Opinion ID: 4558819
Heading Depth: 3
Heading Rank: 2

Heading: The contours of the FHA’s proximate-cause

Text: requirement. To determine the “contours” of a statute’s proximatecause requirement, we evaluate (1) the “nature of the statutory cause of action” and (2) what is administratively feasible. Id (quoting Lexmark, 572 U.S. at 133). In this case, both considerations lead us to confidently conclude that the However, while Wells Fargo’s petition for a writ of certiorari was pending before the Supreme Court, Miami asked the district court to dismiss that case. Miami’s request prompted the Supreme Court to grant Wells Fargo’s petition for a writ of certiorari in a two-sentence order, vacating the Eleventh Circuit’s opinion in Miami II as moot. Wells Fargo & Co. v. City of Miami, 140 S. Ct. 1259 (2020) (citing United States v. Munsingwear, Inc., 340 U.S. 36 (1950)). Most of the district courts that have decided this issue agree that taxrelated injuries suffered by cities as a result of banks’ discriminatory lending practices fall within the FHA’s proximate-cause requirement. See, e.g., City of Sacramento v. Wells Fargo & Co., No. 2:18-cv- 416, 2019 WL 3975590, at  (E.D. Cal. Aug. 22, 2019); City of Oakland v. Wells Fargo Bank N.A., No. 15-cv-4321, 2018 WL 3008538, at  (N.D. Cal. June 15, 2018); City of Philadelphia v. Wells Fargo & Co., No. 172203, 2018 WL 424451, at  (E.D. Pa. Jan. 16, 2018). But see Prince George’s County, Md. v. Wells Fargo & Co., 397 F. Supp. 3d 752, 762– 63 (D. Md. 2019). CITY OF OAKLAND V. WELLS FARGO & CO. 21 FHA’s proximate-cause requirement is sufficiently broad and inclusive to encompass aggregate, city-wide injuries.
Evaluating the nature of the statutory cause of action in this case requires a close review of the FHA’s text and legislative history to glean what Congress intended to be the scope of the statute’s proximate-cause requirement. See Holmes, 503 U.S. at 267 (“The key to the better interpretation [of a statute’s proximate-cause requirement] lies in some statutory history.”). Oakland, and several friends of the court, persuasively argue that the text and legislative history of the FHA and its 1988 amendments indicate that Congress intended the scope of the statute’s proximate-cause requirement to be far-reaching, and to include aggregate, city-wide injuries. We begin with the text of the FHA, which reveals that Congress intended the statute to provide redress for a multitude of injuries that result from housing discrimination. Indeed, the FHA is widely considered one of the most capacious civil rights statutes, in large part due to its broad language. For example, its first section declares that the law’s purpose is “to provide, within constitutional limitations, for fair housing throughout the United States.” 42 U.S.C. § 3601. Unsurprisingly, the Supreme Court has interpreted “[t]he language of the Act [as] broad and inclusive,” warranting “a generous construction” that allows claims from parties “act[ing] not only on their own behalf but also ‘as private attorneys general in vindicating a policy that Congress considered to be of the highest priority.’” Trafficante v. Metro. Life Ins. Co., 409 U.S. 205, 209, 211– 12 (1972) (quoting Brief for the United States as Amicus Curiae, id. (No. 71-708), 1972 WL 136282, at ). Most relevant to this appeal is the FHA’s broad definition of the 22 CITY OF OAKLAND V. WELLS FARGO & CO. term “person aggrieved.” Indeed, “[t]he definition of ‘person aggrieved’ contained in [the FHA] is in [its] terms broad, as it is defined as ‘any person who claims to have been injured by a discriminatory housing practice.’” Id. at 208 (emphasis added) (quoting 42 U.S.C. § 3602(i)(1)). Other parts of the FHA also underscore that Congress intended its application to be very broad, beyond merely prohibiting discrimination in the sale or rental of housing. Surely, the FHA is most known for making it unlawful “[t]o refuse to sell or rent . . . or otherwise make unavailable or deny, a dwelling to any person because of race,” and “[t]o 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.” 42 U.S.C. § 3604(a)–(b). But the FHA also prohibits a host of other forms of insidious housing-related discrimination, such as publishing housing-related notices or advertisements with racial preferences, misrepresenting that a dwelling is not available to a person because of their race, and inducing a person to sell or rent a dwelling by making “representations regarding the entry or prospective entry into the neighborhood of a person or persons of a particular race.” Id. § 3604(c)–(e). As to the particular cause of action at issue in the instant case, the FHA prohibits “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,” including in loans “for purchasing, constructing, improving, repairing, or maintaining a dwelling.” Id. § 3605(a), (b)(1)(A) (emphasis added). Based on this far-reaching language, Congress clearly CITY OF OAKLAND V. WELLS FARGO & CO. 23 intended the FHA to tackle discrimination throughout the real estate market. Even though the text of the statute is sufficient to establish that Congress intended the FHA’s proximate-cause requirement to be very broad, we also look at the FHA’s legislative history to discern what Congress intended the statute’s remedial aims to be, and whether aggregate, citywide injuries fall within the scope of its proximate-cause requirement. Cf. Blue Shield of Va. v. McCready, 457 U.S. 465, 478 (1982) (analyzing “the relationship of the injury alleged with those forms of injury about which Congress was likely to have been concerned . . . in providing a private remedy under [the Clayton Act]”); Associated Gen. Contractors, 459 U.S. at 538 (reiterating the importance of legislative history in evaluating whether an injury “falls squarely within the area of congressional concern” in the context of the Sherman Act (quoting Blue Shield, 457 U.S. at 484)). The FHA’s legislative history underscores that Congress intended the statute to reach beyond those individuals who are the immediate victims of direct discrimination, such as tenants, homebuyers, and home-loan borrowers. There is no doubt that Congress intended the statute to cover aggregate, city-wide injuries. The Supreme Court discussed the legislative history of the FHA in Trafficante, where two tenants of an apartment complex sued their landlord because its race-based discrimination of potential non-White tenants deprived them of “the social benefits of living in an integrated community.” 409 U.S. at 208. The Court explained that the legislative history of the FHA established that “[w]hile members of minority groups were damaged the most from discrimination in housing practices, the proponents of the legislation emphasized that those who were not the direct objects of 24 CITY OF OAKLAND V. WELLS FARGO & CO. discrimination had an interest in ensuring fair housing, as they too suffered.” 409 U.S. at 210 (emphases added). Citing to statements by United States senators who sponsored the bill, the Court held that “the whole community” is the “victim of discriminatory housing practices” under the FHA because “the reach of the proposed law was to replace the ghettos ‘by truly integrated and balanced living patterns.’” Id. at 211 (quoting 114 Cong. Rec. 2706, 3422). Therefore, the Court read the FHA’s legislative history in Trafficante to suggest that Congress intended the scope of the statute’s proximate-cause requirement to reach, at the very least, beyond the immediate injuries suffered by individuals directly being discriminated against. Our own review of the Congressional Record reveals that Congress enacted the FHA not only to address direct discrimination but also to reshape in meaningful ways the landscape of American cities. Indeed, the entire purpose of the statute was to target and reverse the large-scale insidious effects of discrimination, including racial and economic segregation within cities, suburban flight, and urban decay. We have no doubt that Congress was keenly focused on the impact that discriminatory housing practices, including discriminatory lending, were having on cities and their tax base. Congress therefore clearly intended the proximatecause requirement of the FHA to reach neighborhood-wide and city-wide injuries. For example, Senator Walter Mondale—who was the chief sponsor of the bill that eventually became the FHA— explained that the statute was intended to reform entire neighborhoods: [O]vert racial discrimination remains in one major sector of American life—that of CITY OF OAKLAND V. WELLS FARGO & CO. 25 housing. . . . [F]air housing is one more step toward achieving equality in opportunity and education . . . . The soundest, long-range way to attack segregated schools is to attack the segregated neighborhood. . . . [I]n truly integrated neighborhoods people have been able to live in peace and harmony—and both [Black persons] and [W]hites are the richer for the experience. 114 Cong. Rec. 3421, 3422 (Feb. 20, 1968) (emphases added). Senator Edward Brooke—a co-sponsor of the FHA— underscored that the law’s purpose was to help cities fight the economic and social problems that result from segregation. He asked, “[a]s segregation continues to grow . . . will not the cities which house the majority of the nation’s industrial and commercial life find themselves less and less able to cope with their problems, financially and in every other way?” Id. at 2988 (Feb. 14, 1968) (emphases added). Even more relevant to Oakland’s claims, Senator Mondale specifically and repeatedly referenced cities’ “declining tax base” as one of the large-scale injuries that the FHA was designed to mitigate. Id. at 2274 (“Declining tax base, poor sanitation, loss of jobs, inadequate educational opportunity, and urban squalor will persist as long as discrimination forces millions to live in the rotting cores of central cities.” (emphasis added)). In no uncertain terms, he underscored that continued housing discrimination would “lead to the destruction of urban centers by loss of jobs and businesses to the suburbs, a declining tax base, and the ruin brought on by absentee ownership of property.” Id. at 2993 26 CITY OF OAKLAND V. WELLS FARGO & CO. (emphasis added). Therefore, he said, “[f]air housing legislation is a basic keystone to any solution of our present urban crisis.” Id. 2275 (emphasis added). Given the statutory text and the statements from the statute’s sponsors—especially Senator Mondale’s reference to a “declining tax base”—we have no difficulty concluding that Oakland’s city-wide financial injury claims fall squarely within the FHA’s intended purposes, which include helping cities fight the insidious and large-scale effects of housing discrimination on a neighborhood-wide and city-wide basis. N. Haven Bd. of Educ. v. Bell, 456 U.S. 512, 526–27 (1982) (explaining that “remarks . . . of the sponsor of the language ultimately enacted[] are an authoritative guide to the statute’s construction.”); Fed. Energy Admin. v. Algonquin SNG, Inc., 426 U.S. 548, 564 (1976) (“As a statement of one of the legislation’s sponsors, this explanation deserves to be accorded substantial weight in interpreting the statute.”). Congress reiterated its commitment to a broad and inclusive application of the FHA when it revisited the statute in 1988. That year, Congress strengthened the FHA’s enforcement mechanisms to “remov[e] barriers to the use of court enforcement by private litigants,” noting that the FHA, up to that point, had “fail[ed] to provide an effective enforcement system.” H.R. Rep. No. 100-711, at 13 (1988). See generally Fair Housing Amendments Act of 1988, Pub. L. No. 100-430, 102 Stat. 1619 (1988). These amendments “strengthen[ed] the private enforcement section by expanding the statute of limitations, removing the limitation on punitive damages,” and updating the attorney’s fees section to match similar sections in other civil rights statutes. H.R. Rep. No. 100-711, at 17. According to Senator Edward Kennedy—who sponsored the 1988 amendments—these changes were necessary because the FHA “proved to be an CITY OF OAKLAND V. WELLS FARGO & CO. 27 empty promise because the legislation lacked an effective enforcement mechanism.” 134 Cong. Rec. 10454 (1988). Undoubtedly, when Congress revisited the FHA in 1988, it expanded its reach and reiterated its broad and inclusive purpose. Significantly, by the time Congress amended the FHA, the Supreme Court had long held in Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 110–11 (1979), that cities had standing to sue under the FHA because “[a] significant reduction in property values [caused by racially discriminatory housing practices] directly injures a municipality by diminishing its tax base, thus threatening its ability to bear the costs of local government and to provide services.” (emphasis added). Rather than overturn Gladstone, the House Report on the amendments explicitly states that the bill “reaffirm[ed] the broad holdings of [Gladstone and its progeny].” H.R. Rep. 100-711, at 23 (emphasis added) (citing Gladstone, 441 U.S. at 91). In no uncertain terms, Congress explicitly endorsed lawsuits by cities and municipalities under the FHA. Tex. Dep’t of Hous. & Cmty. Affs. v. Inclusive Cmtys. Project, Inc., 135 S. Ct. 2507, 2520 (2015) (“Congress’ decision in 1988 to amend the FHA while still adhering to the operative language in §§ 804(a) and 805(a) is convincing support for the conclusion that Congress accepted and ratified the unanimous holdings of the Courts of Appeals finding disparate-impact liability.”); see also Forest Grove Sch. Dist. v. T.A., 557 U.S. 230, 243 n.11 (2009) (“When Congress amended [the statute at issue] without altering the text of [the relevant provision], it implicitly adopted [the Supreme Court’s] construction of the statute.”). After reviewing the FHA’s text and legislative history, we conclude that Congress clearly intended the “nature of 28 CITY OF OAKLAND V. WELLS FARGO & CO. the statutory cause of action” at issue in this case to be broad and inclusive enough to encompass less direct, aggregate, and city-wide injuries.
The Supreme Court also instructed us to consider “what is administratively possible and convenient” when deciding the contours of the FHA’s proximate-cause requirement. Miami I, 137 S. Ct. at 1306 (quoting Holmes, 503 U.S. at 268). Administrative feasibility is important because “proximate cause ‘generally bars suits for alleged harm that is “too remote” from the defendant’s unlawful conduct.’” Id. (quoting Lexmark, 572 U.S. at 133 (quoting Holmes, 503 U.S. at 268–69). Therefore, when we decide what is “administratively possible,” we typically ask whether a plaintiff’s alleged injuries are “too remote” to satisfy the proximate-cause requirement of the statute at issue. Holmes, 503 U.S. at 268. In other words, to be administratively feasible, an indirect injury must have “some direct relation” to a defendant’s violative conduct. Id. The administrative feasibility analysis was outlined by the Supreme Court in its seminal decision in Holmes. In that case, the Supreme Court laid out three factors that govern whether an indirect injury is administratively feasible and convenient under a given statute: (1) whether it is possible to ascertain “a plaintiff’s [indirect] damages attributable to the violation, as distinct from other, independent, factors”; (2) whether it is possible to “apportion[] damages among plaintiffs removed at different levels of injury from the violative acts, to obviate the risk of multiple recoveries”; and (3) whether allowing recovery for the indirect injury is “unjustified by the general interest in deterring injurious conduct, since directly injured victims can generally be counted on to vindicate the law as private attorneys general.” CITY OF OAKLAND V. WELLS FARGO & CO. 29 Id. at 269–70 (first citing Associated Gen. Contractors, 459 U.S. at 542–44; then citing Blue Shield, 457 U.S. at 473– 75; then citing Hawaii v. Standard Oil Co. of Cal., 405 U.S. 251, 264 (1972); and then citing Associated Gen. Contractors of Cal., Inc., 459 U.S. at 541–42). All three of these factors support a finding that at least some of Oakland’s aggregate, city-wide injuries are administratively feasible and convenient under the FHA. First, relying on its proposed statistical regression analysis, Oakland plausibly alleges that it can precisely calculate the exact loss in property values attributable to foreclosures caused by Wells Fargo’s predatory loans, isolated from any losses attributable to non-Wells Fargo foreclosures or other independent causes, such as neighborhood conditions. Although Oakland has not yet conducted this regression analysis or attached the results to its amended complaint, its explanation of the analysis in its pleadings is neither speculative nor conclusory. In fact, the amended complaint explains in considerable length and meticulous detail exactly how it will conduct the regression analysis to quantify the loss in property values attributable to Wells Fargo’s discriminatory lending. The City also points to other studies that use the same methodology to produce the kinds of results that Oakland will need to rely on to prevail on the merits. In other words, Oakland has offered much more than a purely formulaic recitation of how the FHA’s causation requirement will be met—it has plausibly alleged a harm that is measurable using sophisticated, reliable, and scientifically rigorous methodologies. See Compton v. Countrywide Fin. Corp., 761 F.3d 1046, 1054 (9th Cir. 2014) (“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’ . . . . ‘[L]abels and conclusions’ or ‘a 30 CITY OF OAKLAND V. WELLS FARGO & CO. formulaic recitation of the elements of a cause of action’ do not suffice.” (first quoting Iqbal, 556 U.S. at 678; and then quoting Twombly, 550 U.S. at 570)). Therefore, taking Oakland’s explanation of the regression analyses in its amended complaint as true, we hold that Oakland has plausibly alleged that it can calculate exactly which lost property-tax revenues are attributable to Wells Fargo’s wrongdoing. Second, there is no risk of duplicative recoveries in this case. In the antitrust context, the Supreme Court has limited lawsuits to directly harmed individuals due to “the risk of duplicative recovery engendered by allowing every person along a chain of distribution to claim damages” from a single violation. Blue Shield, 457 U.S. at 474–75. Here, by contrast, individual borrowers cannot recover for Oakland’s aggregate, city-wide injuries like reduced property-tax revenues or increased municipal expenses, which means there will be no need for the district court to apportion these damages between multiple plaintiffs. Furthermore, the injuries to individual borrowers from Wells Fargo’s predatory loans are completely independent, which means it is entirely possible to apportion the damages directly suffered by the individual borrowers from Oakland’s damages. In fact, in 2017, the Justice Department settled a separate nationwide lawsuit on behalf of individual borrowers against Wells Fargo for the higher borrowing costs and other harmful consequences associated with the same discriminatory lending practices at the core of this case. See Consent Order, United States v. Wells Fargo Bank N.A., No. 1:12-cv-01150 (D.D.C. Sept. 21, 2012), ECF No. 10. No court would allow these borrowers to also recover a City’s lost property-tax revenues. See, e.g., Sacramento, 2019 WL 3975590, at  (concluding that the City’s alleged financial injuries, including lost property-tax revenues “are CITY OF OAKLAND V. WELLS FARGO & CO. 31 unique and uniquely capable of vindication under the FHA”). Third, and finally, the fact that individual borrowers can sue Wells Fargo to vindicate their rights under the FHA does not mean that the City is unjustified in also doing so. Oakland’s lawsuit in no way affects the ability of the individual borrowers to recover from Wells Fargo for the same discriminatory lending practices. The Supreme Court has primarily applied the third Holmes factor in the antitrust context, expressing “concern for the reduction in the effectiveness of those suits if brought by indirect purchasers with a smaller stake in the outcome than that of direct purchasers suing for the full amount of the overcharge.” Ill. Brick Co. v. Illinois, 431 U.S. 720, 745 (1977). Of course, this assumes that more directly harmed parties have a larger stake in deterring wrongdoers, can sue for the entire harm caused by the alleged statutory violation, and will leave no “significant antitrust violation undetected or unremedied.” Associated Gen. Contractors, 459 U.S. at 542. These assumptions hold true in antitrust cases where a price increase affects the distributor and the consumer in the exact same way—they both pay more. Housing discrimination, by contrast, affects different parties in different ways. In the instant case, for example, Oakland has an independent interest in deterring Wells Fargo and other banks from issuing predatory loans because individual borrowers cannot sue Wells Fargo to recover for the City’s aggregate, citywide injuries. Conversely, Oakland was not a part of and did not receive any funds from the $175 million settlement the Attorney General entered into with Wells Fargo in the aforementioned lawsuit brought on behalf of individual borrowers in the District of Columbia. Therefore, the City’s lawsuit in no way “undermin[es] the effectiveness of [the individual borrowers’] suits,” and vice versa. Holmes, 32 CITY OF OAKLAND V. WELLS FARGO & CO. 503 U.S. at 274 (quoting Associated Gen. Contractors, 459 U.S at 545). Moreover, Oakland can better deter Wells Fargo’s discriminatory lending practices because it can sue to remedy the Bank’s systematic misconduct across thousands of home loans, whereas individual residents can only challenge the effects of the discriminatory lending policies on themselves. In sum, all three of the Holmes factors support our conclusion that it is administratively feasible for the district court to administer the aggregate, city-wide injuries that Oakland claims it suffered as a result of Wells Fargo’s unlawful discriminatory lending practices throughout the City.