By Jonathan Stempel
(Reuters) - A federal appeals court on Tuesday rejected Cincinnati's effort to hold Wells Fargo & Co liable for creating a public nuisance by letting properties it owned, including through foreclosure, fall into disrepair because the upkeep cost too much.
The 6th U.S. Circuit Court of Appeals in Cincinnati said the Ohio city of roughly 299,000 people failed to show that higher police and fire expenses to combat crime and blight, and a drop in its property tax base, were the direct result of misconduct by Wells Fargo.
It also said Cincinnati failed to show that the third-largest U.S. bank intended to cause harm, or that the hundreds of properties it has owned, including in distressed neighborhoods, endangered the public's health or safety.
"The city may use nuisance law to address an actual nuisance," Circuit Judge Jeffrey Sutton wrote for a 2-1 majority. "But alleged bad intent or alleged code violations by themselves do not suffice in the absence of an unsafe or unsanitary condition associated with an identifiable property."
Cincinnati's city solicitor, Paula Boggs Muething, expressed disappointment with the decision, saying it frees banks to continue "privatizing economic benefit and socializing economic loss" in Ohio.
"The city of Cincinnati will continue to aggressively protect its neighborhoods from out of town, problem property owners, but today's decision - that banks may ignore the city's laws without consequence - has dealt a blow to that effort," she said in a statement.
Wells Fargo did not immediately respond to requests for comment.
Cincinnati is one of many large U.S. cities to accuse banks following the 2008 financial crisis of causing harm by letting properties deteriorate, conducting predatory lending, or both.
The city claimed that San Francisco-based Wells Fargo disregarded state and local property maintenance laws "with impunity," including by routinely ignoring civil fines for high weeds, grass and building code violations.
It said the bank's unlawful practices have persisted since 2006, including in "more vulnerable" neighborhoods where Wells Fargo appeared willing to spend on upkeep only if it stood to profit or reduce losses.
Cincinnati previously resolved other claims against Wells Fargo, as well as nuisance and other claims in a similar lawsuit against Deutsche Bank AG, the appeals court said.
The case is Cincinnati v Wells Fargo Bank NA et al, 6th U.S. Circuit Court of Appeals, No. 16-3752.
(Reporting by Jonathan Stempel in New York; Editing by Jonathan Oatis)