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City’s lawyers work to keep Wells Fargo lawsuit alive

In his latest attempt to convince a federal judge that Baltimore’s home-loan discrimination suit against Wells Fargo should not be dismissed, John P. Relman likened the city to a motorist who gets knocked off I-95 by a distracted, drifting driver.

Rainy conditions are the recent economic downturn, so the story goes, and the truck that rolls through oncoming traffic and strikes the car represents other contributing factors that lead to foreclosures of city properties. But it’s the “texting” driver, the loan originator, who’s at fault, Relman emphasized.

“That driver in this analogy is Wells Fargo,” said Relman, the municipality’s outside counsel who himself traveled up the interstate from his Washington, D.C., office Wednesday to persuade U.S. District Judge J. Frederick Motz to reverse his January ruling in the case.

Andrew L. Sandler, the San Francisco-based bank’s attorney, seized upon Relman’s analogy to make a point he and, to some degree, Motz, have consistently made: the city’s case is not a borrower class action, it’s a Fair Housing Act discrimination case.

“Mr. Relman doesn’t represent the driver,” Sandler said of the fabled operator of the bumped car. “The driver is the borrower. He’s got the wrong plaintiff.”

The first-of-its-kind lawsuit, in which the city is claiming damages for the public services cost and diminished tax revenues attributable to Wells Fargo’s subprime loans, may have been refashioned as a motor tort case Wednesday, but in many ways the hearing was similar to the exchange between the parties and the court in the same courtroom nearly nine months ago: Relman said he had sufficient evidence of the bank’s “egregious conduct,” Motz seemed dubious of the city’s ability to prove its case, and the defense sounded broad denials.

Motz, who dismissed the case earlier this year while inviting the city to more narrowly tailor its claims, did not say when he would rule this go-round. The judge made a joke about how the Orioles’ recent turnaround might give the blighted city hope, descended to shake hands with the lawyers and walked back to his chambers, leaving the lawyers to wonder whether the judge’s mind had been changed.

Asked whether limiting the city’s claim to costs associated with just 190 Wells Fargo-related vacancies carried the day with Judge Motz, City Solicitor George A. Nilson said, “It should, but he’s the judge and we’re the lawyers.”

Sandler deferred questions to a bank spokeswoman who attended the hearing.

“Everything I was going to say, I said in the courtroom,” Sandler said.

The spokeswoman, Vickee Adams, reiterated that “the city’s challenges are not the result of Wells Fargo’s actions.”

“[O]ne half of one percent of the vacant properties … can be attributed to Wells Fargo and 10,000 of them are attributable to the city of Baltimore,” she said.

Relman argued that to survive a motion to dismiss, all the city must do is present a plausible case, one that he said it has, supported by both statistics and damning affidavits from former employees of the bank.

But while Motz said the city had offered “powerful evidence of wrongdoing,” he seemed unconvinced that the city could, amid all the other factors at play, prove a causal connection between the bank’s lending practices and the city’s increased costs and lowered revenues.

“It seems to me there is a gap between the two,” Motz said.

For his part, Relman seemed concerned that the judge was focusing on proof rather than plausibility. He asked the judge for more limited discovery that would allow the city to demonstrate that it, in fact, has a case. Relman noted Wells Fargo probably has pulled together similar information in response to a recently announced investigation by federal regulators.

“Seeing the ship going down, Mr. Relman says, ‘Give me a little bit of discovery,’” Sandler responded. (Motz did not ask about the government investigation.)

Sandler concluded by calling the city’s documentation of its costs for the more limited number of Wells Fargo-related vacancies “very, very sloppy” and saying the city’s contention that Wells Fargo was an outlier among banks is a “knowing misrepresentation.”

“It is time for this case to end,” Sandler said.