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Los Angeles Unified School District v. Wells Fargo & Co.

United States District Court, C.D. California

February 3, 2015



OTIS D. WRIGHT, II, District Judge.


This case is one of four identical actions filed by Plaintiff Los Angeles Unified School District ("LAUSD") against large banking institutions alleging violations of the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3604-05. LAUSD alleges that several years of discriminatory lending practices in violation of the FHA caused a high number of foreclosures and property value reductions, which in turn "reduce[d] the property tax revenues collected by LAUSD." (ECF No. 1 ["Compl."] ¶¶ 178-83.) Pending before the Court are a Motion to Dismiss and a Motion to Stay filed by Defendants Wells Fargo & Co. and Wells Fargo Bank, N.A. (collectively "Wells Fargo"). (ECF No. 16 ["MTD"].) For the reasons discussed below, the Court GRANTS Wells Fargo's Motion to Dismiss and DENIES Wells Fargo's Motion to Stay as MOOT.[1]


The factual allegations against Wells Fargo in LAUSD's one-count Complaint are nearly indistinguishable from the factual allegations against Wells Fargo by the City of Los Angeles in two other matters before the Court. See City of Los Angeles v. Wells Fargo & Co., et al., No. 13-cv-09007 (C.D. Cal. filed Dec. 5, 2013); California v. Wells Fargo & Co., et al., No. 14-cv-09751 (C.D. Cal. filed Dec. 19, 2014).[2] Due to the similarity among the pleadings, the Court incorporates the factual background section from a recent order denying Wells Fargo's motion to dismiss, see City of Los Angeles v. Wells Fargo & Co., 22 F.Supp. 3d 1047, 1051-52 (C.D. Cal. 2014), and will only briefly mention several key distinguishing facts.

LAUSD's boundaries cover 720 square miles, to include the City of Los Angeles and thirty-one other municipalities. (Compl. ¶ 24.) LAUSD receives a portion of its operating revenue from local property taxes. ( Id. ¶ 176.) According to LAUSD, Wells Fargo's discriminatory and unlawful lending practices, which targeted African-American and Latino borrowers, caused a disproportionately high number of foreclosures in historically underserved minority communities within LAUSD's boundaries. ( Id. ¶¶ 40-60.) The foreclosures resulted in vacant homes and depressed property values for surrounding properties, thus leading to a decrease in property tax revenue. ( Id. ¶ 176-78.) LAUSD alleges that the "decreased property values of foreclosed [and surrounding] homes in turn reduce property tax revenues to the School District and constitute damages suffered by LAUSD." ( Id. ¶ 181.)


A. Federal Rule of Civil Procedure 12(b)(1)

A Rule 12(b)(1) motion tests whether the court has subject-matter jurisdiction to hear the claims alleged in the complaint. See Fed.R.Civ.P. 12(b)(1). When a motion to dismiss attacks subject-matter jurisdiction on the face of the complaint-a "facial challenge"-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). The pleading standards set forth in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), apply in equal force to facial challenges. 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).

"By contrast, in a factual attack, the challenger disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In a factual attack, a court need not presume the truthfulness of the allegations in the complaint and may consider extrinsic evidence. See White v. Lee, 227 F.3d 1214, 1242-43 (9th Cir. 2000) (affirming judicial notice of matters of public record in Rule 12(b)(1) factual attack); Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983) (holding that a district court is free to hear evidence regarding jurisdiction). 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.

B. Article III Standing

"[T]hose who seek to invoke the jurisdiction of the federal courts must satisfy the threshold requirement imposed by Article III of the Constitution by alleging an actual case or controversy." City of Los Angeles v. Lyons, 461 U.S. 95, 101 (1983). "[T]o satisfy Article III's standing requirements, a plaintiff must show (1) it has suffered an injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000). Each of these elements "must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of litigation." Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).


Wells Fargo's Motion to Dismiss raises a Rule 12(b)(1) factual challenge to this Court's subject-matter jurisdiction. Specifically, Wells Fargo argues that LAUSD did not suffer any injury because LAUSD's funding levels never decreased as school district funding in California is regulated by the State and insulated from decreases in local property tax. (MTD at 14-16.) The Court first notes that it is not writing on a blank slate. Judge Percy Anderson recently dismissed LAUSD's identical lawsuit against Bank of America on grounds that LAUSD did not suffer an injury in fact. See Los Angeles Unified Sch. Dist. v. Bank of Am. Corp., et al. (" LAUSD I"), No. 14-cv-07364 (C.D. Cal. January 7, 2015) (order granting motion to dismiss). Judge ...

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