WASHINGTON (AP) – The Supreme Court seems inclined to allow Miami to sue banks for predatory lending practices among minority customers that led to foreclosures, declines in property taxes and dips in property values.
At least four of the eight justices appeared willing during arguments Tuesday to let the suits go forward under the anti-discrimination Fair Housing Act. Miami and other cities are trying a novel approach to hold banks accountable for the wave of foreclosures during the housing crisis that hit in 2007.
If the court splits 4 to 4, the decision of a lower court in favor of Miami would remain in place, but there would be no nationwide ruling addressing similar lawsuits by other cities.
Miami claims that Wells Fargo, Bank of America and Citigroup pursued a decade-long pattern of targeting African-American and Hispanic borrowers for costlier and riskier loans than those offered to white customers. The loans to minority homeowners went into default more quickly as well, the city says.
Wells Fargo and Bank of America appealed the lower court ruling to the Supreme Court, arguing that cities can't use the Fair Housing Act to sue over reductions in tax revenues. The banks said the connection between a loan and the tax consequences is too tenuous. Citigroup did not appeal, though its lawsuit also would be affected by the high court ruling.
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Neal Katyal, representing the banks, said a ruling for Miami could lead to lawsuits asking for "billions of dollars."
Robert Peck, Miami's lawyer, told the court that the banks are exaggerating the claims. "We said we lost millions of dollars," Peck said, adding that similar lawsuits filed by Baltimore and Memphis, Tennessee, were settled for less than $10 million each.
During the Election Day-session, two justices who typically pepper lawyers with questions that often reveal how they view a case were uncharacteristically quiet. Justice Stephen Breyer asked only a couple of questions and Justice Samuel Alito did not ask any.
Some justices said they worried about opening the courthouse door to shop owners, gardeners and other companies that might lose business as a result of home foreclosures.
A decision in Bank of America v. Miami, 15-1111, and Wells Fargo v. Miami, 15-1112, is expected by June.