City of Los Angeles v. Citigroup Inc.
24 F. Supp. 3d 940
C.D. Cal.2014Background
- Plaintiff City of Los Angeles sues Citigroup and related Citi entities under the Fair Housing Act (FHA) and for common‑law restitution, alleging racially discriminatory lending (redlining/reverse‑redlining) that increased foreclosures in minority neighborhoods and reduced tax revenue/increased municipal service costs.
- Complaint (filed Dec. 5, 2013) relies on public loan data, a hedonic regression analysis, and confidential witness statements; alleges ~1,200 discriminatory Citi loans in L.A. that resulted in foreclosures and anticipates more discovered in discovery.
- Defendants moved to dismiss under Rules 12(b)(1) and 12(b)(6) for lack of Article III standing, statute of limitations, failure to state an FHA claim, and moved to strike portions of the complaint under Rule 12(f).
- Court treated both facial and factual challenges to jurisdiction, granted judicial notice of many public records (but not certain Lexis/Westlaw compilations or one news printout), and found some of Defendants’ materials to constitute a factual attack but declined to resolve intertwined merits facts at the pleading stage.
- The Court denied both Motions: held L.A. adequately pleaded Article III standing (injury and traceability), the continuing‑violations doctrine keeps claims within the FHA limitations period, FHA disparate‑treatment and disparate‑impact theories survive pleading, restitution claim pleaded as quasi‑contract survives, and none of the challenged paragraphs warranted striking.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III — injury in fact | L.A. alleges concrete municipal injuries: decreased property‑tax revenue and increased municipal services due to Citi foreclosures. | Citi argues injuries are not concrete/specific and offers public records to contest injury (factual attack). | Court: Injury adequately pleaded; Defendants’ factual showing insufficient at pleading stage and intertwined with merits. |
| Article III — causation (traceability) | Citi’s discriminatory lending → foreclosures → reduced values/tax base and increased city costs; supported by regression and witness statements. | Defendants say causal chain is attenuated and dependent on many independent third‑party actions. | Court: Causation sufficiently alleged; chain plausible and not speculative; factual disputes reserved for later. |
| Statute of limitations | L.A. pleads an ongoing pattern/practice of discrimination; continuing‑violations doctrine applies, so limitations run from last occurrence. | Defendants say each loan origination is a discrete act and many alleged loans predate the 2‑year FHA limitations period. | Court: Continuing‑violation doctrine applies; claim timely; city‑council notice does not establish Citi‑specific notice. |
| Failure to state an FHA claim (disparate treatment/impact) | Pleads intentional targeting and statistics/witnesses; also asserts disparate‑impact theory with detailed, bank‑specific allegations. | Defendants contend no intent alleged for disparate treatment and argue disparate impact is not a viable FHA theory. | Court: Disparate‑treatment allegations sufficient; disparate‑impact recognized by Ninth Circuit and adequately pleaded here. |
| Restitution (quasi‑contract/unjust enrichment) | L.A. seeks restitution for externalities (city costs) that unjustly benefited defendants. | Defendants say no freestanding restitution claim in California, no benefit conferred, and SOL bars claim. | Court: Treats claim as quasi‑contract unjust enrichment; benefit alleged (externalities); continuing‑violation tolls SOL; claim survives. |
| Motion to strike (12(f)) | N/A — L.A. defends challenged paragraphs as relevant/contextual. | Defendants seek to strike numerous paragraphs as immaterial, impertinent, or scandalous. | Court: Denied; paragraphs relate to lending practices or provide proper context; striking premature. |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requirements)
- Gladstone Realtors v. Village of Bellwood, 441 U.S. 91 (municipal injury from reduced property values)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading plausibility standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading and plausibility principles)
- Havens Realty Corp. v. Coleman, 455 U.S. 363 (continuing violation doctrine for pattern/practice claims)
- Bennett v. Spear, 520 U.S. 154 (traceability and third‑party actions)
- Maya v. Centex Corp., 658 F.3d 1060 (standing/causation analysis in lending context)
- Ojo v. Farmers Group, Inc., 600 F.3d 1205 (Ninth Circuit recognizing disparate‑impact under FHA)
- U.S. v. Bestfoods, 524 U.S. 51 (parent/subsidiary liability and agency principles)