Chiang v. Veneman

• Citation: 385 F.3d 256
• Decision Date: 20 September 2004
• Docket Number: No. 03-3488.,03-3488.
• Parties: Gail Watson CHIANG; Lynda<SMALL><SUP>*</SUP></SMALL> Alexander Muhammad; Jacqueline Carr; Denise Pittman; Carmen McAlpin-Clarke; Karen Hunt; Theresa Collingwood-Morris; David C. Nicholas; Precious Yearwood; Frederick Freeman; Beverly Rawlins; Andrea Carroll; Ronald J. Mitchell; Jack Daniel; Christine Daniel; Anesta E. Gore; Vaneta Martin; Carmen Gonzalez; M. Nartel Green; Shirley Williams; Maria Blyden; Gonzalo Rivera; Blanche R. Rawlins; Rhea L. Johnson; Marilyn Rivera; Keith R. Williams; Al Brunn; Emeryl Christopher; Charles G. Johnson; Velsina L. George; Kaleen Clouden; Eunice Gomes; Ruth Dublin; Kimberley L. Oliver; Elena Herbert; Lawrence Christian; Marjorie John; Laverne Williams; Reverend James Christian, on behalf of themselves and all others similarly situated v. Ann M. VENEMAN, In her Official Capacity as Secretary of The United States Department of Agriculture, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

385 F.3d 256

Gail Watson CHIANG; Lynda^* Alexander Muhammad; Jacqueline Carr; Denise Pittman; Carmen McAlpin-Clarke; Karen Hunt; Theresa Collingwood-Morris; David C. Nicholas; Precious Yearwood; Frederick Freeman; Beverly Rawlins; Andrea Carroll; Ronald J. Mitchell; Jack Daniel; Christine Daniel; Anesta E. Gore; Vaneta Martin; Carmen Gonzalez; M. Nartel Green; Shirley Williams; Maria Blyden; Gonzalo Rivera; Blanche R. Rawlins; Rhea L. Johnson; Marilyn Rivera; Keith R. Williams; Al Brunn; Emeryl Christopher; Charles G. Johnson; Velsina L. George; Kaleen Clouden; Eunice Gomes; Ruth Dublin; Kimberley L. Oliver; Elena Herbert; Lawrence Christian; Marjorie John; Laverne Williams; Reverend James Christian, on behalf of themselves and all others similarly situated v. Ann M. VENEMAN, In her Official Capacity as Secretary of The United States Department of Agriculture, Appellant.

No. 03-3488.

United States Court of Appeals, Third Circuit.

Argued December 10, 2003.

Filed September 20, 2004.

Appeal from the District Court of the Virgin Islands, Thomas K. Moore, J.

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Douglas B. Inman, (Argued), Sayre & Chavez, Christiansted, St. Croix, USVI, for Appellees.

Peter D. Keisler, Assistant Attorney General, David M. Nissman, United States Attorney, Ernest Bategna, Assistant United States Attorney, Robert M. Loeb, Charles W. Scarborough, Colette G. Matzzie, (Argued), Attorneys, Appellate Staff, U.S. Department of Justice, Washington, DC, for Appellant.

Before NYGAARD, BECKER, and STAPLETON, Circuit Judges.

OPINION OF THE COURT

BECKER, Circuit Judge.

This is an interlocutory appeal by the defendant, United States Secretary of Agriculture, Ann M. Veneman ("Veneman") pursuant to Fed.R.Civ.P. 23(f), in which she challenges a class certification granted by the District Court in a civil rights case brought against her in her official capacity. The lead plaintiff is Gail Watson Chiang ("Chiang"), the representative of the putative class, who, along with thirty-eight other plaintiffs, alleges systematic discrimination against persons who are "Black, Hispanic, women, and/or Virgin Islanders," over a period of nineteen years, in the administration of loan programs intended to help low income rural families obtain homes and make repairs to existing homes. The claims are made primarily under the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. ("ECOA"), which makes it "unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction ... on the basis of race, color, religion, national origin, sex or marital status, or age." 15 U.S.C. § 1691(a). To establish a prima facie case under ECOA the class members must show that (1) plaintiff was a member of a protected class; (2) plaintiff applied for credit from defendants; (3) plaintiff was qualified for the credit; and (4) despite qualification, plaintiff was denied credit. See Matthiesen v. Banc One Mortgage Corp., 173 F.3d 1242, 1246 (10th Cir.1999).

According to Chiang, the regional USDA office in Vermont, which had jurisdiction over the U.S. Virgin Islands, kept Virgin Islanders "out of the system" by implementing a "phony," illegal waiting list on which thousands of Virgin Islanders, almost all of whom were Black, Hispanic, or female, had their names placed instead of being given an actual loan application in violation of USDA policy, instructions, and regulations. These applicants were told that they would receive applications when they became available but, even after years of waiting, most never did. According to Chiang, not only were applications available, but the Virgin Islands was the only locality in the United States where this type of waiting list was implemented. Thus, Chiang submits, the so-called "waiting list" was not a true waiting list at all, but was rather a device used to deny class members loan applications altogether.

Chiang also alleges that the USDA administrators in Vermont further instructed Virgin Islands officials to give applications only to those class members on the waiting list who became a "problem," and then told local employees "you know what to do with it." This message was uniformly understood by local USDA officials to mean that the applications were not to be processed, but rather that actions were to be taken to make it difficult or impossible for the inquiring parties to meet qualifications and deadlines, the intention being that the applicants would become so frustrated that they would withdraw their loan applications, or that delays would result in disqualification or other justification for denial of the applications. In Chiang's submission, this became known in the local USDA office as the "Impossible Yes": an application would be given out, but the USDA would make it impossible for the putative applicant to have the application fairly processed.

Furthermore, Chiang alleges corruption in the administration of the loan program in the Virgin Islands-in the rare instances in which loans were approved-through favoritism to local contractors who were not building homes in a safe and workmanlike manner. This resulted, it is said, in placing Virgin Islanders into inadequate and unsafe housing, representing a further form of discrimination against Virgin Islanders.

At the behest of Chiang, the District Court granted a Rule 23(b)(3) certification to a class of

All persons who are Black, Hispanic, female and /or Virgin Islanders who applied or attempted to apply for, and/or received, housing credit, services, home ownership, assistance, training, and/or educational opportunities from the USDA through its Rural Development offices (and predecessor designations) located in the U.S. Virgin Islands at anytime between January 1, 1981 and January 10, 2000, and who believe they were discriminated against on the basis of race, gender or national origin.

In Veneman's submission, the District Court abused its discretion when it certified what she describes as a sprawling and unmanageable class action seeking $2.8 billion in damages from the USDA. She complains that the class definition is overbroad, and that it is internally inconsistent insofar as it encompasses every Virgin Islander who applied or attempted to apply for any of the different Rural Housing Service ("RHS")¹ credit and benefit programs during a nineteen-year period (from 1981 to 2000), including those with non-credit claims, those with untimely claims, and Caucasian loan applicants who the complaint alleges benefitted from the discrimination.

In Veneman's view, not only is the class so sweeping that the threshold requirements of Rule 23(a) likely are not satisfied, but even if the class definition were deemed to meet Rule 23(a)'s standards, the class fails Rule 23(b)(3)'s more stringent requirements because common issues do not predominate over individual ones and class treatment would not be superior to individual adjudications. Central to Veneman's contention is the argument that to prevail on his or her individual claims under ECOA, each class member would need to demonstrate that the USDA's proffered reason for denial of credit (or loan for defective property) was a pretext for discrimination on the basis of race, gender or national origin. According to Veneman, liability on these claims can only be determined through case-by-case inquiries into the specifics of each transaction, and most particularly, the loan eligibility of each putative class member. If the class member could not have obtained the loan, then he or she cannot succeed in his or her claim of discrimination, regardless of the existence of the alleged waiting list.

Chiang counters this with the contention that determination of loan eligibility would, in fact, be susceptible to class proof because those determinations were purely ministerial in nature. In her supplemental exhibit 1, Chiang submits a chart for our consideration which she claims was the primary document used by USDA employees to determine eligibility, contending that those employees did not have any particular knowledge or skill, but rather, were mere clerks charged with matching income to columns on the chart. According to Chiang, the evaluations of eligibility constituted neither in-depth nor discretionary assessments of the circumstances of each applicant, and hence are subject to common proof.

Veneman is surely correct that the plaintiff in an ECOA case must establish that he or she was qualified for loan eligibility as part of the prima facie case. The record developed thus far leaves us in some doubt as to the validity of Chiang's contentions about the susceptibility of eligibility determinations to common proof. Nevertheless, we believe that this question will be best resolved by the District Court in the first instance. We have no doubt, however, that the question of the existence vel non of the "phony" waiting list — and associated techniques used to prevent Virgin Islanders from gaining access to loan applications and loans — is a matter appropriate for class determination. We will therefore affirm that portion of the District Court order certifying the class pursuant to Rule 23(c)(4), which allows a class action to be maintained with respect to particular issues — in this case the waiting list — while simultaneously reserving for the District Court the authority to determine whether eligibility for loans can be certified as a question suitable for class adjudication.

We are not troubled by the seeming internal contradiction in the class definition because, inasmuch as the plaintiffs' primary claim is that they were discriminated against for being Virgin Islanders, a cognizable class, we will treat the claim as such and modify the District Court's certification order accordingly. While some claims allege individual gender and race discrimination, the number of such complaints appears to be small, and we think that certifying a class...