Philadelphia's lawsuit against Wells Fargo over allegations the company's allegedly discriminatory lending practices damaged the city is too much of a stretch to proceed, the company has argued as part of its effort to dismiss a type of action that was only recently sanctioned by the U.S. Supreme Court.
In mid-May, Philadelphia city government lawyers sued the national lending company, alleging it violated the Fair Housing Act by targeting minority borrowers with high-risk and high-interest loans. The suit was the first that a city lodged against a financial institution since the Supreme Court's May 1 decision in Bank of America v. City of Miami and Wells Fargo v. City of Miami, which established that municipalities have standing to sue banks over allegedly discriminatory lending practices.
That ruling, however, wasn't a total win for municipalities looking to sue, and, in its motion to dismiss Philadelphia's suit, Wells Fargo cited the heightened burden the high court established for municipalities in suing under the Fair Housing Act.
"The City of Miami proximate cause requirement does not permit the city's allegations of cause and effect, and effect, and effect. The case must be dismissed," the motion, filed by Duane Morris attorney Alexander Bono, said. "Absent application of the directness requirement, Fair Housing Act liability could stretch to any remote yet imaginable aspect of 'economic and social life' in a never-ending causal chain like in the children's book 'If You Give a Mouse a Cookie.'"
Wells Fargo filed the motion July 21 in the U.S. District Court for the Eastern District of Pennsylvania.
A spokesman for Philadelphia declined to comment about Wells Fargo's motion. Bono also did not return a call for comment Tuesday.
The complaint that Philadelphia filed on May 15 in the U.S. District Court for the Eastern District of Pennsylvania focuses on lending practices that occurred between 2004 and 2014, and contends that the allegedly discriminatory conduct caused high foreclosure rates in minority neighborhoods and lowered tax revenues that the city otherwise would have collected.
Wells Fargo, however, contended that the city's arguments would require six steps that need to take place to establish a connection between any allegedly discriminatory loans and the city's claimed injuries.
"The theory requires instances of blight and crime at foreclosed properties because of vacancies (not simply because of chance or general social conditions) that caused the city to spend money on services that otherwise would not have been spent," the motion said. "Looking at the proof that would be required to support a verdict in this case confirms the claim must be dismissed."