A federal judge has refused to back off her order blocking Cook County from demanding Bank of America reimburse the county potentially billions of dollars for property tax revenue the county says was lost amid the foreclosure crisis – a loss the county has blamed in part on alleged discriminatory lending practices.
U.S. District Judge Elain E. Bucklo refused Cook County’s request to reconsider her order from the spring of 2018, in which she limited the county’s ability to press its payment demands against Bank of America for the alleged misconduct.
In her order, issued Dec. 19, Bucklo said the county still cannot establish Bank of America’s alleged practices was the cause of any financial calamity for the county government.
“… Just as it would be ‘exceedingly difficult to trace causation from the Banks’ predatory practices’ to the local grocer’s diminished profits, it would be impossible to trace a decline in the County’s future tax revenues back to defendants’ discriminatory practices with any reasonable degree of certainty,” Bucklo wrote in her most recent order.
The decision comes amid long-running legal actions brought in Chicago federal court by Cook County against Bank of America and other major home mortgage lenders, including Wells Fargo and HSBC. Those separate actions remain pending in federal court, as well.
In the lawsuits, filed in 2014, the county accuses Bank of America and the other big banks of allegedly violating the federal Fair Housing Act. The lawsuits assert the lenders issued home loans to African Americans and other racial minority borrowers with rates and terms allegedly more burdensome than loans offered to white borrowers with similar financial history.
The lawsuits asserted the banks’ practices amounted to so-called reverse redlining and helped fuel the foreclosure wave, as the loans allegedly stripped equity from minority home mortgage borrowers, causing them to default, and leaving vacant homes scattered throughout the county. That, in turn, allegedly further depressed home values and reduced the amount of money the county and other local governments could collect in property taxes, which increasing county costs for services related to the foreclosures and vacant properties.
In the case against Bank of America, the bank has asked the judge to dismiss the case, asserting the county hasn’t actually proved it lost money from the foreclosures.
The judge so far has refused to dismiss the case entirely, but in March 2018, she limited the county’s ability to collect in the case, only to the county’s costs due to handling the foreclosures and vacant properties.
However, in more recent months the U.S. 11th Circuit Court of Appeals, in Atlanta, had answered the questions before Bucklo differently, allowing the city of Miami, Fla., to proceed with similar discrimination and tax loss lawsuits against the lenders.
That decision prompted Cook County to ask Bucklo to reconsider her March 2018 ruling. In the motion and related briefs, the county conceded it continued to collect the same amount of taxes as before. However, the county argued it still lost money, because it was not able to collect as much as it would have, had the foreclosures, allegedly worsened by Bank of America’s alleged lending practices, not occurred.
Cook County’s lawyers called the discussion over its tax collections to be “a red herring.”
The county said its losses are “readily calculable” and required the county to “undertake other measures to make up that lost revenue,” including raising “the tax rates affecting all similar classes of property and … raise other taxes.”
However, the county’s lawyers argued there are limits to how much the county can raise taxes to make up for losses, as raising taxes too often or too high can create an essential domino effect of harm to Cook County’s economy, reducing the tax base by further reducing home values and driving businesses out of the county.
Judge Bucklo said the county’s assertions illustrate well “the ‘ripples of harm’ that undoubtedly flow to any number of participants in the local economy.”
But she said the county’s arguments fall short in establishing anything “plausibly resembling a direct causal chain between defendants’ (Bank of America’s) misconduct and the far-reaching negative effects the County attributes to an increase in tax rates.”
The judge said neither the 11th Circuit’s ruling in the City of Miami case, nor any other cases presented by Cook County, could persuade her to reverse her earlier findings the county’s “tax losses are too remote” to be fixed to conduct alleged against Bank of America.
Cook County is represented by attorneys with the firms of Evangelista Worley LLC, of Atlanta, Georgia; Milberg, Tadler, Phillips, Grossman LLP and Milberg LLP, both of New York City; and James D. Montgomery & Associates of Chicago.
Bank of America and its subsidiaries are defended by the firms of Goodwin Proctor LLP of Boston and Washington, D.C.; and Winston & Strawn, of Chicago.