In May, the City of Los Angeles sued JPMorgan Chase (JPM), alleging that the bank had pushed minority borrowers into mortgages they could not afford “since at least 2004.”
The city’s suit suggested that the bank’s lending practices created a wave of foreclosures that impacted property values and brought urban blight to the city.
But the bank has secured a legal victory over Los Angeles, according to a report from Reuters.
In a decision made public on Wednesday, U.S. District Judge Otis Wright said the city could not hold JPMorgan responsible for questionable lending by the former Washington Mutual Inc, under a federal law governing the wind-down of failed banks.
Wright said Los Angeles may file an amended complaint focused on JPMorgan's, but not WaMu's, lending practices.
According to the Reuters report, Judge Wright acknowledged JPMorgan’s claim that the Financial Institutions Reform, Recovery and Enforcement Act prevented claims against banks until a separate Federal Deposit Insurance Corp. claims process was completed.
"FIRREA bars this court from hearing the city's claims as they relate to WaMu's discriminatory lending practices," Wright wrote, in a decision dated August 5.
The judge said the rest of the lawsuit also had to be dismissed because Los Angeles "lumps loans issued by both Chase and WaMu together."
But he gave Los Angeles permission to file an amended complaint that tries to "excise" allegations related to WaMu.
A spokesman for the city of Los Angeles said that the city plans to continue the fight.
"We respectfully disagree with the court's ruling as to the loans made by Washington Mutual, and are exploring our options," said Frank Mateljan, a spokesman for Los Angeles City Attorney Mike Feuer. "In the meantime, we are aggressively pursuing our case against JPMorgan Chase."