Opinion ID: 4558819
Heading Depth: 2
Heading Rank: 5

Heading: Oakland’s claims for monetary damages.

Text: Having established the broad and inclusive contours of the FHA’s proximate-cause requirement, we can now turn to the two questions the district court certified for interlocutory appeal. First, we are asked to decide whether Oakland’s claims for monetary damages based on the injuries asserted in the amended complaint—reduced property-tax revenues and increased municipal expenses—satisfy the FHA’s proximate-cause requirement. We hold that the allegations in the amended complaint are sufficient to plead that Oakland’s reduced property-tax revenues, but not its increased municipal expenses, are proximately caused by Wells Fargo’s discriminatory lending practices.
Understanding the broad and inclusive nature of the FHA, as well as what is administratively feasible under the CITY OF OAKLAND V. WELLS FARGO & CO. 33 statute, we hold that Oakland plausibly alleges that its decrease in property-tax revenue has some direct relation to Wells Fargo’s predatory lending practices. It is undisputed that Wells Fargo’s alleged wrongdoing did not immediately cause Oakland’s lost property-tax revenues. Far from being within the first step of the causal chain, the drop in Oakland’s tax base is several steps removed from Wells Fargo’s discriminatory lending practices. 20 However, these injuries are within the FHA’s proximate-cause requirement because the City plausibly alleged that they have “a sufficiently close connection to the conduct the statute prohibits.” Lexmark, 572 U.S. at 133. Of course, at summary judgment or trial, a judge or a jury will eventually have to decide whether, after discovery, Oakland adduced enough evidence that Wells Fargo’s predatory lending more likely than not caused the City’s reduced tax base. Wells Fargo argues that, to satisfy proximate cause under any statute, a plaintiff must allege an injury that is the immediate result of an alleged statutory violation. 21 Such a 20 The district court outlined the multiple causal steps between Wells Fargo’s conduct and the City’s financial injuries as follows: (1) the unlawful discrimination was carried out by Wells Fargo; (2) leading to default by the individual borrowers; (3) which in turn led to foreclosures; (4) which led to lower property values; and (5) consequently lower property-tax revenues for Oakland. 21 Wells Fargo also offers two “rare” exceptions to its proposed categorical proximate-cause rule: (1) “where the most directly affected party cannot sue,” or (2) “where a plaintiff alleges a harm at the second step that is as ‘surely attributable’ to the alleged statutory violation.” But these circumstances are not “exceptions.” They are factors that the Supreme Court has established, in cases like Lexmark and Holmes, 34 CITY OF OAKLAND V. WELLS FARGO & CO. categorical proximate-cause requirement under the FHA would allow parties to recover only for injuries that are within the first step of the causal chain—in other words, only those who are immediately affected by discrimination. 22 Applying such standard to this case, Wells Fargo’s liability would be limited to the individual borrowers directly harmed by the Bank’s redlining and reverse redlining. As an initial matter, Wells Fargo’s categorical proximate-cause requirement is facially at odds with the Supreme Court’s rule that “the general tendency” in proximate cause cases “is not to go beyond the first step” of the causal chain. Miami I, 137 S. Ct. at 1306 (emphasis added) (quoting Hemi, 559 U.S. at 10). The commonsense reading of “general tendency” is that in most cases, but not all, the proximate-cause requirement will be limited to the first step. Therefore, it cannot be that an intervening step automatically vitiates proximate cause. Indeed, Wells Fargo does not explain why, if the proximate-cause requirement under the FHA is as straight-forward and categorical as Wells Fargo suggests, the Supreme Court did not simply pronounce it as such in Miami I. If an intervening step alone is always enough to vitiate proximate cause, the Supreme should be considered when evaluating the contours of a particular statute’s proximate-cause requirement. 22 Importantly, Wells Fargo relies exclusively on civil RICO cases to support its argument that the FHA also requires a categorical firststep-only proximate-cause requirement. All these cases are distinguishable, however, because the Supreme Court has clearly held that RICO “should not get . . . an expansive reading,” Holmes, 503 U.S. at 266, whereas the FHA is consistently and repeatedly interpreted broadly. Compare Hemi., 559 U.S. at 9–10, and Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 456 (2006), with Trafficante, 409 U.S. at 208–09, and Inclusive Cmtys., 135 S. Ct. at 2516–26 (2015), and Gladstone, 441 U.S. at 103, and Havens, 455 U.S. at 372–75. CITY OF OAKLAND V. WELLS FARGO & CO. 35 Court would not have sought the input of the lower federal courts. Moreover, adopting Wells Fargo’s categorical proximate-cause requirement would require this court to contravene decades of established Supreme Court precedent on standing under the FHA. Under Wells Fargo’s proposed standard, its predatory lending practices can only proximately cause the injuries of its direct victims—the individual borrowers. But the Supreme Court has held, time and time again, that indirectly injured parties, including municipalities, have standing to sue under the FHA. See Gladstone, 414 U.S. at 100–09 (permitting the Village of Bellwood to sue realtors who discriminated against Black prospective homeowners even though the Village itself was not directly discriminated against); Trafficante, 409 U.S. at 212 (permitting tenants to sue their landlord for discriminating against prospective tenants even though the landlord had not discriminated against both plaintiffs directly); Havens Realty Corp. v. Coleman, 455 U.S. 363, 378–79 (1982) (permitting a fair housing organization to sue not only to address harm its members suffered but also to recover its own injuries). Under Wells Fargo’s categorical proximate-cause requirement, none of the plaintiffs in Gladstone, Trafficante, or Havens would have been able to recover for the indirect injuries they suffered under the FHA. We decline Wells’ Fargo’s invitation to ignore the mandates of the Supreme Court. In Lexmark, the Supreme Court in fact departed from the first-step “general tendency” standard, underscoring that an intervening step does not necessarily end proximate cause. In that case, the plaintiff was a manufacturer of components used by companies that refurbished Lexmark printer cartridges (the “remanufacturers”). Lexmark, 572 U.S. 36 CITY OF OAKLAND V. WELLS FARGO & CO. at 121. It sued Lexmark, a printer and cartridge manufacturer, under the Lanham Act for misleading customers into believing that they were legally obligated to return spent cartridges to Lexmark. Id. at 120–23. The injury in that case was the plaintiff’s lost revenue from consumers returning their spent cartridges to Lexmark rather than taking them to the remanufacturers to be refurbished. Id. at 123 In Lexmark, as here, there was more than one step in the causal chain: (1) Lexmark deceived consumers; (2) the consumers chose not to take their cartridges to the remanufacturers; and (3) those remanufacturers in turn bought fewer components from the plaintiff. Like Wells Fargo, Lexmark argued for a “categorical test permitting only direct competitors to sue for false advertising [under the Lanham Act].” Id. at 134. Writing for a unanimous Court, Justice Scalia explained that an intervening step does not necessarily break the causal chain if there is continuity between the plaintiff’s alleged injuries and the defendant’s alleged misconduct. Id. at 139– 40 . The Court concluded that the Lexmark plaintiff satisfied proximate cause under the Lanham Act because, although the causal chain “include[d] an intervening link of injury to the remanufacturers,” there was no “‘discontinuity’ between the injury to the direct victim and the injury to the indirect victim, so that the latter is not surely attributable to the former (and thus also to the defendant’s conduct), but might instead have resulted from ‘any number of [other] reasons.’” Id. at 139–40 (emphases added) (quoting Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 458–59 (2006)). In other words, the plaintiff was able to demonstrate continuity: its injuries were directly related to the remanufacturers’ injuries, which were in turn directly related to Lexmark’s conduct. CITY OF OAKLAND V. WELLS FARGO & CO. 37 In Bridge, a RICO case, the Supreme Court again focused on the continuity between the defendant’s alleged violation and the plaintiff’s indirect injury, not how many “steps” were in between. See 553 U.S. at 653–58. In that case, the plaintiffs were bidders participating in countyoperated tax lien auctions. Id. at 642. They sued defendants—who were also bidders—for filing fraudulent documents that increased the defendants’ chances of winning the auctions. Id. at 642–44. Again, there was more than one step in the causal chain: (1) the defendants filed fraudulent documents; (2) the county relied on the fraudulent documents; and (3) the plaintiffs lost the auction. Id. Nonetheless, the Court held that plaintiffs’ injuries were proximately caused by the defendants’ misconduct because “first party reliance” was not “necessary to ensure that there [was] a sufficiently direct relationship between the defendant’s wrongful conduct and the plaintiff’s injury.” Id. at 657 (emphasis added). Although the Court framed its analysis in terms of reliance, the principle is the same— plaintiffs need not be the most immediate victims of a defendant’s misconduct to satisfy proximate cause, as long as their injuries have some direct relation and are surely attributable to the misconduct. Even though Lexmark and Bridge did not involve the FHA, the proximate-cause principles they establish squarely apply to this case. In Lexmark, “any false advertising that reduced the remanufacturers’ business necessarily injured [the plaintiff] as well.” Lexmark, 572 U.S. at 139. Similarly, in Bridge, the injury to the county necessarily injured the plaintiffs. The same is true here. Through sophisticated and well-explained statistical regression analyses, Oakland has plausibly alleged that the predatory loans issued by Well Fargo that caused injury to individual borrowers, namely in the form of foreclosures, also necessarily injured the City 38 CITY OF OAKLAND V. WELLS FARGO & CO. because the foreclosures caused a respective drop in property values and in turn reduced property-tax revenues. Oakland achieves this by isolating the lost property value attributable to Wells Fargo’s foreclosures, as opposed to other potential causes. In other words, if Oakland’s Hedonic regression analysis operates as it is explained in the complaint, the same continuity the Supreme Court found in Lexmark and Bridge exists here. In addition, Oakland’s regression analyses plausibly and thoroughly account for other variables that might explain Oakland’s reduced tax base, such that Oakland’s injury can be surely attributed to Wells Fargo. This is especially true because Oakland’s claims are aggregate, city-wide claims that are well-suited for data-driven statistical regression analyses. In this way, the City has established that there is some direct relation and continuity between its reduced property-tax revenues and Wells Fargo’s predatory loans. Wells Fargo attempts to distinguish Bridge and Lexmark by arguing that, unlike in those cases, there are more directly harmed persons who can bring suit here—the individual borrowers. 23 But individual borrowers often lack the financial incentive to pursue a lawsuit because their damages are much lower than the cost of prosecuting a lawsuit in federal court. Also, individual borrowers’ lawsuits are often barred by the FHA’s two-year statute of limitations because the harmful effects of predatory loans become apparent only years after the loans are issued. See Garcia v. Brockway, 526 F.3d 456, 461 (9th Cir. 2008) (en banc) (“[A]n aggrieved person must bring the lawsuit [under the FHA] 23 Wells Fargo conveniently overlooks that there were more directly harmed parties that could have sued in both Lexmark and Bridge—the remanufacturers and the county, respectively. CITY OF OAKLAND V. WELLS FARGO & CO. 39 within two years of either ‘the occurrence . . . of an alleged discriminatory housing practice’ or ‘the termination of an alleged discriminatory housing practice.’” (quoting 42 U.S.C. § 3613(a)(1)(A))); see also Thomas v. S.F. Hous. Auth., 765 F. App’x 368 (9th Cir. 2019) (“FHA claims are subject to two-year statute of limitations.”); Lopez v. Wells Fargo Bank N.A., 727 F. App’x 425, 426 (9th Cir. 2018) (“The district court properly dismissed [individual borrower’s] . . . FHA . . . claim[] as barred by the applicable [two-year] statute[] of limitations.”); Cervantes v. Countrywide Home Loans, Inc., No. CV 09-517, 2009 WL 3157160, at  (D. Ariz. Sept. 24, 2009), aff’d, 656 F.3d 1034 (9th Cir. 2011) (finding that because Latino “[p]laintiffs obtained their loans in 2006 and brought [the] present action in March 2009. . . [their] claims fall outside the two-year time limitation”). 24 Additionally, cities and local governments are uniquely well-suited to bring aggregate lawsuits under the FHA to deter banks from engaging in widespread, large-scale discriminatory lending practices. Unlike individual borrowers, local governments have tools—including homeloan counseling programs for potential new homeowners, relocation programs for displaced tenants, eviction assistance programs, and a complaint system for alleged wrongful eviction and rent adjustments—that allow them to 24 Oakland’s amended complaint is not subject to the FHA’s twoyear statute of limitations because it challenges a larger and ongoing discriminatory practice. See Garcia, 526 F.3d at 461–62 (“[W]here a plaintiff, pursuant to the Fair Housing Act, challenges not just one incident of conduct violative of the Act, but an unlawful practice that continues into the limitations period, the complaint is timely when it is filed within [the statutory period, running from] the last asserted occurrence of that practice.” (alteration in original) (quoting Havens, 455 U.S. at 380–81)). 40 CITY OF OAKLAND V. WELLS FARGO & CO. detect illegal practices and patterns on a large, systematic scale. These tools allow cities—unlike individual borrowers—to discern a bank’s pattern of discriminatory lending that becomes apparent once a critical mass of predatory home loans have been issued, and to generate statistical disparities to support an aggregate disparateimpact claim. Wells Fargo also attacks the City’s foreclosure regression on multiple fronts, none of which have merit. First, it argues that the regression is invalid because it assumes that a borrower defaults on a predatory loan because of the loan’s high costs and onerous terms, and not because of well-recognized causes of foreclosure like job loss, medical hardships, or divorce. 25 Including these variables in the regression analysis would likely make no difference, however, because they are not correlated with the likelihood that a person will receive a predatory loan, especially because Wells Fargo argues that these life events happen after the borrower receives the predatory loan and before they stop making payments. See Daniel L. Rubinfeld, Reference Guide on Multiple Regression, in Reference Manual on Scientific Evidence 303, 315 (3d ed. 2011) (“Omitting variables that are not correlated with the variable of interest is, in general, less of a concern, because the parameter measures the effect of the variable of interest on the dependent variable is estimated without bias.”). By arguing that these life events explain the discrepancy in foreclosure rates between minority and White borrowers, 25 Oakland’s amended complaint acknowledges that, due to data limitations, its current regression analysis does not control for every aspect of financial hardship that could plausibly affect the likelihood that someone defaults on a predatory loan, including job loss, medical hardship, or divorce. CITY OF OAKLAND V. WELLS FARGO & CO. 41 Wells Fargo implies that minority borrowers are somehow more likely than White borrowers to get divorced, suffer from medical hardships, or lose their jobs. Because this argument has no basis in law or common sense, we conclude that accounting for these life events would not increase the plausibility of the City’s foreclosure regression analysis. See Bazemore v. Friday, 478 U.S. 385, 400 (1986) (Brennan, J., joined by all other Members of the Court, concurring in part) (“While the omission of variables from a regression analysis may render the analysis less probative than it otherwise might be, it can hardly be said, absent some other infirmity, that an analysis which accounts for the major factors ‘must be considered unacceptable as evidence of discrimination.’” (quoting Bazemore v. Friday, 751 F.2d 662, 672 (4th Cir. 1984))). Second, Wells Fargo warns that allowing the City to plead its injuries using regression analyses would mean that every plaintiff going forward would be able to satisfy proximate cause under the FHA so long as she has a good statistician on hand. We disagree. A local corner store or flower shop—to use Wells Fargo’s example—would be hard-pressed to design a regression analysis that could precisely account for its drop in revenues attributable to predatory-loan-related foreclosures. What prevents any other private plaintiff from bringing a similar lawsuit is the principle, established in Lexmark, that what matters is whether Wells Fargo’s wrongdoing “necessarily injured [Oakland] as well” as the individual borrowers in such a way that the individual borrowers were “not [a] ‘more immediate victim[]’” than Oakland. Lexmark, 572 U.S. at 140 (quoting Bridge, 553 U.S. at 658). That principle is satisfied in the instant case because Oakland plausibly alleges how Wells Fargo’s predatory loans to Black and Latino borrowers necessarily resulted in widespread foreclosures, which in 42 CITY OF OAKLAND V. WELLS FARGO & CO. turn necessarily reduced property values, and thus necessarily reduced Oakland’s property-tax revenues. A flower shop, by contrast, could lose revenues for a myriad of reasons, including the emergence of new competitors or an inexplicable drop in its customers’ appetite for flowers, all of which would likely be impossible to quantify in a regression analysis. In this way, like in Lexmark, the City’s injuries—unlike those of a local corner store or flower shop—also have “something very close to a 1:1 relationship” to Wells Fargo’s predatory loans. Finally, Wells Fargo unconvincingly argues that the Ninth Circuit has rejected the use of statistics to overcome the remoteness of a plaintiff’s injury. It relies on Oregon Laborers-Employers Health & Welfare Trust Fund v. Phillip Morris, Inc., 26 where this court held that the statistical model used by the plaintiff, a welfare fund, was speculative because it sought to establish that the fund’s participants “would have allegedly quit smoking or begun smoking safer products, reducing their smoking-related illnesses, and thereby lowering the Funds’ costs for reimbursing smokers’ health care expenditures.” 185 F.3d 957, 965 (9th Cir. 1999) (emphasis added) (quoting Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc., 171 F.3d 912, 929 (3d Cir. 1999)). The problem with the statistical analysis in Oregon Laborers was that—unlike Oakland’s regression analysis here—it speculated about events that had not yet occurred. Indeed, the Oregon Laborers court even recognized that it would be “easy to ascertain” the “actual damages attributable to medical payments [already] made by 26 Wells Fargo also relies on Canyon County v. Sygenta Seeds, Inc., 519 F.3d 969 (9th Cir. 2008), which is completely inapposite because the plaintiffs in that case did not offer a statistical model or regression analysis to show proximate causation. CITY OF OAKLAND V. WELLS FARGO & CO. 43 plaintiffs due to smoking-related injuries.” Id. at 964. Therefore, Oregon Laborers does not support Wells Fargo’s unfounded claim that the Ninth Circuit has rejected statistical evidence to plausibly plead proximate causation altogether. In sum, construing the amended complaint’s allegations in the light most favorable to the City, including its proposed statistical regression analyses, we hold that Oakland has plausibly alleged that its decrease in property-tax revenues has some direct and continuous relation to Wells Fargo’s discriminatory lending practices throughout much of the City. It is important to note that this case reaches us at the motion to dismiss stage, where Oakland has the burden of meeting a plausibility standard, not a reasonable probability or more-likely-than-not standard. Swierkiewicz v. Sorema N. A., 534 U.S. 506, 515 (2002) (“Rule 8(a) establishes a pleading standard without regard to whether a claim will succeed on the merits. ‘Indeed it may appear on the face of the pleadings that a recovery is very remote and unlikely but that is not the test.’” (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). In this regard, Bazemore is instructive: Whether, in fact, such a regression analysis does carry the plaintiffs’ ultimate burden will depend in a given case on the factual context of each case in light of all the evidence presented by both the plaintiff and the defendant. However, as long as the court may fairly conclude, in light of all the evidence, that it is more likely than not that impermissible discrimination exists, the plaintiff is entitled to prevail. 44 CITY OF OAKLAND V. WELLS FARGO & CO. 478 U.S. at 400–01 (Brennan, J., joined by all other Members of the Court, concurring in part). Therefore, even if we conclude today that the City has plausibly alleged that Wells Fargo’s conduct proximately caused a reduction in its tax base, Oakland’s allegations still need to be tested through discovery, including the rigors of expert rebuttal. For example, Wells Fargo argues that Oakland cannot attribute reduced property values in the Bay Area to foreclosures because California caps the annual property value increases at two percent. Even if proven true, this argument is only appropriate at the summary judgment or trial stages, when a trier of fact can evaluate competing evidence to determine if the two-percent cap undermines Oakland’s regression analyses. Iqbal, 556 U.S. at 678 (holding that at the pleadings stage this court must look only at the allegations in the amended complaint to determine if they are sufficiently detailed to “state a claim for relief that is plausible on its face”). The City’s regression analyses will be scrutinized during discovery and at trial before it can be determined that Wells Fargo’s conduct more likely than not diminished the City’s tax base. Bazemore, 478 U.S. at 400– 01.
Although Oakland plausibly alleges that Wells Fargo’s discriminatory lending practices have some direct relation to its lost property-tax revenues, it fails to do the same for its increased municipal expenses. Miami I, 137 S. Ct. at 1306. At the pleading stage, Oakland must do more than state, in conclusory fashion, its theory of how foreclosures caused by Wells Fargo’s predatory loans proximately caused additional municipal expenses. Iqbal, 556 U.S. at 678 (“[T]he tenet that a court must accept as true all of the CITY OF OAKLAND V. WELLS FARGO & CO. 45 allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” (citing Twombly, 550 U.S. at 555)). Without more, the district court cannot precisely ascertain which increases in municipal expenses are attributable to foreclosures caused by Wells Fargo’s predatory loans to Black and Latino residents. Obviously, the entire increase in Oakland’s municipal expenses over the relevant time period cannot be attributed to Wells Fargo’s alleged predatory lending practices. Because Oakland has not accounted for other independent variables that might have contributed to or even caused the spike in expenses, its claim of increased municipal expenses fails the first Holmes factor, which requires Oakland to plausibly plead that it is possible to ascertain with precision what increase in municipal expenses is attributable to Wells Fargo’s misconduct. 503 U.S. at 269. Accordingly, Oakland’s conclusory proximate-cause allegations as to its alleged increased municipal expenses are implausible and the district court did not err in dismissing them. VI. Oakland’s claims for injunctive and declaratory relief. The district court also asked us to decide whether the FHA’s proximate-cause requirement applies to claims for injunctive or declaratory relief. We hold that it does. The district court was apparently mistaken in its reading of Miami I and other Supreme Court precedents clearly establishing that plaintiffs must satisfy the proximate-cause requirement to receive any form of relief. 137 S. Ct. at 1305–06. Oakland does not dispute this point of law on appeal. 46 CITY OF OAKLAND V. WELLS FARGO & CO. In Miami I the Supreme Court noted that claims for statutory damages are analogous to common law tort actions, and therefore courts “repeatedly applied directness principles to statutes with ‘common-law foundations.’” 137 S. Ct. at 1306 (quoting Anza, 547 U.S. at 457). In doing so, the Court simply established that statutes with common law foundations require a showing of proximate cause. But nowhere in that opinion does the Court state that it requires plaintiffs to allege proximate cause only for damages claims under those statutes. In fact, the Supreme Court does not even mention declaratory or injunctive relief, let alone hold that proximate cause is not required to receive such relief. See generally, id. Furthermore, in Lexmark, the Supreme Court was unequivocal that “[p]roximate causation is . . . an element of the cause of action under the statute.” 572 U.S. at 134 n.6. It specifically underscored that “proximate causation . . . must be met in every case,” even if the plaintiff is not entitled to damages, because “it may still be entitled to injunctive relief.” Id. at 135 (emphasis added). Therefore, the Court applied its proximate-cause reasoning generally to the plaintiff’s false advertising claim without making any distinction based on the type of relief, even though the plaintiff sought both damages and injunctive relief. See id. at 123, 137. Not surprisingly, almost every other court that has reviewed analogous FHA claims in the wake of Miami I has also applied proximate-cause principles to cities’ claims without making any distinction between damages and injunctive relief. See, e.g., Miami II, 923 F.3d at 1268 (applying proximate cause where “[t]he City also asked for a declaratory judgment stating that the Banks’ conduct violated the FHA, [and] an injunction barring the Banks CITY OF OAKLAND V. WELLS FARGO & CO. 47 from engaging in similar predatory conduct”); Sacramento, 2019 WL 3975590, at  (applying proximate cause where “[t]he City seeks declaratory and injunctive relief and damages”); Philadelphia, 2018 WL 424451, at  (applying proximate cause where plaintiff sought an injunction prohibiting further discriminatory conduct). But see Prince George’s County., 397 F. Supp. 3d at 765 (“[T]o the extent that the Counties are seeking injunctive or declaratory relief against Defendants’ alleged equity-stripping practices, the proximate-cause requirement being less strict, the Counties may proceed.” (citing Oakland, 2018 WL 3008538 at )). Accordingly, we reverse the district court’s conclusion that Oakland did not have to satisfy the FHA’s proximatecause requirement as to its claims for declaratory and injunctive relief. On remand, the district court should determine whether Oakland plausibly alleged that its ongoing injuries are being proximately caused by Wells Fargo’s alleged wrongdoing.