A Chicago federal judge will not slow down Cook County’s predatory lawsuit against HSBC, denying a request from the British banking conglomerate to place the county’s legal action on hold to allow a federal appeals court to iron out differing opinions among local federal judges as to whether the county actually has standing under federal law to sue HSBC and other banks over allegations the banks discriminated against borrowers based on race and in the process, compounded the local housing foreclosure crisis, caused urban blight and cost the county government billions.
Judge John Z. Lee delivered the decision Jan. 19 in the U.S. District Court for Northern Illinois, rejecting HSBC’s request to stop proceedings in the lawsuit so the U.S. Seventh Circuit Court of Appeals could hear an interlocutory appeal – an appeal designed to answer an important legal question in a lower court case - over the question of the county’s standing under the U.S. Fair Housing Act.
In March 2014, Cook County filed separate, yet very similar lawsuits against several financial institutions, including Wells Fargo, Bank of America and HSBC and its affiliates, alleging violations of the Fair Housing Act. The county contended the bank’s allegedly dubious lending practices contributed to a wave of foreclosures in the late 2000s, which deprived Cook County of billions of dollars in tax revenue, increased the demand for governmental services, depressed real estate values and scarred neighborhoods with vacant houses.
HSBC filed a motion to dismiss the county’s suit, arguing the county had no skin in the game, as its claims did not fall within the “zone of interests” as outlined by courts in relation to the Fair Housing Act. Specifically, HSBC pointed to a July 2015 ruling by Chicago federal district judge Gary Feinerman in a similar suit by Cook County against Wells Fargo.
In that ruling, Feinerman noted the county was never turned down for a loan or offered unfavorable terms related to housing and did not even have race or gender status – the latter two of which are safeguarded by the Fair Housing Act.
“Cook County’s alleged injuries . . . are purely derivative and not the type that the FHA was designed to protect,” Feinerman ruled.
However, Judge Lee – presiding over the HSBC case – was not persuaded, saying on Sept. 30 the county has “alleged a rather straightforward FHA claim,” with the bank’s actions causing a “rash of foreclosures in the county, which in turn caused economic and noneconomic injury to the County.”
Lee’s position was also taken by fellow Chicago federal Judge Elaine Bucklo, who also refused to dismiss the county’s FHA suit against Bank of America in March 2015.
As a result of these seemingly contradictory motion-to-dismiss rulings in three nearly identical cases in the same district, HSBC asked Lee to allow for an interlocutory appeal to the Seventh Circuit so that body could resolve the conflict as to Cook County’s standing under the Fair Housing Act.
HSBC maintained an interlocutory appeal was in order, because the question at hand satisfied the statutory requirements for such an appeal: the issue involved a controlling question of law, with a “substantial” difference of opinion among the judges, and an immediate appeal would speed up the case, if not bring it to an end, saving millions of dollars in legal costs.
In addition, HSBC maintained federal district courts outside Chicago have also diverged in their interpretation of standing under FHA.
However, Judge Lee would not budge on his earlier decision, acknowledging there is a “split” in the district, but asserting he nevertheless believed “binding precedent mandates the conclusion that Cook County has standing.”
In support of his view, Lee cited Chicago federal district rulings - Gladstone Realtors v. Village of Bellwood from 1979 and Gorski v. Troy from 1991, which reinforced the 1979 case, as well as the 2011 U.S. Supreme Court ruling in Thompson v. North American Stainless, which Lee said reinforced the lower court holdings.
Lee denied the motion and set a status hearing for April 27.
Cook County is represented by James D. Montgomery and Associates, of Chicago, and Harris Penn Lowry, of Atlanta.
HSBC is defended by the firm of BuckleySandler, which has offices in Chicago and Washington, D.C.