The Supreme Court ended its October 2014 term on Monday with several significant decisions, including one that, while interpreting the Fair Housing Act, strongly implies the continued viability of the disparate impact theory under the Equal Credit Opportunity Act (Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.). However, the Court deferred until its next term two appeals from decisions on financial services laws. One appeal asks the Court to examine who is entitled to protection under the ECOA, and the other presents a broader question about who has standing to sue under the U.S. Constitution.
ECOA. In Hawkins v. Community Bank of Raymore, two individuals have asked the Court to consider whether spousal guarantors are applicants for credit who are entitled to the protection of the ECOA and Reg. B—Equal Credit Opportunity (12 CFR Part 1002). The individuals claimed that the bank required them to guarantee loans to their spouses’ real estate development business and that requiring a spousal signature violated the equal credit laws. However, the U.S. Court of Appeals for the Eighth Circuit decided that guarantors are not credit applicants, so requiring the individuals to sign did not constitute credit discrimination.
The U.S. Court of Appeals for the Sixth Circuit has reached the opposite conclusion. In RL BB Acquisition LLC v. Bridgemill Commons Development Group, LLC, the Sixth Circuit decided that the ECOA was ambiguous about whether a guarantor was an applicant. The regulatory agencies’ interpretation that guarantors are applicants, which is contained in Reg. B, was reasonable and thus was entitled to judicial deference, the Sixth Circuit said.
The Eighth Circuit’s reply was that “We find it to be unambiguous that assuming a secondary, contingent liability does not amount to a request for credit. A guarantor engages in different conduct, receives different benefits, and exposes herself to different legal consequences than does a credit applicant.”
The Supreme Court granted certiorari in Hawkins v. Community Bank of Raymore, Dkt. No. 14-520, on March 2, 2015.
Standing to sue. Spokeo Inc. v. Robbins has the potential to affect suits under a broad group of federal statutes, not just the Fair Credit Reporting Act under which it arises. The question presented is whether a person who claims no injury other than a violation of a right created by a statute has suffered an injury that confers standing to sue under Article III of the Constitution.
Spokeo runs a website that provides users with information about other individuals, including contact data, marital status, age, occupation, economic health, and wealth level, according to the U.S. Court of Appeals for the Ninth Circuit. A consumer claimed that information posted about him was incorrect and that he had been harmed, but his allegations of specific injury were “sparse,” the court said. Nevertheless, the court decided that his complaint was adequate to describe an “injury in fact” that conferred standing to sue because he had alleged a violation of his own statutory rights, as opposed to the rights of another person, and the law in question—the FCRA—was intended to protect against individual, rather than collective, harm.
Should the Supreme Court reverse the Ninth Circuit and require that plaintiffs demonstrate some type of pecuniary or personal injury to establish their standing to sue, consumers likely will have more difficulty asserting violations of a number of consumer protection statutes.
The Supreme Court granted certiorari in Spokeo Inc. v. Robbins, Dkt. No. 13-1339, on April 27, 2015.
Pending petitions. In addition, the Supreme Court left undecided whether to accept two other appeals of potential significance:
- Wells Fargo Bank v. Gutierrez, in which the Court was asked whether a class of consumers could be certified if it included members who were not injured and who could not have sued successfully as individuals (Dkt. No. 14-1230); and
- Quicken Loans v. Brown, in which the Court was asked whether the West Virginia Supreme Court should have included a borrower’s attorney’s fees and costs, totaling $596,200, in the punitive-to-compensatory damages ratio when it decided that a punitive damages award of $2.17 million was not excessive (Dkt. No. 14-1191).