## Facts

- The City of Los Angeles sued Bank of America Corporation, Bank of America, N.A., and Countrywide-affiliated entities under the Fair Housing Act of 1968 (FHA), alleging discriminatory residential mortgage lending in Los Angeles.
- The City alleged the bank engaged in both redlining and reverse redlining aimed at minority borrowers and minority neighborhoods.
- The City claimed the bank targeted minority borrowers with high-cost and predatory loan products, including charging unreasonably high interest rates not justified by credit risk, using teaser rates disproportionately for minorities, and misleading minority borrowers about refinancing options.
- The City relied on statistical data to allege the bank was more likely to place borrowers in minority neighborhoods into high-cost or predatory loans.
- The City alleged those lending practices caused disproportionate defaults and foreclosures in minority neighborhoods.
- The City sought damages for two categories of municipal harm tied to foreclosures and vacancies: (1) decreased property-tax revenue due to reduced property values and (2) increased municipal expenditures (e.g., police, fire, and code-enforcement services) to address blight and safety risks at vacant properties.
- The City also asserted a state-law unjust-enrichment theory based on the bank’s alleged profits from the discriminatory practices.
- The bank moved to dismiss under Rule 12(b)(6), arguing the City lacked standing, the harms were too remote to satisfy proximate cause, the FHA claims were time-barred, and the complaint failed to state a claim (including for unjust enrichment).

## Issues

1. Whether the City alleged Article III injury and FHA statutory standing as an “aggrieved person” based on lost property-tax revenue and increased municipal service costs attributed to discriminatory lending and resulting foreclosures.
2. Whether the complaint plausibly alleged proximate cause between the bank’s alleged FHA violations and the City’s claimed damages, including whether the causal chain was sufficiently direct for (a) increased municipal service costs and (b) lost property-tax revenue.
3. Whether the FHA claims were timely under the FHA’s limitations period in light of alleged ongoing origination, servicing, and foreclosure conduct.
4. Whether the City stated a viable unjust-enrichment claim under California law based on the alleged discriminatory lending practices.

## Decision

- The court granted the motion to dismiss in part and denied it in part.
- The court held the City plausibly alleged Article III injury and fell within the FHA’s broad standing provision, at least at the pleading stage, because the asserted municipal fiscal harms were concrete and tied to foreclosures and vacant properties in Los Angeles neighborhoods.
- The court held the City plausibly pleaded proximate cause for damages based on increased municipal expenditures (police, fire, code enforcement) linked to foreclosures and vacancies allegedly caused by the bank’s targeted predatory lending in minority communities.
- The court dismissed, without prejudice, the City’s property-tax revenue loss theory because intervening forces (including housing-market conditions and borrower payment decisions) made the causal chain too attenuated as pleaded.
- The court rejected the bank’s timeliness challenge at the pleading stage, accepting allegations that discriminatory practices continued into the limitations period (supporting a continuing-violation theory).
- The court dismissed the unjust-enrichment claim (at least as pleaded), allowing the City an opportunity to amend.

## Legal Principles

- Standing under the FHA extends to the limits of Article III, and a municipality may qualify as an “aggrieved person” when it alleges concrete fiscal harms fairly traceable to discriminatory housing practices.
- Article III injury may be shown through municipal financial injuries, including increased expenditures for services and, in some circumstances, reduced tax revenue, when the allegations connect those losses to identifiable local conditions (such as foreclosures and vacancies).
- FHA damages require proximate cause: the alleged injury must have a sufficiently direct relationship to the alleged discriminatory conduct, and courts may treat distinct categories of damages differently depending on the causal chain alleged.
- At the pleading stage, allegations that discriminatory targeting of predatory loans led to foreclosures and vacancies can support proximate cause for municipal service-cost damages tied to those foreclosures and resulting neighborhood conditions.
- Claims resting on broader market effects (such as property-value declines affecting tax receipts) may fail proximate cause where multiple intervening variables make the alleged link speculative or indirect absent more particularized factual allegations.
- The FHA’s limitations period may be satisfied where the complaint alleges discriminatory conduct continuing into the limitations window, including conduct related to loan servicing and foreclosure.
- Under California law, unjust enrichment/restitution generally requires allegations that the defendant received and unjustly retained a benefit connected to the plaintiff; conclusory allegations may be dismissed with leave to amend.

## Conclusion

The court allowed Los Angeles to proceed on FHA theories seeking damages for increased municipal service costs plausibly tied to discriminatory, predatory lending that allegedly produced foreclosures and vacancies, but it dismissed the property-tax revenue loss theory as too remote on the pleaded facts and also dismissed the unjust-enrichment claim with leave to amend, while rejecting a limitations defense based on allegations of continuing discriminatory conduct.


City of Los Angeles v. Bank of America Corporation, 2014 WL 2770083 (2014)