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City of Los Angeles v. Citigroup Inc.

United States District Court, C.D. California

June 9, 2014


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For City of Los Angeles, a municipal corporation, Plaintiff: Clifton W Albright, LEAD ATTORNEY, Albright Yee and Schmit LLP, Los Angeles, CA; Elaine T Byszewski, Lee M Gordon, LEAD ATTORNEYS, Hagens Berman Sobol Shapiro LLP, Pasadena, CA; Howard S Liberson, Joel Keith Liberson, LEAD ATTORNEYS, Trial and Appellate Resources PC, El Segundo, CA; Michael Nelson Feuer, LEAD ATTORNEY, Los Angeles City Attorney's Office, Los Angeles, CA; Robert S Peck, LEAD ATTORNEY, PRO HAC VICE, Center for Constitutional Litigation, Washington, DC; Steve W Berman, PRO HAC VICE, Hagens Berman Sobol Shapiro LLP, Seattle, WA.

For CitiGroup Inc, Citibank N.A., CitiMortgage Inc, Citicorp Trust Bank FSB, Citi Holdings Inc, Defendants: Bronwyn F Pollock, LEAD ATTORNEY, Evan M Wooten, Mayer Brown LLP, Los Angeles, CA; Debra Bogo-Ernst, Lucia Nale, Stephen J Kane, PRO HAC VICE, Mayer Brown LLP, Chicago, IL.



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This is one of a handful of cases that Plaintiff the City of Los Angeles (" L.A." ) has brought against lending institutions under the federal Fair Housing Act (" FHA" ), 42 U.S.C. § § 3601-19. Defendants in this action are Citigroup Inc.; Citibank, N.A.; CitiMortgage, Inc.; Citicorp Trust Bank, FSB; and Citi Holdings, Inc. (" Defendants" or " Citi" ). L.A. is seeking damages from Defendants for lost property-tax revenue and increased municipal services stemming from foreclosures that are allegedly the result of discriminatory lending practices.

Before the Court is Defendants' Motion to Dismiss the Complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (ECF No. 29.) The Motion is based on several grounds including lack of Article III standing, expiration of the statute of limitations, and failure to state a claim. Also before the Court is Defendants' Motion to Strike Portions of Plaintiff's Complaint. (ECF No. 30.) For the reasons discussed below, the Court DENIES both Motions.


L.A. filed the Complaint on December 5, 2013, asserting two claims for (1) violating the federal Fair Housing Act (" FHA" ), 42 U.S.C. § § 3601-19, and (2) common-law restitution. (ECF No. 1.)

According to L.A., Defendants have engaged in discriminatory lending practices that have resulted in a disparate number of foreclosures in minority areas of Los Angeles. ( See Compl. ¶ 2.) Specifically, L.A. alleges that Defendants have engaged in " redlining" and " reverse redlining." ( Id. ¶ 4.) Redlining is the practice of denying credit to particular neighborhoods based on race. ( Id. ¶ 4 n.2.) Reverse redlining is the practice of flooding a minority neighborhood with exploitative loan products. ( Id. ¶ 4 n.3.) The lengthy Complaint includes a regression analysis based on Citi loans issued in Los Angeles. ( See, e.g., id. ¶ ¶ 93-98.) L.A. alleges numerous statistics based on this regression analysis. One example is that from 2004 to 2011, an African-American borrower was 2.273 times more likely to receive a " predatory loan" as a white borrower with similar underwriting and borrower characteristics. ( Id. ¶ 94.) Also in the Complaint are confidential witness statements from former employees of Defendants who describe how minorities were allegedly steered toward predatory loans. ( Id. ¶ ¶ 55-86.)

Based on publicly available loan data, L.A. alleges that it has identified 1,200 discriminatory loans issued by Defendants in Los Angeles that resulted in foreclosure. ( Id. ¶ 136.) L.A. expects that number to rise during the course of discovery. ( Id. ¶ 136 n.39.) According to L.A., these discriminatory loans were more likely to result in foreclosure, which in turn diminished the tax base and led to blight in Los Angeles neighborhoods. ( Id. ¶ ¶ 110-35.) L.A. seeks to recover lost property-tax revenue as well as expenses incurred for increased municipal services. ( Id. )

The instant Motions were filed on February 21, 2014, under an extended briefing schedule. (ECF Nos. 16, 29, 30.) The case was transferred to this Court on May 20, 2014. (ECF No. 42.) The Court took the Motions under submission on May 28, 2014. There are at least three related cases filed by L.A. against other lending institutions in the Central District of California seeking to recover the same type of

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damages for allegedly discriminatory lending practices. ( City of L.A. v. Wells Fargo, No. 2:13-cv-9007-ODW(RZx), 22 F.Supp.3d 1047; City of L.A. v. Bank of Am.Corp., No. 2:13-cv-9046-PA(AGRx); City of L.A. v. JPMorgan Chase & Co., No. 2:14-cv-4168-ODW(RZx).) The Court has already ruled on very similar motions to dismiss and to strike in one of those cases. See City of L.A. v. Wells Fargo, No. 2:13-cv-9007-ODW(RZx), 22 F.Supp.3d 1047, 2014 WL 2206368 (C.D. Cal. May 28, 2014).


A. Rule 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) provides for dismissal of a complaint for lack of subject-matter jurisdiction. The Article III case or controversy requirement limits a federal court's subject-matter jurisdiction, which includes the requirement that plaintiffs have standing to bring their claims. Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1121-22 (9th Cir. 2010). Rule 12(b)(1) jurisdictional attacks can be either facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000).

When a motion to dismiss attacks subject-matter jurisdiction on the face of the complaint, the court assumes the factual allegations in the complaint are true and draws all reasonable inferences in the plaintiff's favor. Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 2009). Moreover, the standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), apply in equal force to Article III standing when it is being challenged on the face of the complaint. See Perez v. Nidek Co., 711 F.3d 1109, 1113 (9th Cir. 2013); Terenkian v. Republic of Iraq, 694 F.3d 1122, 1131 (9th Cir. 2012). Thus, in terms of Article III standing, the complaint must allege " sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).

On the other hand, with a factual Rule 12(b)(1) attack, a court may look beyond the complaint. See White, 227 F.3d at 1242-43 (affirming judicial notice of matters of public record in Rule 12(b)(1) factual attack); see also Augustine v. U.S., 704 F.2d 1074, 1077 (9th Cir. 1983) (holding that a district court is free to hear evidence regarding jurisdiction). In a factual attack, a court need not presume the truthfulness of the allegations in the complaint. White, 227 F.3d at 1242. But courts should refrain from resolving factual issues where " the jurisdictional issue and substantive issues are so intertwined that the question of jurisdiction is dependent on resolution of the factual issues going to the merits." Augustine, 704 F.2d at 1077 (holding that resolution of factual issues going to the merits requires a court to employ the standard applicable to a motion for summary judgment).

B. Rule 12(b)(6)

Under Rule 12(b)(6), a court may dismiss a complaint for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To survive a dismissal motion, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2)--a short and plain statement of the claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual " allegations must be enough to raise a right to relief above the speculative level" and a claim for relief must be " plausible on its face." Twombly, 550 U.S. at 555, 570.

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The determination whether a complaint satisfies the plausibility standard is a " context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679. A court is generally limited to the pleadings and must construe all " factual allegations set forth in the complaint . . . as true and . . . in the light most favorable" to the plaintiff. Lee v. City of L.A., 250 F.3d 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Moreover, a court may take judicial notice of matters of public record without converting the motion into one for summary judgment. E.g., Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1016 n.9 (9th Cir. 2012).

C. Rule 12(f)

Under Rule 12(f), a court " may order stricken from any pleading . . . any redundant, immaterial, impertinent, or scandalous matter." The essential function of a Rule 12(f) motion is to " avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev'd on other grounds, 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994). Rule 12(f) motions to strike are generally disfavored. Bureerong v. Uvawas, 922 F.Supp. 1450, 1478 (C.D. Cal. 1996); see also Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir. 2000).


Defendants move to dismiss the Complaint on a number of grounds--all of which address the sufficiency of the City's allegations with respect to Article III standing, the statute of limitations, and overall ability to state a claim. As an alternative to dismissal of the entire Complaint, Defendants also move to strike certain paragraphs as impertinent, immaterial, or scandalous. ...

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