Prince George's County, Maryland et al v. Wells Fargo & Co. et al
MEMORANDUM OPINION. Signed by Judge Peter J. Messitte on 2/17/2021. (heps, Deputy Clerk)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
PRINCE GEORGE’S COUNTY,
MARYLAND, et al.,
WELLS FARGO & CO. et al.,
Civil No. 18-3576 PJM
Prince George’s County and Montgomery County, Maryland, filed this suit against
Defendants Wells Fargo & Company and related entities1 (collectively “Wells Fargo”) based on
allegations of predatory and discriminatory residential mortgage lending, servicing, and
foreclosure practices in violation of the Fair Housing Act (FHA), 42 U.S.C. §§ 3601 et seq. After
the Court deferred ruling in part on Wells Fargo’s first motion to dismiss, the Counties filed an
amended complaint, and Wells Fargo thereafter filed the present Motion to Dismiss the Amended
Complaint. Having considered the parties’ principal and supplemental briefs and held oral
argument, the Court will GRANT IN PART and DENY IN PART the motion.
The Counties allege that Wells Fargo engaged in predatory lending practices relative to
racial minority communities, in their respective jurisdictions, which they say contributed to the
recent financial crisis, as characterized by mortgage loan delinquencies, defaults, foreclosures, and
Other Defendants include Wells Fargo Bank, N.A. (a subsidiary of Wells Fargo & Co.), Wells Fargo
Financial, Inc. (previously a subsidiary of Wells Fargo & Co., until it transferred its lending operations to
Wells Fargo Bank), and Wells Fargo “John Doe” Corps. 1–375 (affiliates or subsidiaries of Wells Fargo &
Co. that may be responsible for the conduct alleged in the complaint).
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home vacancies in the Counties, particularly in communities with high concentrations of FHAprotected minority residents. Am. Compl. ¶¶ 3–4, ECF No. 62. The Counties proceed under both
disparate-impact and disparate-treatment theories and allege both economic and noneconomic
The suit proceeds in three counts: count I, disparate impact resulting from Wells Fargo’s
equity-stripping scheme, beginning with loan origination and continuing through servicing and
mortgage foreclosure, id. ¶¶ 443–67; count II, disparate impact based solely on Wells Fargo’s
mortgage servicing and foreclosure practices, id. ¶¶ 468–82; and count III, intentional disparate
treatment throughout the entire equity-stripping scheme, id. ¶¶ 483–93. The Counties allege five
general categories of injuries: (1) foreclosure processing costs, (2) increased cost of municipal
services (i.e., municipal expenditure), (3) economic injuries to the Counties’ tax base, (4) lost
municipal income, and (5) various noneconomic injuries. See Mem. Op. at 2–3, ECF No. 53.
In its decision on Wells Fargo’s motion to dismiss the original complaint, the Court held
that the Counties had sufficiently pleaded their claims regarding foreclosure processing costs but
found that the alleged noneconomic injuries for money damages were too far removed from the
alleged discriminatory conduct to have been plausibly proximately caused by Wells Fargo. Id. at
17. The Court therefore dismissed the noneconomic claims for money damages but held that the
Counties could proceed on those claims insofar as they seek injunctive or declaratory relief. See
id. The Court deferred decision on the Counties’ other claims and granted them the opportunity to
amend their complaint “setting forth in more detail how the losses caused by [Wells Fargo’s]
purported violations may be ascertainable through a regression analysis or other specific method.”
Order at 1–2, ECF No. 54. With the filing of an amended complaint, the viability of the remaining
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claims is again at issue: (1) economic injury to the Counties’ tax base, (2) increased municipal
expenditure, and (3) lost municipal income.
In their amended complaint, the Counties describe a “downward spiral in home prices, in
assessed home values, and in property tax collections” caused by “concentrations of foreclosures
and increasing rates of foreclosures,” including lower sales prices on pre-foreclosure homes. Am.
Compl. ¶¶ 389–90. The fair market value of residential real estate in certain communities, they
submit, was “adversely impacted” by Wells Fargo’s discriminatory foreclosures. Id. ¶ 392.
To prove proximate causation of their monetary damages, the Counties state that they will
“us[e] foreclosure property addresses, borrower names, and foreclosure event date information,”
derived from Wells Fargo’s “loan origination, loan servicing, and loan default and foreclosure
data,” to isolate and establish damages caused by “foreclosures on properties secured by mortgage
loans originated, acquired, serviced, or foreclosed on” by Wells Fargo by reason of the alleged
discriminatory practices. Id. ¶ 393. The Counties maintain that the “critical aspect” of proving
damages will be identifying individual properties where damages occurred as result of Wells
Fargo’s discriminatory practices, and that Wells Fargo’s loan data are the only source of
information “that links affected borrowers and their property locations to [the] discriminatory
practices.” Id. ¶ 394.
The Counties suggest that their experts’ analysis2 of the loan data will “us[e] standard
statistical and regression techniques” to isolate the “discriminatory loans/foreclosures from nondiscriminatory loans/foreclosures,” and the Counties can then “identify the specific foreclosures
and vacancies” that resulted from Wells Fargo’s alleged discriminatory practices. Id. ¶¶ 396–97.
Although a single expert declaration was filed in support of the Counties’ claims, the Counties’
amended complaint consistently refers to “experts.” The Court understands that the Counties may rely on
more than one expert to complete the necessary analyses but clarifies that at this time only one such expert
has been identified.
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Only then can experts “calculate the tax base-related damages using regression analysis.”3 Id.
¶ 397. The Counties will then “search their own regularly maintained databases to find their outof-pocket damages information specific to those foreclosures within the appropriate time frame
for which” Wells Fargo is allegedly responsible. Id.
A. Tax-Base Claim
As to the tax-base injury, the Counties explain in their amended complaint that “[p]roperty
taxes are the primary way” that they pay for municipal services, and the amount of property taxes
collected “depends on the value of the property being taxed and the tax rate that is applied (the
millage rate).” Id. ¶ 401. A decline in the value of the Counties’ tax base therefore purportedly
injures the Counties directly by reducing the amount of property taxes they can collect at a given
millage rate. Id. ¶ 402. Foreclosures, it is argued, particularly when concentrated, reduce the value
of the foreclosed property, reduce the value of surrounding properties, and consequently shrink the
property tax base going forward. Id. ¶ 403.
The Counties note that, in assessing the values of residential properties, the state of
Maryland considers myriad factors, including the sales prices of surrounding and comparable
properties. Id. ¶ 404. They assert that regression analysis will allow them to “accurately and
confidently isolate the amount of their tax base related damages” that were a direct result of Wells
Fargo’s discriminatory practices, as opposed to other factors. Id. ¶ 406.
The Counties have attached to the amended complaint a declaration by Dr. Charles Cowan,
a data analytics expert, who states that regression models are used in a variety of applications and
“Multiple regression analysis is a statistical tool used to understand the relationship between or among
two or more variables.” Daniel L. Rubinfeld, Reference Guide on Multiple Regression, in Fed. Jud. Ctr.,
Reference Manual on Scientific Evidence 303, 305 (3d ed. 2011). This tool can be “well suited to the
analysis of data about competing theories for which there are several possible explanations for the
relationships among a number of explanatory variables.” Id.
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contexts, including “to measure the reduction in value of properties due to specific events such as
an environmental disaster or,” as here, “as a result of foreclosures.” Cowan Decl. ¶¶ 7–10, ECF
No. 62-2. Dr. Cowan explains how, having been engaged to calculate the Counties’ tax base–
related damages, he will use Wells Fargo’s loan data, including property addresses and sales
amounts, to conduct three standardized regression analyses: one to compute tax appraisal values
based on sales price estimates, allowing for the calculation of total property taxes; a second
examining the impact of foreclosure sales prices on tax appraisal values and, subsequently, total
property taxes; and a third determining both “the extent to which foreclosures cause nearby
properties to lose value” and the comparative “rate at which properties in higher minority areas
with higher concentrations of foreclosures lose value” and the attendant amount of lost property
taxes. Id. ¶¶ 13–16. These analyses “will enable [him] to calculate the impact of [Wells Fargo’s]
foreclosures at issue” on the Counties’ property tax collections, thereby allowing the Counties to
“isolate the actual amount of their tax-base-related damages” resulting from Wells Fargo’s
discriminatory practices. Id. ¶ 21.
B. Municipal Expenditure Claim
As to the increased municipal services claim, the Counties allege that Wells Fargo’s failure
to secure and care for abandoned and vacant properties has occasioned their building code
enforcement, police departments, and fire departments personnel time and out-of-pocket costs by
requiring that those components address events on those properties that threaten public health and
safety. Am. Compl. ¶¶ 421–22. The Counties again state that they can demonstrate proximate
cause by correlating Wells Fargo’s loan data (specifically, the relevant property addresses and
timeframes) with their own regularly maintained event and cost data (i.e., the cost of government
resources expended at those vacant or foreclosed properties during the relevant timeframes). Id.
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¶¶ 423–24. After completing that cross-check, the Counties “can then produce documentary
support to prove the amount of their damages from their records, including their budgets and
appropriations, various contracts, and task performance information.” Id. ¶ 425. They indicate that
they will be able to complete a similar process with the data from their social service organizations,
budgets and appropriations, various contracts, and task performance information to determine the
costs of helping displaced families who faced foreclosure and eviction as a result of Wells Fargo’s
discriminatory practices. Id. ¶ 426.
C. Lost Municipal Income Claim
Finally, as to the lost franchise tax and utility-related damages claim, Counties allege that,
because many of Wells Fargo’s foreclosures resulting from discriminatory practices were delayed
(the so-called “zombie foreclosures”), the Counties lost revenue due to unpaid franchise taxes and
utility service costs from the homes that sat vacant over significant periods of time. Id. ¶¶ 410–11.
The Counties claim that, once they have Wells Fargo’s loan data in hand, they can search their
databases and records for each relevant property address and timeframe to establish the damages
resulting from lost utility and franchise-tax revenue on that property. Id. ¶¶ 412–13. They contend
that determining their damages on a property-to-property basis using Wells Fargo’s loan data “will
ensure that [the] damages are a direct result” of Wells Fargo’s alleged discriminatory conduct. Id.
II. Legal Standard
A. Rule 12(b)(6)
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff
must plead facts sufficient to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). This standard requires “more than a sheer possibility that a
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defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Although a court
will accept factual allegations as true, “[t]hreadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Id. Legal conclusions couched as factual
allegations and “unwarranted inferences, unreasonable conclusions, or arguments” do not satisfy
the plausibility pleading standard. E. Shore Markets, Inc. v. J.D. Assocs. Ltd. P’ship, 213 F.3d 175,
180 (4th Cir. 2000). The complaint’s factual allegations must fairly apprise the defendant of “what
the . . . claim is and the grounds upon which it rests.” Twombly, 550 U.S. at 555 (quoting Conley
v. Gibson, 355 U.S. 41, 47 (1957)).
B. Fair Housing Act
As explained in the Court’s opinion on the first motion to dismiss, the Fair Housing Act is
a “far-reaching” statute that “takes aim at discrimination that might be found throughout the real
estate market and throughout the process of buying, maintaining, or selling a home.” City of Miami
v. Wells Fargo & Co. (Miami II), 923 F.3d 1260, 1279 (11th Cir. 2019), vacated as moot sub nom.
Bank of Am. Corp. v. City of Miami, 140 S. Ct. 1259 (2020) (mem.). Here, as in parallel litigation
in other federal courts, the defendant bank argues that the plaintiff municipalities have not set forth
causes of action because “the complaint fails to draw a ‘proximate-cause’ connection between the
violation claimed and the harm allegedly suffered.” Bank of Am. Corp. v. City of Miami (Miami I),
137 S. Ct. 1296, 1301 (2017).
In Miami I, the Supreme Court held that “foreseeability alone is not sufficient to establish
proximate cause under the FHA,” which “requires ‘some direct relation between the injury asserted
and the injurious conduct alleged.’” Id. at 1305–06 (quoting Holmes v. Sec. Inv. Prot. Corp., 503
U.S. 258, 268 (1992)). However, the Court left it to the lower courts to “define, in the first instance,
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the contours of proximate cause under the FHA and decide how that standard applies to [a
municipality’s] claims for lost property-tax revenue and increased municipal expenses.” Id.
This Court explained in its previous opinion that it “agree[d] with the Eleventh Circuit [in
Miami II] that proximate cause in the context of FHA suits, such as the present one, is fairly pled
where the injury is directly traceable to the purported violation, without a discontinuity that breaks
the connection.” Mem. Op. at 8;4 see also City of Oakland v. Wells Fargo & Co., 972 F.3d 1112
(9th Cir. 2020) (adopting similar standard in another parallel FHA case, finding the statute “to be
broad and inclusive enough to encompass less direct, aggregate, and city-wide injuries”). Thus,
that is the proximate-cause standard that guides the ensuing analysis of the Counties’ amended
Wells Fargo has moved to dismiss the three claims as to which the Court earlier deferred
decision. “The question for now is whether, accepting the allegations as true, as we must, the
[Counties] ha[ve] said enough to make out a plausible case—not whether [they] will probably
prevail.” Miami II, 923 F.3d at 1264. The Court now concludes that the Counties have plausibly
alleged injurious violations of the FHA as to their tax-base and municipal services expenditure
claims but that their allegations continue to fall short as to the lost municipal income claim.
Wells Fargo argues that the Court should no longer consider the Eleventh Circuit’s reasoning in Miami
II persuasive or even relevant following the Supreme Court’s vacatur of that opinion. This Court disagrees.
The Supreme Court’s vacatur—which was done as a procedural matter pursuant to the Munsingwear
doctrine and did not touch on the merits—has no substantive effect on this case. See generally United States
v. Munsingwear, Inc., 340 U.S. 36 (1950). Although the Eleventh Circuit’s opinion is not and has never
been controlling here, the Court has already stated that it finds the Eleventh Circuit’s analysis persuasive.
The vacatur does not alter that conclusion.
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A. Tax-Base Claim
The Counties have sufficiently alleged injury to their property tax base that is “directly
traceable” to Wells Fargo’s discriminatory lending practices.
Wells Fargo first argues that the Counties failed to plead an injury in fact sufficient to
establish Article III standing. Specifically, Wells Fargo contends that the Counties have not alleged
injury to their overall property tax revenue because the Counties’ ability to determine the applied
tax rate (i.e., the millage rate) generally allows them to stabilize the amount of property tax revenue
even when the overall tax base declines. The Counties argue that the collateral-source rule
precludes any consideration of their overall tax revenue in consideration of the tax-base injury.
“The common law collateral source rule provides that a tort award should not be offset by
compensation that a plaintiff receives from another source.” Balt. Neighborhoods, Inc. v. LOB,
Inc., 92 F. Supp. 2d 456, 465 n.9 (D. Md. 2000) (citing United States v. Price, 288 F.2d 448, 449–
50 (4th Cir. 1961)). Because “[a] damages action under the [FHA] sounds basically in tort,” Curtis
v. Loether, 415 U.S. 189, 195 (1974), the Court finds the theory relevant here.
Wells Fargo argues that the collateral-source rule should not apply here, relying on two
related cases from another district court that declined to apply the rule to claims of decreased tax
revenue as a result of discriminatory lending practices. See L.A. Unified Sch. Dist. (LAUSD) v.
Bank of Am. Corp., No. 14-cv-7364, 2015 WL 13653868 (C.D. Cal. Jan. 7, 2015); LAUSD v.
Citigroup Inc., No. 14-cv-7368, 2015 WL 476303 (C.D. Cal. Feb. 3, 2015). The Court finds those
cases inapposite. The plaintiffs there were not municipalities alleging direct injury to their tax
bases as are the Counties here; rather, they were school districts alleging injury to their funding,
which was not directly derived from property taxes but was determined by the state legislature.
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See LAUSD, 2015 WL 13653868, at *4 (“LAUSD suffered no injury because its funding level is
not dependent on the amount of property taxes collected within its boundaries. Instead, the amount
of funding LAUSD receives is based on policy decisions made by the California Legislature.”). In
contrast, the Counties’ tax-base injury in the case at bar is concrete and bears “some direct relation”
to the alleged predatory lending; it is not undermined by the Counties’ limited ability to offset the
injury to their overall tax revenue caused by Wells Fargo’s alleged conduct. The Court thus
concludes that the collateral-source rule applies, with the result that the Counties’ overall property
tax revenue from one year to the next is not, strictly speaking, relevant to the question of whether
they suffered an injury to their tax base. The Court finds that the collateral-source rule is
independently dispositive of Wells Fargo’s motion to dismiss the tax-base claim for failure to plead
injury in fact.
But even if the collateral-source rule were not applicable here, the Court would find that
the Counties have nevertheless established appropriate injury in fact. As an initial matter, the
Supreme Court has expressly held that “[a] significant reduction in property values directly injures
a municipality by diminishing its tax base.” Gladstone Realtors v. Village of Bellwood, 441 U.S.
91, 110–11 (1979). That is precisely the injury alleged here.
Wells Fargo views the Counties’ power to determine the millage rate as fatal to their claim
of injury here, apart from the collateral-source rule. The Court disagrees. Setting the millage rate
is not the equivalent of waving a magic wand to grow the county treasury. The Counties’ ability
to adjust millage rates in response to declines in the overall value of their tax bases due to
foreclosures is subject to practical limits, given that a higher millage rate affects properties
countywide. The Counties therefore arguably suffer an injury to their tax base whether or not their
overall property tax revenue remains stable over time. Regardless of the total property tax revenue
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collected during the relevant period, the Counties may suffer an injury in fact if their “propertytax revenue could have been higher absent the discriminatory lending.” City of L.A. v. Citigroup
Inc., 24 F. Supp. 3d 940, 948 (C.D. Cal. 2014).
Wells Fargo next argues that the Counties fail to show how they can isolate and plausibly
calculate the amount of tax revenue loss attributable to Wells Fargo’s alleged discriminatory
conduct. In its earlier opinion, the Court directed the Counties to plead their tax-base injury with
more specificity by showing how they propose to “isolate and ultimately prove damages to the
Counties’ tax bases,” such that the “‘direct relation’ between the two is clear.” Mem. Op. at 14;
see also Miami II, 923 F.3d at 1281 (“Perhaps the most important step in the proximate cause
analysis in this case is consideration of ‘what is administratively possible and convenient.’”
(quoting Miami I, 137 S. Ct. at 1306)). This is where the matter of regression analysis comes in:
Have the Counties sufficiently explained how they, with the aid of experts, can use regression
analyses to isolate the tax-base injuries they suffered as a direct result of Wells Fargo’s alleged
The Court is persuaded that they have. In addition to Dr. Cowan’s declaration5 and
supplemental materials explaining this methodology,6 the Court looks to the Oakland case for
guidance. In that case, the city of Oakland conducted certain initial regression analyses at the
pleading stage, since the city already had relevant data, which “Wells Fargo reports to local and
federal authorities.” Oakland, 972 F.3d at 1118–19 & n.6. Oakland explained in its complaint how
those regression analyses were controlled for credit history and other factors, then revealed, for
The Court expressly incorporates by reference, for pleading purposes only at this stage, the declaration
of Dr. Cowan, ECF No. 62-2.
E.g., Daniel L. Rubinfeld, Reference Guide on Multiple Regression, in Fed. Jud. Ctr., Reference
Manual on Scientific Evidence 303 (3d ed. 2011).
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example, exactly how much more likely discriminatory loans were for an African American
borrower in Oakland, as opposed a similar white borrower (2.583 times), and for a borrower in a
majority-minority neighborhood, as opposed to a nonminority neighborhood (3.207 times). Am.
Compl. ¶¶ 68, 70, Oakland, No. 15-cv-4321 (N.D. Cal. Aug. 15, 2017). Regression analyses
further revealed, among other things, the exact greater likelihood that the borrowers of those
discriminatory, high-risk loans would suffer foreclosure (2.573 times for African American
borrowers, 3.312 for Latino borrowers). Id. ¶ 91.
Crucially, using Hedonic regression,7 Oakland was able to quantify its property tax losses
attributable to Wells Fargo’s practices by correlating the reduction in property values with
addresses in Oakland where discriminatory loans issued by Wells Fargo entered the foreclosure
process. Id. ¶ 114; id. Ex. A (sample chart demonstrating that correlation). Oakland then explained
how Hedonic regression techniques would allow them to “isolate the lost property value
attributable to Wells Fargo foreclosures and vacancies caused by discriminatory lending from
losses attributable to other causes, such as neighborhood conditions.” Id. ¶ 120 (emphases added).
The Ninth Circuit thus found that Oakland had plausibly alleged proximate cause “through
sophisticated and well-explained statistical regression analyses.” Oakland, 972 F.3d at 1132.
This Court is persuaded that, as alleged in the Counties’ amended complaint, similar
regression analysis techniques would be meaningful here in demonstrating “some direct relation”
between Wells Fargo’s alleged discriminatory loans and the Counties’ reduced tax revenue from
affected properties. See also Miami II, 923 F.3d at 1283 (finding that the complaints “suffice to
describe the analysis in far more than speculative or conclusory fashion,” even though the city did
Hedonic regression is a method of analysis that “isolates the factors that contribute to the value of a
property by studying thousands of transactions” and “determines the contribution of each of these factors
to the value of a home.” Oakland, 972 F.3d at 1120 n.11.
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“not go so far as to conduct this analysis and attach the results to its pleadings”). “In other words,
if [the Counties’] Hedonic regression analysis operates as it is explained in the [amended]
complaint,” there is no discontinuity that breaks the connection. Oakland, 972 F.3d at 1133.
Wells Fargo advances various arguments challenging the use of regression analyses in
general, while sidestepping the reasoning in Miami II and Oakland.8 Rather than contending that
the Counties’ assertions regarding the efficacy of regression analysis in this context fall short of
the required level of specificity, Wells Fargo urges the Court to apply a different standard. It first
argues that the Counties have failed to account for “multiple independent and intervening factors”
affecting the calculation of property values and taxes. The Court finds this argument unavailing
because most of the “independent variables posited by [Wells Fargo] occur before foreclosure.”
Miami II, 923 F.3d at 1277. Once increased foreclosures occur on a countywide basis, the
Counties’ “substantially decreased tax base is clear, direct and immediate,” without “intervening
roadblocks.” Id.; see also Oakland, 972 F.3d at 1133 (“Oakland’s regression analyses plausibly
and thoroughly account for other variables that might explain Oakland’s reduced tax base, such
that Oakland’s injury can be surely attributed to Wells Fargo,” especially “because Oakland’s
claims are aggregate, city-wide claims that are well-suited for data-driven statistical regression
Wells Fargo also suggests that it will be impossible for the Counties to calculate what the
assessed value of a property would have been if no foreclosure had occurred, because the existing
assessments were conducted only every three years and by the state of Maryland, an independent
party. But the Court’s understanding is that the regression analyses the Counties describe are able
Wells Fargo attempts to distinguish Miami and Oakland from the present case on the basis that the
Counties here have failed to allege diminution of their overall property tax revenue. But that argument goes
to whether there exists a cognizable injury, as discussed above, not whether that injury can be sufficiently
isolated and traced such that proximate cause has been adequately alleged.
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to take into account how and when the property tax values were assessed, as it appears that the
relevant information for this aspect of the analysis would not be who completed the property
assessment but how they did so—specifically, what factors were considered in making the
assessments. Those factors are identifiable, and, indeed, the Counties identify them. They explain
in their amended complaint precisely which factors Maryland considers in valuing residential
property, including the nature and effect of its “neighborhood adjustment.” Am. Compl. ¶¶ 404–
Wells Fargo further argues that Dr. Cowan’s expert declaration cannot not otherwise
“salvage” the tax-base claim. But, for the reasons explained above, the Court is satisfied that the
Counties—with the aid of, but by no means exclusively through, Dr. Cowan’s declaration—have
plausibly alleged that the use of regression analysis will allow them to sufficiently demonstrate
Finally, Wells Fargo suggests that the proposed analyses would only address foreclosures
as a proximate cause of tax-base injury, not the challenged lending. The Court disagrees with this
suggestion. The amended complaint explains that the regression analysis would require use of
Wells Fargo’s “mortgage loan origination and servicing data,” which go far beyond foreclosures
to include “every useful data point over the life of a mortgage loan.” Am. Compl. ¶¶ 394–95. The
Court understands that this data will allow the Counties to identify those borrowers affected by the
alleged discriminatory practices—and the Counties’ experts will then be able to correlate the
property data for those borrowers with the Counties’ property assessment and tax data.
It is by no means certain that the Counties will ultimately prevail on their tax-base claim,
but for now the allegations suffice to survive a motion to dismiss, and they “must be afforded an
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opportunity to conduct discovery and obtain more property-specific information.” City of L.A., 24
F. Supp. 3d at 950. The Court DENIES the motion to dismiss as to the tax-base claim.
B. Municipal Expenditure Claim
For similar reasons, the Court is satisfied that the Counties have now met their burden as
to their municipal expenditure claim. Specifically, the amended complaint sufficiently alleges that
the additional municipal expenditures necessitated by the abandoned and foreclosed properties
were a direct result of Wells Fargo’s alleged discriminatory lending practices and, further, that Dr.
Cowan’s proposed regression analyses will allow the Counties to isolate the damages attributable
to Wells Fargo by matching the property addresses at issue and the relevant time period to the
Counties’ own event and cost data for additional services to those properties.9 For the present, at
least, the claim passes muster. Thus, the Court DENIES the motion to dismiss as to the municipal
C. Lost Municipal Income Claim
Here the Court draws the line. It views the lost municipal income claim as a bridge too far.
The central question as to this claim is whether the Counties’ claimed loss of franchise-tax and
utility revenue is too removed from the alleged discriminatory lending in the chain of causation.
In the amended complaint, the Counties certainly attempt to “flesh out the connection” between
the alleged equity-stripping and the loss of franchise-tax and utility revenue, but the Court
concludes that, beyond mere foreseeability, this connection is not sufficiently direct to constitute
Both the Eleventh and Ninth Circuits rejected the increased municipal expenditure claims of the
plaintiffs in Miami and Oakland, respectively. However, the Counties here plead this claim with more
specificity than the plaintiffs in those cases. Unlike Miami and Oakland, the Counties describe how—just
as with their tax-base claim—they will use regression analysis to trace specific municipal expenditures
during the relevant period to specific properties vacated or foreclosed after discriminatory lending by Wells
Fargo. Compare Am. Compl. ¶¶ 421–26, with Am. Compl. ¶¶ 129–39, Oakland, No. 15-cv-4321 (N.D.
Cal. Aug. 15, 2017), and Am. Compl. ¶¶ 110–21, Miami, No. 13-cv-24508 (S.D. Fla. Nov. 15, 2015).
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the requisite proximate cause. The alleged damages on this claim do not pass directly to the
Counties in the same way property tax revenue does. The Counties’ franchise taxes or fees are
derived not from the property owners but from third-party cable companies. Similarly, the
Counties’ utility revenue is derived from the relevant “government-affiliated utility.” Diminished
revenue from reduced cable or utility use may come about for reasons wholly independent of
predatory lending. In the Court’s view, these extra links in the causal chain create “a discontinuity
to call into question whether the alleged misconduct led to the injury.” Mem. Op. at 7. Accordingly,
the Court GRANTS the motion to dismiss as to the lost municipal income claim.
D. Noneconomic Injuries
The Court has already held that this case may go forward on the noneconomic claims for
injunctive relief but has dismissed the noneconomic claims for money damages. See Mem. Op. at
17 (“[T]o the extent that the Counties are seeking injunctive or declaratory relief against [Wells
Fargo’s] alleged equity-stripping practices, the proximate cause requirement being less strict, the
Counties may proceed.” (citing Miami I, 137 S. Ct. at 1305–06)); Order at 2, ECF No. 54. The
Court will not entertain Wells Fargo’s attempts to argue otherwise. Its earlier ruling stands.
In sum, while the Counties’ pleadings fall short as to their lost municipal income claim and
noneconomic claims for damages, they may proceed on the foreclosure processing, tax-base, and
municipal expenditure claims and on the noneconomic claims for injunctive relief.10
A separate order will issue.
Prior to filing the amended complaint, the Counties moved for limited discovery, which the Court
concluded was “not necessary (if not improper)” at that early stage. Mem. Op. at 4, ECF No. 60. Following
the Court’s ruling on the motion to dismiss the amended complaint finding three of the Counties’ claims
viable, discovery is in order.
Case 8:18-cv-03576-PJM Document 91 Filed 02/17/21 Page 17 of 17
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