314 F. Supp. 3d 975
E.D. Ill.2018Background
- Cook County alleges Wells Fargo engaged in an "equity-stripping" practice: originating and servicing high‑cost/nonprime mortgages, extracting fees, denying modifications, and foreclosing, concentrated in majority‑minority neighborhoods in Cook County.
- County claims disparate‑impact and disparate‑treatment violations of the Fair Housing Act (FHA) based on statistical disparities in nonprime lending and targeted marketing/employee incentives.
- Alleged county harms include increased costs to the Cook County Sheriff and Circuit Court to process foreclosures/evictions, lost tax revenue, greater demand for social services, and destabilization/segregation of minority communities.
- Procedurally: original complaint dismissed for lacking FHA zone‑of‑interests standing; case stayed pending the Supreme Court's decision in City of Miami v. Bank of America; County filed a second amended complaint after City of Miami; Wells Fargo moved to dismiss under Rule 12(b)(6).
- The court applied City of Miami and related proximate‑cause principles, accepting the complaint's factual allegations for pleading‑stage review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proximate cause for county economic harms | County: Wells Fargo's discrimination caused foreclosures that directly increased Sheriff's and court costs | Wells Fargo: causal chain is too attenuated; many intervening factors; some harms remote | Granted in part: proximate cause adequately pleaded for direct costs of administering/processing foreclosures (Sheriff and Circuit Court); other alleged harms too remote and dismissed |
| Disparate‑impact liability under FHA | County: statistical disparity + a corporate policy (equity‑stripping) caused disparate impact on minorities | Wells Fargo: alleged policy is not facially neutral or is mere employee discretion, so no actionable disparate‑impact policy | Denied: County plausibly pleaded disparate‑impact claim (statistical disparity, a coherent policy theory, and sufficient causal allegation) |
| Statute of limitations (FHA 2‑year) | County: equity‑stripping is a continuing/cumulative violation; ongoing conduct keeps claims timely | Wells Fargo: many acts occurred outside 2‑year window so claims time‑barred | Denied: complaint alleges continuing violations and recent acts; limitations defense premature on pleadings |
| Claim preclusion (res judicata) based on Illinois AG consent decree | Wells Fargo: earlier AG suit and consent decree covered same facts and interests, so County is barred | County: AG's suit sought different statutory relief for different beneficiaries; no privity with Cook County | Denied: no privity; res judicata does not bar County's distinct claims |
Key Cases Cited
- City of Miami v. Bank of Am. Corp., 137 S. Ct. 1296 (2017) (FHA zone‑of‑interests satisfied but proximate‑cause requires a sufficiently direct relationship)
- Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) (proximate‑cause analysis focuses on direct relation between injurious conduct and harm)
- Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (1992) (direct relation requirement for proximate cause)
- Inclusive Communities Project, Inc. v. Texas Dep't of Hous. & Cmty. Affairs, 135 S. Ct. 2507 (2015) (disparate‑impact claims cognizable under FHA but require statistical disparity and a causal, artificial/arbitrary policy)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (2010) (limits on proximate cause where multiple intervening actors separate conduct and asserted injury)
- Anza v. Ideal Steel Supply Corp., 547 U.S. 451 (2006) (proximate cause rejected where plaintiff's injury resulted from independent actions of third parties)
- Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008) (proximate cause satisfied where plaintiff's injury was the direct result of defendants' fraud)
- City of Joliet v. New W., L.P., 825 F.3d 827 (7th Cir. 2016) (disparate‑impact requires proof of policy causing disparity; one‑off decisions analyzed as disparate treatment)
- Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., 873 F.3d 574 (7th Cir. 2017) (dismissing where causal chain and damages attribution were too speculative)