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City of Los Angeles v. JPMorgan Chase & Co.

United States District Court, C.D. California

November 14, 2014


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

For JPMorgan Chase & Co., JPMorgan Chase Bank, N.A., Defendants: Elizabeth Lemond McKeen, LEAD ATTORNEY, Ashley M Pavel, Robert M Swerdlow, O'Melveny and Myers LLP, Newport Beach, CA; Steven J Olson, LEAD ATTORNEY, O'Melveny & Myers LLP, Los Angeles, CA.

For Chase Manhattan Bank USA, N.A., other, Chase Bank USA, NA, Defendant: Steven J Olson, LEAD ATTORNEY, O'Melveny & Myers LLP, Los Angeles, CA.




Before the Court is Defendants JPMorgan Chase & Co.; JPMorgan Chase Bank, N.A; and Chase Manhattan Bank USA, N.A's (collectively, " Chase") Motion to Dismiss Plaintiff's First Amended Complaint. (ECF No. 43.) This action is one of four cases brought by Plaintiff the City of Los Angeles (" the City") against large lending institutions. The City is seeking damages under the federal Fair Housing Act (" FHA"), 42 U.S.C. § § 3601-19, for lost property-tax revenue and increased municipal services stemming from foreclosures that are allegedly the result of discriminatory lending practices. The present Motion largely mirrors similar motions to dismiss brought in related cases. The Court finds no reason to deviate from the rulings in the related cases. Accordingly, for the reasons discussed below, the Court DENIES Defendants' Motion to Dismiss.[1] (ECF No. 43.)


The City filed suit against Chase on May 30, 2014, asserting two claims for (1) violating the FHA, and (2) common-law restitution. (ECF No. 1.) This action is one of four related cases brought by the City against large lending institutions, alleging identical claims. ( City of L.A. v. Wells Fargo, No. 2:13-cv-9007-ODW(RZx); City of L.A. v. Citigroup Inc., No. 2:13-cv-9009-ODW(RZx); City of L.A. v. Bank of Am. Corp., No. 2:13-cv-9046-PA(AGRx).)

Chase moved to dismiss the original Complaint, and the Court granted the motion on August 5, 2014, finding that Chase is not liable for the conduct of the now-defunct Washington Mutual under the Federal Institutional Reform, Recovery, and Enforcement Act of 1989 (" FIRREA"), 12 U.S.C. § 1821. (ECF No. 40.) The City was given leave to amend to excise the allegations relating to Washington Mutual, and the First Amended Complaint (" FAC") was filed on August 26, 2014. (ECF No. 41.)

In the FAC, the City alleges that Chase has engaged in discriminatory lending practices that have resulted in a disparate number of foreclosures in minority areas of Los Angeles. ( See FAC ¶ ¶ 2-3.) Specifically, the City 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 FAC includes a regression analysis based on Chase loans issued in Los Angeles. ( See id . ¶ ¶ 90-95.) The City alleges numerous statistics based on this regression analysis. One example is that from 2004 to 2011, an African-American borrower was 2.783 times more likely to receive a " predatory loan" as a white borrower with similar underwriting and borrower characteristics. (Id. ¶ 91.) Also in the FAC are confidential witness statements from former employees of Chase who describe how minority borrowers were treated differently than white borrowers in the loan process. ( See id . ¶ ¶ 58-82.)

Based on publically available loan data, the City alleges that it has identified 947 discriminatory loans issued by Chase in Los Angeles that resulted in the start of foreclosure proceedings. (Id. ¶ 134.) The City expects that number to rise during the course of discovery. (Id. ¶ 134 n.42.) According to the City, the discriminatory loans issued by Chase were more likely to result in foreclosure, which in turn diminished the City's tax base and led to blight. (Id. ¶ ¶ 119-33.) The City is seeking to recover lost property-tax revenue as well as expenses incurred for increased municipal services as a result of these foreclosures. (Id.)

Chase filed the present Motion to Dismiss the FAC on September 12, 2014. (ECF No. 43.) The Motion is similar, if not identical, to motions to dismiss that have already been denied in the three related cases. ( Wells Fargo, No. 2:13-cv-9007-ODW(RZx), ECF No. 37; Citigroup, No. 2:13-cv-9009-ODW(RZx), ECF No. 47; Bank of Am., No. 2:13-cv-9046-PA(AGRx), ECF No. 50.) Chase's Motion is now before the Court for decision.


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). When a motion to dismiss attacks subject-matter jurisdiction under Rule 12(b)(1) 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).

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.

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 ...

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