In a recent case the Third Circuit (Delaware, New Jersey, Pennsylvania and Virgin Islands)held that a discrimination lawsuit cannot be certified as a class action based solely on lender pricing discretion. Rodriguez v. National City Bank, 726 F.3d 372 (3d Cir. 2013). The plaintiffs filed a class-action lawsuit against National City Bank alleging that its policy of providing pricing discretion to loan officers had a disparate impact on minority applicants because a larger percentage of minority borrowers were surcharged points and fees unrelated to credit risk than similarly situated Caucasian borrowers.
The parties agreed to settle the case and received tentative approval from the lower court. But after the U.S. Supreme Court issued its landmark class-action decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), the lower court reconsidered its approval and denied class certification. On appeal, the Third Circuit affirmed the decision not to certify the case as a class action based on the Dukes case. In Dukes, the plaintiffs alleged that the local Wal-Mart store managers’ discretionary authority over employees’ pay had a disparate impact on female employees, whose salaries were lower on average than similarly situated male employees. The Supreme Court held that the managers’ discretion over salaries that resulted in disparities did not, by itself, satisfy the class-action requirement of a common issue affecting all class members.
Under Dukes, plaintiffs must also identify the challenged practice causing the disparities and demonstrate that each class member was subjected to the challenged practice in the same manner. The Third Circuit found that “as in Dukes, the exercise of broad discretion by an untold number of unique decision-makers in the making of thousands upon thousands of individual decisions undermines the attempt to claim, on the basis of statistics alone, that the decisions are bound together by a common discriminatory mode.” The court therefore affirmed the denial of class certification.
The Rodriguez case is a big win for creditors. Liability and legal costs in a class action case can be huge. The decision does not prohibit individual plaintiffs from proceeding with their claims. The process of defending its practices in numerous individual cases is also expensive.