Goodrich v. Cross River Bank

Background

The court considered Cross River Bank’s motion to strike class allegations under Federal Rule of Civil Procedure 23(d)(1)(D). The opinion states that Julia Greenfield’s complaint asserted one claim under the Equal Credit Opportunity Act and Regulation B. It also states that two other named plaintiffs had dismissed their claims, although the caption identifies Robert Goodrich, et al., as plaintiffs.

Greenfield alleged that she applied to Cross River Bank for a Paycheck Protection Program loan on January 19, 2021. She alleged that the bank denied her application and other proposed class members’ applications using reasons including “Insufficient information or documentation to make a PPP credit decision” and that the applications were unsuccessful through the bank’s automated system. She alleged that the applications contained enough information for the bank to make a credit decision and that the stated reasons were not true, accurate, complete, or specific.

The proposed class covered people in the United States who completed a Cross River Bank Paycheck Protection Program loan application in 2021, received one or both specified denial reasons, and did not receive another statement of reasons within 30 days of the denial.

Legal standard and analysis

The Equal Credit Opportunity Act requires a creditor taking adverse action against an applicant to provide a written statement of the specific reasons for that action. Regulation B likewise requires a written notification stating specific reasons. The regulation’s official interpretation says that the reasons must accurately describe the factors the creditor actually considered or scored. It also allows a creditor to deny an application as incomplete when the applicant could provide missing information and the creditor lacks enough data to make a credit decision.

Cross River Bank argued that determining whether each proposed class member’s application was incomplete would require individualized review. Greenfield argued that the issue was premature because discovery about the bank’s policies, procedures, systems, and records might show that individualized review was unnecessary.

The court recognized that a district court may decide at the pleading stage whether discovery is appropriate before ruling on whether class treatment is proper. The court nevertheless found that Greenfield had not shown a probability that the requested discovery would eliminate the need to examine each proposed class member’s application. The court also rejected Greenfield’s suggestion that discovery might show that incompleteness was a pretext, noting that the complaint and opposition did not suggest that Cross River Bank had a motive to deny completed applications as incomplete, much less to do so systematically.

The court further observed that the proposed class definition did not limit membership to people who submitted complete applications. The court stated that adding such a limitation would appear to create an impermissible “fail-safe” class—one whose membership depends on first deciding whether the members were legally wronged.

Disposition

The court granted Cross River Bank’s motion to strike the class allegations. The class allegations were stricken with leave to file, by August 15, 2022, a first amended complaint realleging claims on behalf of a proposed class if Greenfield chose to do so. The court also continued the case-management conference from August 26, 2022, to October 21, 2022, and required a joint case-management statement by October 14, 2022. Judge Maxine M. Chesney signed the order.