295 F.3d 565 (6th Cir. 2002), 00-1634, Paschal v. Flagstar Bank

Docket Nº:00-1634.
Citation:295 F.3d 565
Party Name:Gerald PASCHAL, et aL, Plaintiffs-Appellees, v. FLAGSTAR BANK, FSB, a Federal Savings Bank, f/k/a First Security Savings Bank, FSB, Defendant-Appellant.
Case Date:July 17, 2002
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 565

295 F.3d 565 (6th Cir. 2002)

Gerald PASCHAL, et aL, Plaintiffs-Appellees,

v.

FLAGSTAR BANK, FSB, a Federal Savings Bank, f/k/a First Security Savings Bank, FSB, Defendant-Appellant.

No. 00-1634.

United States Court of Appeals, Sixth Circuit

July 17, 2002

Argued: March 19, 2002.

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Stephen R. Tomkowiak (argued and briefed), Southfield, MI, for Plaintiffs-Appellees.

Francis R. Ortiz (argued and briefed), Paul R. Bernard, Rick A. Haberman (briefed), Dickinson, Wright, PLLC, Detroit, MI, for Defendant-Appellant.

Before: SILER and GILMAN, Circuit Judges; HEYBURN, Chief District Judge.[*]

OPINION

GILMAN, Circuit Judge.

Eight sets of African-American plaintiffs filed a mortgage-lending discrimination lawsuit against Flagstar Bank. Although the district court granted Flagstar summary judgment against three of these sets, the claims of the other five sets proceeded to trial. During jury selection, Flagstar excused the only African-American on the jury panel. But the district court recalled the juror after concluding that Flagstar's peremptory challenge was improperly exercised. The district court also decided a number of evidentiary issues against Flagstar during the trial. A verdict was subsequently returned in favor of Flagstar as to three of the five sets of plaintiffs, but the jury found that the remaining two sets of plaintiff's—the Edwardses and the Paschals—had proven by a preponderance of the evidence that Flagstar racially discriminated against them when they applied for mortgages. Flagstar filed a number of post-trial motions, all of which were denied by the district court. The bank now appeals the various adverse decisions that the district court rendered throughout the case. For the reasons set forth below, we AFFIRM the district court's judgment in favor of the Edwardses, REVERSE its judgment in favor of the Paschals, and REMAND the case with instructions to dismiss the Paschals' complaint.

I. BACKGROUND

The district court succinctly stated the general background of this case as follows:

This is a housing discrimination case (mortgage lending) brought under sections 805 and 818 of the Fair Housing Amendment Act of 1988, 42 U.S.C. § 3605 and § 3617, and corresponding regulations promulgated by the Department of Housing and Urban Development pertaining to mortgage lending, 24 C.F.R. §§ 100.120 to 100.130, as well as the Civil Rights Act of 1866 and 1870, 42 U.S.C. § 1981 and § 1982, and section 504 of Michigan's Elliot-Larsen Civil Rights Act, M.C.L. § 37.2504.

In general, plaintiffs claim that they were the subjects of racial discrimination in the manner in which defendant Flagstar Bank (Flagstar), a mortgage bank, handled their mortgage loan applications or in the way the terms and

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conditions of their mortgage loans were set.

Edwards v. Flagstar Bank, 109 F.Supp.2d 691, 692-93 (E.D.Mich.2000).

Prior to trial, Flagstar filed a motion for summary judgment, arguing that the events underlying the claims of four sets of plaintiffs, including the Paschals, occurred outside of the applicable statute of limitations. Although the district court granted Flagstar's motion for partial summary judgment with regard to the three other sets of plaintiffs, it denied the motion with regard to the Paschals. Flagstar did not contend that the Edwardses' claims were barred by the statute of limitations.

Five sets of plaintiffs went to trial. They are described by the district court as follows:

Audra Carson (Carson) claimed she was the victim of racial discrimination in the manner in which her application for a mortgage loan was handled. She did not close with Flagstar.

Paquita Davis-Friday (Davis-Friday) claimed she was the victim of racial discrimination in the manner in which her application for a mortgage loan was handled. She did not close with Flagstar.

Heath Thomas (Thomas) claimed he was the victim of racial discrimination in the manner in which his application for a mortgage loan was handled. He did not close with Flagstar.

David Edwards and E. Stephanie Edwards, his wife, (the Edwards[es]) claimed they were the victims of racial discrimination in the manner in which their efforts to refinance their mortgage loan with Flagstar was handled. The Edwardsf[es] eventually obtained a new mortgage loan from Flagstar.

Gerald Paschal and Lisa Paschal (the Paschals) claimed they were the victims of racial discrimination in the manner in which their application for a mortgage loan was handled. The Paschals were approved for a mortgage loan by Flagstar on terms considerably less favorable than for which they applied and eventually obtained a mortgage loan elsewhere.

Edwards, 109 F.Supp.2d at 693.

Because the jury rendered a verdict in favor of the Edwardses and the Paschals, we will describe their claims in more detail. On March 11, 1994, the Edwardses applied for a 15-year mortgage from Flagstar at a fixed interest rate of 7.875%. Their application was denied on May 26, 1994. According to Flagstar, the Edwardses' application was denied because they had insufficient funds to close the loan, inadequate collateral, and Flagstar "do[es] not grant credit to any applicant on the terms and conditions [the Edwardses] requested." The Edwardses claim that the stated reasons were a pretext, designed to mask racial discrimination.

In an attempt to answer Flagstar's questions about various credit issues, the Edwardses met with a Flagstar loan officer on June 1, 1994. The Edwardses maintain that these alleged credit issues were old and inconsequential. Nevertheless, on September 16, 1994, Flagstar issued a second credit denial statement. The Edwardses claim that the reasons given for this denial were also pre textual.

After addressing additional questions about various credit issues, the Edwardses applied for a 30-year mortgage at a higher 9.5% interest rate. When this application was also denied, the Edwardses applied once again for a 30-year mortgage, but this time at a 10.875% interest rate. This final application was approved by Flagstar, and the Edwardses agreed to the terms. The Edwardses now claim that, throughout the entire process, Flagstar treated them as "second class citizens" due to their race.

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In contrast, the Paschals were pre qualified for a $75,000 mortgage at an adjustable 5.625% interest rate in May of 1992, despite having previously filed for bankruptcy. The Paschals were later notified by a loan officer that their mortgage had been tentatively approved. In August of 1992, however, Flagstar prepared a "Statement of Credit Denial, Termination, or Change" in which it informed the Paschals that Flagstar would approve only a $55,000 mortgage. Flagstar asserted that it was making this "counteroffer" because of the Paschals' other credit obligations, their prior bankruptcy, and the bank's inability to verify the Paschals' credit references. According to the Paschals, these reasons were a pretext intended to hide racial discrimination.

Flagstar's loan officer then took the Paschals' loan file to Mortgage Solutions, a/k/a Investaid Corporation, which preliminarily approved a $75,000 mortgage at a fixed 7.99% interest rate. Investaid, however, later withdrew this offer. According to the Paschals, "Flagstar pressured Investaid to not close on the Paschals' application ...." The Paschals also allege that Flagstar fired its loan officer who took the Paschals' file to Investaid. On September 24, 1992, Investaid approved a $59,600 mortgage at 16.490%. After refusing this offer and withdrawing their application from Flagstar, the Paschals received a $68,700 mortgage, at an initial interest rate of 10.490%, from another lender.

The district court summarized the jury trial and subsequent verdicts as follows:

Plaintiffs' claims were tried to a jury in November of 1999. The jury returned a verdict in favor of Flagstar on the claims of Carson, Davis-Friday, and Thomas, and returned a verdict in favor of the Edwards[es] and Paschals. Particularly, the jury found the Paschals proved by a preponderance of the evidence that their race or color was one of the reasons why they did not obtain a mortgage loan from Flagstar. The jury awarded the Paschals $250,000 in compensatory damages and $325,000 in punitive damages. As to the Edwards[es], the jury found that they proved by a preponderance of the evidence that their race and color was one of the reasons why they did not obtain a mortgage loan on their initial application with Flagstar. The jury awarded the Edwards[es] $125,000 in compensatory damages.

Edwards, 109 F.Supp.2d at 693.

After the jury returned its verdict, Flagstar filed a motion for judgment as a matter of law pursuant to Rule 50(b) of the Federal Rules of Civil Procedure. It also filed alternative motions for a new trial pursuant to Rule 59 of the Federal Rules of Civil Procedure and for a remittitur. The district court denied all of Flagstar's motions. This timely appeal followed.

II. ANALYSIS

A. Statute of limitations defense

Flagstar contends that the district court erred in denying its motion for summary judgment, which was based on its argument that the Paschals' suit was barred by the applicable three-year statute of limitations established by 42 U.S.C. §§ 1981 and 1982 and the Michigan Elliott-Larsen Civil Rights Act. M.C.L. § 37.2504. This court has held, however, that "where summary judgment is denied and the movant subsequently loses after a full trial on the merits, the denial of summary judgment may not be appealed." Jarrett v. Epperly, 896 F.2d 1013, 1016 (6th Cir. 1990). The policy behind this rule is based on the conclusion that the potential injustice of allowing the improper denial of a motion for summary judgment is outweighed by the injustice of "depriv[ing]

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