If lenders of home mortgages discriminate against minority borrowers, and that sets off a chain that ultimately ends in racially segregated residential neighborhoods, who along that chain gets to sue for damages? And, in particular, if cities at the end of that chain can show they were harmed, can they sue and, if so, how do they prove that in court?
That was the highly significant cultural and legal question that occupied the Supreme Court for a lively hour on Tuesday, as the Justices went about their business while much of the rest of Washington – and America – was focused on Election Day.
Hearing two combined cases that will go by the name Bank of America v. Miami, the Justices left a clear impression that the cities could be the winners – in one way or another, either in a major or a more limited way. There was even some prospect of a 4-to-4 split, but even that would favor the cities.
Three lawyers, one for the lenders (banks, in this case), one for the city of Miami, and one for the federal government (siding with Miami), all suggested that sometimes cities do get to sue to challenge discriminatory home loans made in violation of the federal Fair Housing Act. But the advocates differed widely on how far down the chain from financing to segregation that right to sue would reach.
The banks’ lawyer basically said there had to be a one-to-one link between the illegal loan and the harm done – that is, the first step in the chain. But the lawyer for the city of Miami, and the federal government attorney, argued that if such loans led to default, and then to foreclosure, and then to declining property values, and then to segregated neighborhoods, and then to lower city revenue from property taxes, a city government could sue by proving that its civic injury was traceable back to the illegal loan.
The Court, in reaction to those arguments, displayed a good deal of worry about who would have a valid legal claim for the harm that ultimately flowed from discriminatory lending. Could a corner grocery store owner sue, because business got bad after segregation set into the neighborhood? Could a gardener who lost yard work when blight set in?
Such questions did not bear directly on the scope of cities’ right to sue under the Act, but they did display the Court’s caution about how they would write an opinion that opens the courthouse door to city governments, but doesn’t open it too wide, and definitely did not open it to everyone who might try to sue as a victim of residential segregation. “How do we write it?” Justice Sonia Sotomayor asked, pleadingly.
As the Justices pondered what limits they might impose on Housing Act claims by city governments, some of them wondered whether a city could sue if tourists stayed away because of urban deterioration; the answer to that, from the city’s lawyer, was No; and whether segregation of a single apartment housing complex might open the way for a city to sue the lender involved; the answer seemed to be maybe.
There were a number of signs that the deciding vote on the outcome might be held by Justice Anthony M. Kennedy. He repeatedly pressed lawyers on both sides to define, with specificity if they could, who would qualify as entitled to seek enforcement of Congress’s fair housing mandate. “How far out do damages extend?” he asked at a critical point. And he probed whether a city could, in fact, be a “direct victim” of a discriminatory loan that led to a cascade of consequences. He seemed to be reaching for a way to make the link between lending and urban blight, but wasn’t sure where that might be,
Chief Justice John G. Roberts, Jr., seemed to be the most skeptical of the Justices who took an active part, repeatedly rephrasing his questions to the city’s lawyer to approach from different angles the core question he wanted answered: “What cuts off the chain (on the right to sue for illegal loans)?”
As the hearing moved on, the lawyer for the city of Miami, Robert S. Peck, sought to assure the Justices that city governments would be able to prove that they could close the proof gap between initial loans and civic harm and that they would not be seeking huge damage verdicts, while the lawyer for the banks, Neal K. Katyal, sought to show that the cities were demanding an unlimited right to sue and that the risk of a victory for the cities would be thousands of lawsuits seeking millions in damages.
Two Justices asked no questions – Samuel A. Alito, Jr., and Clarence Thomas. But the other six were active, and their questions and comments suggested – at least as an overall impression – that the outcome is going to be divided. If the court were to wind up splitting 4-to-4, the result would be simply to uphold the federal appeals court decision being reviewed. That decision allowed the city of Miami to sue. It would not set a nationwide precedent, however, so the issue could return to the Court in the future.
(NOTE: This post also appears today on Constitution Daily, the blog of the National Constitution Center in Philadelphia.)