Maya v. Centex: Lawsuit Alleging High-Risk Loans Diminished Neighborhood Property Values May Proceed
The Ninth Circuit has revived a prospective nationwide class action in which the plaintiffs allege that developers knowingly marketed properties in the plaintiffs’ neighborhoods to high-risk borrowers, decreasing both the resale value and desirability of the plaintiffs’ properties. See Maya v. Centex Corp., 2011 U.S. App. LEXIS 19344 (9th Cir. Sept. 21, 2011) (available here). Last year, the district court granted the defendants’ Rule 12 motion to dismiss, holding that the plaintiffs had failed to allege an “injury” as required by Article III. Id. at *3-4. In reversing the district court, the unanimous three-judge panel found that “decreased economic value and desirability are cognizable injuries.” Id. at 28 (referencing Maya v. Centex Corp., 2010 U.S. Dist. LEXIS 44829 (C.D. Cal. Mar. 31, 2010)).
The appellate court specifically rejected the district court’s analysis that the plaintiffs’ proffered injuries were too speculative, even if the “plaintiffs will not realize any decrease in the value of their property until they attempt to sell.” Id. at *23. Instead, the Ninth Circuit held that “[a] current reduction in the economic value of one’s home is a cognizable injury for constitutional standing purposes.” Id. at *21.
The court also held that the plaintiffs had alleged a separate “injury” because the defendants’ lending practices made the plaintiffs’ properties “less desirable.” Id. at *24. The resulting decrease in the plaintiffs’ quality of life is adequate to support standing. Id.
While this ruling helps homeowners seeking redress for decreased home value and neighborhood desirability, Maya will likely also be extended to other contexts in which the plaintiffs allege a harm that has not yet been realized through a formal economic transaction.