This week, the Court clarifies the Fair Housing Act and Resource Conservation Recovery Act.

CITY OF OAKLAND V. WELLS FARGO & COMPANY

The en banc Court holds that Oakland failed to adequately plead proximate cause under the Fair Housing Act ("FHA") for its claims that allegedly discriminatory lending practices caused lower tax revenues and increased municipal spending, and that the FHA's proximate cause requirement applies to claims for declaratory and injunctive relief.

En Banc Panel: Chief Judge Thomas and Judges McKeown, Wardlaw, Paez, Callahan, Ikuta, Nguyen, Hurwitz, Nelson, Bade, and VanDyke, with Judge McKeown writing the opinion.

Key Highlight: "The City of Oakland claims that Wells Fargo's discriminatory lending practices caused higher default rates, which in turn triggered higher foreclosure rates that drove down the assessed value of properties, and which ultimately resulted in lost property tax revenue and increased municipal expenditures. These downstream 'ripples of harm' are too attenuated and travel too 'far beyond' Wells Fargo's alleged misconduct to establish proximate cause."

Background: Oakland sued Well Fargo, alleging that the bank violated the FHA by steering minority borrowers into costlier and riskier mortgage loans than those regularly offered to similarly situated white borrowers. Those riskier loans caused higher default and foreclosure rates, and lower property values, the City alleged, leading to lower property tax revenues and increased municipal spending on public health and safety. Oakland also claimed that the alleged discriminatory lending undermined its racial-integration goals. The City sought damages, as well as declaratory and injunctive relief. The district court dismissed Oakland's claims for damages from increased municipal expenditures for lack of proximate cause, and dismissed Oakland's claims of non-economic injury on standing grounds. But the court allowed Oakland's damages claims as to decreased property tax revenue to proceed. And it also allowed all claims for declaratory and injunctive relief to move forward. The district court then certified two questions for interlocutory appeal: "(1) whether Oakland's claims for damages satisfy the FHA's proximate-cause requirement, and (2) whether that proximate-cause requirement applies to claims for injunctive and declaratory relief." A Ninth Circuit panel reversed the district court's determination that the FHA's proximate-cause requirement did not apply to injunctive and declaratory relief, and affirmed the other holdings.

Result: The en banc Ninth Circuit affirmed in part and reversed in part. First, the Court explained that under the FHA and the Supreme Court's decision in Bank of America Corp. v. City of Miami, 137 S. Ct. 1296 (2017), proximate cause generally requires a direct relationship between the challenged practices and any asserted injuries. Applying that standard, the Court concluded that Oakland did not sufficiently plead proximate cause for its reduced tax revenue claim. Because Oakland's theory of harm went beyond the "first step" of harm-that is, "the harm to minority borrowers who receive predatory loans"-it was not direct enough to satisfy the FHA. Nothing about the nature of the statutory cause of action or its administrability in this case warranted a departure from the "first step" principle. The harm that the FHA guards against is "situated at the first step: the issuance of the discriminatory loan," not further attenuated harm. There were too many gaps in the causal chain of Oakland's theory. And nothing prevented borrowers directly harmed by Wells Fargo's practices from suing the lender themselves.  For the same reasons, the en banc Ninth Circuit also affirmed the district court's dismissal of Oakland's increased municipal spending claim, which it concluded was "even further afield from the alleged wrongdoing than the reduced tax revenue claim." Finally, the en banc Ninth Circuit agreed with the panel that the FHA's proximate cause requirements apply equally to claims for declaratory and injunctive relief, not just damages. Because "proximate cause is an element of the cause of action that must be established in every case," there was no basis for distinguishing between different types of relief.

CALIFORNIA RIVER WATCH v. CITY OF VACAVILLE

The Court holds that a claim for contributing to the transportation of solid waste in violation of the Resource Conservation Recovery Act ("Resource Act") does not require the transporter to have had a role in "discarding" the waste in the first place.

The Panel: Judges Tashima, Bumatay, and Rayes (D. Ariz.), with Judge Bumatay writing the opinion, and Judge Tashima dissenting.

Key Highlight: "Nothing in [the Resource Act's] text suggests that the 'transporter' of the solid waste must also play some role in 'discarding' the waste. While the City may be distributing groundwater contaminated by others, [the Resource Act's] endangerment provision broadly applies to any 'person,' including a 'governmental instrumentality,' like the City, that 'contribute[s]' to the 'transportation' of 'any' waste. So, a 'transporter' of waste need not also be the cause of the waste's existence."

Background: In the 1970s and 80s, wood treatment facilities in Elmira, California dumped a massive amount of hexavalent chromium, a human carcinogen, in the ground ("the Wickes site"). The Wickes site was identified as a federal hazardous waste site and was found to have contaminated drinking-water wells nearby. Plaintiff River Watch contended that the hexavalent chromium has since migrated through the groundwater from the Wickes site to the Elmira Well Field, where the City of Vacaville draws much of its water. River Watch sued the City under the Resource Conservation and Recovery Act, alleging that the City is "contributing to" the "transaction" of a "solid waste," namely hexavalent chromium, in violation of that Act. Under that Act, the definition of "solid waste" is "discharged material" so the parties' dispute centered on whether the hexavalent chromium was discarded. The district court granted summary judgment to the City concluding that River Watch could not show that the City's water-processing activities were discharging hexavalent chromium.

Result: The Ninth Circuit vacated the district court's judgment and remanded. On appeal, River Watch argued that because the hexavalent chromium originates from the Wickes site, it is "discarded material" under the Resource Act, and thus the City is liable for its transportation through its water-distribution system. The Court first held that River Watch had not forfeited this argument. Although, in the district court, River Watch had argued that that the hexavalent chromium's exact origin was irrelevant that did not constitute a forfeiture of its appellate argument because it had also always argued that the Wickes site was the likely source of the substance. On the merits, the Court concluded that River Watch had raised a genuine issue of material fact over whether the City had contributed to the distribution of solid waste in violation of the Resource Act. Material is discarded when it has served its intended purpose and is no longer wanted by the consumer. Here, River Watch presented expert evidence that the hexavalent chromium at the wood treatment facilities had been abandoned and cast aside by facilities' operators as leftover waste. River Watch had also presented evidence that the City had contributed to the transportation of the solid waste by presenting expert evidence that water originating from the Elmira Well Field and pumped through the City's water-distribution system contains hexavalent chromium. Contrary to the district court's order, the Resource Act does not require the "transporter" of the solid waste to also play some role in "discarding" the waste. The majority rejected the argument that its reading of the statute would produce absurd results, explaining that it was unlikely a person's transmission of a de minimis amount of solid waste (like handling a glass of contaminated water to a friend) would give rise to viable Resource Act suits.

Judge Tashima dissented. Because the City had no role in the contaminating the water, he would have held that it was not liable under the Resource Act. Alternatively, Judge Tashima would have held that River Watch waived its appellate argument because it was not a theory River Watch argued in the district court.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved