Directness Between Plaintiffs Injury and Defendant’s Action Is Necessary in Federal Causes of Action

CHICAGO ­– (May 1, 2017)— The Supreme Court today adopted the view advocated in a DRI amicus curiae brief that, to prove a violation of the Fair Housing Act, a plaintiff must do more than show that the harm suffered was a foreseeable consequence of the defendant’s actions. The brief had been filed by DRI’s Center for Law and Public Policy.

The City of Miami brought separate Fair Housing Act suits against Bank of America and Wells Fargo in the Southern District of Florida.

The City alleged that the banks provided loans to minorities on less favorable terms than to non-minorities; that some of those loans defaulted because of those allegedly discriminatory terms; that some of those defaults led to foreclosures; that some of those foreclosures led to decreased property values, not only at the foreclosed property but at other nearby properties, as well; and that those decreases in property values in turn led to decreased tax revenue (and increased municipal-service costs) for the city government. The City claims “hundreds of millions” of dollars in damages.

The banks each moved to dismiss and the district court agreed, dismissing both cases. The Eleventh Circuit reversed holding that proximate cause is satisfied so long as the plaintiff’s injury could have been foreseen by the defendant.

The DRI brief asserted that to date, the Supreme Court has consistently held that the proximate cause requirement Congress is presumed to include in federal causes of action requires not only that the plaintiff’s injury be foreseeable, but also that there be some degree of directness between a plaintiff’s injury and defendant’s conduct.

The Court reversed the Eleventh Circuit’s proximate cause analysis and reiterated that damages claims under the FHA are analogous to common law tort actions, and thus require a direct relationship between the injury asserted and the injurious conduct alleged.  The Court remanded the case to the Eleventh Circuit to apply the principles set forth in the Court’s opinion.

The Court’s decision has implications beyond the FHA.  The decision is part of a phalanx of cases imposing traditional principles of proximate cause to various federal statutory causes of action including the Clayton Act, RICO, and now the FHA.  Today’s decision should be cited for the proposition that proximate cause for violations of federal statutes requires a direct connection between the purported misconduct and the alleged harm (absent contrary statutory language).  And according to the Supreme Court, mere foreseeability of the alleged harm is not sufficient. 

“As the district court recognized, it is exceedingly difficult to determine with any reasonable certainty what amount of lost tax revenue and resource expenditures were attributed to (alleged) unfair lending practices, given all of the other economic factors responsible for the City’s losses,” DRI’s brief stated.

DRI brief author Matthew Nelson of Warner Norcross & Judd LLP in Grand Rapids, Michigan, is available for interview or for expert comment through DRI’s Communications Office.

For the full text of DRI’s amicus brief, click here.

Directness Between Plaintiffs Injury and Defendant’s Action Is Necessary in Federal Causes of Action

CHICAGO ­– (May 1, 2017)— The Supreme Court today adopted the view advocated in a DRI amicus curiae brief that, to prove a violation of the Fair Housing Act, a plaintiff must do more than show that the harm suffered was a foreseeable consequence of the defendant’s actions. The brief had been filed by DRI’s Center for Law and Public Policy.

The City of Miami brought separate Fair Housing Act suits against Bank of America and Wells Fargo in the Southern District of Florida.

The City alleged that the banks provided loans to minorities on less favorable terms than to non-minorities; that some of those loans defaulted because of those allegedly discriminatory terms; that some of those defaults led to foreclosures; that some of those foreclosures led to decreased property values, not only at the foreclosed property but at other nearby properties, as well; and that those decreases in property values in turn led to decreased tax revenue (and increased municipal-service costs) for the city government. The City claims “hundreds of millions” of dollars in damages.

The banks each moved to dismiss and the district court agreed, dismissing both cases. The Eleventh Circuit reversed holding that proximate cause is satisfied so long as the plaintiff’s injury could have been foreseen by the defendant.

The DRI brief asserted that to date, the Supreme Court has consistently held that the proximate cause requirement Congress is presumed to include in federal causes of action requires not only that the plaintiff’s injury be foreseeable, but also that there be some degree of directness between a plaintiff’s injury and defendant’s conduct.

The Court reversed the Eleventh Circuit’s proximate cause analysis and reiterated that damages claims under the FHA are analogous to common law tort actions, and thus require a direct relationship between the injury asserted and the injurious conduct alleged.  The Court remanded the case to the Eleventh Circuit to apply the principles set forth in the Court’s opinion.

The Court’s decision has implications beyond the FHA.  The decision is part of a phalanx of cases imposing traditional principles of proximate cause to various federal statutory causes of action including the Clayton Act, RICO, and now the FHA.  Today’s decision should be cited for the proposition that proximate cause for violations of federal statutes requires a direct connection between the purported misconduct and the alleged harm (absent contrary statutory language).  And according to the Supreme Court, mere foreseeability of the alleged harm is not sufficient. 

“As the district court recognized, it is exceedingly difficult to determine with any reasonable certainty what amount of lost tax revenue and resource expenditures were attributed to (alleged) unfair lending practices, given all of the other economic factors responsible for the City’s losses,” DRI’s brief stated.

DRI brief author Matthew Nelson of Warner Norcross & Judd LLP in Grand Rapids, Michigan, is available for interview or for expert comment through DRI’s Communications Office.

For the full text of DRI’s amicus brief, click here.