Wells Fargo Bank in Charleston, South Carolina. Photo: Carmen Natale/ALM

A federal appeals court has dismissed a Miami-Dade city's civil rights complaint against Wells Fargo for lack of standing.

The U.S. Court of Appeals for the Eleventh Circuit held the City of Miami Gardens failed to establish standing in its 2014 legal action against the banking giant. In its lawsuit, the city alleged Wells Fargo violated the Fair Housing Act and deliberately discriminated against minority and low-income borrowers residing in Miami Gardens. The third amended complaint entered by the city in the Southern District of Florida contended the bank's predatory practices between 2004 and 2008 resulted in a spate of foreclosures “disproportionately located in minority neighborhoods in Miami Gardens.”

The suit argued the ensuing foreclosures caused damage to the city by producing a state of disrepair among Miami Gardens homes as well as a drop in property values and a reduction in tax revenue.

U.S. District Judge Federico Moreno granted Wells Fargo's motion for summary judgment in June 2018, reasoning in part that Miami Gardens did not present adequate evidence that differential loan pricing between the city's white and minority residents was “caused by race, and not by the reasons proffered — lender credits, promotional pricing, and timing.”

The city subsequently filed a notice of appeal in August 2018. Although the opinion from the appellate court Tuesday vacated the summary judgment entered against Miami Gardens, it also reversed the case with instructions for dismissal.

“The district court should have dismissed the action for lack of standing,” the order said. The ruling noted the Fair Housing Act provides for claims to be filed “not later than two years after the occurrence or the termination of an alleged discriminatory housing practice,” which led for the discovery period in the underlying case to focus on loans that were generated between June 13, 2012, and June 12, 2014. Both Moreno and the appellate panel held the evidence and arguments presented by Miami Gardens failed to illustrate the city suffered “actual or imminent” injuries caused by Wells Fargo-issued loans from the limitation period.

Read the court opinion:

“The city did not produce any evidence of the effect of these foreclosures on property-tax revenues or municipal spending,” the opinion said. The appellate panel found Miami Gardens also did not “present any evidence that these loans were issued on discriminatory terms or otherwise attempt to isolate the contribution of Wells Fargo's actions, if any, to the decline in property value sustained by these properties.”

The appeals court acknowledged the city's argument that the summary judgment was incorrectly granted because it evaluated their claims solely within the framework of loans issued by Wells Fargo between 2012 and 2014 period, rather than accounting for the years detailed in the complaint or the historical trends surroundings loans issued to low-income and minority Miami Gardens residents. The opinion said the onus fell upon the city for not requesting additional discovery in the case.

“No unfairness occurs if a plaintiff fails to advise the district court of the need for further discovery to prove standing at summary judgment, and a circuit court decides in the first instance that the plaintiff failed to establish standing,” the opinion said. “By … opposing the motion for summary judgment on the merits, the city acceded to the entry of judgment on any issue raised in the motion for summary judgment based on the existing record. And even on appeal, the city has failed to provide us with any explanation of how further discovery would have enabled it to establish standing.”

The city's legal team included Perlman, Bajandas, Yevoli & Albright partner Porpoise Evans as well as attorneys from Lieff Cabraser Heimann & Bernstein's New York City office. Neither Miami Gardens' outside counsel nor City Attorney Sonja Knighton Dickens returned requests for comment by deadline.

Wells Fargo was represented in the proceedings by Paul Hancock and Olivia Kelman with K&L Gates' Miami office as well as Miami-based attorneys with Hogan Lovells and Kozyak Tropin & Throckmorton. Wells Fargo spokesman Tom Goyda said the bank was “very pleased with the appellate court's decision.”

“We will continue our focus on helping to expand home ownership opportunities in South Florida and across the country,” Goyda said.

Bruce Jacobs, a Miami-based foreclosure attorney who's frequently litigated against Wells Fargo, told the Daily Business Review the bank and similar lending institutions should be held accountable for their role in causing mass foreclosures in South Florida and across the United States.

“These banks target the most vulnerable communities with racial discrimination that either redlines or reverse redlines communities of color,” Jacobs said, respectively referring to the practices of denying credit to applicants based on race, as well as flooding predominantly minority communities with predatory loans. “As a foreclosure defense lawyer it makes no sense that courts would tolerate such obvious illegal activity. … These banks need to pay for their racist and fraudulent practices. The rule of law demands nothing less.”

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