By Eli Segal, Dan Ackelsberg, and Joseph Sullivan
In July, the Public Interest Law Center and Stapleton Segal Cochran LLC, a Philadelphia- and Marlton-based litigation boutique, combined in a pro bono effort as amicus curiae to block efforts by the Department of Justice to prematurely end a federal consent decree involving alleged housing discrimination. Under the 2023 consent decree, a private bank, ESSA Bank & Trust (“ESSA”), had agreed to take several steps over five years to remedy its alleged geographic and financial discrimination against communities in the Philadelphia region.
Under the Consent Order, ESSA also agreed to comply with other federal laws combatting housing discrimination and ensuring fair and equal access to credit by ending a practice the United States termed “redlining”.
Historically, redlining has been used to engage in illegal racial discrimination by excluding predominantly Black and Hispanic neighborhoods whose area was “redlined” by banks and other lenders from gaining access to financial resources that were otherwise available to residents. This drove down property values in those redlined neighborhoods, while limiting the freedom of movement of those same property owners, ultimately leading to more segregation.
Specifically, the Complaint, filed in federal court and assigned to Judge Michael Baylson, had alleged that from 2017 through at least 2021, ESSA had deliberately excluded parts of Philadelphia from the Community Reinvestment Act (CRA) assessment area, leading to the exclusion of majority-Black and Hispanic census tracts in West Philadelphia from the CRA area. The Complaint also charged that ESSA had failed to adequately staff its branches closest to the excluded Philadelphia areas -- employing no nonwhite or bilingual loan officers to help implement required fair housing practices -- and instead intentionally focused on predominantly majority-white census tracts to receive mortgage loans.
The Complaint charged that these practices amounted to unlawful exclusion of certain majority-Black and Hispanic communities, making it effectively impossible for their residents to benefit from access to the bank’s home owner buyer program and other financial benefits.
The Complaint noted that an FDIC examination concluded that there was reason to believe that ESSA had engaged in a pattern or practice of redlining and referred the matter to the Department of Justice.
Less than a month later, the Court entered a Consent Order resolving all claims between the U.S. and ESSA, and stated that the Consent Order would be effective for at least five years—and for longer if, after five years, ESSA had not fully invested at least $2.92 million in a loan subsidy fund designed to create access to mortgages and refinancing loans. Importantly, the loan subsidy fund was just one of the Consent Order’s requirements. Others included five years’ worth of required fair lending training, hiring practices, community outreach, and monitoring. The Court also retained jurisdiction to enforce the Order, stating that any modifications would require Court approval by motion.
Over the following nearly two years, ESSA completed some of the steps outlined in the Consent Order but others remained necessarily unfinished given that they were five-year-long requirements.
Then, on June 6 of this year, still less than two years after the Order was filed, the U.S. filed what it called an “uncontested” motion to terminate the Consent Order and dismiss the action with prejudice, arguing that ESSA was “substantially” in compliance with the Order’s terms because ESSA had disbursed all of the required loan subsidy fund.
An uncontested motion meant no adversarial briefing at all. Accordingly, within days, the proposed amici curiae Housing Equality of Pennsylvania, POWER Interfaith and the National Fair Housing Alliance sought leave to file an amicus brief opposing the U.S. motion for early termination of the Order.
Leave was granted, the amici filed a brief in opposition to the U.S. motion to terminate, and the U.S. and ESSA responded. The Court then held a hearing and days later issued an opinion denying the motion, holding that ESSA had not fully complied with the Consent Order, thus blocking its early termination:
Rooted in the mandates of federal law and the protections of the U.S. Constitution, the Consent Order aims to address the lingering effects of ESSA’s alleged discriminatory lending practices by requiring ongoing measures to promote credit access in previously excluded majority Black and Hispanic census tracts. These obligations serve the public interest and remain necessary until the Consent Order’s full term is complete.
The Executive Director of the Housing Equality Center, Rachel Wentworth, declared that “[t]his is a victory for the West and Southwest Philadelphia communities who fought hard for these protections just two years ago,” adding that “[f]or decades banks of all kinds have used redlining to deny neighborhoods of color access to wealth and opportunity,” stating that this form of lending discrimination “will not be tolerated in our communities.”
In its Opinion, the Court noted that, while ESSA had fully disbursed the required loan subsidies, other five-year-long requirements necessarily remained outstanding. ESSA’s own counsel admitted uncertainty as to whether ESSA would maintain those activities [complying with the terms of the Consent Order] without a binding order of the Court. And the Court “emphasize[d] that consent orders are final judicial determinations—not mere policy statements subject to reversal at the discretion of a changing Executive Administration. The integrity of the judicial process and public confidence in the rule of law remain paramount."
Daniel Urevick-Ackelsberg, co-counsel on the matter from the Public Interest Law Center, lauded the court’s decision: “It is a victory for the people of Philadelphia, who deserve a lending market free from discrimination. And it is a victory for the rule of law,” said Urevick-Ackelsberg.
Eli Segal, co-counsel on the matter from Stapleton Segal Cochran LLC, was similarly pleased with the outcome of the pro bono collaboration: “When the Public Interest Law Center asked us to help on this important issue, we were delighted to have the opportunity to join forces. This was a true team effort and one that, we hope, will deter the United States from continuing to seek to undo anti-redlining consent orders under the radar.”
Brent Landau, Executive Director of the Public Interest Law Center, added: “This case demonstrates the power of pro bono partnerships to make an impact on our communities. Each year, pro bono lawyers volunteer thousands of hours of their time to support the Public Interest Law Center, and we rely on firms like Stapleton Segal Cochran to stand with us as we pursue justice for those facing poverty, discrimination, and inequality in Philadelphia and beyond.”
Eli Segal is a business litigator at Stapleton Segal Cochran LLC. Dan Ackelsberg is a senior attorney at Public Interest Law Center. Joseph Sullivan, formerly of counsel and Director of Pro Bono Programs of the Troutman Pepper law firm is the creator and editor of this series.
