which Wells Fargo loan officers
used their discretion to get away with steering people with prime credit into subprime loans,
beginning with “A reps” who were supposed to make prime loans:
In many cases A reps used their discretion to steer prime loan customers to subprime loan officers by telling the customer, for example, that this was the only way for the loan to be processed quickly; that there would be less paperwork or documentation requirements; or that they would not have to put any money down. Customers were not told about the added costs, or advised about what was in their best interest.
Jacobson Decl. ¶ 12. The subprime loan officers then took advantage of their discretion “to
qualify the A rep referrals for subprime loans.”
One way was to tell customers not to put any money down on the loan and borrow the entire amount, even if they could afford a big enough down payment to qualify for a prime loan. As soon as the loan was submitted without a down payment, it would “flip” from prime to subprime and a subprime loan officer would be able to get the loan qualified as a subprime loan. Another technique would be to tell the customer that the only way to get the loan closed quickly would be to submit it as a subprime loan. A third technique would be to put a
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person into a “stated income” loan, even if they had a W-2 statement that verified their income. By doing this, the loan was flipped from a prime to a subprime loan. Id. ¶ 17; see also id. ¶¶ 15-16; Paschal Decl. ¶ 14. In 2004 Wells Fargo responded to public criticism by creating “filters” that were supposed to prevent the steering of prime customers into subprime loans. But as senior managers knew, the filters were not effective. Jacobson Decl. ¶¶ 19-20; Paschal Decl. ¶ 18. Wells Fargo also “discriminated against minority loan applicants by not offering them its better or newer products which had lower fixed interest rates and fees.” Paschal Decl. ¶ 14. Loan officers likewise deceived subprime borrowers about onerous prepayment penalties associated with their loans, which typically made it difficult for borrowers to refinance into new and better loans. Id. ¶ 15. With Wells Fargo engaged in so many abusive lending practices, Jacobson and her colleagues “morbidly joked that we were ‘riding the stagecoach to Hell.’” Jacobson Decl. ¶ 31.
2. Detailed Allegations Based On Statistical Evidence6 The statistical evidence in the Third Amended Complaint confirms the strong causal connection between Wells Fargo’s race-based targeting of predatory practices in Baltimore and excessive foreclosures on the specific Wells Fargo loans that resulted from that targeting. The foreclosure rate on Wells Fargo’s loans in Baltimore neighborhoods that are at least 60% African-American – that is, in neighborhoods that Jacobson and Paschal explain were targeted

6

Wells Fargo’s footnote citation to the unpublished case of United States v. Nara Bank, No. 09-07124, 2010

WL 2766992 (C.D. Cal. May 28, 2010), is irrelevant to Baltimore’s statistical allegations. Nara Bank, in which the

government alleged discrimination in favor of Asians, involved statistical allegations that explicitly ignored many

people. For example, while one defendant allegedly gave loans to 1200 non-Asians, the government’s statistics only

accounted for 600 of them. See id. at *1, *3 (“to say that half of the non-Asians were treated worse than the average

Asian is not to say much at all”). The government could have isolated the non-Asians with the worst loans to

present misleading statistics. By contrast, Baltimore’s statistics leave nobody out. Additional problems pervaded

the government’s allegations in Nara Bank that are not present here.

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for predatory lending – is 4.82%. TAC ¶ 39. Yet Wells Fargo’s foreclosure rate in Baltimore neighborhoods that are at least 60% white, which were not targeted, is only 1.63%. Id. This three-fold difference in foreclosure rates is the plausible and natural result of making unfair and deceptive loans in one community, while refraining from such practices in the other.7
Similarly, more than half of Wells Fargo’s foreclosures from 2005 to 2009 were in census tracts that are more than 80% African-American and 62% were in tracts that are over 60% African-American, but only 12% were in tracts that are 20% or less African-American. Id. ¶¶ 37-38. The figures are virtually identical for Wells Fargo’s foreclosures from 2000 to 2004. Id. These figures are particularly revealing because the bulk of Wells Fargo’s mortgage lending in Baltimore is in white neighborhoods. Id. ¶ 4.
Wells Fargo’s high cost loans are also disproportionately concentrated in AfricanAmerican neighborhoods. Id. ¶¶ 72-75. Wells Fargo made high cost loans to 43% of its African-American mortgage customers in Baltimore in 2007, but only to 9% of its white customers. In 2006, the respective rates were 65% and 15%; in 2005, they were 54% and 14%; in 2004, they were 31% and 10%. Id. ¶ 72.8
All of these statistical disparities are fully consistent with the outcome one would expect given the direct evidence of targeting described above and the investigation conducted by Baltimore in response to the Memo to Counsel.

7

By using foreclosure rates – the number of foreclosures divided by the number of originations – Baltimore

controls for differences in the raw number of loans made by Wells Fargo in African-American and white

neighborhoods, respectively.

8

Additional statistical evidence in the Third Amended Complaint demonstrates that Wells Fargo targets

interest rate increases at homes in African-American neighborhoods and interest rate decreases at homes in white

neighborhoods, TAC ¶¶ 76-78; that Wells Fargo incorporates higher interest rate caps on adjustable rate loans made

in African-American neighborhoods than on loans in white neighborhoods, id. ¶¶ 86-88; and that Wells Fargo’s

loans in African-American neighborhoods that go to foreclosure do so much more quickly than its loans in white

neighborhoods, id. at ¶¶ 89-92.

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B. Foreclosures at the Wells Fargo Properties Plausibly Result In Many of the Wells Fargo Properties Becoming Vacant When They Would Otherwise Be Occupied
It is highly plausible that properties noticed for foreclosure are likely to become vacant. A notice of foreclosure means that the borrower is seriously in default, lacks the means to make the mortgage payments, and faces the threat of being evicted. That the borrower will leave the property unoccupied – whether as a result of giving up or being legally compelled to depart – is a natural and predictable result of the inability to maintain a mortgage and the receipt of a notice initiating foreclosure proceedings.
Whether loans are improper because of steering into higher cost loans than the borrowers qualified for or because the borrowers were unqualified, the result is vacancies at properties that would be occupied if the loans had never been made. As the Court already found, Baltimore’s allegations establish that this causal connection is plausible with respect to steering. See Section I.A, supra. For the reasons discussed above, the new allegations in the Third Amended Complaint establish that it is also plausible with respect to lending to unqualified borrowers. For example, a homeowner who does not have a mortgage, but is then given an unaffordable home equity loan that he does not have the resources to repay and is not qualified for, is likely to face foreclosure and leave the property unoccupied.
The limited discovery previously afforded the parties to test the connection between foreclosure notices on Wells Fargo loans and vacancies likewise affirms the connection. See, e.g., Mem. to Counsel (Feb. 20, 2009) (Docket No. 48). Out of 486 foreclosure notices on Wells Fargo loans in Baltimore’s African-American neighborhoods from 2000 to 2009 of which the City is currently aware, 269 (55%) of the properties became vacant. See TAC ¶¶ 110, 118. If Wells Fargo had only made loans commensurate with borrowers’ financial resources and ability
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to repay them, many if not all of these foreclosures and vacancies would have been avoided. The borrowers could have continued to afford their monthly payments and their homes would have remained occupied instead of becoming vacant. See, e.g., id. ¶¶ 96-98, 104, 108-11, 117.
C. Baltimore Is Injured By Vacancies and Foreclosures at the Wells Fargo Properties
The vacancies and foreclosures at Wells Fargo properties injure Baltimore in two different and independently provable ways. The City only needs to show that either one is plausible to satisfy the Article III requirements for standing.
1. The City’s Records Show that Vacancies at the Wells Fargo Properties Plausibly Have Caused the City to Spend Precisely Quantifiable Funds to Provide Specific Services at the Properties
The municipal services that Baltimore must provide at vacant Wells Fargo foreclosure properties are very specific and closely connected to a property being vacant. Vacant properties are frequently open to casual entry because a lock or a window is broken, for example, and the City must purchase materials and send personnel to board and secure them. The properties frequently become dumping grounds for garbage that must be collected. Often they are not maintained, requiring City services from structural maintenance and repairs to grass cutting to rodent control and more so that the impact on neighbors’ health, safety, and quality of life is minimized. Inspectors must be sent to the properties to assess all of these issues and the City must prosecute violations of its housing code that the inspectors identify. The police must come to the vacant Wells Fargo properties because they attract squatters, drug use, and other crime. All of these problems increase the risk of fire at the vacant Wells Fargo properties and the fire department must therefore respond to the Wells Fargo properties at an excessive rate to fight fires. These problems would not occur or would only occur at a dramatically reduced rate if the properties were occupied. Occupied properties, for example, are not left open to casual entry and
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do not require boarding. Squatters do not move into houses where people are living. See TAC ¶¶ 111-16, 311-19, Attach. R ¶¶ 3-9, Attach. S ¶ 3; see also id. Attachs. E-O.
The Third Amended Complaint details the provision of such services at 190 vacant Wells Fargo foreclosure properties. Id. ¶¶ 119-308; see id. Attach. R ¶¶ 4, 9, Attach. S ¶¶ 4-5. Each individual predatory loan and corresponding vacancy has caused incremental harm to the City and the amount of that harm can be determined on a property-by-property basis and separated from costs that are not attributable to Wells Fargo vacancies, such as the costs of sending police officers to investigate a possible crime elsewhere on the same block.
2. High Concentrations of Wells Fargo Foreclosures In Particular Areas Reduce Tax Revenues By Plausibly and Negatively Affecting the Value of Other Houses In Close Proximity
The Court has explained that where a lender that is engaged in unlawful lending activities plays a large enough role in a particular area, the connection between its unlawful activities and neighborhood decline is plausible. See Op. (Jan. 6, 2010) (Docket No. 141) at 5 n.2, 6. Baltimore analyzed all of the 486 Wells Fargo foreclosures in African-American parts of the City as well as all foreclosures by other lenders to isolate such areas. The result is the 37 compact sub-neighborhoods identified in the Third Amended Complaint. In each, at least one-third of all foreclosures are Wells Fargo foreclosures. Many of these sub-neighborhoods are clustered in areas that have long been stable or have improved significantly in the past decade. TAC ¶ 321. It is very plausible that in these areas, the high proportion of Wells Fargo foreclosures negatively affects the values of other homes very close to the foreclosure properties. This reduces the City’s property tax revenues because property taxes are based on property values.
Baltimore’s regression analysis found that the Wells Fargo foreclosures in each subneighborhood are responsible for a quantifiable loss in the assessed values of the other residential
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properties in the same sub-neighborhood, and that the loss in assessed value translates into a precisely quantifiable loss in property tax revenue. Id. ¶ 325. These findings exclude any lost value due to foreclosures from outside the sub-neighborhoods, from any non-Wells Fargo foreclosures, and from macroeconomic factors like the recent recession. The City’s analysis confirms the causal connection between the concentrated Wells Fargo foreclosures in the specified sub-neighborhoods and the narrow property tax damages sought by the City. III. THE VARIOUS ARGUMENTS THAT WELLS FARGO REPEATS FROM ITS
PRIOR MOTIONS CONTINUE TO LACK MERIT Apart from mischaracterizing the Memo to Counsel, Wells Fargo relies chiefly on several arguments that are holdovers from its prior motions to dismiss. Each argument is sweeping in scope and, if accepted, would apply to both types of improper loans identified in the Memo to Counsel despite the Court’s clear conclusion that they must be analyzed separately. Nonetheless, Wells Fargo continues to argue that the Third Amended Complaint should be dismissed in its entirety because (1) Baltimore did not include allegations about individual borrowers and their loans and foreclosures; (2) socioeconomic conditions are the cause of all the injuries alleged by the City; (3) personal circumstances noted in Wells Fargo’s undisclosed loan files, not improper loans, are the cause of all the foreclosures and vacancies at the properties at issue; (4) dismissals of purportedly similar cases in other jurisdictions counsel dismissal here; and (5) Baltimore has purportedly not alleged an injury-in-fact. A. Baltimore Does Not Have To Make Allegations About Individual Borrowers
At the Pleading Stage Despite the wealth of detailed, plausible allegations and evidence in the Third Amended Complaint demonstrating each step of the causation chain, Wells Fargo insists that Baltimore has not supported causation adequately because it has not made allegations identifying individual
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borrowers who received Wells Fargo loans that caused vacancies. See Opp. at 1, 2, 3, 6, 11, 13. This contention, made by Wells Fargo repeatedly in this case, is an attempt to hold Baltimore to a summary judgment standard before it has had an opportunity for discovery. The law does not compel Baltimore to include such specific allegations at this point in the case and the Court correctly did not require them.
Wells Fargo’s position is at odds with the Supreme Court’s oft-repeated statement in the leading case of Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992), that standing:
must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation. At the pleading stage, general factual allegations of injury resulting from the defendant’s conduct may suffice, for on a motion to dismiss we “presume that general allegations embrace those specific facts that are necessary to support the claim.” In response to a summary judgment motion, however, the plaintiff can no longer rest on such “mere allegations,” but must “set forth” by affidavit or other evidence “specific facts,” Fed. Rule Civ. Proc. 56(e), which for purposes of the summary judgment motion will be taken to be true. And at the final stage, those facts (if controverted) must be “supported adequately by the evidence adduced at trial.” (Citations and brackets omitted.) The fundamental reason for the difference between what is required of Baltimore at the pleading and summary judgment stages is, of course, that discovery has yet to occur. This reason has particular force here because the files that identify all the borrowers and the circumstances of their loans and foreclosures are solely in Wells Fargo’s possession. Even when Wells Fargo relied on its borrower-by-borrower loan files and servicing records at the 2009 evidentiary hearing before Chief Judge Legg, it was not required to disclose them. Months earlier Baltimore had requested the opportunity for discovery of such documents, but the request was denied. See Letter from John P. Relman to Hon. Benson E. Legg (Mar. 3, 2009) (Docket No. 56); Tr. (Mar. 4, 2009) at 5. Thus, these documents remain exclusively in Wells Fargo’s
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control. All that Wells Fargo has produced about the documents is a conclusory affidavit from a consultant it hired for this case. See Aff. of D. Williams (Docket No. 155-20) at 43-64. The City has not even been permitted a deposition of this consultant. Until Baltimore receives full discovery it would be fundamentally unfair – and contrary to the limited requirements of Rule 8 as articulated in Lujan and elsewhere – to require the City to present evidentiary allegations at the level of detail found in Wells Fargo’s undisclosed individual borrower files. This would be tantamount to holding Baltimore to a summary judgment standard before an opportunity for discovery. Moreover, simply locating most of these borrowers to obtain details from them about their individual circumstances requires the kind of information found in Wells Fargo’s undisclosed borrower-specific files because the foreclosures have caused them to move to unknown places. See Tr. (Sept. 8, 2010) at 27, 31 (statement of Plaintiff’s counsel explaining advantage Wells Fargo has in locating borrowers and identifying borrower-specific information).
The proper test at this stage is instead whether Baltimore has provided enough detail in its allegations to show that the causation element of standing is plausible, not whether its allegations are sufficient to prove standing. As long as Baltimore’s allegations demonstrate plausibility, as they do, it is not required to include with its complaint all the additional borrower-by-borrower or other evidence it has obtained through its investigation. Indeed, Baltimore is no more required to do so than Wells Fargo is required under Rule 8 to provide every piece of evidence it believes supports its defense.
The Court did not hold otherwise in ruling on Wells Fargo’s Motion to Dismiss the Second Amended Complaint. At the September 8, 2010 hearing on that motion, Wells Fargo’s first and foremost argument was that Baltimore had not identified individual borrowers who received improper loans. See, e.g., Tr. at 3, 14, 62. The Court questioned Plaintiff about the
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issue, see, e.g., id. at 25-26, 36-37, and it was discussed at length. Plaintiff presented the position that while a factual, borrower-by-borrower analysis of the causes and consequences of individual loans is a legitimate defense that Wells Fargo may raise after discovery, no such borrower-by-borrower details are needed at the pleading stage to establish a plausible and therefore sufficient inference that Wells Fargo’s wrongdoing injured the City. See, e.g., id. at 38-39. The Court recognized the distinction and stated, “[w]e may or may not be apart, but I think that’s where the issue is.” Id. at 39. Plaintiff reiterated its position at the conclusion of the hearing after Wells Fargo again argued that the lack of allegations about individual borrowers and their loans was fatal to the Second Amended Complaint, but stated in the alternative that if the Court found that such allegations were necessary, then the City should have an opportunity to amend the complaint accordingly:
if that is the only thing that in the Court’s mind stands in the way of our going forward, then I would ask respectfully in the alternative – I don’t think it’s necessary, but ask in t[h]e alternative for leave for a period of time for us to be able to amend the complaint to add the borrowers to that. If that’s the only thing blocking it. But just in the alternative . . . . Id. at 66. Thus, the issue of whether the complaint must include allegations about specific borrowers was raised and considered at the hearing, and the Court’s decision issued six days later contains nothing indicating that such allegations are needed.9

9

Wells Fargo does not even attempt to identify any part of the Memo to Counsel that purportedly sets forth

such a requirement. Wells Fargo instead cites only to the September 8, 2010 hearing transcript, which it

characterizes incorrectly in asserting that “[t]he City has failed to follow the Court’s direction and to abide by its

own indication that it would provide detail relating to individual borrows.” Opp. at 2; see also id. at 6 (similarly

mischaracterizing an earlier part of the hearing transcript). Wells Fargo’s attempt to turn every thought expressed

by the Court while probing the parties’ arguments at the hearing into an actual holding is entirely at odds with the

purpose of motion hearings and with the judicial process.

Elsewhere, Wells Fargo presents a similarly inaccurate characterization of the December 14, 2009 hearing transcript with its insertion of bracketed language in the following quote from Baltimore’s counsel: “‘our ability to [allege fairly traceable causation] hinges . . . on things that we find out in discovery.’” Opp. at 7 (citing Tr. (Dec. 14, 2009) at 72) (brackets and ellipsis added by Wells Fargo). Baltimore has always said that it will require discovery to prove its case, but never that it requires discovery to make sufficient allegations to defeat a motion to dismiss. Moreover, Wells Fargo’s citations to the December 14, 2009 hearing on the Motion to Dismiss the [First]
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B. Socioeconomic Challenges Do Not Explain Wells Fargo’s Disproportionately High Foreclosure Rate In African-American Parts of the City
As it did at greater length in its prior motions to dismiss, Wells Fargo continues to assert that the stark disparity between its foreclosure rates in African-American and white neighborhoods in Baltimore merely reflects a “complex weave of social and economic factors,” not discrimination. Opp. at 3. This is a shorthand reference to the series of purported facts and statistics that Wells Fargo has cobbled together in past briefs from newspaper articles and a myriad of other untested sources, to which it adds one new newspaper article in the current iteration of the motion to dismiss. The Court may not take judicial notice of these “facts” under Fed. R. Evid. 201.10

Amended Complaint are generally irrelevant, see Opp. at 4, 7; the Court has held that the City has already “cured the fundamental flaw I found to exist in the first amended complaint . . . .” Memo to Counsel at 1.

10

Judicial notice may not be used to displace the traditional judicial processes for resolving factual disputes

with evidence, especially when the factual disputes involve critical issues. Fed. R. Evid. 201(b) sets strict limits on

the types of facts that may be judicially noticed. It excludes factual issues that are “subject to reasonable dispute.”

Fed. R. Evid. 201(b); see, e.g., Haavistola v. Cmty. Fire Co. of Rising Sun, Inc., 6 F.3d 211, 218-19 (4th Cir. 1993)

(reversing district court for taking “judicial notice of the facts that many volunteer fire departments operate in

Maryland without governmental intervention at all and that all volunteer fire departments operate in a gray area as to

the functions they provide”); Carley v. Wheeled Coach, 991 F.2d 1117, 1126 (3d Cir. 1993) (reversing district court

for taking judicial notice of “rollover problems of vehicles having a high center of gravity”); Cardio-Med. Assocs.,

Ltd. v. Crozer-Chester Med. Ctr., 721 F.2d 68, 75-76 (3d Cir. 1983) (reversing district court for taking judicial

notice of factors considered by patients when choosing a doctor). Although Wells Fargo has not acknowledged that

it is asking for judicial notice of a wide range of “facts,” that has plainly been its purpose in submitting untested

exhibits and making myriad extra-record factual assertions.

Because Wells Fargo’s factual assertions about the role of socioeconomic issues in the City are central to its motion to dismiss yet vigorously disputed, the most the Court may do is take notice of the existence of Wells Fargo’s exhibits and statements, but not the truth of their content. In Lee v. City of Los Angeles, 250 F.3d 668 (9th Cir. 2001), the defendants’ motion to dismiss “rest[ed] almost entirely on factual challenges,” and “defendants’ factual assertions” were the basis for the trial court’s decision to grant the motion. Id. at 688. The circuit court reversed, explaining that the trial court erred by relying on “judicial notice of disputed facts stated in public records,” when it was permitted to notice only the “existence” of those records. Id. at 690 (emphasis in original). The trial court compounded this error by favoring the judicially noticed “facts” over the reasonable inferences that could be drawn from the complaint. See id. Likewise, Hennesy v. Penril Datacomm Networks, Inc., 69 F.3d 1344 (7th Cir. 1995), affirmed the district court’s refusal to take judicial notice of the number of employees reported by a company in its own 10-K filing with the SEC. See id. at 1354-55. The issue before the court turned on this very number. See id. The 10-K could be used for cross-examination, but not to bypass normal evidentiary procedures through judicial notice. See id. at 1355.
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Even if the Court could take judicial notice of these “facts,” which it may not, they fail to explain why Wells Fargo’s foreclosure disparity rate is higher than its peers. If the disparity in socioeconomic conditions explained the disparity in foreclosure rates between African-American and white neighborhoods, Wells Fargo’s peers would have similarly lopsided foreclosure rates – high in African-American neighborhoods and low in white neighborhoods – yet they do not. All lenders make loans in the same environment; if socioeconomic factors determine whether a loan winds up in foreclosure, then every lender that Wells Fargo competes with to make mortgage loans in Baltimore should have the same proportion of negative outcomes. The evidence will instead show that the disparity in Wells Fargo’s foreclosure rates between white and AfricanAmerican neighborhoods is excessively large compared to its peers. See TAC ¶ 40. Its status as an outlier is consistent with the wealth of evidence showing that Wells Fargo intentionally targeted African-American neighborhoods for predatory loans.
Furthermore, when Wells Fargo cites the December 14, 2009 motion hearing in support of its assertion that the “problems that the City complains of in the instant lawsuit predate the origination of virtually every loan identified in the TAC as this Court has noted,” Opp. at 4, it is addressing the relevance of socioeconomic issues to the wrong complaint. In the decision that followed that hearing, the Court expressed its concern that socioeconomic issues stood in the way of standing because it construed the First Amended Complaint as seeking generalized, Citywide damages. See Op. (Jan. 6, 2010) (Docket No. 141). But the Court made clear in the Memo to Counsel that, with the Second Amended Complaint clarifying that the City only seeks property specific damages, this issue has been “cured.” Memo to Counsel at 1. The “problems that the City complains of in the instant lawsuit” are discriminatory and predatory lending
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practices by Wells Fargo, and nothing else. These are not independent problems that “predate” the loans; rather, they are the cause of the loans.
Wells Fargo’s reliance on its new newspaper article is similarly misleading. See Opp. at 4, 13 & Ex. 1. The article contains statements from Baltimore officials that merely acknowledge that the overall issue of vacancies in the City, which Wells Fargo terms “the City’s endemic vacancy problems,” Opp. at 11, is due to a variety of causes. Wells Fargo would have the Court believe this exonerates it. Aside from the impropriety of taking judicial notice of this article under Fed. R. Evid. 201, the officials quoted do not in any way address the reasons for specific vacancies at the specific Wells Fargo properties at issue here, much less say that Wells Fargo does not bear responsibility. Wells Fargo’s conflation of generalized conditions in Baltimore with the specificity of the claims at issue in this case continues to undermine its argument about socioeconomic conditions.
C. Wells Fargo’s Untested Assertions About Facts Purportedly Found In Its Own Undisclosed Files Do Not Provide a Proper Basis to Challenge Standing Under Rule 12
In continued patent disregard for elementary fairness, Wells Fargo again tells the Court that it “has demonstrated that it can show through loan-by-loan analyses that life circumstances such as illness, job loss, death, divorce, and investments gone awry are the true causes of delinquency.” Opp. at 11. But as discussed above, the loan files, servicing records, and other documents that Wells Fargo relies on have not been disclosed. To this day, Wells Fargo has not provided any of the files that its consultant considered and offered opinions about in the affidavit Wells Fargo submitted at the 2009 evidentiary hearing based on his review of Wells Fargo’s files. The bare provision of the affidavit is not an adequate substitute for proper discovery and a fair opportunity to contest Wells Fargo’s assertions about the contents of its hidden files. Wells
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Fargo’s untested and unverified assertions about the “true causes” of its excessive foreclosures in African-American neighborhoods therefore have no place in the resolution of this motion to dismiss. Id.
At the same time that it tenders its “trust me” explanation for its version of causation, Wells Fargo tries to hide the fact that a key component of its consultant’s affidavit supports the City’s case. The consultant concluded that the most frequent reason for the Wells Fargo foreclosures in Baltimore’s African-American neighborhoods was what he termed “excessive obligation.” Aff. of D. Williams (Docket No. 155-20) at 47, 60. At the evidentiary hearing conducted by Chief Judge Legg, the Court recognized that this did not help Wells Fargo’s case and stated that a borrower’s excessive obligations could be caused by discriminatory underwriting of the loan. Tr. (June 29, 2009) at 158. Wells Fargo’s consultant agreed. Id. The ratio of a prospective borrower’s debt to the borrower’s income is a principal measure for responsible underwriting. At a later hearing, the Court stated that if Wells Fargo relied on the excessive obligations factor in support of a summary judgment motion, the motion would likely be denied because of how closely the factor can be related to the terms of the Wells Fargo loan. Tr. (Aug. 6, 2009) at 48-50. Testimony from its own expert requiring denial at the more exacting summary judgment stage likewise also requires denial at the Rule 12 stage.
D. Birmingham, Cleveland, and Tingley are Inapposite Wells Fargo again relies on City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S (N.D. Ala. Aug. 19, 2009), City of Cleveland v. Ameriquest Mortgage Securities, Inc., 615 F.3d 496 (6th Cir. 2010), and Tingley v. Beazer Homes Corp., No. 3:07-cv-176, 2008 WL 1902108 (W.D.N.C. Apr. 25, 2008), and goes so far as to assert that “[h]oldings from these opinions are applicable verbatim” to the Third Amended Complaint. Opp. at 11; see generally id. at 8-12.
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Yet these cases only reflect the unremarkable proposition that complaints wholly lacking in specific allegations of wrongdoing and injury, and relying instead on generalizations and conclusory statements, do not satisfy Twombly and Iqbal’s plausibility requirement. City of Birmingham, City of Cleveland, and Tingley are not remotely analogous to this case, which is instead controlled by the Supreme Court’s directly on point decision recognizing municipal standing in Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979). Gladstone is the seminal case on standing under the Fair Housing Act, which Wells Fargo again wholly fails to address. See Section IV, infra.
1. City of Birmingham Birmingham’s complaint (attached as Ex. 3 to Defs.’ Mot. to Dismiss [the First] Am. Compl. (Sept. 18, 2009) (Docket No. 126-5)) lacked any allegations or evidence linking the seven defendants to any unlawful practices or to any specifically-identified harm. Birmingham merely made general allegations (which were copied from the first part of Baltimore’s original complaint without Baltimore’s participation or consent) about subprime lending, predatory practices, reverse redlining, and the harm that can result. It did not include any detailed allegations about particular discriminatory practices, statistical disparities, or injuries, and included no direct evidence of discrimination. Birmingham therefore provided no reason to think that any particular defendant had done anything wrong, and it failed to identify any particular damages it had allegedly suffered due to loans at particular properties. Wells Fargo’s assertion that Birmingham’s allegations were just like the allegations at issue here could not be further from the truth. City of Birmingham is not remotely analogous to this case.
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2. City of Cleveland City of Cleveland is likewise inapposite here. It was not a Fair Housing Act case, as this Court has noted, see Tr. (Sept. 8, 2010) at 10, but a state law public nuisance case. The decision is based explicitly on the “directness requirement” of Holmes v. SIPC, 503 U.S. 258 (1992), and Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006). See City of Cleveland, 615 F.3d at 502-06. “Directness” under Holmes and Anza refers to the causal connection between the defendant’s conduct and the plaintiff’s injury. The reliance on Holmes and Anza wholly distinguishes City of Cleveland because there is no directness requirement under the Fair Housing Act. This is because of the lack of prudential limitations on standing in FHA litigation. Thus, the analytical framework of City of Cleveland does not apply here and that decision’s analysis of causation is inapposite. The Seventh Circuit addressed this issue in New West, L.P. v. City of Joliet, 491 F.3d 717 (7th Cir. 2007). The lower court had held that the plaintiff lacked standing because its claim was based on harm it suffered as an indirect result of discrimination against someone else. See New West L.P. v. City of Joliet, No. 05-C-1743, 2006 WL 2632752 (N.D. Ill. Sept. 8, 2006). The Court explained that the lower court had analyzed the issue of standing incorrectly: For some statutes it matters whether the injuries are direct or derivative. See, e.g., Anza v. Ideal Steel Supply Corp., ___ U.S. ___, 126 S. Ct. 1991 (2006); Holmes v. SIPC, 503 U.S. 258 (1992). The Fair Housing Act is not among those statutes; the Supreme Court has held that only the Constitution’s own requirements, and not any prudential supplements, apply to litigation under this statute. New West, L.P., 491 F.3d at 721. The Court then immediately turned to Gladstone and Village of Arlington Heights v. Metropolitan Housing Development Corporation, 429 U.S. 252 (1977), and explained that they, not Holmes and Anza, control the proper analysis of causation under the FHA:
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“New West relies on these decisions; defendants’ brief ignores them, and the district court did not mention them. They are dispositive in favor of New West’s standing.”11 Id.

As in New West, L.P., Gladstone, not City of Cleveland, controls here and requires that Wells

Fargo’s motion to dismiss be denied. Gladstone specifically rejects the contention that parties “who

have not been harmed directly by [defendant]s’ alleged conduct” lack standing to bring suits under

the FHA. 441 U.S. at 102. City of Cleveland was a nuisance case, not a FHA case. It is for this

reason that Gladstone is nowhere mentioned in the Sixth Circuit’s opinion. Thus, the Court’s

discussion of the role of homeowners or other third parties who might affect the “directness” analysis

arises in the context of a doctrine that has no application here.

This point is demonstrated by the fact that the application of the City of Cleveland/Holmes/

Anza “directness requirement” would preclude a municipality from maintaining a FHA challenge to

racial steering by real estate agents. Yet one of the precise holdings of Gladstone is that

municipalities may pursue exactly such a case. Id. at 109-10. Gladstone involved the very same

type of municipal tax base injury alleged by Baltimore; indeed, the causal connection between the

illegal activity and the injury was much more tenuous in Gladstone than here. The Village of

Bellwood’s injury was not the “direct” result of steering. Rather, it required certain decisions by

many third parties and could have been affected by many independent factors. For example, the

causal chain relied on people who were steered deciding not to obtain real estate information from

other sources (e.g., newspapers or other real estate companies) and not choosing a property based on

unrelated personal preferences related to location or schools. The economy could have affected

11

Wells Fargo previously asserted that the way in which Judge Easterbrook used the directness concept has

nothing to do with standing, even though that is explicitly how Judge Easterbrook used it. See Reply Mem. (July 30,

2010) (Docket No. 168) at 14 n.8. But even if Wells Fargo were reading New West, L.P. correctly (which it is not),

it would still mean that Holmes and Anza, and therefore City of Cleveland which wholly relies on them, have

nothing to do with FHA standing. That is because Holmes and Anza are the explicit source of the directness

requirement discussed and rejected in New West. This means that Wells Fargo’s assertion that directness in New

West is irrelevant to standing here is an admission that Holmes and Anza (and therefore City of Cleveland) are also

irrelevant to standing here.

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housing prices and tax revenue. One could postulate many steps between the defendants’ steering and the Village’s injury, but the Supreme Court held that the causal connection was sufficiently plausible to satisfy Article III’s standing requirements. Id. at 115.
The causal chain here, described in Section II above, is much simpler. It is more than sufficient to maintain standing to bring a FHA claim under Gladstone. This is clear when one compares the allegations in City of Cleveland and those here. The allegations in City of Cleveland required a much longer and generalized causal chain, making it essentially impossible to identify and apportion damages. Cleveland did not even challenge lending. Rather, it attempted to place “principal[] responsib[ility] for the financial crisis” and its effects throughout Cleveland on 22 companies that engaged in the “financing, purchasing, and pooling of vast amounts of [subprime mortgages], to create mortgage-backed securities to sell to their customers . . . .” City of Cleveland, 615 F.3d at 499; Docket No. 163-2 (July 6, 2010) at 2-3 (¶¶ 2, 5) (Second Am. Compl. in City of Cleveland). Securitizing loans is an inherently legal activity. City of Cleveland, 615 F.3d at 505 n.6. Cleveland did not seek to connect any particular defendant to any particular foreclosures, or even to connect the defendants collectively to all of the foreclosures for which it sought recovery. Id. at 505. These factors were crucial to the Sixth Circuit’s application of Holmes and Anza. See, e.g., id. at 505 n.6 (difference between legal and illegal conduct is “critical” to analysis) (emphasis in original), 506 (better suit would be “limit[ed] . . . to the specific Defendants that financed [specific] subprime loan or loans”). They precluded the attribution of specific damages to each defendant; created the possibility of multiple recoveries based on the same conduct; and meant that the causal chain relied exclusively on voluntary acts, not acts coerced by illegal conduct. See id. at 503-06.
These obstacles are not present here. Thus, even if the Holmes/Anza framework that City of Cleveland applied were relevant – which it is not – Baltimore would still have standing under the
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Holmes three-factor test. See id. at 503 (discussing test). Plaintiffs have sued only Wells Fargo and exclusively for damages at particular Wells Fargo properties resulting from particular illegal loans made by Wells Fargo. The recipients of these loans did not freely “cho[o]se to enter into a subprime mortgage and to default on their loans,” id. at 505, but were deceived into taking unaffordable loans. Instead of suing securitizers, Baltimore has sued a “[c]ompan[y] that sold mortgages to home buyers [and] decided which loans should be made and on what conditions.” Id. at 504. There is no risk of multiple recovery because the City only seeks – and has identified – precise damages that are unique to itself. In sum, while Cleveland tried to blame a host of securitizers acting lawfully for general harm to the city, Baltimore’s suit is the very opposite – a suit to hold Wells Fargo responsible for the specific consequences of specific illegal loans.
Finally, City of Cleveland is not even a standing case, but a Rule 12(b)(6) case. As discussed above, the partial overlap of the causation analyses under Rules 12(b)(1) and (b)(6) requires the Court to find that jurisdiction exists and address causation as a merits issue at the appropriate stage of the case.
3. Tingley In Tingley, the record was as empty and void of any details as the record in City of Birmingham. Likewise, the complaint in Tingley set forth only the barest and most generalized allegations purportedly connecting the actions of the defendant home builders to any foreclosure or any injury. See Docket No. 163-2 (July 6, 2010) at 45-51 (Class Action Compl. in Tingley). Thus, while it is understandable that the court in City of Birmingham looked to Tingley given the similarly barren records and conclusory allegations in both cases, neither is remotely analogous to the detailed and focused claims presented by Baltimore here.
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Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 47 of 52
E. Baltimore Has Adequately Alleged Injury-In-Fact, Which Is The Final Step In The Causation Chain
Wells Fargo also takes issue again with the third and final step in the causation chain, which connects vacancies to the property specific injuries suffered by the City. See Opp. at 1213. It asserts that “vacancy itself results in no cost to the City” and that the City “has failed to establish that it incurred costs directly attributable to a vacant property that was unoccupied because the property owner had an improper Wells Fargo loan.” Id. at 3-4, 12. To the contrary, the connection between the vacancies and both types of damages – the costs of providing additional municipal services and lost property tax revenues – is alleged in great detail in the complaint. As discussed above, these allegations are plausible and have been confirmed by the City’s exhaustive review and expert analysis of its records.12
Moreover, the connection to damages is an explicit focus of the Memo to Counsel. The Court’s starting point is its statement that standing requires “a causal connection between the injuries [Baltimore] claims and Wells Fargo’s conduct of which it complains.” Memo to Counsel at 1. The very basis for the Court’s holding that socioeconomic conditions do not defeat standing is its consideration of the nature of the damages sought, i.e., property specific instead of generalized. See id. Thus, the implication of Wells Fargo’s argument about injury-in-fact is that the Court failed to consider whether the injury was sufficient when it explicitly considered whether the injury was causally connected to the alleged discrimination. Wells Fargo offers no basis for this criticism of the Court’s reasoning. Rather, the Court’s narrow focus on the

12

To the extent Wells Fargo is arguing that Baltimore has not even alleged any injury based on the vacancies

identified in the complaint, see Opp. at 2, that is plainly incorrect. The Third Amended Complaint specifically

alleges that the City has been injured by the vacancies at these properties, see TAC ¶¶ 111-18, as did the Second

Amended Complaint, see Second Am. Compl. ¶¶ 97-104. For the reasons stated above, the City’s allegations are

plausible.

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connection between improper loans and vacancies is consistent with the proper conclusion that the allegations of injury are plausible and sufficient under Twombly and Iqbal.
Wells Fargo makes the additional assertion that if the injuries alleged by the City are sufficient to confer municipal standing, it would “expand the law of standing to give every neighbor with a pest infestation and every crime victim within a few blocks of a house in foreclosure access to financial institutions in federal court.” Opp. at 5. There is no basis for this “slippery slope” argument. The only claims about standing made by Baltimore are that its own specific financial injuries attributable to unlawful lending practices at specific properties are cognizable under Article III. This has no bearing on whether different alleged injuries unique to nearby residents may form the basis of a federal lawsuit. IV. BALTIMORE HAS STANDING UNDER THE SUPREME COURT’S
SEMINAL FAIR HOUSING ACT CASE ON STANDING, WHICH WELLS FARGO IGNORES Wells Fargo again does not address Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91 (1979), the leading decision on standing under the Fair Housing Act. Baltimore’s claim to standing is even stronger than the one that passed muster in that case. In Gladstone, a municipal corporation sued two local real estate companies and their employees for racial steering.13 See 441 U.S. at 93-94. The Village alleged that it “has been injured by having [its] housing market . . . wrongfully and illegally manipulated to the economic and social detriment of the citizens of [the] village.” Id. at 95 (brackets and ellipsis in original; quotation marks omitted). Drawing inferences from this allegation, the Supreme Court held that the Village had alleged an injury-in-fact sufficient to support standing in large part because “prices may be deflected downward” by the alleged unlawful acts and “[a] significant reduction

13

“[I].e., directing prospective homebuyers interested in equivalent properties to different areas according to

their race.” Gladstone, 441 U.S. at 94.

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Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 49 of 52
in property values directly injures a municipality by diminishing its tax base.” Id. at 110-11; see also Pennsylvania v. New Jersey, 426 U.S. 660, 663-64 (1976) (per curiam) (assuming sub silentio that reduced tax revenue is an injury-in-fact and limiting standing inquiry to causation).
Gladstone is also dispositive with respect to causation. The Supreme Court held that the traceability of an injury to the Village’s purse was satisfied by a much more tenuous causal chain than the one here and without the kind of detailed evidentiary allegations in Baltimore’s Second Amended Complaint. The Gladstone Court reasoned that racial steering could ultimately bring about what the Seventh Circuit later described as “tipping,” Village of Bellwood v. Dwivedi, 895 F.2d 1521, 1525 (7th Cir. 1990), if enough prospective buyers were led to buy homes in other towns and “if perceptible increases in the minority population directly attributable to racial steering precipitate an exodus of white residents,” Gladstone, 441 U.S. at 110. This could then harm the Village by causing the downward price pressure and reduced tax base noted above. See id. at 110-11. The links in this causal chain were far from certain (they required a widespread impact on many people to bring the town to the tipping point, after which an injury might occur) and had to be constructed by the Court, but the Court held them sufficient to satisfy Article III.
Additional Supreme Court decisions make clear that, as in Gladstone and contrary to Wells Fargo’s contentions, traceability is not defeated simply because third parties play some role in the causal chain. Wells Fargo insists that the role of third parties breaks the connection between the discriminatory, unaffordable loans and Baltimore’s injuries, but this “wrongly equates injury fairly traceable to the defendant with injury as to which the defendant’s actions are the very last step in the chain of causation.” Bennett v. Spear, 520 U.S. 154, 168-69 (1997) (internal quotation marks and citation omitted). As long as there is a “likelihood” that the injury
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Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 50 of 52

will result, the traceability requirement is met regardless of the role of third parties. Clinton v. City of New York, 524 U.S. 417, 432 (1998) (citations omitted).
Bryant v. Yellen, 447 U.S. 352 (1980), United States v. SCRAP, 412 U.S. 669 (1973), and Clinton all refute Defendants’ view of the law (as does Gladstone). In each, private parties challenged acts of the federal government, and traceability was satisfied because third parties were likely to respond to those acts in a manner that would injure the plaintiffs. Clinton considered a constitutional challenge to the Line Item Veto Act. The plaintiff alleged that people who might otherwise sell their business to it were not likely to because the President had vetoed a capital gains tax advantage the sellers would otherwise receive. See 524 U.S. at 432. The Court found traceability “easily satisfied.” Id. at 433 n.22. Bryant addressed the federal government’s position that 233,000 acres held by 800 landowners could not be irrigated under a federal statute. See 447 U.S. at 365-66 & n.15. The Court held that intervenors who wanted to buy the land cheaply had standing. See id. at 366-68. If the land could not be irrigated, it was “likely” that the 800 owners would choose to sell it at low prices. Id. at 368. In SCRAP, people who used Washington-area lands for recreation challenged a federal order permitting railroads to increase rates. See 412 U.S. at 678, 685. Their standing argument was that “a general rate increase would allegedly cause an increased use of nonrecyclable commodities as compared to recyclable goods, thus resulting in the need to use more natural resources to produce such goods, some of which might be taken from the Washington area, and resulting in more refuse that might be discarded in national parks in the Washington area.” Id. at 688. The Court was skeptical of this “attenuated line of causation,” but held it sufficient at the Rule 12 stage.14 Id. at 689-90.

14

Wells Fargo has attempted to distinguish Gladstone, Clinton, Bryant, and SCRAP by asserting that the

cases somehow involved an explicitly “coercive” effect on third parties, but that simply misrepresents the Supreme

Court’s decisions. See Reply Mem. (June 19, 2008) (Docket No. 18) at 13 n.11. Wells Fargo also attempted to

distinguish Gladstone by noting the Supreme Court’s observation that the area that was the focus of the steering was

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Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 51 of 52
CONCLUSION For all of the reasons stated above, Baltimore respectfully submits that Defendants’ Motion to Dismiss the Third Amended Complaint should be denied in its entirety. If the Court nonetheless concludes that the portion of the Third Amended Complaint addressed to discriminatory lending to unqualified borrowers has not been adequately alleged, the City respectfully requests that, as stated in the Court’s Memo to Counsel, it be permitted to proceed with its claim that Wells Fargo discriminated by steering borrowers into higher priced loans than the loans for which they were qualified.
“relatively compact,” see id. at 6, but that was only relevant to the Supreme Court’s analysis of whether the individual plaintiffs had standing, not whether the Village had standing. Gladstone, 441 U.S. at 114.
Wells Fargo also continues to rely on Allen v. Wright, 468 U.S. 737 (1984), see Opp. at 9, 11, 12, but Allen reflects the same kind of traceability analysis as Gladstone, Clinton, Bryant, and SCRAP. In Allen, parents of public school children challenged the IRS’s guidelines for determining whether a private school was nondiscriminatory and tax-exempt. See 468 U.S. at 739. They alleged that lax guidelines increased the funds available to segregated private schools, reducing the number of white students in public schools, and thereby reducing their children’s opportunity to receive a desegregated education. See id. at 745-46, 752-53. Even though this chain rested on the decisions of “numerous third parties (officials of racially discriminatory schools receiving tax exemptions and the parents of children attending such schools),” the Court held that the injury “would be fairly traceable to unlawful IRS grants of tax exemption [] if there were enough racially discriminatory private schools receiving tax exemptions in respondents’ communities for withdrawal of those exemptions to make an appreciable difference in public school integration.” Id. at 758-59. Standing was only rejected because plaintiffs had “made no such allegation,” alleging instead only that four individual schools across seven states might lose an exemption under proper guidelines. Id. at 743, 758 & n.23. Allen thus focused on the “chain as a whole,” like any other traceability case, and did not shortcut its analysis through a rule that the chain is automatically broken if third parties have some significant role in it.
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Case 1:08-cv-00062-JFM Document 182 Filed 12/22/10 Page 52 of 52

December 22, 2010

Respectfully submitted,
/s/ John P. Relman John P. Relman, MD Fed. Bar No. 11482 Glenn Schlactus, pro hac vice Megan Moran-Gates, pro hac vice RELMAN, DANE & COLFAX, PLLC 1225 19th Street NW, Suite 600 Washington, DC 20036 (202) 728-1888 (202) 728-0848 (fax) jrelman@relmanlaw.com gschlactus@relmanlaw.com mmgates@relmanlaw.com
Special Assistant City Solicitors and Attorneys for Plaintiff

George Nilson, City Solicitor, MD Fed. Bar No. 01123 Suzanne Sangree, Chief Solicitor, MD Fed. Bar No. 26130 City Hall 100 N. Holliday Street Baltimore, Maryland 21202 (410) 396-3297 (410) 659-4077 (fax) George.Nilson@baltimorecity.gov Suzanne.Sangree@baltimorecity.gov
Attorneys for Plaintiff

47

 
 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

MAYOR AND CITY COUNCIL OF BALTIMORE
Plaintiff v. WELLS FARGO BANK, N.A., et al.
Defendant.

* * * * * * * * * * * *****

Civil Case No. JFM-08-62

MEMORANDUM

The Mayor and the City Council of Baltimore (“the City”) have filed a cause of action

against Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. (together, “Wells

Fargo”) under the Fair Housing Act of 1968 (“FHA”), 42 U.S.C. §§ 3601 et seq. Pursuant to

Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), Wells Fargo has filed a motion to

dismiss the City‟s Third Amended Complaint on the theory that the City lacks Article III

standing because it has not demonstrated a fairly traceable causal connection between its claimed

injuries and Wells Fargo‟s alleged conduct. (Defs.‟ Mem. at 1.) For the reasons stated below,

Wells Fargo‟s motion to dismiss is denied.

I. BACKGROUND

In January 2008, the City filed a complaint alleging that Wells Fargo had violated 42

U.S.C. §§ 3604-05 of the FHA by engaging in “reverse redlining,” a practice described by the

City as the “targeting [of] African-American neighborhoods in Baltimore for deceptive,

predatory, or otherwise unfair mortgage lending practices.” (Third Am. Compl. ¶ 335.) The

case, originally assigned to Judge Legg, was reassigned to me on August 6, 2009. (Order of

Recusal, Aug. 6, 2009, ECF No. 120.) In an opinion dated January 6, 2010, I granted Wells Fargo‟s motion to dismiss the City‟s First Amended Complaint. I held that the City had failed to allege a plausible causal connection between the widespread damages it sought and Wells Fargo‟s lending practices, but I granted the City leave to file an amended complaint seeking more limited damages. Mayor of Baltimore v. Wells Fargo Bank, N.A., 677 F. Supp. 2d 847, 851 (D. Md. 2010).
The City filed a Second Amended Complaint seeking narrower, property-specific damages in April 2010. In September 2010, I again granted Wells Fargo‟s motion to dismiss the Second Amended Complaint. In a letter opinion setting forth that decision, I noted that while the Second Amended Complaint properly focused on property-specific, rather than generalized, damages, these damages were still premised on the assumption that the properties in question would not have been vacant but for the improper loans made by Wells Fargo. Letter Op. at 1, Sept. 14, 2010, ECF No. 174. Without alleging this factual premise, I held, the City could not state a plausible causal connection between its damages and the allegedly improper lending activities of Wells Fargo. Nonetheless, I granted the City leave to file a third amended complaint incorporating this allegation—if it could do so consistent with Rule 11. Id. at 2. The City filed its Third Amended Complaint on October 21, 2010. On December 3, 2010, Wells Fargo moved to dismiss. II. ANALYSIS
Wells Fargo moves to dismiss the City‟s Third Amended Complaint on the ground that the City lacks standing because any injury it may have suffered is not fairly traceable to Wells Fargo‟s alleged conduct. For the reasons that follow, I conclude that the City has plausibly
2

alleged injuries that are fairly traceable to Wells Fargo‟s alleged conduct, and Wells Fargo‟s motion is therefore denied.
A. Standard of Review “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to „state a claim to relief that is plausible on its face.‟” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Although easily stated, the plausibility standard sometimes proves difficult to put into practice, and its application is often “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 129 S. Ct. at 1950). While a plaintiff is required to “articulate facts . . . that show that the plaintiff has stated a claim entitling him to relief,” the Supreme Court has emphasized that the plausibility standard is “not akin to a probability requirement.” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 557). Rather, the plausibility requirement is met “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. As I have noted previously, the plausibility standard applies equally to allegations concerning standing. Mayor of Baltimore, 677 F. Supp. 2d at 850. B. Constitutional Standing and Fair Traceability “Standing concerns „whether the plaintiff is the proper party to bring the suit.‟” ProEnglish v. Bush, 70 Fed. App‟x 84, 87 (4th Cir. 2003) (per curiam) (quoting Raines v. Byrd, 521 U.S. 811, 818 (1997)). Although the standing inquiry “involves both constitutional and prudential limitations on its exercise,” the Supreme Court has made clear that the constitutional and prudential limitations merge in a FHA case because standing under the FHA is “as broad as
3

is permitted by Article III of the Constitution.” Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 108 (1979). Thus, in a FHA claim, a court need only assess the three requirements of constitutional standing: (1) “the plaintiff must have suffered an injury in fact;” (2) “there must be a causal connection between the injury and the conduct complained of;” and (3) “it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.”1 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (citation and internal quotation omitted).
Wells Fargo‟s motion to dismiss focuses primarily on the second of these factors, the causation requirement, which requires that a plaintiff “allege personal injury fairly traceable to the defendant‟s allegedly unlawful conduct.” Allen v. Wright, 468 U.S. 737, 751 (1984). If “the line of causation . . . is too attenuated” or “highly indirect,” the plaintiff‟s injury is not “fairly traceable” to the defendant and the plaintiff will not have standing. Id. at 757. Unfortunately, “[w]hat constitutes a „fairly traceable‟ causal connection that is not „too attenuated‟ amounts to something like a moving target that must be plotted on a case-by-case basis.” City of Birmingham v. Citigroup, Inc., No. CV-09-BE-467-S, 2009 U.S. Dist. LEXIS 123123, at *9 (N.D. Ala. Aug. 19, 2009). Nonetheless, courts agree that “traceability does not mean that plaintiffs must show to a scientific certainty that defendant‟s [conduct] caused the precise harm suffered by the plaintiffs.” Friends of the Earth, Inc. v. Gaston Copper Recycling Corp., 204 F.3d 149, 161 (4th Cir. 2000).
In dismissing the City‟s Second Amended Complaint, I noted that the City had “cured the fundamental flaw I found to exist in the first amended complaint by focusing upon „property
1 In its motion to dismiss the Third Amended Complaint, Wells Fargo challenges only the causation and injury-in-fact prongs of the constitutional standing inquiry. The decision not to contest redressability is unsurprising, as it is clear that the City‟s injuries would be redressed by a favorable decision.
4

specific,‟ rather than generalized, damages.”2 Letter Op. at 1, Sept. 14, 2010, ECF No. 174. I
further observed, however, that these damages were fairly traceable to the allegedly improper
loans made by Wells Fargo only insofar as the City could allege “that the properties foreclosed
upon by Wells Fargo would not have been vacant . . . but for the improper loans made by Wells
Fargo.” Id. Although the City had not adequately alleged this factual premise in its Second
Amended Complaint, I indicated that making such an allegation in an amended complaint would likely satisfy the City‟s burden of establishing standing and would allow it to survive a motion to
dismiss. Thus, the issue at the heart of the instant motion is whether the City has plausibly
alleged that the properties in question would not have become vacant but for the allegedly
improper loans made by Wells Fargo.
In its Third Amended Complaint, the City identifies two types of illegal lending activity
allegedly engaged in by Wells Fargo and maintains that both practices created vacancies that
would not otherwise have occurred. First, the City states that Wells Fargo deliberately steered
African-American borrowers who qualified for prime loans into more onerous subprime loans.
(Third Am. Compl. ¶¶ 96-97.) As a result, says the City, borrowers who would have been able
to keep up with mortgage payments under the terms of a less expensive prime loan became
unable to make the more demanding payments required by subprime loans. The City asserts that
2 Consistent with the allegations of the Second Amended Complaint, the City‟s Third Amended Complaint again specifies two types of property-specific damages resulting from Wells Fargo foreclosures and vacancies: the cost of increased municipal services and lost property tax revenue. The City has identified 190 vacant Wells Fargo foreclosure properties at which it has had to provide municipal services such as “inspecting, boarding, cleaning, cutting grass and weeds, prosecuting, condemning, sending fire personnel, sending police personnel, and more.” (Third Am. Compl. ¶¶ 116, 119-308.) Additionally, the City claims damages based on reduced property tax revenues from thirty-seven specific “sub-neighborhoods,” in which a disproportionately large number of Wells Fargo foreclosures and vacancies have had a “significant and deleterious effect” on property values. (Id. ¶ 320.)
5

this practice caused foreclosures and eventual vacancies in properties that otherwise would have remained occupied had the borrowers been given prime loans. (Id. ¶ 97.)
These allegations clearly provide the missing causal link between Wells Fargo‟s alleged steering and the vacant properties identified by the City. As I observed in my earlier letter opinion, in such cases of steering, the borrowers presumably “would have continued to make payments on their mortgages and would have remained in possession of the subject premises” absent the alleged discriminatory treatment. Letter Op. at 1, Sept. 14, 2010, ECF No. 174. Thus, the City has standing to pursue its claims for its steering-related injuries, as these harms are fairly traceable to Wells Fargo‟s alleged conduct.
The City also alleges that Wells Fargo approved unqualified African-American borrowers for refinance or home equity loans when Wells Fargo knew or should have known that these borrowers would be unable to make the required monthly payments.3 (Third Am. Compl. ¶¶ 98104.) According to the City, these unqualified borrowers then defaulted on their mortgage payments, causing additional foreclosures and vacancies. Importantly, refinance and home equity loans are given to borrowers who already own and occupy their homes, and the City asserts that the borrowers in this case owned their houses subject to modest, “comfortably afford[able]” mortgages—or no mortgage at all—prior to taking on these allegedly improper loans. (Id. ¶ 98.) Consequently, the City maintains that if not for these refinance and home equity loans, “the subject properties would not have become vacant and would have remained occupied during the period for which the City claims damages.” (Id.)
3 The City explains that these refinance and home equity loans most commonly take the form of “cash out” refinance loans, whereby a homeowner receives money to make home improvements to the property, or debt consolidation, in which unsecured debts are consolidated with an existing mortgage to create a larger loan. (Third Am. Compl. ¶¶ 99-100.)
6

By limiting its allegations to those situations involving borrowers who were already owning and occupying their homes, the City again successfully fills in the gap between its claimed injuries and Wells Fargo‟s alleged conduct. Presumably, absent Wells Fargo‟s allegedly unaffordable refinance and home equity loans, these homeowners would have continued to make their monthly mortgage payments and occupy their properties. It is therefore plausible that any injuries arising from these vacant Wells Fargo foreclosure properties are fairly traceable to Wells Fargo‟s alleged predatory lending to unqualified borrowers.
Wells Fargo argues at length, however, that the new allegations in the Third Amended Complaint fail to establish causation because they do not identify specific individual borrowers who vacated their properties because of Wells Fargo loans. (Defs.‟ Mem. at 5-12.) Wells Fargo claims that without details about specific individual borrowers, the City‟s allegations amount to theoretical “guesses” and “speculat[ion]” about “phantom borrowers,” not plausible allegations that its lending practices caused a concrete injury. (Id. at 6.) Accordingly, Wells Fargo concludes, the City “has no factual basis to link its causal chain from even one allegedly discriminatory loan . . . to its damages.” (Defs.‟ Reply at 2.) This argument is unpersuasive.
Under Iqbal, the critical question is whether the City‟s causal chain is plausible, and Wells Fargo has cited no authority for the proposition that the City is required to identify individual borrowers in order to plausibly allege a fairly traceable causal connection. Rather, plausibility demands only that the allegations allow the court to draw a “reasonable inference that the defendant is liable for the misconduct alleged,” Iqbal, 129 S. Ct. at 1949, and even without identifying specific individual borrowers, the Third Amended Complaint‟s factual allegations are sufficient to satisfy this standard. For example, the City provides an in-depth explanation of how targeting homeowners with predatory refinance and home equity loans of the
7

type allegedly made by Wells Fargo can create vacancies in homes that would otherwise be
occupied. (Third Am. Compl. ¶¶ 98-104.) The City then avers that even in the “limited
instances where the City has been able to identify and contact borrowers,” its investigation “has
shown that Wells Fargo has engaged in at least some of the practices [described above] at
properties located in Baltimore‟s African-American neighborhoods which are the subject of this
lawsuit.” (Id. ¶ 108.) Additionally, the Third Amended Complaint further states that “[l]oan
data analyzed by the City” demonstrates that “in numerous instances, Wells Fargo gave . . .
refinance or home equity loans to owners of occupied properties at issue in this Complaint that
significantly increased the borrower‟s mortgage debt and/or replaced the borrower‟s fixed rate
loan with an adjustable rate loan.” (Id. ¶ 107.) Thus, contrary to Wells Fargo‟s argument that the
City‟s allegations depend on mere “guesses” or “speculation,” it is apparent that the asserted causal chain is in fact grounded on contact with real borrowers and analysis of hard data.4
Consequently, I conclude that the absence of allegations related to any one individual borrower
does not prevent the City from plausibly stating a fairly traceable causal connection between its
injuries and Wells Fargo‟s lending activity.
Aside from its primary contention that the City‟s allegations are insufficient because
they do not identify individual borrowers, Wells Fargo also advances several other arguments in
an attempt to defeat standing. First, Wells Fargo claims that any injuries suffered by the City are
4 The plausibility of the City‟s causal allegations is further supported by direct and statistical evidence of Wells Fargo‟s alleged discriminatory lending set forth in the Third Amended Complaint. This evidence includes declarations from former Wells Fargo employees Elizabeth Jacobson and Tony Paschal describing discriminatory lending practices targeting predominantly African-American neighborhoods, (Third Am. Compl. ¶¶ 46-71, 84), and statistical evidence indicating that Wells Fargo‟s foreclosure rate in neighborhoods that are 80 percent or more African-American is significantly higher than the average foreclosure rate of other major lenders in Baltimore, (id. ¶ 40). This proffered evidence also undermines Wells Fargo‟s claim that the City‟s allegations identify nothing more than “industry-wide wrongful practices” common to all lenders. (Defs.‟ Mem. at 5.)
8

caused by a “complex weave of social and economic factors” rather than its own lending activities. (Defs.‟ Mem. at 3.) Yet this argument, which has been pressed by Wells Fargo throughout the pendency of the suit, singles out the problem that the City has already “cured . . . by focusing upon „property specific,‟ rather than generalized damages.” Letter Op. at 1, Sept. 14, 2010, ECF No. 174. While I previously recognized that “the external conditions affecting the value of real estate in Baltimore City may ultimately have some relevance to the City‟s damage claims,” id., these societal factors do not break the fairly traceable causal chain between Wells Fargo‟s lending practices and the City‟s narrowed damages.
Next, Wells Fargo asserts that the holdings from a trio of cases—all of which denied standing for lack of causation—are “applicable verbatim” to this case. (Defs.‟ Mem. at 9-12.) These cases are not binding, however, and even a brief examination reveals that they are not particularly analogous to the facts of this case either. In fact, one of the cases, City of Cleveland v. Ameriquest Mortgage Securities, Inc., 615 F.3d 496 (6th Cir. 2010), did not even involve a FHA claim. Instead, City of Cleveland concerned a nuisance claim, and the outcome turned on prudential limitations associated with a “directness requirement” that is not at issue under the FHA‟s constitutional standing analysis. Id. at 502-06. The other two cases, City of Birmingham, 09-BE-467, 2009 U.S. Dist. LEXIS 123123 (N.D. Ala. Aug. 19, 2009), and Tingley v. Beazer Homes Corp., 07-cv-176, 2008 U.S. Dist. LEXIS 34303 (W.D.N.C. Apr. 25, 2008), are similarly inapposite. In both, the plaintiffs sought sweeping damages but presented only general and conclusory allegations of harm.5 In contrast, the City‟s Third Amended Complaint seeks only
5 In fact, the City notes that the plaintiff‟s allegations in City of Birmingham apparently were copied directly from the City‟s original Complaint in this case. (Pls.‟ Opp‟n at 37.) As the City has since completely overhauled its original Complaint by amending it three times, the allegations evaluated in City of Birmingham can hardly be compared to those contained in the City‟s Third Amended Complaint, the operative pleading in this case.
9

narrow damages and makes specific allegations of discrimination based on direct and statistical evidence. Given these obvious differences, the dismissals of the claims in City of Birmingham and Tingley are of little, if any, persuasive value in this case.
Finally, as a last resort, Wells Fargo contends that not only has the City failed to show causation, but also it has failed to allege a cognizable injury-in-fact in the first place. An injuryin-fact involves the “invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560. Seizing upon this language, Wells Fargo maintains that the City‟s increased spending on municipal services provided at vacant houses is merely a conjectural injury because it is speculative to assert that the City‟s injuries were caused by Wells Fargo loans and not a range of other social and economic conditions. (Defs.‟ Mem. at 12-13.) This argument, however, conflates the injury-in-fact analysis with the causation prong of the standing inquiry, for to say that the cause of an injury is speculative is not the same as saying that the injury itself is speculative or conjectural. City of Birmingham, which Wells Fargo itself relies upon heavily, demonstrates the importance of pulling apart these two strands of the standing inquiry and analyzing them separately. Although the court in City of Birmingham eventually denied standing due to a lack of causation, it initially determined that Birmingham‟s allegations of “increased spending on police and fire protection and increased spending to secure foreclosed homes” did constitute a concrete injury-in-fact. 2009 U.S. Dist. LEXIS 123123, at *8. Likewise, despite Wells Fargo‟s contention that it did not cause the City to increase its municipal expenditures, the increased expenditures themselves clearly constitute a concrete financial injury.
10

III. CONCLUSION Although the City had previously taken steps to narrow its damages and supplement the
details of its complaint in an effort to establish standing, the causal chain it asserted had yet to plausibly allege that the subject properties would not have been vacant but for Wells Fargo‟s lending practices. The Third Amended Complaint fills in this gap, and I therefore hold that the City has standing to pursue its claims. Although I am denying Wells Fargo‟s motion to dismiss, it is, of course, still free to assert any applicable factual defenses to the City‟s claims in a motion for summary judgment.
For the foregoing reasons, Wells Fargo‟s motion to dismiss is denied. A separate order is being entered herewith.

Date: April 22, 2011

/s/ J. Frederick Motz United States District Judge

11

 
 Case 1:08-cv-00062-JFM Document 222 Filed 08/07/12 Page 1 of 1

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

MAYOR AND CITY COUNCIL OF

*

BALTIMORE

Plaintiff(s)

*

vs.

*

WELLS FARGO BANK, NA

Defendant(s)

*

Civil Action No. JFM-08-62

******

SETTLEMENT ORDER (LOCAL RULE 111)

This Court has been advised by the partie s that the abo ve action h as been settled , including all counterclaims, cross-claims and third-party claims, if any. Accordingly, pursuant to Local Rule 111 it is ORDERED that:
This action is hereby dism issed and each part y is to bear its own costs unless otherwise agreed, in which event the costs shall be adjus ted between the parties in accordance with their agreement. The entry of this Order is without pr ejudice to the right of a party to m ove for good cause within 30 days to reopen th is action if settlement is not consummated. If no party m oves to reopen, the dismissal shall be with prejudice.

Date: August 7, 2012 United
U.S. District Court (Rev. 9/20/2004)

/s/ J. Frederick Motz
States District Judge

 
 Case: 1:08-cv-62 As of: 05/14/2013 10:18 PM EDT 1 of 19
APPEAL,CASREF,CLOSED
U.S. District Court District of Maryland (Baltimore) CIVIL DOCKET FOR CASE #: 1:08−cv−00062−JFM

Mayor and City Council of Baltimore v. Wells Fargo Bank, N.A. Date Filed: 01/08/2008

et al

Date Terminated: 08/07/2012

Assigned to: Judge J. Frederick Motz

Jury Demand: Plaintiff

Case in other court: USCA, 08−01874

Nature of Suit: 443 Civil Rights:

USCA, 09−01872 Cause: 42:405 Fair Housing Act

Accomodations Jurisdiction: Federal Question

Plaintiff

Mayor and City Council of Baltimore

represented by John Peter Relman Relman Dane and Colfax PLLC 1225 19th St NW Ste 600 Washington, DC 20036 12027281888 Fax: 12027280848 Email: jrelman@relmanlaw.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Bradley H Blower Relman, Dane &Colfax, PLLC 1225 19th St NW Washington, DC 20036 12027281888 Fax: 12027280848 Email: bblower@relmanlaw.com TERMINATED: 06/30/2010 ATTORNEY TO BE NOTICED

George A Nilson Baltimore City Law Department City Hall 100 N Holliday St Room LL31 Baltimore, MD 21202 14103963249 Fax: 14106594077 Email: george.nilson@baltimorecity.gov ATTORNEY TO BE NOTICED

Glenn Schlactus Relman and Dane PLLC 1225 19th St NW Ste 600 Washington, DC 20036 12027281888 Fax: 12027280848 Email: gschlactus@relmanlaw.com PRO HAC VICE ATTORNEY TO BE NOTICED

Megan Cacace Relman Dane and Colfax PLLC 1225 19th St NW Ste 600 Washington, DC 20036 12027281888 Fax: 12027280848 Email: mmgates@relmanlaw.com PRO HAC VICE ATTORNEY TO BE NOTICED

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Suzanne Sangree City of Baltimore Law Department City Hall Room 109 100 N Holliday St Baltimore, MD 21202 14103963249 Fax: 14106594077 Email: suzanne.sangree@baltimorecity.gov ATTORNEY TO BE NOTICED
Tara Kolar Ramchandani Relman Dane and Colfax PLLC 1225 19th St NW Ste 600 Washington, DC 20036 12027281888 Fax: 12027280848 Email: tramchandani@relmanlaw.com PRO HAC VICE ATTORNEY TO BE NOTICED

V. Defendant Wells Fargo Bank, N.A.

represented by Andrew L Sandler BuckleySandler LLP 1250 24th St NW Ste 700 Washington, DC 20037 12023498000 Fax: 12023498080 Email: asandler@buckleysandler.com LEAD ATTORNEY ATTORNEY TO BE NOTICED
Benjamin Barnet Klubes BuckleySandler LLP 1250 24th St NW Ste 700 Washington, DC 20037 12023498002 Fax: 12023498080 Email: bklubes@buckleysandler.com ATTORNEY TO BE NOTICED
Jonice Gray Tucker BuckleySandler LLP 1250 24th Street NW Suite 700 Washington, DC 20037 12023498005 Fax: 12023498080 Email: jtucker@buckleysandler.com ATTORNEY TO BE NOTICED
Michael P Kelly Skadden Arps Slate Meagher and Flom LLP 1440 New York Ave NW Washington, DC 20005 12023717282 Fax: 12023935760 TERMINATED: 03/30/2009 PRO HAC VICE ATTORNEY TO BE NOTICED
Valerie L Hletko

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BuckleySandler LLP 1250 24th St NW Suite 700 Washington, DC 20037 12023498000 Fax: 12023498080 Email: vhletko@buckleysandler.com PRO HAC VICE ATTORNEY TO BE NOTICED

Defendant Wells Fargo Financial Leasing, Inc.

represented by Andrew L Sandler (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Benjamin Barnet Klubes (See above for address) ATTORNEY TO BE NOTICED

Jonice Gray Tucker (See above for address) ATTORNEY TO BE NOTICED

Michael P Kelly (See above for address) TERMINATED: 03/30/2009 PRO HAC VICE ATTORNEY TO BE NOTICED

Valerie L Hletko (See above for address) PRO HAC VICE ATTORNEY TO BE NOTICED

V. Interested Party David Kissi

represented by David Kissi 38348037 FCI, ELKTON P.O. BOX 10 Lisbon, OH 44432 2026756365 PRO SE

Date Filed 01/08/2008
01/08/2008 01/08/2008 01/15/2008

# Docket Text
1 COMPLAINT against Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. (Filing fee $ 350. Receipt # 14637022520), filed by Mayor and City Council of Baltimore. (Attachments: # 1 Attachment A, # 2 Civil Cover Sheet)(ljs, Deputy Clerk). (Entered: 01/08/2008)
Jury Trial Demand by Mayor and City Council of Baltimore. (ljs, Deputy Clerk) (Entered: 01/08/2008)
2 Summons Issued 20 days as to Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (ljs, Deputy Clerk) (Entered: 01/08/2008)
3 ORDER REFERRING CASE to Magistrate Judge Paul W. Grimm for Discovery. Signed by Chief Judge Benson Everett Legg on 1/15/08 (cag, Deputy Clerk) Modified on 1/15/2008 (cag, Deputy Clerk). (Entered: 01/15/2008)

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01/23/2008

4 WAIVER OF SERVICE Returned Executed by Mayor and City Council of Baltimore. Wells Fargo Financial Leasing, Inc. waiver sent on 1/11/2008, answer due 3/11/2008. (Blower, Bradley) (Entered: 01/23/2008)

01/23/2008

5 WAIVER OF SERVICE Returned Executed by Mayor and City Council of Baltimore. Wells Fargo Bank, N.A. waiver sent on 1/11/2008, answer due 3/11/2008. (Blower, Bradley) (Entered: 01/23/2008)

03/05/2008

6 STIPULATION re 1 Complaint, AND [PROPOSED] ORDER EXTENDING TIME FOR FILING RESPONSIVE, OPPOSING AND REPLY PAPERS by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Sandler, Andrew) (Entered: 03/05/2008)

03/06/2008

7 PAPERLESS ORDER granting 6 request for extension of time to file response and reply. Signed by Chief Judge Benson Everett Legg on 03/06/2008. (Legg, Benson Everett) (Entered: 03/06/2008)

03/20/2008

8 MOTION to Appear Pro Hac Vice for Michael P. Kelly on behalf of Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Filing fee $ 50, receipt number 1463702419. by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. (slf, Deputy Clerk) (Entered: 03/20/2008)

03/20/2008

9 PAPERLESS ORDER granting 8 Motion to Appear Pro Hac Vice for attorney Michael P. Kelly on behalf of Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc.. Directing attorney Michael P. Kelly to register on−line for CM/ECF at http://www.mdd.uscourts.gov/attorney/registration.asp. Signed by Clerk on 3/20/2008. (ts, Deputy Clerk) (Entered: 03/20/2008)

03/21/2008

10 MOTION to Dismiss, MOTION to Dismiss for Lack of Jurisdiction by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 4/7/2008 (Attachments: # 1 Memorandum of Law, # 2 Exhibit A, # 3 Exhibit B, # 4 Exhibit C, # 5 Exhibit D, # 6 Exhibit E, # 7 Exhibit F, # 8 Exhibit G, # 9 Exhibit H, # 10 Exhibit I, # 11 Exhibit J, # 12 Exhibit K, # 13 Exhibit L part 1, # 14 Exhibit L part 2, # 15 Exhibit L part 3, # 16 Exhibit M, # 17 Exhibit N, # 18 Exhibit O, # 19 Exhibit P part 1, # 20 Exhibit P part 2, # 21 Exhibit P part 3, # 22 Exhibit P part 4, # 23 Exhibit P part 5, # 24 Exhibit Q, # 25 Exhibit R, # 26 Exhibit S, # 27 Exhibit T, # 28 Exhibit U, # 29 Exhibit V, # 30 Exhibit W, # 31 Exhibit X, # 32 Exhibit Y, # 33 Text of Proposed Order)(Sandler, Andrew) (Entered: 03/21/2008)

03/21/2008

11 Local Rule 103.3 Disclosure Statement by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Sandler, Andrew) (Entered: 03/21/2008)

05/20/2008

12 MOTION Seeking Court's Permission To File Papers on behalf of Baltimore as a Friend of the Court by David Kissi (Attachments: # 1 attachment)(eg, Deputy Clerk) (Entered: 05/20/2008)

05/20/2008

13 MOTION for Leave to File Excess Pages by Mayor and City Council of Baltimore Responses due by 6/6/2008 (Relman, John) (Entered: 05/20/2008)

05/20/2008

14 RESPONSE in Opposition re 10 MOTION to Dismiss MOTION to Dismiss for Lack of Jurisdiction filed by Mayor and City Council of Baltimore. Replies due by 6/3/2008. (Attachments: # 1 Affidavit of Glenn Schlactus, # 2 Appendix of Unpublished Cases)(Relman, John) (Entered: 05/20/2008)

05/22/2008

15 RESPONSE in Opposition re 10 MOTION to Dismiss MOTION to Dismiss for Lack of Jurisdiction CORRECTED filed by Mayor and City Council of Baltimore. Replies due by 6/5/2008. (Relman, John) (Entered: 05/22/2008)

05/22/2008

16 PAPERLESS ORDER granting 13 Motion for Leave to File Excess Pages. Signed by Chief Judge Benson Everett Legg on 05/22/2008. (Legg, Benson Everett) (Entered: 05/22/2008)

05/30/2008

17 MARGINAL ORDER denying 12 Motion seeking court's permission to file papers on behalf of Baltimore as a Friend of the Court. Signed by Chief Judge Benson Everett Legg on 5/30/08.(c/m 5/30/08) (slf, Deputy Clerk) (Entered: 05/30/2008)

06/19/2008

18 REPLY to Response to Motion re 10 MOTION to Dismiss MOTION to Dismiss for Lack of Jurisdiction and for Failure to State a Claim filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Attachments: # 1 Exhibit A, # 2

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06/30/2008 08/01/2008
08/21/2008 09/02/2008 09/22/2008 10/30/2008 11/04/2008 11/05/2008
11/10/2008 11/17/2008
11/20/2008 12/01/2008 12/08/2008 12/08/2008 12/12/2008 12/12/2008

Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E)(Sandler, Andrew) (Entered: 06/19/2008)
19 NOTICE OF CROSS APPEAL as to 17 Order on Motion for Miscellaneous Relief by David Kissi. (nrm, Deputy Clerk) (Entered: 08/01/2008)
20 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 19 Notice of Cross Appeal. IMPORTANT NOTICE: To access forms which you are required to file with the United States Court of Appeals for the Fourth Circuit please go to http://www.ca4.uscourts.gov and click on Forms &Notices. (nrm, Deputy Clerk) (Entered: 08/01/2008)
USCA Case Number 08−1874 for 19 Notice of Cross Appeal filed by David Kissi. Case Manager − Lisa Nesbitt (nrm, Deputy Clerk) (Entered: 08/21/2008)
21 Supplemental to 15 Response in Opposition to Motion filed by Mayor and City Council of Baltimore. (Relman, John) (Entered: 09/02/2008)
Magistrate Judge Paul W. Grimm no longer assigned to case. (cag, Deputy Clerk) (Entered: 09/22/2008)
22 ORDER directing Counsel to confer with one another and contact Deborah Fales, on or before November 7, 2008, stating which date counsel are available for the Motion hearing. Signed by Chief Judge Benson Everett Legg on 10/30/08. (mcb, Deputy Clerk) (Entered: 10/30/2008)
23 MOTION to Appear Pro Hac Vice for Glenn Schlactus on behalf of Mayor and City Council of Baltimore Filing fee $ 50, receipt number 04160000000001902532. by Mayor and City Council of Baltimore (Blower, Bradley) (Entered: 11/04/2008)
24 PAPERLESS ORDER granting 23 Motion to Appear Pro Hac Vice for attorney Glenn Schlactus on behalf of Mayor and City Council of Baltimore. Directing attorney Glenn Schlactus to register on−line for CM/ECF at http://www.mdd.uscourts.gov/attorney/registration.asp.. Signed by Clerk on 11/5/08. (cmns, Deputy Clerk) (Entered: 11/05/2008)
25 ORDER scheduling hearing on motion to dismiss. Signed by Chief Judge Benson Everett Legg on 11/7/08. (jnl, Deputy Clerk) (Entered: 11/10/2008)
26 MOTION for Copy Work at the Expense of the United States by David Kissi Responses due by 12/4/2008 (Attachments: # 1 Affidavit, # 2 Exhibit A, # 3 Exhibit B)(elt, Deputy Clerk) (Additional attachments added on 11/17/2008: # 4 Motion, # 5 Affidavit, # 6 Exhibit A, # 7 Exhibit B) (elt, Deputy Clerk). Modified on 11/17/2008 (elt, Deputy Clerk). [More legible copies of pleadings attached] (Entered: 11/17/2008)
27 MARGINAL ORDER denying 26 Motion of David Kissi for Copy Work. Signed by Chief Judge Benson Everett Legg on 11/20/08. (das, Deputy Clerk) (Entered: 11/20/2008)
28 MOTION for Reconsideration re 27 Order denying Motion for Copy Work by David Kissi (c/s J. Legg) (das, Deputy Clerk) (Entered: 12/05/2008)
29 MARGINAL ORDER denying 28 Motion of Kissi for Reconsideration of order denying copywork at government expense. Signed by Chief Judge Benson Everett Legg on 12/8/08. (das, Deputy Clerk) (Entered: 12/08/2008)
30 (SECOND) MOTION for Reconsideration re 27 Order on Motion for Copy Work by David Kissi. (Attachments: # 1 appendix A, # 2 appendix B, # 3 appendix C)(das, Deputy Clerk)(Originally Filed on 12/5/08) (Entered: 12/08/2008)
31 NOTICE OF INTERLOCUTORY APPEAL as to 29 Order on Motion for Reconsideration, 27 Order on Motion for Copy Work by David Kissi and Exhibits A and B. (Fee Status: Filing Fee Not Paid) (sls, Deputy Clerk) Modified on 12/12/2008 (sls, Deputy Clerk). (Entered: 12/12/2008)
32 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 31 Notice of Interlocutory Appeal. IMPORTANT NOTICE: To access forms which

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12/19/2008 12/22/2008
12/22/2008 01/26/2009 01/26/2009 01/27/2009 01/27/2009 01/27/2009 01/28/2009 01/29/2009 01/30/2009 02/02/2009 02/05/2009
02/18/2009

you are required to file with the United States Court of Appeals for the Fourth Circuit please go to http://www.ca4.uscourts.gov and click on Forms &Notices. (Attachments: # 1 Fee Letter)(sls, Deputy Clerk) (Entered: 12/12/2008)
33 NOTICE OF INTERLOCUTORY APPEAL as to 25 Order by David Kissi. (Fee Status: Filing Fee Not Paid)(NOA rec'd in USCA on 12/4/08) (sls, Deputy Clerk) Modified on 12/22/2008 (sls, Deputy Clerk). (Entered: 12/22/2008)
34 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 33 Notice of Interlocutory Appeal. IMPORTANT NOTICE: To access forms which you are required to file with the United States Court of Appeals for the Fourth Circuit please go to http://www.ca4.uscourts.gov and click on Forms &Notices. (Attachments: # 1 Fee Letter)(sls, Deputy Clerk) (Entered: 12/22/2008)
USCA Appeal Fees received $455 receipt number 84637013542 re 33 Notice of Interlocutory Appeal filed by David Kissi. (sls, Deputy Clerk) (Entered: 12/23/2008)
35 MOTION Request for Judicial Notice by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 2/12/2009 (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Text of Proposed Order)(Sandler, Andrew) (Entered: 01/26/2009)
36 ORDER SCHEDULING Oral Argument on 10 MOTION to Dismiss of Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. for 1/28/09. Signed by Chief Judge Benson Everett Legg on 1/26/09. (das, Deputy Clerk) (Entered: 01/27/2009)
37 ORDER RESCHEDULING Hearing. Signed by Chief Judge Benson Everett Legg on 1/27/09. (das, Deputy Clerk) (Entered: 01/27/2009)
38 ORDER SUPPLEMENTING list of questions to address during oral arguemnts. Signed by Chief Judge Benson Everett Legg on 1/27/09. (das, Deputy Clerk) (Entered: 01/27/2009)
39 RESPONSE in Opposition re 35 MOTION Request for Judicial Notice filed by Mayor and City Council of Baltimore. Replies due by 2/10/2009. (Relman, John) (Entered: 01/27/2009)
41 Motion Hearing held on 1/28/2009 re 10 MOTION to Dismiss MOTION to Dismiss for Lack of Jurisdiction filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. held before Chief Judge Benson Everett Legg. (Court Reporter: Mary Zajac) (kmt, Deputy Clerk) (Entered: 01/29/2009)
40 ORDER Tentatively SETTING date for hearing re: limited damages discovery, for 2/6/09. Signed by Chief Judge Benson Everett Legg on 1/29/09. (das, Deputy Clerk) (Entered: 01/29/2009)
42 ORDER SETTING date for hearing to discuss limited damages discovery for 2/11/09. Signed by Chief Judge Benson Everett Legg on 1/30/09. (das, Deputy Clerk) (Entered: 01/30/2009)
43 ORDER RESETTING date for hearing on limited damages discovery to 2/20/09. Signed by Chief Judge Benson Everett Legg on 2/2/09. (das, Deputy Clerk) Modified on 2/2/2009 (das, Deputy Clerk). (c/m 2/2/09−das) (Entered: 02/02/2009)
44 NOTICE OF FILING OF OFFICIAL TRANSCRIPT of Proceedings held on 1/28/09, before Judge Benson Everett Legg. Court Reporter/Transcriber Mary M. Zajac, Telephone number 410−962−4544. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained from the Court Reporter or through PACER.. Redaction Request due 2/23/2009. Redacted Transcript Deadline set for 3/5/2009. Release of Transcript Restriction set for 5/4/2009. (mmz, Court Reporter) (Entered: 02/05/2009)
45 Supplemental to 15 Response in Opposition to Motion filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit A − NAACP v. Ameriquest Mortgage Co.)(Relman, John) (Entered: 02/18/2009)

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02/18/2009

46 ORDER SETTING FORTH additional questions to be answered during hearing. Signed by Chief Judge Benson Everett Legg on 2/18/09. (das, Deputy Clerk) (c/m Kissi 2/19/09−das) (Entered: 02/19/2009)

02/19/2009

47 Supplemental to 15 Response in Opposition to Motion filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit NCRC v. Accredited)(Relman, John) (Entered: 02/19/2009)

02/20/2009

48 ORDER CONFIRMING rulings made at 2/20/09 hearing on discovery. Signed by Chief Judge Benson Everett Legg on 2/20/09. (Attachments: # 1 Policy Regarding Discovery Disputes)(das, Deputy Clerk) Modified on 4/7/2009 (das, Deputy Clerk). (SEALED DISCOVERY OF EXCEL SPREADSHEET FILED ON CD AND NOT AVAILABLE IN PAPER OF PDF FORMAT− FILED SEPARATELY IN SEALED ROOM) (CD filed w/ chambers as well with permission) (Entered: 02/20/2009)

02/20/2009

49 ORDER DIRECTING counsel to contact chambers to schedule date for telephone conference for the dates of 2/26/09 or 2/27/09. Signed by Chief Judge Benson Everett Legg on 2/20/09. (das, Deputy Clerk) (Entered: 02/20/2009)

02/23/2009

50 ORDER SCHEDULING telephone conference for 3/4/09. Signed by Chief Judge Benson Everett Legg on 2/23/09. (das, Deputy Clerk) (Entered: 02/23/2009)

02/24/2009

51 NOTICE OF FILING OF OFFICIAL TRANSCRIPT of Proceedings held on 2−20−2009, before Judge Legg. Court Reporter/Transcriber Gail Simpkins, Telephone number 410−962−4536. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained from the Court Reporter or through PACER.. Redaction Request due 3/16/2009. Redacted Transcript Deadline set for 3/24/2009. Release of Transcript Restriction set for 5/22/2009. (gak, Court Reporter) (Entered: 02/24/2009)

02/24/2009

52 Joint MOTION for Approval of the Parties' Stipulations by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 3/13/2009 (Kelly, Michael) (Entered: 02/24/2009)

02/25/2009

53 Joint MOTION for an Order Regarding Confidentiality of Discovery Material by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 3/16/2009 (Kelly, Michael) (Entered: 02/25/2009)

02/27/2009

54 STIPULATED ORDER REGARDING CONFIDENTIALITY OF DISCOVERY. Signed by Chief Judge Benson Everett Legg on 2/27/09. (das, Deputy Clerk) (Entered: 03/03/2009)

02/27/2009

55 ORDER APPROVING 52 Joint MOTION for Approval of the Parties' Stipulations regarding discovery filed by Wells Fargo Bank, N.A., Mayor and City Council of Baltimore, Wells Fargo Financial Leasing, Inc.. Signed by Chief Judge Benson Everett Legg on 2/27/09. (dass, Deputy Clerk) Modified on 3/3/2009 (dass, Deputy Clerk). (Entered: 03/03/2009)

03/03/2009

56 Correspondence re: telephone conference scheduled for March 4, 2009 (Relman, John) Modified on 3/3/2009 (dass, Deputy Clerk). (Entered: 03/03/2009)

03/03/2009

57 Correspondence re: Plaintiff's March 3, 2009 Correspondence re: telephone conference scheduled for March 4, 2009 (Sandler, Andrew) (Entered: 03/03/2009)

03/06/2009

58 ORDER SETTING date for an all day hearing on pending motion to dismiss on 6/29/09; DIRECTING parties to confer and propose joint structure for the hearing by 5/1/09; DIRECTING the court will hear argument on dispositive questions set forth. Signed by Chief Judge Benson Everett Legg on 3/6/09. (das, Deputy Clerk) (Entered: 03/09/2009)

03/26/2009

59 MOTION to Withdraw Appearance by Defendants' Counsel Skadden, Arps, Slate, Meagher &Flom, LLP by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 4/13/2009 (Sandler, Andrew) (Entered: 03/26/2009)

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03/26/2009

60 STIPULATION by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Sandler, Andrew) (Entered: 03/26/2009)

03/27/2009

61 Paperless ORDER granting 59 MOTION to Withdraw Appearance by Defendants' Counsel Skadden, Arps, Slate, Meagher &Flom, LLP. Signed by Chief Judge Benson Everett Legg on 03/27/09. (Legg, Benson) (Entered: 03/27/2009)

03/27/2009

62 Paperless ORDER granting re 60 Joint Stipulation filed by Wells Fargo Bank, N.A., Mayor and City Council of Baltimore, Wells Fargo Financial Leasing, Inc. Signed by Chief Judge Benson Everett Legg on 03/27/09. (Legg, Benson) (Entered: 03/27/2009)

04/06/2009

63 RESPONSE re 48 Order filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Sandler, Andrew) (Entered: 04/06/2009)

04/06/2009

64 MOTION to Seal by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 4/23/2009 (Sandler, Andrew) (Entered: 04/06/2009)

04/06/2009

65 Correspondence re: February 20, 2009 Order (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3)(Relman, John) (Entered: 04/06/2009)

04/08/2009

66 MARGINAL ORDER granting 64 Motion of Defendants to Seal limited discovery.. Signed by Chief Judge Benson Everett Legg on 4/20/09. (dass, Deputy Clerk) (Entered: 04/08/2009)

04/17/2009

67 NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of March 04, 2009, (Telephone Conference) before Judge Benson E. Legg, Court Reporter/Transcriber Compuscribe. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained from the Court Reporter or through PACER. Redaction Request due 5/5/2009. Redacted Transcript Deadline set for 5/15/2009. Release of Transcript Restriction set for 7/13/2009. (nrm, Deputy Clerk) Modified on 4/17/2009 (nrm, Deputy Clerk). (Entered: 04/17/2009)

04/27/2009

68 Joint REQUEST for Extension of Time to File Proposed Joint Structure for June 29, 2009 Hearing (Relman, John) (Entered: 04/27/2009)

04/28/2009

69 PAPERLESS ORDER GRANTING re 68 Request for Extension of Time. Parties' proposed joint structure is due on or before 5/15/2009. Signed by Chief Judge Benson Everett Legg on 04/28/2009. (Legg, Benson Everett) (Entered: 04/28/2009)

04/29/2009

70 JUDGMENT of USCA (certified copy) "Dismissing" the appeal as to 19 Notice of Cross Appeal filed by David Kissi (Attachments: # 1 opinion)(nrm, Deputy Clerk) (Entered: 04/29/2009)

05/15/2009

71 ORDER DIRECTING the parties have until 6/1/09 to propose their joint stucture for the 6/29/09 hearing and to contact chambers to schedule a telephone conference if the hearing date is in jeopardy. Signed by Chief Judge Benson Everett Legg on 5/15/09. (das, Deputy Clerk) (Entered: 05/15/2009)

05/19/2009

72 NOTICE of Appearance by Jonice Gray Tucker on behalf of all defendants (Tucker, Jonice) (Entered: 05/19/2009)

05/21/2009

73 MANDATE of USCA as to 19 Notice of Cross Appeal filed by David Kissi (nrm, Deputy Clerk) (Entered: 05/22/2009)

06/01/2009

74 MOTION to Amend/Correct 1 Complaint, by Mayor and City Council of Baltimore Responses due by 6/18/2009 (Attachments: # 1 Text of Proposed Order, # 2 Exhibit First Amended Complaint, # 3 Exhibit Attachment A to First Amended Complaint, # 4 Exhibit Attachment B to First Amended Complaint, # 5 Exhibit Attachment C to First Amended Complaint, # 6 Exhibit Attachment D to First Amended Complaint, # 7 Exhibit Attachment E to First Amended Complaint, # 8 Exhibit Attachment F to First Amended Complaint, # 9 Exhibit Attachment G to First Amended Complaint, # 10 Exhibit Attachment H to First Amended Complaint, # 11 Exhibit Attachment I to First Amended Complaint, # 12 Exhibit Attachment J to First Amended Complaint, # 13 Exhibit Attachment K to First Amended Complaint, # 14 Exhibit Attachment L to First Amended Complaint, #

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06/01/2009 06/01/2009 06/01/2009 06/02/2009 06/03/2009 06/03/2009 06/03/2009 06/09/2009 06/09/2009
06/17/2009
06/19/2009 06/22/2009

15 Exhibit Attachment M to First Amended Complaint, # 16 Exhibit Attachment N to First Amended Complaint, # 17 Exhibit Attachment O to First Amended Complaint, # 18 Exhibit Attachment P to First Amended Complaint, # 19 Exhibit Attachment Q to First Amended Complaint, # 20 Exhibit Attachment R to First Amended Complaint, # 21 Exhibit Attachment S to First Amended Complaint, # 22 Exhibit Redline Version of Initial Complaint)(Relman, John) (Entered: 06/01/2009)
75 MOTION for Reconsideration re 58 Order, by Mayor and City Council of Baltimore Responses due by 6/18/2009 (Attachments: # 1 Exhibit, # 2 Exhibit, # 3 Exhibit, # 4 Exhibit, # 5 Exhibit, # 6 Exhibit, # 7 Exhibit, # 8 Exhibit, # 9 Text of Proposed Order)(Relman, John) (Entered: 06/01/2009)
76 Correspondence re: Structure of June 29, 2009 Evidentiary Hearing (Relman, John) (Entered: 06/01/2009)
80 MOTION to join as co−plaintiff by David Kissi (Attachments: # 1 attorney appearance, # 2 Docket Sheet, # 3 Delaware Complaint, # 4 envelope)(das, Deputy Clerk)(c/s) (Entered: 06/05/2009)
78 RESPONSE to 76 Correspondence re: Structure of 6/29/09 Evidentiary Hearing filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. (Attachments: # 1 Correspondence to John Relman)(das, Deputy Clerk) (Entered: 06/03/2009)
77 Correspondence re: June 29, 2009 hearing (Relman, John) (Entered: 06/03/2009)
79 ORDER denying the City's 75 Motion for Reconsideration; DIRECTING the 6/29/09 hearing will proceed as scheduled; CONFIRMING the pre−hearing schedule as set by the parties during 6/3/09 telephone conference call. Signed by Chief Judge Benson Everett Legg on 6/3/09. (das, Deputy Clerk) (Entered: 06/03/2009)
Telephone Conference held on 6/3/2009 before Chief Judge Benson Everett Legg. (das, Deputy Clerk) (Entered: 06/03/2009)
81 MARGINAL ORDER denying 80 Motion of David Kissi to join as a co−plaintiff. Signed by Chief Judge Benson Everett Legg on 6/9/09. (das, Deputy Clerk) (c/m 6/9/09−das) (Entered: 06/09/2009)
82 NOTICE OF FILING OF OFFICIAL TRANSCRIPT (Telephone Conference) for dates of June 03, 2009, before Judge Benson E. Legg, re 31 Notice of Interlocutory Appeal Court Reporter/Transcriber CompuScribe. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained from the Court Reporter or through PACER. Redaction Request due 6/29/2009. Redacted Transcript Deadline set for 7/7/2009. Release of Transcript Restriction set for 9/4/2009. (nrm, Deputy Clerk) (Entered: 06/09/2009)
83 NOTICE by Mayor and City Council of Baltimore Of Filing Of Supplemental Declarations And Response To Court's Questions In Preparation For June 29, 2009 Hearing (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13, # 14 Exhibit 14, # 15 Exhibit 15, # 16 Exhibit 16, # 17 Exhibit 17, # 18 Exhibit 18, # 19 Exhibit 19, # 20 Exhibit 20, # 21 Exhibit 21, # 22 Exhibit 22, # 23 Exhibit 23, # 24 Exhibit 24, # 25 Exhibit 25, # 26 Exhibit 26, # 27 Exhibit 27, # 28 Exhibit 28)(Relman, John) (Entered: 06/17/2009)
84 MOTION to Strike Plaintiff's 83 Filing of 6/17/09, that directly contravenes this court's 6/3/09 Order, by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 7/6/2009 (Attachments: # 1 Memorandum)(Tucker, Jonice) Modified on 6/22/2009 (das, Deputy Clerk). (Entered: 06/19/2009)
85 RESPONSE re 79 Order on Motion for Reconsideration, filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Attachments: # 1 Exhibit, # 2 Exhibit)(Tucker, Jonice) (Entered: 06/22/2009)

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06/24/2009

86 NOTICE by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. re 79 Order on Motion for Reconsideration, Describing June 29, 2009 Hearing Presentation (Tucker, Jonice) (Entered: 06/24/2009)

06/24/2009

87 NOTICE by Mayor and City Council of Baltimore re 79 Order on Motion for Reconsideration, (Attachments: # 1 Exhibit Attachment A)(Relman, John) (Entered: 06/24/2009)

06/24/2009

88 MOTION for Other Relief To Prohibit Defendants From Submitting Evidence At The June 29 Hearing Or, In The Alternative, For An Order Directing Defendants To Produce Their Evidence By June 26 by Mayor and City Council of Baltimore Responses due by 7/13/2009 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 06/24/2009)

06/25/2009

89 MOTION to Strike 88 MOTION for Other Relief To Prohibit Defendants From Submitting Evidence At The June 29 Hearing Or, In The Alternative, For An Order Directing Defendants To Produce Their Evidence By June 26, 87 Notice (Other) by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 7/13/2009 (Attachments: # 1 Memorandum in Support of Motion to Strike)(Tucker, Jonice) (Entered: 06/25/2009)

06/26/2009

90 Correspondence re: June 26, 2009 Order (Relman, John) (Entered: 06/26/2009)

06/26/2009

91 ORDER DIRECTING the city to submit by close of business on 6/26/09 a brief letter as therein set forth; denying 88 Motion to prohibit Defendants from submitting evidence at the 6/29/09 hearing or in the alternative for an order directing defendants to produce their evidence by 6/26/09 ; granting 89 Motion to Strike the City' reply beginning at roman numeral two and including the attachment. Signed by Chief Judge Benson Everett Legg on 6/26/09. (das, Deputy Clerk) (Entered: 06/29/2009)

06/26/2009

Telephone Conference held on 6/26/2009 before Chief Judge Benson Everett Legg. (das, Deputy Clerk) (Entered: 06/30/2009)

06/29/2009

92 Motion Hearing held on 6/29/2009 held before Chief Judge Benson Everett Legg. (Court Reporter: Martin Giordano) (kmt, Deputy Clerk) (Entered: 06/30/2009)

07/01/2009

93 PLAINTIFF'S EXHIBIT LIST by Mayor and City Council of Baltimore. (eg, Deputy Clerk) (Entered: 07/01/2009)

07/01/2009

94 DEFENDANT'S EXHIBIT LIST. (eg, Deputy Clerk) (Entered: 07/01/2009)

07/01/2009

95 Stipulation re: Return of exhibits to Counsel. (eg, Deputy Clerk) (Entered: 07/01/2009)

07/02/2009

96 ORDER granting 74 Motion to Amend/Correct Complaint; denying 10 Motion to Dismiss; denying 10 Motion to Dismiss for Lack of Jurisdiction; SETTING Hearing for 7/20/09. Signed by Chief Judge Benson Everett Legg on 7/2/09. (das, Deputy Clerk) (Entered: 07/02/2009)

07/02/2009

97 AMENDED COMPLAINT against all defendants filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E, # 6 Exhibit F, # 7 Exhibit G, # 8 Exhibit H, # 9 Exhibit I, # 10 Exhibit J, # 11 Exhibit K, # 12 Exhibit L, # 13 Exhibit M, # 14 Exhibit N, # 15 Exhibit O, # 16 Exhibit P, # 17 Exhibit Q, # 18 Exhibit R, # 19 Exhibit S)(das, Deputy Clerk) (Entered: 07/02/2009)

07/08/2009

98 ORDER denying 30 Motion for Reconsideration ; denying 35 Motion to take judicial notice of certain documents; denying 84 Motion to Strike. Signed by Chief Judge Benson Everett Legg on 7/8/09. (das, Deputy Clerk) (c/m 7/8/09−das) (Entered: 07/08/2009)

07/10/2009

99 Joint REQUEST for Extension of Time to File Proposed Discovery Plan and Schedule (Relman, John) (Entered: 07/10/2009)

07/13/2009

100 PAPERLESS ORDER GRANTING re 99 Request for Extension of Time. Discovery plan due on or before 7/29/09; hearing re scheduling will be held on 8/6/09 at 2:30 p.m. in Courtroom 7A. Signed by Chief Judge Benson Everett Legg on 07/13/2009. (Legg, Benson Everett) (Entered: 07/13/2009)

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07/16/2009

101 MOTION to Seal Plaintiff Mayor and City Council of Baltimore's Motion to Modify Stipulated Order Regarding Confidentiality of Discovery Material by Mayor and City Council of Baltimore Responses due by 8/3/2009 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 07/16/2009)

07/16/2009

102 NOTICE by Mayor and City Council of Baltimore of Filing of Document Under Seal (Relman, John) (Entered: 07/16/2009)

07/16/2009

103 ORDER granting 101 Motion to Seal Motion to Modify Stipulated Order re: Confidentiality of Discovery Material. Signed by Chief Judge Benson Everett Legg on 7/16/09. (hmls, Deputy Clerk) (Entered: 07/16/2009)

07/16/2009

104 MOTION to Amend/Correct 54 Protective/Confidentiality Order by Mayor and City Council of Baltimore. Responses due by 8/3/2009. (hmls, Deputy Clerk) (Additional attachment(s) added on 7/16/2009: # 1 SEALED MOTION, # 2 SEALED TEXT OF PROPOSED ORDER) (hmls, Deputy Clerk). Modified on 10/1/2009 (cag, Deputy Clerk). (Entered: 07/16/2009)

07/24/2009

105 NOTICE OF FILING OF OFFICIAL TRANSCRIPT for dates of June 26, 2009 Telephone Conference, before Judge Benson E. Legg, Court Reporter/Transcriber CompuScribe. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained from the Court Reporter or through PACER. Redaction Request due 8/11/2009. Redacted Transcript Deadline set for 8/21/2009. Release of Transcript Restriction set for 10/19/2009. (nrm, Deputy Clerk) (Entered: 07/24/2009)

07/29/2009

106 NOTICE by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. re 96 Order on Motion to Amend/Correct, Order on Motion to Dismiss, Order on Motion to Dismiss/Lack of Jurisdiction of Defendants' Proposed Discovery Plan (Tucker, Jonice) (Entered: 07/29/2009)

07/29/2009

107 Correspondence re: Proposed Discovery Plan (Attachments: # 1 Exhibit 1, # 2 Exhibit 2)(Relman, John) (Entered: 07/29/2009)

07/31/2009

108 NOTICE OF APPEAL as to 98 Order on Motion for Miscellaneous Relief, Order on Motion to Strike, Order on Motion for Reconsideration by David Kissi. Appeal Record due by 8/31/2009. (Attachments: # 1 page 2, # 2 page 3, # 3 page 4 &5) (nrm, Deputy Clerk) (rcv'd 7/17/09) (Entered: 07/31/2009)

07/31/2009

109 Transmission of Notice of Appeal and Docket Sheet to US Court of Appeals re 108 Notice of Appeal,. IMPORTANT NOTICE: To access forms which you are required to file with the United States Court of Appeals for the Fourth Circuit please go to http://www.ca4.uscourts.gov and click on Forms &Notices. (nrm, Deputy Clerk) (Entered: 07/31/2009)

07/31/2009

110 Correspondence re: Proposed Discovery Plan (Relman, John) (Entered: 07/31/2009)

08/03/2009

111 MOTION to Strike 110 Miscellaneous Correspondence by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 8/20/2009 (Attachments: # 1 Exhibit Memorandum in Support)(Tucker, Jonice) (Entered: 08/03/2009)

08/03/2009

112 NOTICE by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. of Filing of Document Under Seal (Tucker, Jonice) (Entered: 08/03/2009)

08/03/2009

113 MOTION to Seal by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 8/20/2009 (Tucker, Jonice) (Entered: 08/03/2009)

08/03/2009

114 ORDER granting Defendants' 113 Motion to Seal their memorandum in opposition to Plaintiff's motion to modify stipulated order regarding confidentiality of discovery. Signed by Chief Judge Benson Everett Legg on 8/3/09. (das, Deputy Clerk) (Entered: 08/04/2009)

08/03/2009

115 SEALED Memorandum in opposition to 104 MOTION to Amend/Correct 54 Protective/Confidentiality Order MOTION to Amend/Correct 54 Protective/Confidentiality Order filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. (das, Deputy Clerk) (das, Deputy Clerk). Modified on

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08/05/2009 08/05/2009
08/05/2009 08/05/2009 08/06/2009 08/06/2009 08/06/2009
08/06/2009
08/07/2009 08/07/2009 08/13/2009 09/18/2009
09/23/2009 09/23/2009
09/24/2009

8/4/2009 (das, Deputy Clerk). (Entered: 08/04/2009)
116 MEMORANDUM to Counsel RE: questions that will be taken up at the 8/6/09 discovery conference hearing and stating the courts tentative rulings on some of the issues. Signed by Chief Judge Benson Everett Legg on 8/5/09. (das, Deputy Clerk) (Entered: 08/05/2009)
117 MOTION to Seal Plaintiff Mayor and City Council of Baltimore's Reply Memorandum in Support of Its Motion to Modify Stipulated Order Regarding Confidentiality of Discovery Material by Mayor and City Council of Baltimore Responses due by 8/24/2009 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 08/05/2009)
118 NOTICE by Mayor and City Council of Baltimore of Filing of Document Under Seal (Relman, John) (Entered: 08/05/2009)
119 RESPONSE in Opposition re 111 MOTION to Strike 110 Miscellaneous Correspondence filed by Mayor and City Council of Baltimore. Replies due by 8/19/2009. (Relman, John) (Entered: 08/05/2009)
120 ORDER OF RECUSAL reassigning case to Judge J. Frederick Motz; DIRECTING 8/6/09 hearing will go forward as scheduled with Judge Motz in Courtroom 5A. Signed by Chief Judge Benson Everett Legg on 8/6/09. (das, Deputy Clerk) (Entered: 08/06/2009)
121 USCA Case Number 09−1872 for 108 Notice of Appeal, filed by David Kissi. Case Manager − Sue Ellen Nagle (nrm, Deputy Clerk) (Entered: 08/06/2009)
122 ORDER granting Plaintiff's 117 Motion to Seal Reply memorandum in support of motion to modify stipulated order regarding Confidentiality of Discovery Material. Signed by Chief Judge Benson Everett Legg on 8/5/09. (dass, Deputy Clerk) Modified on 8/6/2009 (dass, Deputy Clerk). (Originally filed 8/5/09) (Entered: 08/06/2009)
123 SEALED REPLY to Response to 104 MOTION to Amend/Correct 54 Protective/Confidentiality Order MOTION to Amend/Correct 54 Protective/Confidentiality Order filed by Mayor and City Council of Baltimore. (dass, Deputy Clerk) (Additional attachment(s) added on 8/6/2009: # 1 Reply in support of motion to modify) (dass, Deputy Clerk). Modified on 8/6/2009 (dass, Deputy Clerk). (Entered: 08/06/2009)
124 Correspondence confirming matters discussed during the conference. (Motz, J.) (Entered: 08/07/2009)
125 Motions Hearing held on 8/6/2009 held before Judge J. Frederick Motz. (Court Reporter: Christine Asif) (kmt, Deputy Clerk) (Entered: 08/07/2009)
Case reassigned to Judge J. Frederick Motz. Chief Judge Benson Everett Legg no longer assigned to the case. (ljs, Deputy Clerk) (Entered: 08/13/2009)
126 MOTION to Dismiss Amended Complaint by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 10/5/2009 (Attachments: # 1 Memorandum of Law, # 2 Exhibit 1, # 3 Exhibit 2, # 4 Exhibit 3, # 5 Exhibit 4, # 6 Exhibit 5 (Part 1 of 2), # 7 Exhibit 5 (Part 2 of 2), # 8 Text of Proposed Order)(Tucker, Jonice) (Entered: 09/18/2009)
127 Correspondence setting a conference call. (Motz, J.) (Entered: 09/23/2009)
128 MOTION for Extension of Time to File Response/Reply as to 126 MOTION to Dismiss Amended Complaint by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 10/13/2009 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 09/23/2009)
129 Paperless ORDER granting 128 Motion for Extension of Time to File Response/Reply. Signed by Judge J. Frederick Motz on 9/24/09. (Motz, J.) (Entered: 09/24/2009)

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10/01/2009

Telephone Conference held on 10/1/2009 before Judge J. Frederick Motz. (das, Deputy Clerk) (Entered: 10/07/2009)

10/06/2009

131 RULE 45 MANDATE of USCA as to 108 Notice of Appeal, filed by David Kissi (nrm, Deputy Clerk) (Entered: 10/08/2009)

10/06/2009

132 ORDER of USCA "Dismissing" this proceeding for failure to prosecute pursuant to Local Rule 45 as to 108 Notice of Appeal, filed by David Kissi (nrm, Deputy Clerk) (Entered: 10/08/2009)

10/16/2009

133 RESPONSE in Opposition re 126 MOTION to Dismiss Amended Complaint filed by Mayor and City Council of Baltimore. Replies due by 10/30/2009. (Attachments: # 1 Appendix)(Relman, John) (Entered: 10/16/2009)

11/05/2009

134 MOTION to Appear Pro Hac Vice for Valerie L. Hletko on behalf of Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Filing fee $ 50, receipt number 04160000000002311506. by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. (Tucker, Jonice) (Entered: 11/05/2009)

11/06/2009

135 PAPERLESS ORDER granting 134 Motion to Appear Pro Hac Vice for attorney Valerie L. Hletko on behalf of Wells Fargo Bank, N.A. and Wells Fargo Financial Leasing, Inc. Directing attorney Valerie L. Hletko to register on−line for CM/ECF at http://www.mdd.uscourts.gov/attorney/registration.asp. Signed by Clerk on 11/06/09. (md, Deputy Clerk) (Entered: 11/06/2009)

11/06/2009

136 REPLY to Response to Motion re 126 MOTION to Dismiss Amended Complaint filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Tucker, Jonice) (Entered: 11/06/2009)

11/24/2009

137 A hearing on all pending motions will be held in courtroom 5A at 9:30 a.m. on Monday, December 14, 2009. (Motz, J.) (Entered: 11/24/2009)

12/15/2009

138 Correspondence re: Tax Revenue Loss Damages (Attachments: # 1 Exhibit Immergluck &Smith Study, # 2 Exhibit Shlay &Whitman Study, # 3 Exhibit Dr. Richard Voith Declaration, # 4 Exhibit Dr. Richard Voith Testimony, # 5 Exhibit Dr. Ira Goldstein Declaration, # 6 Exhibit Baltimore Resident Declarations)(Relman, John) (Entered: 12/15/2009)

12/17/2009

139 MOTION to Strike 138 Miscellaneous Correspondence, by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 1/4/2010 (Attachments: # 1 Memorandum in Support)(Tucker, Jonice) (Entered: 12/17/2009)

12/22/2009

140 RESPONSE in Opposition re 139 MOTION to Strike 138 Miscellaneous Correspondence, filed by Mayor and City Council of Baltimore. Replies due by 1/8/2010. (Relman, John) (Entered: 12/22/2009)

01/06/2010

141 OPINION. Signed by Judge J. Frederick Motz on 1/6/09. (dass, Deputy Clerk) (Entered: 01/06/2010)

01/06/2010

142 ORDER granting 126 Motion of Defendants to Dismiss Amended Complaint; granting Plaintiff leave to file a second amended complaint on or before 2/3/10. Signed by Judge J. Frederick Motz on 1/6/10. (dass, Deputy Clerk) (Entered: 01/06/2010)

01/07/2010

143 NOTICE OF FILING OF OFFICIAL TRANSCRIPT of Proceedings held on 12/14/2009, before Judge J. Frederick Motz. Court Reporter/Transcriber Christine Asif, Telephone number 410−962−4492. Total number of pages filed: 97. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained from the Court Reporter or through PACER... Redaction Request due 1/28/2010. Redacted Transcript Deadline set for 2/8/2010. Release of Transcript Restriction set for 4/7/2010. (ca, Court Reporter) (Entered: 01/07/2010)

01/12/2010

144 Correspondence regarding January 14, 2010 conference call. (Motz, J.) (Entered: 01/12/2010)

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01/12/2010

145 The conference call scheduled for January 14, 2010 at 4:30 p.m. is hereby rescheduled to January 14, 2010 at 3:00 p.m. I ask counsel for plaintiff to initiate the call. Thank you. (Motz, J.) (Entered: 01/12/2010)

01/14/2010

Scheduling Conference held on 1/14/2010 held before Judge J. Frederick Motz. (mdw, Deputy Clerk) (Entered: 01/15/2010)

01/15/2010

146 Correspondence confirming matters discussed during the conference. (Motz, J.) (Entered: 01/15/2010)

02/18/2010

147 STIPULATION re 146 Miscellaneous Correspondence Extending Time for Filing of Second Amended Complaint by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Relman, John) (Entered: 02/18/2010)

02/19/2010

148 Paperless ORDER approving re 147 Stipulation filed by Wells Fargo Bank, N.A., Mayor and City Council of Baltimore, Wells Fargo Financial Leasing, Inc.. Signed by Judge J. Frederick Motz on 2/19/10. (Motz, J.) (Entered: 02/19/2010)

03/04/2010

149 The scheduling conference scheduled for March 9, 2010 is hereby rescheduled to March 23, 2010 at 4:45 p.m. I ask counsel for plaintiff to arrange the call. (Motz, J.) (Entered: 03/04/2010)

03/11/2010

150 MOTION for Extension of Time by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 3/29/2010 (Tucker, Jonice) (Entered: 03/11/2010)

03/11/2010

151 Proposed Order to 150 Motion for Extensioin of Time by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. (Tucker, Jonice) Modified on 3/12/2010 (das, Deputy Clerk). (Entered: 03/11/2010)

03/12/2010

152 Paperless ORDER granting 150 Motion for Extension of Time. Signed by Judge J. Frederick Motz on 3/12/10. (Motz, J.) (Entered: 03/12/2010)

04/07/2010

153 AMENDED COMPLAINT against Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc., filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit Attachment A to Second Amended Complaint, # 2 Exhibit Attachment B to Second Amended Complaint, # 3 Exhibit Attachment C to Second Amended Complaint, # 4 Exhibit Attachment D to Second Amended Complaint, # 5 Exhibit Attachment E to Second Amended Complaint, # 6 Exhibit Attachment F to Second Amended Complaint, # 7 Exhibit Attachment G to Second Amended Complaint, # 8 Exhibit Attachment H to Second Amended Complaint, # 9 Exhibit Attachment I to Second Amended Complaint, # 10 Exhibit Attachment J to Second Amended Complaint, # 11 Exhibit Attachment K to Second Amended Complaint, # 12 Exhibit Attachment L to Second Amended Complaint, # 13 Exhibit Attachment M to Second Amended Complaint, # 14 Exhibit Attachment N to Second Amended Complaint, # 15 Exhibit Attachment O to Second Amended Complaint, # 16 Exhibit Attachment P to Second Amended Complaint, # 17 Exhibit Attachment Q to Second Amended Complaint, # 18 Exhibit Attachment R to Second Amended Complaint, # 19 Exhibit Attachment S to Second Amended Complaint, # 20 Exhibit Attachment T to Second Amended Complaint, # 21 Exhibit Redline Version of First Amended Complaint)(Relman, John) (Entered: 04/07/2010)

04/13/2010

Scheduling Conference held on 4/13/2010 before Judge J. Frederick Motz. (mdw, Deputy Clerk) (Entered: 04/16/2010)

04/14/2010 154 Correspondence confirming schedule. (Motz, J.) (Entered: 04/14/2010)

05/25/2010

155 MOTION to Dismiss Second Amended Complaint for Declaratory and Injunctive Relief and Damages by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 6/11/2010 (Attachments: # 1 Memorandum of Law, # 2 Exhibit 1, # 3 Exhibit 2, # 4 Exhibit 3, # 5 Exhibit 4, # 6 Exhibit 5, # 7 Exhibit 6, # 8 Exhibit 7, # 9 Exhibit 8, # 10 Exhibit 9, # 11 Exhibit 10, # 12 Exhibit 11, # 13 Exhibit 12, # 14 Exhibit 13, # 15 Exhibit 14, # 16 Exhibit 15, # 17 Exhibit 16, # 18 Exhibit 17, # 19 Exhibit 18 (1 of 2), # 20 Exhibit 18 (2 of 2), # 21 Exhibit 19, # 22 Exhibit 20, # 23 Exhibit 21, # 24 Text of Proposed Order)(Hletko, Valerie) (Entered: 05/25/2010)

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06/09/2010

156 This will confirm that the hearing will be held on Wednesday, September 8, 2010 at 9:30 am. (Motz, J.) (Entered: 06/09/2010)

06/18/2010

157 Joint MOTION for Extension of Time by Mayor and City Council of Baltimore, Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 7/6/2010 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 06/18/2010)

06/18/2010

158 Paperless ORDER granting 157 Motion for Extension of Time. Signed by Judge J. Frederick Motz on 6/18/10. (Motz, J.) (Entered: 06/18/2010)

06/30/2010

159 MOTION to Withdraw as Attorney by Mayor and City Council of Baltimore Responses due by 7/19/2010 (Attachments: # 1 Text of Proposed Order)(Blower, Bradley) (Entered: 06/30/2010)

06/30/2010

160 MOTION to Appear Pro Hac Vice for Megan Moran−Gates on behalf of Mayor and City Council of Baltimore ( Filing fee $ 50, receipt number 0416−2585897.) by Mayor and City Council of Baltimore (Blower, Bradley) (Entered: 06/30/2010)

07/02/2010

161 PAPERLESS ORDER granting 160 Motion to Appear Pro Hac Vice for attorney Megan Moran−Gates on behalf of Mayor and City Council of Baltimore. Directing attorney Megan Moran−Gates to register on−line for CM/ECF at http://www.mdd.uscourts.gov/attorney/registration.asp. Signed by Clerk on 07/02/2010. (md, Deputy Clerk) (Entered: 07/02/2010)

07/06/2010

162 MOTION for Leave to File Excess Pages by Mayor and City Council of Baltimore Responses due by 7/23/2010 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 07/06/2010)

07/06/2010

163 RESPONSE in Opposition re 155 MOTION to Dismiss Second Amended Complaint for Declaratory and Injunctive Relief and Damages filed by Mayor and City Council of Baltimore. Replies due by 7/23/2010. (Attachments: # 1 Appendix of Cases Not Generally Reported, # 2 Affidavit of Glenn Schlactus)(Relman, John) (Entered: 07/06/2010)

07/14/2010

164 RESPONSE in Opposition re 162 MOTION for Leave to File Excess Pages filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. Replies due by 8/2/2010. (Hletko, Valerie) (Entered: 07/14/2010)

07/16/2010

165 REPLY to Response to Motion re 162 MOTION for Leave to File Excess Pages filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit 1)(Relman, John) (Entered: 07/16/2010)

07/19/2010

166 Paperless ORDER granting 162 Motion for Leave to File Excess Pages. Signed by Judge J. Frederick Motz on 7/19/10. (Motz, J.) (Entered: 07/19/2010)

07/21/2010

167 Counsel for plaintiff has e−filed document number 163 which (with any attached exhibits) exceeds 15 pages in length. Counsel have not submitted a paper copy of that document as required by the court's CM/ECF instructions. Counsel are directed to do so immediately by mailing or hand−delivering to chambers a paper copy of the document, together with a notice that the document has been e−filed. (Motz, J.) (Entered: 07/21/2010)

07/30/2010

168 REPLY to Response to Motion re 155 MOTION to Dismiss Second Amended Complaint for Declaratory and Injunctive Relief and Damages filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Attachments: # 1 Appendix, # 2 Exhibit 1, # 3 Exhibit 2)(Sandler, Andrew) (Entered: 07/30/2010)

08/19/2010

169 MOTION for Leave to File Surreply Brief to Address a New Decision First Discussed By Defendants In Their Reply Brief by Mayor and City Council of Baltimore Responses due by 9/7/2010 (Attachments: # 1 Exhibit 1, # 2 Text of Proposed Order)(Relman, John) (Entered: 08/19/2010)

08/19/2010

170 PAPERLESS ORDER granting 169 Motion of Plaintiff for Leave to File Surreply Brief. Signed by Judge J. Frederick Motz on 8/19/10. (mcb, Deputy Clerk) (Entered: 08/19/2010)

08/19/2010

171 SURREPLY BRIEF in Opposition to Defendants' MOTION to Dismiss the Second Amended Complaint filed by Mayor and City Council of Baltimore. (mcb, Deputy

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09/08/2010 09/13/2010 09/14/2010 09/14/2010 10/21/2010
10/21/2010 11/08/2010 11/08/2010 11/09/2010 12/03/2010 12/22/2010 01/11/2011 04/22/2011

Clerk) (Entered: 08/19/2010)
172 Motion Hearing held on 9/8/2010 re 155 MOTION to Dismiss Second Amended Complaint for Declaratory and Injunctive Relief and Damages filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Oral arguments only, before Judge J. Frederick Motz. (Court Reporter: Christine Asif) (mdw, Deputy Clerk) (Entered: 09/09/2010)
173 Correspondence re: September 8, 2010 Motion Hearing (Relman, John) (Entered: 09/13/2010)
174 Order granting Defendants' Moton to Dismiss the Second Amended Complaint and granting Plaintiff leave to file a Third Amended Complaint. Signed by Judge J. Frederick Motz on 9/14/10. (bmh, Deputy Clerk) (Entered: 09/14/2010)
175 ORDER granting 155 Defendants' Motion to Dismiss the Second Amended Complaint; and granting Plaintiff leave to file a Third Amended Complaint. Signed by Judge J. Frederick Motz on 9/14/10. (bmh, Deputy Clerk) (Entered: 09/14/2010)
176 AMENDED COMPLAINT against All Defendants, filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit A to Third Amended Complaint, # 2 Exhibit B to Third Amended Complaint, # 3 Exhibit C to Third Amended Complaint, # 4 Exhibit D to Third Amended Complaint, # 5 Exhibit E to Third Amended Complaint, # 6 Exhibit F to Third Amended Complaint, # 7 Exhibit G to Third Amended Complaint, # 8 Exhibit H to Third Amended Complaint, # 9 Exhibit I to Third Amended Complaint, # 10 Exhibit J to Third Amended Complaint, # 11 Exhibit K to Third Amended Complaint, # 12 Exhibit L to Third Amended Complaint, # 13 Exhibit M to Third Amended Complaint, # 14 Exhibit N to Third Amended Complaint, # 15 Exhibit O to Third Amended Complaint, # 16 Exhibit P to Third Amended Complaint, # 17 Exhibit Q to Third Amended Complaint, # 18 Exhibit R to Third Amended Complaint, # 19 Exhibit S to Third Amended Complaint, # 20 Exhibit T to Third Amended Complaint, # 21 Exhibit Redline Version of Second Amended Complaint)(Relman, John) (Entered: 10/21/2010)
177 Correspondence re: Third Amended Complaint (Relman, John) (Entered: 10/21/2010)
178 MOTION for Extension of Time by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 11/26/2010 (Attachments: # 1 Text of Proposed Order)(Hletko, Valerie) (Entered: 11/08/2010)
179 RESPONSE in Opposition re 178 MOTION for Extension of Time filed by Mayor and City Council of Baltimore. Replies due by 11/26/2010. (Relman, John) (Entered: 11/08/2010)
180 Letter ORDER confirming the dates set during the conference held today. Signed by Judge J. Frederick Motz on 11/9/10. (Motz, J.) (Entered: 11/09/2010)
181 MOTION to Dismiss Third Amended Complaint for Declaratory and Injunctive Relief and Damages by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Responses due by 12/20/2010 (Attachments: # 1 Memorandum of Law, # 2 Exhibit 1, # 3 Exhibit 2, # 4 Text of Proposed Order)(Hletko, Valerie) (Entered: 12/03/2010)
182 RESPONSE in Opposition re 181 MOTION to Dismiss Third Amended Complaint for Declaratory and Injunctive Relief and Damages filed by Mayor and City Council of Baltimore. Replies due by 1/10/2011. (Relman, John) (Entered: 12/22/2010)
183 REPLY to Response to Motion re 181 MOTION to Dismiss Third Amended Complaint for Declaratory and Injunctive Relief and Damages filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Hletko, Valerie) (Entered: 01/11/2011)
184 Correspondence setting scheduling conference. (Motz, J.) (Entered: 04/22/2011)

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04/22/2011

185 MEMORANDUM Signed by Judge J. Frederick Motz on 4/22/11. (cag, Deputy Clerk) (Entered: 04/22/2011)

04/22/2011

186 ORDER denying 181 Motion by Wells Fargo to Dismiss the third amended complaint. Signed by Judge J. Frederick Motz on 4/22/11 (cag, Deputy Clerk) (Entered: 04/22/2011)

05/03/2011

187 MOTION to Appear Pro Hac Vice for Tara K. Ramchandani ( Filing fee $ 50, receipt number 0416−2981824.) by Mayor and City Council of Baltimore (Relman, John) (Entered: 05/03/2011)

05/05/2011

188 MOTION for Extension of Time to File Response/Reply by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. Responses due by 5/23/2011 (Attachments: # 1 Text of Proposed Order)(Hletko, Valerie) (Entered: 05/05/2011)

05/05/2011

189 Due to a change in my schedule, the scheduling conference scheduled for May 10, 2011 is hereby rescheduled to May 17, 2011 at 9:00 am. (Motz, J.) (Entered: 05/05/2011)

05/05/2011

190 Paperless ORDER granting 188 Motion for Extension of Time to File Response/Reply. Signed by Judge J. Frederick Motz on 5/5/11. (Motz, J.) (Entered: 05/05/2011)

05/10/2011

191 QC NOTICE: 187 Motion to Appear Pro Hac Vice filed by Mayor and City Council of Baltimore needs to be modified. See attachment for details and corrective actions needed regarding missing or incomplete information. (nrm, Deputy Clerk) (Entered: 05/10/2011)

05/10/2011

192 CORRECTED MOTION to Appear Pro Hac Vice for Tara K. Ramchandani, Esq. by Mayor and City Council of Baltimore (Fee Paid)(bmh, Deputy Clerk) (Entered: 05/10/2011)

05/11/2011

193 PAPERLESS ORDER granting 192 Motion to Appear Pro Hac Vice for attorney Tara K. Ramchandani on behalf of Mayor and City Council of Baltimore. Directing attorney Tara K. Ramchandani to register on−line for CM/ECF at http://www.mdd.uscourts.gov/attorney/registration.asp. Signed by Clerk on 5/11/11. (nrm, Deputy Clerk) (Entered: 05/11/2011)

05/17/2011 194 Correspondence regarding status report date. (Motz, J.) (Entered: 05/17/2011)

05/17/2011

Scheduling Conference held on 5/17/2011 before Judge J. Frederick Motz. (mdw, Deputy Clerk) (Entered: 06/01/2011)

05/23/2011

195 ANSWER to 176 Amended Complaint,,,, by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc..(Hletko, Valerie) (Entered: 05/23/2011)

06/09/2011

196 MOTION for Extension of Time to File Proposed Scheduling Order (unopposed) by Mayor and City Council of Baltimore Responses due by 6/27/2011 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 06/09/2011)

06/09/2011

197 Paperless ORDER granting 196 Motion for Extension of Time to File Document. Signed by Judge J. Frederick Motz on 6/9/11. (Motz, J.) (Entered: 06/09/2011)

06/20/2011

198 −SEALED−RESPONSE re 194 Miscellaneous Correspondence re: Plaintiff's Proposed Discovery Plan filed by Mayor and City Council of Baltimore. (Attachments: # 1 Exhibit 1, # 2 Text of Proposed Order)(Relman, John) (Entered: 06/20/2011)

06/20/2011

199 MOTION to Seal Plaintiff's Proposed Discovery Plan by Mayor and City Council of Baltimore Responses due by 7/8/2011 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 06/20/2011)

06/20/2011

200 Correspondence re: Wells Fargo's Proposed Discovery Plan (Hletko, Valerie) (Entered: 06/20/2011)

06/24/2011

202 MOTION for Leave to File Response to Defendants' Proposed Discovery Plan by Mayor and City Council of Baltimore Responses due by 7/11/2011 (Attachments: # 1 Attachment 1, # 2 Text of Proposed Order)(Relman, John) (Entered: 06/24/2011)

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06/24/2011

203 RESPONSE re 202 MOTION for Leave to File Response to Defendants' Proposed Discovery Plan filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. (Hletko, Valerie) (Entered: 06/24/2011)

06/30/2011

204 A hearing regarding the discovery plan will be held at 10:00 am on Tuesday, July 19, 2011 in courtroom 5A. (Motz, J.) (Entered: 06/30/2011)

07/01/2011

205 Consent MOTION to Continue Hearing Regarding Discovery Plan by Mayor and City Council of Baltimore Responses due by 7/18/2011 (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 07/01/2011)

07/05/2011

206 Paperless ORDER granting 205 Motion to Continue. The hearing is hereby rescheduled for August 10, 2011 at 4:30 pm in courtroom 5A. Signed by Judge J. Frederick Motz on 7/5/11. (Motz, J.) (Entered: 07/05/2011)

07/06/2011

207 REPLY to Response to Motion re 202 MOTION for Leave to File Response to Defendants' Proposed Discovery Plan filed by Mayor and City Council of Baltimore. (Attachments: # 1 Text of Proposed Order)(Relman, John) (Entered: 07/06/2011)

08/10/2011

208 Motion Hearing held on 8/10/2011 re 202 MOTION for Leave to File Response to Defendants' Proposed Discovery Plan filed by Mayor and City Council of Baltimore, 199 MOTION to Seal Plaintiff's Proposed Discovery Plan filed by Mayor and City Council of Baltimore before Judge J. Frederick Motz − ARGUED − Oral opinion rendered by the Court. (CR: C. Asif) (CRD:bma) (Entered: 08/11/2011)

08/11/2011

209 Paperless ORDER granting 202 (with the addition set forth in document 207) Motion for Leave to File. Signed by Judge J. Frederick Motz on 8/11/2011. (Motz, J.) (Entered: 08/11/2011)

08/24/2011

210 MOTION for Reconsideration re 208 Motion Hearing, by Mayor and City Council of Baltimore Responses due by 9/12/2011 (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Text of Proposed Order)(Relman, John) (Entered: 08/24/2011)

08/26/2011

211 RESPONSE in Opposition re 210 MOTION for Reconsideration re 208 Motion Hearing, filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. Replies due by 9/12/2011. (Attachments: # 1 Text of Proposed Order)(Hletko, Valerie) (Entered: 08/26/2011)

08/30/2011

212 (FILED IN ERROR − Counsel will refile) RESPONSE in Support re 210 MOTION for Reconsideration re 208 Motion Hearing, filed by Mayor and City Council of Baltimore. Replies due by 9/16/2011. (Relman, John) Modified on 8/31/2011 (bmhs, Deputy Clerk). (Entered: 08/30/2011)

08/30/2011

213 REPLY to Response to Motion re 210 MOTION for Reconsideration re 208 Motion Hearing, filed by Mayor and City Council of Baltimore. (Relman, John) (Entered: 08/30/2011)

09/28/2011

214 OPINION. Signed by Judge J. Frederick Motz on 9/28/11. (c/m 9/29/11 bmh, Deputy Clerk) (Entered: 09/29/2011)

09/28/2011

215 ORDER denying 210 Motion for Reconsideration. Signed by Judge J. Frederick Motz on 9/28/11. (c/m 9/29/11 bmh, Deputy Clerk) (Entered: 09/29/2011)

10/11/2011

216 Mail Returned as Undeliverable. Mail sent to David Kissi, pleadings #214 and #215 (jmk, Deputy Clerk) (Entered: 10/12/2011)

01/13/2012

217 PAPERLESS ORDER granting 199 Motion to Seal Discovery Plan. Signed by Judge J. Frederick Motz on 1/13/11. (hmls, Deputy Clerk) (Entered: 01/13/2012)

02/17/2012

218 NOTICE by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc. Joint Proposed Discovery Plan and Scheduling Order (Tucker, Jonice) (Entered: 02/17/2012)

02/17/2012

219 Paperless ORDER approving re 218 Notice (Other) filed by Wells Fargo Bank, N.A., Wells Fargo Financial Leasing, Inc.. Signed by Judge J. Frederick Motz on 2/17/12. (Motz, J.) (Entered: 02/17/2012)

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07/16/2012

220 Correspondence from David Kissi re: portion of settlement fund (Attachments: # 1 Attachment)(mps, Deputy Clerk) (Entered: 07/20/2012)

07/30/2012

221 RESPONSE re 220 Miscellaneous Correspondence filed by Mayor and City Council of Baltimore. (Relman, John) (Entered: 07/30/2012)

08/07/2012

222 SETTLEMENT ORDER DISMISSING case with each party to bear its own costs unless otherwise agreed without prejudice to the right of a party to move for good cause to reopen this action if settlement is not consummated. Signed by Judge J. Frederick Motz on 8/7/12. (bmhs, Deputy Clerk) (Entered: 08/07/2012)