Semler v. General Electric Capital Corp.
196 Cal. App. 4th 1380
Cal. Ct. App.2011Background
- Semler, trustee on a private investment, sought to invest in ARI Overland; GE Capital funded via mezzanine loan and equity participation.
- Overland Management (managing member) excluded Semler due to his 1988 felony convictions; GE Capital proceeded with loan/investment.
- Complaint alleged GE Capital violated the Unruh Civil Rights Act (Civ. Code, § 51) by discriminating against Semler because of his felony status.
- GE Capital demurred, arguing statute of limitations and lack of Act violation; trial court dismissed.
- Court applied Harris three-part framework to determine if felon status is a protected characteristic and whether business interests justified the decision.
- Court affirmed dismissal, holding felon status is not a protected characteristic under the Act, and the decision was a legitimate business risk mitigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is felon status a protected characteristic under the Unruh Act? | Semler contends felon status may be protected as a personal characteristic. | GE Capital argues felon status is not among enumerated or illustrative protected traits. | Felon status is not a protected characteristic under the Act. |
| Did GE Capital have legitimate business reasons to deny the loan and equity investment? | Semler argues decisions rely on discriminatory premises rather than business needs. | GE Capital needed to protect loan repayment and investment return; felon status could undermine the venture. | Yes; legitimate business interests justified the decision. |
| Should the Unruh Act apply to lender-investor decisions in mezzanine financing? | Semler argues Act protects individuals in access to credit and investment opportunities. | Lending decisions are market-based and should not be second-guessed by the judiciary. | No; court should not micromanage lending criteria; decision falls within business judgment. |
Key Cases Cited
- Harris v. Capital Growth Investors XIV, 52 Cal.3d 1142 (1991) (three-part Harris framework for applying the Act)
- Marina Point, Ltd. v. Wolfson, 30 Cal.3d 721 (1982) (illustrative rather than restrictive basis of discrimination under the Act)
- Cox v. Cox, 3 Cal.3d 205 (1970) (scope and interpretation of public accommodations under the Act)
- Orloff v. Los Angeles Turf Club, 36 Cal.2d 734 (1951) (individuals cannot be excluded solely on class reputation; focus on conduct)
- Stoumen v. Reilly, 37 Cal.2d 713 (1951) (principle against excluding based on class characterization)
- Koebke v. Bernardo Heights Country Club, 36 Cal.4th 824 (2005) (domestic partner status distinguished from protected classifications)
- Gatto v. County of Sonoma, 98 Cal.App.4th 744 (2002) (economic regulation and public accommodation doctrines in context)
- Roth v. Rhodes, 25 Cal.App.4th 530 (1994) (commercial landlord decisions and business justification defense)