WASHINGTON — The Supreme Court ruled Monday that cities may sue big banks over allegedly discriminatory lending practices that they say led to urban blight, but added that they must meet higher standards to prove a direct relationship.
The result was a mixed one for Miami, which was at the forefront of a move by cities across the country who have sued big lending institutions under the federal Fair Housing Act.
A majority of the court agreed that cities, not just individuals, could sue under the FHA.
‘‘This court has repeatedly written that the FHA’s definition of person ‘aggrieved’ reflects a congressional intent to confer standing broadly,’’ Justice Stephen Breyer wrote for himself and four other justices.
But to prove their cases, the justices generally agreed, the cities have to prove more than just that the damage done to the cities by the banks’ lending practices was foreseeable, a standard agreed to by the lower courts. Instead, the cities must show ‘‘some direct relationship between the injury asserted and the injurious conduct alleged,’’ Breyer wrote.
Miami and other cities had pursued what had been described as a novel approach under the FHA to recover what they lost in tax revenue and the demand for increased services as a result of the housing collapse.
Banks have been sued by individuals and taken to task by the federal government for lending practices, but these new cases are the first in which cities are the plaintiffs and are demanding that banks be held accountable for harming their communities.
The banks countered that Congress never intended for the law to be used for such purposes. ‘‘Municipal suits like this one were unheard of until recently, when enterprising contingency-fee counsel began pushing them,’’ Bank of America told the court. Baltimore settled a suit it had filed against banks, and there is litigation by other cities across the country.
Breyer recounted the arguments they make.
Predatory lending practices in minority neighborhoods ‘‘led to a ‘concentration’ of ‘foreclosures and vacancies’ in those neighborhoods. Those concentrated ‘foreclosures and vacancies’ caused ‘stagnation and decline in African American and Latino neighborhoods.’ They hindered the city’s efforts to create integrated, stable neighborhoods. And, highly relevant here, they reduced property values, diminishing the city’s property tax revenue and increasing demand for municipal services,’’ he wrote.
All that together means that the city has standing to sue, wrote Breyer, who was joined by Chief Justice John Roberts and liberal Justices Ruth Bader Ginsburg, Sonia Sotomayor, and Elena Kagan. But that doesn’t mean that the city can prevail without proving that the bank’s practices were directly responsible.
‘‘The housing market is interconnected with economic and social life. A violation of the FHA may, therefore, be expected to cause ripples of harm to flow far beyond the defendant’s misconduct,’’ Breyer wrote. ‘‘Nothing in the statute suggests that Congress intended to provide a remedy wherever those ripples travel.’’
The court sent the case back to lower courts to draw the ‘‘contours of proximate cause under the FHA and decide how that standard applies to the city’s claims for lost property tax revenue and increased municipal expenses.’’
Three justices disagreed. Justices Anthony Kennedy and Samuel Alito signed on to Justice Clarence Thomas’s opinion that Miami should not be able to bring suit under the FHA. Even if it could, he wrote, the city’s injuries are ‘‘too remote from the injurious conduct it has alleged.’’