Supreme Court justices grilled lawyers for big banks and for Miami alike Tuesday in lively Election Day oral arguments over the city’s lawsuit seeking millions of dollars in damages from racially discriminatory loans.
The case hinges on whether the 1968 Fair Housing Act, the last of the landmark civil rights laws, covers only the direct effects of discrimination or also covers the indirect consequences.
With a vacancy still unfilled from the death of Antonin Scalia and with Justice Clarence Thomas maintaining his customary silence, the seven other justices appeared somewhat receptive to Miami’s argument that the law protects not only individual victims of discrimination, but also the municipality that must deal with urban blight to which discrimination contributes.
At the same time, several justices expressed concern about how far the law’s protections extend, asking whether claims should cover anyone who suffers indirect financial loss because of discriminatory mortgages.
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Neal Katyal, a former U.S. solicitor general who is representing the Bank of America and Wells Fargo in the case, acknowledged that the high court had ruled in favor of a Chicago suburb alleging financial damages under the Fair Housing Act in its 1979 Gladstone Realtors v. Village of Bellwood case.
“Gladstone falls into the segregation category,” Katyal said. “A city can recover [damages] for the harms from making an integrated neighborhood become segregated.”
Justice Anthony Kennedy asked whether the harm would include the costs of added police.
“What could a city recover for based on a more segregated neighborhood?” he asked.
Katyal responded: “That may be very hard to identify.”
Robert Peck, a Washington lawyer representing Miami, faced tough questions from Chief Justice John Roberts, who asked whether local businesses should also be able to sue lenders over decreased profits as a result of neighborhood blight from bad loans.
“The city has a special interest in fair housing and an integrated community that the Fair Housing Act intended to vindicate,” Peck said. “A company does not.”
Roberts retorted: “But a business has an interest in running its operations in an integrated, vibrant neighborhood just as the city does.”
The difference, Peck responded, is that a city spends money on police, utilities and other services to maintain nice neighborhoods. Those investments, he said, are harmed by racially predatory loans that lower property values, increase foreclosures and cause other forms of blight.
Miami has not yet put a dollar value on the financial harm it alleges was caused by the predatory loans, but the cities of Baltimore and Memphis previously settled lawsuits for bank payouts in the range of $10 million.
Miami Gardens is among a number of cities that have filed similar cases against banks and are waiting the Supreme Court ruling in the Miami suit.