By Tony Mauro

A mixed-bag ruling by the U.S. Supreme Court on Monday gives ammunition to both sides in litigation between cities and banks under the Fair Housing Act over the impact of predatory lending practices on local communities.

Civil rights and civil liberties groups applauded the court’s 5-3 decision affirming that Miami has standing to claim in court that it was harmed by the discriminatory lending practices of banks targeting minority borrowers. But banks were relieved that on a second issue, the court unanimously agreed that Miami must meet a high standard of proof to establish that the banks’ actions caused the city’s injuries.

The high court vacated and remanded the case back to the U.S. Court of Appeals for the Eleventh Circuit, which had ruled in favor of Miami on the standing issue and also on “proximate cause,” finding that all of the harms Miami suffered, such as lower property tax revenue and higher costs of city services, were foreseeable. The Supreme Court agreed that foreseeability was not enough to sustain a claim for damages.

“This will encourage cities that are on the fence to try their hand” at recovering possibly large damages from lenders, said Philip Stein, a banking litigator at Bilzin Sumberg in Miami, who was not involved in the case decided Monday. “The court gave cities something of a roadmap, and good attorneys representing cities can parse out what might work.” Lawsuits similar to Miami’s have been filed in Miami and Cobb County and DeKalb County in Georgia, according to a brief in the case filed by 26 cities across the nation.

But Stein also said the decision “gives more flexibility to defendant banks, reinvigorating them with more solid footing to defend” against liability by claiming their actions were too remote from the claimed harms for cities to collect damages.

Brianne Gorod, chief counsel of the Constitutional Accountability Center said, “The key takeaway from the court’s opinion is that Miami and other cities have standing to sue—that’s a win for Miami. To be sure, it would have been better for Miami had the Court affirmed on the proximate cause issue, as well, but the Court’s opinion leaves no doubt that the Eleventh Circuit can conclude on remand that there is proximate cause.”

Kristen Clarke, president of the Lawyers’ Committee for Civil Rights Under Law also applauded the decision, while calling the proximate-clause finding “a small step backward.” Clarke said, “Our nation is still wrestling with the collateral consequences of the foreclosure crisis. Today’s Supreme Court decision reinforces the critical role that states and cities must play in holding banks and other actors accountable for actions that continue to harm communities, particularly minority communities that have borne the brunt of the crisis.”

Justice Stephen Breyer, writing for the majority in the consolidated cases of Bank of America v. City of Miami and Wells Fargo & Co. v. City of Miami, said longstanding court precedents established that “the City’s claimed injuries fall within the zone of interests that the FHA arguably protects. Hence, the City is an ‘aggrieved person’ able to bring suit under the statute.”

But Breyer also wrote, “The housing market is interconnected with economic and social life. A violation of the FHA may, therefore, ‘be expected to cause ripples of harm to flow’ far beyond the defendant’s misconduct … Nothing in the statute suggests that Congress intended to provide a remedy wherever those ripples travel.”

Banking and business groups filed briefs in the case warning that a broad interpretation of standing could invite a flood of litigation not only from cities, but from plumbers and grocers who lost income because of neighborhood foreclosures. The American Banking Association, in a brief filed by Robert Long Jr. of Covington & Burling, told the court, “According to the Eleventh Circuit … the category of potential FHA plaintiffs is essentially limitless.”

Neal Katyal of Hogan Lovells argued the case for the banks, while Robert Peck of the Center for Constitutional Litigation argued for Miami.

Chief Justice John Roberts Jr. joined liberal justices Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan in the majority. Justice Clarence Thomas dissented in part, joined by justices Anthony Kennedy and Samuel Alito Jr. Justice Neil Gorsuch did not participate in the case, which was argued last November 8, Election Day.

In his partial dissent, Thomas wrote, “I would hold that Miami’s injuries fall outside the FHA’s zone of interests. I would also hold that, in any event, Miami’s alleged injuries are too remote to satisfy the FHA’s proximate cause requirement.”