Public Nuisance Litigation against Subprime Industry Hits Roadblock in Cleveland

By Brian P. Brooks
July 20, 2009
Over the past decade, elected city offi cials around the country have attempted to achieve political goals, and to fill municipal coffers, by suing unpopular industries for damages because they have supposedly caused a “public nuisance.” That is not hyperbole—these cities have sued entire industries, not merely particular companies. Invoking the “public nuisance” theory, city governments from Chicago to Philadelphia to St. Louis have sued gun manufacturers, companies that once made lead paint, and others in an attempt to use the litigation process to shut down industries engaged in lawful but locally unpopular businesses. Although most such lawsuits were dismissed as legally meritless in the early part of this decade, the City of Cleveland in 2008 decided to take a turn at the wheel by suing virtually every major participant in the subprime mortgage industry. U.S. District Judge Sara Lioi of the Northern District of Ohio has now dismissed the Cleveland action in its entirety, leaving industry observers to speculate on whether Judge Lioi’s decision will deter other cities from filing similar actions...