Michael Woods v. City of Greensboro
855 F.3d 639
| 4th Cir. | 2017Background
- BNT (Black Network Television Ad Agency), a minority-owned LLC run by Michael and Ramona Woods, applied for a $300,000 ten-year economic development loan from the City of Greensboro and offered their home as collateral.
- City Council initially passed a resolution authorizing the loan secured by "no more than a second lien," conditioned on a title search and first-mortgage balance limits; an appraisal showed ample equity.
- After discovering an existing home-equity line (resulting in a potential third lien position), the City declined to amend the resolution to permit a third-position lien and later revoked the loan authorization.
- BNT sued under 42 U.S.C. § 1981 and other claims; the district court dismissed the complaint for failure to state a claim and for lack of standing, treating comparator allegations as insufficient.
- The Fourth Circuit majority reversed the § 1981 dismissal, holding BNT adequately pleaded an "imputed racial identity" for standing and that its factual allegations (disparity study, alleged adequate equity, and examples of differential treatment) made race-based pretext plausible at the pleading stage.
- The court emphasized that Iqbal/Twombly plausibility applies but does not permit dispositive factual weighing at Rule 12(b)(6); discovery and McDonnell Douglas shifting-burdens analysis remain for later stages. Judge Wilkinson dissented, arguing BNT alleged only speculation and that neutral lending concerns provided an obvious alternative explanation.
Issues
| Issue | Plaintiff's Argument (Woods/BNT) | Defendant's Argument (City) | Held |
|---|---|---|---|
| Standing under § 1981 for a minority-owned corporation | BNT is wholly minority-owned and thus has an imputed racial identity, so it falls within § 1981's zone of interests | Certification is required in this Circuit (per district court reading of Carnell) | Fourth Circuit: certification not required; BNT plausibly pleaded imputed racial identity and has standing under § 1981 |
| Pleading standard applicable to discrimination claims | Need not plead a prima facie case; Iqbal/Twombly plausibility governs but allows factual allegations to survive | Iqbal/Twombly apply and facts must plausibly show discrimination (city urged higher scrutiny of comparator allegations) | Court: Iqbal/Twombly govern; plaintiffs need plausible factual allegations, not a full prima facie showing |
| Whether City’s refusal to accept a third lien (while approving second lien) plausibly alleges race-based pretext | City applied more stringent collateral terms to BNT than to some nonminority recipients; disparity study and examples of disparate treatment make race-based pretext plausible | City’s refusal is a neutral, prudent lending decision given discovered liens and lien priority risk; comparators are not sufficiently similar | Court: BNT alleged sufficient factual matter (disparity study, equity facts, contemporaneous third-lien approvals for nonminorities) to nudge claim from conceivable to plausible; dismissal reversed |
| Appropriateness of dismissing for failure to identify valid comparators at 12(b)(6) | Comparator similarity is primarily an evidentiary inquiry for summary judgment and discovery; alleging examples suffices at pleading stage | Comparator analysis can render the claim implausible and justifies dismissal | Court: district court erred by resolving comparator similarity at pleading stage; comparators may be tested later in discovery |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard requires factual allegations that nudge claim past speculative)
- Ashcroft v. Iqbal, 556 U.S. 662 (applies Twombly plausibility standard to discrimination claims; courts must assess plausibility but not weigh competing inferences prematurely)
- McDonnell Douglas Corp. v. Green, 411 U.S. 792 (burden-shifting framework for proving intentional discrimination at later stages)
- Swierkiewicz v. Sorema N.A., 534 U.S. 506 (prima facie evidentiary showing is not a pleading requirement)
- Carnell Constr. Corp. v. Danville Redev. & Hous. Auth., 745 F.3d 703 (4th Cir.) (adopted imputed racial identity concept for corporate plaintiffs; district court misread it as requiring certification)
- Thinket Ink Info. Res. v. Sun Microsystems, 368 F.3d 1053 (9th Cir.) (corporation may acquire an imputed racial identity via ownership or designation)
- Williams v. Staples, Inc., 372 F.3d 662 (4th Cir.) (recognizes that a defendant may treat members of a protected class favorably in some contexts while discriminatorily in others)
- Houck v. Substitute Tr. Servs., Inc., 791 F.3d 473 (4th Cir.) (district courts should not require plaintiffs to show alternatives are less likely; plausibility suffices at pleading stage)