Banks dodge claims of discriminatory foreclosures
Homeowners in Hawaii and Florida say that the banks conspired to deliberately foreclose on them knowing that they couldn't pay back the loans.
by Candace Cheung, Court House News, March 23, 2023
HONOLULU (CN) — A federal judge in Hawaii dismissed a class action accusing Bank of America and the Bank of New York Mellon of engaging in a mortgage foreclosure scheme against homeowners of color Thursday but instructed the homeowners to amend their extensive RICO and Fair Housing Act lawsuit into something more concise.
Bank of America pushed for dismissal of the suit in a March 3 hearing, where U.S. District Court Judge Jill Otake questioned the confusing and conflicting nature of the homeowners’ arguments in their complaint and in the hearing.
The eight class action plaintiffs first leveled racketeering and Fair Housing Act claims against the banks in a 264-page filing that Otake described in her ruling as “egregiously long, unnecessarily complex, and confusing.”
The class action contends that Bank of America and the Bank of New York Mellon deliberately targeted people of color in Hawaii and Florida for home loans that the bank knew they would never be able to pay back. Three of the five Hawaii plaintiffs are of Native Hawaiian descent and the three Florida plaintiffs are women of color.
The members of the class also say they have been or are currently being foreclosed on, some for nearly two decades, as part of the bank’s scheme to use fraudulent documentation to initiate a false foreclosure.
“Defendants BANA and BONYM devised a scheme or artifice to defraud, that involves the use of many sub-schemes, for the purpose of filing and prosecuting, or causing the filing and prosecution of, thousands of unlawful foreclosures complaints, in this district and nationally," the plaintiffs said in their July 2022 complaint.
The two banks argued together that the claims should never have even been brought, as they were never alleged in any of the underlying initial foreclosure cases. Even if they were proper, Bank of America attorney Jesse Smallwood, representing both banks, argued at the hearing the claims were entirely without merit anyway, saying that the foreclosure filing documents themselves could never stand under RICO as evidence of fraud.
Judge Otake agreed and also observed that many of plaintiff attorney Frederick Arensmeyer's arguments during the hearing did not match up with claims argued in the filed complaint.
“The Court notes, however, that Plaintiffs made numerous statements at the hearing that were not alleged in the Complaint, which they assert are critically important to Plaintiffs’ RICO claims,” she wrote, referring to an assertion by Arensmeyer that the fraudulent acts were intrinsic and extrinsic within and outside of litigation activity in the original foreclosure cases.
“But critically, they conceded that they failed to make these allegations clear in their Complaint with Plaintiffs’ counsel admitting he could not identify supporting allegations," she added.
Otake also dismissed the Fair Housing Act claims, identifying that the inclusion of several plaintiffs who do not fall under Fair Housing Act protections undermines the claim as whole.
“Because Plaintiffs allege that both 'minority' and 'non-minority' borrowers alike were affected by Defendants’ practices, their allegations do not proffer that FHA Plaintiffs were significantly disproportionately impacted; quite the opposite,” she wrote.
Otake also frequently opined that the plaintiffs’ claims were somehow both overlong and not specific enough to each claim. Arensmeyer addressed the judge’s concerns by promising that a following amended complaint would assign racketeering claims to specific defendants and that he would separate out and quantify the Fair Housing claims.
The class action shares similar grievances toward Bank of America with another district court case dismissed with leave to amend in February. The case, also litigated by Arensmeyer, claimed that Bank of America reneged on promises to provide millions in home loans on Native Hawaiian homelands.
Fun Fact: Arensmeyer used to work for Gary V Dubin