Given the subprime mortgage debacle and the spate of foreclosures around the country, it’s no surprise that city governments are looking for someone to blame. But our nation's courts are refusing to validate this scapegoating effort and are instead rejecting the claim that banks have engaged in discriminatory lending practices.
Andrew Sandler, a partner in SandlerBuckley, spent most of 2009 representing financial institutions in litigation and regulatory actions involving subprime lending practices -- first in Cleveland, then Birmingham, then Buffalo, and most recently Baltimore. In each case, his clients triumphed over the cities’ attempts to settle blame on them.
“We have had three cases in a row — Cleveland, Birmingham, and now Baltimore, where the cities are trying to sue individualized lenders for generalized problems of the city,” said Sandler, who represented the lenders in all three victories. “The combination of these three decisions says that city government doesn’t have standing to do that and should not be pursuing such cases.”
None of the cases brought by cities has survived a motion to dismiss. Last month, Baltimore Federal District Court Judge J. Frederick Motz dismissed Baltimore's suit against Wells Fargo bank.
“The city’s allegations . . . of a causal connection between Wells Fargo’s alleged misconduct and the damages the city claims are not plausible,” Judge Motz wrote in his six-page ruling.
“Lawyers in this case and other cases, who are running around the country trying to convince other cities to file these kinds of cases, they have no legal basis and hopefully this decision coupled with the other two decisions will help cities to understand they are being led astray by lawyers who are trying to talk them into filing these sort of cases,” Sandler said. “The cities are having trouble with tax revenues, and so they are looking to find ways to bring money in and that’s what this is about.”
Sandler believes the perfect record of vindicated defendants sends a strong message to municipalities contemplating predatory lending litigation.
“At some point, when enough of these cases gets dismissed, it becomes bad-faith litigation for these cities to pursue them -- and we’re getting very close to that point,” he said. “What the city should be doing is turning its attention to the many problems that the city has, rather than try to figure out ways to litigate and blame individual lenders for the city’s problems.”
