WASHINGTON — In the last of its landmark civil rights laws, Congress passed the Fair Housing Act in 1968 to prevent African-Americans from being denied mortgages in white neighborhoods or from getting less-favorable mortgage rates.
Now, Miami is asking the Supreme Court to decide whether major banks should pay the city millions of dollars in damages for financial harm it claims to have suffered because of predatory loans to minority borrowers.
The court will hear oral arguments Tuesday in Miami’s lawsuit against Bank of America and Wells Fargo, two of the biggest mortgage lenders in the city and across the country.
Miami Commissioner Francis Suarez said the city’s case was rooted in the mortgage crisis that began about a year before his election in November 2009.
“As we investigated, we discovered that many banks were lending money to minority members of our community under less favorable terms than nonminority members,” Suarez said. “They were preying on our residents. That led to unusually high levels of foreclosures in our city, which caused all kinds of problems from an enormous diminishment in the value of our tax base and more squatters in foreclosed properties to almost having to declare bankruptcy as a city.”
The Bank of America and Wells Fargo say the Fair Housing Act protects direct victims of discrimination, not municipalities or other government jurisdictions that may suffer financial effects of discrimination.
Lawrence Grayson, senior vice president at Bank of America, said, . “We believe that a municipality seeking purely monetary recovery is not covered by the statute, and we welcome the Supreme Court’s scrutiny and clarity.”
Suarez, however, said the city was mandated by law to protect the interests of its residents.
“Our lawsuit is on behalf of them,” he said. “It seeks redress from those banks for the damages they suffered through the government that is tasked to represent them.”
Miami’s lawsuit is the first by a large city against banks under the Fair Housing Act to reach the Supreme Court.
Most other lawsuits were settled.
The City of Miami Gardens has a similar case before a federal judge in Miami, but it’s on hold pending the Supreme Court’s ruling in the Miami case.
The civil rights division of the Justice Department has also challenged banks under the same law, winning substantial settlements for the cities of Baltimore and Memphis.
Each of those cities received about $10 million in damages. While Miami has not yet asked for a specific amount of money, its payout could be somewhat smaller because its population is less than those of Baltimore or Memphis.
Robert Peck, a Washington lawyer who will argue for Miami Tuesday, said the city was relying in part on a 1979 case.
In that case, the Supreme Court ruled that the village of Bellwood, a Chicago suburb, could sue two real estate brokerages.
“The court found that municipalities do have standing to bring action under the Fair Housing Act because the cities suffer directly from the discriminatory actions of those who violate that law,” Peck said.
The court’s ruling said in part: “If, as alleged, petitioners’ sales practices actually have begun to rob Bellwood of its racial balance and stability, the village has standing to challenge the legality of that conduct.”
The banks, are relying on a 2011 Supreme Court ruling in an employment-discrimination case.
While that case involved employment, not housing, it also turned on the indirect effects of discrimination as opposed to direct effects.
In Thompson v. North American Stainless, the court ruled five years ago in favor of a worker who claimed he was fired because his girlfriend filed a grievance.
The justices said, however, that federal employment law set limits on the extent to which a worker could claim harm from spinoff discrimination, as opposed to direct discrimination.
In Miami’s suit under the Fair Housing Act, U.S. District Judge William Dimitrouleas ruled against the city in July 2014, but the 11th U.S. Circuit Court of Appeals overturned the decision in September 2015.
The city also has sued Citigroup Inc. and JPMorgan Chase Co. in separate cases seeking financial redress under the Fair Housing Act.
