Cherry v. Amoco Oil Co.

• Citation: 490 F. Supp. 1026
• Decision Date: 11 June 1980
• Docket Number: Civ. A. No. C78-574A.
• Parties: Claire CHERRY, Plaintiff, v. AMOCO OIL COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Georgia

490 F. Supp. 1026

Claire CHERRY, Plaintiff, v. AMOCO OIL COMPANY, Defendant.

Civ. A. No. C78-574A.

United States District Court, N. D. Georgia, Atlanta Division.

June 11, 1980.

Lawrence L. Aiken, Atlanta, Ga., for plaintiff.

Earle B. May, Jr., Judson Graves, Jones, Bird & Howell, Atlanta, Ga., for defendant.

FINDINGS OF THE COURT AND DIRECTION FOR ENTRY OF JUDGMENT

ORINDA DALE EVANS, District Judge.

The above-captioned case was tried to the Court sitting without a jury on April 29-30, 1980. Having considered the evidence adduced at the trial, together with the briefs and arguments of counsel, the Court finds in favor of Defendant Amoco Oil Company. Specifically, the Court finds and concludes as follows:¹

I. SUMMARY OF CASE

Plaintiff is a white woman who resides in a predominately non-white residential area in Atlanta, Georgia. She applied for but was denied a gasoline credit card by Defendant Amoco Oil Company. She seeks damages² under the Equal Credit Opportunity Act,³ which provides in part that it is unlawful for a creditor to discriminate against a credit applicant on the basis of race. She contends the reason for rejection of her application was race-related and that as such, said denial is proscribed by the Act.

Defendant Amoco Oil utilizes a complex computerized system to evaluate credit card applications. The system takes into account 38 objective factors in scoring each application, including level of income, occupation, and Amoco's prior credit experience in the U. S. Postal Service zip code area where the applicant resides. The information provided with respect to each of the 38 factors is scored by the computer. Credit is granted to those who receive a passing aggregate score; it is automatically denied to others.

Amoco's testimony indicated that its scoring system assigns a low rating to those zip code areas in which it has had unfavorable delinquency experience. Of those Atlanta zip code areas bearing the prefix 303—,⁴ low ratings were assigned to all predominantly non-white zip code areas⁵ as well as to many predominantly white areas. Plaintiff's zip code area, 30310, was assigned a rating of 1, the least desirable rating on a scale of 1 to 5.⁶ The evidence showed without dispute that if Plaintiff lived in a zip code area rated 3 or above, and all other information including level of income shown on her application had remained constant, she would have been granted a credit card by Amoco.

Plaintiff asserts that Amoco's utilization of zip code ratings is racially discriminatory. She contends she has standing⁷ to complain of such discrimination because she was adversely affected by it; to wit, she lives in a predominantly non-white zip code area which has been low-rated by Amoco's system.

Plaintiff produced two witnesses, herself and a sociologist. Plaintiff's testimony established that she received a letter from Amoco indicating her application had been turned down; the letter specified that one of the reasons was "our previous credit experience in your immediate geographical area."⁸ Plaintiff testified she was humiliated and embarrassed by rejection of her credit card application. She further testified she subsequently has had to reveal this denial on other credit applications, but there was no testimony that she has been denied other credit. In short, Plaintiff presented no testimony of actual damages, unless the statutory term "actual damages" is to be interpreted by the Court as permitting an award of damages for mental anguish.

Plaintiff's other witness testified he had received from Plaintiff's counsel a list of those Atlanta zip code areas bearing a 303 prefix which were rated 1 or 2 by Amoco, along with information as to credit application acceptance rate in each area. He then compiled, based on estimates derived from 1970 census data, percentage estimates of non-white population in each of these areas. These two sets of percentages were then correlated on a scattergram he prepared (Plaintiff's Exhibit 5, Figure 4). As may be seen from an examination of the scattergram, it shows a significant correlation between acceptance rate/percentage of white population or conversely, rejection rate/percentage of non-white population.

Defendant Amoco produced witnesses who opined that the methodology used by Plaintiff was faulty for various reasons. Amoco claimed the scattergram was based on incorrect demographic data and that even assuming the correctness of the data reflected in the scattergram, it did not prove anything about relationship between use of zip code ratings and rejection of black credit applicants, because (1) it made the unsupported assumption that the reason for rejection was the applicant's residence in his particular zip code area and (2) it made the unsupported assumption that Amoco's applicant pool for each zip code area reflected the racial composition of the population as a whole.

II. LAW APPLICABLE

The Equal Credit Opportunity Act, 15 U.S.C. § 1691, was originally passed in 1974 to prohibit credit discrimination based on sex and marital status. It was amended in 1976 to, among other things, prohibit race discrimination in credit transactions. The Act provides that an aggrieved applicant may sue for actual damages, punitive damages and equitable and declaratory relief. 15 U.S.C. § 1691e(a)-(c). A successful litigant is entitled to recover costs and a reasonable attorney's fee. 15 U.S.C. § 1691(d). There has been relatively little judicial interpretation of the Act, thus leaving unresolved many provocative issues, including some presented in this case. In the first place, must a plaintiff show actual damages in order to be entitled to any relief under the Act? Secondly, what must a plaintiff show in order to make out a prima facie case? Can discrimination be inferred by using an "effects test" concept, per Griggs v. Duke Power Company, 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971)? If so, what is the proper methodology to be utilized?

Dealing with the damages question first, the Court holds that it is not necessary for plaintiff to prove actual damages to be entitled to relief. In this case, Plaintiff did state she was humiliated by Amoco's failure to grant her credit and that she felt she had been damaged by having to reveal the refusal of credit on future credit applications. This does not constitute proof of actual damage. However, it is clear to the Court that the Act did not envision the necessity of proof of actual damages as a prerequisite to entitlement to punitive damages, equitable or declaratory relief, or attorney's fees. Section 1691e(d) provides that "in the case of any successful action under subsection (a), (b), or (c) of this section, the cost of the action, together with a reasonable attorney's fee as determined by the Court, shall be added to any damages awarded by the court under such subsection." Subsection (a) is the subsection dealing with actual damages; subsection (b) pertains to punitive damages; and subsection (c) relates to equitable and declaratory relief. Obviously, § 1691e(d) envisions that there could be a recovery of punitive damages or equitable or declaratory relief in a situation where no actual damages are found. Therefore, the Court determines that should a violation be found, it has the power to award Mrs. Cherry punitive damages, even where no actual damages have been shown.

The question of what a plaintiff must show under the Equal Credit Opportunity Act to make out a prima facie case is a more subtle one. The Court notes that the drafters of the regulations accompanying the Act, see 12 C.F.R. § 202.6, footnote 7 as well as the legislative history of the Act, see Senate Report to accompany H.R. 6516, No. 94-589, pp. 4-5; House Report to accompany H.R. 6516, No. 94-210, p. 5, U.S. Code Cong. & Admin.News 1976, p. 403, assume that the "effects test" will be utilized in cases under the Equal Credit Opportunity Act. See also Hsia, Credit Scoring and the Equal Credit Opportunity Act, 30 Hastings L.J. 371 (1978).

The so-called "effects test" is derived from a decision of the U.S. Supreme Court, Griggs v. Duke Power Company, 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), a Title VII case under 42 U.S.C. § 2000e, et seq. There, the employer required persons hired in the labor department of its power generating facility to have a high school diploma. The effect of this requirement was to exclude a significantly higher percentage of black applicants from qualifying for employment than white applicants. In reversing the Fourth Circuit Court of Appeals' determination that Title VII required proof of intent to discriminate, and that such intent could not be inferred from mere disparate impact of the diploma requirement on black persons, the Supreme Court held that Title VII not only proscribes intentionally discriminatory conduct but also looks to the consequences of conduct, whether intent to discriminate is present or not. It held that plaintiff's evidence of disparate impact on a protected class was sufficient to make out a prima facie case. At that point, it became the employer's burden to show that the job requirement was related to job performance.

Although there are significant differences between the scope and purpose of Title VII and the Equal Credit Opportunity Act, and between the employment and credit settings, the court nonetheless concludes that use of an effects test concept is an available method for a plaintiff to make out a prima facie case. This conclusion is based upon the Court's assumption that otherwise, the Act will provide a remedy only in those rare cases where a company deciding on credit expressly states it is denied for a prohibited reason. Also, the Court is cognizant of the fact that discrimination in credit transactions is more likely to be of the unintentional, rather than the intentional, variety. The employment setting necessarily involves day-to-day dealings and contact...