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National Fair Housing Alliance v. Bank of America

United States District Court, D. Maryland

July 18, 2019




         This is a large-scale effort to hold Bank of America, N.A. and its primary home-maintenance contractor, Safeguard Properties Management LLC ("Safeguard"), liable for deteriorating conditions found in many foreclosed bank-owned real estate properties. The central claim here is that Bank of America and Safeguard disproportionately neglect their home-maintenance duties in communities of color, while tending more closely to foreclosed properties in white neighborhoods. In addition to the National Fair Housing Alliance ("NFHA"), the plaintiffs are private fair housing organizations and individual home-owners who allegedly have been harmed by the defendants' conduct. The lead claims are the plaintiffs' allegations of intentional discrimination and disparate impact brought under various sections of the Fair Housing Act ("FHA"), which are accompanied by ancillary arguments under the FHA and two addendum common law nuisance claims. At issue here are the defendants' motions to dismiss this action, which are argued both on the merits and, for certain claims (and certain plaintiffs), on standing, jurisdiction, and timeliness grounds. The facts pled raise a reasonable inference that the defendants violated anti-discrimination provisions of the Fair Housing Act, 42 U.S.C. § 3601, et seq., and the threshold legal arguments for dismissal are not persuasive at this stage of the case. Therefore, the motions will be denied.


         The bundling of subprime mortgages into prime-rated securities contributed to a financial crisis in 2008 that left in its wake an era of widespread bank-owned real estate. Known as "real estate owned" properties ("REOs"), at issue here are homes upon which Bank of America foreclosed and which the bank, in turn, was unable to sell at a foreclosure sale. Bank of America P&AMot. Dismiss at p. 12, ECF No. 44-1.[1] This case concerns an extensive seven-year (2011-2018) investigation by the plaintiffs into Bank of America's "maintenance and marketing" of REOs in its possession. Compl. ¶ 6. The investigation concluded that "[a]cross the board, properties located in communities of color were much more likely to have numerous objective routine maintenance and marketing deficiencies than the Bank of America-owned homes located in white areas[]" and concluded that there has been a "systemic and particularized pattern of differential treatment... on the basis of race, color, and/or national origin." Compl. ¶ 7.

         The data collected by the plaintiffs, presumed to be true here, are copious. A somewhat rough recitation goes like this: The plaintiffs developed a list of 37 "objective aspects" of routine exterior maintenance and marketing of REO properties. Compl. ¶ 6. They then examined 1, 677 properties owned by Bank of America after foreclosure in both "predominantly white communities" and "communities of color." Compl. ¶¶ 5-6, 64. They conducted this investigation in 37 different metropolitan areas, including Baltimore and Prince George's County/Washington, D.C. Compl. ¶ 7, 65. The plaintiffs selected zip codes within each of the 37 metropolitan areas that were "racially concentrated with the highest foreclosure rates, and from those zip codes chose the ones with high homeownership rates that qualified as working- or middle-class neighborhoods, based on comparing the zip codes' median income to those of the metropolitan statistical area and the state" to conduct their study. Pls' Opp'n Defs' Mot. Dismiss at p. 13, ECF No. 55; Compl. ¶ 67. Within them they "inspected 100% of the Bank of America-owned homes . .. in the same time period, unless the properties appeared to be occupied, someone at the property said they were the new owners, or work was actively occurring at the time of the testers' visit." Pls' Opp'n Defs3 Mot. Dismiss at p. 13, ECF No. 55; Compl. ¶ 67. Once collected, they subjected these data to regression analyses, ostensibly to isolate any independent variable(s). Compl. ¶ 87.

         The plaintiffs derive one central conclusion from their investigation: there are "significant disparities in the routine exterior maintenance and marketing of Bank of America-, owned homes in communities of color as compared to white communities" that cannot be explained by factors other than the racial composition of the community in which the property is located. Compl. ¶ 6, 87. They found that in each metropolitan area examined, "Bank of America-owned homes located in predominantly white census block groups were better-maintained and' exhibited fewer objective routine maintenance and marketing deficiencies than Bank of America-owned homes located in neighborhoods comprised primarily of African Americans and/or Latinos." Compl. ¶ 7. Their regression analyses controlled for myriad factors including prior sale prices, dwelling size, and lot size, and concluded that "the disparities uncovered by the Organizational Plaintiffs' testing cannot be explained by non-racial factors." Compl. ¶ 8, 87. It is upon this conclusion that the plaintiffs' claims are predicated.

         The plaintiffs advance seven claims in their detailed 113-page Complaint. Counts I-V allege that the defendants; actions violate 42 U.S;C. § 3604(a), § 3604(b), § 3605, § 3617, and the FHA's general prohibition on actions perpetuating housing segregation. The plaintiffs make their case for discrimination under both intentional discrimination (disparate treatment) and disparate impact theories, which they outline first (and at length) before asserting specific discrimination allegations in their more abbreviated count-specific arguments. Count VT and Count VII are private nuisance claims brought by individual plaintiffs only. Bank of America and Safeguard both move to dismiss the complaint for failure to state a claim under the operative pleading standard. They put forth standing, jurisdiction, and timeliness grounds for dismissal for a substantial, subset of the plaintiffs' claims.


         I. Standard of Review

         When ruling on a motion under Rule 12(b)(6), the court must "accept the well-pled allegations of the complaint as true," and "construe the facts and reasonable inferences derived therefrom in the light most favorable to the plaintiff." Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). "Even though the requirements for pleading a proper complaint are substantially aimed at assuring that the defendant be given adequate notice of the nature of a claim being made against him, they also provide criteria for defining issues for trial and for early disposition of inappropriate complaints." Francis v. Giacomelli, 588 F.3d 186, 192 (4th Cir. 2009). "The mere recital of elements of a cause of action, supported only by conclusory statements, is not sufficient to survive a motion made pursuant to Rule 12(b)(6)." Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To survive a motion to dismiss, the factual allegations of a complaint "must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atlantic Coif. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). "To satisfy this standard, a plaintiff need not 'forecast' evidence sufficient to prove the elements of the claim. However, the complaint must allege sufficient facts to establish those elements." Walters, 684 F.3d at 439 (citation omitted). "Thus, while a plaintiff does not need to demonstrate in a complaint that the right to relief is 'probable,' the complaint must advance the plaintiff s claim 'across the line from conceivable to plausible.'" Id. (quoting Twombly, 550 U.S. at 570).

         II. Discussion

         At issue in the present motions to dismiss are both merits arguments pertaining to the sufficiency of the plaintiffs' pleadings and a variety of threshold legal questions concerning standing, personal jurisdiction, and timeliness. While not purported to be dispositive of the entire case, these latter concerns are best discussed first to properly define the contours of the merits inquiry to follow.'

         A. Threshold Matters

         a. Standing

         The defendants contend that the organizational plaintiffs, fair housing groups from around the country that together mounted the investigation, lack standing because they have not sufficiently traced the defendants' alleged wrongdoing to their respective injuries. The plaintiffs argue that diversion of resources and frustration of mission are cognizable injuries under the FHA, that all plaintiffs in this case have incurred some amount of injury, and that requiring a precise accounting of their respective loss at this stage is more than Article III requires. A ruling to the contrary, they say, would lead to claim splitting and redundant litigation. While the defendants do not concede that even the National Fair Housing Alliance has standing, their primary dispute relates to the smaller organizational plaintiffs, who, they say, may have had no part in the investigation of REOs in Maryland.

         An organization can establish standing either as a representative of its members or on its own behalf. Havens Realty Corp. v. Coleman, 455 U.S. 363, 378 (1982). The tests are different. Here, the plaintiffs contend that they have direct standing in their own right, see Pl.s' Opp'n Defs' Mot. Dismiss at pp. 51-54, ECF No. 55, and thus the test to be applied is "the same inquiry as in the case of an individual[.]" Havens Realty Corp., 455 U.S. at 378. Lujan's tripartite framework governs. The plaintiffs must present (1) an injury-in-fact, (2) causation (the injury's connection to the actions of the defendant), and (3) the likelihood of redress in federal court. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). But additional prudential standing requirements need satisfied because this is a fair housing action. Havens Realty Corp., 455 U.S. at 372 ("courts... lack the authority to create prudential barriers to standing" in FHA cases). Instead, organizational standing in FHA cases exists to the outer limits of Article Ill's case or controversy requirement. Id. Here, while the parties spar over all three standing requirements, the lion's share of the briefing concerns injury-in-fact.

         The plaintiffs have sufficiently pled an injury-in-fact to establish standing at this stage. In Havens, the organizational plaintiff alleged that it had been "frustrated by defendants' racial steering practices in its efforts to assist equal access to housing through counseling and other referral services. [The organization] has had to devote significant resources to identify and counteract the defendant's [sic] racially discriminatory steering practices." Id. at 379. The court then reasoned, "[i]f, as broadly alleged [the defendants'] steering practices hav'e perceptibly impaired [the organizational plaintiffs] ability to provide counseling and referral services for low-and moderate-income homeseekers, there can be no question that the organization has suffered injury in fact." Id. (emphasis added). It concluded: "[s]uch concrete and demonstrable injury to the organization's activities-with the consequent drain on the organization's resources-constitutes far more than simply a setback to the organization's abstract social interests[.]" Id. (contrasting-the specificity of the injury alleged with that alleged in Sierra Club v. Morton, 405 U.S. 727, 739 (1972)). la. Equal Rights Ctr. v. Equity Residential, the court noted that plaintiffs must only allege facts showing that "the defendants' actions either have caused the organization to divert resources to identify and counteract the defendants' unlawful practices, or that the challenged actions have frustrated plaintiffs mission." 483 F.Supp.2d 482, 486-87 (D. Md. 2007) (adding further that "the very fact that plaintiff undertook a nationwide investigation of defendants' violations is proof positive of plaintiff s concrete injury; the resources devoted to the two-year investigation were clearly 'diverted.' Nothing more is required."); see also Ragin v. Harry Macklove Real Estate Co., 6 F.3d 898, 905 (2d Cir. 1993) (reasoning that the investigation which formed the basis of the complaint was also an independent activity aimed at identifying and counteracting the discriminatory actions); Williams v. Poretsky Mgmt, Inc., 955 F.Supp. 490, 494 (D. Md. 1996) (plaintiff established organizational standing by alleging it had "devoted significant resources to identifying and counteracting the defendant's practices, and because time was spent on these efforts, the organization was prevented from spending time on other efforts to end discrimination in the housing area"); Equal Rights Ctr. v. Equity Residential, 798 F.Supp.2d 707, 720-25 (D. Md. 2011) (addressing proof of standing at the summary judgment stage).

         Here, the defendants' actions have perceptibly impaired the organizational plaintiffs' varied efforts to stem segregated housing in American cities. See Ha\>ens Realty Corp., 455 U.S. at 379. The defendants' effort to distinguish Havens and the cases that apply it in this district are not persuasive. Bank of America argues that the plaintiffs were not conscripted to perform this investigation, that they must plead affirmative losses beyond the cost of litigation (like the cost of additional counseling services in Havens), and that, in essence, the harm pled is merely a setback to the plaintiffs' "abstract social interest." Ha\'ens Realty Corp., 455 U.S. at 379. Most circuits to have contemplated the issue have held that the costs of investigating discriminatory conduct alone can give fair housing organizations standing. Compare Ragin, 6 F.3d at 905; Alexander v. Riga, 208 F.3d 419, 427 n.4 (3d Cir. 2000); Hooker v. Weathers, 990 F.2d 913, 915 (6th Cir. 1993); Vill. of Bellwood v. Dwivedi, 895 F.2d 1521, 1526 (7th Cir. l990);, M. ACORN FairHous., Inc. v. Greystone Dev., Ltd. Co., 160 F.3d 433, 434-35 (8th Cir. 1998); Fair Hotts. of Marin v. Combs, 285 F.3d 899, 905 (9th Cir. 2002); Cent. Ala. FairHous. Ctr., Inc. v. Lowder Realty Co., Inc., 236 F.3d 629, 640-42 (11th Cir. 2000) with Fair Emp. Council of Greater Wash., Inc. v. BMC Mktg. Corp., 28 F.3d 1268, 1276-77 (D.C. Cir. 1994)[2];La. ACORN Fair Horn. v. LeBlanc, 211 F.3d 298, 305-06 (5th Cir. 2000). And yet even if the cost of investigation alone does not confer standing (each organizational plaintiff specifies down to the hour the time spent on this investigation, see Compl. ¶¶ 161-252), the plaintiffs have adequately pled the diversion of resources away from other pursuits, frustration of mission, impairment to their community investment programs, and educational and advocacy efforts that were needed to mitigate the downstream effects of the defendants' allegedly discriminatory home maintenance. Compl. ¶¶ 150-159. Under Havens and its application in the Fourth Circuit, the facts pled are sufficient to confer organizational standing for purposes of the present motion to dismiss. Any additional argument that the plaintiffs must disaggregate costs incurred goes not to the presence of an injury but to its extent-and is thus best saved for summary judgment.

         Bank of America's redressability argument is only that compensating the plaintiffs for the costs of bringing this lawsuit will not promote their mission of eliminating racial segregation. Bank of America P& A Mot. Dismiss at pp.42-43, ECF No. 44-1. Safeguard additionally contends that both the injury-in-fact and its possible avenues of redress are "too remote and speculative" for standing purposes, Greengael, LC v. Bd. of Supervisors, 313 Fed. App'x. 577, 581 (4th Cir. 2008)[3], because "no specific person or group of persons was allegedly denied access to housing because of race[.]" Safeguard P&A Mot. Dismiss at p. 33, ECF No. 41-1. While the appropriate type and scale of any remedy may require further discussion, it is within the court's power to issue the injunctive, declaratory, and monetary relief sought. Thus, as a constitutional matter, there is no redressability impediment to permitting this case to proceed.

         b. Personal Jurisdiction

         The personal jurisdiction challenge in the present motions is similarly unavailing. There is no contention in this case that there is general jurisdiction over Bank of America or Safeguard in Maryland. They are not at home here-neither company is incorporated in Maryland or principally located here. Goodyear Dimlop Tires Ops., S.A. v. Brown, 564 U.S. 915, 919, 924 (2011); Daimler AG v. Bauman, 571 U.S. 117, 137-39 (2014). Specific jurisdiction is therefore the jurisdictional hook. The defendants invoke Bristol Myers for the proposition that specific jurisdiction must exist independently for each plaintiffs claims. Bank of America's P&A Mot. Dismiss, p. 38, ECF No. 44-1; Safeguard's P&A Mot. Dismiss, p. 34, ECF No. 41-1. The Supreme Court held in Bristol Myers that California courts lack personal jurisdiction over out-of-state plaintiffs' claims in a mass pharmaceutical tort case because there was not a sufficient connection between the forum and the out-of-state plaintiffs' claims. Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco Cty., 137 S.Ct. 1773, 1781 (2017). Here, none of the organizational plaintiffs are Maryland entities. And the only alleged connection to this forum is that Baltimore and Prince George's County were included in the plaintiffs' investigation.

         The Bristol Myers court explicitly withheld judgment as to its holding's applicability in federal court. Id. at 1783-84 (explaining that "since our decision concerns the due process limits on the exercise of specific jurisdiction by a State, we leave open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.") Nor has the Fourth Circuit opined on the issue.[4] Lower courts to have contemplated its application in federal court, and to federal question cases specifically, note that the animating federalism concerns that drove the Court to divest California of the power to hear certain claims of out-of-state plaintiffs may apply differently in federal court where the forum tribunal and any alternative tribunal represent the same sovereign. See, e.g., Sloan v. Gen. Motors LLC, 287 F.Supp.3d 840, 856-64 (N.D. Cal 2018). The Bristol-Myers Court was also careful to distinguish its holding from that in Keeton v. Hustler Magazine, where the Court found personal jurisdiction existed over a New York libel plaintiffs claims against Hustler Magazine brought in New Hampshire alleging nationwide harm. Bristol-Myers Squibb Co., 137 S.Ct. at 1782; Keeton v. Hustler Magazine, Inc., 465 U.S. 770 (1984). In Keeton, jurisdiction was present because there was a connection between the defendants' actions and damage allegedly caused within the state of New Hampshire, as well as the rest of the country. It did not concern the Court that the plaintiff resided out-of-state, because the proper focus was on the sufficiency of the defendant's contacts with the state. Keeton, 465 U.S. at 779-80. In Bristol-Myers, by contrast, "the nonresident's claims involve no harm in California and no harm to California residents." Bristol-Myers Squibb Co., 137 S.Ct. at 1782.[5]

         Even if Bristol-Myers applies to federal question actions in federal court-a question that this court does not reach-the claims pled here by nonresidents involve injuries that occurred in Maryland and harm to Marylanders, to a degree sufficient to establish personal jurisdiction.[6] The fact that some of the alleged harm happened here renders this case more closely analogous to Keeton than to Bristol-Myers. In Bristol-Myers, the Court found that there was no personal jurisdiction because the nonresident plaintiffs' claims "involv[ed] no in-state injury and no injury to residents of the forum State." Id. Here, by contrast, as in Keeton, the claims made by nonresident plaintiffs involve harm that is alleged to have occurred in Maryland and to residents of Maryland as a result of actions taken by the defendants in or directed at Maryland. Under the same logic, this, court has jurisdiction to entertain this case because it involves in-state injuries and injuries to residents of Maryland, irrespective of the precise fraction of nationwide harm that occurred in Maryland.[7]

         c. Timeliness

         The final threshold concern is the timeliness of the plaintiffs' claims. All parties agree • that the FHA has a two-year statute of limitations, see 42 U.S.C. §. 3613(a)(1)(A), but that most claims, against Bank of America were tolled by the filing of the administrative action with HUD. See Bank of America Reply at p. 20, ECF No. 57; Pls' Opp'n Defs' Mot. Dismiss at pp. 54-55, ECF No. 55. Instead, the dispute here is over the fate of four organizational plaintiffs who were not parties to the HUD action-whose claims, the defendants assert, are untimely unless they concern actions postdating June 26, 2016, two years before the filing of this lawsuit. Safeguard argues, for its part, that it was never subject to a related HUD action and thus all claims against it should be time-barred. Countering both Bank of America and Safeguard, the plaintiffs insist that any statute of limitations concern is obviated by the continuing violation doctrine. Pl.s' Opp'n to Defs' Mot. Dismiss at pp. 54-56, ECF No. 55. "A continuing violation is occasioned by continual unlawful acts, not continual ill effects from an original violation."' Nat'l Advert. Co. v. City of Raleigh, 947F.2d 1158, 1166 (4th Cir. 1991).

         The plaintiffs are right on this score for two reasons. First, while it provides for a two-year statute of limitations, the plain text of the FHA also expressly announces that the period commences "after the occurrence of termination of an alleged discriminatory housing practice." 42 U.S.C. 3613(a)(1). Noting that the policy reasons for limiting the time to sue over discrete acts of discrimination are different from those challenging ongoing housing practices, the Havens Court remarked: "we . . . conclude that where a plaintiff, pursuant to the Fair Housing Act, challenges not just one incident of conduct violative of the Act, but an unlawful practice that continues into the limitations period, the complaint is timely when it is filed within 180 days of the last asserted occurrence of that practice." Havens Realty Corp., 455 U.S. at 380-81. Plainly, there is no contention here that the allegedly unlawful practice ended two years before this suit was filed, and the plaintiffs' home maintenance grievances are squarely the kind of unlawful practice contemplated by the statute. In no way is the harm complained of here a discrete act of discrimination or "just one incident of conduct violative of the Act." Id. at 381. Because the plaintiffs allege a continuing unlawful practice, the full scope of its investigation is timely.

         Second, there is no notice restriction to the doctrine's application in the Fourth Circuit. In Deutsche Bank, a Northern District of Illinois case involving substantially similar claims by NFHA against Deutsche Bank, the district court limited the actionable allegations window to two years before the suit was filed. But, the court noted, "the Seventh Circuit has explained that the [continuing violation] doctrine has no application where the time-barred incident put the plaintiff on notice that his rights were being violated." Nat'l Fair Hous. All. v. Deutsche Bank, 2018 WL 6045216, at *3 (N.D. Ill. Nov. 19, 2018) (quoting EEOC v. N. Gibson Sch. Corp., 266 F.3d 607, 617 (7th Cir. 2001)). Other circuits do not impose such a notice restriction. In the Ninth Circuit, for example, "a strict notice limitation 'has never been the 'litmus test' for application of the continuing violation doctrine.'" Id. at *4 (quoting City of Los Angeles v. Citigroup Inc., 24 F.Supp.3d 940, 952 (CD. Cal. 2014). Courts in this District hew closer to the Ninth Circuit rule. See Equal Rights Ctr. v. Camden Prop. Tr., 2008 WL 8922896, at'* 10 (D. Md. Sept. 22, 2008) (noting that discrimination claims pertaining to the design and construction of hundreds of properties brought under the FHA constitutes a continuing violation and is different from mere continuing effects of past violations); see also The Equal Rights Ctr. v. Avalon Bay Communities, Inc., 2009 WL 1153397, at *9 (D. Md. March 23, 2009); Bait. Neighborhoods, Inc. v. Rommel Builders, Inc., 40 F.Supp.2d 700, 710 (D. Md. 1999). The fact that the plaintiffs were on notice of the allegedly discriminatory practice in 2011 when they chartered their investigation does not curtail their ability to challenge that ongoing practice in 2018. The plaintiffs' claims are timely.

         B. The Merits

         There are two questions that constitute the merits inquiry at this stage in the case. (1) Are there sufficient facts pled to show discrimination under the Fair Housing Act? (2) If so, have the plaintiffs otherwise pled cognizable FHA claims? Affirmative answers to both questions are necessary for this case to proceed. Finally, there are arguments specific to ...

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