The US Court of Appeals for the Ninth Circuit, sitting en banc, ruled Tuesday that the city of Oakland, California, cannot sue Wells Fargo for violating the Fair Housing Act (FHA) because the city did not adequately show proximate causation. The court’s decision reverses the prior decision of its three-judge panel.

Oakland had claimed that Wells Fargo steered Black and Latino borrowers into riskier mortgages in violation of the FHA. The city argued that this practice increased foreclosure rates and decreased property values, which resulted in lost property tax revenue for the city while creating the need for increased municipal expenditures to address public health and safety issues. Oakland also claimed non-economic injury in that Wells Fargo’s discriminatory lending practice undermined its racial integration goals.

The court held that the US Supreme Court decision in Bank of America Corp.v. City of Miami foreclosed Oakland’s suit because foreseeability is not enough to establish proximate cause under the FHA. In contrast, the act requires “some direct relation between the injury asserted and the injurious conduct alleged.”

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