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City of Miami Gardens v. Wells Fargo & Co.

United States Court of Appeals, Eleventh Circuit

July 30, 2019

CITY OF MIAMI GARDENS, a Florida municipal corporation, Plaintiff-Appellant,
v.
WELLS FARGO & CO., WELLS FARGO BANK N.A., Defendants-Appellees.

          Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:14-cv-22203-FAM

          Before WILLIAM PRYOR, NEWSOM, and BRANCH, Circuit Judges.

          PER CURIAM.

         This appeal requires us to decide whether the summary-judgment standard applies in determining whether a plaintiff has standing when the district court has limited discovery and the merits issues to be considered on summary judgment, and, if so, whether the plaintiff in this appeal introduced sufficient evidence of standing under that standard. The City of Miami Gardens filed a complaint against Wells Fargo & Co. and Wells Fargo Bank, N.A., alleging that they violated the Fair Housing Act, 42 U.S.C. §§ 3601-19, by steering black and Hispanic borrowers into higher-cost loans than similarly situated white borrowers. The district court bifurcated discovery, with the initial phase focused on whether the City could identify a violation that occurred within the two-year limitation period provided by the Act, id. § 3613(a)(1)(A). After initial discovery, the district court entered summary judgment in favor of Wells Fargo on the merits. The City challenges this ruling, but Wells Fargo argues that the district court should have dismissed the suit because the City failed to establish standing. Before oral argument, we asked the parties to address whether the City established standing under the standard ordinarily applicable at summary judgment and, if not, whether the limitations on the subject matter of discovery and summary judgment imposed by the district court mandate the application of a more lenient standard. We conclude that the ordinary standard applies and that the City has not established standing. We vacate and remand with instructions to dismiss for lack of subject-matter jurisdiction.

         I. BACKGROUND

         The City filed its initial complaint on June 13, 2014, alleging that between 2004 and 2008, Wells Fargo originated mortgage loans in "numerous geographic markets around the country" that violated the Fair Housing Act. The City did not allege that it had received such loans from Wells Fargo. Instead, the City asserted that Wells Fargo engaged in both redlining-the practice of denying credit to particular neighborhoods based on race-and reverse redlining-the practice of "flooding a minority community with exploitative loan products"- by "refusing to extend mortgage credit to minority borrowers . . . on equal terms as to non-minority borrowers" and "extending mortgage credit on predatory terms to minority borrowers in minority neighborhoods in Miami Gardens."

         The district court dismissed the initial complaint without prejudice and instructed the City that any amended complaint would have to state "the exact violations of the Fair Housing Act" and "what specific predatory practices occurred in Miami Gardens and how minorities were allegedly targeted there." The district court also determined that an amended complaint would need to "allege . . . the facts that confer standing to complain about private home foreclosures, the specific injury to the governmental entity, the precise number and dates of foreclosures, and the specific costs to the City of Miami Gardens." To that end, the district court directed the City to detail "(1) how Miami Gardens is injured, (2) how that injury is traceable to the conduct of each Wells Fargo defendant, and (3) how the injury can be redressed with a favorable decision in this case." The City twice amended its complaint.

         The amended complaint alleged that "African-Americans and Hispanics and residents of predominantly African-American and Hispanic neighborhoods in Miami Gardens . . . receive[d] mortgage loans from Wells Fargo that have materially less favorable terms than mortgage loans given by Wells Fargo to similarly situated whites and residents of predominantly white neighborhoods in Miami Gardens." The complaint outlined a list of kinds of "predatory loans" that Wells Fargo allegedly "steered minorities into when they otherwise qualified for less expensive and less risky loans," including high-cost loans (i.e., loans with an interest rate at least three percent above the Treasury rate prior to 2010 and one-and-a-half percent above the prime mortgage rate thereafter), subprime loans, interest-only loans, balloon-payment loans, loans with prepayment penalties, negative-amortization loans, no-documentation loans, higher-cost government loans, such as Federal Housing Administration and Veterans Affairs loans, home-equity line-of-credit loans, and adjustable-rate mortgage loans with "teaser rates" (loans in which the lifetime maximum rate is greater than the initial rate plus six percent).

         The amended complaint also addressed standing by alleging that loans issued to minority borrowers in Miami Gardens were more likely to go into default or foreclosure as a result of Wells Fargo's alleged practice of steering those borrowers into higher-cost loans. These effects on the housing market in Miami Gardens allegedly caused the City to suffer "economic injury based upon reduced property tax revenues resulting from (a) the decreased value of the vacant properties themselves, and (b) the decreased value of properties surrounding the vacant properties." Apart from the asserted impact on property-tax revenues, the foreclosures and defaults allegedly increased the "cost[s] of municipal services . . . to remedy blight and unsafe and dangerous conditions which exist at properties that were foreclosed as a result of Wells Fargo's illegal lending practices." The amended complaint also alleged that the City sustained non-economic injuries because Wells Fargo's lending "impaired the City's goals to assure that racial factors do not adversely affect the ability of any person to choose where to live in the City or . . . detract from the . . . benefits of living in an integrated society" and "adversely affected the City's longstanding and active interest in promoting fair housing and securing the benefits of a stable racially non-discriminatory community."

         The statute of limitations for claims under the Act requires a plaintiff to file suit "not later than 2 years after the occurrence or the termination of an alleged discriminatory housing practice." 42 U.S.C. § 3613(a)(1)(A). Wells Fargo filed its first complaint on June 13, 2014, so for the complaint to be timely, an act of housing discrimination must have occurred on or after June 13, 2012. Although much of the amended complaint concerned subprime lending practices that ended before June 13, 2012, it also alleged that Wells Fargo "continued to issue predatory mortgage loans to minorities in Miami Gardens subsequent to June 13, 2012." The alleged violations that occurred outside of the limitation period were actionable in principle under the continuing-violation doctrine of Havens Realty Corp. v. Coleman, 455 U.S. 363 (1982). Under that doctrine, if a plaintiff "challenges not just one incident of conduct violative of the Act, but an unlawful practice that continues into the limitations period, the complaint is timely" if the "last asserted occurrence of that practice" occurred within the limitation period. Id. at 380-81.

         Because the City could invoke the continuing-violation doctrine only if it could identify a loan violative of the Act that occurred within the limitation period, Wells Fargo moved to divide discovery into phases, with the initial phase focused on the threshold question whether the City could satisfy the statute of limitations. On January 19, 2016, the district court entered a scheduling order accepting Wells Fargo's proposed bifurcation. The order instructed the parties "to complete initial discovery related to loans originated between June 13, 2012, and June 12, 2014," by February 19, 2016, and imposed a deadline of February 29 to file "summary judgment motions on the statute of limitations issue."

         On January 20, the City served requests for production of documents, requests for admission, and interrogatories. Five days later, Wells Fargo produced electronic data concerning 153 loans originated in Miami Gardens during the limitation period that included information about the characteristics of the borrowers and the details of the loans. Wells Fargo also produced "formal written policies" that the City requested. The City deposed three Wells Fargo officials, and Wells Fargo conducted two depositions, including a deposition of the City through its corporate representative. Fed.R.Civ.P. 30(b)(6).

         On January 29, the City filed one discovery motion, but it did not challenge the restriction of the subject matter of discovery or Wells Fargo's responses or document production. Instead, the motion requested "a 30 day extension of time to conduct discovery," so that the deadline for the completion of initial discovery would fall on March 21, and the deadline to file motions for summary judgment would fall on March 31. The City also filed an unopposed motion for a "14 day extension of time" for summary-judgment briefing.

         At a hearing on the City's motions held on February 25, the magistrate judge asked the parties whether there was "other discovery that needs to be done for [Wells Fargo] to file [a] motion for summary judgment or for [the City] to file [its] response." The City requested data concerning loans originated outside Miami Gardens in Miami-Dade County. The magistrate judge granted the City's request for an extension of the period for briefing but denied the City's other requests. It concluded that "discovery was in large part completed within the time frame set by [the district court] and the discovery the plaintiff is now seeking should have been raised with opposing counsel and the Court earlier."

         On March 14, Wells Fargo moved for summary judgment. After the City filed its opposition, the district court placed the case "in civil suspense" because the Supreme Court granted certiorari to review a decision of this Court in an appeal that arose from a similar suit brought against Bank of America and Wells Fargo by the City of Miami. See City of Miami v. Bank of Am. Corp. (City of Miami I), 800 F.3d 1262 (11th Cir. 2015), cert. granted, 136 S.Ct. 2545 (2016), vacated and remanded sub nom. Bank of Am. Corp. v. City of Miami (City of Miami II), 137 S.Ct. 1296 (2017). The district court granted leave to Wells Fargo to refile its motion for summary judgment after the Supreme Court's decision. Wells Fargo refiled on May 31, 2017.

         On June 13-more than a year after the parties completed briefing on the initial motion for summary judgment and the hearing on the City's initial request for expanded discovery-the City moved to "defer Wells Fargo's [motion] due to the need to conduct additional discovery under Federal Rule of Civil Procedure 56(d)." One month later, the district court held a hearing on the City's motion to defer consideration of the motion for summary judgment. At the hearing, the City explained that it requested deferral because Wells Fargo had raised "new business necessity defenses" that were beyond the limited scope of the statute-of-limitations issue. But when the district court reiterated that the only merits issue to be considered on summary judgment was whether the City could satisfy the statute of limitations, the City stated that the only "discovery" it "would need" would be permission to introduce a supplemental expert report by Ian Ayres, a professor at the Yale Law School and the Yale School of Management. The district court granted that request and the report was admitted into evidence.

         Wells Fargo's motion for summary judgment raised three principal arguments. First, it argued that the City was bound by the testimony of its representative who testified under Rule 30(b)(6), and because that testimony "conceded . . . that the City could not identify any 'predatory' or 'discriminatory' loans in the Limitations Period," the City could not introduce new evidence of discriminatory lending to supplement the representative's profession of ignorance. Second, the motion contended that the City had not presented sufficient evidence to support a reasonable inference that the 153 loans originated by Wells Fargo in Miami Gardens during the limitation period were unlawful under either a disparate-treatment or a disparate-impact theory of discrimination. And third, the motion argued that the City had not introduced sufficient evidence to establish standing because the undisputed evidence "reflect[ed] that none of the 153 loans Wells Fargo originated in Miami Gardens during the Limitations Period foreclosed."

         With respect to standing, the City argued that because it was proceeding under a continuing-violation theory of liability, it had no duty to identify an injury causally attributable to a loan originated during the limitation period. The City also argued that "the loans issued during the statutory period [were] likely to injure the City in the same manner as the loans" that were identified in the City's complaint "as part of the continuing violation from the pre-limitations period." In support of this conjecture, the City pointed out that Ayres had "identified a loan" originated in the limitation period "that ha[d] already been delinquent since it was issued, whereas the lower cost loan issued to the similarly situated white borrower ha[d] not encountered similar problems."

         The City's response on the merits relied principally on Ayres's reports, which identified two government-insured home-purchase loans, referenced by the parties as loans HC2 and HC6, that were allegedly more expensive after controlling for various factors than loan NHW8, which was issued to an allegedly similarly situated white borrower. Ayres opined that the cost differential between the loans was "consistent with the hypothesis" of race-based discrimination, but he acknowledged that Wells Fargo "also issued some loans to minority borrowers that were priced lower than loans made to non-Hispanic white borrowers with similar characteristics."

         Ayres's conclusions were partly at odds with those of Wells Fargo's expert, Bernard Siskin, who argued in a rebuttal report that there were key differences between loans HC2 and HC6 on the one hand and loan NHW8 on the other. Loan NHW8 was originated during a two-week period in which Wells Fargo offered a promotional pricing discount on all loans. And the minorities who received loans HC2 and HC6 opted to receive a higher interest rate in exchange for more lender credits, which operate as rebates to offset closing costs. The borrowers of loans HC2 and HC6 received $8, 000 and $1, 877 in lender credits, respectively, whereas the borrower of loan NHW8 received only $479.

         The district court granted summary judgment to Wells Fargo on the merits. It declined to address the issue of standing and ruled that the City had failed to establish a genuine issue of material fact as to whether Wells Fargo engaged in disparate-impact or disparate-treatment discrimination within the limitation period. The district court accepted Wells Fargo's argument that the City was "bound by the testimony of its Rule 30(b)(6) representative." Because that representative "conceded during his deposition that the City could not identify any 'predatory' or 'discriminatory' loans in the limitations period" and "was unaware of any information providing a basis for the City's allegation that borrowers were or may have been eligible for 'more favorable and less expensive loans, '" the district court concluded that the City was not permitted to supplement that testimony with additional evidence of discrimination under Rule 30(b)(6).

         The district court ruled, in the alternative, that even if Rule 30(b)(6) did not bar the introduction of other evidence of discrimination, the City's evidence was insufficient to support a prima facie case that disparate-impact or disparate-treatment discrimination occurred within the limitation period. The district court concluded that the City's disparate-impact claim failed because the City identified only two loans issued to minorities that were purportedly more expensive than loans issued to similarly situated white borrowers, which was not enough "to show the policies produced statistically-imbalanced lending patterns." The district court also concluded that the City failed to present any evidence of a causal connection between Wells Fargo's lending policies and the cost disparity. As for the City's disparate-treatment claim, the district court concluded that because "[t]he minority borrowers opted to receive a higher rate of interest in exchange for lender credits . . . to defray closing costs" while their nonminority comparator received de minimis lender credits and a promotional discount, the minority borrowers of the higher cost loans identified by the City were not similarly situated to their alleged comparator.

         II. STANDARD OF REVIEW

         We review questions of subject-matter jurisdiction de novo. United States v.Pavlenko, 921 ...


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