In Cleveland, Facing Giants and Failing

The City of Cleveland, Ohio, went after 21 large financial institutions with legal action when it filed a lawsuit alleging their subprime mortgage lending activities constituted organized crime against the city. The case was tossed out Friday. The suit aimed to recover foreclosure-related damages to the city’s property tax revenues, homes involved and neighboring properties, according to a report filed by Andrew Longstreth at American Lawyer . Cleveland federal district court judge Sara Lioi dismissed the case on the grounds that Ohio state law preempted the city’s allegations, which could not substantially demonstrate the banks’ responsibility in causing the damages to the city’s neighborhoods and tax revenues. An attorney representing several of the banks involved in the case told HousingWire the court ruling shows that banks are not responsible for all the social and economic problems of Cleveland, based on the “public nuisance” premise of the prosecution. But that won’t stop the city, according to a statement given by Robert Triozzi, Cleveland’s law director: “Our lawsuit has been about holding those responsible for the damages caused to our neighborhoods accountable for their actions,” he wrote, according to American Lawyer. “That the court chose to absolve these firms’ conduct by dismissing our claims is a setback, but just a temporary setback.” “As we have always stated, we are in this for the long haul,” Triozzi added. “We will continue this fight to the Sixth Circuit Court of Appeals where we believe our legal cause will be vindicated. The City of Cleveland deserves its day in court and we will pursue and defend our rights for as long as it takes.” The city filed suit against a number of banks including JPMorgan Securities, Citigroup, Countrywide, Credit Suisse First Boston, Goldman Sachs, Deutsche Bank Securities, Wells Fargo, Greenwich Capital Markets, GMAC-RFC, HSBC Securities, Lehman Brothers Holdings, Merrill Lynch, Morgan Stanley, Washington Mutual, Wells Fargo and Bank of America. Write to Diana Golobay.

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