Brown v. City National Bank

Background

Elaine Brown applied to City National Bank for a $335,000 home loan in June 2019. The bank requested additional documents and then denied the application by letter dated July 11, 2019, citing excessive obligations in relation to income and insufficient funds to close the loan.

In January 2023, Brown learned that the Department of Justice had filed a complaint against City National Bank alleging discriminatory lending practices in majority-Black and Hispanic neighborhoods in Los Angeles. The parties agreed to a Consent Order, which, as the opinion notes, stated that the bank denied the allegations in the complaint.

Brown sued City National Bank in June 2023. She alleged that the bank denied her loan as part of an illegal pattern and practice of redlining and asserted claims under the Fair Housing Act, the Equal Credit Opportunity Act, sections 1981 and 1982 of the Civil Rights Act of 1866, and several California laws.

Motion to Dismiss

City National Bank moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the claims other than the Equal Credit Opportunity Act claim were time-barred and that the Equal Credit Opportunity Act claim was not adequately pleaded.

Fair Housing Act and Civil Rights Act Claims

The court held that Brown’s federal discrimination claims were based on the denial of her loan application. The Fair Housing Act claim was subject to a two-year limitations period that began when the alleged discriminatory act occurred, not when Brown later discovered evidence that might suggest a discriminatory motive. Because the loan denial occurred in July 2019, the court concluded that the Fair Housing Act claim expired in July 2021. The court dismissed that claim with prejudice.

The court likewise concluded that Brown’s claims under sections 1981 and 1982 accrued when she learned that City National Bank had denied her loan, even if she did not then know that discrimination might have motivated the denial. Those claims also expired in July 2021. The court dismissed counts three and four with prejudice as time-barred.

Equal Credit Opportunity Act Claim

The court explained that the Equal Credit Opportunity Act prohibits a creditor from discriminating against an applicant in a credit transaction based on listed protected characteristics. Brown pursued both disparate-treatment and disparate-impact theories. A disparate-treatment theory requires allegations of discriminatory intent. A disparate-impact theory requires allegations connecting a specific policy or practice to a significant disproportionate effect on a protected class and to the plaintiff’s injury.

The court found that Brown did not identify allegations showing that City National Bank intentionally denied her loan because of race. The court also found that her allegations about the bank’s Oakland branch, marketing practices, and loan activity in majority-Black and Hispanic neighborhoods did not connect a specific policy to the denial of her loan. The court therefore dismissed the Equal Credit Opportunity Act claim with leave to amend.

State-Law Claims and Disposition

Because the court dismissed all claims over which it had original federal jurisdiction, it declined to exercise supplemental jurisdiction over Brown’s remaining state-law claims and did not address City National Bank’s arguments for dismissing those claims. The court dismissed the state-law claims without prejudice.

The court granted City National Bank’s motion to dismiss. It dismissed counts one, three, and four under the Fair Housing Act and Civil Rights Act with prejudice; dismissed the second cause of action under the Equal Credit Opportunity Act with leave to amend; and dismissed the remaining state-law claims without prejudice. The court allowed Brown to amend her complaint by February 19, 2024, and stated that no additional parties or claims could be added without permission or the defendant’s agreement.