Cleveland v. JP Morgan Chase Bank, N.A.
2013 Ohio 1035
Ohio Ct. App.2013Background
- City of Cleveland sues multiple lenders and securitizers for creating a mortgage-backed-securities market using subprime Cleveland mortgages.
- Alleges public nuisance and OCPA violations from securitization and alleged robosigning in foreclosures.
- Trial court dismissed claims under Civ.R. 12(B)(6) for lack of proximate cause, preemption, and economic-loss concerns; OCPA also failed.
- Court reviews de novo the dismissal grounds based on the pleadings and controlling precedents.
- Court finds intervening factors and remoteness preclude a cognizable public-nuisance claim and the OCPA claim; preemption and economic-loss issues similarly fail.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether City adequately pled proximate cause for public nuisance | City asserts reasonably connected harms from Chase's securitization | Chase argues injuries are too remote due to intervening factors | Proximate cause not established; injuries too remote |
| Whether public nuisance claim is preempted by state law | Regulatory/special status does not bar suit in proprietary capacity | Regulatory framework precludes municipal nuisance action | Preemption defense succeeds; nuisance claim barred |
| Whether economic-loss rule bars the nuisance claim | Damages include non-contractual costs tied to foreclosures | Damages purely economic; not recoverable in tort | Economic-loss rule bars the claim for damages alleged |
| Whether OCPA claim states a cognizable injury | City suffered independent harms from improper foreclosures | Injuries are derivative of actions against mortgagors | OCPA claim fails; injuries derivative and unrecoverable |
Key Cases Cited
- Beretta U.S.A. Corp. v. Cincinnati, 95 Ohio St.3d 416 (Ohio 2002) (defines public nuisance and need for direct relation)
- Holmes v. Securities Investor Protection Corp., 503 U.S. 258 (U.S. 1992) (proximate cause framework for public-nuisance-like claims)
- Ameriquest Mortgage Sec., Inc. v. City of Cleveland, 615 F.3d 496 (6th Cir. 2010) (federal proximate-cause framework applied in related cases)
- Rhode Island v. Lead Indus. Ass’n, Inc., 951 A.2d 428 (R.I. 2008) (public nuisance limitations with remote injuries and regulatory context)
- Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519 (Supreme Court 1983) (static proximate-cause standard in RICO context adopted more broadly)