The city of Miami has accused Wells Fargo & Co. and Wells Fargo Bank N.A. of manufacturing a conflict among circuit courts.

But the bank's pleadings suggest "defiance" by the U.S. Court of Appeals for the Eleventh Circuit, which it says has refused to follow high-court instructions in a case that could cost billions, according to Wells Fargo.

Miami and Wells Fargo are in a dispute over the bank's alleged role in the housing market collapse, which the city says depleted property-tax revenue.

Miami accuses the bank of contributing to the 2008 housing market crash with predatory lending practices.

But Wells Fargo argues it's the target of cities, who've unfairly sued it, with only a "loose causal chain" to its alleged actions and their lost revenue. And now, it claims the Eleventh Circuit has refused to force the cities to definitively make that connection, as the U.S. Supreme Court ordered, and as other courts have done.

"The Eleventh Circuit's defiance of this court's holdings is troubling enough on its own," Wells Fargo wrote in a petition for certiorari before the U.S. Supreme Court. "But the Eleventh Circuit's decision opens a split with several other circuits. Those other courts have found proximate cause lacking on analogous causal chains."

But the city fired back with criticism of its own, alleging the bank was looking to pit the courts against each other.

"Assuming that the Eleventh Circuit's careful examination of this Court's opinion could be characterized as reaching an erroneous conclusion, Wells Fargo manufactures a circuit conflict that only exists if different statutes with different language and purposes must be construed the same way," Miami argued.

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Litigation volley

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The city sued Wells Fargo in 2013 under the Fair Housing Act, alleging it offered discriminatory mortgage terms that increased the likelihood of African American and Latino borrowers defaulting on their loans. And that, the suit claimed, reduced the value of foreclosed houses and neighboring properties, whittling Miami's property tax revenue.

The case has flip-flopped through the courts, at first dismissed by the district court, then revived by the U.S. Court of Appeals for the Eleventh Circuit, and later affirmed and reversed in part at the U.S. Supreme Court. There, the justices found that the city's claims fell under the FHA, but that mere foreseeability was not enough to establish proximate cause. It then instructed the lower courts to apply common-law principles to decide.

The Eleventh Circuit found in May 2019 that the plaintiff had established proximate cause, but Wells Fargo claims that ruling "flouted" the high court's instructions. Wells Fargo's petition asks whether the FHA requires proximate cause to mean more than a "logical bond" between the alleged statutory violation and injury.

Among the bank's qualms: it claims that while the Supreme Court found the FHA requires some direct relation between alleged conduct and injury, the Eleventh Circuit found the plaintiff's injury "need not be caused directly" be the statutory violation.

Wells Fargo also pointed to the Supreme Court's finding that such a statutory violation could be "expected to cause ripples of harm to flow far beyond the defendant's misconduct," but that nothing in the statute says Congress "intended to provide a remedy wherever those ripples travel." Whereas the Eleventh Circuit found that the FHA's proximate cause standard "looks far beyond the single most immediate consequence of a violation."

But Miami claims a review would require the court to abandon long-standing jurisprudence.

"The bank's petition reveals that it is a disappointed litigant, who asks for nothing more than error-correction on the basis of its own skewed reading of this court's decision. Those are not grounds upon which certiorari is granted," the city's brief said.

Wells Fargo claimed that the Eleventh Circuit's "defiance" will cause confusion across the U.S., where it said several other courts have found proximate cause lacking in similar cases.

"The stakes remain staggeringly high: The city is just one of many municipalities seeking to recover what amounts to billions of dollars based on a loose causal chain that asks financial institutions to indemnify them for tax revenue declines following a nationwide housing market slump," Wells Fargo's petition said.

But Miami called that stance "fanciful," claiming a conflict only exists "if different statutes with different language and purposes must be construed the same way." It urged the high court to wait for an actual circuit conflict before taking up the issue, and stressed that the Ninth Circuit is poised to review near-identical claims in City of Oakland v. Wells Fargo Bank, slated for oral argument on Feb. 10.

"Wells Fargo makes its radical assertion that all federal statutes adopt the identical proximate-cause requirement in order to contrive a circuit split that is otherwise missing," the city's brief said.

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Read the brief:

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Robert Peck of the Center for Constitutional Litigation in Washington, D.C., represents Miami, while Neal Katyal of Hogan Lovells in Washington, D.C., represents Wells Fargo with Paul Hancock and Olivia Kelman of K&L Gates in Miami. They did not respond to requests for comment by deadline.

Miami has filed a similar brief in its case against Bank of America, which it also accuses of discriminatory lending practices. That brief claims the bank has tried to dodge the suit by "invoking the demonstratively false specter of liability in the hundreds of millions or even billions of dollars per community and an imaginary proliferation of lawsuits."

William McGinley Jay of Goodwin Procter in Washington, D.C., represents Bank of America, which has also asked the Supreme Court to review proximate cause.

Both cases have attracted amicus briefs from interested parties, including the U.S. Chamber of Commerce, The American Bankers Association and Washington think tank The Cato Institute.

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