Latimore v. Citibank, F.S.B., 95 C 0436.

• Decision Date: 23 September 1997
• Docket Number: No. 95 C 0436.,95 C 0436.
• Citation: 979 F.Supp. 662
• Court: U.S. District Court — Northern District of Illinois
• Parties: Helen LATIMORE, Plaintiff, v. CITIBANK, F.S.B., Marcia Lundberg, and Ed Kernbauer, Defendants.

Page 662

979 F.Supp. 662

Helen LATIMORE, Plaintiff, v. CITIBANK, F.S.B., Marcia Lundberg, and Ed Kernbauer, Defendants.

No. 95 C 0436.

United States District Court, N.D. Illinois, Eastern Division.

September 23, 1997.

Michael D. Gerstein, Law Office of Michael D. Gerstein, Chicago, IL, Edwin R. McCullough, Chicago, IL, for Plaintiff.

Robert J. Kriss, Alan Norris Salpeter, Lucia Nale, Mary Ann Spiegel, Mayer, Brown & Platt, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

BUCKLO, District Judge.

The plaintiff, Helen Latimore, sued Citibank, F.S.B. ("Citibank") and two of its employees, Marcia Lundberg and Ed Kernbauer, for racial discrimination in denying a mortgage loan application. The defendants have moved for summary judgement. For the following reasons, the motion is granted.

I.¹

On August 16, 1993, Ms. Latimore, an African-American, submitted an application for a mortgage loan to Citibank. She sought $51,000, using her residence at 6150 South Ingleside, Chicago, Illinois as collateral. The racial population of Ms. Latimore's neighborhood was and is over 90 percent African-American. Citibank assigned Mr. Kernbauer, its in-house appraiser, to prepare an appraisal of Mr. Latimore's house. On August 26, 1993, Mr. Kernbauer prepared an appraisal report valuing the plaintiffs property at $45,000, yielding a loan-to-value ratio of 113 percent. For the type of loan Ms. Latimore was seeking, Citibank's lending criteria required a loan-to-value ratio of, at most, 75 percent.

There followed several telephone conversations between the plaintiff and Ms. Lundberg, the Citibank's account executive responsible for Ms. Latimore's application.² Ms. Lundberg informed the plaintiff that the appraisal value of her property would not support the loan. Upon learning that Ms. Latimore had higher appraisals of her home, Ms. Lundberg asked that they be forwarded. Ms. Lundberg received an appraisal report, dated October 8, 1992 and reflecting a value of $82,000 ("October 1992 appraisal"), and submitted it, along with Mr. Kernbauer's appraisal, to the Citibank's Appraisal Review Department.

Having reviewed Ms. Latimore's file, the Appraisal Review Department concluded that no change was warranted to Mr. Kernbauer's initial appraisal of $45,000.³ After informing Ms. Latimore of that decision, Ms. Lundberg submitted the plaintiff's application to Underwriting, which denied the loan. As an African-American, Ms. Latimore was entitled to another level of review by the Community Reinvestment Act ("CRA") Committee. The CRA Committee examined the plaintiffs file and concluded that the denial of her loan application was consistent with the Citibank's underwriting criteria. Citibank mailed an adverse action notice to Ms. Latimore on October 12, 1993. On January 23, 1995, Ms. Latimore filed suit.

In Counts I through IV, Ms. Latimore alleges that the defendants discriminated against her on the basis of her race or the racial composition of her neighborhood by denying her a loan, in violation of Sections 1981 and 1982 of the Civil Rights Act of 1964, 42 U.S.C. §§ 1981, 1982, the Fair Housing Act ("FHA"), 42 U.S.C. 3605, and the Equal Credit Opportunity Act ("ECOA"). 15 U.S.C. 1691(a)(1). In Count V, Ms. Latimore alleges a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("Illinois Consumer Fraud Act"). 815 ILCS 505/1 et seq. (1993). The defendants move for summary judgment.

II.

To prevail on a claim under Sections 1981⁴ and 1982,⁵ the plaintiff must prove intentional discrimination by the defendants. Phillips v. Hunter Trails Community Ass'n, 685 F.2d 184, 187 (7th Cir.1982). In contrast, under the FHA⁶ and the ECOA,⁷ the plaintiff "must show that `race was a motivating consideration in the [defendants'] decision' not to make the loan." Thomas v. First Fed. Sav. Bank, 653 F.Supp. 1330, 1338-39 (N.D.Ind.1987) (quoting Kaplan v. 442 Wellington Coop. Bldg. Corp., 567 F.Supp. 53, 57 (N.D.Ill.1983)); Saldana v. Citibank, F.S.B., No. 93 C 4164, 1996 WL 332451, at *2 (N.D.Ill. June 13, 1996).

Adopting the burden-shifting approach of McDonnell Douglas Corp. v Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973), the courts have articulated the same prima facie case requirements for all four statutes. Selden Apartments v. United States Dep't of Hous. & Urban Dev., 785 F.2d 152, 159 (6th Cir.1986) (§ 1982 and FHA); Saldana, 1996 WL 332451, at *2 (FHA and ECOA). Thus, in a case where the plaintiff alleges that her loan application was discriminatorily denied, she must prove (1) that she is a member of a protected class, (2) that she applied for and was qualified for a loan, (3) that the loan was rejected despite her qualifications, and (4) that the defendants continued to approve loans for applicants with qualifications similar to those of the plaintiff. Thomas, 653 F.Supp. at 1338(FHA); Gross, 669 F.Supp. at 53 (ECOA); Bell v. Mike Ford Realty Co., 857 F.Supp. 1550, 1556 (S.D.Ala.1994) (§ 1982).⁸

There is no dispute that Ms. Latimore, an African-American, satisfies element one. The remaining elements are disputed. The defendants maintain that, although Ms. Latimore's credit history met the Citibank's underwriting guidelines, she was ultimately not qualified for a loan because she did not satisfy the Citibank's loan-to-value ratio of, at most, 75 percent. Ms. Latimore maintains that, due to race considerations, Mr. Kernbauer's appraisal did not reflect her home's true value, and that Ms. Lundberg assisted white applicants but not African-Americans during the appraisal review process.

To withstand summary judgment, Ms. Latimore must provide evidence from which a reasonable factfinder could conclude that she meets the elements of the prima facie case. See Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Because the last three elements are intertwined, Ms. Latimore's task is essentially to show that the defendants treated her materially differently than similarly situated white loan applicants or loan applicants from non-minority neighborhoods.

Mr. Kernbauer's Appraisal

Mr. Kernbauer appraised Ms. Latimore's home at $45,000. Ms. Latimore offers the October 1992 appraisal of $82,000, which she forwarded to Ms. Lundberg; her expert's "reconstructive" appraisal of $62,000;⁹ and a 1994 appraisal of $79,000, performed in connection with the plaintiff's receipt of a mortgage loan from the Household Bank.¹⁰ A townhouse similar to Ms. Latimore's, but with four additional rooms, sold for $50,000 several months after Mr. Kernbauer's appraisal.

Although Ms. Latimore's expert, Russell Hume, selected different comparable sales and made different adjustments to those sales than Mr. Kernbauer, Mr. Hume admitted that the selection of comparable sales is an art, not a science, that adjustments are judgment-driven, and that he could support the adjustments Mr. Kernbauer made. See Thomas, 653 F.Supp. at 1341-42 (plaintiffs' appraisal expert admitted that his appraisal was "merely another subjective evaluation ... through the inexact appraisal process"). The question, however, is whether there is evidence from which a reasonable factfinder could conclude that Mr. Kernbauer was inconsistent in his appraisal methods depending on "the race or neighborhood of the homeowners." Id. at 1339.

In Thomas, the defendant appraised the plaintiffs' house at $22,000 and found the loan-to-value ratio to be in excess of its guidelines. The defendant thus denied the plaintiffs' mortgage application. The plaintiffs brought suit under Sections 1981 and 1982, the FHA, and the ECOA. At trial, the plaintiffs offered an appraisal by their expert of $40,000. 653 F.Supp. at 1333-35. Granting the defendant's motion to dismiss all claims pursuant to Fed.R.Civ.P. 41(b), the court held as follows:

[i]n theory, the court agrees that a defendant cannot escape liability under the Fair Housing Act by artificially lowering the appraised value of a home for a prohibited reason like race. Plaintiffs need not prove actual intent to discriminate on the part of defendants in order to make out a violation of the Fair Housing Act.... However, plaintiffs must show that race was a motivating consideration in the defendants' decision not to make the loan.... Here, after plaintiffs presented all their evidence, they still had not shown that defendants' knowledge of the Thomases' race contributed in any degree to ... defendants' decision ... in appraising the Thomas home.

Id. at 1338-39 (quotations omitted). The court dismissed the ECOA and the Sections 1981 and 1982 claims under the same reasoning. Id. at 1341-42.

It is undisputed that in 1993, Mr. Kernbauer's appraisals supported the loan amounts of other African-American residents of Ms. Latimore's Woodlawn neighborhood. In addition, John March, Citibank's then Chief Community Reinvestment Act Underwriter for U.S. Operations, affirms that in 1993, Mr. Kernbauer appraised the property of 69 African-American applicants.¹¹ Only three of those applications, including the plaintiff's, were declined because of the appraised value of the property.

Ms. Latimore argues that under Watson, Steptoe v. Savings of America, 800 F.Supp. 1542 (N.D.Ohio 1992), and Old West End Ass'n v. Buckeye Fed. Sav. & Loan, 675 F.Supp. 1100 (N.D.Ohio 1987), she has presented a triable case. In Watson, the defendant claimed that he rejected the plaintiffs' application because they had a history of late payments. 702 F.Supp. at 187. The plaintiffs countered with evidence that "other applicants with late payments did receive loans from [the defendant]." Id. at 188. The court held that, for the purposes of the FHA, the plaintiffs made out a prima facie case, because they created a factual issue as to whether they were qualified for the loans and whether the defendant approved the loan applications of persons with similar qualifications. Id. at 188-89. In ...