The Supreme Court ruled on Monday that the city of Miami has standing to bring a claim that its neighborhoods were harmed by the lending practices of Bank of America and Wells Fargo.

The ruling marks the first time the Supreme Court has ruled directly on the application of a proximate cause requirement in the context of the Fair Housing Act.

In a 5-3 ruling, Justice Stephen Breyer wrote that the city's claim of injuries fell within the "zone of interests" that the Fair Housing Act protects. The court remanded the case to the Eleventh Circuit, which had previously ruled in favor of the city.

In 2013, the city of Miami sued both B of A and Wells for steering minority borrowers into predatory loans that caused properties to fall into foreclosure, decreasing the value of the homes and neighboring properties. Miami alleged that the ensuing foreclosure crisis deprived the city of property tax revenue, created blight and forced the city to spend additional money on municipal services.

U.S. Supreme Court Justice Stephen Breyer.
Justice Stephen Breyer wrote the opinion for the majority. He was joined by Chief Justice John Roberts Jr. and Justices Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor. Bloomberg News

Miami also separately had sued Citigroup and JPMorgan Chase. The B of A and Wells cases were consolidated because their litigation had advanced further.

The banks had argued that individuals can bring a claim under the Fair Housing Act but that a city could not. Breyer ruled that the Fair Housing Act is broad enough to contemplate the city as a plaintiff.

A spokesman for B of A said the bank will continue to litigate.

"We believe these claims are without merit and we will continue to defend our interests in this matter," said the spokesman, Lawrence Grayson. "The bank is committed to the goals and intent of the Fair Housing Act."

In a statement, Wells Fargo said it expects to prevail. "We believe that under the stringent standards articulated by the Supreme Court, it will be very difficult for Miami or any other municipality to show the required connection between the claimed damages and unsubstantiated allegations about our lending practices, which do not reflect how we operate in the communities we serve," the company said.

Breyer was joined in the majority opinion by Chief Justice John Roberts Jr. and Justices Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor. Justice Clarence Thomas dissented in part, and was joined by Samuel Alito Jr. and Anthony Kennedy. Justice Neil Gorsuch did not vote because the case was argued Nov. 8, before he had joined the court.

The Eleventh Circuit will have to apply the proximate causation standard to the allegations to determine whether the harm alleged by Miami has a sufficiently close connection to the conduct of the banks that the statute prohibits.

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