Juarez v. Social Finance, Inc.

Background

Ruben Juarez and Calin Constantin Segarceanu filed a proposed class action against Social Finance, Inc. and Social Finance Lending Corp., collectively called SoFi. They alleged that SoFi denied or prevented loan applications based on their immigration-related statuses. Juarez alleged that SoFi’s website did not allow him to complete applications because he was a Deferred Action for Childhood Arrivals recipient rather than a United States citizen, lawful permanent resident, or visa-holder. Segarceanu alleged that SoFi denied his personal-loan application because he was a conditional permanent resident whose green card had a two-year validity period.

The amended complaint asserted three causes of action: discrimination based on alienage under 42 U.S.C. § 1981; discrimination under California’s Unruh Civil Rights Act; and obtaining a consumer report without a permissible purpose under the Fair Credit Reporting Act. The plaintiffs also proposed three classes covering certain noncitizens with Deferred Action for Childhood Arrivals status or conditional permanent-resident status.

SoFi moved to compel arbitration as to Juarez and moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss all of the plaintiffs’ claims.

Arbitration

SoFi argued that Juarez agreed to arbitrate when he registered on SoFi’s website in 2016. The court rejected the plaintiffs’ argument that the agreement lacked consideration, meaning something of legal value exchanged for the agreement. The court held that the parties’ mutual promises to arbitrate were sufficient consideration even though Juarez alleged that he was ineligible for a SoFi loan.

The court nevertheless found that the arbitration agreement did not cover Juarez’s later interactions with SoFi. The agreement referred to a registration, submission of information, or loan application in the singular and operated on a transaction-by-transaction basis. It did not say that the agreement applied to every future registration, submission, or application. The court also found that the agreement’s survival clause affected the agreement’s duration, not its scope. Because Juarez’s 2017, 2018, and 2019 efforts were alleged to be separate transactions rather than a continuation of the 2016 application, the court denied SoFi’s motion to compel arbitration.

Proposed Class Allegations

SoFi alternatively asked the court to strike the class allegations because the proposed classes included people who sought different types of SoFi loans from those sought by Juarez and Segarceanu. The court declined to strike the class allegations. It reasoned that the plaintiffs alleged the same discriminatory conduct and injury regardless of the specific type of loan sought and that SoFi had not shown that striking the allegations was appropriate at this early stage. The court stated that SoFi could address those issues during class-certification proceedings if the case proceeded.

Motion to Dismiss

As to the § 1981 claim, SoFi argued that its policies did not discriminate based on alienage and were permitted by the Equal Credit Opportunity Act. The court rejected that argument at the pleading stage. It concluded that § 1981 protects lawfully present immigrants, including people with Deferred Action for Childhood Arrivals status and conditional permanent residents, and that the Equal Credit Opportunity Act did not limit § 1981’s protections. The court therefore found that the plaintiffs adequately alleged discrimination under § 1981 and denied SoFi’s motion to dismiss that claim.

As to the Unruh Act claim, SoFi argued that the Act did not apply because the plaintiffs were not California residents and the alleged conduct did not occur in California. The plaintiffs responded that SoFi developed and implemented the challenged policies in California, but the court found that the complaint provided only conclusory allegations without supporting facts. The court granted SoFi’s motion to dismiss the Unruh Act claim.

As to the Fair Credit Reporting Act claim, the plaintiffs alleged that SoFi obtained Segarceanu’s credit report after receiving his green card, which allegedly showed that he was ineligible under SoFi’s lending policy. The court held that these allegations were sufficient at the pleading stage to support the possibility that SoFi lacked a permissible purpose or legitimate business need to obtain the report. The court therefore denied SoFi’s motion to dismiss the Fair Credit Reporting Act claim and noted that the issue could be revisited after discovery.

Disposition

The court denied SoFi’s motion to compel arbitration and granted in part and denied in part SoFi’s motion to dismiss. It allowed the plaintiffs 21 days to amend the deficiencies in the Unruh Act claim. The opinion also ordered a telephonic case-management conference and a joint case-management statement.