A federal appeals court has given new life to a sprawling lawsuit brought by the city of Miami against several of the country’s largest banks over alleged predatory lending practices that allegedly led to the wave of home mortgage foreclosures that helped tank the U.S. economy during the Great Recession.
Cook County has now pointed to that ruling, asking federal judges to similarly revive the full scope of its similar claims against those same banks.
On June 4, attorneys for Cook County filed motions in two of the county’s sprawling lawsuits against lenders Wells Fargo, Bank of America and HSBC, asking the judges hearing the cases against Wells Fargo and HSBC to reconsider their rulings to narrow the scope of the county’s legal actions.
“The County’s alleged tax base injury is identical to the injury alleged by the City of Miami,” Cook County argued in its nearly identical motions.
James Evangelista Evangelista Worley LLC
The filings deal with rulings delivered in early 2018, when federal judges limited the kinds of monetary damages the county could demand from the big banks.
In 2014, Cook County filed suit against Wells Fargo, HSBC and Bank of America, alleging the lenders engaged in discriminatory predatory lending practices against racial and ethnic minority borrowers. Cook County alleged the practices fueled a wave of foreclosures, stripping equity from minority borrowers and sending them into default. That, in turn, left vacant homes scattered throughout neighborhoods in Chicago and many suburbs, depressing home values and costing local governments potentially billions of dollars in lost property tax revenues and costs to deal with the problems resuling from the surge of vacant properties.
The county sought damages for the foreclosures in general, and for depressed property tax collections and increased blight and crime, among other claims.
Last spring, however, federal judges limited those damage claims to direct costs the Cook County Sheriff’s Office and courts may have been forced to pay to handle a larger than usual number of foreclosure cases.
However, in May, the U.S. 11th Circuit Court of Appeals in Atlanta weighed in on the question, ruling a Florida federal judge was wrong to block the city of Miami from continuing with its predatory lending lawsuit against the big banks, including Bank of America and Wells Fargo.
In the 11th Circuit ruling, the judges found the connection between the banks’ alleged actions and the lost property tax revenues and other economic woes the city said it suffered was strong enough to establish “proximate cause” to allow the lawsuit to continue.
"Proximate cause asks whether there is a direct, logical, and identifiable connection between the injury sustained and its alleged cause," 11th Circuit Judge Stanley Marcus wrote in that decision. "The City’s pleadings meet this standard because Miami has alleged a substantial injury to its tax base that is not just reasonably foreseeable, but also is necessarily and directly connected to the Banks’ conduct ... throughout much of the City."
About a month after the ruling, Cook County said the same logic should apply to its claims against HSBC and Wells Fargo.
The 11th Circuit, Cook County said, found “there was a ‘logical and direct bond between discriminatory lending as a pattern and practice applied to neighborhoods throughout the City and the reduction in property values,’” Cook County argued in its motions.
“The fact that an ‘individual home might go under’ for a variety of reasons did not render proximate cause too attenuated: ‘when discriminatory lending practices pervade a neighborhood or a city, the city’s fisc will necessarily be affected because we know some number of homes will go under, and some number of properties will lose value,’” the county wrote, citing the 11th Circuit’s reasoning.
Cook County argued the Chicago federal judges had arrived at the wrong conclusion in light of the 11th Circuit’s ruling, and now should give the county the same chance as the city of Miami to demonstrate and calculate the harm it suffered.
“… The County made even stronger allegations than Miami by alleging that it could use ‘foreclosure property addresses, and Defendants’ loan application registry, loan servicing and loan default and foreclosure information,’ ‘[r]outinely maintained property tax and other financial data,’ ‘mortgage lien and foreclosure data, and well-established statistical regression techniques,’ to identify its actual out-of-pocket and property value and tax related damages on specific foreclosed properties at issue, as well as property value and tax related damages occurring at properties surrounding the subject foreclosed properties,” Cook County wrote.
Cook County is represented in the action by attorneys James M. Evangelista, David J. Worley and Kristi S. McGregor, of the firm of Evangelista Worley LLC, of Chicago, who were hired by the Cook County State’s Attorney’s Office to prosecute the cases.