A Flood-Not a Ripple-of Harm: Proximate Cause Under the Fair Housing Act

Authors

Justin P. Steil, Massachusetts Institute of Technology
Daniel Traficonte, Massachusetts Institute of Technology

Abstract

Over the past decade, several city governments across the country have filed suits against banks pursuant to the Fair Housing Act seeking redress for municipal damages caused by the banks' discriminatory lending practices. Following the ruling in Bank of America Corp. v. City of Miami, lower courts are now confronting the question of where to "draw the line" of proximate causation under the Fair Housing Act, and specifically whether the harms experienced by cities as a result of banks' discriminatory lending meet the requirements of proximate causation. In suggesting a direction for lower courts, the Court in City of Miami alluded to several cases arising under statutes with common law foundations in which proximate cause analysis was limited to the 'first step." In doing so, the Court noted that a Fair Housing Act violation may cause "ripples of harm" to flow through society, thus pointing to a need for some point to limit liability. This Article traces the origins of the 'first step" test-along with the carefully-chosen "ripples of harm" metaphor back to the Clayton and Sherman Acts and their regulation of specific economic harms. The Article suggests that importing proximate cause standards developed for the initially contractual harms arising in the antitrust context into the very different tortious harms arising in the fair housing context is unwise and unworkable. It offers an alternative proximate cause standard for the Fair Housing Act-a "scope of liability" standard-drawn from the Third Restatement of Torts, which we examine in light of the Fair Housing Act's legislative history and the empirical reality of the effects of the discriminatory lending at issue in the case. The harm caused by banks' discriminatory lending practices can be better analogized to water accumulating into a flood than water dispersing through a ripple, and the correct proximate cause standard under the Fair Housing Act allows cities to recover for this harm.

Disciplines

Banking and Finance Law | Consumer Protection Law | Housing Law | Law | Law and Race | Tax Law | Torts

Recommended Citation

Justin P. Steil & Daniel Traficonte, A Flood-Not a Ripple-of Harm: Proximate Cause Under the Fair Housing Act, 40 Cardozo L. Rev. 1237 (2019).
Available at: https://larc.cardozo.yu.edu/clr/vol40/iss3/8