On Jan. 10, 2008, the City of Cleveland filed a complaint against a multitude of investment banks alleging that their proliferation of subprime loans resulted in foreclosures that created a public nuisance. In this commentary, Kenneth M. Lapine provides a step-by-step breakdown of the argument being put forth by the City.
Mr. Lapine writes: “The city of Cleveland, Ohio, has begun its own campaign to combat the scourges of subprime lending on the city’s neighborhoods and its residents. The city filed a lawsuit on January 10, 2008 in the Cuyahoga County Common Pleas Court against 21 major investment banks, including Merrill Lynch, Deutsche Bank, Goldman Sachs, Lehman Brothers, Bear Stearns and Wells Fargo; the city accused the banks of creating a public nuisance by ‘proliferating toxic sub-prime mortgages within [the City’s] borders, under circumstances that made the resulting spike in foreclosures a foreseeable and inevitable result.’ . . . The use of such a novel basis for liability — the creation of a public nuisance — is reminiscent of the theory used to attack lead paint manufacturers, as a group, for causing conditions to exist that led (no pun intended) to injury and the potential for injury from lead poisoning to children who ingested or came into contact with lead-based paint in older residences.” To read the full commentary, click on the link below: