Sarakhman v. Sumitomo Mitsui Finance and Leasing Company, LTD.

Background

Nikolai Sarakhman alleged that Sumitomo Mitsui Finance and Leasing Company, LTD. discriminated against him based on his Russian and Belarussian ancestry. He alleged that Sumitomo denied or effectively denied financing for a truck he intended to purchase for his business, Byteks USA, LLC. His claims invoked the Equal Credit Opportunity Act (ECOA), Section 1981 of the Civil Rights Act, the New York State Human Rights Law, and the New York City Human Rights Law.

According to the complaint, Sumitomo initially approved financing of up to $171,000 for 90 days. Sarakhman later purchased a truck at auction for $177,500 plus $4,000 in fees. Sumitomo told him that formal approval was needed because the purchase price was unknown and exceeded the earlier financing amount. After Sarakhman disclosed that he was born in Russia and grew up in Belarus, Sumitomo asked questions about possible connections between his company and entities in Russia or Belarus. Sumitomo’s compliance and sanctions teams reviewed the matter, and a representative told Sarakhman to assume the answer would be “no” while he pursued other financing. Sarakhman then obtained a loan from another lender.

Motion to Dismiss

Sumitomo moved to dismiss under Rule 12(b)(6), which allows dismissal when a complaint does not allege enough facts to state a legally plausible claim. Sumitomo argued that Sarakhman had not alleged an actual denial of credit, an adverse action, or facts showing discriminatory intent.

ECOA discrimination claim

The court dismissed the ECOA discrimination claim. It concluded that the complaint did not allege that Sumitomo continued similar credit transactions with applicants who had similar qualifications but were outside Sarakhman’s protected class. The complaint identified no comparable applicants and did not allege that Sumitomo applied its compliance process inconsistently or arbitrarily.

The court also concluded that Sumitomo had not actually denied Sarakhman’s application. The earlier approval was limited to $171,000, while the truck purchase exceeded that amount and required additional information and formal approval. Although an unreasonable delay can potentially support an ECOA claim, the court found that Sarakhman had not alleged facts showing that this delay resulted from different treatment or discriminatory intent. The compliance review and Sumitomo’s concern about a possible connection to an entity in Russia or Belarus provided an alternative explanation for the delay.

ECOA notification claim

Sarakhman attempted to raise an ECOA notification claim for the first time in his opposition to the motion. The court stated that a plaintiff generally cannot add a claim through opposition papers, so the claim was not properly before the court. The court nevertheless addressed it and concluded that it would fail because Sumitomo had not taken the type of “adverse action” that triggers ECOA’s notice requirements. The review was still ongoing, Sumitomo had not expressly refused to provide credit on substantially the requested terms, and the requested financing exceeded the previously established $171,000 limit.

Section 1981 claim

The court also dismissed the Section 1981 claim. It assumed, without deciding, that Sarakhman’s Russian and Belarussian background could qualify as ancestry or ethnic characteristics protected by Section 1981. The court focused instead on whether the complaint plausibly alleged intentional racial discrimination.

The court found that it did not. Sarakhman alleged that Sumitomo delayed the financing review after learning of his background and examined his social media. But the complaint connected those actions to Sumitomo’s investigation of a possible relationship with a Russian or Belarusian entity that raised compliance concerns. The complaint did not identify specific social-media activity, statements, or other facts indicating that Sumitomo acted because of Sarakhman’s ancestry. The court also noted that the Sumitomo representative allegedly had no control over the compliance process and could not give formal approval.

New York claims and leave to amend

Sarakhman told the court that he no longer intended to pursue his New York State and New York City Human Rights Law claims. The court therefore dismissed those claims with prejudice.

The court granted Sarakhman leave to amend his ECOA and Section 1981 claims. It ordered him to file an amended complaint, if any, within 30 days. The court stated that if he does not do so, it will dismiss the case with prejudice.

Disposition

Judge Jessica G. L. Clarke granted Sumitomo’s motion to dismiss. The federal claims were dismissed, the New York State and New York City claims were dismissed with prejudice, and Sarakhman was permitted to amend the federal claims within 30 days. Because the order resolved a Rule 12(b)(6) pleading issue rather than deciding whether discrimination actually occurred, this is a procedural order.