A federal appeals court on Tuesday rejected
Cincinnati's effort to hold Wells Fargo & Co liable for creating a public
nuisance by letting properties it owned, including
through foreclosure, fall
into disrepair because the upkeep cost too much.
The 6th U.S. Circuit Court of Appeals in
Cincinnati said the Ohio city of roughly 299,000 people failed to show that
higher police and fire expenses to combat crime and blight, and a drop in its
property tax base, were the direct result of misconduct by Wells Fargo.
It also said Cincinnati failed to show that
the third-largest U.S. bank intended to cause harm, or that the hundreds of properties
it has owned, including in distressed neighborhoods, endangered the public's
health or safety.
"The city may use nuisance law to address
an actual nuisance," Circuit Judge Jeffrey Sutton wrote for a 2-1
majority. "But alleged bad intent or alleged code violations by themselves
do not suffice in the absence of an unsafe or unsanitary condition associated
with an identifiable property."
Cincinnati's city solicitor, Paula Boggs
Muething, expressed disappointment with the decision, saying it frees banks to
continue "privatizing economic benefit and socializing economic loss"
in Ohio.
"The city of Cincinnati will continue to
aggressively protect its neighborhoods from out of town, problem property
owners, but today's decision - that banks may ignore the city's laws without
consequence - has dealt a blow to that effort," she said in a statement.
Wells Fargo did not immediately respond to
requests for comment.
Cincinnati is one of many large U.S. cities to
accuse banks following the 2008 financial crisis of causing harm by letting
properties deteriorate, conducting predatory lending, or both.
The city claimed that San Francisco-based
Wells Fargo disregarded state and local property maintenance laws "with
impunity," including by routinely ignoring civil fines for high weeds,
grass and building code violations.
It said the bank's unlawful practices have
persisted since 2006, including in "more vulnerable" neighborhoods
where Wells Fargo appeared willing to spend on upkeep only if it stood to
profit or reduce losses.
Cincinnati previously resolved other claims
against Wells Fargo, as well as nuisance and other claims in a similar lawsuit
against Deutsche Bank AG, the appeals court said.
The case is Cincinnati v Wells Fargo Bank NA
et al, 6th U.S. Circuit Court of Appeals, No. 16-3752.
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