The Fair Housing Act1 (FHA) was the last of the three major civil rights statutes passed in the 1960s, its passage spurred by a presidential commission’s conclusion that the United States was “moving toward two societies, one black, one white — separate and unequal.”2 The FHA prohibits, among other things, racial discrimination in the terms and conditions of home sales and mortgage loans.3 Any “aggrieved person” is permitted to file suit to enforce its restrictions.4 Last Term, in Bank of America Corp. v. City of Miami,5 the Supreme Court affirmed that cities can be “aggrieved persons” under the FHA.6 The Court also held that “proximate cause under the FHA requires ‘some direct relation between the injury asserted and the injurious conduct alleged’” and remanded the case for reconsideration under this higher standard.7 The majority opinion is moderate in nature, with one issue resulting in a victory for the City and the other for the banks. If the Court was looking for a middle ground between the parties’ positions, this was the right one. The precedents supporting broad standing under the FHA were hard to avoid, and proximate cause is a better doctrinal tool to prevent exposing lenders to the out-of-control liability that seemed to worry the Court. Future courts will decide the legacy of the decision, however, as the extent to which this standard will in fact limit liability is unclear.
Bank of America Corp. came about as an indirect result of the 2008 financial crisis. In the years following the crisis, housing markets in Florida and the City of Miami in particular were devastated. At the peak of the recession in 2010, when foreclosures numbered 2.9 million nationwide, nearly 500,000 of the foreclosed homes were located in Florida.8 By the time the City filed suit in 2013, Miami had a higher foreclosure rate than any other large U.S. city.9
According to the City, these foreclosures and their effects were not distributed proportionally across Miami’s population with regard to race. Miami claimed that several banks engaged in both redlining and “reverse redlining” in the City, on the one hand refusing to offer minorities credit on the same terms as whites and on the other imposing harsher, predatory terms when loans were offered to minority borrowers.10 Compared to similarly situated white customers, minority borrowers faced higher interest rates, were charged more baseless fees and penalties, and were more often refused loan refinancing and modification when faced with the possibility of default.11
On these facts, Miami filed lawsuits against Bank of America, Wells Fargo, and Citigroup, in each case bringing a claim for violations of the FHA and a claim of unjust enrichment.12 The City alleged that the banks’ practices constituted a pattern and practice of discrimination in mortgage lending that led to disproportionately high foreclosure rates in Miami’s minority neighborhoods.13 In turn, the increase in foreclosures decreased the City’s property tax revenues and required additional spending on public services, such as police and emergency first responders, to remedy blight and prevent unsafe living conditions associated with the increase in vacant homes.14 The district court dismissed the FHA claims, holding that the City did not have standing to sue under the statute because its alleged economic injuries did not fall within the zone of interests the Act was intended to protect.15 These claims also failed, the court said, because the City could not establish that the banks’ actions were the proximate cause of its injuries.16 The district court dismissed the unjust enrichment claim on the grounds that the complaint did not state that the City “conferred any direct benefit” on the banks, as required under Florida law.17
The City appealed, and the Eleventh Circuit reversed in part and affirmed in part.18 In a unanimous opinion,19 the court began by addressing standing. Standing has both a constitutional component, which addresses whether the dispute presents an Article III case or controversy, and a statutory component, which looks to whether the plaintiff has a claim under the relevant statute.20 The court first held that Miami had Article III standing because it suffered a decrease in tax revenue traceable to the banks’ challenged lending practices.21 The court also held that Miami was an “aggrieved person” under the FHA, following Supreme Court precedent extending statutory standing under the Act to the limit permitted by Article III.22 And, relying in part on a statistical analysis provided by the City, the court held that the complaint stated a sufficiently close connection between the banks’ practices and the City’s injuries to establish proximate cause.23 In the lone setback for the City, the court affirmed the district court’s dismissal of the unjust enrichment claim.24 Bank of America and Wells Fargo filed petitions for certiorari, and the Supreme Court granted review and consolidated the two cases.
The Supreme Court vacated and remanded. Writing for the Court, Justice Breyer25 began by recounting the City’s alleged injuries, which included economic and noneconomic harms. According to the City, the banks’ practices not only had increased foreclosure rates, leading to reduced tax revenues and increased spending on municipal services, but also had affected the racial makeup of the City and “impaired the City’s goals [of] assur[ing] racial integration and desegregation.”26 Before analyzing the City’s standing claim, Justice Breyer noted that statutory standing is fundamentally an issue of statutory interpretation: “The question is whether the statute grants the plaintiff the cause of action that he asserts.”27
The Court held that the City’s injuries were “at the least, ‘arguably within the zone of interests’” protected by the FHA.28 The FHA permits suits by any “aggrieved person,”29 and Justice Breyer noted that the Court had interpreted this provision broadly in previous cases.30 The Court quoted Trafficante v. Metropolitan Life Insurance Co.’s31 statement that this provision “showed ‘a congressional intention to define standing as broadly as is permitted by Article III of the Constitution.’”32 The Supreme Court had once even approved of standing for a municipality claiming economic injury resulting from realtors “steering” prospective homeowners into particular neighborhoods based on race, lending further credence to Miami’s claim.33 Congress had not rejected this interpretation of the FHA by amending the statute, and — though the banks pointed to similar language in other statutes now being construed more narrowly34 — the Court chose not to upset settled FHA precedent.
On proximate cause, the Court held that the court of appeals erred in requiring Miami to allege only that its injuries were “foreseeable” consequences of the banks’ conduct.35 Instead, the Court held that a plaintiff must establish “some direct relation between the injury asserted and the injurious conduct alleged” to show proximate cause under the FHA.36 Under this standard, liability generally does not extend “beyond the first step” of a causal chain.37 Rather than apply the test, the majority left the question for the lower courts on remand, as no circuit court had yet applied this analysis to an FHA claim and the issue would benefit from further percolation.38
Justice Thomas39 filed an opinion concurring in part and dissenting in part. Justice Thomas began by highlighting the unusual nature of Miami’s FHA claim, noting that the City did not claim to have been discriminated against by the defendants, nor did it sue on behalf of its residents who were victims of discrimination.40 He disputed that the zone of interests protected by the FHA extended to standing’s constitutional limits. Faced with the language in the cases cited by the majority, Justice Thomas quoted an opinion authored by Justice Scalia labeling it “‘ill-considered’ dictum” with “absurd consequences.”41 The same zone-of-interests limitation should apply in FHA cases as in suits under any other statute, Justice Thomas argued, because there was no evidence that Congress had intended to deviate from the ordinary background rule.42 This rule blocks suits from plaintiffs whose “interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot be assumed that Congress intended to permit the suit.”43
Under this standard, Justice Thomas claimed that the City’s asserted economic injuries were “not arguably related to the interests the statute protects.”44 The City differed from the “quintessential ‘aggrieved person’” under the FHA, namely, “a prospective home buyer or lessee discriminated against during the home-buying or leasing process.”45 Unlike plaintiffs in previous cases, Miami did not claim to have been injured by lenders either steering residents to certain areas based on race or otherwise maintaining segregation.46 Justice Thomas ended his zone-of-interests discussion by highlighting two “notable” limitations to the majority opinion’s analysis.47 First, the majority did not directly state that the zone of interests extends as far as Article III permits.48 Second, the Court did not squarely address the banks’ argument that the City’s theory would permit suits by local businesses claiming that discrimination led to foreclosures and fewer customers, instead relying on precedent that supported standing for municipalities as a particular class of plaintiff.49 In Justice Thomas’s view, the conclusion that Miami is an aggrieved person “is wrong, but at least it is narrow.”50
Justice Thomas concurred in the majority’s proximate cause holding, though he would have held that the City failed to meet the heightened standard rather than remand the cases to the Eleventh Circuit.51 Miami’s theory of causation, even taken on its own terms, requires multiple steps.52 Because the court of appeals has no comparative advantage over the Supreme Court in evaluating the viability of the theory, Justice Thomas thought remand was unnecessary.53
The majority in Bank of America Corp. succeeded in finding a defensible middle path and potential limit to liability, if this was its goal.54 The Court allowed Miami’s suit to move forward but enacted a higher bar to establish liability, one that the City and future plaintiffs in its position might not be able to meet. Based on the issues before it, the Court had two options: limiting the zone of interests protected by the statute, which would have been a clear departure from precedent, or limiting proximate cause, which would not. Still, the Court will have to wait to see how effectively its holding functions as a limitation on novel FHA claims, as it is not obvious how the new standard is to be applied.
There is reason to suspect that concerns about massive, unchecked liability animated the Court’s decision. Many commentators have noted that substantive considerations regarding the merits of a case often color a court’s decisions on formally unrelated questions.55 Professor Richard Fallon offers a rich version of this claim in his “Equilibration Thesis.”56 Under Fallon’s approach, courts “decide cases by seeking what they regard as an acceptable overall alignment of doctrines involving justiciability, substantive rights, and available remedies.”57 If courts find a pattern of outcomes unacceptable or undesirable, they might adjust various doctrines in any number of ways to get better overall results.58 This implies that a concern about remedies for a particular claim, for example, might lead a court to impose a higher bar to get into court or to make out that kind of claim on the merits.59
This theory would explain much of the Court’s decisionmaking in Bank of America Corp. In explaining why foreseeability was insufficient for proximate cause, the majority noted that “entertaining suits to recover damages for any foreseeable result of an FHA violation would risk ‘massive and complex damages litigation.’”60 And both opinions alluded to the banks’ argument that Miami’s standing theory would allow suits by private businesses claiming economic loss, a consequence that even the majority was hesitant to embrace.61 Some questioning at oral argument suggests that a primary worry was finding a reasonable limit to theories of liability like Miami’s, out of concern about both future damages suits by municipalities and private suits by local businesses. The issue of damages came up repeatedly,62 though there was no remedy-related question before the Court. Justice Breyer made just this point, asking Miami’s counsel, “Do we have to go into [damages], or not? I’m not . . . saying we should or shouldn’t, but I mean, do we have to to decide this case, decide the damages, what damages are appropriate?”63 It is difficult to imagine much clearer evidence of remedial concerns slipping into what is typically considered an analytically distinct inquiry.64
With the remedy issue hanging in the background, the Court seemed motivated to arrive at some sort of limitation. If this was the case, the Court was correct to focus on proximate cause. It may have even understated the reasons for finding Miami to fall within the FHA’s zone of interests. As the Court only recently made clear, the zone-of-interests analysis requires courts to employ the “traditional tools of statutory interpretation.”65 Stare decisis bears the most weight in statutory interpretation decisions,66 and the relevant holdings here are prominent and exceedingly clear. The Court decided a trio of major FHA standing cases between 1972 and 1982. First, the Court upheld standing for two tenants of an apartment building who alleged their landlord discriminated against minority applicants, stating that Congress intended “to define standing as broadly as is permitted by Article III of the Constitution.”67 Next, the Court allowed a municipality’s suit to move forward based on the asserted injuries of increased racial segregation and a diminished tax base.68 Last, the Court found standing for a “tester” who was told false information while attempting to collect evidence of racial steering and for a nonprofit claiming impairment in its ability to facilitate equal access to housing.69 It once again repeated that standing extends as broadly as Article III permits.70 These statements might be dicta, as Justice Thomas and Justice Scalia argued, but only in the sense that any general proposition will not be the only one that supports reaching a particular conclusion.71
The Court’s proximate cause holding required overturning no longstanding precedents and is broadly in line with recent decisions involving other statutes.72 Moreover, the general purpose of proximate cause in tort doctrine is to impose a reasonable limit on liability.73 Looking more closely at the source of the Court’s proximate cause standard helps to illuminate why it might severely restrict future cases like Miami’s and to explain why Justice Thomas thought remand was unnecessary. The Court quoted a case interpreting the Racketeer Influenced and Corrupt Organizations Act74 (RICO) for the requirement that a plaintiff show a “direct relation” between the injury and the defendant’s unlawful conduct.75 Later RICO cases make clear that this is a demanding standard. For example, in one case the City of New York brought a RICO claim against an online cigarette seller that fraudulently failed to report a list of its purchasers to the state government to facilitate the City’s collection of sales taxes.76 The Supreme Court rejected the City’s theory of causation because “the conduct directly causing the harm was distinct from the conduct giving rise to the fraud.”77 The harm was caused by consumers’ failure to pay city taxes, a duty they had regardless of the company’s alleged failure to meet its legal obligation to the state that would have made the City’s tax collection easier.78 Because there was no direct causal connection between the unlawful conduct and the injury, the City could not establish proximate cause under the direct relation test.
If the FHA is interpreted in the same manner, Miami’s partial victory will be short-lived. Stated in the manner most favorable to the City, there is at least one step between the banks’ alleged unlawful practices and any injury to the City: the banks disproportionately offered bad loans to minorities, who then defaulted at high rates, which caused Miami to collect less property tax revenue than it otherwise would have.79 But if this is the interpretation that governs the FHA, it is difficult to understand why the Court chose to remand the case rather than issue a final decision on these grounds.80
Perhaps forgoing the application of the standard was simply the cost of getting a majority.81 Or possibly the answer is not as simple as Justice Thomas makes it. As with the zone-of-interests analysis, the bounds of the proximate cause inquiry are “controlled by the nature of the statutory cause of action.”82 RICO and the FHA are fundamentally different statutes with different histories and purposes,83 though they share a basis in tort law principles.84 In the case of the FHA, the Supreme Court has approved claims of a similarly indirect nature to Miami’s in the past, albeit without addressing proximate cause.85 Because the inquiry is statute specific, courts have the option of taking these purposes and each statute’s precedents into consideration when applying the proximate cause test to fashion the scope of liability; doing so may undermine the liability-limiting power of the heightened causation requirement.
In Bank of America Corp., the Court resolved the issues it faced in a pragmatic way: it hewed closely to precedent in deciding who is an “aggrieved person,” but imposed a heightened causation requirement to rein in what it seemed to perceive as a novel, potentially limitless theory of liability. Instead of applying the new standard itself, however, the Court remanded the case for the Eleventh Circuit to do so. Such minimalism has its virtues.86 But it also means that it is up to lower courts to determine its limiting power, and ultimately to decide what the legacy of the decision will be.