According to the Eleventh Circuit, a municipalities’ lawsuit alleging lost tax revenue and increased costs for services case proceed against several large lenders. In City of Miami v. Wells Fargo & Co., 2019 WL 1966943 (11th Cir. 2019), Miami alleged that several large banks violated the Fair Housing Act by engaging in predatory lending that targeted racial minorities. These practices allegedly led to a higher rate of home foreclosures, which directly caused lost tax revenue and increased costs for services.

All Miami needed to allege was a direct connection between its supposed injury and the defendants’ conduct.

Earlier in the case, the lenders challenged Miami’s standing to bring an FHA claim. The Supreme Court resolved that issue in Miami’s favor in 2017. On remand, the Eleventh Circuit concluded that Miami’s allegations of proximate causation, taken as true, were sufficient to state a claim. According to the Court, all Miami must show to establish proximate causation is that there is a direct connection between the alleged injury and the defendant’s conduct. Applying the three-pronged test from Holmes v. Securities Investor Protection Corporationthe Eleventh Circuit concluded that Miami adequately alleged proximate causation because: (1) the method for calculating damages (set forth in the complaint) was a plausible way to connect Miami’s damages to the defendants’ conduct, (2) Miami had a unique claim so there was no danger of duplicative recovery, and (3) Miami was in a better position than individual homeowners to deter the allegedly predatory practices. The case will now go back to the district court for further proceedings. We will provide future updates as they are available.