U.S. Supreme Court in Washington, D.C. October 9, 2016. (Photo: Mike Scarcella/ALM)
The U.S. Supreme Court, oblivious to external events like blizzards or presidential elections, heard oral arguments Tuesday in a case that illustrates how the election’s outcome could affect the court’s future business law decisions.
At issue in the consolidated cases Bank of America v. Miami and Wells Fargo v. Miami is a threshold question of standing, which does not often make headlines but is a crucial factor in gaining access to the courts for plaintiffs seeking redress from corporations. Recent court decisions on standing have been a target for critics who say the Roberts court leans too far toward business interests.
Standing doctrine is one of the ways to “kick people out of court,” said Deepak Gupta of Gupta Wessler, who filed a friend of the court brief in the Miami cases on behalf of the National Association of Counties and other municipal groups. “There are two very different competing visions of what courts are for.”
Indeed, the eight-member court seemed divided 4-4 in the case, an outcome that would be a win for Miami. In future cases, depending on how and whether the current vacancy on the court is filled, the court could expand standing or rein it in.
The justices will decide whether cities like Miami can claim enough damage from discriminatory lending practices to sue banks under the Fair Housing Act — even though the law gives standing specifically to “aggrieved persons.” The U.S. Court of Appeals for the Eleventh Circuit ruled in favor of Miami, so if the high court divides 4-4, that ruling would stand.
Citing precedents that give a wide interpretation to standing in the housing law, Miami and the Obama administration argued that cities can and should be able to sue. “We are a direct victim,” Miami’s lawyer, Robert Peck of the Center for Constitutional Litigation, told the justices. The city claimed large monetary damages could be tied to predatory lending practices, because large numbers of foreclosures depressed house values and shrank tax revenues. The housing crash also increased costs of city services, the city claimed.
Not so, said Neal Katyal of Hogan Lovells, who argued for the banks targeted by Miami. “The city has to identify an anti-discrimination interest they have suffered,” Katyal told the court. “They can’t cut and paste and borrow someone else’s.”
From the outset, Katyal acknowledged that cities could sue under the housing law in certain narrow circumstances: such as when a city has to spend money to make a case against a specific discriminatory lender, or where the predatory practices result in segregating a community.
But that was not enough for several justices. Justice Elena Kagan in particular seemed certain that the Fair Housing Act was meant to give broad power to sue.
“The FHA is a very peculiar and distinctive kind of anti-discrimination statute, which really is focusing on community harms,” she told Katyal. “So it’s not just individuals who are harmed; it’s communities who are harmed. And that’s the basic idea of the entire statute, why Congress passed it.” Kagan invoked legislative history to bolster her point, something her late colleague Justice Antonin Scalia would have disliked.
Katyal shifted to another element of Katyal’s argument: the claim that the connection between discriminatory lending and Miami’s harms is too attenuated to justify standing. The court, he said, has never approved “such a long chain of causation, a nondirect chain of causation to the tune of … billions of dollars.”
Peck, Miami’s lawyer, also ran into skeptical questions from justices.
“Do you think you’re a victim of discrimination?” Justice Anthony Kennedy asked Peck. “Because it seems to me that the damages that you seek are not going to be paid to those who were the direct victims of the discrimination.”
Peck replied, “We are suing for our own injuries.”
Chief Justice John Roberts Jr. balked at that suggestion. “You don’t start with you. I understand your argument that you are down the line, but I don’t see how you can say that your loss of property taxes is a direct injury.”
Justice Sonia Sotomayor also wondered whether the “corner grocer” whose business was harmed by the housing crisis could claim damages, if Miami could.
At no time did anyone mention the presidential election that was underway.