County Of Cook v. Bank of America Corporation et al

Filing 664

MEMORANDUM Opinion and Order signed by the Honorable Elaine E. Bucklo on 2/10/2022. Mailed notice. (mgh, )

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 1 of 58 PageID #:44877

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
)
)
)
)
)
)
)
)
)
)

COUNTY OF COOK,
Plaintiff,
v.
BANK OF AMERICA
CORPORATION, et al.
Defendants.

No. 14 C 2280

MEMORANDUM OPINION AND ORDER
Nearly eight years ago, Cook County filed this action under
the Fair Housing Act of 1968 (“FHA”) to recover for economic and
non-economic
result

of

injuries

defendants’

that

it

claims

predatory

and

to

have

suffered

discriminatory

as

scheme

a
to

strip equity from the homes of African American and Hispanic
borrowers in Cook County (“minority borrowers”) and to foreclose
disproportionately
defendants
advanced

identified
data

methodologies”
unchecked
borrowers,

on

or

their
and

mining
and

which

targeted

techniques

engaged

improper

homes.

in

credit

allowed

The

minority
and

practices
approval

minority

County

alleged

borrowers

predictive
that

borrowers

“using

analysis

encouraged:

decisions
to

for

that

(a)

minority

receive

home

loans they could not afford; (b) discretionary application of
surcharges on minority borrowers of additional points, fees, and

1

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 2 of 58 PageID #:44878

other credit and servicing costs over and above an otherwise
objective risk-based financing rate for such loan products; (c)
steering minority borrowers into higher cost loan products; and
(d)

undisclosed

residences

to

inflation
support

of

appraisal

inflated

loan

values
amounts

of

minority

to

minority

borrowers. Compl. ECF 1 at ¶ 7. All of these practices allegedly
increased
minority

the

likelihood

borrowers.

Id.

of
See

default
also

and

id.

at

foreclosure
¶

103

among

(alleging

additional discriminatory terms and conditions); ¶ 299 (same).
As a result of the foregoing practices, the County claimed to
have suffered injuries that included: (1) out-of-pocket costs to
provide governmental services associated with foreclosed and/or
vacant

properties;

(2)

lost

property

tax

revenue;

(3)

lost

recording fee income; and (5) intangible injuries to the fabric
of its communities. Id. at ¶ 408.
After the County’s original complaint survived a motion to
dismiss, see Cty. of Cook v. Bank of Am. Corp., 181 F. Supp. 3d
513 (N.D. Ill. 2015), the Supreme Court’s decisions in Bank of
Am. Corp. v. City of Miami, Fla., 137 S. Ct. 1296 (2017) (“City
of Miami”), and Texas Department of Housing & Community Affairs
v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015)
(“Inclusive Communities”), altered the legal landscape of the
County’s claims. City of Miami confirmed the County’s Article
III standing to pursue FHA claims for economic injuries but held
2

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 3 of 58 PageID #:44879

that the statute’s proximate causation requirement limited the
scope of its actionable injuries to those the County could prove
were the direct result of the discriminatory conduct alleged.
137 S. Ct. at 1305-06. Inclusive Communities confirmed that the
County’s disparate impact theory of discrimination is cognizable
under the FHA but held that claims based on that theory are
subject to a “robust causality requirement” that requires the
County to do more than offer statistical evidence of racial
imbalance; the County must also point to a specific policy and
show

that

it

“artificial,

created

arbitrary,

and

unnecessary

barriers” to equality. 576 U.S. at 543.
In

the

wake

jurisprudence,

the

of

these

County

developments
filed

a

in

Second

the

Court’s

Amended

FHA

Complaint

(“SAC”) in July of 2017. Count I of the SAC asserts the theory
that defendants carried out an equity stripping scheme designed
to enrich themselves at the expense of minority borrowers, who
disproportionately
violation
challenges

of

the

suffered
FHA.1

defendants’

In

default
Count

facially

II,

and
the

foreclosure,
County

neutral

in

specifically

servicing

and

foreclosure practices, which the County likewise claims had a
disparate impact on minority borrowers in violation of the FHA.
Although the County alleges that defendants’ equity stripping
scheme was intentional, Count I is based on “statistical
disparities in foreclosure rates resulting from Defendants’
equity stripping practices,” not on evidence of discriminatory
intent. See Pl.’s Opp. ECF 622 at 3 n. 4 (ECF 622)
1

3

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 4 of 58 PageID #:44880

And in Count III, the County claims that defendants’ equity
stripping

scheme

amounts

to

intentional

discrimination

in

violation of the FHA because it targeted minority borrowers for
higher cost, higher risk loans based on their race and/or color.
See SAC, ECF 177 at ¶¶ 403-551.
Defendants

moved

to

dismiss

the

SAC

in

its

entirety.

Although I rejected defendants’ arguments that the County failed
to

articulate

either

a

plausible

claim

for

any

injury

proximately caused by defendants’ alleged discrimination or the
“robust” causality required to proceed on a disparate impact
theory, I held that the majority of the injuries the County
claimed—including
costs

associated

the

alleged

with

the

erosion

of

provision

of

its

tax

digest

downstream

and

social

services—were “too remote in time, and too contingent on later
events, to satisfy the “first step” directness requirement of
City of Miami. Accordingly, I concluded that only a “narrow
category” of the County’s alleged damages, namely, “the out-ofpocket

costs

discriminatory

it

claims

to

have

foreclosures,”

had

incurred
“a

in

processing

sufficient

temporal

the
and

practical connection” to the challenged foreclosures to satisfy
City

of

Miami’s

proximate

causation

standard.

I

specifically

identified “additional funding for the Cook County Sheriff to
serve foreclosure notices and for the Circuit Court of Cook
County to process the deluge of foreclosures” as examples of
4

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 5 of 58 PageID #:44881

such costs, though I expressed skepticism that these losses were
worth the cost of pursuing the County’s far-reaching claims.
Mem. Op. and Order of 03/30/2018, ECF 204 at 19-20. I later
clarified, pursuant to a motion by the County, that the County
could

also

notices,

seek

“out-of-pocket

conducting

proceedings,

and

judicial

costs

and

registering

in

serving

administrative
and

inspecting

eviction

foreclosure
foreclosed

properties.” Order of 08/17/18, ECF 228 at 1. These decisions,
read together, identified a closed set of “out-of-pocket” costs
that I concluded the County could attempt to show—using the
statistical

regression

analysis

it

heralded

as

capable

of

isolating the effects of defendants’ conduct from the influence
of numerous other factors—were directly caused by defendants’
alleged discrimination.
Discovery

followed,

punctuated

by

substantial

motion

practice, occasionally before me and frequently before the two
magistrate judges successively assigned to this case. Defendants
then filed a motion for summary judgment, which is now ripe for
decision.
motions,

Also
which

pending

are

I

considered

have

the

parties’
in

respective

conjunction

Daubert

with

their

summary judgment arguments. For the following reasons, I grant
defendants’

summary

judgment

motion

motions as set forth below.

5

and

resolve

the

Daubert

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 6 of 58 PageID #:44882

I.
The overarching theme of the SAC is that defendants’ equity
stripping scheme and discriminatory servicing and foreclosure
practices caused skyrocketing foreclosure rates in Cook County
from

2004

to

approximately

2008,

which

disproportionately

affected FHA-protected minority borrowers and communities with a
high

concentration

of

minorities.

This

avalanche

of

foreclosures, in turn, allegedly caused the County to suffer an
increase

in

foreclosure-related

damages

resulting

from

expenses

defendants’

that

it

claims

discriminatory

as

lending

practices.
Defendants attack this theory on nearly every front. Their
primary arguments are: 1) that the County has no evidence that
any unified “equity stripping scheme” existed, much less one
that

targeted

minority

borrowers,

nor

any

evidence

of

intentional discrimination, i.e., disparate treatment; 2) that
even assuming Countrywide and/or Bank of America2 engaged in the

Throughout this opinion, “Countrywide” refers collectively to
Countrywide Home Loans, Inc., Countrywide Bank, FSB, and/or
Countrywide Warehouse Lending, while “Bank of America” refers to
Bank of America, N.A., and/or BAC Home Loans Servicing, LP.
Although the SAC also names as defendants Bank of America Corp.,
Countrywide Financial Corp., and Merrill Lynch & Co. (to which
defendants refer collectively as the “Holding Companies”), and
Merrill Lynch Mortgage Capital, Inc., and Merrill Lynch Mortgage
Lending Inc. (the “Merrill Defendants”), the County does not
dispute that it offers no evidence that these entities
originated, serviced, or foreclosed on any of the at-issue
loans. And while the County insists that these entities can
2

6

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 7 of 58 PageID #:44883

practices

the

County

identifies

as

elements

of

the

putative

scheme, the evidence is insufficient to allow a reasonable jury
to

conclude

that

those

practices

proximately

caused

minority

borrowers to suffer foreclosure more frequently than similarly
situated white borrowers; and 3) that the County has not proven
any of the losses for which I held it could seek damages because
a) it offers no evidence of any increase in its out-of-pocket
expenses

as

a

result

of

defendants’

allegedly

discriminatory

foreclosures, and b) its resource-shifting theory of loss is
both legally flawed and factually unsupported.
The County responds that the record developed in discovery,
and,

in

particular,

the

opinions

and

statistical

evidence

proffered by its experts Dr. Gary Lacefield and Dr. Charles
Cowan—both of whose opinions defendants seek to exclude under
Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharms., 509 U.S.
579 (1993)—establish that defendants’ equity stripping scheme
caused

minority

borrowers

to

pay

higher

monthly

payments

on

higher loan balances than similarly situated white borrowers,
and that as a result, minority borrowers suffered delinquencies
and foreclosures at higher rates. In the County’s view, the

nevertheless be held liable based on defendants’ corporate
relationships and/or the business dealings among them, its
argument in this connection is wholly conclusory. Accordingly,
summary judgment is appropriate as to these entities, and unless
otherwise noted, my use of the term “defendants” in this opinion
refers to Countrywide and Bank of America as defined above.
7

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 8 of 58 PageID #:44884

record also shows that minority borrowers received fewer loan
modifications and work-outs than white borrowers; were denied
loan

modifications

under

the

Home

Affordable

Modification

Program (“HAMP”) for which they were eligible; and were placed
in foreclosure at higher rates than white borrowers. The County
also relies on Dr. Cowan’s testimony to support its claim for
damages to recover for the “resource shifting” that it claims
was

required

to

process

the

foreclosures

resulting

from

defendants’ discriminatory practices.
II.
Summary judgment obviates the need for a trial when there
“is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
See also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A
“material” fact is one that “might affect the outcome of the
suit under the governing law.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986). A “genuine” dispute exists if there is
sufficient evidence to allow a reasonable factfinder to decide
in favor of the nonmoving party. Id.
“Federal

Rule

of

Civil

Procedure

56

imposes

an

initial

burden of production on the party moving for summary judgment to
inform

the

Modrowski

v.

district
Pigatto,

court

why

712

F.3d

a

trial

1166,

is

1168

not
(7th

necessary.”
Cir.

2013).

Where, as here, the non-movant bears the underlying burden of
8

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 9 of 58 PageID #:44885

persuasion,

the

movant

need

not

“support

its

motion

with

affidavits or other similar materials negating the opponent’s
claim.”

Id.

(quoting

Celotex,

477

U.S.

323

(emphasis

in

original)). That is, the movant can discharge its initial burden
“by ‘showing’—that is, pointing out to the district court—that
there is an absence of evidence to support the nonmoving party’s
case.” Green v. Whiteco Indus., Inc., 17 F.3d 199, 201 (7th Cir.
1994) (quoting Celotex 477 U.S. at 325)). Upon such a showing,
the

nonmovant

must

then

point

to

evidence

“sufficient

to

establish the existence of an element essential to that party’s
case” to withstand summary judgment. Modrowski, 712 F.3d at 1168
(citation omitted).
A. Integrated Equity Stripping Scheme
Defendants’
evidence

to

lead

support

claims

in

Counts

scheme

to

strip

defendants

I

submit,

argument

is

that

the

cornerstone

and

III:

equity

the

from

the

of

existence

minority

plaintiffs

its

point

to

County

lacks

equity
of

an

stripping
integrated

borrowers.
a

any

At

best,

concatenation

of

origination, underwriting, servicing, and foreclosure practices
that Countrywide and/or Bank of America implemented at various
times over the years (indeed, decades) during which they issued
or

purchased

the

challenged

loans.

This

is

not

a

trifling

distinction. To the contrary, at the motion to dismiss stage,
the County successfully withstood defendants’ argument that the
9

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 10 of 58 PageID #:44886

SAC did not plausibly plead proximate causation by insisting
that

the

SAC

alleged

“an

integrated,

discriminatory

equity-

stripping scheme that began with predatory lending and ended in
the foreclosures that directly caused its injuries.” 03/30/2018
Mem. Op., ECF 204 at 8 (citing Pl.’s 09/14/2017 Resp., ECF 184
at 7). See also Cty. of Cook v. HSBC N. Am. Holdings Inc., 314
F.

Supp.

3d

950,

“comprehensive
County’s

claims

961

(N.D.

Ill.

equity-stripping
from

those

2018)

program”

resting

(allegations
distinguished

exclusively

on

of

a

the

lenders’

origination practices, as the latter “left open the possibility
that the foreclosures...could have been caused by a wide array
of factors outside of the lenders’ control.”).3
Indeed,

the

County

criticized

defendants

for

“misdirect[ing] the Court by breaking down and disjoining the

A third court in this district declined to dismiss similar
claims at the pleading stage, holding that the County’s
allegations targeting the defendants’ foreclosure practices—the
subject of Count II of the SAC—were sufficient to plead
proximate causation of its foreclosure-processing injuries. See
Cty. of Cook, Illinois v. Wells Fargo & Co., 314 F. Supp. 3d
975, 984 (N.D. Ill. 2018) (allegations that Wells Fargo
“exercised discretion over whether to grant loan modification
requests to borrowers already behind on their payments and
whether to foreclose on borrowers in default,” and thus
“determined not only the number of homes in Cook County that
would end up in default, but also the number that would end up
in foreclosure” were sufficient to plead proximate causation, as
this conduct necessarily “trigger[ed] certain obligations on the
County’s part, including posting foreclosure and eviction
notices, serving foreclosure summonses, executing evictions, and
processing foreclosure suits.”)
3

10

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 11 of 58 PageID #:44887

various

components

of

the

single

equity

stripping

scheme,

improperly treating each component as a distinct step in the
causal chain of a foreclosure...and ignoring the core scheme
allegation that loan defaults and foreclosures were the intended
result” of the discriminatory scheme. Pl.’s Resp. ECF 184 at 1
(emphasis added). It was the existence of the integrated scheme,
the County insisted, that created a “direct, single-link causal
chain”

between

the

foreclosures

and

the

County’s

alleged

economic injury, i.e., its expenditure of “money in the form of
foreclosure-related

proceedings,”

as

well

as

the

additional

downstream losses the County claimed as damages. Id. at 7. See
also

id.

at

discriminatory

15-16
equity

(“The

County

stripping

sued

scheme,

Defendants
and

for

for

their

their
stand-

alone discriminatory foreclosure practices, both of which are
premised on the vacancy/foreclosure as the ultimate causal event
to the County’s injuries.”).
But nothing in the record the County has since developed
suggests that defendants—who, it bears recalling, competed with
each other in the loan business until Bank of America acquired
Countrywide in 2008 and 2009—engaged in a coordinated scheme to
provoke

defaults

and

foreclosures

by

minority

borrowers

by

locking them into loans they could not afford—a scheme that Dr.
Lacefield admitted would “not make economic sense.” Lacefield
Spolin Resp., ECF 573-15 at 15. No witness testified that such
11

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 12 of 58 PageID #:44888

an

integrated

scheme

existed.

No

document

suggests

that

the

practices the County challenges were interconnected elements of
a

unified

homes.

effort

And

to

neither

strip
of

borrowers

the

of

County’s

the

equity

liability

in

their

experts—even

assuming that their opinions are admissible—opines or offers any
basis to conclude that the loan features or lending practices
they deem discriminatory were part of unified equity stripping
scheme.
Indeed,

the

County

does

not

dispute

that

it

lacks

affirmative evidence of the integrated scheme the SAC alleges.
Nevertheless,

it

seeks

to

withstand

summary

judgment

by

miscasting defendants’ argument as resting on the absence of a
written policy setting forth the equity stripping scheme. See
Pl.’s

Opp.,

ECF

622

at

7-8

(“Contrary

to

Defendants’

misconception, the County’s two equity stripping claims are not
dependent
stripping’

on

proof

but

of

rather

a

written

are

proven

policy
by

permitting

evidence

‘equity

showing

that

Defendants’ practices in how they carried out their facially
neutral
impact

policies
in

resulted

African

in

American

a

disparate

and

and

Hispanic

discriminatory

neighborhoods.’”)

(emphasis in original). But the problem defendants identify is
not

that

the

County

cannot

point

to

a

written

policy.

The

problem is that the County’s theory of liability, and indeed,
the proximate causation analysis set forth in City of Miami,
12

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 13 of 58 PageID #:44889

require the County to prove a unified scheme that the record
simply does not substantiate.
The

County

pointing

in

tries

to

scattershot

make

up

for

this

fashion

to

evidence

shortcoming
that

by

Countrywide

and/or Bank of America engaged in a variety of practices over
roughly a decade that adversely affected borrowers: marketing
loan

products

to

consumers

who

were

not

qualified

for

traditional loans; offering incentives to employees to increase
loan volume among borrowers with lower credit scores; making or
servicing

high-risk

loans;

departing

from

underwriting

standards; and/or failing to follow servicing guidelines. But
even if a jury were persuaded that Countrywide and/or Bank of
America engaged in one or more of these practices at some point
between

2004

and

2012,

nothing

in

the

County’s

submissions

offers a basis for the jury to leap from such a finding to the
conclusion

that

defendants

carried

out

an

integrated

equity

stripping scheme targeting minority borrowers. Having averted
dismissal under City of Miami on the argument that the unified
nature

of

establish

defendants’
a

“direct,

scheme

is

what

single-link

allowed
causal

the

County

chain”

to

between

defendants’ lending, servicing, and foreclosure practices on the
one hand, and the County’s injuries on the other—and indeed,
having

disclaimed

any

theory

of

liability

premised

on

the

“disjoin[ted]” components of the scheme—the County cannot now
13

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 14 of 58 PageID #:44890

stand exclusively on evidence of those components as proof of
the unified scheme.
The

bottom

sufficient

line

evidence

is

to

that

the

establish

County

the

has

causal

not

link

presented
its

equity

stripping claims require between the conduct it challenges and
the injuries it claims. For this reason alone, summary judgment
of Counts I and III is appropriate.
B. Intentional Discrimination
Defendants seek summary judgment of the equity stripping
claim in Count III for the additional reason that the County’s
evidence

does

not

give

rise

to

a

reasonable

inference

of

intentional discrimination. To survive summary judgment on its
disparate treatment claim, the County must come forward with
evidence

of

“intentional

discrimination,

provable

via

either

direct or circumstantial evidence.” Cty. of Cook v. HSBC N. Am.
Holdings

Inc.,

(citations

314

omitted).

interpreted

as

F.

Supp.

“Direct

an

3d

950,

evidence

acknowledgment

966
is

(N.D.
that

of

the

Ill.

which

2018)
can

be

defendant’s

discriminatory intent,” East-Miller v. Lake Cty. Highway Dep’t,
421 F.3d 558, 563 (7th Cir. 2005) (quoting Kormoczy v. Sec'y,
U.S. Dep’t of Hous. & Urb. Dev. on Behalf of Briggs, 53 F.3d
821, 824 (7th Cir. 1995), which is to say, “a ‘smoking gun’ of
discriminatory

intent,”

Cavalieri-Conway

v.

L.

Butterman

&

Assocs., 992 F. Supp. 995, 1003 (N.D. Ill. 1998). The County
14

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 15 of 58 PageID #:44891

tacitly concedes that it lacks such “smoking gun” evidence as
discriminatory statements by a policymaker or explicitly racebased policies, see Pl.’s Opp., ECF 622 at 8 (observing that
plaintiffs “rarely have actual evidence of discrimination, such
as a written policy or an admission of impermissible animus”),
and it makes no effort to controvert defendants’ evidence that
their lending, servicing, and foreclosure policies were based on
race-neutral,
Lacefield

credit-related

agreed

with

the

criteria.
assessment

To
of

the

contrary,

defendants’

Dr.

expert,

Sharon Stedman, that “both Countrywide and Bank of America had
fair

lending

compliance

programs

that

were

consistent

with

industry and government standards.” Stedman Rpt., ECF 573-51 at
¶ 49; Lacefield Stedman Resp., ECF 573-2 at p. 25. See also
Stedman

Rpt.

oversight);

at

¶¶ 52-59

¶¶ 60-65

(describing

(describing

policies

policies

reflecting

reflecting

risk

identification, management and monitoring); ¶¶ 66-69 (describing
policies reflecting training); ¶¶ 72-78 (describing defendants’
controls to prevent steering); ¶¶ 80-83 (describing controls to
address discretionary pricing). Indeed, Dr. Lacefield frankly
admitted that “[d]efendants had all of the right manuals in
place,

guidance

prepared,

and

training

for

staff.”

Lacefield

Stedman Resp., ECF 573-52 at p. 29.4

Dr. Lacefield opines that the “resulting data, foreclosure
rates, and sworn statements from the people in charge” indicate
4

15

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 16 of 58 PageID #:44892

To withstand summary judgment of its disparate treatment
claim, the County points to snippets of evidence drawn from
various sources and argues that these materials, taken together
with statistical disparities its experts observe in foreclosure
rates, raise an inference of intentional discrimination. This
argument is flawed on numerous fronts.
1. Data mining
The County first points to defendants’ alleged use of “data
mining” and other “highly sophisticated techniques” to identify
and target minority populations for the purpose of marketing
home loans. Pl.’s Opp., ECF 622 at 8-11. Setting aside that much
of the evidence the County cites in this connection does not
relate to the marketing of home loans, see, e.g., 2014 Bank of
America presentation, “Compliance Office Forum Fair Lending Hot
Topics,” ECF 618-7 at 3 (“Race Estimation – a game changer for
fair lending risk in non-mortgage credit”), and that none of the
cited materials indicates that minority borrowers were targeted
for

specific

e.g.,

(e.g.,

Countrywide

risky

or

high-cost)

presentation,

loan

“African

products,

American

see,

Retail

Campaign,” ECF 617-7 at BANACC0000169489 (identifying campaign

that these policies and controls were not followed, but his
opinions in this connection are flawed for the reasons I address
elsewhere.
16

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 17 of 58 PageID #:44893

objectives),5 if there is any authority for the proposition that
soliciting

business

from

minority

prospects,

or

marketing

in

neighborhoods with a high concentration of minority residents,
amounts to intentional discrimination in violation of the FHA,
the County has not cited it. Indeed, it is not difficult to
imagine an FHA action premised on a lender’s failure to do these
things

while

soliciting

business

from

white

borrowers

and

marketing in predominantly white neighborhoods.6
2. Statistical disparities in issuance of high-risk loans
Next,

the

County

argues

that

statistical

evidence

that

minority borrowers “were placed in specific types of high-risk
subprime/nonprime loan products at a higher rate than similarly
situated white borrowers,” despite evidence that defendants knew
“such

loans

placed

those

borrowers

at

a

higher

risk

of

Although I cite only these examples, I have reviewed the
remaining materials the County cites in its Corrected Local Rule
56.1 (B)(3) Statement of Additional Material Facts ¶¶ 5-9 and
conclude that they likewise fail to raise a reasonable inference
of race-based targeting for specific loan products.
6 As Dr. Cowan notes in his Response Report, ECF 593-3, the OCC’s
Comptroller’s Handbook on Fair Lending defines “redlining” as “a
form of illegal disparate treatment in which a bank provides
unequal access to credit, or unequal terms of credit, because of
the
race,
color,
national
origin,
or
other
prohibited
characteristic(s) of the residents of the area in which the
credit seeker resides or will reside or in which the residential
property to be mortgaged is located,” and includes as an
example: “A bank omits or excludes such an area from efforts to
market residential loans or solicit customers for residential
credit.”
See
https://www.occ.treas.gov/publications-andresources/publications/comptrollers-handbook/files/fairlending/pub-ch-fair-lending.pdf
(last
accessed
January
20,
2022).
5

17

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 18 of 58 PageID #:44894

delinquency, default, and foreclosure,” raises an inference of
intentional

discrimination.

Pl.’s

Opp.,

ECF

622

at

11.

A

threshold problem with this argument is that it relies heavily
on the flawed analyses of Drs. Lacefield and Cowan, which I
address

at

purposes,

greater

analysis

it

length

suffices

wholly

to

in

a

later

observe

misunderstands

section.

that:

what

1)

it

For

Dr.

present

Lacefield’s

means

to

compare

“similarly situated” borrowers; and 2) the County admits that
Dr.

Cowan

intentional

does

not

opine

discrimination

that
or

any

that

defendant

his

engaged

statistical

in

analyses

support a claim of intentional discrimination. See Pl.’s Resp.
to Def.’s L.R. 56.1 Stmt., ECF 623 at ¶ 44.
At

all

events,

statistical

disparities

of

the

kind

the

County points to are rarely sufficient to raise an inference of
intentional discrimination. Alston v. City of Madison, 853 F.3d
901, 907 (7th Cir. 2017) (“disparate impact alone is almost
always insufficient to prove discriminatory purpose.”) (citing
Washington v. Davis, 426 U.S. 229, 239 (1976). Even assuming
that

minority

borrowers

disproportionately

received

loan

products with features the County characterizes as risky, and
assuming further that defendants knew recipients of such loans
were

more

recipients
purpose

likely
of

means

to

enter

traditional
more

than

default

loan

simple
18

and

products,
knowledge

foreclosure

than

“[d]iscriminatory
that

a

particular

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 19 of 58 PageID #:44895

outcome

is

the

likely

consequence

of

an

action;

rather,

discriminatory purpose requires a defendant to have selected a
particular course of action at least in part because of ... its
adverse

effects

upon

an

identifiable

group.”

Id.

(internal

quotation marks and citations omitted) (emphasis added). This is
not

an

inference

that

reasonably

emerges

from

the

County’s

statistical evidence. Even taken at face value, this evidence
comes

nowhere

near

were

“negatively

establishing
affected”

by

that
the

“almost

all

practices

minorities”
the

County

challenges, while “almost no whites” were negatively affected.
Id. at 908. See also Chicago Tchrs. Union v. Bd. of Educ. of the
City of Chicago, 14 F.4th 650, 657-58 (7th Cir. 2021) (evidence
that

school

layoffs

disproportionately

impacted

African

Americans and that Chicago’s Board of Education knew the layoffs
would have a disparate impact on that group did not raise a
triable

issue

of

intentional

discrimination).

Moreover,

the

County “never explains how such knowledge, even if proven, would
demonstrate that [defendants] intended to discriminate,” id. at
658,

given

the

uncontroverted

evidence

that

their

lending,

servicing, and foreclosure policies and practices were based on
race-neutral criteria.
3. Financial incentives
The County’s next argument—that intentional discrimination
can

be

inferred

from

evidence
19

of

financial

incentives

that

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 20 of 58 PageID #:44896

defendants provided loan originators to increase the volume of
high-risk loans to minorities, see Pl.’s Opp. ECF 622 at 17-20—
is

wholly

lacking

in

evidentiary

support.

Uncontroverted

evidence reveals that loan originators’ compensation was based
on the terms of the loans, as Dr. Lacefield himself explains,
see

Lacefield

Rpt.

at

¶ 23

(financial

incentives

“increased

based upon the risk level of the mortgage product-the higher the
risk, the greater the incentive”), and did not factor in the
borrowers’

race

or

ethnicity.

materials

the

County

Indeed,

cites

the

address

majority

policies

of

the

reflecting

differences in broker compensation as between nonprime versus
prime loan origination and make no mention of race. See, e.g.,
Pl.’s Resp. to Def.’s L.R. 56.1 Stmt. ECF 623 at ¶ 70 (citing,
inter

alia,

(reflecting

ECF

617-13
maximum

higher

BANACC0000224250
broker

at

compensation

-224250-51
rates

for

nonprime loans than for prime loans) and ECF 620-5, Miller Tr.
191:22-192:7

(confirming

that

brokers

could

earn

1%

higher

compensation for nonprime loans versus prime loans)). The County
purports

to

show

that

within

certain

categories

of

loans,

brokers actually received higher compensation rates for loans
made to minorities than for loans made to non-minorities. Id.
(citing, inter alia, ECF 618-11 and 618-13). But this ex post
comparison

does

not

evince

intentional

discrimination

for

substantially the reasons discussed above: disparate outcomes do
20

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 21 of 58 PageID #:44897

not,

per

County’s

se,

show

remaining

intentional
evidence

discrimination.

add

anything

to

Nor

does

support

such

the
an

inference.
For example, the County points to an email from Countrywide
executive David Doyle, which includes text stating that “paying
higher

[broker

compensation]

on

PayOption

arms”

posed

a

“significant risk, especially on refinances.” Pl.’s Opp. ECF 622
at 19 (quoting Doyle email of 05/31/2005, ECF 617-18). Although
the

County

accurately

quotes

from

Doyle’s

email,

a

fuller

reading of his message belies the inference the County suggests.
The selected text appears in response to an email from another
Countrywide employee, who writes: “I read the part about paying
higher on PayOption Arms. I know the reason you would want to do
that. We will want to make sure that it does not cause other
issues such as stearing (sic) of borrowers.” Smith email of
05/25/2005, ECF 617-18. Doyle responds: “I agree with you that
this is a significant risk, especially on refinances. We will be
as thorough as we can be in our mitigation of this risk.” Doyle
email of 05/31/2005, ECF 617-18 (emphasis added). Read as a
whole, this exchange does not evoke intentional discrimination
against minority borrowers. To the contrary, it suggests that
Countrywide’s

management

was

mindful

of

the

potential

for

brokers to steer borrowers of any race toward products that

21

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 22 of 58 PageID #:44898

yielded

higher

commissions,

and

that

it

took

measures

to

mitigate that risk.
4. Departure from underwriting standards
The
traction

County’s
from

disparate

evidence

treatment

that

claim

defendants

also

gains

“loosened”

no

their

underwriting guidelines and increased the use of exceptions to
obtain approval for high-risk loans that did not meet standard
guidelines. See Pl.’s Opp. ECF 622 at 20-23. Even assuming a
jury were to credit the County’s evidence and infer from it that
defendants had a practice of extending credit to borrowers who
did not have the ability to repay their mortgage loans, nothing
in that evidence suggests that the practice targeted minorities
in particular.
5. Failure to comply with HAMP guidelines and HUD requirements
The County next submits that intentional discrimination can
be gleaned from evidence that defendants failed to comply with
HAMP guidelines and servicing requirements mandated by HUD. See
Pl.’s Opp. ECF 622 at 23-24. This argument is equally meritless.
If there is any evidence supporting the County’s claim that
“race and ethnicity were factors considered by both Bank of
America and Countrywide in determining borrowers’ eligibility
for

loan

modifications

modification

requests

or

and

whether

place

the

to

grant

loan

in

or
the

deny

loan

foreclosure

process,” the County has not cited it. Instead, the County once
22

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 23 of 58 PageID #:44899

again relies heavily on statistics drawn from Dr. Lacefield’s
analysis of loan outcomes and concludes that minority borrowers
were

treated

Lacefield’s

differently

analysis

in

from

this

white

borrowers.

connection

(as

Dr.

others)

is

in

But

replete with assumptions he does not test, for which he offers
no evidence, and that in some instances are belied by his own
data.

I

address

these

flaws

in

further

detail

in

a

later

section, but offer an example here to illustrate why his opinion
offers no basis for inferring intentional discrimination.
Explaining

his

use

of

the

“delimiter”

SD-3

to

evaluate

whether defendants’ servicing practices were discriminatory, Dr.
Lacefield states, “studies have indicated that the ‘failure to
submit

completed

modifications

applications’

were

declined.

was

If

the

most

‘failure

to

prevalent
submit

reason

completed

applications’ were higher for minority populations[,] then those
modification

applications

may

be

predatory/discriminatory

because that could mean that minority applicants were not worked
with

as

vigorously

applications.”

to

Lacefield

resolve
Rpt.

those

ECF

issues

560-1

at

as

were

¶ 138

white

(emphasis

added). But this observation does not raise an inference of
discrimination
substantiate

because

his

Dr.

speculation

Lacefield
that

offers

defendants

no

facts

might

not

to
have

worked with minority borrowers as vigorously as they did white
borrowers. See Gopalratnam v. Hewlett-Packard Co., 877 F.3d 771,
23

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 24 of 58 PageID #:44900

788 (7th Cir. 2017) (expert opinion that “several manufacturing
processes ‘can cause’ an internal short circuit,” was “simply
too speculative” to support his opinion that ‘such must have
occurred here’”) (original emphasis)). Perhaps the reason Dr.
Lacefield does not elaborate on this point is that the data do
not

support

his

premise.

To

the

contrary,

certain

of

Dr.

Lacefield’s data undercut the inference that applications filed
by

minority

completed

borrowers

were

applications”

at

denied

higher

for

rates

“failure
than

to

submit

applications

by

white borrowers. See Appendix 5 to Lacefield Rpt., Tbl. SD-3,
ECF 560-8 at PageID #10997 (reflecting that in census tracts
with

between

51-70%

minority

concentration,

20.6%

of

applications by white borrowers were rejected for failure to
submit completed applications, while only 14.1% of applications
by

African

American

borrowers

and

20.5%

of

applications

by

Hispanic borrowers were rejected for this reason). Dr. Lacefield
ignores these data and cherry-pick others to opine that his
application of delimiter SD-3 yields statistically significant
race-based disparities in modification outcomes. ECF 560-1 at
¶ 150.

See

undisputed

also
data

Def.’s
from

Tbl.

L.R.
SD-1,

56.1
ECF

Stmt.

at

¶ 42

(citing

560-8

at

PageID

#10994

revealing statistically lower rates of modification approval for
white borrowers than for minority borrowers, and from Tbl. SD-6,
ECF 577-1 at PageID #16471, showing that the proportion of loans
24

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 25 of 58 PageID #:44901

identified as seriously delinquent and foreclosed was higher for
white borrowers than for minority borrowers).7
Having examined both Dr. Lacefield’s data and the County’s
remaining evidence concerning defendants’ servicing practices, I
conclude

that

they

do

not

controvert

defendants’

factual

statements that “[n]either race nor ethnicity was a factor used
by

[Bank

of

America/Countrywide]

in

evaluating

borrowers

for

loan modifications.” Def.’s L.R. 56.1 Stmt., ECF 577 at ¶¶ 17-18
(citing Buchanan Tr., ECF 573-39 at 184:14-21 (“[R]ace was not a
factor in evaluating a borrower for modification. It had nothing
to do with it. . . . Not [the borrower’s] location, nothing.”);
Haumesser Tr., ECF 573-16 at 76:14-77:5 (race was “not part of
the decision process” for loan modifications) and 99:8-21 (Bank
of

America’s

borrower’s

loan

race

or

modification
ethnicity);

systems
Guidici

did

Tr.

not

573-40

list

the

33:21-34:5

(“we didn’t have access to any of the information that . . .
would allow us to know whether [the borrower] was a minority
account or not.”).
In

addition

to

the

evidentiary

shortcomings

discussed

above, the County’s argument in connection with its disparate
These data illustrate one of several flaws in Dr. Lacefield’s
analysis that I do not address in my Daubert discussion below,
which is that he cherry-picks data that support his conclusions
while ignoring those that do not. See Courchane Rpt. ECF 560-11
at Table A2.3 Dr. Lacefield’s Servicing Delimiters (“Dr.
Lacefield looks at particular segments of census tract minority
percentages, ignoring all the ones with no differences”).
7

25

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 26 of 58 PageID #:44902

treatment claim is bereft of any meaningful legal analysis. The
County’s only case citations appear in a section captioned, “A
Reasonable

Jury

Could

Find

Discriminatory

Intent

from

the

Statistical Disparities in Defendants’ Foreclosure Rates,” where
it cites E.E.O.C. v. O & G Spring and Wire Forms Specialty Co.,
38 F.3d 872, 876 (7th Cir. 1994), and Chicago Tchrs. Union, Loc.
1, Am. Fed’n of Tchrs., AFL-CIO v. Bd. of Educ. of City of
Chicago, No. 12 C 10311, 2021 WL 1020991, at *17 (N.D. Ill. Mar.
17, 2021), for the proposition that statistical imbalances so
stark as to be “unexplainable on grounds other than race” raise
an inference of intentional discrimination. But neither of these
cases supports the County’s conclusory argument. The County does
not discuss, quantify, or even cite to any of the statistical
disparities its experts identify to illustrate their supposed
“starkness,” nor does that inference emerges naturally from the
data as a whole. Indeed, the County admits that “[c]ertain of
Dr. Lacefield’s servicing delimiters are present at higher rates
for loans to White borrowers than loans to African American or
Hispanic/Latino borrowers,” as reflected, for example, in Table
SD-1, which shows that in the aggregate, a lower percentage of
white

borrowers

received

loan

modifications

than

minority

borrowers. See ECF 560-8 at PageID #10994. In view of data such
as these, the County’s unadorned statement that “the evidence of
statistically

significant

disparities
26

is

stark

enough

for

a

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 27 of 58 PageID #:44903

reasonable

jury

to

find

Defendants’

discriminatory

intent,”

simply does not warrant the inference it seeks.
For at least the foregoing reasons, summary judgment of
Count III of the SAC is appropriate.
C. Disparate Impact
The

County’s

defendants’
caused

facially

statistical

borrowers

in

disparate
neutral

impact
lending

disparities

violation

of

the

claims
policies

between
FHA.

assert
and

minority

Count

I

that

practices
and

is

white

based

on

defendants’ putative integrated equity stripping scheme,8 while
Count

II

is

based

exclusively

on

defendants’

servicing

and

foreclosure policies. To withstand summary judgment on either
claim,

the

County

must

offer

evidence

to

show

that

the

challenged practices have a “‘disproportionately adverse effect
on minorities’ and are otherwise unjustified by a legitimate
rationale.”

Texas Dep’t of Hous. & Cmty. Affs. v. Inclusive

Communities Project, Inc., 576 U.S. 519, 524 (2015) (quoting
Ricci v. DeStefano, 557 U.S. 557, 577 (2009)). Additionally, the
County

must

show

a

“robust”

causal

connection

between

defendants’ practices and the disparate impact. Id. at 542. “A
plaintiff

who

fails

to...produce

statistical

evidence

As explained above in Section II. A., this claim fails at the
threshold
for
the
County’s
failure
to
present
evidence
sufficient to enable a jury to conclude that such a scheme
existed. In this section, I address additional flaws in the
County’s disparate impact claims.
8

27

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 28 of 58 PageID #:44904

demonstrating a causal connection cannot make out a prima facie
case of disparate impact.” Id. at 543.
The County seeks to prove its disparate impact claims using
the

statistical

analyses

of

Drs.

Lacefield

and

Cowan,

which

defendants ask me to exclude pursuant to Fed. R. Evid. 702 and
Daubert

v.

Merrell

Dow

Pharms.,

509

U.S.

579

(1993).

Accordingly, I begin with the admissibility of these experts’
opinions.
In Daubert, the Supreme Court held that the Federal Rules
of Evidence “assign to the trial judge the task of ensuring that
an expert’s testimony both rests on a reliable foundation and is
relevant to the task at hand.” Id. at 597. Elaborating on the
Daubert framework in Kumho Tire Co. v. Carmichael, 526 U.S. 137
(1999),

the

Court

requirements”

of

explained

relevance

that

and

to

satisfy

reliability,

the

the

“twin

expert

must

“‘employ[ ] in the courtroom the same level of intellectual
rigor

that

characterizes

the

practice

of

an

expert

in

the

relevant field.’” Adams v. Ameritech Servs., Inc., 231 F.3d 414,
423 (7th Cir. 2000) (quoting Kumho Tire, 526 U.S. at 152). To
discharge

its

gatekeeping

function,

a

district

court

“must

examine (among other things) the expert’s qualifications, the
methodologies she used, and the relevance of the final results
to the questions before the jury.” Id. The proponent of the
expert testimony bears the burden of showing, by a preponderance
28

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 29 of 58 PageID #:44905

of the evidence, that the Daubert standard is met. Lewis v.
CITGO Petroleum Corp., 561 F.3d 698, 705 (7th Cir. 2009).
1. Dr. Lacefield
The County proffers Dr. Lacefield as “a highly qualified
fair

housing

experience,

and

fair

including

as

lending
Senior

expert”
Civil

with

Rights

“extensive
Analyst

and

Supervisor of Lending Investigations at the U.S. Department of
Housing

and

training

Urban

federal

Development
regulators

(“HUD”),

and

law

in

investigating,

enforcement

on

and

how

to

investigate, Fair Housing Act violations by mortgage lenders[.]”
Pl.’s Resp., ECF 587 at 1.
Without

objection

or

contradiction

from

the

County,

defendants summarize the methodology Dr. Lacefield employed in
this case as involving:
(i) looking at the loan data for a series of lending
and
servicing
characteristics,
which
he
calls
“delimiters,” that he identifies as hallmarks of
“predatory” loans or servicing outcomes, then (ii)
comparing the relative presence of those “delimiters”
in the census-tract population of all White borrowers,
on the one hand, to all African American and Hispanic
borrowers, on the other hand, and (iii) designating
every minority loan with a “delimiter” in that
neighborhood as an instance of lending or servicing
discrimination.
Def.’s Mot., ECF 559 at 2. Defendants assail the reliability of
this methodology on multiple grounds. Their lead argument is
that

Dr.

Lacefield’s

use

of

“delimiters”

to

conduct

a

fair

lending analysis is unprecedented, unpublished, and unrecognized
29

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 30 of 58 PageID #:44906

by

any

other

defendants

expert

add,

in

is

the

that

field.

Dr.

Compounding

Lacefield

these

purports

to

flaws,
detect

discriminatory patterns using a bivariate statistical model that
analyzes the presence of his “delimiters” without controlling
for other factors, furthering diminishing the reliability of his
conclusions. In addition, defendants argue that Dr. Lacefield
misunderstands

what

it

means

to

compare

“similarly

situated”

borrowers, rendering the conclusions he draws from statistical
disparities both unreliable and legally irrelevant.
“When evaluating the reliability of expert testimony, the
district court must make a preliminary assessment of whether the
reasoning

or

methodology

underlying

the

testimony

is

scientifically valid.” Kirk v. Clark Equip. Co., 991 F.3d 865,
873 (7th Cir. 2021). Daubert set forth “a non-exhaustive list of
guideposts to consult in assessing the reliability of expert
testimony: (1) whether the scientific theory can be or has been
tested; (2) whether the theory has been subjected to peer review
and publication; and (3) whether the theory has been generally
accepted in the relevant scientific, technical, or professional
community. Am. Honda Motor Co. v. Allen, 600 F.3d 813, 817 (7th
Cir. 2010) (citing Daubert, 509 U.S. at 593–94). Dr. Lacefield’s
methodology

fails

to

satisfy

any

of

serious doubts about its reliability.

30

these

criteria,

raising

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 31 of 58 PageID #:44907

In

his

“delimiters”

expert
as

report,

“red

Dr.

flags”

that

Lacefield
were

describes

“developed

from

his
the

lending audit criteria used by the U.S. Department of Housing
and

Urban

Development

(HUD)

to

review

the

underwriting

standards” of all lenders, and that were “designed to identify
HUD’s highest risk scale consisting of four risk levels of loan
audits.” ECF 560-1. at ¶¶ 82-83. Dr. Lacefield testified that he
formulated the delimiters based on “a written list of red flags”
found in an investigative manual HUD used at the time he worked
there (from 1991-1999, see Lacefield curriculum vitae, ECF 560-2
at

11),

lending

which

he

said

investigation

determine

whatever

–

“any

would

investigator
have

whatever

to
the

conducting

look

at

issue

in

was

a

order
they

fair
to
were

examining.” Lacefield Tr., ECF 560-19 at 204:20-205:4. But if
this “written list” or the decades-old HUD manual Dr. Lacefield
describes is anywhere in the record or otherwise to be found,
the County has not pointed me to it.9 In the end, the County
identifies

no

written

materials

that

explain

or

apply

Dr.

Lacefield’s delimiter-based analysis. That the delimiters were
derived from “red flags” described in a manual Dr. Lacefield
consulted in the 1990s does not establish that the specific

Defendants state that the County has produced no such document,
nor have defendants identified any HUD manual describing Dr.
Lacefield’s bivariate delimiter methodology. Lacefield Daubert
Mot., ECF 603 at 4-5.
9

31

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 32 of 58 PageID #:44908

methodology he used is generally accepted in the field of fair
lending examination.
And indeed, Dr. Lacefield acknowledged that he is unaware
of any regulators, industry participants, or academics who have
employed his methodology to conduct a fair lending analysis such
as

his

any

time

in

the

past

thirty

years.

Nor

could

Dr.

Lacefield identify a single peer-reviewed academic paper that
supports,

recommends,

or

discusses

his

methodology.

See

generally Lacefield Tr., ECF 560-19. at 130-136; 202-204. None
of the other experts in this case—including the County’s other
liability expert, Dr. Cowan—was familiar with Dr. Lacefield’s
delimiter-based methodology. See, e.g., Courchane Rpt. ECF 56011 at ¶ 28 (Dr. Lacefield’s “approach is unlike any other that I
have

seen

used

government

to

agency,

assess
a

fair

lending

peer-reviewed

issues,

academic

either

paper,

by
or

a
an

industry participant.”); Stedman Rpt., ECF 560-12 at ¶¶ 17, 33,
38 (same); Cowan Tr., ECF 560-20 at 227:20-228:21 (testifying
that

he

was

not

familiar

with

the

term

“delimiter”

in

the

context of fair lending analysis, and that to his knowledge, no
federal regulator, academic, or court had ever used “delimiters”
in

that

context).

record—other

than

In

short,

Dr.

there

is

Lacefield’s

no
own

indication

in

say-so—that

the
Dr.

Lacefield’s delimiter-based methodology has been used by anyone
other than Dr. Lacefield himself. That is not a hallmark of
32

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 33 of 58 PageID #:44909

reliability.

See

Allen,

600

F.3d

at

818

(7th

Cir.

2010)

(expressing “definite reservations” about the reliability of a
methodology that the plaintiff’s expert developed and was the
only one to use); Chapman v. Maytag Corp., 297 F.3d 682, 688
(7th Cir. 2002) (excluding expert opinions based on a theory
that was “novel and unsupported by any article, text, study,
scientific literature or scientific data produced by others in
[the expert’s] field.”).
My own review of the expert materials in this case confirms
not

only

unheard-of

that
by

Dr.

Lacefield’s

others

in

his

methodology
field,

but

is

untested

also

that

it

and
is

substantively unsound. Among its most salient flaws is his use
of

a

simplistic,

bivariate

model

to

test

for

discriminatory

impact. Dr. Lacefield explained that he “took the entire data
set” of loans and “subjected them to” his various delimiters.
Id. at 166:1-2. He then “evaluated whether the prevalence of
these

delimiters

using

statistical

significant

was

different

tests,”

difference,

and

for
if

he

White
there

and
was

“considered

minority
a

loans

statistically

loans

to

be

discriminatory on the basis of [the] delimiters if the loan for
a minority group was flagged with the delimiter more often than
the White group[.]” Lacefield Rpt., ECF 560-1 at ¶ 114.10 But

Dr. Lacefield explains that because a significant portion of
the loans in the data set did not contain information on the
10

33

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 34 of 58 PageID #:44910

this analysis makes no attempt to control for numerous other
variables,

such

as

differences

in

borrowers’

debt-to-income

ratios (DTI), loan to value ratios (LTV), or credit score, which
even Dr. Lacefield recognized could account for the statistical
disparities he observed in the data. For example, Dr. Lacefield
admitted

that

differences

in

origination

outcomes

might

be

explained by differences in creditworthiness. Lacefield Tr., ECF
560-19 at 144:23-149:11 (identifying DTI, LTV, positive credit
history and other potential nondiscriminatory explanations for
disparities with respect to delimiter 1). See also Lacefield
Courchane Resp., ECF 560-15 at 14 (“I agree with Dr. Courchane’s
statement that many factors such as the cost of funds and sale
of mortgage loans to the secondary market, credit risk, down
payment levels, prepayment risk, and servicing costs can all
borrower’s race, he used census tract data to “estimate”
borrower race. That is, if the subject property was located in a
census tract with greater than 50% minority concentration, Dr.
Lacefield assumed that the loan was a minority loan for purposes
of evaluating disparities in the presence of these delimiters.
Lacefield Rpt. 560-1 at ¶ 117. As Dr. Lacefield acknowledged,
this methodology meant that white borrowers could have “ended up
on the list” of loans Dr. Lacefield created that “represented
situation where [defendants] had discriminated against the
borrowers.” Lacefield Tr. ECF 560-19 at 185:9-14. But Dr.
Courchane opines without contradiction from Dr. Lacefield that
“neighborhood demographics are not a valid or accepted way to
proxy of the race of actual borrowers.” Courchane Rpt., ECF 56011 at ¶ 85. Indeed, as Dr. Cowan’s analysis reflects, in a
“neighborhood category of majority minority (51%-70%), the
largest proportion of borrowers are White (41%), while only 24%
are either African-American or Hispanic,” illustrating why
inferring race based on census tract information is an
unreliable methodology. Id.
34

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 35 of 58 PageID #:44911

impact mortgage loan prices.”).11

For that reason, all federal

financial agencies rely on multivariate regression analysis to
examine fair lending compliance. Courchane Rpt. ECF 560-11 at
¶ 60.12
Dr. Lacefield’s simplistic delimiter analysis also fails to
account

for

either

the

macroeconomic

or

the

individualized

reasons that he concedes influence the likelihood of borrower
default. See Courchane Rpt. ECF 560-11 at ¶¶ 17-18 (identifying
several “macroeconomic events during the period of study [that]
caused many borrowers to default on their loans” and observing
that

“it

is

well-recognized

that

the

reasons

individual

borrowers default and are unable to pay their mortgages is very
often the result of post-closing life events as they occur in

Dr. Lacefield goes on to state, “[h]owever my analysis focuses
on the primary factors that cause borrowers to default on their
mortgages.” Lacefield Courchane Resp., ECF 560-15 at 14. But
this statement merely assumes Dr. Lacefield’s conclusion that
the factors captured by his “delimiters” are the primary cause
of borrower default.
12
Dr. Lacefield does not meaningfully opine otherwise. The
County seizes on Dr. Lacefield’s testimony that “the interagency
guideline on fair housing, which covers OCC, OTS, the FFIEC,
FDIC, credit unions, it says you can use the multi-regression
analysis or other statistical methodologies.”) Pl.’s Resp. ECF
587 at 6, n.4 (quoting Lacefield Tr. ECF 560-19 at 133:22-134:6)
(plaintiff’s emphasis). But Dr. Lacefield’s reference to
provisions of the Federal Financial Institutions Examination
Council’s
(FFIEC)
Interagency
Fair
Lending
Examination
Procedures contemplating the use, “under an agency’s policy,” of
“other statistical methodologies” that employ “the agency’s
specialized procedures,” ECF 588-2 at PageID #16858, does not
establish general acceptance of Dr. Lacefield’s bivariate
delimiter methodology to evaluate fair lending compliance.
11

35

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 36 of 58 PageID #:44912

the larger context of the economy”); Lacefield Courchane Resp.,
ECF 560-15 at 2 (agreeing that the macroeconomic factors Dr.
Courchane cites “had an impact on the high default rate and
foreclosures”). Dr. Lacefield claims that he “can tie most of
those

issues

back

to

the

appraisal,

origination,

and

underwriting.” Id. But even setting aside that I have already
foreclosed

recovery

defendants’

alleged

for

the

County

discrimination

was

on

the

the

prime

theory
mover

that
that

triggered the adverse macroeconomic events Dr. Courchane cites,
Dr. Lacefield’s stream-of-consciousness narrative in response to
Dr. Courchane’s opinions in this connection do not meaningfully
rebut them.13

The text following Dr. Lacefield’s assertion that he can tie
most
macroeconomic
issues
back
to
defendants’
conduct
illustrates the tenor of his response to Dr. Courchane’s
opinions. It reads as follows:
13

For example: 1. Borrowers lost home equity as
nationwide house prices fell [prices fell for a few
key reasons: over-valued collateral and the borrower
placed into homes they never really had the ability to
repay-or
maintain
led
to
multiple
foreclosuresreducing the value of the home-not the debt owed] and
they found it difficult to sell or refinance homes
[couldn’t sell because of the foreclosures in the
neighborhood, turning some properties into rentalsfurther depressing the market. People had to refinance
because of the tens of thousands of adjustable rate
mortgages Defendants ‘qualified’ borrowers for. Let’s
say after three years you had to refinance, get new
mortgage (home would value less than owed), or get a
new mortgage if they wanted if they wanted (sic) to
stay in the home][the problem with refinancing is the
requirement to have 20% equity or money down. Most
36

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 37 of 58 PageID #:44913

Nor

is

Dr.

Lacefield’s

bivariate

delimiter

methodology

capable of accounting for the individualized reasons that some
of the borrowers whose loans he identifies as discriminatory
actually

defaulted

on

those

loans.

Of

the

87,311

loans

Dr.

Lacefield identifies as discriminatory, see Cox Decl., ECF 560
at ¶ 9, 33,465 contain borrower-reported information about the
reasons for default. Almost half of these (48.8%) attribute the
default to “reduction of income,” while another 11.7% reported
“unemployment” as the reason for default. Courchane Rpt., ECF
560-11, Table 8. Dr. Lacefield’s simplistic methodology does not
account for these factors or seek to show that the borrowers who
attributed their default to these concrete issues (or others

folks I know wouldn’t be able to come up with 1% of
the property value much less 20%. See statement above
for reasons market depressed.]. when they had loan
balances in excess of the market value of the home.
(sic)
The
house
price
declines
caused
many
foreclosures,[most of these foreclosures were from two
categories of borrowers: , (sic) first group of
borrowers were having to refinance out of an ARM
product and the second group of borrowers were placed
in loans they never had the ability to repay and
maintain] the (sic) as well as causing some borrowers
to turn to short sales (selling homes for less than
the outstanding loan balances) [because the homes were
overvalued to start with and other foreclosures in the
neighborhood]or strategic defaults (choosing not to
pay as they owed more than the home was worth). In
addition, rising unemployment rates across the country
led to high levels of job loss or to moves that were
required for job mobility.[Job loss created, in part,
because
a
large
number
of
these
families
had
employment tied in some fashion with the housing and
real estate environment].
37

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 38 of 58 PageID #:44914

noted, such as illness and marital difficulties) would have been
any less likely to enter foreclosure if their loans or loan
histories had had none of the features corresponding to Dr.
Lacefield’s delimiters.
Dr.

Lacefield’s

only

response

to

the

evidence

of

these

individualized factors is his unsupported assumption that “over
time, all of these life experiences will happen to all families
regardless

of

their

race

and

ethnicity,

equally.”

Lacefield

Courchane Resp. ECF 560-19 at 2. But that assumption is “true
only if no other factor relevant to [those life experiences] is
correlated with [race],” Sheehan v. Daily Racing Form, Inc., 104
F.3d 940, 942 (7th Cir. 1997), and both of the County’s experts
testified that such correlations do exist. Lacefield Tr., ECF
560-19 at 249:14-21 (acknowledging that “the impact of loss of
employment is not going to fall equally on African-Americans and
Hispanics,” because “across the board, and throughout history,”
these

populations

frequently

than

suffer

whites);

post-closing

Cowan

Tr.,

ECF

unemployment
564-3

at

more

256:8-22

(acknowledging that some borrower “distress events” may affect
minorities

more

frequently

than

non-minorities).

See

also

Courchane Rpt., ECF 560-11 at ¶ 111 (loan data “shows that when
one

examines

racial/ethnic

the
groups,

same

loan

minority

product

borrowers

across
defaulted

different
at

higher

rates than non-Hispanic white borrowers who selected the same
38

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 39 of 58 PageID #:44915

loan product. This means it was likely some factor other than
lender

conduct

that

caused

minority

borrowers

to

default

at

higher rates. Possible alternative factors include higher rates
of unemployment, higher rates of income reduction, lower levels
of liquid assets, and a host of other individualized factors.”)
(emphasis in original).
Finally, it is clear that Dr. Lacefield’s methodology does
not compare “similarly situated” borrowers as courts construe
that phrase when applying federal antidiscrimination laws. “To
raise an inference of discrimination, statistical comparators
must be directly comparable to the plaintiff in all material
respects,” Purtue v. Wisconsin Dep’t of Corr., 963 F.3d 598, 603
(7th Cir. 2020) (internal quotation marks and citation omitted).
See also Williams v. Bd. of Educ. of City of Chicago, 982 F.3d
495, 505 (7th Cir. 2020) (comparators must be “similar enough to
eliminate

confounding

variables”)

(citation

omitted).

In

the

context of fair lending, borrowers are similarly situated if
they have “similar underwriting and borrower characteristics.”
City of Oakland v. Wells Fargo & Co., 14 F.4th 1030, 1033 (9th
Cir. 2021).
At

his

deposition,

Dr.

Lacefield

agreed

that

all

peer-

reviewed articles say that “to conduct a statistical analysis of
lending

discrimination,”

the

populations

compared

had

to

be

similarly situated. Lacefield Tr., ECF 560-19 at 42:5-10. He
39

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 40 of 58 PageID #:44916

stated that he respected this principle in his investigation by
applying “one underwriting factor or a series of underwriting
factors to the entire universe of...loans,” id. at 43:1-3, and
opined that “when you apply the same attribute across the board,
then you are treating everyone similarly and trying to determine
whether

or

not

based

upon

that

factor...there

is

a

discriminatory effect or impact.” Lacefield Tr., ECF 560-19 at
43:5-9. But testing all borrowers across the board is not the
same as ensuring that the borrowers being tested are similarly
situated. Dr. Lacefield may have done the former, but he did not
do the latter, which is what the law requires.
The County’s insistence that Dr. Lacefield accounted for
borrower characteristics such as FICO score, LTV ratios, and DTI
ratios is also misguided. See Resp., ECF 587 at 10-11. It is
true that Dr. Lacefield defined several of his delimiters by
those features. See Lacefield Rpt. at ¶¶ 103, 105-06. But he did
not control for those features when applying any of his other
delimiters

or

do

anything

to

isolate

and

account

for

their

impact on loan outcomes. This is a fatal methodological flaw in
a study intended to examine the relationship between a lender’s
race discrimination on the one hand and a borrower’s foreclosure
on the other. See Sheehan, 104 F.3d at 942 (7th Cir. 1997)
(excluding
potential

expert

opinion

explanatory

that

variables”
40

failed
other

“to
than

correct
race,

for

but

any

merely

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 41 of 58 PageID #:44917

“equat[ed]

a

simple

statistical

correlation

to

a

causal

relation.”). In short, Dr. Lacefield’s statistical analysis does
not

reflect

the

“care

that

a

statistician

would

use

in

his

scientific work, outside of the context of litigation.” Id.
The

foregoing

is

not

an

exhaustive

account

of

the

methodological and analytical flaws in Dr. Lacefield’s report,
but

rather

a

representative

illustration

of

its

insuperable

shortcomings. The problem is not, as the County contends, that
defendants’ experts disagree with Dr. Lacefield’s conclusions.
The problem is that Dr. Lacefield’s methodology has never been
used, much less approved, by anyone else in the field of fair
lending and is fundamentally incapable of generating statistical
data that would assist the jury in deciding whether there exists
a “robust causal connection” between defendants’ practices and
the

race-based

Accordingly,

disparate

impact

defendants’

the

motion

County

to

seeks

exclude

to

all

prove.
of

Dr.

Lacefield’s opinions is granted.
2. Dr. Cowan’s Liability Opinions
Dr. Cowan is an expert in statistical research and design
whom

the

initiated
than

on

Minority

County

engaged

foreclosures
White

to

on

borrowers;

borrowers,

and

examine

Minority
(ii)

(iii)

whether

defendants:

borrowers

issued
issued

higher

at

higher

cost

higher-risk

“(i)
rates

loans

to

products

to

Minority borrowers.” Cowan Rpt., ECF 564-1 at ¶¶ 1, 5. The loan
41

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 42 of 58 PageID #:44918

population Dr. Cowan analyzed comprised approximately 365,000
loans “originated or purchased by Defendants.”

Id. ¶ 13. He

summarizes his opinions as follows:


Defendants foreclosed on Minority loans at higher
rates than on White loans, after controlling for
factors associated with the credit-risk profile of
the borrower.



Similarly,
foreclosure
rates
are
higher
neighborhoods
with
greater
concentration
minorities, controlling for those same factors.



Defendants charged higher Annual Percentage Rates
(APRs) to minority borrowers when compared to
similarly situated White borrowers.



In the same way, APRs are higher in neighborhoods
with a greater concentration of minorities.



Minority borrowers were issued higher-risk products
at higher rates than similarly situated White
borrowers.



In like fashion, the proportion of higher-risk
products is higher in neighborhoods with greater
concentration of minorities.

in
of

Id. at ¶ 3.
Defendants

raise

a

battery

of

arguments

targeting

the

methodology Dr. Cowan used to arrive at these conclusions. Their
most salient criticism is that Dr. Cowan analyzed loan data on
an aggregated basis, which is to say, across multiple lenders,
multiple

products,

and

multiple

decades—an

approach

that

Dr.

Cowan himself admits no agency or regulator uses to conduct fair
lending analyses. See Cowan Dep., ECF 564-3 at 247:5-8; 249: 16-

42

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 43 of 58 PageID #:44919

23.

Indeed,

the

FFIEC

Interagency

Fair

Lending

Examination

Procedures, which establish the procedural framework for federal
agencies

to

use

when

conducting

fair

lending

examinations,

provide:
Examiners should tailor their sample and subsequent
analysis to the specific factors that the institution
considers when determining its pricing, terms, and
conditions. For example, while decisions on pricing,
and other terms and conditions are part of an
institution’s
underwriting
process,
general
underwriting criteria should not be used in the
analysis if they are not relevant to the term or
condition to be reviewed. Additionally, consideration
should be limited to factors which examiners determine
to be legitimate.
FFIEC, “Interagency Fair Lending Examination Procedures,”
ECF 564-9 at 22-23.
For example, in July of 2007, Sandra Braunstein, Director
of

the

Federal

Affairs,
that

Reserve’s

testified

agency’s

before

supervisory

Division
a

of

Consumer

congressional

and

enforcement

and

Community

subcommittee
activities

about

against

mortgage pricing discrimination. See Braunstein Stmt., ECF 5646.

At

the

practices

outset,
the

her

County

testimony
challenges

confirms

that

in

case—specifically,

this

some

of

the

“broad discretion in pricing by loan officers or brokers” and
“financial incentives for loan officers or brokers to charge
borrowers higher prices—are indeed “risk factors” for mortgage
discrimination.” Id. at 3. Importantly, however, she went on to
explain that determining whether these risk factors materialized
43

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 44 of 58 PageID #:44920

into discrimination requires a “closer review” of a number of
product-

and

lender-specific

factors.

Id.

at

3,

4.

“To

be

accurate,” Braunstein testified,
our reviews need to be based on the institution’s
specific pricing policies and product offerings.
Unless we take the time to understand the lender’s
business and tailor our analysis accordingly, we risk
either missing violations or erroneously concluding
that a lender discriminated when it did not.
Id. at 4 (emphasis added). Thus, to ensure the reliability of
its

analysis,

designed

to

particular,

the

agency

conducts

“effectively
Braunstein

detect

explained,

“targeted

pricing

discrimination.”
when

using

reviews”
Id.

In

“statistical

techniques” to perform a pricing review,
we typically obtain extensive proprietary, loan-level
data on all mortgage loans originated by the lender,
including prime loans (i.e., not just higher-priced
loans reported under HDMA). To determine how to
analyze these data, we study the lender’s specific
business
model,
pricing
policies,
and
product
offerings. With respect to product offerings, we take
great care in defining the products or class of
products we analyze, since each product may have
different pricing that must be considered in the
analysis.
On the basis of our review of the lender’s policies,
we determine which factors from the lender’s data
should be considered. We then create a statistical
model that takes into account those factors and is
tailored to that specific lender.
Id. (emphasis added).
The County’s only response is to insist that an expert’s
methodology

need

not

“match

44

those

employed

by

federal

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 45 of 58 PageID #:44921

regulators” and to quote a portion of the FFIEC’s Interagency
Procedures stating that the Procedures are “intended to be a
basic and flexible framework to be used in the majority of fair
lending examinations conducted by the FFIEC agencies” and “to
guide examiner judgment, not to supplant it.” Pl.’s Resp., ECF
593 at 6. What these observations overlook, however, is that it
is

the

County’s

burden

to

establish

affirmatively

that

Dr.

Cowan’s methodology is reliable. To be sure, the fact that no
federal agency or regulator aggregates data as Dr. Cowan did
when conducting fair lending examinations is not dispositive of
reliability. See Smith v. Ford Motor Co., 215 F.3d 713, 720 (7th
Cir. 2000) (“no single factor among the traditional Daubert list
is conclusive in determining whether the methodology relied on
by a proposed expert is reliable.’). But plaintiff’s failure to
identify

anyone—any

professional

in

the

government
home

lending

agency,

any

industry,

any

compliance
academic

researcher or other commentator—who uses or endorses Dr. Cowan’s
aggregated

methodology,14

coupled

with

Braun’s

testimony

explaining that the Federal Reserve has found that “targeted,”
In response to Dr. Courchane’s report, Dr. Cowan states that
Dr. Courchane herself has published “a research paper that
assess (sic) pricing disparities by simultaneously aggregating
across lenders and time periods.” Cowan Resp., ECF 593-3 at
¶ 40. But this wholly conclusory reference to an article the
County does not even mention in its response brief falls far
short of demonstrating that Dr. Courchane (or anyone else) has
ever used aggregated data to perform a statistical analysis
intended to detect FHA violations by specific lenders.
14

45

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 46 of 58 PageID #:44922

institution- and product-specific examinations are necessary to
avoid

either

undercounting

or

overcounting

instances

of

discrimination, casts significant doubt on the reliability of
his undifferentiated methodology.
And

indeed,

Dr.

Cowan’s

own

analysis

illustrates

why

aggregating loan data in the way that he does yields unreliable
results. For example, while four of the six opinions Dr. Cowan
offers

relate

to

putative

discrimination

in

defendants’

loan

origination practices—namely, perceived disparities in the APRs
charged on, and in the overall risk profiles of, loans issued to
minority borrowers and in minority neighborhoods versus those
issued to white borrowers and in white neighborhoods—the data
set Dr. Cowan analyzed includes a “significant” number of loans
originated by lenders other than defendants, which defendants
purchased post-origination. Cowan Dep., ECF 564-3 at 37:12-18.
Similarly,

his

originated

or

data
acquired

set
by

includes
defendants

loans
but

that
were

were

either

foreclosed

by

other (non-defendant) entities. Cowan Rpt., ECF 564-1 at ¶ 18.
It does not take an expert to understand that defendants could
not have discriminated in the origination of loans they did not
originate or in the foreclosure of loans they did not foreclose.
Although Dr. Cowan was unable to quantify the number of loans in
his data set that fell into one of the above categories, he
acknowledged that the number was likely “significant,” raising
46

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 47 of 58 PageID #:44923

further

doubts

Nothing

in

about

either

the

the

reliability

County’s

or

of

Dr.

his

conclusions.

Cowan’s

responsive

submissions addresses this methodological flaw.
It

is

no

answer

to

complain

that

defendants’

data

production was inadequate to allow Dr. Cowan to weed out loans
originated or foreclosed by entities other than defendants, see
Cowan Dep., ECF 564-3 at 247:11-14 (“I was provided, at best, a
crippled data set that was missing a remarkable amount of data,
and I did the best I could with...an impoverished data set that
I had to supplement with third-party sources”), or to cast the
issue as a dispute concerning the “quality of the data” that is
best left for the jury, Pl.’s Resp., ECF 593 at 4. For one
thing, the County apparently believes that it was appropriate
for Dr. Cowan to consider loans originated by other lenders on
the

theory

that

defendants

either

detected

or

should

have

detected discrimination in those loans prior to purchasing them,
and

therefore

“have

knowingly

undertaken

the

discriminatory

loans.” Pl.’s Resp., ECF 593 at 8. But if there is any support
for this theory of FHA liability, the County has not cited it.15
For another, Dr. Cowan’s inclusion of loan data that is not
probative of defendants’ practices (as opposed to other lenders’

The County offers no legal theory or any conceptual
justification for Dr. Cowan’s inclusion of loans foreclosed by
non-defendant entities in his analysis supporting the conclusion
that defendants engaged in foreclosure discrimination.
15

47

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 48 of 58 PageID #:44924

practices) in an analysis putatively designed to ascertain the
impact of defendants’ practices on various populations is indeed
a methodological flaw.
Defendants challenge Dr. Cowan’s opinions on a number of
other

grounds,

but

the

foregoing

issues

raise

sufficient

concerns about the reliability of his methodology to warrant
exclusion

of

his

disproportionate

testimony

foreclosure

about:

rates,

1)

and

defendants’

2)

defendants’

disproportionate issuance of higher-risk loans, and loans with
higher APR rates, to minority borrowers and in neighborhoods
with a high concentration of minority residents. Nevertheless, I
address one additional argument defendants raise with respect to
Dr.

Cowan’s

Daubert

analysis,

arguments

as

and

it

their

provides
broader

a

segue

arguments

between

their

targeting

the

County’s evidence of causation and damages.
3. Causation and damages
Defendants argue that Dr. Cowan should not be permitted to
offer any opinions on the issue of causation—specifically, that
his

testimony

causality”

cannot

required

be

to

offered

establish

in

support

disparate

of

the

impact

“robust

liability—

because he did not review any of defendants’ policies.16 See

The County raises a tepid factual challenge to this argument,
pointing to Dr. Cowan’s statement at his deposition that he
“looked at the comprehensive set of policies” in forming his
conclusions. Cowan Dep., ECF 606-1 at 29:7-8. This is a
16

48

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 49 of 58 PageID #:44925

Inclusive Communities 576 U.S. at 542 (“a disparate-impact claim
that

relies

plaintiff

on

a

cannot

statistical

point

to

a

disparity

defendant’s

must

fail

policy

or

if

the

policies

causing that disparity. A robust causality requirement ensures
that ‘[r]acial imbalance ... does not, without more, establish a
prima

facie

case

of

disparate

impact’

and

thus

protects

defendants from being held liable for racial disparities they
did not create.”). Defendants argue that Dr. Cowan’s testimony
should be excluded because it would not help the jury determine
the legally relevant question, which is not simply whether the
County has established a statistical disparity, but whether it
has

shown

a

statistical

disparity

that

is

caused

by

“a

defendant’s policy or policies.” Inclusive Communities, 576 U.S.
at 542. See also Daubert 509 U.S. at 591 (expert testimony must
“assist

the

trier

of

fact

to

understand

the

evidence

or

to

determine a fact in issue.”) (quoting Fed. R. Evid. 702).
While defendants correctly characterize the relevant legal
question,

the

fact

that

Dr.

Cowan’s

opinions

do

not

wholly

answer it is not a basis for exclusion. See Adams v. Ameritech
Servs., Inc., 231 F.3d 414, 425 (7th Cir. 2000) (“the question
perplexing statement, given that in next breath Dr. Cowan stated
that he “didn’t look at” any of the policies he was asked about,
and that he elsewhere testified that didn’t look at any
servicing policies at all. Whatever Dr. Cowan may have meant by
this testimony, however, he identified nothing that could be
considered a “policy” of any defendant in the “Materials Relied
On” section of his expert report. See ECF 564-1.
49

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 50 of 58 PageID #:44926

before us is not whether the reports proffered by the plaintiffs
prove the entire case... [n]o one piece of evidence has to prove
every element of the plaintiffs’ case; it need only make the
existence

of

probable.”)

any

fact

(internal

that

is

quotation

of

consequence

marks

and

more

citation

or

less

omitted).

Accordingly, I agree with the County that it may rely on other
evidence to establish the causal link between the statistical
disparity

Dr.

Cowan

identifies

(assuming

arguendo

that

his

opinions about those disparities are otherwise admissible) and
defendants’
agreement

on

allegedly
this

discriminatory

point

is

practices.17

undoubtedly

cold

But

my

to

the

comfort

County, since the only additional evidence it points to for that
purpose

is

Dr.

Lacefield’s

proposed

testimony,

which

as

I

explained above is itself inadmissible. Moreover, even assuming
that

both

experts’

opinions

survived

defendants’

Daubert

The County wisely does not contend that a jury could find
causation based on Dr. Cowan’s testimony alone. Dr. Cowan
explained his theory as follows: “My theory of causation is
simple. Two people, similarly situated, the primary difference
being that one is a minority and one is not a minority, are
charged different interest rates for housing loans. This results
in the minority paying hundreds or thousands of dollars more
over time for a loan. It follows that the minority has less
income for other purchases and in the event of an illness,
accident, or other catastrophe is more likely to default. The
borrower is more likely to default and is less likely to be able
to satisfy the terms of a workout.” Cowan Resp., ECF 593-3 at ¶
15. But this theory is based exclusively on loan origination
conduct, which as I explained in my decision dismissing the SAC,
cannot be deemed to have proximately caused the challenged
foreclosures.
17

50

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 51 of 58 PageID #:44927

motions, the County articulates no reasoned argument to explain
how weaving their opinions together raises a triable issue of
causation.
But this is not the end of the County’s troubles on the
causation

front.

As

another

court

in

this

district

has

explained:
The “robust causality” required in a disparate impact
claim is distinct from the proximate cause analysis
required of all claims under the FHA per City of
Miami, 137 S. Ct. 1296. See Cty. of Cook, Illinois v.
Wells Fargo & Co., 314 F. Supp. 3d 975, 990, 994 (N.D.
Ill. 2018) (analyzing proximate cause and the robust
causality requirement separately); City of Miami v.
Bank of Am. Corp., 171 F. Supp. 3d 1314, 1320 (S.D.
Fla. 2016) (making an “adequate showing” of proximate
cause is insufficient to meet the separate “robust
causality requirement” for a disparate impact claim).
The former concerns whether a defendant’s conduct in
an FHA suit is properly pleaded as the proximate cause
of a plaintiff’s damages; the latter involves an
examination of whether a defendant’s policies were
properly pleaded as the cause of the discriminatory
impact. See Alston v. City of Madison, 853 F.3d 901,
907-08 (7th Cir. 2017), cert. denied sub nom. Alston
v. City of Madison, Wis., 138 S. Ct. 1571 (2018),
reh'g denied, 138 S. Ct. 2714 (2018).
Nat'l Fair Hous. All. v. Deutsche Bank Nat’l Tr., No. 18 CV
839, 2019 WL 5963633, at *17 (N.D. Ill. Nov. 13, 2019). My
discussion

above

addressing

the

methodological

flaws

in

the

statistical analyses of the County’s experts is directed to the
latter

issue

insufficient
causality”

and
to

explains

allow

between

a

why

the

reasonable

defendants’

51

County’s
jury

policies

to

and

evidence
find

any

is

“robust

race-based

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 52 of 58 PageID #:44928

statistical

disparities

in

foreclosure

rates.

In

the

next

section, I address the former issue and conclude that the record
also

does

not

raise

a

reasonable

inference

that

defendants’

conduct proximately caused the injuries for which the County
seeks damages.
As

noted

at

the

outset

of

this

decision,

my

decisions

partially granting dismissal of the SAC and partially granting
the County’s subsequent motion for clarification spelled out the
“narrow category” of injuries for which the County had plausibly
alleged

the

sort

of

causal

link

that

would

satisfy

City

of

Miami’s proximate causation standard: “the out-of-pocket costs
it

claims

to

have

incurred

in

processing

the

discriminatory

foreclosures,” specifically: “additional funding for the Cook
County Sheriff to serve foreclosure notices and for the Circuit
Court of Cook County to process the deluge of foreclosures,” as
well

as

“out-of-pocket

costs

in

serving

eviction

notices,

conducting judicial and administrative foreclosure proceedings,
and registering and inspecting foreclosed properties.” Mem. Op.
and Order of 03/30/2018, ECF 20 at 19-20 and Order of 08/17/18,
ECF 228 at 1. Four years later, the County has come forward with
no evidence that it provided any “additional funding” to the
Sheriff’s Department, the Clerk of Court, or the Office of the
Chief Judge (the three offices it claims suffered compensable
losses as a result of defendants’ discrimination), nor does it
52

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 53 of 58 PageID #:44929

identify a single “out-of-pocket” expense that it would not have
incurred in the absence of defendants’ alleged discrimination.
In fact, neither of the County’s damages experts identified any
County

costs

that

varied

as

a

function

of

the

number

of

foreclosures the County processed. Cowan Dep., ECF 573-96 at
80:17-81:3; Hildreth Dep., ECF 573-101 at 108:17-109:2.
To

the

contrary,

the

County’s

former

Chief

Financial

Officer examined the County’s budget documents and found that
these

offices’

appropriations

and

expenditures

remained

essentially stable from 2004 through 2018——the period for which
the County seeks damages—while residential foreclosures spiked
and then declined. See Report of Thomas Glaser, ECF 612-1 at
¶¶ 21-23.18 In other words, the budget documents show that the

The County asks me to exclude Mr. Glaser’s testimony as
unqualified and unreliable, but the motion is meritless. First,
Mr. Glaser’s education—he holds a B.S. in finance and an MBA—and
his experience working as an accountant, a high-level financial
executive, and the County’s own Chief Financial Officer for over
a dozen years—plainly qualify him to interpret the County’s
budget documents and to opine on what they show about the
County’s costs. Second, Mr. Glaser does not purport to “opine on
the appropriate damages methodology” as a legal matter, nor does
he offer opinions about “how to calculate damages for a
nonprofit governmental organization such as the County.” Pl.’s
Mot., ECF 590 at 4. Instead, he opines on the factual issue of
whether the County’s budget materials reflect any increase in
its appropriations or expenditures as a result of additional
foreclosures between 2004-2018. See Glaser Rpt. at ¶¶ 8(a),(b).
Mr.
Glaser’s
opinions
in
this
connection
are
neither
“subjective,” nor “speculative,” nor “unsupported.” Pl.’s Mot.,
ECF 590 at 6. Mr. Glaser generally describes the County’s annual
budget and appropriations process and other processes through
which County offices can request and receive additional funding
18

53

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 54 of 58 PageID #:44930

County

experienced

no

material

increases

in

its

costs

as

a

result of increased foreclosures.
Unable to controvert evidence that the appropriations and
expenditures

for

each

of

these

offices

remained

stable

throughout the damages period, the County grudgingly admits as
much,

see

Pl.’s

expenditures

Mot.,

for

each

ECF

590

office

at

as

a

9

(“appropriations

whole

may

have

and

remained

somewhat stable”), then pivots to a newly-minted damages theory:
that

resources

were

“shifted”

or

“reallocated”

within

the

affected offices to cope with additional burdens occasioned by
the

challenged

foreclosures,

and

that

the

County

suffered

damages in the form of opportunity costs when these offices were
“forced

to

utilize

additional

their

foreclosures

limited

resources

resulting

to

from

process

the

Defendants’

discriminatory mortgage practices.” Pl.’s SJ Resp. ECF 622 at
39. But absent any evidence that the County failed to fund any
program, to pursue any initiative, or to provide any service as
a

result

of

an

internal

redistribution

of

resources,

no

if needed during the fiscal year. He then identifies the
materials he considered in forming his opinions and explains why
these materials are likely to contain evidence, if any exists,
of increases in the County’s costs. The County’s attack on Mr.
Glaser’s methodology is short on reasoned analysis and long on
bluster, challenging such trivialities as Mr. Glaser’s inability
to recall how many pages of deposition testimony he had review
and his failure to read the Illinois fee statute or some
unidentified “critical Chancery Court documents” in preparing
his report. These observations do not undermine the soundness of
the methodology he describes.
54

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 55 of 58 PageID #:44931

reasonable

jury

could

find

that

it

suffered

any

compensable

injury that was proximately caused by defendants’ alleged FHA
violations.19
Indeed,

such

injuries—like

those

the

County

previously

claimed based on the alleged diminution of its tax digest but
later conceded involved no corresponding decrease in its tax
revenues—appear

to

be

entirely

“notional.”

See

Order

of

12/19/2019, ECF 423 at 4. Because an FHA damages claim sounds in
tort, Meyer v. Holley, 537 U.S. 280, 285 (2003), “general tort
principles govern the award and calculation of damages,” and
under those principles, “compensatory damages are designed to
place the plaintiff in a position substantially equivalent to
the one that he would have enjoyed had no tort been committed.”
Cty. of Cook v. Wells Fargo & Co., 335 F.R.D. 166, 170 (N.D.
Ill.

2020)

(quoting

Anderson

Grp.,

LLC

v.

City

of

Saratoga

Springs, 805 F.3d 34, 52 (2d Cir. 2015)). Because the County
acknowledges that its ledger (including the appropriations and
expenditures of the
costs)

was

not

three offices it claims had additional

affected

by

the

alleged

discrimination,

compensatory damages are unavailable.
But see Valencia v. City of Springfield, Illinois, No. 163331, 2020 WL 1265421, at *6 (C.D. Ill. Mar. 16, 2020) (denying
summary judgment without discussing proximate causation of the
organizational plaintiff’s FHA claim seeking a portion of its
employees’ salaries on the theory that their time was diverted
from the organization’s mission to combat the defendants’
alleged discrimination).

19

55

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 56 of 58 PageID #:44932

Further, whatever the merits of the County’s “average cost
methodology” in principle, one thing is clear: the County’s cost
tabulations
necessary

ignore

to

injuries

As

ensure

that

analysis.

the

damages

that

satisfied
the

the
City

County

limitations
County

I

could

concluded

recover

only

were
for

of

Miami’s

proximate

causation

frankly

admits,

its

averaging

cost

methodology “captured all the County’s costs, including overhead
and shifted resources,” that were associated in any manner with
the

challenged

foreclosures.

Pl.’s

Resp.,

ECF

622

at

43

(emphasis added). In fact, fully a quarter of the damages it
seeks are overhead costs that include administrative and support
services, and some portion of these—though the County cannot say
how

much—is

entirely

unrelated

to

foreclosure

processing:

commissioner salaries, premiums for employee health insurance
and pensions, information technology, facilities management and
depreciation,

supplies,

and

the

like.

Conspicuously,

the

County’s own expert refers to these as “indirect costs” related
to foreclosure processing. Def.’s L.R. 56.1 Stmt., ECF 577 at
¶ 98. Yet, City of Miami “requires some direct relation between
the injury asserted and the injurious conduct alleged.” 137 S.
Ct. at 1306 (internal quotation marks and citation omitted). To
award the County damages for such overhead costs would surely
violate this principle.

56

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 57 of 58 PageID #:44933

The County champions its cost averaging methodology as an
alternative to itemizing the incremental costs it incurred to
process the challenged foreclosures—an exercise it admits would
be

“administratively

unfeasible,

and

virtually

impossible[.]”

Pl.’s Resp., ECF 622 at 43. But this only underscores that the
damages the County seeks cannot be reconciled with the idea that
proximate causation turns, in part, on “an assessment of what is
administratively possible and convenient.” City of Miami, 137 S.
Ct. at 1306 (citation omitted). See also Kemper v. Deutsche Bank
AG, 911 F.3d 383, 392 (7th Cir. 2018) (“we use ‘proximate cause’
to

label

generically

the

judicial

tools

used

to

perform

an

inquiry that ultimately reflects ideas of what justice demands,
or of what is administratively possible and convenient”) (some
internal

quotation

marks

and

citations

omitted).

Lacking

any

feasible way to identify and segregate overhead costs that are
directly related to foreclosure processing, the County employed
a damages model that would make defendants responsible for a
portion of costs entirely unrelated to their conduct. The County
may not simply overlook City of Miami’s directness requirement
in exchange for administrative convenience.
It is true that the Supreme Court declined, in City of
Miami, “to draw the precise boundaries of proximate cause under
the FHA.” 137 S. Ct. 1306. But even its broad brush strokes in
that case make clear that a significant portion of the damages
57

Case: 1:14-cv-02280 Document #: 664 Filed: 02/10/22 Page 58 of 58 PageID #:44934

the

County

claims

amount

to

distant

“ripples

of

harm”

far

removed from defendants’ conduct. Id. at 1299. Accordingly, they
are not compensable under the statute.
III.
For the foregoing reasons, defendants’ motions to exclude
the

expert

testimony

of

Gary

Lacefield

and

the

liability

opinions of Charles Cowan are granted, as is their motion for
summary judgment. The County’s motion to exclude the testimony
of Thomas Glaser is denied.
ENTER ORDER:

_____________________________
Elaine E. Bucklo
United States District Judge
Dated: February 10, 2022

58