No. 09-2275 v. Wachovia Mortgage Corp..

Decision Date13 September 2010
Docket NumberNos. 09-2275, 09-2336.,s. 09-2275, 09-2336.
PartiesTolano ANDERSON; Cathy Anderson; Richard Wilkins; Brenda Wilkins; Lloyd Wheatley; Audria Wheatley, Appellants No. 09-2275 v. WACHOVIA MORTGAGE CORPORATION; Wachovia Corporation, Appellants No. 09-2336.
CourtU.S. Court of Appeals — Third Circuit

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

John S. Grady, Esq. [ARGUED], Grady & Hampton, Dover, DE, for Appellants Cross Appellees.

Michael J. Barrie, Esq., Benesch, Wilmington, DE, Stephen A. Fogdall, Esq. [ARGUED], Schnader Harrison Segal & Lewis LLP, Philadelphia, PA, for Appellees Cross Appellants.

Before: RENDELL and JORDAN, Circuit Judges, and PADOVA, District Judge * .

OPINION OF THE COURT

RENDELL, Circuit Judge.

This case is brought by three African-American couples who, in 2004, purchased adjacent houses in a Dover, Delaware, community known as “Silver Lake.” Plaintiffs received mortgages from Wachovia Mortgage Corporation, but only after Wachovia imposed several conditions on the approvals of these mortgages. Plaintiffs allege that these conditions were racially motivated, and brought suit against Wachovia under 42 U.S.C. § 1981 and various state law causes of action.

This appeal requires us to identify, as a matter of first impression, the elements of a prima facie case of lending discrimination under § 1981. Whether plaintiffs have made out a prima facie case of discrimination is a close call, but even if they have, they have not undermined Wachovia's legitimate reasons for imposing the conditions it did. Thus, we conclude that they have not shown that the mortgage conditions were imposed for discriminatory reasons. The District Court therefore properly granted summary judgment to Wachovia on the § 1981 claim. We also conclude that the District Court correctly granted summary judgment on plaintiffs' breach of contract and tortious interference claims, and that it acted within its discretion in denying plaintiffs' motion to compel certain discovery. Finally, we find that the District Court acted within its discretion in remanding plaintiffs' good faith and fair dealing claim to Delaware state court. We will therefore affirm the District Court's orders and judgment.

I.
A.

Plaintiffs Tolano and Cathy Anderson, Richard and Brenda Wilkins, and Lloyd and Audria Wheatley purchased adjacent houses in the Silver Lake community from an individual named Peter Aigner. On June 18, 2004, plaintiffs agreed to go to settlement on August 6, and agreed that if the houses were not purchased by that date they would forfeit their joint deposit of $40,000 on the total purchase price for all three homes of $800,000. After reaching this agreement, plaintiffs contacted Wachovia to arrange financing.

Several individuals at Wachovia were involved with plaintiffs' loans. J.D. Hogsten was assigned as plaintiffs' loan officer, and appears to have had the most contact with them. Colleen Fazzino acted as the underwriter for the Anderson and Wheatley loans, George Akerley acted as the underwriter for the Wilkins loan, and Terri Hamm acted as an “exception officer” to address issues specific to the Wheatley loan.

Each of the couples' loans was subject to a unique set of conditions. With respect to the Anderson loan, plaintiffs claim that Wachovia mandated extensive, pre-sale repairs to the house's drywall, insulation, and plumbing, after an independent appraiser informed Hogsten that the property could not be appraised without such repairs. The Andersons contend that these repairs were especially challenging both because of the accelerated timetable and because they needed to obtain permission from Aigner to make repairs before purchasing the house. Nonetheless, the repairs were completed, and the sale closed on schedule.

Wachovia imposed several conditions on the Wheatley loan. It initially denied his application for a non-income-verification loan, which would have required a 15% down payment, because Mr. Wheatley's credit score was too low for that type of loan. 1 The Wheatleys then changed their application to a “stated income loan,” JA488, for which the credit score was sufficient, and which would have required a 10% down payment. 2 Wachovia, however, then found the property's condition to be inadequate and required repairs to the house's roof, heating system, pipes, and floors. After those repairs were completed and an appraiser submitted a completion certificate, Wachovia required the Wheatleys to submit an additional completion certificate from a roofing specialist showing that the necessary repairs to the roof had been completed. The Wheatleys were not told of this new requirement until the day of closing, preventing the closing from occurring on schedule. (Aigner granted an extension of the sale deadline, however, and the Wheatley sale closed on August 13.) In addition, after conditionally approving the Wheatleys for the loan requiring only a 10% down payment, Wachovia reclassified the loan as an “exception loan” and required them to provide a 20% down payment. When the Wheatleys attempted to use funds from their small business toward the down payment, Wachovia required them to have an accountant verify details of the business's tax filings.

Finally, Wachovia challenged the Wilkinses' use of a convenience check issued by their credit card company to pay their earnest money deposit to Aigner. However, once the underwriter learned that Mr. Wilkins had obtained a secured loan and used its proceeds to pay the balance due on his credit card, he determined that this issue had been resolved.

B.

Plaintiffs attempt to support their claims that Wachovia imposed discriminatory conditions on their loans with the following three types of evidence.

First, plaintiffs provide anecdotal evidence of the racial makeup of the Silver Lake community to support their contention that Wachovia imposed the mortgage conditions to prevent them, as African-Americans, from moving into a predominantly Caucasian neighborhood. They testified that the Silver Lake community is “almost exclusively ... white,” and that they believed that the community “desired that it remain that way.” JA369. They also presented an affidavit from a Dover insurance agent stating that it was common knowledge that the homes in Silver Lake “were almost all owned by white families.” JA191. Mr. Anderson testified that Deanne Wicks, a Wachovia employee who was not involved in these transactions, told him that [t]here are a lot of people that are not happy with you all purchasing homes on Silver Lake,’ and that ‘Silver Lake is an exclusive lily white community and now here you guys come.’ JA384-85.

Second, plaintiffs offer comparative evidence based on their experiences. They claim that the banks in their prior real estate transactions, which involved purchases of property in minority neighborhoods, did not impose such stringent conditions. Mr. Anderson testified that Wachovia itself had not imposed similar requirements when it financed his prior purchases of several investment properties and an unimproved lot. Mr. Wheatley testified that he had not experienced difficulties in real estate transactions involving other banks. Mr. Wilkins testified that he had never been questioned about the source of his earnest money deposits in prior real estate transactions, although he conceded that he had never used a credit card convenience check for such a purpose before.

Third, plaintiffs testified to a number of comments made by Hogsten that they believe demonstrated discriminatory animus. According to Mr. Anderson, Hogsten said to him, ‘you people don't understand how the process works,’ which Anderson believed indicated racial prejudice. JA387. Mr. Wheatley also testified that Hogsten said to him that “you people don't understand the loan process”; Wheatley “infer[red] that this was a reference to “the Afrocentric race.” JA448. Mr. Anderson further testified that Hogsten said, ‘I'm getting a lot of pressure on this transaction’ and ‘a lot of heat.’ JA398. Although Hogsten did not identify who was pressuring him, Anderson construed his comments to mean that people did not want this deal to go through and he was being pressured to cause it to collapse.” JA398. Mr. Wheatley also testified that Hogsten said “that I'm getting a lot of pressure and there are people who do not want you all to buy these properties.” JA442. According to Mr. Wilkins, Hogsten had “a nasty attitude” and was “unprofessional.” JA520-21. 3

C.

This case was initially filed in Delaware state court, and was removed by Wachovia to federal court. Plaintiffs then amended their complaint, asserting that Wachovia had violated 42 U.S.C. § 1981, had breached a contract with plaintiffs, had breached the covenant of good faith and fair dealing, and had tortiously interfered with plaintiffs' contracts with Aigner. Wachovia moved to dismiss the amended complaint. The District Court granted the motion with respect to the breach of contract and tortious interference claims but denied it with respect to plaintiffs' § 1981 and good faith and fair dealing claims. Anderson v. Wachovia Mortg. Corp. (“Anderson I”), 497 F.Supp.2d 572 (D.Del.2007).

After discovery was nearly complete, plaintiffs filed a second amended complaint, which asserted essentially the same legal claims as in the first amended complaint but slightly adjusted the supporting factual allegations. 4 Wachovia moved for summary judgment, and the District Court granted summary judgment on the § 1981, breach of contract, and tortious interference claims. However, the Court remanded the case to state court for consideration of the good faith and fair dealing claim. Anderson v. Wachovia Mortg. Corp. (“Anderson II”), 609 F.Supp.2d 360 (D.Del.2009). Plaintiffs now appeal the grant of summary judgment, as well as an earlier order denying plaintiffs' motion to compel certain discovery. Wachovia cross-appeals the remand of the good...

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