9th Circuit ends Oakland's fair housing lawsuit against Wells Fargo

(Reuters) - The 9th U.S. Circuit Court of Appeals ruled that the City of Oakland cannot sue Wells Fargo & Co for lost tax revenue the city claimed was caused by discriminatory mortgage lending, reversing an earlier decision.

U.S. Circuit Judge Margaret McKeown wrote for the unanimous en banc panel that the harm the city claimed was too far removed from allegations the bank steered Black and Latino borrowers into riskier mortgages.

The city had said the lending practices let to increased foreclosures, driving down tax revenue.

The court ordered the case to be dismissed and Oakland to pay the bank's legal costs.

The Oakland City Attorney's Office called the ruling disappointing in a statement.

"We are reviewing the opinion and contemplating next steps to protect the rights of Oaklanders who have been harmed by Wells Fargo's discriminatory conduct," a spokesperson said.

Wells Fargo spokesperson Tom Goyda said the bank was pleased with the outcome and had always denied the allegations.

"We will continue our focus on helping to expand home ownership opportunities in the City of Oakland and across the country," he said.

The 9th Circuit relied on the U.S. Supreme Court's 2017 decision in Miami's FHA case against Bank of America Corp. In that case, the justices said municipalities can sue for damages under the FHA, but only if they show a direct connection between the harm and the discriminatory lending.

That ruling barred Oakland's lawsuit, the 9th Circuit said.

"Because Oakland only alleges that the discriminatory loans make foreclosure and decreased tax revenue more likely, there is not a 1:1 relationship between the discriminatory loan — the conduct forbidden by the FHA — and decreased tax revenue," McKeown wrote.

The ruling reversed a three-judge panel's decision in August 2020 that Oakland had plausibly alleged a direct connection between its tax revenue and the bank's lending practices.

The panel held the city could not sue for the cost of city services to address the effects of foreclosures, a holding which the en banc panel affirmed.

The case is City Of Oakland v. Wells Fargo & Co, 9th U.S. Circuit Court of Appeals, No. 19-15169.

For Oakland: Barbara Parker and Maria Bee of the Oakland City Attorney's Office; and Robert Peck of the Center For Constitutional Litigation

For Wells Fargo: Paul Hancock of K&L Gates; and Neal Katyal of Hogan Lovells

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