314 F. Supp. 3d 950
E.D. Ill.2018Background
- Cook County sued HSBC and affiliates under the Fair Housing Act, alleging a predatory subprime program (marketing, pricing, servicing, foreclosures) that targeted Black and Latino borrowers in Cook County and caused municipal harms.
- Allegations include targeted marketing using algorithmic models, steering minority borrowers to higher‑cost loans, discriminatory pricing after controlling for credit risk, and discriminatory servicing/foreclosure practices that increased minority foreclosures.
- County claims monetary harms: out‑of‑pocket foreclosure and eviction administration costs, lost recording/transfer/intangible fees (from use of MERS), lost property tax and other revenues, demolition costs, social‑service expenditures, diminished property values, and urban blight.
- HSBC moved to dismiss for failure to plead proximate cause, insufficient disparate‑treatment and disparate‑impact pleadings, statute‑of‑limitations bar, and to drop corporate affiliates; County relied on ongoing discriminatory servicing/foreclosure practices to invoke continuing violations.
- The Court accepted County allegations at pleading stage and held some injuries were too attenuated, but allowed claims that were direct and administratively manageable to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proximate cause for municipal injuries | County: HSBC's origination plus discriminatory servicing/foreclosure directly caused municipal foreclosure‑related costs and lost fees | HSBC: County's claimed harms are speculative and attenuated; foreseeability alone insufficient after City of Miami | Allowed some claims: direct foreclosure admin costs and lost recording/transfer/intangible fees (MERS). Dismissed attenuated claims (social services, lost property tax revenue, diminution, demolition, urban blight, unspecified revenues) |
| Disparate‑treatment claim sufficiency | County: Complaint pleads intentional targeting, steering, discriminatory terms and servicing to minorities | HSBC: Pleading fails to allege intentional discrimination (profit motive) | Court refused HSBC's perfunctory challenge (waived) and held disparate‑treatment claim sufficiently pleaded |
| Disparate‑impact claim sufficiency | County: Pleaded policies (marketing, pricing, underwriting, servicing, foreclosure) plus HSBC‑specific statistics showing disparate outcomes | HSBC: Must meet Inclusive Communities prima facie four‑part test; allegations rely on general lender data and discretionary acts | Court: Inclusive Communities does not impose prima facie pleading test; County pled causal connection and HSBC‑specific data — disparate‑impact claims survive |
| Statute of limitations / continuing violation | County: Discriminatory servicing/foreclosure continued into limitations period; continuing‑violation applies | HSBC: Most challenged loans dated 2003–2007; claims untimely; continuing violation inapplicable | Court: Pleadings plausibly allege ongoing discriminatory foreclosure/servicing; limitations defense reserved for summary judgment |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausibility)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard: factual enhancement beyond speculation)
- Bank of Am. Corp. v. City of Miami, 137 S. Ct. 1296 (2017) (proximate cause in FHA claims requires direct relation; foreseeability alone insufficient)
- Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (statutory proximate‑cause/directness principles)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (directness; intervening causes weaken proximate causation)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (indirect injury insufficient where intervening actors directly cause harm)
- Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (proximate cause and standing analysis; 1:1 loss relationship supports directness)
- Texas Dep't of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015) (disparate‑impact cognizable under FHA; pleading requires allegation of causal connection)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (class/aggregate discrimination and role of discretionary policies in disparate‑impact analysis)