Gross v. US Small Business Admin.

• Decision Date: 12 August 1987
• Docket Number: No. 80-CV-454.,80-CV-454.
• Citation: 669 F. Supp. 50
• Parties: Sally GROSS, Plaintiff, v. UNITED STATES SMALL BUSINESS ADMINISTRATION and J. Wilson Harrison, District Director of the United States Small Business Administration, Defendants.
• Court: U.S. District Court — Northern District of New York

669 F. Supp. 50

Sally GROSS, Plaintiff, v. UNITED STATES SMALL BUSINESS ADMINISTRATION and J. Wilson Harrison, District Director of the United States Small Business Administration, Defendants.

No. 80-CV-454.

United States District Court, N.D. New York.

August 12, 1987.

John Michael Caster, Auburn, N.Y., for plaintiff.

Frederick J. Scullin, Jr., U.S. Atty., Syracuse, N.Y. (Gustave J. DiBianco, Asst. U.S. Atty., of counsel), for defendants.

MEMORANDUM-DECISION AND ORDER

McCURN, District Judge.

This is an action pursuant to § 701(a)(1) of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691(a)(1). A non-jury trial was held between April 27 and May 4, 1987. The following constitutes this court's opinion consistent with Fed.R.Civ.P. 52.

I. BACKGROUND

On June 12, 1980, plaintiff, Sally Gross, filed suit against the United States Small Business Administration (SBA) and its District Director, J. Wilson Harrison. Suit was brought pursuant to the ECOA alleging that the SBA and Harrison discriminated against the plaintiff on the basis of sex or marital status in their denial of her loan applications. In particular, plaintiff complained that credit applications she had made in 1975, 1976 and 1977 were improperly denied. In addition, she alleged that February 9, 1978 reconsideration regarding the 1977 loan application was denied on the basis of her sex or marital status.

At a motion term held on January 25, 1982, this court dismissed all of the plaintiff's claims as untimely. 15 U.S.C. § 1691e(f) requires an ECOA action to be brought within two years of accrual. The court determined that the SBA's denials had occurred on November 3, 1975, October 26, 1976, October 7, 1977 and May 2, 1978 (all more than two years prior to this suit). In so doing, the court determined that a June 15, 1978 letter from the SBA to the plaintiff did not constitute a denial by the SBA. The court opined that the June 15 letter was merely a courtesy because the May 2 rejection was proper under the applicable law and regulations. Consequently, the court determined that even the plaintiff's most recent cause of action dealing with the 1978 reconsideration accrued on May 2, 1978; and, that this action, commenced on June 12, 1980, was time-barred.

The Court of Appeals for the Second Circuit reversed and remanded. While the Court of Appeals agreed that the May 2 letter was an effective denial, and could have started the limitations clock, it determined that there were questions of fact concerning whether the SBA had reconsidered the plaintiff's loan application between May 2, 1978 and June 15, 1978:

If the agency was merely considering whether to entertain an application for reconsideration, the finality of the May 2 denial would not have been disturbed, and the statute of limitations would have run. On the other hand, if the agency had elected to entertain an application for reconsideration and still had under advisement the merits of the loan application within two years of the date of the complaint, then the complaint would be timely.

Gross v. United States Small Business Administration, No. 82-6043, slip. op. at 4. (2d Cir. June 29, 1982) 697 F.2d 290 (Table).

On remand, the defendants moved: for dismissal of the claims against the SBA asserting that the United States did not waive its sovereign immunity with respect to ECOA claims; for dismissal of the 1975, 1976, and 1977 causes of action as time-barred; and, for summary judgment. This court, in an oral opinion and in an Order dated December 24, 1986, denied the motion to dismiss based on sovereign immunity; dismissed the 1975, 1976 and 1977 causes of action;¹ and, denied the summary judgment motion.

The court also held a separate bench trial pursuant to Fed.R.Civ.P. 42(b) on the statute of limitations as applied to the 1978 reconsideration. From that trial, the court determined that between May 2 and June 15, 1978, the SBA was not merely considering whether to entertain an application for reconsideration of its May 2 rejection, but had elected to entertain such an application and still had under advisement the merits of plaintiff's loan request. Consequently, the court held that plaintiff's cause of action with regard to the 1978 reconsideration did not accrue until June 15, 1978; and, that plaintiff's suit with regard to that claim was timely. The court next conducted a four-day, non-jury trial on the merits of that claim. The following constitutes the court's findings of fact and conclusions of law relative thereto.

II. RELEVANT LAW

Plaintiff's ECOA claim derives from 15 U.S.C. § 1691 which provides, in pertinent part:

(a) Activities constituting discrimination. It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction—

(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract)

The SBA and Harrison are creditors within the meaning of the ECOA. See 15 U.S.C. § 1691a(e) and (f).

Plaintiff may establish her ECOA claims in a manner similar to that used in Title VII discrimination cases. Bhandari v. First Nat. Bank, 808 F.2d 1082, 1100-1101 (5th Cir.1987); Williams v. First Fed. Sav. & Loan Ass'n, 554 F.Supp. 447, 448-49 (N.D.N.Y.1981), aff'd, 697 F.2d 302 (2d Cir. 1982). The plaintiff may ground her case on either a disproportionate impact theory under Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), or a disparate treatment analysis under the widely held test articulated in McDonnel Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973). Plaintiff has urged this court to go beyond these two traditional tests, however. The court declines the invitation. Plaintiff relies on Miller v. American Express Co., 688 F.2d 1235 (9th Cir.1982) for the proposition that the ECOA does not always limit proof of credit discrimination to the two traditional Title VII tests. That may be so. The question, however, is whether this case is best governed by those tests.

The court notes that other courts have generally required proof in ECOA cases to conform to the traditional Title VII tests. See e.g., Bhandari, 808 F.2d at 1100-1101; Williams, 554 F.Supp. at 448-49; Sayers v. General Motors Acceptance Corp., 522 F.Supp. 835, 839-40 (W.D.Mo.1981); Cragin v. First Fed. Sav. & Loan Ass'n, 498 F.Supp. 379, 384 (D.Nev.1980); Vander Missen v. Kellog-Citizens Nat. Bank, 481 F.Supp. 742 (E.D.Wisc.1979). Miller is the exception and not the rule; and, the present case is distinguishable from Miller. The defendant in Miller was liable for discrimination because it violated a specific regulation promulgated pursuant to the ECOA. 12 C.F.R. § 202.7(c) specifically proscribes a creditor from terminating a person's account merely on the basis of a change in marital status absent evidence of inability or unwillingness to pay. In Miller, the defendant, American Express Company, terminated the plaintiff's account due to the death of her husband in violation of section 202.7(c). Under those circumstances, the Miller court did not require a specific finding of discriminatory intent. The regulation in question there had been duly promulgated by the Board of Governors of the Federal Reserve System (the "Board"). The Board had already determined that such conduct was discriminatory. Given this determination, the Miller court did not need to find discrimination through the ordinary means. We have no such determination of the Board here. The burden shifting devices of Title VII case law, which are utilized to assist plaintiffs in proving their cases, see Loeb v. Textron, 600 F.2d 1003, 1014-15 (1st Cir.1979), are appropriate here.

There was little or no evidence produced at trial which would support a disparate impact claim, and plaintiff admitted in her closing argument that the proof was best analyzed under the disparate treatment test of McDonnel Douglas. Consequently, the plaintiff must present facts from which one can infer that the actions taken by the defendants, if unexplained, more likely than not were the result of unlawful discrimination. Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 252-53, 101 S.Ct. 1089, 1093, 67 L.Ed.2d 207 (1981). To meet this prima facie burden, she must offer proof that:

(1) she belongs to a minority or protected class,

(2) she applied for and was qualified for a loan,

(3) despite her qualifications she was rejected, and

(4) males or married females of similar credit stature were given loans, or were treated more favorably than plaintiff in the application process.

See Sayers, 522 F.Supp. at 839-40; Cragin, 498 F.Supp. at 384. If she is successful, the burden shifts to the defendants to articulate a legitimate, non-discriminatory reason for the denial of credit. Sayers, 522 F.Supp. at 840. If the defendants produce such evidence, the plaintiff may still prevail if she can prove by a preponderance of the evidence that a discriminatory reason more likely motivated the defendants, or that the defendants' proffered explanation is unworthy of credence or is a pretext for discrimination.

III. APPLICATION OF THE RELEVANT LAW TO THE PRESENT CONTROVERSY

Plaintiff, a licensed real estate broker, established her real estate business in 1968. She operated out of her home from 1968 through some time in 1974 when she purchased an office located at 6888 E. Genesee Street, Fayetteville, New York. In 1975, with an eye toward expanding her business, the plaintiff sought bank financing guaranteed by the SBA. When the bank refused to grant her request, she turned to the SBA for direct financial assistance. She made an application to the SBA for an $100,000 loan on September 3, 1976, which was denied. She then made an application for a $95,000 loan on June 15, 1977, which was also denied. After the latter denial she sought reconsideration of her 1977 application by letter dated February...