Cleveland’s Law-Distorting ‘Public Nuisance’ Suit Dismissed

By May 19, 2009Briefly Legal

From the AM Law Litigation Daily, “Judge Dismisses Cleveland’s Suit Against Subprime Lenders“:

Perhaps Cleveland mayor Frank Jackson scored points with his base when he announced back in January 2008 that the city was suing 21 financial institutions. Likening the banks’ activity to that of organized crime, the city claimed the banks had created a public nuisance by fueling subprime mortgages that left certain neighborhoods devastated by foreclosures. But the city’s legal reasoning has not impressed Cleveland federal district court judge Sara Lioi, who dismissed the case with prejudice on Friday.

The city sought to recover damages related to the costs of “monitoring, maintaining, and demolishing foreclosed properties” and “the diminution in the city’s property tax revenues caused by the depreciating effect foreclosures have had on the affected homes and surrounding properties,” according to Judge Lioi’s opinion. But Judge Lioi found, among other things, that Ohio state law preempts the city’s public nuisance claim and that the allegations did not sufficiently show that the defendants were the proximate cause of the alleged damages.

The city’s suit, like so many others, was always political grandstanding more than cogent law. A block of Cleveland is blighted because Credit Suisse First Boston securitized mortgages? You might as well sue the Mayor of Cleveland for promoting policies that undermine the city’s tax base that pay for police and city services. You might as well sue the people who trashed the buildings and actually, you know, created the blight.

Twisting public nuisance law to serve political purposes or to tap a new source of revenue has proved a dismal failure, as Rhode Island and Ohio’s lead paint lawsuits demonstrate. Time for candidates and voters to hold the elected officials who brought the suits accountable.

(Hat tip, Walter Olson, Point of Law, with much background at this post.)

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