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City of Cincinnati v. Deutsche Bank National Trust Co.

United States Court of Appeals, Sixth Circuit

July 11, 2017

City of Cincinnati, Plaintiff-Appellant,
v.
Deutsche Bank National Trust Company, et al., Defendants, Wells Fargo Bank, N.A.; Wells Fargo Bank, N.A., as Trustee, Defendants-Appellees.

          Argued: May 3, 2017

         Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 1:12-cv-00104-Sandra S. Beckwith, District Judge.

          Jessica L. Powell, CITY OF CINCINNATI, Cincinnati, Ohio, for Appellant.

          David Dunn, HOGAN LOVELLS U.S. LLP, New York, New York, for Appellees.

          Jessica L. Powell, Jacklyn Martin, CITY OF CINCINNATI, Cincinnati, Ohio, for Appellant.

          David Dunn, HOGAN LOVELLS U.S. LLP, New York, New York, Sean Marotta, HOGAN LOVELLS U.S. LLP, Washington, D.C., James E. Burke, KEATING MUETHING & KLEKAMP PLL, Cincinnati, Ohio, for Appellees.

          Before: COLE, Chief Judge; SUTTON and KETHLEDGE, Circuit Judges.

          OPINION

          SUTTON, Circuit Judge.

         A bank customarily has the right to take title to a property if the borrower fails to repay the loan used to purchase it. After the 2008 financial crisis, many banks foreclosed on many properties used to secure the underlying loans. According to the City of Cincinnati, one financial institution based out of State (Wells Fargo) and one based out of the country (Deutsche Bank) adopted a policy of violating local and state property regulations when the cost of compliance outweighed the value that could be recouped through the resale of a foreclosed property. The policy, says the City, had two consequences. One was to violate local and state public-safety laws that require owners to maintain their properties. The other was to create a common law public nuisance that lowered property tax revenues, increased police and fire expenses, and added other administrative costs.

         As this case comes to us, the parties have resolved all claims arising from any individual code violations and associated fines attached to properties named in the City's complaint. The City also has resolved the common law nuisance claims against Deutsche Bank. That leaves the common law nuisance claims against Wells Fargo, which the district court eventually rejected as a matter of law. The City appeals that ruling, and we affirm.

         I.

         The City's complaint, several complaints in truth, alleged that the banks' policy created a common law absolute and qualified public nuisance, statutory public nuisance, interference with fiduciary duty, and municipal code violations. It sought punitive and compensatory damages as well as declaratory relief. By the time it filed the third amended complaint, the one pertinent here, the City had dropped the interference and punitive damage claims as well as the claims against some of the Deutsche Bank entities. But it still maintained claims for municipal code violations (Claims 1-4), statutory public nuisance (Claim 5), common law public nuisance (Claim 6), and declaratory relief (Claim 8) against Wells Fargo and its affiliates and some of the Deutsche Bank entities. Though the second amended complaint contained separate claims for common law public nuisance and common law absolute public nuisance, the third amended complaint contained only the former (which apparently explains the absence of a seventh claim). In addition to challenging Wells Fargo's practice of non-compliance, the City attached a series of exhibits naming several properties as common law and statutory nuisances as well as a number of properties with outstanding code violations.

         Developments since the City filed its third amended complaint have narrowed the dispute still further. In connection with a settlement agreement, the City stipulated to the dismissal of the rest of the Deutsche Bank entities and dismissed the claims arising from several Wells Fargo properties. Both sides agreed to dismiss the statutory nuisance claim with prejudice (Claim 5) and to stipulate to final judgment in favor of the City on the municipal code violations (Claims 1-4). The City has since disavowed any claims for injunctive and declaratory relief on appeal (Claim 8).

         That leaves Claim 6: the damages claim for common law public nuisance against Wells Fargo. In rejecting this claim, the district court held that (1) the economic-loss doctrine foreclosed recovery and (2) the City's alleged damages―increased police and fire expenses, a decrease in the City's tax base, and an increase in the City's administrative costs―were too attenuated to establish proximate cause. The City appealed this ruling.

         II.

         Under Ohio law, a common law public nuisance is "an unreasonable interference with a right common to the general public." Kramer v. Angel's Path, L.L.C., 882 N.E.2d 46, 51 (Ohio 2007). Examples of such rights, from Ohio and elsewhere, include: a right of public passage (e.g., obstruction of highways); a right to use public space (e.g., pollution of fisheries); a right to navigable waterways (e.g., obstruction of public streams); a right to public health (e.g., exposure to diseased animals); a right to public safety (e.g., negligent marketing/sale of dangerous weapons); a right to public morality (e.g., houses of ill-repute); a right to public peace (e.g., excessive noise); and a right to public ...


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